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Jan Keppeler: Thank you, Sandra, and welcome, everyone, to our 9 months 2025 financial results conference call. With me today are, as always, Marcus Wolfinger, CEO of Stratec as well as our new CFO, Tanja Bucherl. Be aware that this conference is being webcast live, and you can download this presentation either from the webcast or from our website. And of course, following the presentation, we will have a question-and-answer session as usual. Finally, please allow me to draw your attention to the safe harbor statement, which we have on Page 3 of that presentation. And with this, it's now my pleasure to hand over to Marcus. Marcus Wolfinger: Yes. Thanks, Jan. Good morning in the United States, and good afternoon in Europe. Before we start, ladies and gentlemen, I'm truly excited to welcome Tanja Bucherl, our new CFO. From minute 1 on, it was clear that she brings not only a super strong financial background, but also the energy and team spirit that defines who we are. With her expertise, she will play a key role in future strengthening our financial stability and setting the course for future growth. We are thrilled to have her on board. Welcome, Tanja. A big thank you goes out to Oliver Albrecht, our Interim CFO until last week, who very professionally bridged the gap until Tanja joins the senior management team. So with no further ado, let's dive into the agenda. I'll try to walk you through the first 9 months at a glance. Then Tanja will give you the financial review and some further financial details, followed by the outlook and focus and the two of us then will try to answer your questions thereafter. We had a positive sales growth despite supply chain interruptions, which already kicked in, in Q3, not material, but already very visible. What we definitely see is a stabilization in the market. Like during the past two or three crisis, we had, say, the dot-com crisis after -- financial crisis and after that COVID, certainly, only a few months after this kind of hits we took in this industry, it was very visible that the end of the crisis is in sight. In this very case, I would like to remind you that after COVID, we had the supply crisis and then certainly geopolitics and war and the tail end of COVID. So as a matter of fact, I think it's a well-accepted fact that this crisis took longer. If we are looking into those signals between the lines sent by end customer by our customers, I think we really dipped out at this moment in time, and I think the worst is over. I only returned back from the United States, where we met key customers. And I already mentioned that a couple of times that particularly after Q4 last year, they started to grow again. And please allow me to remind you that in our industry, us as an enabler. We build infrastructure from the perspective of our customer. This is CapEx. They place the instruments. They use the consumables as soon as they, let's say, bring new tests on instruments, they can actually grow with the fleet, they already placed years and months ago, whereas we are coming at the very tail end of things, which means only if the market grows to the extent that our customers are investing into their own growth, into their own future, growth for Stratec comes in. And I think this is actually the inflection point where this is coming back. So we see that the testing volume stabilizes. It was already very stable. And if you look into the statements made by the quarter reports of our customers, you definitely see that they are very positive in terms of testing volume despite geopolitics. And some of them, particularly in immunoassay and some other areas like in complex sample prep, the growth already came back, but it actually could not yet offset the declined volume after COVID-19 with molecular tests where the saturation took place during COVID-19. And after that, everybody took advantage of those instruments, which were launched and placed during COVID-19 and haven't been forced to buy new ones. We see that the discussion started into the investment of new platforms, into keeping those platforms young. But on the other side, even for those instruments, which are, in the meantime, worn down after COVID-19 and the years thereafter, that our customers are openly starting to discuss that even those instruments will have to be replaced. So I think we are really through to growth. We had a fairly good margin development. However, the margin development held back by the product mix. So at this moment in time, a little bit unfavorable. Our products with high gross margin are still weaker. Those ones with the weaker gross margin are stronger, as always [indiscernible]. And then certainly, particularly towards the year end, we have a number of development activities, which will be accounted, which will then drive the margin. That's factored in -- into our guidance and into our financial guidance, and I'll touch base on that. On the other side, I think like everyone, the headwinds we experienced in H1 got a little bit better, but are still material. All that is leading to the margin as is. We have confirmed our margin guidance, but I think it's important to again reiterate that as last year, 2024, we could make the statement at this point that we will probably end up at the upper edge of the guidance given. And actually last year, we even exceeded this. I think this year has to be understood that this is closer to the lower end of the guidance. We made material progress in the development of partnerships. Actually, we got a new customer in with finalizing development work, which was actually done mostly in-house and the transfer is ongoing. So we got a new partner. We see a significant upturn in development activities and in talks. Still highly fragmented. I think it's unrealistic to expect that -- such development work where the partner commits from the very get-go to a $40 million development investment and a $200 million downstream procurement commitment. I think this is some limitations at this point. Things are getting more fragmented. However, our business model fits that very well. And we definitely see that the demand not only in system development goes up, this affects product life cycle management, which is very margin heavy and certainly, instrumentation picks up as well. I think it is worth mentioning that in the budget round, we are finalizing these days, we see a development resource allocation of 105% across the group. And I think this nicely mimics what's going on. I think demand for development activities coming back and development activities is the leading indicator for downstream manufacturing activities, and this is where we make the money. So as already mentioned, lower end of 2025 margin guidance confirmed despite a lower sales outlook. I think it's a good signal that we had these issues with the magnet. I don't want to go too deep into details. We have almost sorted out the supply issue. So we just need to catch up. We'll certainly not catch up entirely by the end of the year, but I think we are showing good trajectories with the measures established. Talking about efficiencies and measures established, I think the fact that we had to slightly cut the top end of our top line guidance and still can maintain margin. I think this shows the efficiency measures are really tangible, are really showing efficiency. And I think this is a good point to start from growth here again. And I think we'll talk about growth as soon as we show our guidance for 2026, which will not happen here. That only happens when we talk about full year's results. So that gets me to the point where I would like to hand over to Tanja. Tanja Bucherl: Thank you very much, Marcus. Good day, everyone. Also from my side, a warm welcome. My name is Tanja Bucherl. As you have heard, as of November 1, I joined Stratec as the new Group CFO. And I can tell you already after my first week that this is a company with a really great potential and a remarkable team spirit. So I'm really looking forward to actively shaping our continued development and supporting the next steps on our path of a sustainable growth. But with that, let me now take you through our financial performance for the first 9 months of 2025. As you can see on the chart, the sales increased by 2.5% at a constant exchange rate. It's reaching to EUR 175.6 million versus EUR 173 million in the prior year period. As you also know, we had a very positive momentum in the first half year. The sales in the third quarter declined by 3.4% at a constant exchange rate. It was mainly impacted by the already mentioned supply chain disruptions as well as, let's call it, a softer momentum in the Service parts and Consumable business. But more to that later on in my presentation. Let's have a look to the adjusted EBIT margin. So for the first 9 months, we stand at 7.3% versus the 8.8% in the prior year. Also, as a consequence and driven by the temporarily increased tax rate in the third quarter and despite an improved financial result, our adjusted net income for the first 9 months decreased by 15.8% year-over-year to the EUR 7.1 million that you can see also on that chart. This leads also to a corresponding adjusted earnings per share of EUR 0.58. But maybe let me take also a note here regarding the outlook. So we expect a significantly improved earnings dynamic in the fourth quarter. And given the implied regional mix, a notable better tax rate in the final quarter of the year 2025. And as a result, the full year tax rate should be significantly below the 26.5% that we showed in our report for the first 9 months. Coming now to the adjustments with a closer look in our adjusted EBIT and adjusted net profit. There is not too much to say on that slide because nothing unusual in the adjustments for the first 9 months happened. For the period, we adjusted EUR 2.3 million in the PPA amortization as well as EUR 1.7 million in other adjustments. They are mainly attributable to the so-called one-off, and its advisory expenses that we have already recognized in the first half year of 2025. Therefore, we are going straight to the next page, the sales. We will have now a bit more deep dive on our sales development. In the first 9 months, the sales increased by 2.5% year-over-year at a constant currency to the already mentioned EUR 175.6 million. This was mainly driven by a double-digit increase in the development and in the service sales. And thanks to the ongoing high development activities and large numbers of active customer projects we are having. The system sales was more or less flat year-over-year. The ramp-up curves of the newly launched systems continued to be flatter than actually expected. Already mentioned supply chain disruptions, they impacted us negatively already in Q3, causing especially some delivery shortfalls in the immunoassay franchise, and this was hitting us actually a lot in the Q3, but we are looking for coming back in the next quarters or in the Q1 next year 2026. In Molecular Systems, we observed a promising and actually ongoing stabilization in customer orders following demand disruptions that the industry faced after the post pandemic. The service parts and consumables, last but not least, for the 9 months of 2025, they were slightly down year-over-year as volatile global trade restrictions, as you all know, led to some logistics optimizations at our customers. And therefore, we actually have seen order volatility, especially in Q3 2025. Coming from the sales now to the earnings. Closer look now to the adjusted EBIT and our EBIT margin on that slide. you see that the adjusted EBIT margin declined by 150 basis points year-over-year to 7.3%. I told you already, this is mainly due to the decrease in the gross margin from 27.4% last year to 25.8% in the first 9 months. Yes, the decline results from the still, let me call it, less unfavorable product mix in the System business, and a reduced share of our high-margin service parts and consumable sales in Q3 as well for sure also the unfavorable FX rate environment that we are in compared to last year. However, a good sign also here, the progress was made in the functional cost areas. So we have done, we have started early our homework. So we are confirming the strict cost discipline and also initiated efficiency measures to have the countermeasures in place for all of these negative environments that we are facing currently. Coming now to the cash flow and our net debt development. So the operating cash flow remained negative for the first 9 months, mainly due to high tax cash out that we have recognized in the first half year and as well reduced trade payables compared to last year. However, the operating cash flow improved in Q3 and amounted to positive EUR 4.4 million. As of September 30, also the investment ratio continues to be slightly below our initial budget. And for the full year, we expect a total investment in tangible and intangible assets to remain slightly below the predicted range of 8% to 10% of sales. Our leverage, you see as well here on that chart, means the ratio of net debt at the EBITDA LTM is currently at 2.4, up from 1.9 at the end of the fiscal year 2024, but it is still on a very solid level. Last but not least, I would like to highlight the successful closing of a EUR 125 million syndicated loan during the third quarter. This facility replaces the bridge financing related to the Natech Plastics acquisition back in 2023. And I'm really, really happy with that move because with that transaction, we were able to further optimize our financing structure. And at the same time, it is providing us the sufficient flexibility to support our future development. And therefore, I really would like to take the opportunity to thank all of the Stratec colleagues that were involved in that process and especially also my predecessor, Oliver Albrecht. This brings us also to the end of my part of the presentation. For the full year outlook 2025, I will hand over back to my colleague, Marc. Marcus Wolfinger: Thank you. Financial guidance, we already touched base several times already during the presentation. So as mentioned, we confirm to go flat top line. So we are expecting approximately to match previous year's top line figures on a constant currency basis. Adjusted EBIT margin, we have forecasted at the beginning of the year financial guidance between 10% and 12% after 13% last year. We confirm that we will match the guidance, but clearly mentioned that we'll most likely end up towards the lower end of this guidance. In order to achieve that, we are certainly tracking a number of KPIs very closely, as Tanja already mentioned. So there is a high earnings contribution of high-margin development and service sales expected in the fourth quarter in order to achieve it and certainly better scaling effects by the utilization under the System business and upcoming supply chain interruptions is really that we are keeping a very close monitor on that. Again, as Tanja, already mentioned, we will most likely end up a little bit south of the investments intangible and intangible assets, so even better than expected, which was already good after last year's 7.1% most likely end up like in between the 7.1% and the 8%, so better than expected. Let me try to walk you through our activities over, let's say, the next 3 quarters and give you an outlook. So as already mentioned, we are maintaining cost discipline. I think we found the ideal balance over the past 2.5, 3 years to, on the one hand side, make sure that everybody understands that we are really looking into the details and are trying to be super disciplined, but still not saving costs for the sake of saving costs, but still being very potential oriented, invest where investment makes sense and still be disciplined. And I think that's the right thing to do. We didn't oversave. We see a lot of companies who oversave and now are really struggling. We didn't do that. Let me remind you that just one example, looking into development activities, it doesn't make too much sense to cut into activities, which will lead to growth and earnings in 2, 3, 4 years from now, particularly considering that we have existing agreements with our customers. So we want to make sure that we are delivering on milestones. So we continued a nice investment policy into future, into our colleagues, into the education and training of our colleagues. So we are very proud that we didn't only try hardly to find this very narrow balance. I think we managed that fairly well. Then we want to execute on the deal pipeline. That was actually an area where we focused a lot over the past 6 months. A lot of things are ongoing. We mentioned that from a couple of times though. From here and then, we did new feasibility work. We brought a couple of new things on board, which a couple of them will replace our own instruments in -- after the development, like just as an example, we do the LIAISON XL 2.0 for DiaSorin, where we do the predecessor. We do the successor instrument for other instruments we have in the field. So we are very proud that our customers are coming back. And on the other hand side, we really managed to bring new customers or new programs within existing customers on board. So this is not just saving legacy. This is actually investing into growth and the likelihood that growth returns is getting closer and closer. And again, allow me to remind you that during the discussions at the tail end of COVID-19, we were very keen on the fact that during COVID-19 and right after, we launched a number of new platforms, and we thought that we could offset the dip. I think it was everyone very clear that particularly the molecular market will dip after COVID-19. And we said we can most likely offset this dip with the three instruments which were launched during COVID-19 or thereafter. Unfortunately, the growth rate and the ramp-up curve is and used to be slightly flatter than expected. We can report that one of those instruments is starting to show nice traction, and we are expecting the same thing to happen with the other two instruments. Then certainly, we continue to grow our footprint in selected markets like in areas where we believe that we find this, again, narrow balance between not doing the Spearhead, Spearhead Technology, but being the second one. So when markets are starting to get more mature, like in high-sensitivity immunoassays, where we were together with our partners, the first one here where we have nice development programs ongoing. Same applies for advanced imaging and cell & gene therapy where we have started to try to build our footprint as well. Then certainly, we want to manage our well-filled M&A pipeline, as always. And allow me to remind you, this is very binary. We continue to look into opportunities. At this moment in time, we have a handful of opportunities, nothing super concrete. It's the full spread. We are typically looking into technologies. We are looking into markets, and we are looking into geographies. Again, it has to be understood that probably the next decade in this industry will be dominated by local-for-local. So we'll definitely have to do more in the United States. We'll definitely have to do more in China and continue to have high investment in activities in Europe. Local-for-local is probably the thing in order to overcome geopolitics and other activities, which are limiting abilities to do business with goods across the continent these days. Then I already mentioned the localization, very important, certainly cash flow in order to make sure that we can do investments. We want to continue to improve our cash flow dynamics. Here, we already achieved good results over the last quarters and over the last years. However, there is still room for improvement and getting closer from a cash flow perspective, more closer to the earnings situation. I think that's the actual goal here. And definitely, we have to put a strong focus on inventory management for you who continue to have these discussions with us at this moment in time, still our inventory levels is too high. We still have a number of products where the products are very young. We have high inventories, low run rates. So -- although we nicely work down inventory levels already in 2025, we continue to sit on an elevated level of inventories. For those products which have high turnover rates, obviously, the inventory levels are highly optimized. So without a solid recovery of the market in those areas where we are really sitting on a high inventory level, it will definitely continue to be a challenge to materially reduce the inventory levels. But if we think about where we used to be in the past and offset that by last time buys we had to do on the procurement side, I think there is still a room of EUR 20 million to EUR 30 million on inventory level, which could be reduced over the next couple of years, and that will certainly lead to the equivalent cash release. So this gets me to the end of the focus. And now I would like to hand back the word to Sandra, who will explain us how to do Q&A. Thank you so far. Operator: [Operator Instructions]. Our first question comes from Jan Koch from Deutsche Bank. Jan Koch: I would like to take them one by one. The first one is on your guidance for 2025. Is there any risk that development sales that you plan to recognize in Q4 will only be booked in Q1 2026? Marcus Wolfinger: Yes, thank you for the question. As always, this is forward-looking. So there is always a certain risk associated, but I would really see this as minor. So obviously, we know that in this tight situation that we have to monitor things very closely and that we are in continuous communication, not only with the project -- with the internal project teams and the internal project management, but they certainly keep communication up with their counterparts within the customers if approvals are required. So we are definitely very confident that this is not going to get an issue. However, this is forward-looking. Things can happen, although we don't expect. And again, allow me to remind you that certainly things continue to be extremely back-end loaded. So I think you see what has to be achieved top line and bottom line-wise in the third quarter. We have already asked the teams, the manufacturing teams and the associated development teams to work like between Christmas and New Year. So allow me to, first of all, thank them again and secondly, make that very clear that this is super back-end loaded, therefore, inherently risky, although I don't see any risk to fail. Jan Koch: Okay. Great. And then secondly, your largest customer is in the process of being acquired by private equity. Do you believe that this could have any kind of implications on your business? Marcus Wolfinger: No, Jan, thank you for bringing that up. So we shouldn't get that into a situation where we are talking about gut feeling and things like that. I think on a professional level. And actually, I only returned back from this very customer on a -- I was there on a scheduled trip, but certainly this was one of the topics we discussed. So they made it very clear that their communication with private equity is about growth. We have ongoing programs where we are a supplier, a key supplier supplying with our products, our products, which bear our own IP. So the risk of walking away is very, very small. We have ongoing development programs where we are not only a contributor in terms of development work, we are a contributor in terms of know-how and finalizing things and getting things done and getting things done right. So I think the level of contribution we have within this customer is key. And I think that private equity invested in this company to return the company into higher growth rates to take advantage of the synergy, which exists here and there in order to focus on what makes them strong. And I think if we see the position of, in this very case, the Panther instrument, although an instrument being in the market for a couple of years, still the gold standard, still the instrument, which provides the benchmarking for every competitor to Hologic and on the other side, with a quality which is unprecedented. So if we put that all together, I think our position within this company is very, very strong. I think they understand our contribution to their future success. So I'm not worried about that. Jan Koch: Understood. And then finally, you mentioned in the press release that you recently initiated a partnership for well-established high throughput product in the molecular diagnostics area. What does that exactly mean? Are you going to produce in that system for the customer or develop the next generation? And how big is the installed base is? And when do you expect to receive the first revenue? And what is the potential for you here going forward? Marcus Wolfinger: Yes. Please forgive me, it's way too early to talk about that, particularly those elements where you are trying to get your hands around is actually something which is still under discussion. So definitely, it requires a lot of development work. The tail end manufacturing is very lucrative. It's one of the bigger ones. It's most likely one of the biggest programs, which has been outsourced over the past years. So we are very proud to get in touch with this partner. But I think it's important to understand that this is just the initiation. This is everything else, but in a status where we can disclose details about duration of development work, when this extension will go to the market and how big the manufacturing volume might be. So I think it is important to -- for us, it was important to show internally and externally that the momentum comes back on the one hand side, but definitely with the activities ongoing, the big chunk of manufacturing will only be 3, 4, 5 years downstream. Operator: And next question comes from Oliver Reinberg from Kepler Cheuvreux. Oliver Reinberg: Three questions also from my side. First, I just wanted to come back also to Jan's question on Q4. I mean you need basically EUR 20 million incremental sales. So can you just unpack that a bit in terms of providing some kind of color how much of that is development, how much is equipment just to get a better feeling for that? And along these kind of lines, when you have this kind of volatility now in terms of consumables, in terms of timing disruptions from tariffs, I mean is it not also a risk factor when there's now the kind of Supreme Court challenging the kind of whole tariff setup that people just say like we're going to pause and see if there will be chances to order excluding any kind of tariffs? That would be question number one, please. Marcus Wolfinger: Tanja, can you answer the first part, like breakdown of revenues expected for Q4 because I don't have it in front of me. Tanja Bucherl: So -- yes, sure. The biggest chunk comes from the systems actually followed with the development service, yes. So those are the two main pillars for the increase in Q4. Marcus Wolfinger: And Oliver, obviously, we were trying to kind of look into the relevant -- risk exposure of the relevant positions. So actually, when we updated the guidance certainly -- this was only after when we looked several times and went through each business, each program, each contributor and we're actually trying to find out if there is any residual risk, and that was actually already factored in. So I think the answer should be no. With those supply chain interruptions, as mentioned before, we cannot say it's all over, but those elements, which are affected in the meantime, we have access to those products, respectively, they are in transfer. Obviously, it needs some time to get them through the supply chain and to get them in. So there is a likelihood that we can slightly recover. Please don't expect that to happen and please don't factor it in, leave it as we gave the guidance. However, I think the message should be that this was a temporary interruption and that we have sorted out the issue. And kindly allow me to remind you that this actually happened entirely unexpected. So obviously, we saw with the discussion about rare earth that some of our products are affected and we found alternative sources of workarounds. This very magnet we are now talking about is actually a magnet where the specification actually don't foresee the usage of rare earth in the magnet. They got -- contamination got in. And the contamination is exactly of the threshold when the export rules are kicking in for rare earth. So the contamination is 0.1%. And that actually led to the fact that we couldn't get those magnets out of China. That was really kind of a surprise to us. We reacted immediately. So people from procurement, our Head of Procurement was actually in China during that time, and a big thank you to her. She sorted that out very nicely. And I think we are back on track. However, things like that can always come up, and I think these kind of issues are here to stay for the next couple of years. We have to deal with them. We have to factor those things in when talking about supply chains and lead times and guidance. So certainly, we have to learn from that, but particularly talking about Q4, Oliver, even with the Supreme Court activities regarding tariffs, we -- those things which have to be supplied by the end of the year, we already have our hands on or they are in Europe and our suppliers have their hands on. So I don't expect anything from this side. Oliver Reinberg: Okay. Understood. And second question, obviously, there's a lot of weakness in the industry from China. Can you just remind us what exposure you have to China? I mean I guess it's all indirectly, but how much is that? And do you see that the demand for the systems that are being used in China is also further incrementally deteriorating? Marcus Wolfinger: I think it's extremely complicated to describe that. I think if you talk to our customers, they are definitely trying to maneuver around statements regarding China. Our exposure, so first of all, we don't have any material substantial customer in China. We have a couple of important customers in Asia, but definitely our top 10 customers are sitting either in Europe or the United States. Then we can see literally only two behavior pattern within our customers. Some of them are actively trying to reduce their exposure in China. Some of them are actually trying to see this as a chance and are trying to certainly on an as high as possible risk-free approach to take advantage of that there is demand for certain products of our customers, and we are supporting exactly that. So if they need products made in China, we definitely help them to manufacture, in our case, assemble those products in China. So do assembly, final assembly and final testing according to Chinese rules in order to support their activities. However, we are trying to reduce our exposure. So top line exposure is neglectable. Looking into our customers, we see a couple of our customers, which entertain nice sales in China. I think with this indirect exposure, we are south of 5% of revenues. When I say indirect, we are selling to our customers and our customers are selling products into China. There are limitations. So if, say, Chinese suppliers -- sorry, Chinese customers want to include our customers into tenders, that's a huge effort for them. That's why that doesn't happen that often anymore. So there are secondary markets, which are served by some of our customers. That's why their exposure is fairly minor. We have to see that particularly with our Hematology business, we are seeing strong competition out of China, particularly in those areas where commodities are concerned, systems of lower complexities are concerned, definitely, the competition out of China is getting stronger and stronger, particularly when pricing plays a material role. However, that actually shows how important our strategy, and execution in our strategy is that, as mentioned before, we definitely want to develop and supply spearhead technologies, not spearhead, spearhead. This has to be handled by the research organization. But as soon as this initial dust settles, we want to be there. We want to be the immediate follow. We have nice technologies. These days, we have huge investments into things which are concerning workflow, things which are concerning safety and security in providing the results, development in IoT, cybersecurity. So everything which concerns haptics, ease of use, safety of the instrument. This is where investments in the Western world and in Europe are actually taking place. And here, we feel it's excellently positioned. Oliver Reinberg: Super. And last question, if I may, just on the molecular diagnostic market. I mean what kind of signs of recovery do you see? And can you just remind us where are you in terms of equipment sales compared to, let's say, the kind of pre-pandemic baseline? Marcus Wolfinger: Yes, Oliver. Let me answer the second question first. We have -- we are in a very special situation. The main contributor to our molecular franchise are mainly three instruments. With DiaSorin, we are in a generation change. With BD, we are in a ramp-up situation. And only with Hologic, we have something where we really have comparable pre-COVID data. And I think I'm not telling you any secret here because the data points are disclosed that Hologic is about on a run rate, which represents between 1/2 and 2/3 depends on the relevant instrument between half and 2/3 of pre-COVID level, but picking up, and that's a nice thing. What we definitely see as a behavior pattern across all our customers is that they are trying to [ prelaunch ] the product life cycle. And I don't -- do not necessarily mean that we develop an instrument in year 1 through 5 and then launch it and then we sell it from year 5 through year 20. What I mean is that when an instrument gets sold to the end customer or placed in an end customer lab, and it runs there for 4 years, 5 years, 6 years and so on, there is a moment in time where the instrument gets worn down and typically gets replaced. And during the last 2 years, we definitely saw that our customers were trying to [ prelaunch ] those life cycles in the laboratory with the relevant instrument to the extent possible. But as mentioned, this is a means to an end. You can only do that so and so long, and we definitely see that these discussions, which are actually reflecting the fact that typically an instrument of a certain age causes higher service costs and that probably the amortization of a newly placed instrument is actually positively offsetting the service costs. So I think that the decision-making processes and the ongoing discussions are actually showing that our customers are at this point where they say, okay, we take this instrument out and we place a new one and that's exactly when the growth comes back. So I'm actually particularly within some customers expecting even a catch-up effect here. Operator: [Operator Instructions] The next question comes from Michael Heider from Berenberg Bank. Michael Heider: I have a couple of questions, less detailed questions here. So when I start with the sales development in your Systems business in the third quarter. You actually said -- I mean there obviously were supply issues, and I believe that was on the immunoassay side. I think you have said that. And yet your sales were flat versus previous year. So is my assumption correct that this shortfall then was made up by the molecular systems side? Or is there something else that has been growing? Marcus Wolfinger: Affirmative, molecular and to a certain degree, immunohematology as well. So affirmative. Michael Heider: Okay. And then on the margin side, yes, we have seen a lower margin in the third quarter versus the previous year due to a negative mix and also due to the negative mix in the instruments business, but also due to the lower share of consumable sales. Yet again, here, your quarter-on-quarter margin has improved. And I would assume now because you're only talking about the Lower Consumer business now in the third quarter that the mix overall in the second quarter must have been better, the product mix, yet your margin is higher in the third quarter. So is this all a result of your cost-saving measures? Or what is the story behind that here? Marcus Wolfinger: Yes, efficiency measures are coming in nicely. So certainly, this is a lot about product mix and scalability. And Michael allow me to say that the forecasting our Consumables and particularly Maintenance parts and Spare parts business is way more complicated than complicating Instrumentation business. So certainly, on the instrumentation and high-volume consumables, certainly, we have established forecast systems, and we should know where we end up over the next 3 months, 6 months, 9 months. On the consumables and maintenance part side, that's a little bit different. What we definitely saw with tariffs kicking in that there was a change in behavior pattern of our customers. Actually, we had a deep analysis about the behavior and some of the business was actually already pulled in, in the first 6 months, which led to fairly well-established results then. We actually -- at this moment in time, we typically got the last orders of the year, particularly for consumables and spare parts, and that was actually weaker than we forecasted initially. It's factored in our amended guidance, but it was weaker than expected. So not only that the business is more short term and therefore, doesn't allow for high predictabilities and high transparency, even the change in behavior patterns came on top here. So deriving something from the past doesn't make too much sense. Like margin drivers in Q3, definitely slight recovery in the Molecular business, some development programs ongoing. So it's actually across the border. And certainly, in some areas, the better economies of scale are helping us very much as well, and so we have performed price increases. We are trying to apply discipline in terms of procurement activities. So all-in-all, I think things are lining up nicely. However, we are not really satisfied. I think as soon as scalability and the right product mix comes back, we can easily get closer to our historical margin. However, I want to make sure that even when I say that I believe the market comes back and the momentum comes back, that all sounds very bullish. I want to make sure that you understand that particularly timing is super unpredictable. So I think that if we finalize our budget cycle and if we are coming out with our new guidance that we will already show this slightly positive momentum, but definitely, 2026 will not be this year of the great relief. What I wanted to get across is that I think there is a chain of things, which have to happen. So the positive mood of our customers, the return of the number of their sales when they get new tests on the instruments when they are actually continue to grow. I think in immunoassay, they grew all the time. But in molecular growth comes back, in sample prep growth comes back, in proteomics growth comes back. So all-in-all, a super nice lineup here. However, this has to go through this pipelines of development activities, market launch, regulatory will take some time. I wanted to get across that we believe that we are through the worst. That's the thing we want to get across. Michael Heider: Okay. And then another question on the supply issue. Do you think that there will be a structural change to your supply situation? I mean are you considering maybe in more times to have a dual supply or supply that is more diversified? And this then, in turn, will maybe result in a more costly supply side for you? Or what is the reaction to the situation? And also in that context, how did your customer react to this? I mean are they obviously not thinking about cancellations, you're expecting to just deliver the instruments then a little bit later. But I mean, what was the reaction on that side? Marcus Wolfinger: Yes, Michael, thanks for bringing it up. Actually, a complex question requiring a complex answer. So first of all -- and please allow me to get to that point first. So definitely, whenever possible, we already have dual sources for suppliers. But there are certain things where either economically dual sourcing makes no sense at all or where it actually provides risk. So that certainly, there are some key suppliers which have their own IP, which would mean trying to find a second source would actually mean that most likely the source material would not be compatible, which means you would have to branch from day 1, which is extremely risky from a regulatory perspective and should be avoided from our customers. So I think, obviously, trying to derisk supply chain is one of the core challenges, which means when, where and how to source. So definitely -- and that's something we are trying to get our customers on board is that in some areas, we can only address that properly by going into high inventory levels by highly risky and single source parts. We already reacted over the past 15 years towards that, that we are trying to particularly develop the complex materials ourselves, so which means that we can easily move manufacturing from A to B to C if we don't get our hands on things and that we control those suppliers at the very tail end, which have their own IP. However, there will be materials, just think about microcontrollers. You cannot just walk away from a microcontroller supply and you see the issues [ VW ] has these days. I think this is certainly something no one actually expected. But I think we will have to accept that we are living in a world that supply chain interruptions like this can happen that in a globalized world where raw materials are sent 10x back and forth between Asia and only -- if one step gets interrupted, the entire supply chain gets interrupted. I think this is something -- these are problems which came to stay and probably in a deglobalized world, they will still stay for longer than everyone expects. And the result of that, like particularly sourcing more locally and manufacturing local-for-local will definitely have an impact on pricing. So I think this is an assessment each of our customers have to take either to accept that they will have to live with supply chain interruptions on the one hand side or something we can handle for them, but they definitely will find its input to the price tag attached to the instruments and attached to spare parts. However, I think we are not the only one facing that problem. I think this will actually pop through the surface in a couple of industries over the next years. I hope that helps. Michael Heider: Okay. And then last question here really on your inventory situation and operating cash flow for the full year. What do you think you can achieve in the full year on the operating cash flow side? And a detailed question here on the inventory because you mentioned that you have higher inventories in one particular area where it requires an upturn in the end demand -- end market demand. Are we talking about molecular here? Or is this something else? Marcus Wolfinger: It's allocated in our Molecular business, right? And it's particularly affected by the lower-than-expected or flatter than expected ramp-up curve. Definitely, that is our biggest [indiscernible] as mentioned, and we stick to that guidance at the very beginning of the year said that we will most likely manage to reduce our inventories by the end of the year in the area of EUR 5 million to EUR 10 million. And I think we are on a good track here. And that actually leads to the equivalent cash release coming from inventory levels. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Jan Keppeler for any closing remarks. Jan Keppeler: Thank you all. That concludes the conference call. Thank you, and goodbye.
Operator: Good morning, ladies and gentlemen, and welcome to the CVG Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Andy Cheung, Chief Financial Officer. Please go ahead, sir. Andy Cheung: Thank you, operator, and welcome, everyone, to our conference call. Joining me on the call today is James Ray, President and CEO of CVG. This morning, we will provide a brief company update as well as commentary regarding our third quarter 2025 results, after which we will open the call for questions. As a reminder, this conference call is being webcast and the Q3 2025 earnings call presentation, which we will refer to during this call is available on our website. Both may contain forward-looking statements, including, but not limited to, expectations for future periods regarding market trends, cost-saving initiatives and new product initiatives, among others. Actual results may differ from anticipated results because of certain risks and uncertainties. These risks and uncertainties may include, but are not limited to, economic conditions in the markets in which CVG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, financial covenant compliance and liquidity, risks associated with conducting business in foreign countries and currencies and other risks as detailed in our SEC filings. I will now turn the call over to James to provide some highlights from our third quarter performance. James Ray: Thank you, Andy. Good morning, and thanks to all those who joined the call. Please turn your attention to the supplemental earnings presentation, starting on Slide 3. As we have highlighted on this slide, CVG delivered continued improvement in profitability despite a very challenging market environment. During the quarter, we delivered an adjusted gross margin of 12.1%, which is up 10 basis points on a sequential basis and up 50 basis points compared to last year. The continued improvement in profitability was again driven by the operational efficiency improvement initiatives we have spoken to in prior calls. I will expand on this a bit more in a minute. But I just want to give a heartfelt thanks to the entire CVG team for their contributions in driving these operational improvements in these very challenging times. Another highlight of the quarter is the continued performance improvement within our Global Electrical Systems segment. For the quarter, we saw segment performance inflect with revenues up 6% compared to the prior year despite continuing end market softness. Of note, we benefited from the ramp-up of 2 key new programs in the quarter. The first is with an autonomous vehicle manufacturer in North America, while the other is with a major automotive manufacturer in Europe. Both program ramp-ups are in their early stages, and we expect a continued strong and growing revenue contribution from these programs moving forward. We also delivered sequential and year-over-year margin expansion, driven primarily by the higher revenues as well as the operational efficiency improvements we've made. Also highlighted on this slide is our strong year-to-date free cash generation. For the first 9 months, we've generated $25 million in free cash, up $14 million from last year, driven by improved working capital performance and lower capital expenditures. I'll speak more about specific guidance later, but we do expect to generate free cash flow in the fourth quarter of 2025. And finally, I just want to highlight that we are not standing still in our efforts to drive further operational efficiencies and reduce costs. In North America, we continue to rightsize our manufacturing footprint to adjust to the current demand environment. In EMEA and Asia-Pacific, where we are seeing better end market demand, we are proactively optimizing our production capacity to lower costs and create additional capacity to meet future demand growth. We also continue to manage headcount and flex manufacturing operations work schedules across the company to reduce both SG&A expenses and manufacturing overhead costs, respectively. Turning to Slide 4. I want to provide additional color as it relates to the continued sequential improvement we are seeing at the gross margin line. As we highlighted for the last 2 quarters, the operational efficiency improvements made related to freight, labor and plant level overhead continue to benefit our profitability. We continued that trend this quarter with additional margin expansion of 10 basis points versus the second quarter of 2025, giving us a cumulative improvement of 370 basis points versus the fourth quarter of 2024. What is even more notable is that we were able to expand margins sequentially in the third quarter despite an 11% drop in revenue versus the second quarter of 2025. This clearly demonstrates the operational efficiency improvements we've made to address our cost structure. As a quick reminder, the bulk of these improvements have come from a reduced reliance on expedited freight, optimized terms with our suppliers and our improved lead times and order quantities. We have also flexed our direct labor to better align with customer volume changes and our new segment alignment has provided a more optimal overhead structure. Our focus is on driving operational efficiency, which has supported our financial performance in a lower demand environment. While we acknowledge the broader market and macroeconomic uncertainty, we are committed to taking the necessary proactive actions to drive improved financial performance. As we look ahead to the eventual end market recovery, we believe we are well-positioned to enhance shareholder value through continuing to win new business, driving accretive growth, accelerating margin expansion and increasing our capital efficiency. With that, I'd like to turn the call back to Andy for a more detailed review of our financial results. Andy Cheung: Thank you, James, and good morning, everyone. If you are following along in the presentation, please turn to Slide 5. Consolidated third quarter 2025 revenue was $152.5 million as compared to $171.8 million in the prior year period. The decrease in revenues is due primarily to a softening in customer demand across our Global Seating and Trim Systems and Components segments, primarily in North America. Adjusted EBITDA was $4.6 million for the third quarter compared to $4.3 million in the prior year. Adjusted EBITDA margins were 3.0%, up 50 basis points as compared to adjusted EBITDA margins of 2.5% in the third quarter of 2024, driven primarily by operational efficiency improvements and reductions in SG&A expenses. Interest expense was $4.1 million as compared to $2.4 million in the third quarter of 2024, driven by higher interest rates following our June 2025 debt refinancing. Net loss for the quarter was $6.8 million or a loss of $0.20 per diluted share as compared to a net loss of $0.9 million or a loss of $0.03 per diluted share in the prior year. Adjusted net loss for the quarter was $4.6 million or a loss of $0.14 per diluted share as compared to adjusted net loss of $0.4 million or a loss of $0.01 per diluted share in the prior year. Net loss and adjusted net loss were impacted by softened customer demand in North America as well as higher interest and taxes, offset somewhat by operational efficiency improvements. Free cash flow from continuing operations for the quarter was negative $3.4 million compared to positive $17.1 million in the prior year as softer demand and the facility move in China led to an increase in inventory in the third quarter. The China facility move positions us for lower labor cost and a more optimal manufacturing footprint moving forward. Just a reminder that last year's third quarter included the proceeds from the sale of our cap structures business as well as another facility, totaling $27.4 million. James will share more color on our free cash flow outlook momentarily. At the end of the first quarter, our net leverage ratio calculated as our net debt divided by our trailing 12 months adjusted EBITDA from continuing operations was 4.9x, up slightly from 4.8x at the end of the second quarter. Moving to the segment results, starting on Slide 6. Our Global Seating segment achieved revenues of $68.7 million, a decrease of 10% as compared to the year ago quarter, with the decrease primarily driven by lower North American sales volume as a result of reduced customer demand. Adjusted operating income was $2.9 million, an increase of $3.7 million compared to the third quarter of 2024. Despite the revenue decline in this segment, we saw an improvement in adjusted operating income margin, primarily attributable to the proactive actions taken to drive operational efficiency improvements as well as lower SG&A expenses. Turning to Slide 7. Our Global Electrical Systems segment third quarter revenues was $49.5 million, an increase of 6% as compared to the year ago quarter as the ramp-up of new business wins more than offset weaker Construction and Agriculture demand. Adjusted operating income for the third quarter was $1.4 million, an increase of $1.6 million compared to the prior year, primarily attributable to increased revenues and operational efficiencies. We are continuing to see the benefits of the restructuring actions we have taken in this segment, and we are encouraged by the return to growth we saw in this third quarter. As we have said before, we continue to win new business here at attractive margins and Global Electrical Systems remains a key area of focus for growth and cash generation moving forward. Moving to Slide 8. Our Trim Systems and Components revenues in the third quarter decreased 29% to $34.3 million compared to the year ago quarter due to lower sales volume as a result of decreased customer demand. As a reminder, this segment solely serves the North American market and is most directly impacted by the reduction in Class 8 production volumes. According to ACT Research, Class 8 fields were down 39% year-over-year in the third quarter. Adjusted operating loss for the third quarter was $0.3 million compared to a profit of $4.1 million in the prior year. The decrease is primarily attributable to lower sales volumes. While it was encouraging that segment revenues declined less than the market in the quarter, we are implementing further actions to rightsize this business to adjust to the lower demand environment. We are in the process of implementing further operational improvements, including spending cuts, collaboration with suppliers to reduce costs and launching new programs such as a new wiper program in Q3, all with a goal of returning this segment to profitability as quickly as possible. That concludes my financial overview commentary. I will now turn the call over to James to cover our market outlook, key strategic actions being taken and our updated guidance. James Ray: Thank you, Andy. I will start with our key end market outlooks on Slide 9. According to ACT's Class 8 heavy truck build forecast, 2025 estimates imply a 28% decline in year-over-year volumes. ACT is forecasting a further decline of 14% in 2026 before rebounding 34% in 2027. Just a reminder that we quote ACT's North American Class 8 production outlook as a point of reference, but our revenue here is driven by our actual end market and geographical mix as well as our customers' demand and production schedules. Furthermore, ACT's outlooks have been subject to large variations as seen by the revisions they've made since we reported Q2 results. Based on published reports, the U.S. has been in a freight recession over the last 2 years as capacity exceeds demand following a surge of additions to meet supply challenges during and coming out of COVID. ACT is currently factoring lingering tariff impacts into their 2026 forecast, but acknowledges a more positive tariff environment provides upside to their 2026 outlook. We have also seen North America truck OEMs give more optimistic 2026 North American Class 8 forecast than ACT, giving some indication that the current production levels are running below expected market replacement needs. As a result, despite adjusting our footprint to current demand levels, we are preserving optionality for when markets eventually improve to drive operating leverage as volumes recover. Moving to our Construction and Agriculture market outlook. Based on recent commentary and outlooks from our customers and key market players, we expect the construction market to be down 5% to 10% and agriculture markets to be down in the 5% to 15% range as construction is faring a bit better than agriculture this year. The drivers in both markets remain higher interest rates, weaker housing starts, slower commercial real estate activity and lower commodity prices continuing to weigh on demand. We remain optimistic about these end markets, which most directly impact our Global Electrical Systems business as we see ongoing replacement needs and underlying secular trends driving a recovery in these markets in 2026 and beyond. Turning to Slide 10. I'd like to give more details on the outlook for our Global Electrical Systems segment. I'll get into the drivers momentarily, but we expect our Global Electrical Systems segment sales to increase in the high single-digit to low double-digit percentage range in 2026, even in the face of these weaker end markets I just discussed. This increase is driven by the continued ramp-up of new business wins, which is accelerating the utilization of our recent capacity additions. Furthermore, we have made structural improvements to our business model in this segment, which we expect to drive growth and reduce volatility. We are focused on our core market and customers where we can drive growth in wallet share through a continued focus on quality, customer satisfaction as well as upselling. We also are accelerating our expansion in adjacent markets with strong secular growth drivers such as autonomous EVs and infrastructure markets. And finally, we are extending our differentiated solutions, including high-voltage wire harness and power distribution boxes to drive increased content per vehicle. The biggest driver of Q3 performance as well as our expectations for growth in 2026 is the ramp of new business previously won. We recently launched a program where we provide low-voltage wire harnesses for an autonomous vehicle customer in North America. Autonomous vehicles have been a key focus area for the company, and we are currently working with our partners to establish a leading market position here for CVG. We have also launched programs providing wire harness solutions for multiple European OEMs across various geographies. After seeing delays and push out of our new business win program launches during 2024, we're encouraged to see these programs ramping up and driving top line growth. As these programs ramp up, we are seeing improved utilization at our new production facilities in Aldama, Mexico and Tangier Morocco, helping drive margin expansion. As the ramp-up of these programs continues and other new programs contribute, we expect to see continued margin improvement into 2026 and beyond for the Global Electrical Systems segment. Turning to Slide 11. I'd like to provide some updates on key actions we have underway to drive free cash flow improvement as well as mitigate the impact of tariffs and broader macroeconomic headwinds. First, we remain focused on driving improved cash generation and aligning our SG&A structure with our current revenue base this year. As Andy mentioned, we did see a small inventory build in the third quarter, and we expect working capital to return to being a source of cash for us in the fourth quarter. We continue to expect $30 million in working capital reduction for the year, focused primarily on inventory and accounts receivable as well as a 50% reduction in planned capital expenditures this year. We also continue to expect $15 million to $20 million in cost savings this year with a focus on SG&A, which should drive incremental margin expansion as our top line returns to growth in the future. Second, we are seeing tangible benefits of strategic portfolio actions taken in 2024 to lower our cost structure as we experienced lower decremental margins, positioning us well to grow our earnings power as end market demand recovers. As demonstrated this quarter, despite demand headwinds leading to a revenue decline of $19 million year-over-year, adjusted EBITDA increased by $300,000 versus the prior year. Third, we've remained in constant communication with our customers, improving our line of sight to production schedule changes, particularly in the light of current market conditions, which allows us to implement necessary cost action in the event of future changes. In addition, our teams took immediate action in response to tariffs to mitigate potential impacts, and we've made substantial progress in negotiations on price recovery terms with our customers. Turning to Slide 12. I'll share several thoughts on our updated outlook for 2025, which reflects the current estimated impact of tariffs, trade policy and economic uncertainty as well as our proactive efforts to manage this current uncertain environment. Most importantly, we are maintaining our free cash flow guidance to reflect our progress year-to-date as well as our ongoing focus on cash generation. We expect to build on our year-to-date free cash flow progress in the fourth quarter, generating at least $30 million of free cash flow for the full year, which we expect to use to pay down debt. Our continued focus on reducing working capital and lowering capital expenditures underpin this outlook. Net leverage is expected to decline through 2026 as we work toward returning to our targeted 2x level. Based on current macroeconomic trends, prevailing truck build forecast and ongoing softness in Construction and Agriculture markets, we are lowering our quantitative annual guidance for revenue and adjusted EBITDA and tightening the range on both. Given current demand outlooks, we are adjusting our full year 2025 revenue guidance range to $640 million to $650 million, which is down from $650 million to $670 million from our prior guidance. We are also revising our adjusted EBITDA guidance expectations to the range of $17 million to $19 million for 2025, down from $21 million to $25 million from our prior guidance. With regard to the current demand outlook, I mentioned a few minutes ago that ACT Research's 2025 North American Class 8 production forecast is down 28% year-over-year. If you look more closely, you'll see that they are forecasting second half 2025 volumes down 37% sequentially versus the first half of 2025. While there is typically some seasonality to our North American Class 8 related business, you can imagine the challenges this type of sequential decline creates. Consequently, we remain laser-focused on operational efficiency improvements and reducing SG&A to protect margins in the face of lower demand and position us for strong operating leverage when the eventual market recovery happens. With that, I will now turn the call back to the operator and open up the line for questions. Operator? Operator: [Operator Instructions] Your first question comes from Joe Gomes with NOBLE Capital. Joseph Gomes: I wanted to start out on some of the efficiency improvements, the headcount reductions, the reduced CapEx. Obviously, I understand why that's going on, but how much more can we wring out of those before you have to start spending more money on CapEx? Are you starting to cut into muscle, so to speak, with some of these headcount reductions? I'm just trying to get a little handle on what more is possible there. James Ray: Joe, this is James. Yes, we continue to prioritize our reduction areas so that we take advantage of the higher growth and also cut, restructure, reorganize where we're seeing much slower growth. So from a headcount standpoint, it's not just SG&A, but it's also the manufacturing overhead headcount. As we look at our facilities and our footprint, there are opportunities to create synergies between sites to minimize the manufacturing overhead. We continue to focus on execution items and quality scrap, premium freight, those things that we made headwind in. We still are entitled to additional operational efficiency improvements. So we're not done yet. And as you know, as volumes change and as mix changes, that creates other opportunities. The one thing that we did in Q3, and we started in Q2 was really engaging with our supply chain partners and our supply base to look for additional opportunities as suggested by them that are mutually beneficial to both the supplier and to us. And we've really generated a good funnel of incremental opportunities to go after. We obviously continue to work with our customers to make sure we're aligned with their schedule changes as well as their approvals for mitigating tariffs as well as approvals for making changes to designs and other cost savings initiatives. So there's still opportunity to reduce more the bottom line to your question, without significantly impacting our ability to respond to market changes. We have seen fluctuations both up and down. So we're very careful and very surgical in how we flex those so we don't leave opportunity on the table by not being able to respond to demand. And that's on a global basis. So that's pretty much where we are right now. We're not finished. And as the market continues to fluctuate and we deal with the volatility, we have a playbook that we're going after to make sure our costs are aligned and we don't sacrifice the future for recovery. Andy Cheung: Joe, if I may add on the CapEx side for your question. So mostly this year, we are holding on to our maintenance CapEx. And as you asked when will CapEx come back up, it really depends on the business program launches that we are seeing in the next year. As you know, we already invested a lot in our electrical system capacity in the last couple of years. So major fixed costs are there. So when the new business and revenues come in, we may need to add some equipment. So that's when we see CapEx coming up a little bit, maybe sometime later next year. Joseph Gomes: Okay. And a question on the updated guidance. You took revenue down as you stated, but it looks like it's a bigger reduction in adjusted EBITDA based on the numbers that you provided. Just wondering why the bigger reduction in adjusted EBITDA there? Is that just deleveraging or is there anything else behind that? Andy Cheung: Yes, Joe, I would say that the majority of that is the deleveraging. And part of the changes will you have to consider the mix of the reduction. As James mentioned, right now, what we are facing the most sharp reduction is in our North America Class 8 business, which is really affecting our Trim and Component business, and that is a very fixed cost-driven business. As you can imagine, our business product lines thermoforming, a lot of the equipment is already put in place. So there's a higher contribution margin in that business. So that 30-some, 40% reduction is really helping our margin from a mix standpoint. Joseph Gomes: Okay. And one more for me, if I may. So I understand the ACT numbers are not the be all end all, but let's assume their forecast is somewhat accurate here, and you're looking at that 14% reduction in '26 in Class 8, can the expectation of the electrical system and new products generating more revenue there offset a continued decline in the Class 8 business for 2026? Is that possible? James Ray: Yes, Joe, that's our expectation. As we look into our customer schedules for Q1 and also Q2, where some of the other programs are starting to ramp up at a more significant rate in the back half, we feel and we expect to offset the forecasted downturn. And when you look at it sequentially, the Q1 to Q4 build rate isn't substantially different. It's somewhat flattish going into Q1 and then lingering into Q2 and then the back half, when you look at ACT's numbers, it starts to ramp back up. So the key is getting through the next quarter or 2 with our cost structure changes we made and with our improved operational efficiency, we expect to have better operating leverage as the quarters roll in with higher production numbers. So margin expansion is a focus, cash generation is a focus and paying down debt as a result of additional cash and margin expansion is our priority. Andy Cheung: And Joe, it's a little too early for us to guide '26, but we already mentioned a little bit about our expectation for our electrical business top line next year, somewhere close to a double-digit improvement. So we believe that next year, overall, with the Class 8 reduction, we likely see a flattish revenues for the enterprise, but we'll know more in a couple of months when we go out for guidance in our Q4 earnings call. Operator: Your next question comes from John Franzreb with Sidoti Company. John Franzreb: I'm going to start where you just left off, Andy. When you're thinking about the new program wins in electrical, when does that ramp become the full annualized rate? Is that a 2026 event? Is that a 2027 event? How should we be thinking about that? James Ray: When we look at the schedules from our customers, John, a lot of the ramp at volume starts in the second half of '26. We're already producing some pre-series builds and prototype builds, and we have very significant customer engagement that is validating our capacity to ramp at the rate that they expect to. But in normal course, we make sure we manage the risk of delays as well as the opportunity that ramps may occur faster. So we've built in some flexibility to go either way to make sure we stay focused on margin preservation as well as cash generation. Andy Cheung: Yes. Short answer, John, will be late '27, '28 is what we're expecting. As James mentioned, typically, our customer will require somewhere around a year or so to ramp their production. So second half '26 is what we're starting to see, and then it will likely take another year. But again, it's a little bit difficult for us to speculate our customer production schedule, sometimes can be lumpy, but this is what we've been told around this time. John Franzreb: That's exactly what I'm kind of looking for. I appreciate that, both of you. And when you think about the cost savings takeout of $20 million to $25 million, are you fully done those cost-outs or how much remains in the fourth quarter? James Ray: The cost-out process we [ formally ] have, John, is ongoing. We do have opportunity this quarter to continue. The part of the challenge is when we dimension and quantify potential projects that roll in, as volumes change from our customers and delays or reduced volume, that does impact the amount of cost-out. So we have to offset that with additional measures, so we continue to maintain the projection that we're forecasting. The engagement of the supply base as well as the customers also help us have a better SIOP, or sales inventory operations planning, process so that we make sure that we valve cost to achieve in the cost savings that we plan to harvest. So we're trying to have better alignment with the cost to achieve and the cost that we're going to harness based on volume outlook and based on schedule fluctuations and new project launches. But I feel like we're much better positioned going into -- finishing out the fourth quarter going into '26 than we've been from the standpoint of mitigating some of the inefficiencies and unplanned leakage that we had in prior periods. John Franzreb: Okay, James. And I guess I'm kind of curious where you stand on tariffs, not only in negotiations with your customers, but also with the suppliers. And if I missed that in your prepared remarks, I apologize. James Ray: Yes, no problem. Tariffs, obviously, is a moving pin, right? Every month, there's a different dynamic. But what I will say is that we engaged immediately with customers, and there are 2 paths here. One is the discussions around the data required to prove that we had impact from tariffs. And our customers are very fact-based, and we provide data that shows what our impact is, so that can translate into potential price adjustments or term changes. The other area is mitigation. And this can be almost as significant, and this is reshoring, onshoring, changing suppliers, coming up with onshore distribution warehouses where we don't incur the tariff that the supplier does and then we negotiate with the suppliers. But we feel that both of those work streams have yielded pretty good progress through the year. It took us a quarter or 2 to really get traction on it. But now we've got agreements in place. We also have a road map of mitigation actions, whether it's technology product changes or whether it's the -- as I mentioned, the reshoring and the supply chain changes that will mitigate some of the country reciprocal tariffs as well as the 232 steel tariffs. But again, that's a changing roadmap from our trade policy, and we stay pretty close to that as well with our customers. So we have much, much better alignment right now going into this quarter and going into next year. John Franzreb: Okay. Got it. And one last question, if I can just sneak it in. I'm just curious about the revenue sensitivity in the Trim segment. Is that a short lead time business? I mean, should we look for that to be the canary in the coal mine when things start to improve in Class 8? I'm just curious, it's been down 2x compared to Global Seating all year long and maybe just some thoughts about that. James Ray: Yes. Well, yes, as a reminder, the Trim Systems and Components business is a North American business with the majority of that business focused into the Class 8 end market. We have adjusted our shift patterns and our plant utilization. There is more work to do there but one of the bright spots in that business is that we have good capacity available in dealing with our customers and dealing with other interested parties, we can onshore and nearshore some of what they're importing into our capacity. So the focus right now is really looking at opportunities for onshoring and helping our customers mitigate tariffs where they're importing product. But the leverage when that business -- the end market does come back, that's going to provide pretty substantial operating leverage as compared to some of the other businesses because we already have the investments in place. And if you look back in prior periods, prior years, the trim portion of the business, the wipers and plastics and trim products have very attractive margins compared to some of our other segments. So we expect to see that inflection as that volume increases, but also we're not waiting for it either. So we have field sales rep organizations that we use to market our capacity that we have in flight. We have a very significant funnel of opportunities that we're going after, not just in Class 8, but other end market -- adjacent markets. So it is a very key focus for us to fill some of that capacity and absorb some of this excess cost as well as look at additional restructuring and realignment of those plants. Operator: Your next question comes from Gary Prestopino with Barrington Research. Questions here. Gary Prestopino: Andy, first of all, interest expense year-over-year was up. And I'm just wondering if there were some one-timers in that number since you refinanced -- I think you did something in your credit facility. Andy Cheung: Yes, Gary, you're right. You remember, we completed our refinancing at the end of June. So Q3 is actually a full year that reflected the new interest rate for us. And as we communicated after the refinancing, the interest -- effective interest rate has actually gone up from our prior financing structure. So every quarter, we're adding about $1 million to $1.5 million based on the current borrowing that we have. So that's why you see the year-over-year increase in interest expense. Gary Prestopino: So that's a good quarterly run rate is what you're saying. There isn't anything in there in terms of that you backed in that were onetime related to the refinancing? Andy Cheung: No, there's no onetime there. But as you can see, as we guided as well, that we continue to use our free cash flow to pay down debt. So we continue to see the next few quarters that the debt level will come down. So that will help us bring down the overall interest expense. Gary Prestopino: Okay. And then just to be clear, it looks like you're -- obviously, you're seeing the work of your driving efficiencies in your adjusted gross margin. It looks like your SG&A this quarter was flat for the 9-month period, it looks like it was down $3 million, but there was also a $3.5 million gain on the sale of the business unit or a factory or something in last year that was added in SG&A. So the real level of SG&A would have been about $58 million. Is that correct? Andy Cheung: That's about right. If you think about it last year, we are running at around $20 million a quarter is our SG&A as enterprise. And now you can see $17-ish million is our run rate. So you can see a 15% reduction year-over-year. If you look at quarter-to-quarter, sometimes there's some timing of expenses, but between the $20 million to the $17 million is where we bring down our SG&A run rate. Gary Prestopino: Okay. So when you talk about headcount reductions that you put in place and all that, that's going to -- that's really more at the factory level. So it's going to be more of an impact on gross margin versus your SG&A run rate. Is that correct? Andy Cheung: No, it's actually both. We did also work in the SG&A headcount as well. So when I say 15% reduction in SG&A, if you look at our SG&A headcount, it's actually reduced by a similar amount in terms of head percentage. So what James mentioned about our productivity programs, we actually work on both on the factory side and gross margin as well as in the SG&A side. James Ray: Gary, so the focus on the re-segmentation and the organizational design efficiency we continue to see benefit from that as we've navigated through the year. And again, there's additional opportunity as we look at where we need to rightsize with the end market. So we're not standing still. Again, it's -- you all say more parts per person per day and SG&A is more services per person per day. So looking at how we just get more out of what we have and looking at our processes as well as the people expense. So some of the outside services that we used previously, we've really ramped that down quite a bit and not so dependent on it and just improving the capability of our organization to do more on our own and harvest that opportunity into margin and cash flow and paying down debt. Gary Prestopino: And then in terms of the Global Electrical, the new business that's coming on stream in 2026, could you just reiterate those programs again for me? I wasn't able to write them down as quickly. James Ray: There are a number of programs, Gary. Two of the major ones, though, that are having -- we're starting to see a benefit in Q4, but more significant benefit as we navigate through '26 and then the back half, and as Andy mentioned, ramping up to full volume in '27, '28. One of those is with an autonomous vehicle OEM where we have a portion of the wiring system. There is opportunity to expand wallet share, not just with the new customers, but also our existing customers. And we've gotten good indication from our core markets in ConAg, where we have opportunity to expand share in those end markets plus the launching of the new program. The second program is a European OEM, where we're utilizing our Morocco facility as well as our existing Eastern European facilities. to launch that business, and that's coming on toward mid- to late next year. Gary Prestopino: And that's a European OEM for EVs? James Ray: That's correct -- no, it's ICE internal combustion engine. But we do have EV opportunities in Europe, but the driver is ICE, internal combustion engine vehicles. Gary Prestopino: And the autonomous vehicle OEM, is that a North American-centric? James Ray: Yes. That's correct. And we're utilizing our Aldama, Mexico facility to ramp that up. So in prior quarters and prior periods, we've talked about the lag between getting the capacity online and the ramp starting. So -- in a couple of cases, ramps have been delayed or have been slower to ramp, but they're starting to hit now. And we're seeing key leading indicators from our customers where their factories are in place to build the vehicles and their launch planning is very meticulous to make sure we're aligned from a capacity standpoint. So we've got some good leading indicators that if the ramp is starting and it will come. Operator: [Operator Instructions] There are no further questions at this time. I will now turn the call over to James for closing remarks. I'd like to thank you all for joining today's call. James Ray: We continue to take necessary proactive steps to support our customers in this very dynamic environment, also driving operational efficiency improvements as well as ultimately delivering better results financially as well as for our customers. More importantly, we are managing the elements under our control to set CVG up for the future, and we look forward to updating CVG's progress in the next quarter. Thank you all. Have a great day. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Tel Aviv Stock Exchange Q3 2025 Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded November 11, 2025. The recording will be publicly available on TASE's website. With us on the line today are Mr. Ittai Ben-Zeev, CEO; and Mr. Yehuda Ben-Ezra, CFO. Before I turn the call over to Mr. Ittai Ben-Zeev, I would like to remind everyone that this conference is not a substitute for reviewing the company's annual financial statements, quarterly financial statements and the interim report for the third quarter of 2025, in which full and precise information is presented and may contain inter-alia forward-looking statements in accordance to Section 32 to securities law 1968. In addition to IFRS reporting, we might mention certain financial measures that do not confirm to generally accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as a substitute for our financial results. However, we believe that they provide additional insight for better understanding of our business performance. Accumulations between these non-GAAP measures and the most comparable related GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call. Both can be accessed on the English MAYA site and in the Investor Relations portion of our website at ir.tase.co.il/in. Mr. Ben-Zeev, would you like to begin? Ittai Ben-Zeev: Good evening, Israel time, everyone, and thank you for joining us today. I'm happy to host you in our earnings call. We concluded the third quarter of 2025 with all-time record results across all of TASE's core business lines and activities. Revenues for the quarter were ILS 147.1 million, up 35% year-on-year. Our adjusted EBITDA reached ILS 79.5 million, up 76% year-on-year and pushing our EBITDA margin up to a record 54.1%. TASE's net profit reached ILS 50 million, up 29% year-on-year and the best quarterly profit in our company's history. These quarterly results are underpinned by the continued success in execution on our strategic plan and the significant growth potential of the Israeli capital market. Yehuda Ben-Ezra, our CFO, will discuss the financial statements in detail later in this call. Despite the ongoing conflict in Gaza, Israel continued to demonstrate both social and economic resilience throughout Q3 2025. With TASE leading indices maintaining the upward momentum and reaching new heights. September was marked by heightened volatility, driven by President Trump's 21-point framework for an agreement we come up on the end of the conflict. This immediately fueled investor expectation for a substantial reduction in security risk and the potential for wider regional resolution, causing the risk premium to decline and creating a fresh wave of increases in our equity indices which delivered impressive performances and broke all-time records numerous times. The leading TASE indices stood out in terms of returns in the first 9 months of 2025 with historical records being broken as the TA-35 and TA-90 indices topped the global return table with gains of 34% and 32%, respectively. For comparison, the Dow Jones and S&P 500 indices in the U.S. saw gains of about 11% and 15%. This positive and exceptional trend was also evident in the sectorial indices, particularly in the financial sector. Since the beginning of 2025 through the end of Q3, the TA Insurance index surged by 112% and the TA Finance Index climbed by 71%, and the TA Banks index rose by 50%. TA's equity market cap increased to ILS 1.8 trillion at the end of Q3, representing year-on-year growth of 51%. Equity average daily trading volumes hit a new all-time high, reaching ILS 3.8 billion in Q3, up 88% year-on-year. The surge in trading volumes is partially due to the net inflows into our indices by foreign investors totaling ILS 6.4 billion during the first 9 months of 2025 compared to net inflows of ILS 2.4 billion in the same period last year. The Israeli Retail segment continued to show increased interest in the domestic market this quarter and the growth in the opening of new trading accounts continued through the end of the quarter. Net inflow into our equity market for retail investors in the first 9 months of the year reached ILS 10.9 billion, a remarkable reversal compared to the net retail outflows of approximately ILS 1.1 billion in the same period last year. However, we continue to see significant potential for growth from the retail investors as this segment still accounts for only 11% of our market which is still relatively low compared to most developed western countries. The IPO market was active with 17 new companies having join TASE since the beginning of the year, raising a total of ILS 3.8 billion compared to 5 companies that raised ILS 0.8 billion in all of 2024. We saw additional IPOs in October and expect to see more new companies complete IPOs until the end of the year. We saw strong activity in our bond market with 21 new companies joining our market with ILS 5.2 billion in bond issuance. The total number of companies we take lifted bonds reached a decade long peak of 100 companies by the end of the quarter and corporate bond issuance totaled ILS 148 billion compared to ILS 87 billion in the same period last year. In our government bond segment, we saw a decline in issuance with ILS 115 billion raised by the Ministry of Finance in the first 9 months of 2025 a down from ILS 142 billion raised in the same period last year. This decline results from a combination of factors, including the appreciation of the shekel the decline in the risk premium and an increase in tax revenues alongside a lower rate of growth in government expenditure partly due to the abatement of the fighting throughout most of the year. We are advancing our strategic plan at full pace which includes initiatives to enhance the liquidity of taste listed companies. As of the end of Q3, there are 300 shelves participating in the market-making program. On our previous earnings call, I mentioned that Hapoalim joined our tailor-made market-making program for public companies, and I'm pleased to update you that since then, BankLeumi and Mizrahi Bank have also joined the program. So all 3 of the largest banks in Israel are now participating. In addition, in mid-October, Bezeq, Israel largest telecommunications company announced it is joining the program, and we anticipate more companies will follow soon. On August 10, we implemented the new trading phase trading at last, TAL, aligning us with global exchanges. I'm pleased to report that TAL has successfully penetrated the capital market with data showing a significant adoption in trading by foreign investors and domestic institutional investors across shares bonds and treasury bills. We also continue to innovate in our index segment with 11 new indices launched since the beginning of 2025 to date. In addition, as mentioned in our previous call, TASE's Board of Directors has authorized us to examine strategic initiatives in relation to our index activity including a partial or full sale of the operation or a collaboration with a leading international entity, for which the leading investment bank, Jefferies, was selected to advise us. I can now update you that we have received inquiries from a number of international entities expressing interest. We are continuing at full speed towards the transition to Monday to Friday trading. After a successful test with both local and international TASE members over the past months. The move will officially take effect on January 5, 2026. In conclusion, the Q3 financial statements reflect taste growth across all its core operations. Recent positive security development and optimism regarding a broader regional resolution could mean that the Israeli capital market is poised for continued growth. We tend to persist in our efforts to develop the market and achieve the goals set out in our strategic plan. And now I'd like to hand over to Mr. Yehuda Ben-Ezra, who will continue with a review of the third quarter results. Yehuda Ben-Ezra: Thank, Ittai. While TASE has delivered strong results in recent years in all of its business lines and core activities, our record-breaking performance in Q3 and in the first 9 months of 2025 stands out. It's a testament to the solid foundation of the Israel economy and reflects the continued confidence of both domestic and global investors in the economy and capital market. Some of the main national metrics are shown in Slide #6. Our revenues displayed substantial growth of 35% for the quarter and hit a new record totaling ILS 147.1 million. Our adjusted EBITDA at ILS 79.5 million also set a record, bringing our adjusted EBITDA margin to a record 5.1%. Our adjusted net profit increased to an all-time high of ILS 5.7 million, an 86% increase over the same quarter last year. I will continue with Slide 12, which shows some of the key highlights from our results for the first 9 months of 2025. Our total revenues amounted to ILS 414.2 billion a 25% increase compared to the same period last year. Our adjusted EBITDA totaled ILS 212 million, representing a 53% increase over the same period last year. Our adjusted EBITDA margin significantly improved to 51.4% compared to 43.3% in the same period last year. Our adjusted net profit totaled ILS 132 million, compared to ILS 80.7 million in the same period last year, a significant 64% increase. I will continue with Slide 7, we show some of the key highlights from our results in Q3 2025. Revenues totaled ILS 147.1 million compared to ILS 109 million in the same quarter last year in a case of 35% with evident across all activities. Our revenues for nonproduction and services were up 1% to reach 63% of total revenues. Expenses totaled ILS 84.5 million compared to ILS 79.1 million in the same quarter last year, an increase of 7%. The increase is due mainly to higher computer and communication expenses, operating expenses and depreciation and amortization expenses. Adjusted EBITDA totaled ILS 79.5 million compared to ILS 45.1 million in the same quarter last year, an increase of 76%. The increase is due mainly to the higher revenues, net of interest and expenses. Net profit amounted to ILS 50 million compared to ILS 26 million in the same quarter last year, an increase of 22%. The increase is due mainly to the increase in revenue from services net of the increase in cost and tax expenses. Basic EPS reached a new high of ILS 0.54, increasing by a record 94% compared to the same quarter last year. I will continue with Slide 9, where we can take a deeper look into our revenues in Q3 2025. Revenues from trading and clearing commission increased by 29% compared to the same quarter last year and total 53.9 million. The increase is due mainly to the higher trading volumes, mainly in shares, corporate bonds and mutual fund units. This increase was partially offset by a reduction of 3 trading days and a reduction in the effective commission rate mainly in shares, revenues from listing fees and annual levies increased by 14% compared to the same quarter last year and totaled ILS 25.5 million. The increase was due mainly to revenues from manual levies as a result of the increase in the number of companies and funds that pay an annual levy. In addition, revenues from listing fees and examination fees are also higher due to the increase in the volume rate. Revenue for clearing services increased by 85% and compared to the same quarter last year and totaled ILS 39.4 million. Increase is mainly due to the completion of regulation measures relating to the OTC transaction. Other factors resulting in the increase were the higher stage fees as a result of the increase in the value of the assets that are held in the custodianship and they are updating the custodian fees price lift. Revenues from data distribution and connectivity services increased by 21% compared to the same quarter last year and totaled ILS 27.7 million. The increase is due to an increase in revenue from our transition to the test indices mainly as a result of the increase in the value and the use of test indices and from higher data distribution revenues from businesses and private customers in Israel and abroad. I will continue with Slide 12, we show some of our Q3 2025 expenses. Employee benefit expenses increased by 1% compared to the same quarter last year, totaling ILS 42 million. The increase is mainly due to higher salaries, and an increase in variable compensation, which reached the maximum level set in the collective agreement. Computer and communication expenses increased by 17% that totaled ILS 3.1 million. Increase results mainly from incisive the maintenance cost of the computer system and license and from an increase in man power and projects. Marketing expenses decreased by 54% and compared to the same quarter last year and totaled ILS 0.8 million. Most of the increase is mainly due to spanning of campaigns. Other operational expenses increased by 200%, a total ILS 2.5 million. Most of the increase is due to expenses related to the market-making program. Depreciation and amortization expenses increased by 11% compared to the second quarter last year totaled ILS 15.5 billion. The increase is due mainly to new projects into new investments in software and license. Net financing income totaled ILS 2.6 million compared to the financing income of ILS 4 million in the same quarter last year. The increase is due mainly to a decrease in the balance of deposits and to decrease in gains from marketable securities. Let's go on to Slide 19, where we can review our financial position at the end of Q3 2025. Our equity totaled ILS 599.4 million. Our adjusted equity includes deferred income for listing fees and represents 76% of the adjusted balance sheet, excluding open derivatives position balances. We had ILS 429.9 million in cash and investment financial assets. The balance of the bank loan totaled ILS 101.4 million. The surplus equity, other regulatory requirements totaled ILS 500 million compared to ILS 627 million at the end of 2024. The decrease in surplus equity is mainly due to the ILS 202.4 million used for the buyback of the company's shares in the first quarter. The surplus liquidity regulatory requirements totaled ILS 225 million compared to ILS 172 million at the end of 2024. The increase in surplus liquidity is mainly due to the increase in the EBITDA and investment in test technological infrastructure. I will continue with Slide 20, where we can review our Q3 cash flow highlights. Cash flows from investing activities resulted in negative cash flows of ILS 2.9 million compared to negative cash flow of ILS 3.7 million in the same quarter last year. To share with you, mainly to a decrease in investment in property and equipment. Cash flows for financing activities resulted a negative cash flow of ILS 13.1 million compared to a negative cash flow of ILS 14.8 million in the same quarter last year. The change is due to the ongoing payment of a bank loan. TASE free cash flows increased by ILS 32 million compared to the same quarter last year and totaled ILS 61.9 million. Increase was due mainly to the increase in the EBITDA. In summary, TASE record breaking performance this quarter is a clear indication of our strong foundation and our commitment to continue to go. And with that, I will return the call to moderator to come back at the Q&A. Operator: [Operator Instructions]. Ittai Ben-Zeev: We got a message from Jefferies from the Research Analyst that he wants to ask questions. Do you see him in the queue? Operator: I don't see in the queue, and I don't see him on the line. Ittai Ben-Zeev: He is on the line. He just -- he text us it. Because we see him on the line. Dan, can you hear me? Daniel Fannon: Can you hear -- I'm here. Are you guys there? Ittai Ben-Zeev: Yes, we are here. I don't know what happened, but -- good morning. Daniel Fannon: Yes, yes. So I guess just to start, Ittai if you could just expand upon within the index and ETFs, and so that would be helpful. Ittai Ben-Zeev: Dan, sorry. There was a poll, so I didn't hear the first couple of sentences, if you can please just repeat the question. Daniel Fannon: Oh, sorry about that. Just on the new issuance activity, both from the corporate side in terms of new listings plus within ETFs as well as indexes. Just wanted to talk about just the pipeline of what's happening and how to think about where things sit today and also going into next year. Ittai Ben-Zeev: Sure. So what we've been seeing in our market that there are some companies, especially from the real estate sector, they start with issuing bonds which is a way to get to know these run institutions and to start understanding some about disclosure, now it's happening. And after a time, when they issue bonds, then they flow the equity. It doesn't mean necessarily that they will do so. But we did see in the past couple of years, some companies that started with the bonds and then switched to equity. On top of it, I think that more and more companies understand the full value proposition we bring to them in terms of getting loans through the capital markets and it's a relatively easy process. And as people expect that at some time, hopefully soon, interest rates will start going down in Israel as well. We've been seeing activity in bond segment as well, even though we've seen much more money coming in, in the past year into our equity ETF which, as I stated before, also because of the performance of the leading indices, clearly, it was a positive factor. Daniel Fannon: Understood. That's helpful. And then just in terms of -- you gave some stats in your release and on the call around foreign inflows as well as retail inflows in terms of the increase you're seeing -- can you talk about where you think you are in the, I don't know, opportunity set for that? And how -- what you're doing to increase those contributions as you think about that opportunity going forward? Ittai Ben-Zeev: Right. So as you know, years ago, we did a bunch of changes in order to facilitate and build the right infrastructure to support the future growth. I think what happened, especially in the past year that in terms of global investors that have a lot of money to invest outside of the U.S., and they compare Israel to many other companies. They see the strong fundamentals of our economy. They see the way we performed and the resilience that we've demonstrated, and they see the performance of our leading indices. I think that both from the international and of course, the retail where we started very low. And even though we grew substantially in the past year, every benchmark that we are doing to other western markets, we still see a very significant growth potential. There's still huge amount of money they're just sitting in the cash accounts of the bank. And by the way, the banks are also now paying more and more attention to retail participation and they're doing more marketing and PR in terms of getting retail to invest through them and not through the brokers who are the non-banks, we actually see I think for the first time in Israel a real competition, which is clearly something that we've been waiting for. So the way I see it, we still have a very long way before we are a mature market, both from the domestic and from the global. And I would say that part of what we are trying to get a better sense with respect to our index business, is how we can get a better global distribution because still a lot of the leading U.S. brokers are not digitally open to invest in TASE equities. And we know because we conduct also some Q&A with American investors, and we know that there are a growing demand for getting more exposure to our leading companies and we are constantly looking for ways to get better distribution for public companies. So honestly, I think it will take a few years on both aspects. Before we can be like what you call a mature market. And also, I hope and believe that the transition to Monday to Friday will also be very positive in terms of how global investors are looking to invest in our market. Daniel Fannon: Great. That's super helpful. And then, wanted to get a little bit of an update on the market-making program that you've announced, and you said in your prepared remarks another bank joining. And is there a way to discuss what the tangible impacts to velocity or volume or turnover in the context of what's happened subsequent to this program being instituted and how to maybe even think about that going forward? Ittai Ben-Zeev: Yes. So in Israel, part of the story to build the market and get the pie much bigger is an educational process with some of the Israeli public companies about the importance of it and to take the best elements from other global exchanges. So it was not easy, but eventually, we got to 300 companies that are part of this program, which is very, very important of building IR and how this whole thing is working. And on top of it, we managed in the past few months to get four big companies, three of them, the three largest banks and now Bezeq to actually pay more money to market makers. And the fact that it's been successful and why we believe it, it's just a question of time before more and more companies will join because the steps show that it brings more trading to the company, and it narrows the spreads. So I can tell you that even though we've been only a few months running this program is already a big success. We invest a few millions of shekels in supporting this program, and we are very happy from the outcome. We also did AI in terms of the English translation of biggest public companies. And we believe that over time, liquidity will become better in our market, more English report, and it will help to get more and more international investors. So overall, we are very happy from the results so far that we see. And we analyze each company. So we know on a daily basis, weekly basis, monthly basis, once the percentage of the market maker out of the total trading of the company. Daniel Fannon: Got it. Okay. And then another just follow-up here around expenses and margins. Clearly, the margin profile continues to improve. And I think you've said publicly before that you think you can, over time, get to some of the global peers, but we've seen a really nice step-up in this year so far. As you think about normalization of, I don't know, things like marketing or maybe areas where you're underinvesting that might need to pick up and might maybe stall or slow down that rate of margin expansion if that is true. Ittai Ben-Zeev: I don't see anything that should -- which is under invested in the company. We do anything we can, we believe it's crucial to foster and support this growth. As I stated in the past, there is no fundamental reason why this company should not continue to grow over time. And as I mentioned before, even though we are focused on the double-digit growth, we are always remain very focused on the expense side. I think that we've been growing in the past years on the nontransactional items. But clearly, this year has been a very successfully in terms of trading volumes. And because of the nature of the business, you see the results because the penetration of the retail and also global investors, is not as high as we expect. And because we still have some services and products that have been -- haven't been deployed fully yet I believe that we will continue to grow in the next few years. So nothing that should hold up in -- with that respect. Operator: [Operator Instructions]. There are no further questions at this time. This concludes the Tel-Aviv Stock Exchange Q3 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Thank you for standing by. Welcome to PodcastOne Q2 Fiscal 2026 Financial Results and Business Update Conference Call. [Operator Instructions] I would now like to turn the conference over to Ryan Carhart, Chief Financial Officer. Please go ahead, sir. Ryan Carhart: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to PodcastOne fiscal second quarter 2026 business update and financial results conference call and webcast. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. On our call today is Kit Gray, President and Founder of PodcastOne; myself, Ryan Carhart, Chief Financial Officer. I would like to remind you that some of the statements made on today's call are forward-looking and are based on current expectations, forecasts and assumptions that involve various risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of the company, including expected future financial results and expected future growth in the business. Actual results may differ materially from those discussed on this call for a variety of reasons. Please refer to PodcastOne's filings with the SEC for information about factors which could cause the company's actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today in the company's earnings release, which is posted on its Investor Relations website. The company encourages you to periodically visit its Investor Relations website for important content. The following discussion, including our responses to your questions, contains time-sensitive information and reflects management's view as of the date of this call, November 11, 2025, and except as required by law, the company does not undertake any obligation to update or revise this information after the date of this call. I'd like to highlight to investors that this call is being recorded. PodcastOne is making it available to investors and the media via webcast, and a replay will be available on PodcastOne's IR website in the Events section shortly following the conclusion of the call. Additionally, it is the property of the company and any redistribution, retransmission or rebroadcast of the call or the webcast in any form without the company's expressed written consent is strictly prohibited. Now I would like to turn the call over to PodcastOne's President, Kit Gray. Kit Gray: Thank you, and welcome to our fiscal second quarter 2026 Earnings Call. As a reminder, we are not on a calendar reporting year and our fiscal year 2026 starts on April 1st. Today, I'll provide an overview of PodcastOne, share key highlights from the quarter and discuss how our AI-powered platform continues to drive innovation, growth and monetization across the network before turning the call over to Ryan for financial results. Finally, we'll open it up for Q&A. We're thrilled to report a strong fiscal second quarter, demonstrating the power of our AI-driven platform to scale revenue, expand audience reach and support our creators in delivering outstanding content. PodcastOne continues to stand out as the leading pure-play podcasting platform in the public markets. Our vertically integrated approach from talent, development and content creation to distribution, analytics and monetization is strengthened by advanced AI tools that enhance efficiency and performance across every aspect of our business. Our AI toolkit is at the heart of this growth. Flightpath leverages predictive analytics to optimize profitability. Booster powers our advertising management, including a proposal recommendation engine that scales our ad revenue efficiently. Adobe Audition ensures superior audio quality through AI-driven noise and speech cleanup. OpusClip turns long-form video into shorts with a single click, boosting audience engagement across platforms. We also continue to attract high-caliber creators who recognize the strength of our platform. One of our recently acquired shows shared when the host asked ChatGPT, which podcast network would be the best fit for her show, PodcastOne was the top recommendation. A great example of how our reputation and AI-driven innovation are resonating across the industry. Momentum remains strong and meaningful growth across multiple revenue channels. Pod Roll, our dynamic ad marketplace generated a 71% increase, which nearly tripled since last year, underscoring its rapid adoption and scalability. This is now a 7-figure revenue generating tool for our podcast. Our creator monetization initiatives continue to perform exceptionally well. Adam Carolla subscription and video channel spanning YouTube, Rumble and Apple Plus rose 51% from last quarter, highlighting strong audience engagement and demand. Overall, we achieved a record high total revenues for the quarter, marking a significant milestone for PodcastOne. Additionally, programmatic and Amazon's ART19 revenue saw a 14% increase from Q1. Combined, the growing strength of our ad tech stack, demand from brand partners and growth in our monthly capacity moved PodcastOne to a higher revenue tier. PodcastOne continues to attract high-profile talent and shows. This quarter, we celebrated Adam Carolla's record-breaking 4000th episode featuring Jay Leno. Other notable guests across the network included Bill O'Reilly, Amanda Knox, Mel Robbins, Charlie Sheen and more. We also expanded our content portfolio through strategic partnerships and acquisitions. Including a new collaboration with Media Giant BuzzFeed on a brand-new original podcast series, Phone a Fangirl and the acquisition of Beach Too Sandy, Water Too Wet and exclusive sales rights to Notsam wrestling. Apple Podcast also selected Pop Apologists for their Creators We Love campaign, a strong recognition of the quality and impact of our content. Our platform empowers creators with end-to-end support, enabling them to focus on producing exceptional content, while our AI-enhanced tools drive discoverability, audience growth and monetization. From studio access and editing to distribution and marketing, combined with a data-driven sales approach, we ensure both creators and advertisers maximize value on our network. Operationally, this quarter was highly productive. Our AI-powered tools enable more efficient production, editing and distribution, allowing our creators to focus on high-quality content. Video consumption continues to grow, supported by an expanded distribution across YouTube, Spotify, Apple Plus, TikTok, Rumble and Substack, popular titles like Bitch Bible, Fool Coverage, Pop Apologists, Some More News, The Adam Carolla Show and You're Welcome experienced significant engagement, highlighting the ongoing demand for video-driven podcast content. Now before going further, I'd like to turn the call over to Ryan, our CFO, to walk through the financial results for the fiscal first quarter. Ryan? Ryan Carhart: Thank you, Kit. As Kit mentioned at the beginning of the call, I want to again remind listeners that our fiscal year starts on April 1st. Revenue in the fiscal second quarter of 2026 was $15.2 million. Operating loss in the fiscal second quarter of 2026 was $975,000 compared to an operating loss of $1.7 million in the same year ago quarter. This was primarily driven by an increase in programmatic revenue and lower costs and operating expenses. Net loss in the fiscal second quarter 2026 was $975,000 or $0.04 per basic and diluted share compared to a net loss of $1.7 million or $0.07 per basic and diluted share in the same year ago quarter. Adjusted EBITDA in the fiscal second quarter of 2026 was $1.1 million compared to adjusted EBITDA loss of $403,000 in the same year ago quarter. The change in adjusted EBITDA was primarily driven by higher revenue and talent revenue share paid in the form of shares. We ended the fiscal quarter with zero debt on our balance sheet and $2.8 million in cash and cash equivalents as of September 30, 2025. As we look ahead, I'd like to also briefly touch on guidance, reiterating expected fiscal 2026 revenue of $55 million to $60 million in fiscal 2026, adjusted EBITDA of $4.5 million to $6 million. Now I'd like to turn the call back to Kit for closing statements and questions from the audience. Kit Gray: Thanks. Looking ahead, we're excited to build on this momentum with several initiatives that leverage our AI capabilities to maximize impact and reach. From predictive ad analytics with Flightpath to streamlined ad management through Booster, our platform is continually optimizing operations and outcomes for creators and advertisers alike. We're also focused on expanding our audience through high-profile events and partnerships. In addition to our collaboration with BuzzFeed and key acquisitions, we are actively exploring opportunities to bring our creators to new audiences and continued strengthening PodcastOne's position as the leading destination for podcast, talent and innovation. To close, I want to recognize the hard work and dedication of our team, our partners and our creators. PodcastOne thrives because we stay focused on what matters most, compelling content, strategic monetization and trusted relationships with talent and advertisers. With our AI tools and creator first approach, we are well positioned for continued growth deeper audience engagement and expanded monetization opportunities in the months ahead. We remain proud of our achievements this quarter and confident in the path forward. With that, we'll now open the line for questions. Operator? Operator: [Operator Instructions] And your first question comes from the line of Sean McGowan with ROTH Capital Partners. Sean McGowan: A couple of questions. Let me start with a few, Kit. Can you -- sometimes these podcast rankings numbers are a little, I'd say, slippery, but like the growth in the audience is sometimes not consistent across the time period. So can you parse out for us how much of your ranking success? I think you right now at #9. How much of that is real growth versus consolidation among competitors around you? Kit Gray: Well, it's a good question. The rankings are really tricky. It's really up to who as a podcast network subscribed to the service, what show is subscribed to it as well. So not everyone is included, and all the different rankers that are out there, we just had a really good relationship with Podtrac over the years, and we work with them. And I think it's interesting the timing always is different, right? Like as NFL rolls out, typically the sports network, the strong moves by Barstool Sports and so forth have good growth, and for us being more of a -- on the housewives and reality TV stuff when we see a bump when new Vanderpump shows start up or Dancing with the Stars or things like that. So it's very much cyclical on that. There's definitely been some consolidation in terms of podcast production in terms of new shows being launched and dead shows. So we're constantly monitoring our network and kind of watching what other networks are doing on that side of things to make sure we're kind of all aligned. But the rankings at the end of the day, they're important, but not really -- a real reflection of actual growth. When I look at things, I look at revenue growth, I look at sellout rates, I look at CPMs, and that's where -- you've seen the great financial results there. I mean we've grown. And I think each impression that we've had is more valuable, and I think that's how we kind of rate ourselves or score ourselves in terms of performance. Sean McGowan: That's helpful. And I noticed -- it seems like you did a great job of calling out the various ways that AI is helping you across some multiple fronts. So I guess the question I have is how much of that is stuff that you weren't doing before that you're doing now as opposed to you didn't [ bring ] in a while, and you're just calling it out now. So like how many of those tools have only recently been applied versus maybe they were there already, and we just didn't hear about it. Kit Gray: Yes. I think we'd all agree that over the last 12 months, AI is just drastically changed. What people were doing a year ago, they're not doing now. And even the the things that seem to be working, they've been enhanced tremendously over the last 6, 12 months. So we are doing a lot more with the ones that I highlighted, and there's others that we do work with as well. We're constantly talking to them about the enhancements that they're bringing to the table to make their products better or even new services. We really get approached almost like on a daily basis with other AI like companies that are designed to help us. Now will they? Do they? That's really the question. So what we do as an industry or as our network, and what gives us the advantages being a small boutique company that can bring these new technologies on, we test them. We test them with some of our shows and then we activate if they work. And that has to do with the operational efficiencies, that has to do with production efficiencies, marketing and sales and really every single level. So we're constantly looking at new things. These are ones that have been really useful for us, and we're doubling down if not tripling down on them. And we'll be continuing to add more over time. Sean McGowan: That's helpful. And then if I could switch to Ryan for a bit. So a couple of questions about expenses. There were some that were higher than I thought, some were lower than I thought. And I just wanted to know if there's anything that you could point out that might be unusual or onetime that would have driven that. For example, sales and marketing was quite a bit lower than I thought, quite a bit lower than it was last year. Was there anything unusual that brought it down, or should we expect this kind of level, similar G&A was actually higher. Was there anything unusual driving that up? And same question with -- I mean you've been talking about stock-based comps. So I guess we'll be at that level. But is there anything kind of in this quarter that is not indicative of what we should expect going forward? Ryan Carhart: Yes, Sean, thanks. Good question. For sales and marketing, what you're seeing this quarter is what we expect going forward. So very modest increase potentially for things we're doing here in Q3 when the volume picks up, it will go up a little bit, but it's sales and marketing is pretty indicative of what you're going to see going forward. G&A quarter-over-quarter is not a huge change. I think the change that you're seeing is additional stock comp that comes through, right? So that's the one thing that's flowing through the G&A when that's a little bit higher as we have some new awards that are a little bit higher. So you'll see that come through, but it gets adjusted out through adjusted EBITDA. This last quarter was a little higher on the special fees side as well. And so you should see that part of it come down. So it will be a little higher because of the stock comp, but lower in the future quarters because professional fees related audits and all the things between on the professional side were a little higher during Q2. Sean McGowan: Very helpful. Can you tell us now how much of the G&A. -- how much of the stock-based comp was as reflected in the G&A line? Ryan Carhart: Let hold on one sec. Can I give you that break out in a bit. Operator: The next question comes from the line of Leo Carpio with Joseph Gunnar. Leo Carpio: A couple of quick questions I had about the quarter. I just want to walk through them. First, can you talk about the competitive environment through the higher rankings. Are you now in a better position to recruit higher-tier talent? And how helpful is your stock as a currency in those negotiations? Kit Gray: Yes. We've been pretty competitive. You guys have seen our growth in terms of shows and content. We've got a huge slate of shows that we're currently pitching. And yes, I think -- to me and my personal opinion is that we're known as a really good solid company for people to come, work with us, but not just a year or two years, but to really grow and build the business around it. One of our shows that just came on to this at ChatGPT, and what podcast network is the best network for them to join, and we came up. And I think it's just super cool, right? And I think that people out there are seeing the Jordan Harbingers, the Adam Carollas, The LadyGangs, The Kaitlyns, the A&Es, the Stassis that are just coming over from other competing networks and seeing how well we're doing for them. And it's not necessarily a spot where we're asking them to do more, but using our resources and talented staff and tech stack and AI development to grow their shares not only in an audience states, but also monetarily for that same amount of content. So it's been great in that sense, I think we have that reputation out in the street, not only in the shares individually, but with the agents. So really competitive. It helps to be in the top 10 on Podtrac. It helps to be where we're at, it helps to be growing. And the stock side of things, is a unique tool that really no one else uses like we do. And it gives everybody this swim in the same direction kind of feel when we run promos on shows, they're getting equal and more value in return, but they're also -- they want to see these guys succeed. Everybody succeeds, then we all succeed. And that's the design by including them on the stock-based compensation. And that's what's really exciting. And I think it just far outweighs what we have to offer than other people have to offer as well. So it's a good spot to be. Leo Carpio: Okay. Could you share some details on the expanded Amazon partnership? I saw in the press release you went from about $60.5 million to a $20 million annual run rate. I mean, what are the expectations in terms from Amazon's perspective in terms of downloads, activity? Any details you can share? Kit Gray: Sure. No problem. The design of that was as we grow the deal grows, right? So as we're able to hit different impression thresholds to offer Amazon's marketplace, they give us more of a minimum guarantee. So we have been able to hit some of those new thresholds in really short order. So that's really exciting for us. And that has to do with bringing on new programming, having our existing programming, get more growth in terms of audio downloads and listenership, but also promoting backlog episodes and classic emphasis as people go back and listen to these great episodes, they have the ability to monetize it. So we've just seen tremendous growth there. And I think if you'd ask Amazon, they're seeing more demand on the podcasting platforms and different ways to reach advertisers using that qualitative audience, right? People really see the value and the strength in the podcast listeners. And so as we bring them more, they're able to get more sellout rates, higher CPMs and so forth. So it's been a great partnership so far, and we're talking to them almost daily on new things that we can do, and there's some exciting stuff color. Leo Carpio: Okay. And can you discuss the advertising environment, if I understand your business model, the holiday season is going to be a -- is a major driver of ad revenue for your podcast talent? And just seeing what's the early pulse check right now you're seeing? Kit Gray: Sure. So I was actually just looking at our upcoming -- every week, we look at our pacing reports just to see how things are going in the quarter. Our direct sales led by Sue McNamara and our 12 salespeople across the country. And these have relationships with brands, integrations in our shows. This doesn't have anything to do with the Amazon or even the programmatic marketplaces which are really driving some significant growth. That is at an all-time high for us as we are in this quarter. And we're still fighting for every dollar, but is looking really strong in terms of us having a direct sales great quarter. And what that means for us is maybe less impressions available for the programmatic marketplaces and even ART19 Amazon, but much higher CPMs, right? So when we look at the waterfall, it's always our direct sales has the highest CPMs, and then we got in ART19 Amazon deal, and then the programmatic marketplace, and they're tiered, right, based on priority and what's available to sell. So seeing our sales team kill it as they are I -- it's really good for the business, and it's really good for us. And again, we're a company that goes well past stops and dots, and I think that's what is shown with our ability to put these integrations and work with our production team to make sure advertisers are really happy, and that's what we do best. So we're excited about thanks so far. Leo Carpio: Okay. And then my last question is about the revenue guidance you raised. What needs to be in place for you to achieve the high end of the guidance, that is in the $59 million, $60 million range. Is it a factor of -- a function of more shows on the platform, better revenue, just more downloads? Kit Gray: Yes, it's really keep doing what we're doing, right? Keep getting more and more consumption of our programs, current programs, new programs coming on. Our sales teams continue to do a great job. And then the ART19 Amazon deal continuing to do what it's been doing. And if we keep going in that direction, we'll get on the high end of it. So I think we're doing everything that we can to be there. And as always, there's a couple of big deals that are there, whether it's content or ad deals that we need to close, and we'll see how that those go. But I'm really excited about our opportunity at the high end of that at least. Operator: [Operator Instructions] And I'm showing no further questions at this time. I would like to turn it back to Kit Gray for closing remarks. Kit Gray: Sorry about that, I was on mute. But I just wanted to say thank you, everyone, for your time today, and keep an eye out for PodcastOne news and listen to our podcast. I hope everyone has a safe holiday season as we approach Thanksgiving and the rest of the holidays throughout the remainder of the year. Thank you so much, and have a great day. Operator: Thank you. And this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to Infinity Natural Resources Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greg Pipkin, Senior Vice President, Corporate Development and Strategy. Sir, you may begin. Gregory Pipkin: Thank you, operator. Good morning, and thank you for joining our third quarter 2025 earnings results conference call. With me today are Zack Arnold, President and Chief Executive Officer; and David Sproule, Executive Vice President and Chief Financial Officer. In a moment, Zack and David will present their prepared remarks with a question-and-answer session to follow. An updated investor presentation has been posted to the Investor Relations portion of our website, and we may reference certain slides during today's discussion. A replay of today's call will be available on our website beginning this evening. I'd like to remind you that today's call may contain forward-looking statements. All statements that are not historical facts are forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control that could cause actual results to materially differ from these forward-looking statements. Please review our earnings release and the risk factors discussed in our SEC filings. We will also be referring to certain non-GAAP financial measures. Please refer to our earnings release and investor presentation for important disclosures regarding such measures, including definitions and reconciliations to the most comparable GAAP financial measures. Now over to Zack. Zack Arnold: Thank you, Greg, and welcome to Infinity Natural Resources Third Quarter 2025 Earnings Call. We're pleased to share our quarterly operational and financial performance with you today, along with an overview of our ongoing development program and our perspective on the remainder of 2025. Starting with the highlights from the third quarter. We delivered exceptional results that demonstrate our continued momentum across the Appalachian Basin. We achieved 39% total production growth year-over-year to 36.0 MBoe per day during the quarter. This included 70% growth in natural gas production compared to the third quarter of 2024, reflecting our increased focus on natural gas development during 2025. Our continued execution is driving operational momentum. We have experienced strong results on our recent projects, including our best producing projects in each of Ohio and Pennsylvania to date. Most notably, we achieved a single day net production record of 47.9 MBoe per day in October. This milestone reflects the consistent execution and commitment to operational excellence that has driven several new company records. Operationally, we had yet again a very strong quarter, demonstrating our consistent execution throughout 2025. In total, we placed 10 wells into sales during the third quarter comprised of 6 oil-weighted wells in the Ohio Utica and 4 natural gas wells in the Pennsylvania Marcellus. We drilled 93,000 lateral feet and completed 442 stages across 6 wells during the quarter. We continued to emphasize extended lateral development with an average well length of nearly 15,000 feet during the quarter. On the drilling side, our team improved efficiencies on casing running speed, decreasing the average time by more than 25%. On the completion side, we set a new record for stages pumped in 24 hours on one of our projects in Guernsey County, exceeding 16 stages in a 24-hour period, reflecting both the quality of our completions design and our team's operational expertise. On the strategic front, we continue to have success in the ground game acquiring approximately 3,000 net acres during the quarter across approximately 350 transactions, increasing working interest in our active development projects and enhancing future projects. These working interest additions are among the highest returning dollars we invest as we acquire more of each project we are already executing. Looking at our activity by state. In the Ohio Utica, we drilled 3 wells and completed 377 stages during the quarter, all in Guernsey County. We also turned into sales a 57,000 foot 3-well pad early in October resulting in the first production from our Muskingum Watershed Conservancy District acquisition we made earlier this year. In the Pennsylvania Marcellus, we drilled 3 wells and completed 65 stages. Specifically, in July, we began drilling operations on the 50,000-foot 3-well natural gas project that we elected to advance early in the second quarter. We are excited to announce that we plan to turn these wells to sales in the coming weeks representing approximately 6 months from FID to revenue generation. Taking a step back to look at 2025 as a whole, our team's execution and strong well performance has allowed us to increase our production guidance for full year 2025 to 33.5 to 35 MBoe per day, from 32 to 35 MBoe per day. We are also updating our full year total development capital expenditure guidance to a range of $270 to $292 million, which is inside the higher end of our combined D&C and midstream CapEx guidance. We are on track to have turned to sales 23 wells this year, 12 natural gas weighted wells, and 11 oil-weighted wells. This nearly 50-50 split is slightly more gas-heavy than our expectations coming into the year, but demonstrates the unique optionality our strategic positioning in Appalachia provides. With a balanced portfolio across oil-weighted Utica assets in Ohio and natural gas-weighted assets in Pennsylvania, we can adapt to varying commodity price environments and execute projects that maximize shareholder returns. The operational momentum we've built throughout 2025 combined with our strategic asset positioning across both oil and natural gas assets provides a solid foundation as we look ahead to 2026. The strength of our balance sheet remains an invaluable asset, and we will continue to be thorough and thoughtful as we evaluate organic and inorganic growth opportunities. With that, I'll turn the call over to David for a more detailed review of our financial results. David Sproule: Thank you, Zack. Our third quarter results speak directly to the operational and financial execution during the period. As Zack noted, we delivered a 39% increase in net production to 36 MBoe per day year-over-year. Moreover, as noted earlier, our natural gas production increased 70% year-over-year to 138 MMcf per day for Q3 2025. We anticipate further production growth during the fourth quarter, driven by additional turn in lines in the period. While driving production growth, we also continue to drive cash operating costs lower, the $6.09 per Boe from $9.42 per Boe in the prior year's quarter. As expected, our LOE and GP&T per unit metrics continued to decline as we bring on additional natural gas volumes in Pennsylvania. As always, we are focused on EBITDA generation and capital efficiency, delivering best-in-basin adjusted EBITDA margins and capital efficiency when compared to our Appalachian peers. We generated adjusted EBITDA of $60 million during the quarter and an adjusted EBITDA margin of $18.12 per Boe, again a top-tier result compared to our Appalachian peers. The shift towards natural gas weighting continues to improve our operating cost structure while maintaining leading margins. We expect per-unit costs will continue to decline as we accelerate Pennsylvania production. On capital deployment, we invested $95 million into our business during the quarter, comprised of $83.2 million in development capital expenditures and $11.8 million in land acquisitions. Again, we anticipate capital spend to decline in the fourth quarter. As Zack noted, our land acquisition strategy continues to deliver results, with approximately 3,000 net acres added during the third quarter and approximately 4,300 net acres acquired year-to-date. What makes these acquisitions particularly valuable to Infinity is that they increase our working interest in ongoing development projects while expanding our future drilling inventory. From a practical standpoint, the increase in working interest on development wells has effectively added approximately one net well to our 2025 development program. Our development capital spend for the calendar year is anticipated to be within our prior 2025 guidance. This represents more value for investors at the same spend. Turning to the balance sheet, our leverage profile remains exceptionally strong, with approximately $71 million in net debt. On October 1, we expanded our borrowing base yet again to $375 million, providing us with $304 million in liquidity. Turning to 2025 guidance, we are raising our full-year net daily production guidance to 33.5 to 35 MBoe per day, from 32 to 35 MBoe per day. This is driven by strong well performance and operational successes across our portfolio. We are updating our full-year total development capital expenditure guidance to a range of $270 to $292 million, inside the higher end of our previous combined D&C and midstream CapEx guidance of $249 to $292 million. Again, we are inside the 2025 CapEx guidance while delivering more net wells for our investors. Lastly, our Board of Directors has authorized a $75 million share repurchase program, reflecting confidence in our underlying long-term value for our business, the strength of our balance sheet, and the undervalued nature of our stock price relative to our performance. With that, over to Zack to close out our opening remarks. Zack Arnold: Thanks, David. To wrap up, our third quarter results reflect the strength and strategic value of our diversified Appalachian operations. Our success this quarter highlights what makes Infinity Natural Resources unique, our proven ability to optimize development across both our Ohio Utica oil properties and our Pennsylvania Marcellus natural gas assets. We demonstrated this flexibility by successfully executing our accelerated natural gas program while maintaining strong momentum on our oil development, positioning us to turn in line 23 wells in 2025 with a near 50-50 gas-to-oil production split. We are exceptionally well-positioned to sustain our active development pace into 2026 while continuing to deliver strong returns for our shareholders. Operator, you may now open up to Q&A. Operator: [Operator Instructions] Your first question today comes from the line of Tim Rezvan from KeyBanc Capital Markets. Timothy Rezvan: First of all, I wanted to dig in with natural gas, looking more attractive. I know you've sort of pushed back plans to test the deep Utica to 2026. There's been strong comments from public peers. Can you talk about any plans you may have to test that into what's looking like a stronger natural gas price environment? Zack Arnold: Sure. Thanks, Tim. I'll take that question. This is Zack. We haven't announced anything specific to the development plan of the Deep Dry Gas Utica, and we haven't given any guidance on our 2026 development program at all. As we continue to plan that, that will be a part of our development of that plan. We are always evaluating what other operators are doing, and we think there's continued momentum for the Deep Dry Gas Utica in our South Bend area, and we're excited about that. It is important to remember that when we drill our first Deep Dry Gas Utica well, it will be just one well of many spuds in that year, and we'll be excited about it, as we are excited about every project we develop. Timothy Rezvan: Okay. Okay. That's fair. We'll stay tuned. We'll stay tuned. I just wanted to dig in, make sure I heard you correctly, Zack. You said that 3,000 net acres that you added, I believe you said that's 350 transactions. I don't know if I heard that correctly, but you've added 4,300 year-to-date. Can you talk to kind of what the ground game, how that's evolving? I know it may be a little more challenging time to pursue sort of larger opportunities, but you talk about maybe how that's progressing and how you see that into next year. Zack Arnold: Great question. I want to maintain the statement that we are focused on both, the ground game and larger scale transactions. To answer your ground game question, we added 3,000 acres over the 350 transactions. I think that is an incredible testament to our team's ability to stay focused in areas where we see value. I think we have a strategic advantage by being located in the basin that gives us a unique opportunity to be in the neighborhoods and in the communities as we go out and talk to folks. Those transactions that we closed and those acres that we added additional working interest to projects that are incredibly meaningful to us. Projects that we are already developing at the back half of this year, we were able to increase our working interest due to the work that folks did. Really excited about that work, and we'll keep doing those ground game attacks in both areas, in Ohio and in Pennsylvania, and we'll keep looking at the larger scale M&A also. Operator: Your next question comes from the line of John Freeman from Raymond James. John Freeman: Nice to see the share repurchase plan, especially at these valuations. Just maybe how y'all think about the trade-off between share buybacks versus continued kind of ground game acquisitions. David Sproule: Yes. John, this is David. I'll take that one. I think there's a couple of points on that. I think first and foremost, the share buyback will not impact our asset development or acquisition strategies at all. I think that's very much a testament to the team and the capabilities that we have and the assets that we're developing here. The second thing I'd say is the share price is significantly undervalued, and we're being opportunistic here given our long-term view of the business and our focus on allocating capital and maximizing shareholder returns at every step. It's a good opportunity for us, and we're excited about executing that alongside of all the other assets that we're developing. John Freeman: Got it. And then my follow-up question, it looks like the amount of natural gas hedges kind of went down each quarter going forward. Maybe can you just speak to that decision? David Sproule: Yes. We've been pretty well hedged on natural gas. The decline there on natural gas hedges as a percentage, is that your question, John, that a percentage of total natural gas bought? John Freeman: It looked like, David, at the absolute like volume amount that you all have hedged versus your prior update had gone down the rest of 3Q, 4Q and then also for full year '26. Just the actual volumes that you all have gas hedges on, it looked like that went down. David Sproule: Sure. We can circle back with you. I think first and foremost, we're pretty well hedged on natural gas through 2025, as you guys can see. I think the change in our percentages hedging has continued to highlight the strong well performance that we're having in Pennsylvania. Our strategy overall with regards to hedges, as we've kind of talked about at length before, is to really look at this kind of return on investment that we get on these projects and lock in some of those at an FID, and then we have sort of uptick those when we have the completion crews come. We'll continue to execute on that plan there, but we're pretty well hedged through 2025 in particular on natural gas and then have great exposure to natural gas uptick in the coming years. Operator: Your next question comes from the line of Scott Hanold from RBC. Scott Hanold: Yes. I appreciate the fact that it's probably too early for 2026 guidance, but I don't know, Zack, could you kind of frame it up for us a little bit? Should we think about this kind of 1 to 1.5 rig pace you ran this year as a reasonable kind of trajectory in how you think about oil versus gas mix in general? Just help us frame up for what that means on the capital side too with the development efficiencies and everything else you're seeing. Zack Arnold: Sure. I'll start by saying we aren't giving soft guidance yet for what 2026 will look like. We will provide guidance in Q1 to let everybody understand how we're approaching next year in our capital allocation and our pace of business. To kind of back up from that and just kind of give some framework for folks to be able to think about what our business could look like, though, as we still formulate all of our development plans. If we ran 1.2 rigs in 2025, I think you should expect that we remain at least that active in 2026. We are providing splits to our capital allocation right now between gas or oil, but we have very attractive returns in both commodities, and I would expect us to be active in both states next year. Scott Hanold: Okay. Got that. And then just to clarify too, I think you said you all reached 47.9 MBoe per day in October. Just could you clarify that? Was that a peak rate or was that an average? Just help me kind of square the circle with, I think you said you expect to see some growth through the fourth quarter. I think guidance for something around 43 MBoe a day. If you were up around 48 MBoe, just kind of help us walk through the time of the tills and natural declines coming off of some of the pads you've done. Zack Arnold: Sure. Specifically, that number was a daily spot rate that we reported there. We have six wells that we will be turning in line this quarter. Three of them have already happened. That number corresponded with those wells coming online. We have three additional gas wells that will come online here in pretty fresh time here in the next couple of weeks. We do not give quarterly production guidance, so I cannot really help you specifically get to what this quarter is going to be, but I just point you back to the production range that we set. I think those production -- sorry, I was just going to make a comment that we have been very happy with our recent well performance too, and that helps us hit those production records as we go. Scott Hanold: Yes. And just to clarify, am I correct, though, the implied kind of 4Q guidance is around 43-ish, somewhere around there? That if I take your full year or less, what you've done year to date? Zack Arnold: Yes. I don't know. We don't have a specific quarter number because we haven't necessarily spoken about that, but I would just keep you thinking about how the 33.5 to 35 represents our view of production for the year. Operator: Your next question comes from the line of Michael Scialla from Stephens. Michael Scialla: I wanted to ask on your D&C CapEx guide for the year. You took that up at the midpoint a bit. I just want to see how well costs and the pace of development are trending versus your prior expectations. David Sproule: I think a couple of things there. We've been really happy and proud of our operational team. They have not only delivered this year, but they delivered in an expedient fashion. We're kind of seeing some of that come through with the numbers there. Obviously, tariffs affect things, but I would tell you that our dollar per foot basis here is great and actually tracking extremely well to what we anticipated back in March. I think some of the things that you're seeing with a higher level of spend is reflecting a couple of fronts. One is, Zack alluded to this in his comments, that we've added additional acreage and working interests. We kind of noted it in the prepared remarks that we provided. We've effectively added an additional well in that. So as you think about an additional well for us, it's a 15,000-foot lateral. It's a pretty impactful benefit to us from an economic perspective, but also kind of does affect the overall spending channel. The second thing is we have pulled forward some of those natural gas projects and have spent some money to prepare us for 2026 with regards to our infrastructure aspect. You are seeing both of those kind of manifest here. Again, we are delivering better results. We are delivering more effective net wells at the same spend. Michael Scialla: Sounds good. And I know you had some midstream constraints that you talked about last quarter. At this point, are you running into any kind of constraints midstream or otherwise that could impact your operations going forward? Zack Arnold: No. No midstream constraints. We are really excited about the midstream that we are building out on our own for gas assets, as David talked about, spend money there preparing for this year's gas volumes and next year's gas volumes. We are well positioned there. Our near-term development in Ohio is all from pads that are tied into pipeline already. No anticipated midstream issues at all. Operator: Your next question comes from the line of Paul Diamond from Citi. Paul Diamond: Just wanted to touch back on the share buyback and just kind of the strategy around execution. I mean, you stated you think the shares are undervalued. I guess at what point would you lean further in? Is there a marker you have out there, or is it just more relative well or against an internal model? Just how to think about the pace and timing of that, I guess. David Sproule: Yes. Paul, this is David. I think first and foremost, I do not think it is surprising to anybody listening on this call that we think that our shares are undervalued. I do not think we are going to give today any view of where we would opportunistically utilize our buyback authorization, if you will, at this stage. We obviously are really happy and excited about the business that we have, the long-term generation of cash that we anticipate here, and think that the shares are significantly undervalued, and we are just going to be opportunistic about rolling them back into the company. Paul Diamond: Got it. Makes perfect sense. Since IPO early this year and kind of as you have really commenced on that 1, 1.5 kind of drill pace, can you talk about anything that might have either the upside or the downside surprised you about well results versus the original expectations, the decline rates in line, the IPs, EURs, all that stuff? Zack Arnold: I think it's important to note that we've been incredibly spot on with our budgeting of these projects from a CapEx perspective and a production perspective. We've been very pleased with the team's ability to predict and forecast what these wells are going to do. We are really happy with a couple of the recent projects that are outperforming our base type of assumptions. Those are always nice to have, those surprises to the positive. I'll compliment the team that they've done a tremendous job in preparing for the IPO and executing this year at planning our business and putting out a budget that we can meet. Operator: [Operator Instructions] Your next question comes from the line of Nicholas Pope from ROTH Capital. Nicholas Pope: Another question about the share repurchase. I was just curious, and the comment is that it's for Class A shares. I was curious if there was a mechanism for conversion of the Class B shares to be a part of the share repurchase, or do they need to be completely separated in kind of the approval process? David Sproule: I think, Nick, this is David. I think first and foremost, our investors, our legacy investors, I should say, are really bullish on this story for us. I do not think you should anticipate any of that anytime soon. I think with regards to the share repurchase, the program is targeted in around the Class A shares. Those are the economic shares that are trading, obviously. We have about 15.6 million shares that are trading. I think it is important to note at yesterday's close of roughly $11.50, that would be in the execution of a $75 million share repurchase program, that would effectively claw back or repurchase north of 40% of the Class A shares. It is a pretty impactful share repurchase program for us, but again, it is just targeted on the shares that are actively trading in the market today. Nicholas Pope: Makes sense. As you kind of look at that share repurchase and kind of how things are going to progress going forward, is it primarily going to be focused on the free cash flow that the company's generating? I just want to make sure it's not anything as you're going through the development process or spending development capital that this isn't something that's going to increase debt, that it's mostly going to be coming from the generation of free cash flow. Zack Arnold: I think from our standpoint, Nick, none of the share repurchase program will impact the asset development and strategies of the development plans of the company. For us, I think that's the most critical aspect of the company that we have. We have a very strong balance sheet. We intend to maintain a very strong balance sheet. We think that it's a strategic strength of us to utilize that balance sheet, when appropriate and prudent. Again, none of the activities announced with the share repurchase program will impact our ability to execute on our plan. Operator: And there are no further questions at this time. I will now turn the call back over to Zack Arnold for closing remarks. Zack Arnold: Well, thank you very much for joining us today as we shared our Q3 results. We appreciate your time and your interest in INR. Have a great day. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Theodor Daniel: Good morning. Thank you, operator, and thank you all for joining us. Titanium continued to navigate a challenging freight market with discipline and focus for the period ending September 30, 2025. Despite persistent softness across the transportation sector, driven by trade tensions, geopolitical volatility and weaker consumer confidence, our third quarter performance underscores the momentum building across the business. Both our Truck Transportation and Logistics segments delivered positive operating income for the second consecutive quarter. This reflects the impact of the strategic actions we've taken over the past several quarters. On a consolidated basis, we generated $115.7 million of revenue and $8.9 million of EBITDA, supported by continued strength in our U.S. logistics platform and improved operating performance in Truck Transportation. In both segments, we remain disciplined on pricing, customer and industry mix, along with focus on cost efficiency. All of these are key elements of our approach during this prolonged period of market softness. Our Logistics segment, despite considerable headwinds, continued to perform well. Revenue increased 3.3% year-over-year to $62.9 million, driven primarily by continued organic volume growth of 19% across both our Canadian and U.S. brokerage operations. We did see some pricing pressure in transactional freight toward the latter part of the quarter, which tempered the full impact of the volume growth. Even so, underlying demand trends remained stable and our asset-light model continues to demonstrate its scalability and resilience. Our operational and sales teams are working hard to maintain market share and functional margins. During the quarter, we also formally opened our Dallas and Virginia Beach offices. Turning to Truck Transportation. Revenue came in at $53.8 million, down year-over-year as expected, given our deliberate exit from unprofitable lanes last year. EBITDA was $7.7 million with an EBITDA margin of 16.1%. This is now our most efficient trucking quarter in nearly 2 years, and it reflects the benefit of our efforts to streamline capacity and focus on sustainable freight. On the capital allocation front, we remain focused on building financial flexibility, we generated $9.5 million in operating cash flow, up from $7 million last year and ended the quarter with $20.7 million in cash. Importantly, we repaid $8.9 million in debt in the quarter, continuing our deleveraging priority. Our substantially modern fleet requires no rolling stock expenditures over the next year. This will result in below average CapEx for the next 12 months, allowing us to continue our debt reduction efforts. We're operating with discipline, staying focused on what we can control and positioning Titanium for the long term. And with that, I'll hand it over to our CFO, Alex, to walk through the financials in more detail. Alex, over to you. Kit Chun: Thanks, Pat, and good morning, everyone. Titanium continued to demonstrate operational discipline and resilience in Q3 despite ongoing macro headwinds. I'll walk through the consolidated numbers first and then touch on the segment performance. On a consolidated basis, the company generated revenue of $115.7 million compared with $118.4 million in the same period last year. EBITDA was $8.9 million with an EBITDA margin of 8.7%. While margins were modestly compressed year-over-year, the underlying performance reflects continued progress in operational efficiency, customer mix optimization and disciplined pricing across both segments. Logistics continued to be a key growth engine for the company. Revenue in this segment increased 3.3% year-over-year to $62.9 million, supported by steady U.S. volume growth and continued customer engagement across our brokerage network. EBITDA for the segment was $2.3 million, with an EBITDA margin of 4.2%. Similar to last quarter, margins were affected by ongoing geopolitical uncertainty and supply side cost pressures. Despite this, underlying demand trends remain stable and our asset-light model continues to demonstrate scalability, particularly in the U.S. where newer offices are strengthening relationships and gaining traction. In Truck Transportation, revenue for the quarter was $53.8 million, down from $58.1 million last year, reflecting our strategic exit of unprofitable lanes in 2024. EBITDA for the segment was $7.7 million, representing a margin of 16.1%. This marks the segment's third consecutive quarter of sequential profitability improvement. Disciplined pricing and continued efficiency gain across the fleet supported another quarter of positive operating income. Operating cash flow remained strong at $9.5 million, up from $7 million last year, highlighting improved cash conversion and working capital management. Net income from continuing operations per share was $0.01, a year-over-year improvement from a loss of $0.01 per share in Q3 2024. From a capital allocation standpoint, we remain committed to strengthening the balance sheet. We ended the quarter with $20.7 million in cash and repaid $8.9 million in loans and finance lease during the quarter. These actions contribute to further improvements in our leverage position and reinforces our focus on debt repayment. Overall, our capital-light growth strategy, combined with prudent cost management and operational discipline continues to position Titanium to navigate this cycle effectively. We remain focused on protecting margins, enhancing liquidity and supporting long-term shareholder value. With that, I'll pass the call over back to Ted. Theodor Daniel: Thank you, Alex. Overall, our performance this quarter reflects the strength of our operating model and the progress we've made in sharpening our disciplined execution across the business. While freight markets remain challenging and visibility continues to be limited, we are seeing early signs of stabilization in certain regions. As we continue to adapt to our current industry environment, we look forward to more productive market conditions. Titanium continues to operate with discipline, focusing on what we can control. The benefits of our refined operating model are becoming increasingly evident, reflected in positive operating income in both segments for the second consecutive quarter. Titanium continues to operate with a strong foundation and even more efficient cost structure and most importantly, a resilient platform. To conclude, I would like to reiterate that we remain confident in the fundamentals of the business and continue to be focused on operational execution, margin preservation and cash generation. We estimate revenue of $112 million to $117 million and EBITDA percent of 8.5% to 9.5% for the next quarter. As we look ahead, our priorities remain unchanged: protect margins, maintain balance sheet strength and continue executing with discipline across our network. We're not waiting for the market to recover. We are taking proactive steps to ensure that Titanium emerges stronger and better positioned for long-term sustainable growth. With that, I'll turn the call over back to the operator for questions.[ id="-1" name="Operator" /> And before we begin the question-and-answer session, I would like to remind everyone that certain statements made on this call today may be forward-looking. In that regard, please refer to the risk factors and cautionary provisions outlined in the press release issued by the company yesterday as well as the filings made by Titanium on SEDAR. [Operator Instructions] With that, our first question comes from the line of Gianluca Tucci with Haywood Securities. Gianluca Tucci: So it sounds like with the market the way it is that you've had to do some rejigging of routes to adapt to this market. Any color there, I think, would be helpful, Ted. And secondly, like when you think about your asset-based fleet size as it is today, are you comfortable like with the size for this market, these market conditions? Or is there some work to be done there, too? Theodor Daniel: I mean you've got really 2 questions, yes. The first one is kind of rebalancing the fleet given current market conditions. So I know Marilyn would like to answer that. Marilyn Daniel: Yes. I mean we are seeing more domestic work. Cross-border has softened. But we're well positioned with our U.S. fleet and Canadian fleet to sort of balance out the 2 marketplaces between Canada and the U.S. So kind of just -- we work on our domestic U.S. and our domestic Canadian. So that kind of helps us sort of balance off the typical cross-border freight that we were experiencing for many years. So a bit of a change there for sure. And then in terms of the size of the fleet, we're fine for the moment. I don't know, Ted, if you want to add anything else to that? Theodor Daniel: I think we're good. We have already rightsized to a certain degree last year, and we're managing what we have. So at this point in time, it's continue to just do the best we can and focus on profit. And just kind of go from there and see what happens in terms of the general North American economy over the next couple of quarters. Gianluca Tucci: Okay. That's helpful color. And then just secondly, how are you thinking about asset-light expansion in the face of the current environment in the near term, at least like is the cadence of a couple of offices incrementally per year still the game plan? Or how are you thinking about the brokerage piece of the business in light of the current situation out here? Theodor Daniel: So we believe that we're going to continue to grow in brokerage. It's going to be sure and steady at this point in time. Obviously, this is not an economy where I think people are -- it's not -- let's just say it's not a tailwinds economy. Certainly, I think in this industry, we're still experiencing headwinds. So we are going to -- we're definitely going to continue to focus on technology in the space, and we're going to continue to expand our existing offices and try and continue to gain market share. [ id="-1" name="Operator" /> And the next question comes from Michael Kypreos with Desjardins Securities. Michael Kypreos: I know it's still early days, but as the budget only came out last week, but do you have any early signs of maybe changes with customers in the Canadian market when it comes to, let's say, customers diversifying away from players that are perceived to be driver in? Marilyn Daniel: I can answer to that way too early for that kind of an effect to be known. Customers have talked about it over the years. It's not nothing completely new, but definitely a positive, positive for the industry, positive direction. The impact will be over time. We don't know all the details yet in terms of penalties, et cetera. We know it's a project and a source of attention for the government over the next 4 years with a good chunk of money allocated to it. How it all rolls out, the enforcement, the penalties and so on, I think we don't have any details on that yet, but it is definitely positive. From a customer perspective, they're going to have to see the effects of it first to have a real impact on the customer. Michael Kypreos: All right. Appreciate it. And maybe just on the Logistics segment, maybe just any additional details you could provide in terms of the margin compression despite the volume growth, maybe start-up inefficiency costs of the new locations? Or what are your expectations in terms of the fourth quarter? Theodor Daniel: I think it's just -- honestly, Mike, I think it's just pure pricing at this point in time. Again, it's still a market where you've got a lot of overcapacity. It is improving slowly but surely. Last year, everybody was hoping for the end of the freight recession, and it's just taken a lot longer. It is headed in the right direction, but I believe that a more balanced pricing environment is what's going to help with that. And again, the other thing is, of course, technology. We believe that there's more efficiency in the market from a technological perspective, which is something that we do invest in. We are very technologically focused from that perspective. Marilyn Daniel: And from a margin compression, there were some announcements in the quarter that affected carrier relations with brokers during the quarter with immigration and language law enforcement that came up. So there was a lot of disruption for a little bit. I think it's coming down, but that was definitely a peak in the end of the -- towards the end of the quarter, definitely had an effect. [ id="-1" name="Operator" /> [Operator Instructions] And we do have a follow-up question coming from the line of Gianluca Tucci with Haywood Securities. Gianluca Tucci: Perhaps a question for Alex. Just to confirm, it sounds like CapEx plans for '26 is pretty marginal at best at this point. Any color there, Alex, on the CapEx plans for next year? Kit Chun: Yes, for sure. Thanks, Gianluca. The CapEx plan for the next year, so all the way to Q3 2026 is going to be minimal, as you say. For the entire year for 2026, we -- like we said in the previous call, there will be some replacements for the Oakwood fleet. So it may go to the tune of $5 million to $10 million. It really depends on the market at the time. We may not need all $10 million. So it's now trending to the lower side, to be honest. And that's where we're going to be at for 2026, and there's no replacement for the Canadian crude. Gianluca Tucci: Okay. And then perhaps just one last follow-up for Ted. Ted, like when you size up the market today, are you continuing to see capacity exit the market? Or how is the supply side shaking out these days? Like is it still trending to being a smaller market? And is the pace that you're seeing of cuts on the capacity piece of things, like is it coming down aggressively or like modestly? How would you kind of stack up the lay the land right now in the transport market on the supply side? Theodor Daniel: So there are definitely indicators. So you're right, Gianluca, there's definitely indicators that are saying, "Hey, you know what, we are shrinking capacity." But I believe that it isn't happening as fast as we would have liked it. It's been a very, very prolonged freight recession, and it is happening but very, very, very slowly. Pricing pressure, you still see it in the RFQs. It's still a very competitive market from a pricing perspective. So I don't believe that it's, call it, as an industry, it's out of the woods. But at this point in time, it's headed in the right direction. Gianluca Tucci: Okay. Well, curious to greener days ahead, Ted. Theodor Daniel: We're slowly but surely getting there. [ id="-1" name="Operator" /> And the next question comes from Robert Murphy with Raymond James. Robert Murphy: So I just wanted to follow up kind of on the outlook here. You indicated some early signs of stabilization in certain regions. Just wondering if you could provide a bit more color here. Like are there certain end markets, geographies, in particular, where you're seeing this improvement, et cetera? Theodor Daniel: A little bit of improvement in the -- kind of call it the Northeast and the Midwest. That is probably along the lines to some degree of the whole issue of illegal drivers. And it's an interesting because you wouldn't have expected that region, but that seems to have more of the impact on pricing. But again, it's more kind of a little bit of everything, right? It's the fact that we're going to address, hopefully, over the next couple of years. I don't know what the budget has, but the driver they're addressing language laws in the U.S. There's issues with making sure that you've got compliant drivers and so on. So it's -- I think it's kind of a culmination of a whole bunch of different components. Do you have anything to add to that? Marilyn Daniel: No, I think you've covered it off. I mean it's -- certain regions that are happening, definitely in the U.S., you're starting to see a spark in certain areas, which is good. It's usually a good tail sign for us here in Canada. So it's -- there is some movement in the right direction. I think you will see carriers exit just at a pure exhaustion over this period. I think things will come together between regulations, costing, technology and all of those things to see sort of a better marketplace in the future. When is the question? Theodor Daniel: That's the crystal ball right there. Robert Murphy: Okay. Great. That's great color. And then just kind of shifting gears, I just had one follow-up here. Just on the trucking margin. Good to see some progression there sequentially the last couple of quarters. Just kind of looking into 4Q, and I know you guys provided the 4Q guide there, but just looking to 4Q and 2026, kind of how should we think of margins progressing on the trucking side? Kit Chun: Thanks, Robert. So margin for the trucking side, barring any market improvement, we're definitely trying to improve it as we streamline -- like we said in previous calls and last year as well, we are looking to only take on business that has sustainable rates, and that has been our focus for operations this year, and we continue to go that way. That's why our operational efficiency has improved. How far can we go? It's difficult to say given the current market conditions, but we are looking to improve that. Our expectation is that we are going to bring that up to potentially the 17% mark and hopefully beyond that. [ id="-1" name="Operator" /> [Operator Instructions] I'm showing no further questions at this time. I would like to turn it back to Titanium's President and CEO, Ted Daniel, for closing remarks. Theodor Daniel: Great. Thank you, operator, and thank you all for joining us. We appreciate your interest in our company. At this time, I'd also like to thank all of our team members, our staff for their hard work and dedication. I would also like to acknowledge and thank the hard work and dedication and attention to compliance and safety of all of our drivers. We look forward to providing an update on our progress and all of our priorities discussed today when we report our Q4 and full year 2025 results in March. If there are any further questions, please feel free to contact us. Thank you for joining us today on this call. [ id="-1" name="Operator" /> Thank you. And ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Hello, everyone, and thank you for joining us today for the DCC interim presentation for the 6 months ended 30th of September 2025. My name is Sami, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Donal Murphy, Chief Executive of DCC, to begin. Please go ahead, Donal. Donal Murphy: Good morning, and welcome to DCC's interim results presentation for the 6 months ended the 30th of September 2025. Thank you all for joining us this morning on our webcast. I'm joined today by our Group CFO, Conor Murphy. Here's our standard disclaimer. Thankfully, I don't have to read it out. So this morning, I will outline the significant strategic progress we have made to build DCC into a simpler, stronger and more focused business since announcing our change in strategy this time last year. Conor will give you an update on the trading performance in the first half of the year, and we'll finish with our outlook statement and a summary before we open up the session for your questions. So let's get started with an overview of the significant strategic progress we have made over the last 12 months. On the 12th of November 2024, we announced a strategic plan to maximize shareholder value by focusing solely on our compelling opportunity in our energy business and simplifying the group's operations through portfolio actions. Over the last 12 months, we have made very significant progress to simplify the group with the majority of the planned changes now complete. More on this shortly. We announced in May that we intended to return up to GBP 800 million of the proceeds from the sale of DCC Healthcare to shareholders. We completed the initial on-market buyback of GBP 100 million in September, and we will shortly commence a tender offer for GBP 600 million of our equity. On the 21st of October, we announced that we had acquired 2 liquid gas businesses in Europe, a priority development area for the group. And last, we have to perform while transforming the group. I am pleased that our trading performance improved through the first half of the year after a difficult start in a challenging environment and that we are maintaining our guidance for the year as a whole. So let's look in a little bit more detail on our strategic progress over the past 12 months. The plan we announced last November to maximize shareholder value had 3 actions. Firstly, we said the group will now focus solely on our most compelling growth opportunity, our energy business. Secondly, we launched the process to sell DCC Healthcare. Thirdly, we said that within the next 18 to 24 months, we would review our strategic options for DCC Technology. We have made significant progress since last November. In September, we completed the sale of DCC Healthcare. In May, we commenced an initial GBP 100 million share buyback program, which we completed in September. We will shortly commence a tender offer, returning a further GBP 600 million of the proceeds to shareholders. On the 14th of July, we announced that we had reached agreement for the sale of DCC's Info Tech business in the U.K. and Ireland to AURELIUS, a globally active private equity investor. The business had revenues of approximately GBP 2 billion and represented approximately 1% of DCC's continuing profits in FY '25. We announced on November 3 that the sale completed. While the cash proceeds to DCC are not material, the business was responsible for about half of our intra-year working capital swing for the group. It was also the only business within the group availing of supply chain financing. The removal of both factors further strengthens DCC's financial position. The final component of DCC's Info Tech activities is a very small and unprofitable business in the Netherlands, which we will exit in the second half of the year. We have commenced the proprietary work for the sale of the remaining part of DCC Technology. This business is a global leader in the sales, marketing and distribution of specialist Pro AV, Pro Audio and related products and services. It is predominantly based in North America. We are on schedule with the integration plan we outlined last November. It is our intention to have reached agreement for the sale of our Specialist Technology business by the end of calendar 2026. To set DCC up for growth as a single sector energy business, we have made a number of leadership changes, both at Executive Director level and at management team level. The new DCC leadership team is fully in place, has extensive experience in the energy sector and the commercial agility and drive to build DCC into a global energy leader. DCC is a unique energy business, providing multi-energy solutions to our customers for 5 decades. We operate across solutions, energy products and energy services and mobility. We have built a strong capability in engineering-led decentralized energy solutions, particularly in our liquid gas business. Our ambition is to be a global leader in the sales, marketing and distribution of energy products and services, delivering high growth and high returns for our shareholders. We have a scalable growth opportunities across our sectors, particularly in liquid gas and energy services. Our strategy is to grow our customer base by being the provider of choice for secure, competitive and cleaner energy products and to sell more services to our energy customers, driving higher organic growth rates. How do we win? We leverage our strong market positions being typically #1 or #2 in most of our markets and with our deeply embedded customer relationships. Our aim is to be the best customer company in the energy sector. We are strong operators in the energy sector and have significant experience in consolidating fragmented energy markets. By delivering our strategy, we will drive organic growth of 3% to 4% and acquisition growth of 6% to 8% on average per annum to achieve our ambition of delivering double-digit growth in earnings. We aim to turn approximately 90% of our profits into cash and always to deliver returns on capital employed in the high teens. Looking ahead, demand for secure, cleaner, competitive energy is stronger than ever. Our commitment to carbon reduction is clear. We will continue to provide innovative offers to support our customers with the multi-energy solution capability we have built over the last 5 years in biofuels and energy services. Emissions reduction will be an output rather than a driver of our strategy. We still believe that energy systems are going to decentralize and move closer to the customer. That is where we win through our closeness to our customers, meeting them where they are at. Now to focus on the large capital return to shareholders. The sale of DCC Healthcare enabled us to return GBP 800 million of capital to shareholders. As I mentioned earlier, the process began in May with an on-market share buyback program of GBP 100 million. Following the completion of the sale of DCC Healthcare on September 9, we announced our intention to return GBP 600 million to shareholders shortly after these half year results via tender offer. The final GBP 100 million return will take place after the receipt of the unconditional deferred consideration within the next 24 months. The tender offer will commence shortly and will be completed by the end of calendar 2025. The strength of DCC's balance sheet and the cash-generative nature of our business provides significant capital for growth to deliver on our 2030 vision. In May, we outlined the exciting growth opportunities we have across our energy activities. In Energy Products, we have an opportunity to scale our liquid gas business in many remaining fragmented markets in Europe and in the U.S. This opportunity in liquid gas is a key part of our plan to reach GBP 830 million of operating profit by 2030, double our 2022 total. DCC has been in the liquid gas business since 1977. We've built leadership positions in 6 countries and established growth platforms in a further 3 markets. Overall, DCC is just 5% share of our total addressable market in Europe and the U.S. Yet in the markets where we already operate in Europe, we have built approximately 30% market share. In these consolidated European markets, our leadership positions drive higher returns. We drive higher returns by, for example, leveraging network effects, better routing and scheduling of our fleet and optimizing the depot infrastructure, reducing the cost to serve our customers and indeed the cost to acquire new customers. We are strong operators, so we often have opportunities to optimize margin management and drive synergies through procurement. We have a very loyal customer base with low churn rates. These relationships typically last more than 10 years. The infrastructure we install on our customer sites makes it costly for them to move to another supplier or energy type. Liquid gas is seen as a transition fuel in Europe. With its lower carbon characteristics, we are attracting new customers from other higher energy carbon energy sources, so who want to reduce their emissions. We have significant opportunities to scale our business by expanding into new fragmented markets and by further consolidating in our existing markets. This is a core competence of DCC. On the 21st of October, we announced that we have agreed to acquire FLAGA in Austria and a cylinder business in the U.K., both from UGI International. FLAGA founded in 1947, serves over 15,000 customers from its nationwide network in Austria across both bulk liquid gas, where average customer lifetime is more than 15 years and via a significant cylinder business. The acquisition extends DCC's leadership position in the Austrian energy market, where we already have a leading liquid fuels business and a growing presence in energy services. In the U.K., the acquisition of the UGI cylinder business is highly synergistic and further strengthens our liquid gas cylinder proposition in the market. I'll now hand you over to Conor, who will take you through the performance for the first 6 months of FY '26. Conor? Conor Murphy: Thanks, Donal, and good morning, everyone. This is my first results presentation since sitting into the CFO seat. I'm really excited to be here, and I'm focused on making sure that we continue to get our messages across in a simple and clear term, particularly as we transition the group to a single sector energy business. As Donal talked through, it has been probably the most significant 6 months of strategic progress that we have ever had in the group. In contrast, the 6 months to September is the seasonally less significant part of the year from a trading perspective, with the first half representing approximately 1/3 of our expected full year operating profits. Before I start, by way of reminder, the results from our former Healthcare business and Info Tech business in U.K. and Ireland are now classified as discontinued. What we have set out in this presentation comprises our continuing operations, which is our Energy business and the remaining part of DCC Technology. Prior year comparatives have been restated accordingly. In the 6 months to September 2025, our revenue was down from GBP 7.9 billion to GBP 7.4 billion on a continuing basis. I will go through the details of the declines when talking through Energy and Technology. At a high level, the main drivers were the fact that volumes were down in energy and that commodity pricing is also significantly lower year-on-year by approximately 15%, which impacts our revenues, but is not reflective of our underlying trading. Operating profit is down 5.4% on a reported basis and 5.3% on a constant currency organic basis. Again, I'll talk through the detail in a moment when walking through Energy and Technology. Our adjusted EPS is down 4.2%, which is lower than the decline in operating profit as a result of the lower finance costs in the first half. The lower finance costs are a result of lower interest rates generally, but also the lower average net debt that we had in the group over the 6 months. We are declaring a 5% increase in our interim dividend. The Board is conscious of the importance of our dividend to our shareholders, and the increase represents the confidence that we have in the business as we enter the seasonally more material second half of the financial year. Finally, our net debt at the end of September was just GBP 522 million, reflecting the proceeds from the disposal of Healthcare, as mentioned earlier. On a pro forma basis, this will be GBP 600 million higher once we complete the capital return by way of tender offer, which is expected to complete by the end of the calendar year. I won't delay on this divisional results slide. It sets out the split of our operating profit between Energy, which now accounts for 84% of the operating profit in the first half and technology, which accounted for 16%. Given the weighting of energy to the second half of the year, we expect that the full year weighting will be more like 88% energy and 12% technology. Focusing on our energy results for the 6 months ended 30 September 2025. In the full year results presentation in May, we presented energy in a more intuitive way and in the way that it is managed commercially. We split energy between our Solutions business, which itself splits between Energy Products and Energy Services and then our Mobility business. Overall, DCC operating profit was 5.2% behind the prior year and 5.9% on a constant currency basis. In our trading statement in July, we highlighted that the first quarter was in line with our expectations, although behind the prior year. We knew that the business had a tough set of comparative numbers in the first half of the prior year and particularly in the first quarter. It has been good to see that energy was slightly ahead of the prior year in the second quarter. Solutions operating profit declined by 10%, driven by Energy Products, while Mobility operating profit increased by 2.8%. I will now take each of these in turn. In Solutions, our Energy Products business accounted for 50% of profits in the first half, though it is a larger proportion of our profitability in the full year. Energy Products encompasses our liquid gas, liquid fuels, on-grid gas and power businesses. Energy Products volumes were 4.9% lower in the first half and operating profit was down by 12.8%. There were 3 main drivers of the decline. Firstly, our businesses experienced warm weather in the early part of the first quarter in France, U.K., Ireland and North America. This impacted on the volume demand in each of these markets. And while we maintained our market shares, profitability declined. Secondly, we disposed of our Hong Kong and Macau business in the prior year. The removal of that business impacted both volumes and profitability, accounting for 4 percentage points of the decline in the Energy Products business. Thirdly, we are seeing the impact on demand of a number of softer economies, particularly impacting commercial and industrial volumes. To give a little more color on this, Continental Europe was primarily impacted by warmer weather, mainly in France. The decline that we experienced in the U.K. and Ireland was driven by our natural gas and power business in Ireland after a very strong performance in the prior year, a significant factor in the tough comparatives that we faced overall. Performance in our liquid gas business in the Nordics was a little difficult, however, with lower demand from commercial and industrial customers. Finally, in Energy Products, our U.S.-based business performed ahead of the prior year despite warmer weather. We've had a number of cost initiatives in the business, driving better margins and operational efficiencies. The smaller part of Solutions is our Energy Services business, which grew its operating profit by 8.5%. The largest and most mature part of our business in Energy Services is our business based in France, and it again grew very strongly during the period, continuing to increase revenues and profits while making good progress in integrating acquisitions completed in the prior year. Although the market backdrop in Germany was difficult, our business there achieved good growth. Our energy service businesses in the U.K. experienced difficult market conditions with the poor economy impacting the willingness of commercial customers to invest. Our business in Ireland has continued to perform well. Our mobility business grew its operating profit by 2.8%, which was mostly organic. Volumes were behind the same period a year ago as we proactively manage margins across each of the regions in which we operate. The continuing trend towards electrification also impacts volumes, though this, of course, benefits our nonfuel revenues and margins. We stepped away from a number of lower-margin, higher-volume contracts, in particular, in Nordics and the U.K., giving the business a sharper focus. In addition to the fuels which we provide at our stations, we offer a range of nonfuel offerings at our service stations, including EV charging, car wash and convenience retail in a select number of sites. In the 6-month period, we developed these across our markets and in France and Luxembourg in particular. The larger part of our nonfuel services encompasses fleet services across fuel cards, telematics and digital truck offerings. We delivered strong organic growth across all of these areas, complemented by a modest contribution from acquisitions. Our nonfuel gross profit grew by 3.5% year-on-year as we expanded our customer offerings. In our full year results presentation, we set out this important slide, but we didn't dwell too much on it in May. I'm going to spend a little more time on it today as it provides much more granular detail on our Energy business and is helpful in telling the story of the first half. Firstly, to highlight the split of profits between Solutions and Mobility. In the full year, this was a 77% weighting of profits to Solutions and 23% to Mobility. It skews quite significantly towards mobility in the first half, which represented 41% of our operating profits. There's a lot more on-road driving done during the summer months across all the markets in which we operate retail networks. And conversely, our energy products businesses are comparatively quiet in the summer months given the commercial and residential weighting in those businesses, although energy demand does tend to be higher. I highlighted that our Energy products volumes were 4.9% behind in the first half, and I've talked about the main drivers of this decline. We set out in the table both the gross margin at a total level and on a pence per liter basis. The pence per liter decline is really a function of mix resulting from the shape of the volume decline. Firstly, the volumes lost from the disposal of the Hong Kong and Macau business were at relatively high margins and the warmer weather reduced domestic demand, thereby resulting in a lower pence per liter margin. Overheads are down in excess of the volume decline. However, the mix impact results in operating profits declining by 12.8%. In Energy Services, it was pleasing to see the revenues continue to grow, 14.3% ahead of the prior year and gross profit further ahead, achieving 16.3% growth. Operating profit grew by 8.5%, although being lower than gross profit growth. We've continued to invest in the businesses which we've acquired, particularly those that were owner-managed, and we've invested to upgrade their infrastructure and management capabilities into the PLC environment. Finally, in Mobility, similar to energy products, we experienced a 4.6% decline in volumes. We increased fuel gross margin per liter from 6.2p per liter to 6.6p per liter, highlighting the resilience of the mobility business model and our proactive margin management. This drove our fuel gross profit up by 2.3% year-on-year. At the same time, nonfuel gross profit decreased by 3.5% -- increased by 3.5%, which demonstrates the focus which we've had on developing and investing in this area of the business. All of this drove 2.8% growth in our operating profit. Moving on to DCC Technology. Revenues in DCC Technology declined by 2.7% in the first half of the year. And with a slight reduction in gross profit, this resulted in operating profit declining by 6.9%, which was a 2% decline on a constant currency basis, given the weighting to U.S. dollar profits that we have in our business. In our North American business, the Pro Specialist product business performed well, increasing our market share where we are the market leader. Our Lifestyle and consumer-focused products segment experienced weaker consumer demand and some stock availability issues impacting the performance of the business in certain categories. As you can imagine, this sector has been more difficult with tariffs leading to uncertainties and consumers somewhat reluctant to spend. The first quarter was the stronger quarter for the business as customers look to pull forward stock orders in advance of the impact of tariffs. Understandably, this led to a slower second quarter as customers work through this stock and as the impact of tariffs became clearer. Our smaller European business delivered growth, particularly in the Nordic region. As we announced on the 3rd of November, we've completed the disposal of DCC Technology's Info Tech business in the U.K. and Ireland to AURELIUS. We continue to prepare the remaining DCC Technology businesses for sale next year, and we've made good progress in the integration and operational efficiency program in North America. Our capital allocation framework. We had set out this framework at the time of our results presentation in May of this year. Given the strategic progress that we've made over the last 6 months, I think it's important to reiterate this framework to recommit to it and to put the progress that we have made in the context of this framework. We've allocated over GBP 70 million to capital expenditure, continuing to invest in our businesses and their organic development. The vast majority of this investment has been in energy. We are declaring a 5% increase in our interim dividend, underlining the strength of the business and our confidence in it. We've committed approximately GBP 60 million to acquisitions over the period, including most recently the acquisition of 2 liquid gas businesses in both Britain and Austria. Finally, we have returned GBP 100 million to shareholders by means of the on-market share buyback and we'll shortly be launching a GBP 600 million capital return by way of tender offer, all following on from the completion of the disposal of DCC Healthcare. And we've done all this while maintaining our strong balance sheet, which we remain committed to. And recently, we have had our investment-grade rating reaffirmed by credit rating agencies. With that, I'd like to hand back to Donal for a summary. Donal Murphy: Thanks, Conor. So just before we open up to Q&A. So what makes DCC unique? Global energy demand will grow. Customers need secure, cleaner and competitive solutions. We scale growth opportunities in new and existing markets, market-leading positions and long-term customer relationships. We're strong operators, and we have an agile, entrepreneurial and resilient business model founded on a strong balance sheet and cash generation, self-funded double-digit growth. And we're a highly experienced compounder, almost 400 acquisitions at high returns. I am confident that this will deliver sustainable, high returns and compounded growth for all our shareholders. So in summary, our outlook for FY '26. DCC continues to expect that the year ended 31st of March 2026 will be a year of good operating profit growth on a continuing basis, significant strategic progress and ongoing development activity. So in summary, we've made excellent strategic progress over the last 12 months, and most of our simplification project is behind us. We are in the process of making a material return of capital to you, our shareholders. And looking ahead, we have an excellent opportunity to grow our unique multi-energy business while delivering high returns for our shareholders. We are well on track to deliver our ambition to double profits by 2030 from 2022. And we are focused on the future, confident that we will build DCC into a global leader in the energy sector. Thank you all for listening, and we look forward to answering your questions. Operator: [Operator Instructions] Our first question comes from Rory McKenzie from UBS. Rory Mckenzie: Here. Two questions, please, on the new Energy divisions and the new KPIs. So firstly, on Energy Solutions products, can you help us understand what a sensible outlook is for H2 after volumes were down 5% year-over-year in H1. I think the margins pence per liter were also down quite a bit. It sounds like quite a lot of that pressure came in Q1 with the disposal and heating volumes. So how do we kind of read those trends as we go into the significantly bigger part of the year? And then secondly, in Solutions Services, I appreciate profits were up overall in H1. But if I assume most of the M&A was going into that segment, that would imply that organic profits were down about 8% year-over-year in H1. So can you also talk about where you are in terms of the integration of M&A in that division and what a kind of fair profit growth outlook should be from here? I know you're doing a lot around customer strategy and repositioning. So where are we with that? And what should we expect for H2? Donal Murphy: Thanks, Rory. And we'll start with just your first question. So when we look at the 2 big impacts in the first half of the year were weather and Hong Kong and Macau. Hong Kong and Macau is kind of easy to deal with. We only had it in the first quarter last year. So we have lapped the Hong Kong and Macau being within the group. And I say, it was a higher-margin activity. On the heating side, and we see this, like the March last year and into April was a very mild period. So we had weakness in our heating demand. That will bounce back in the second half of the year. So we're very confident that the activity that wasn't there in the first half will flow through in the second half. It is higher margin activity that will impact clearly or benefit the margins in the second half of the year. And that's why we're so confident in terms of reiterating our guidance for the year as a whole. So there's nothing really to read into the numbers in the first half of the year. On the services side, actually, there is modest organic growth in the first half of the year. The contributions from acquisitions were pretty small really. And overall, the business is growing very strongly in France and the markets outside of France, demand has been weaker. And that's, I think, been well publicized by many of our peers. I don't know, Conor, if there's anything you'd like to add to that. Conor Murphy: No, no. I think you've covered it well, Donal. I mean the -- as Donal said, the progress in the first half, we will see that maintained, if you like, in -- for the full year. So second half broadly flat, maybe a small bit of growth on the services side. Operator: Our next question comes from David Brockton from Deutsche Numis. David Brockton: And weather, I think you also called out weaker commercial volumes. Can you just sort of give us an update as to what your planning assumptions are for H2? Do you expect those commercial volumes to improve? Or do you expect growth elsewhere to offset it? And if so, where? And then the second question in relation to technology. from memory, you were looking to drive, I think it was GBP 20 million to GBP 30 million of profit improvements in that business before you sold it. Can you give an update on that, please? Donal Murphy: Sure. David, we missed the first part of your question didn't come through, but I think it was weather related and then it went into the commercial... David Brockton: Commercial volumes? Yes. Donal Murphy: Yes. Yes, the commercial volumes. Yes. Look, the -- again, there was nothing kind of overly dramatic in the commercial volumes, like the 2 or bigger impacts in the first half were the weather effect and Hong Kong and Macau. So there was a number of the that we were in a little bit up in Scandinavia, where some of our large commercial customers, their demand was a little bit weaker. We really don't see anything particular flowing through into the second half of the year. Energy business typically is very resilient regardless of what's happening in the energy cycle so -- or in the economic cycle, so people need their energy. You might have a little bit of softness as economic activity is down, but it tends to be around the edges. Conor Murphy: Around the edges. And I guess there's nothing -- the second half forecast we're not forecasting any major pickup from a commercial industrial perspective. So if there was a significant drop off, it would impact, but that's as is baked into the forecast. Donal Murphy: On technology, David, there was -- and there was probably 2 quarters or 2 different quarters in the first half of the year. We actually -- the business in North America performed well in the first quarter. There was probably a little bit of pull forward of business with concerns over tariffs it was weaker in the second quarter. So tariffs and the impact of tariffs had an impact on the business during the first half, but we had the flow-through of that activity in terms of integrating the 2 North American businesses together. So we're actually well on track to deliver on the -- and there's a big range between EUR 20 million and EUR 30 million, but we're certainly well on track to be on the mid side of that range at the moment and heading towards the side of that range. But the market is tough, and that is offsetting some of the benefit that we're seeing coming through from the integration activity. Operator: Our next question comes from James Bayliss from Berenberg. James Bayliss: Two for me, please. Within Energy's Mobility segment, you noted fuel gross margin uplift was in part driven by procurement initiatives, I think it was. How should we be thinking about the direction of travel from here on that side of things? Is there more to be done? And equally, was there a contribution within that gross margin uplift from mix shift within fuel type? And then my second question on capital allocation, admitted M&A in the period was about half of what it was in the prior year. Can you just provide some context around that? Is that the natural ebbs and flows of the pipeline? Or are there any considerations around market backdrop or indeed management's focus on the ongoing group simplification? Donal Murphy: Super. Thanks, James. And maybe just on the mobility side, and there was just -- I suppose just to remind everyone that a chart that we had in our results presentation last May showing the increase in margins over the last decade within the mobility business, it was a CAGR of 13%. So this business and the industry is good at growing margins year-on-year, and we see the benefit of that. There is a little bit of volume margin offsetting one another. So there's times in the year and there was in the first half of the year, particularly in France, where some of our competitors were very aggressive on the pricing side, and we chose not to play, impacted a little bit on our volume. But as you can see, the margin performance was good. The procurement activity is -- it's a good call out, James. And we are seeing significant change in the supply landscape on the energy side as refineries are changing hands, some of the integrated energy companies are pulling back in some of the markets. And as a customer-focused company with significant volume requirements, that's playing into our strength. So we have more opportunities on the supply side than we probably would have had in the past. And that is an opportunity, and it will be an opportunity for us going forward to drive margin improvement. We have -- as part of our simplification process, we have set up central procurement teams so that rather than looking at buying our products locally within each market, we're looking at opportunities to leverage the scale across the energy activities that we have. And we're a substantial buyer of product within the market with a very strong balance sheet. So we see procurement being an area of focus to drive profit margin improvement going forward. Conor, I don't know if there's anything you want to add. Conor Murphy: No. I guess working capital improvement as well. As Donal said, we've -- what the technical guys call the short that we have into the market, the demand that we have into the market is really important to those suppliers, and we will leverage that as best we can to make sure that we're giving our customers the best offer that we can and the best pricing that we can. Donal Murphy: Sorry, capital allocation. Yes, look, the -- in ways, it has been -- say this morning, it's been a quieter period for us on the acquisition side. And that is -- it's not -- we've not been distracted with the divestments. It's just M&A, and we've talked about this over many years, M&A ebbs and flows, and it doesn't come on a consistent basis. We have talked about and talked earlier just about the services area being a little bit more difficult. So we're probably a little bit more measured in terms of capital deployment in that area. But we are very focused on growing our liquid gas activities, in particular, on the product side. So the 2 acquisitions that we announced were very timely. We have a decent pipeline actually and a growing pipeline of opportunities at the moment. So we're certainly very confident that we will be deploying more capital in this financial year. Operator: Our next question comes from Christopher Bamberry from Peel Hunt. Christopher Bamberry: Three questions. In Energy Services, could you please explain the factors behind the lower growth in operating profit compared to gross profit in the first half? Secondly, in Mobility, you intentionally see some lower margin volumes in the Nordics and the U.K. What do you expect to be annualized impact from this and there's potentially some more sharpening of focus to come? And finally, in technology, has the shortage of certain lifestyle products been resolved? Donal Murphy: Okay. And Chris, just to take the first one on Energy Services, we have been -- so we bought quite a number of businesses, and we talked about that a little bit earlier. We're integrating businesses together. Some of that results in investment within the businesses. We -- and we're investing in terms of building our sales organization. And some of that is the business demand was very strong. There was plenty of orders coming to the businesses. We need to be much more proactive now within the business. So there's investment going into these businesses, which we always had planned to do post acquisition. So the big differential between the gross profit growth and the operating margin is really investments that we're making within the business. On the mobility volume side, again, as I said earlier, there is a little bit of margin volume that we play. So it is -- we don't really kind of try and call and say, well, actually, the volume -- that volume will bounce back or volume will be a bit higher in the second half of the year because there could be activities by competitors in markets, and we'll choose not to play on that. I think the lower-margin business that we talked about walking away from, that's done. There's not -- we don't have other business in that category. So it's really down to -- it's down to competitor activity in the markets. But we'd be very confident that we will deliver good organic profit growth within our mobility business for the year as a whole. And finally, just the lifestyle products piece. So again, particularly the uncertainty around tariffs and price points on those tariffs. So a lot of those products that we sell on the lifestyle side come in from China and other markets and are imported into the U.S. So the price of products went up pretty significantly with the tariffs that impacted on demand. That's probably washed its way through the market at the moment. But the consumer in the U.S. is probably not the healthiest at the moment. And that kind of weighs into the outlook for the year. Thanks, Chris. Operator: Our next question comes from Joe Brent from Panmure Liberum. Joe Brent: Three questions, if I may. Firstly, interested to hear your views on what the peer group is saying in solutions. Secondly, if memory serves, I think you were targeting double-digit EBIT growth in services given the first half and what you're saying, does that now appear a bit of a stretch? And then finally, on tariffs for the rest of technology, you've told us kind of where you're at in the first half and the Q1, Q2 split. Could you just give us a little bit more on your thoughts around pricing and consumer sentiment in the second half and how you see the second half playing out for the rest of technology? Donal Murphy: Joe, could you just repeat the start of your first question? Joe Brent: The first one is just your views on what the peer group are saying in solutions. Donal Murphy: Yes. Yes. Okay. Sorry. Look, and I think it's well publicized that, that whole services market is slow on the solutions? Conor Murphy: Services solutions. Donal Murphy: Services solutions. Yes. And Joe, like it is -- where we're seeing, as I say, in France, we have a particularly strong order book we've had going into this year. So we are -- we see the profits are fairly baked in for this year as a whole and actually into next year. In some of the other markets we're in, the demand has been weak for a while, and we're seeing that -- we're very much seeing that across the peer group. And just while we're on it like the peer group generally on the product side, you would see very much the same factors impacting. I think we have been outperforming any of our peers and growing our shares. Conor Murphy: On the double-digit services growth, Joe, like we won't see that in the second half. That's absolutely right. And -- but I think it is something that we are confident in over the medium and longer term. That's absolutely where the demand is going to go, where the business is going to go. When you think about the energy transition, our customers are going to transition into looking for more services, looking for solutions that give them power and energy that is more affordable and cleaner and more independent, and that's going to drive the growth in that area. So look, we're confident in the medium term. We always knew that there was going to be a certain amount of volatility in the shorter term in this business, but we're committed to growing a long-term business from there. Donal Murphy: And just on the tariffs and product demand side, I think like the bar changes or further changes within tariffs, we're a pass-through business. So the increase in the price of the products have been passed into the market at this stage. I suppose the question in terms of the next 2 months really in the -- particularly on the consumer product side is what will demand look like. And we've probably been conservative in our views on what we think the demand will be like in our guidance for the year as a whole. Operator: Our next question comes from Ken Rumph from Goodbody. Kenneth Rumph: Two questions. One is to go back to your expectations for the full year and products and kind of that needing to catch up and start growing in the second half and continue growing as it did in the first quarter. Your comments seem to be that sort of you'd suffered previously from a mild spring. I mean, would another mild spring throw you off course? Or would it merely be kind of just as it was before, and therefore, you expect growth? I mean to try and understand sort of why you were confident that you were going to see that second half growth to sort of recover what was lost in the first half? The second question is just a little bit more kind of technical in a sense, which is you've not given us a price for the tender offer today, which I confess I expected. What's the sort of timetable? We get it on a certain date and then there's a certain number of days for it then to proceed. You've said it's going to finish by the end of the calendar year. I assume that's not kind of Christmas. So what's -- when we do get a figure, what's the timetable? Donal Murphy: Okay. And Ken, just on the weather piece, like -- and been around this for a very long period of time. And you get ebbs and flows from a weather perspective. It is always more acute in the first half of the year because April is a significant heating month as you come out of the winter. And then as Conor said earlier, the rest of the summer, it's a lower level of impact. So your ability to catch up in the first half is very limited. But people buy like a typical average domestic customer will take 2 orders from us a year. The 2 orders will come in the second half of the year. And so you'll get the catch-up on the heating side. Clearly, if we got an extremely mild winter, that would have an impact on our profits for the year. We're not going to be immune from that. But all we can guide on is on the basis of normal weather conditions. The other side that impacted clearly in the first half was Hong Kong and Macau, and we have lapped that. So that is behind us. And finally, we had a very strong first half last year and actually a weaker second half. So the comparatives were tough in the first half, and they're a little bit more benign in the second half. So we're -- as I say, we're very confident in our outlook for the year. On the tender, Ken, there's really nothing more we can say than in the statement. It's clearly all pretty market-sensitive stuff. So all we can say is it will be completed by Christmas, and it will start shortly. And there will be an RNS clearly when the Board has made those decisions, and that will go out and it will detail the steps. There is quite a number of precedents out there. So there's places you can look to see the process. And anyway, it's probably all I can say on that at this stage, Ken. Thank you. Operator: Our next question comes from Annelies Vermeulen from Morgan Stanley. Annelies Vermeulen: I have 2, please. So firstly, just on the M&A pipeline. You've spoken in the past about the opportunity for liquid gas in North America. You've done 2 deals in Europe so far this year. So could you talk a little bit about that pipeline in the U.S.? Is that still interesting? Is there anything going on there in terms of the multiples or the opportunity set that means that we should see less M&A spend in the U.S. going forward? If you could comment on that? And then just coming back on the tech piece in North America, it sounds like there was some destocking in the second quarter. As the dust begins to settle from all these tariff discussions, are you reconsidering your supply chains at all? I know you've spoken about procurement in the energy business, but just wondering in technology, whether there's more to do there on the procurement side as well. Donal Murphy: Thanks, Annelies. The North America is and will remain a very important growth market for us. We have less than 2% of the propane market in the U.S. It's -- and maybe that's a slightly misleading number because these are they tend to be more local businesses. So there are states where we'd have double-digit market shares, and they would have similar characteristics to the more consolidated markets. We see in Europe where they have higher margin benefits, operating margin benefits through leveraging routing and scheduling and all the things I talked about earlier. But there's lots of states where we have very low market share. So we are very active in building our pipeline and talking to players within the market. We're very confident that we will deploy more capital into the U.S. market. But a bit like the conversation earlier, the way M&A comes along, we never force the pace and at least because if you try and force the pace, you overpay for assets. So -- but we certainly don't see anything in the characteristics of the market that would say that we are unlikely to be deploying capital over there. And over time, we'd like to deploy capital at scale into the U.S. market. On the procurement side, it's probably slightly different, at least because we distribute branded products. So we're really not the originator, if you like, of where the product comes from. So it's more down to the supply chain approach of the vendors that we work with. So the big AV vendors, we have seen some movement in where they produce the final assembled products, and that drives the market that we will import the product from. We do have quite an amount of our own branded products. So we do have an opportunity there to look at other markets. But it's not as easy to do that because you have manufacturing partners that you've been working with for many, many years. So our focus has really been much more on passing through the price increases into the market than ultimately looking to change where the product is manufactured. But we do -- as I say, we do think about all those things. Operator: We currently have no further questions. So I'd like to hand back to Donal for some closing remarks. Donal Murphy: Super. Well, look, just to thank everyone for joining us today. Thank you for your time. This has been a period of very significant strategic change for the group as we simplify the business to become a much more focused energy business. And we're very confident in our ability to build DCC and DCC Energy into a global leader in the energy sector. So I know we'll be meeting many of you over the coming week and indeed months, and we look forward to continuing our conversations. Thank you all very much, and see you soon. Bye.
Operator: Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group, Inc. Quarter 3 Earnings Call. [Operator Instructions] I would now like to turn the call over to Ms. Anna Delgado. Please begin. Anna Delgado: Thank you, Luke, and good morning, everyone. Before we begin, I would like to remind you that during the course of this conference call, the company will be making forward-looking statements within the meaning of federal securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Natural Gas Services Group disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's earnings press release and in our filings with the SEC, including our Form 10-Q for the period ended September 30, 2025, and our Form 8-Ks. These documents can be found in the Investors section of our website located at www.ngsgi.com. Should one or more of these risks materialize or should underlying assumptions prove incorrect, actual results may vary materially. In addition, our discussion today will reference certain non-GAAP financial measures, including EBITDA, adjusted EBITDA and adjusted gross margin, among others. For a reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP, please see yesterday's earnings release. I will now turn the call over to Justin Jacobs, Chief Executive Officer. Justin? Justin Jacobs: Thank you, Anna, and good morning, everyone. Thank you for joining our Q3 earnings call. Joining me today is Ian Eckert, our Chief Financial Officer. NGS delivered record results again in the third quarter, extending our momentum and reinforcing the value we provide our customers through high unit run time and great service. These results were achieved through the dedication of our people. I want to start by thanking the entire NGS team. Once again, I want to pay special thanks to our exceptional field service technicians who are the backbone of NGS. Ultimately, they are the reason that customers, both existing and new, are increasingly looking to Natural Gas Services to provide their compression needs. Starting with third quarter performance, we delivered a record quarter across several key metrics, including total rented horsepower, horsepower utilization, adjusted EBITDA and earnings per share. This performance was driven by strong field service execution and excellent technology-enabled uptime. We continue to take market share in large horsepower compression, reflected by the 27,000 horsepower increase in the quarter. All new sets were large horsepower under long-term contract and roughly half were large horsepower electric units. I'd also like to call out the disclosure in our 10-Q regarding Devon Energy. which now represents more than 10% of year-to-date revenue. Devon is a long-time customer that we have had significant amount of horsepower sets over the past year. We are proud to partner with them and look forward to delivering on their needs for years to come. We delivered third quarter adjusted EBITDA of $20.8 million, up approximately 15% year-over-year and 6% sequentially. These results allow us to raise full year 2025 adjusted EBITDA guidance to $78 million to $81 million from the prior $76 million to $80 million range. Additionally, we paid out NGS' inaugural quarterly dividend of $0.10 per share, another important step in enhancing shareholder returns. Our compelling performance, durable operating cash flows and confidence in the 2026 outlook make it possible to increase our fourth quarter dividend by 10% to $0.11 per share or an annualized $0.44 per share. While investors should not expect a dividend increase every quarter, the Board wanted to communicate its clear understanding of the importance of a continuous and growing dividend. These shareholder distributions do not preclude continued high levels of growth. NGS maintains the best leverage position among its public compression peers, giving us the flexibility to fund both growth and shareholder returns. Our competitive position continues to improve through technology leadership and service excellence. As we discussed on previous calls, when comparing to year-end 2024 horsepower, we expected to add approximately 90,000 horsepower over the course of 2025 and early 2026. The significant addition of new electric and gas units in the third quarter keep us on track for that number. Looking at 2026, we already have a significant number of new large horsepower units under contract. This is a mix of both gas and electric units. Additionally, our opportunity pipeline remains quite active for 2026 sets, driven by both existing and new customers. This indicates strong continued demand for compression. While it is still early, based on visibility we have today, we would provide an initial expectation for 2026 growth CapEx of $50 million to $70 million. I'll provide more color in the guidance section of this call. Turning to the broader market. We have delivered strong and sustainable results through September year-to-date, despite persistent volatility and global macroeconomic uncertainty. Regardless of whether these conditions persist, we remain confident in our ability to deliver improved performance because our business is tied to existing production where demand for compression continues to grow. Our customers in oil production currently have a heavy focus on production efficiency, reliability and emissions performance. These are all areas where NGS is advantaged. Furthermore, rising electricity demand and LNG infrastructure build-out create durable compression-intensive growth opportunities. AI and data center expansion, both domestically and internationally, further drive natural gas production and compression needs. Overall, we are optimistic. Compression is essential to delivering production throughput and our fleet, technology and service position NGS to deliver value to both customers and shareholders. I'll move next to our growth and value drivers. First, fleet optimization. We continue to optimize our fleet assets as reflected in continued improvement in rental revenue per horsepower performance. We finished the quarter at $27.08 per horsepower per month, a 1.7% sequential increase driven by new unit sets and price capture through contract renewals. Beyond price and mix, the next leg of optimization comes from data. We are more deeply integrating operational performance from our units and broader operations directly into our enterprise systems, so that commercial and operational decisions are made faster and with more precision. Customers increasingly recognize this as a differentiator. The ability to drive uptime and gas flow through data analytics has become a real competitive advantage for NGS. These investments have tangible payoffs, lower maintenance cost per unit hour, higher customer retention and improved fleet performance. On asset utilization, we have consistently improved working capital efficiency and continue to pursue targeted optimization initiatives. The income tax receivable has been improved by the joint committee on taxation, and we are awaiting payment processing once the federal government shutdown ends. Prior to the beginning of the shutdown, my expectation was that we were going to announce receipt of this receivable on this call. Regarding real estate monetization, we will provide greater transparency on these efforts in the coming quarters. As I've said before, we are not real estate investors. Our goal is to convert nonproductive assets into productive horsepower in the field. These noncash asset monetization efforts provide additional capital to support fleet expansion as reflected in this quarter's additions and our commitment to add significantly more horsepower. Momentum is building with both existing and prospective customers. As I now repeat on these calls, we are clearly taking market share organically. One simple way to quantify this is to look at our growth capital to EBITDA ratio. For NGS, our growth CapEx is for new units under long-term contracts. When you compare our growth CapEx to EBITDA, we were materially higher than each of our publicly traded competitors in 2023, 2024 and now again in 2025. I'm highly confident this trend will continue in 2026. I believe our market share gains are driven by our service, our unit technology and our lower leverage. With that, I'll turn the call over to Ian to review detailed financial and operating results before returning for closing comments on guidance. Ian Eckert: Thank you, Justin, and good morning to those joining us. As Justin emphasized, we delivered a very strong quarter, reflecting significant new fleet additions that position NGS well to continue delivering shareholder value. To recap the third quarter, total rental revenue grew 11.1% year-over-year and 4.9% sequentially to $41.5 million. This growth reflects the 27,000 rented horsepower increase during the quarter. Rental adjusted gross margin was $25.5 million, up $2.6 million year-over-year and $1.5 million sequentially. The rental adjusted gross margin percentage was 61.5%, an improvement of 19 basis points year-over-year and 75 basis points sequentially, reflecting sustained pricing discipline, large horsepower fleet additions and lower maintenance parts consumption. Adjusted EBITDA for the quarter was $20.8 million, up $2.7 million year-over-year and $1.2 million sequentially. Net income was $5.8 million or $0.46 per diluted share, up $800,000 year-over-year and $600,000 sequentially. Rented horsepower ended the quarter at approximately $526,000 compared to $475,000 a year ago and $499,000 in the second quarter of 2025. That's an 11% increase year-over-year and 5% sequentially. Fleet utilization reached a record 84.1%, up 204 basis points year-over-year and 45 basis points sequentially, with essentially all large horsepower equipment fully utilized. Operating cash flow for the quarter was $16.8 million, supported by continued improvement in accounts receivable with quarter end DSO of 28 days. Capital expenditures totaled $41.9 million, including $39.1 million of growth CapEx and $2.8 million maintenance. Sequentially, growth CapEx increased $17 million as fabrication ramped up to deliver new unit sets. We ended the quarter with $208 million outstanding on our upsized revolver and $163 million in available liquidity. Our leverage ratio was 2.5x, up modestly from 2.31x in the second quarter and remains the lowest among our public compression peers by a significant margin. Regarding capital returns, our approach remains disciplined and balanced, focused on delivering a growing dividend over time. While investors should not expect dividend increases every quarter, the decision to raise the fourth quarter dividend by 10% to $0.11 per share underscores confidence in the durability of our operating cash flow. Speaking of outlook, I'll now hand it back to Justin to discuss guidance. Justin Jacobs: Thank you, Ian. Looking ahead, based on our year-to-date performance and a strong second half deployment schedule, we are raising full year 2025 adjusted EBITDA guidance to $78 million to $81 million. This is a 2% increase at the midpoint from our previous guidance. We expect 2025 growth CapEx of $95 million to $110 million, a modest tightening of the range due to improved visibility on payment timing with no impact on total horsepower additions. Looking beyond this year, our preliminary expectation is that 2026 growth CapEx will be $50 million to $70 million. While it is still early, we wanted to communicate to our investors that 2026 will be another year of organic growth for NGS. I have a very high degree of confidence in the low end of that range. How far we go in or above that range will be determined as much by timing as customer needs. As I noted earlier on the call, new unit quote activity for 2026 remains significant for both existing and new customers. I would also comment that regardless of where we are in the range, we expect to materially outpace our publicly traded competitors when comparing growth CapEx to EBITDA. Further, we are starting to see 2027 RFPs and the amount of horsepower indicates continued growth into the future. Our 2025 maintenance CapEx remains $11 million to $14 million, and our ROIC target is unchanged. In closing, we delivered multiple company records in the third quarter. This momentum reflects technology and service-enabled share gains with our customers along with operational and capital efficiency. NGS is set up for strong performance for the remainder of this year, next year and beyond. We are materially increasing the size of our fleet through strategic investments in large horsepower compression, including electric motor drives with what we believe is industry-leading technology and service. Luke, we're now ready to open the call for questions. Operator: [Operator Instructions] And our first question comes from Selman Akyol with Stifel. Selman Akyol: Congratulations on the nice results. I just want to start off, I guess, in -- on '26 and sort of the outlook there. Can you just talk about how those conversations are going with customers? Do they seem to be more hesitant in this environment? Are they waiting longer? And then also, we've heard or seen that getting new units is approaching 60 weeks. And I'm curious if you're seeing that the same thing in the supply chain. And then if you are, then how do you get additional units from here for '26? Justin Jacobs: Sure. Thanks for joining, Selman. So on -- so 2 parts there. First, just I'll address generally kind of customer activity. And from the RFPs or I should say, from the units that we have contracted already from the activity we're seeing in '26 and '27, we're not seeing hesitancy. So I think generally, as we look at that, we take that as encouraging that in certainly with lower oil prices, I think there was some concern around that. But we're seeing a broad range of interest in what we've already signed and in potential, it's a little difficult for me to judge how much of that is -- how much of that might be to some of the market share gains versus just stronger activity than I think some people may have expected. So it's a little difficult for me to necessarily differentiate between those 2. I suspect it's a mix of both. But we're encouraged what we're seeing in terms of demand, including for gas lift in the Permian. On the new unit fabrication lead times, there are a range of different lead times for different units. What I would say as we look at 2026 and particularly the back half of the year for some of the different types of potential new contract wins, we get, we will be able to fill some of those. Now there will be some timing concerns if it's new units in the first half of the year, that's going to be challenging, not necessarily impossible, but challenging. But it's really kind of the second half of the year where we think there are certain types of units where we'll be able to meet customer demand. Selman Akyol: Got it. And then just one other quick one for me. Opportunities for margin improvement from here? Justin Jacobs: I think in the near term, the kind of low 60s number that we have hit for the last number of quarters now is still consistent with what we see in the near term over the more going further -- a little further out, mix shift to large horsepower will certainly continue to pull margins up. And then in terms of optimization of our business, I think it's still too early for us to give any specific guidance around that. Operator: Our next question comes from Tate Sullivan with Maxim Group. Tate Sullivan: In terms of the end market uses for the larger natural gas compressors, is it still the majority of the demand for gas lift in the Permian? And can you reconcile that with your comments about growing demand for data center natural gas load? Justin Jacobs: Sure. Thanks for joining, Tate. So the -- while not all of our new unit demand is gas lift in the Permian, it's certainly the significant majority of it. And as I said, we're still seeing a good amount of activity around that in terms of existing contracts and potential new sets. On the compression needs for data centers, AI, LNG that really creates incremental opportunity for us as we are primarily in gas lift applications today, same basic equipment. So it keeps tightness in the market for the large horsepower and is an area where we hope to be able to grow in the future. Tate Sullivan: Are your compressors now large enough to be placed on pipeline, for example, for pipeline extensions to dedicated natural gas plants? Justin Jacobs: Yes. Yes, they are. Those are typically north of 1,000 horsepower, 1,600 horsepower units, 2,500 horsepower units, and that's where a lot of our new unit sets are. Tate Sullivan: So do you already have existing units placed for natural gas pipeline compression purposes? Justin Jacobs: We do not have midstream applications today. Tate Sullivan: But that's an opportunity. Okay, understood. Operator: Our next question comes from Rob Brown with Lake Street Capital Markets. Robert Brown: On your '26 outlook or CapEx outlook, you said confidence in the low end of the range, but sort of what's the ins and outs on getting that or growing that number? Is it really just timing of contract win or just a sense of what can move that around? Justin Jacobs: I think it's that. I mean it's still early. We're in November now. And as I said in response to one of the earlier questions, we certainly still have some opportunities in the second half of the year for new unit sets. And so that's something that we'll be able to give, I think, better clarity around on the next quarter call, but we just wanted to indicate to our investors that we're going to have significant growth again next year and a very large portion of that is already contracted. And as we engage with customers over the coming couple of months to finalize 2026, our hope is to push that number up. Robert Brown: Okay. Great. And then you had good market share gains, I guess. What's your sense on that? How can that -- or what's the sense on whether that can continue? And do you need to continue to penetrate new customers? Or is it really a share gain at your existing base? Justin Jacobs: I think it's a mix of both. I have been -- obviously, we had the disclosure, as we mentioned earlier, is in the queue of a new 10% customer. We've been setting a lot of equipment with Devon have been very, very pleased with that relationship and look forward to performing on even larger amounts of horsepower with them going forward. As I look at 2026 and then even beyond that, I think we have an expectation, we're going to continue to grow with our existing customers, and we're certainly seeing opportunities with some new customers that could be potentially quite large, but still early there. We have to go out and get some of those wins. Operator: [Operator Instructions] Our next question comes from Nate Pendleton with the Texas Capital. Nate Pendleton: Congrats on the strong quarter. Justin Jacobs: Thanks, Nate. Nate Pendleton: Can you talk about your decision to increase the dividend here given the strong outlook you're messaging for future growth potential? And maybe how you balance that increasing return of capital goal with the growth opportunities ahead of you? Justin Jacobs: Sure. I think it is a balance as we look out to the -- further out into the future of eventually getting to a defined capital allocation framework where we've got a certain amount of EBITDA and whatever term you want to use, getting down distributable cash flow and how we allocate that out. The -- obviously, we had the initial or inaugural dividend last quarter. And just to reiterate, I do not want to create the expectation that there will be an increase every quarter. With that being said, considering the performance of the business and our outlook, we did want to signal to investors that we hear the message loud and clear of a continuous and growing dividend. As we said in our prepared remarks, this is not going to impact in any way our ability to continue to grow from just a dollar perspective. It's not going to impact that, but we thought it was a good way of showing that we're going to be increasing dividend and return of capital to shareholders, while still growing the business at a materially higher rate than our public competitors. Nate Pendleton: Got it. And then maybe going back to Devon. Specifically, how was NGS able to make inroads there? And how did that relationship develop? Justin Jacobs: It's been a long-time relationship. If you go back, I'm not sure how many years, but quite a few years ago, they were a disclosed customer. So they've been a long-time customer. And it was, I think, a great example for us of what some of the technology that we have on our units that are proprietary to us led to a significant expansion of our relationship with an existing customer. And as they understood some of the capabilities of our units and some of the data that they would be able to get off of that. That was the primary driver on top of a reputation from a service perspective to deliver their needs and what is a mission-critical service for them. And so it really boiled down to the 2 simple things or maybe 3 simple things of long-time existing customer gets an understanding of some of the current capabilities we have and the run time that we've delivered for our customers, including for Devon that allowed the significant expansion of that relationship. Nate Pendleton: Great. Congrats again. Justin Jacobs: Thanks, Nate. Operator: [Operator Instructions] Our last question so far comes from Jim Rollyson, Raymond James. James Rollyson: And again, congrats on another solid quarter. Justin, just kind of following up on that. So you mentioned how Devon expanded from a customer into [indiscernible] there. Maybe just a little bit of color on new customer opportunities. Is word kind of spreading about what your technology and service quality is doing for Oxy and Devon to drive new potential customers to the door? Or how are you setting up to get new customers? I'm curious. Justin Jacobs: I think it's an ongoing effort. I think I believe that we are seeing success there. In terms of public quantification, Devon is -- that's something we're able to point to. In terms of conversations with both existing customers that maybe are much smaller customers where we have just a smaller customer. It is really having multiple conversations and then doing demonstrations and showing in the field of this is how the technology works. These are the benefits that our customers get out of that and really getting into the operational and engineering teams at these customers, both existing and then looking to do it with new customers as well. And that's certainly a process, but I'm encouraged by the reaction that we get from these customers when they really start to see the benefits that they will get out from a service performance perspective and data perspective. And so I think it's ongoing, and there are a couple of positive indicators, but something we have to keep working on. James Rollyson: For sure. I appreciate that. And maybe just back up on the CapEx. If I go back 2023, you guys had a very heavy CapEx year, delivered a lot of new units and you kind of took '24 to maybe absorb some of that, get it all make sure operations are running the way you wanted to and then you lean back in this year. And so I guess, as I think about the $50 million to $70 million kind of starting point for CapEx, do we think about '26 maybe as kind of a '24 type of year, and then things continue to build for '27 potentially ramping back up if the macro still kind of cooperates. Is that a good way to think about it? Justin Jacobs: I think generally, we looked at 2026 and say it's in -- looks like it will be generally in line with 2024. I mean, as you go back to 2023, it's a bit of an outlier year in terms of the numbers. It's quite a huge number. But 2025, you're looking midpoint kind of the low hundreds. Some of that is driven by particularly large customer wins, which may not repeat year-to-year, although we're still setting activity. And so we're encouraged by 2026, the opportunities that we see and then 2027, starting to see the RFPs for that for customers that are, I think, kind of ahead of the curve or maybe on the curve of where they should be from an ordering perspective. And those are significant potential horsepower wins. And so we're encouraged as we look forward that we're going to continue to grow at a significant rate organically. And as I kind of look at the market broadly, see that we're capturing market share. James Rollyson: Awesome. Look forward to that growth. Justin Jacobs: Thanks very much, Jim. Appreciate it. Operator: Thank you very much. And with that, we have no other questions. Justin Jacobs: Excellent. Well, thank you, Luke. Thank you to everyone for joining the call this morning. We appreciate the time, the interest, and we look forward to continuing to report strong results for our investors. And so we'll see you again on the next quarter's call. Thank you for your time. Operator: Thank you, everyone. And this concludes today's conference call. Thank you for attending.
Barbara Seidlová: Hello, everyone, and welcome at CEZ Group Financial Results Conference Call for 9 months of 2025. It's my pleasure to welcome Martin Novak, Chief Financial Officer; and Ludek Horn, the Head of Trading, who will be going through the presentation and be available for the questions. I'm now handing over to Martin to start the presentation. Martin Novák: Thank you . Good afternoon, good morning. So I will quickly go through our presentation, and then we can jump to Q&A session. So if you look at Slide 3, our total financial results, our EBITDA is about 3% higher than in the same period of last year. We achieved CZK 103.2 billion. Our net income is 7% lower, CZK 21.5 billion and adjusted net income that is a base for paying dividend is CZK 22.2 billion. Our net operating cash flow is down by 40%. This is mainly due to very strong net operating cash flow in 2024 when we were still receiving back some cash from margining from previous years. And then we had 11% higher CapEx spending that reached CZK 38.7 billion. Important slide on Slide #4, you can actually see main causes of year-over-year change in EBITDA. 3% or CZK 2.9 billion, as I already said. We have a few negative effects and a few positive effects. The negative effect is actually the strong -- by far, the strongest -- it's actually a decline in power prices. Our average achieved price for 2025 is estimated at EUR 121 to EUR 124 per megawatt hour versus something above EUR 130 in 2024. So this effect of kind of EUR 10 per megawatt hour causes CZK 10.5 billion decline on generation facilities. Another negative effect is actually lower generation volumes of hydro plants due to mild winter and not enough snow in 2025. On the other hand, positive is actually impact of fuel cycle extension and the increased capacity at the Dukovany nuclear power plant, which is CZK 3.5 billion positive and other effects, mainly higher fixed expenses of CZK 200 million. Trading activities are down by CZK 3 billion. We have low prop trading margins by CZK 2.6 billion compared to previous period. And that's -- those are actually negative effects in trading and generating. Mining is somewhat down as well due to lower coal sales volumes and lower price of coal. Positive is actually coming from 3 main factors. One is actually just distribution, meaning power distribution, which is helping us with CZK 4.6 billion. We have higher allowed revenue, thanks to growing investments in distribution assets in the past, which is CZK 2.1 billion. Then we have so-called correction factors, CZK 1.3 billion, both from 2 years before, meaning 2023 and also something that we will be handing over back in 2027, but positive effect on 2025 is CZK 1.3 billion. GasNet, important acquisition of 2024. GasNet is a Czech distribution of gas, natural gas which we actually started to consolidate as of September 1, 2024, meaning it was not in our numbers for 8 months in 2024, only the 9th month. And actually, in 2025, it is in our numbers as a full year. So that's why there is such a huge variance of CZK 7.4 billion. Sales segment is also doing better, CZK 4.3 billion improvement, mainly due to lower cost of commodity acquisition, impact of sales of undelivered commodity of CEZ Prodej when they actually had to sell some undelivered commodity in 2024 at a lower price compared to current year when they delivered it to end customers. And also proceeds from litigation with the Railway Administration that actually brought us last year CZK 1.3 billion. It didn't this year. So overall sales segment improvement is CZK 4.3 billion, and it gets us to CZK 103.2 billion. Year-on-year change in net income. By far, the most important change is actually in the depreciation and amortization line. You can see pretty significant increase in depreciation and amortization. It has a few reasons. One of them is actually consolidating GasNet that we did not consolidate last year almost at all, and it is CZK 6.7 billion higher depreciation. We also started to depreciate or accelerate depreciation of our lignite assets that are being depreciated much faster in 2025, '26 and of course, slower towards the end of 2030, basically coping hours of production, which is an allotment under accounting, IFRS accounting when you can see the end of the asset and uneven power generation. We started this type of depreciation as of October 1, 2024. So this accelerated depreciation is not in a comparable period of '24 at all because now we are comparing only 9 months. So the difference is actually net difference of CZK 5.6 billion of accelerated depreciation on coal assets. Those are the main variations. Then, of course, we have higher interest income expenses, mainly due to actually lower interest received as the interest rates go down and deposits that we have are -- bear lower interest than in the past. And that's basically it. There is lower income tax due to lower pretax profit. And finally, we get to net income of CZK 21.5 billion and CZK 22.2 billion is adjusted net income. On the next slide, you can see volumetric data, which I will skip. And we'll go to Slide 7, which is the financial outlook. We are keeping our EBITDA outlook at CZK 132 billion to CZK 137 billion. We are narrowing actually the range of our estimate for adjusted net income that was CZK 26 billion to CZK 30 billion. Now it is CZK 26 billion to CZK 28 billion. We are coming closer to the end of the year, so we are able to narrow down this range. You can see selected assumptions on power prices and carbon credits and also on the level of windfall tax, which is now estimated at CZK 31 billion to CZK 34 billion. Important milestone in our acquisition -- the territory of acquisitions, we acquired gas distribution operator on the south of the country. This is the -- it's called gas distribution, and it's actually dark green color on the chart. So now we control entire area of the Czech Republic gas distribution with the exception of Capital City of Prague that is controlled by municipal company. So this was an important add-on to our assets. We acquired actually gas distribution through GasNet. So we are not 100% owners. It makes sense to do that through the entity that already owns vast majority of gas distribution in the country. The transaction should be closed during the first quarter after all the antimonopoly decisions are made and approvals are received. It's relatively smaller compared to what we actually already own. EBITDA is about CZK 800 million, net income about CZK 100 million, no debt. So a very interesting company into our portfolio. Now let's switch to Generation Mining segment. It's important to see actually how our Generation and Mining did. I already made a few comments on that on the EBITDA slide at the beginning of the presentation. It's important to note that actually, as I said, power prices despite some positives like, for example, operating -- positive operating effects on Temelin power plant, mainly fuel cycle extensions and so on are still not high enough to beat the decline in power prices. So decline in power prices on our zero emission generating facilities on nuclear facilities is about 3% or declining EBITDA, which is mainly caused by declining power prices. On renewables, it's more significant is 26% down mainly due to insufficient water conditions in 2025, the beginning of this year. Emission generating facilities generated, as you will see later on, almost the same and will generate almost the same amount of electricity. However, EBITDA is down by 61% or CZK 6 billion, mainly due to, again, decline in power prices and narrowing margins in coal-fired power plants. Trading at CZK 1.6 billion of net income, which is 65% down compared to previous year. Entire Generation segment is -- and Mining in total is actually down 17%, reaching CZK 64.8 billion EBITDA. When you look at nuclear and renewable generation on Slide 11, you can see actually charts comparing first 9 months and also estimate for full year '25. We should be achieving pretty much highest level of our nuclear generation, close to 32 terawatt hours, mainly due to fuel cycle extension that is now longer than it used to be in the past. So there are years -- which is this year when we will be running nuclear units without interruption during that year, which is the case for Temelín power plant this year. And so that's an increase of -- planned increase of 7% year-on-year. Decline in renewables of 13% that I already commented on and total number to be achieved 35.1%. Electricity generation from coal is on Slide 12, pretty much in line with last year with one exception, which is steep decline in Poland. As many of you know, the first or second week in February 2025, we disposed -- finally disposed our Polish coal assets. And that's why there is no more EBITDA coming and generation, of course, in terawatt hours coming from those assets. That's why there is such a significant decline. There will be a decline on -- a little decline actually on the natural gas and a little decline on coal generation in Czech Republic, which will be about 2% lower. However, in EBITDA numbers, as you could see, it was about 60% decline. One of the most important slides is actually our hedging on Page 13. You can see 2026 average achieved price of EUR 94 so far declining to EUR 72 in 2029, but we are only 5% sold or secured for 2029. So it's a pretty material number. Same for carbon credits on the right side of the chart. And at the bottom, you can see the percentage of power sold, which means there will be significant decline in average sales price because average sales price for this year is estimated between EUR 121 and EUR 124 per megawatt hour, which is something like EUR 30 decline year-on-year, which is pretty significant and will definitely be seen in our sales numbers and EBITDA numbers next year. Distribution and Sales segment is doing rather well. Actually, Distribution segment is up by 75%, mainly due to gas assets that contributed CZK 8.1 billion for first 9 months versus CZK 700 million, which was a number for September 2024 because it was consolidated as of September. So CZK 7.4 billion improvement. And then on actually distribution, electricity distribution, our number is 30% better than it was last year, but CZK 1.3 billion are those correction factors as I discussed from year minus 2 and year plus 2 in total, about CZK 1.3 billion difference compared to last year. The details of Distribution segment are then listed on the slide. Another important factor is -- the most important factor, above correction factors is actually higher allowed revenue, thanks to growing investment base in distribution assets. Year-on-year development of electricity and gas distribution, electricity distribution on CEZ Distribuce territory is up by 1% in total, basically a little change. Residential customers are somewhat higher, but this is mainly due to climate. When you actually adjust for climate, it is a decrease of 0.2%. And calendar, if you adjust it for a number of days, it's decreased by -- it's increased by 0.3%. So pretty much steady distribution numbers. Gas distribution increased by 9%. Climate-adjusted consumption only by 1%. So it is colder winter '25 than '24. Sales and EBITDA -- sales segment EBITDA in total, actually CZK 10.7 billion, which is 67% improvement. You can see the details in CEZ Prodej, which is Czech retail business, 84% improvement and then ESCO companies in various countries. A few -- there were a few positive effects influencing CEZ Prodej, our retail business, one of the most important half of the difference actually -- most of the difference actually, full difference is lower cost of commodity acquisitions and lower cost of deviation, thanks to the market stabilization after it was deregulated. So that's the main chart here. On Page 18, we have volume of electricity and gas sold and number of customers. So electricity sales went up by 1%, gas by 16%. Number of customers is basically steady. We lost a little in electricity being dominant player and gained 5% actually in gas business. So in total number of customers is pretty much not changing. Their customers are much less involved in changing supplier than they were before the crisis when many of the smaller companies or even large companies went bankrupt and they had to switch to different suppliers under a fairly stressful conditions, I would say. Revenues from sales of energy services, meaning ESCO. ESCO activities are actually 8% down, but we expect them to be pretty much in line with last year or only 2% down, mainly because we had a few kind of big significant projects last year -- that were invoiced last year that did not repeat themselves now. However, organic growth is fairly reasonable, and that's why there is -- we are able to make up actually on a full year basis. And that's all for the presentation. And now I think we are ready to take questions. Martin Novák: [Operator Instructions] So the first question comes from Emanuele Oggioni. Emanuele Oggioni: The first one is on the distribution EBITDA guidance for 2025. We have seen another increase after the increase in the guidance in H1 for this business unit. So basically, from the beginning of the year, the change would have been between CZK 7 billion and CZK 9 billion. Now it's between CZK 12 billion and CZK 13 billion, so more than 50% compared with the start of the year. So probably you explained this in Slide 30. So if you could add more color on the Slide 30 and this incrementally positive distribution factor is repeatable or not in '26? And what is your expectation on '26 about this business unit as you exceeded the guidance, the original guidance to a large extent in '25. So the question is not only an explanation on '25 based on Slide 30, but also about the outlook on 2026. This is the first question. The second is on the guidance on sales, EBITDA sales. Also in this case, there is an increase -- there was an increase 2 times in a row. And also in this case, the question is if the positive drivers, the positive moving parts, which lead to this increase are also valid and visible for 2026. So we can expect structurally higher profitability after a stronger-than-expected profitability in '25 also in 2026. And the third and last question by my side for the time being is on the generation business is on the development of the data center market in Czech Republic and also in Central Europe because you are related -- that the power prices is related also to the power price of Germany. So the question is if -- what is the situation as regards to development, the projects of data centers in Central Europe and obviously, in your country. And this could change in your opinion in the midterm, obviously, not in the short term, not in the next quarter or next year, but could change something embedded to sustain the electricity prices in Central Europe, thanks to the development of data centers. Martin Novák: Distribution, as you rightly noted, there is a significant increase in distribution segment, and it's mainly due to acquisition of GasNet, which is actually natural gas distribution on the Slide 30, which is in appendices just because it was basically we did not consolidate. We did not own GasNet first 8 months of 2024. So that's why there is such a huge move. In electricity distribution, it is improvement of CZK 4 billion to CZK 5 billion compared to last year. Half of it is investments, CapEx actually increased asset base from last year's actually of investment and the rest are correction factors that 1 year go in your favor, next year, they go against you. Now actually, we have a positive effect of CZK 1.3 billion, out of which half will have to be returned in 2027. So in 2027, there will be a negative impact of something like half of this CZK 1.3 billion of this amount. So it is -- but generally, I would say that the regulatory framework, especially due to our CapEx is favorable. We would not expect other than those correction factors to decrease our profitability in power distribution in the future. However, it is a regulated business. So you don't have much space for any significant increases of EBITDA either. Gas distribution is very similar. Again, you can make certain changes, you can make certain improvements in the business. But again, it will not be -- you are not able to double the number other than through acquisitions. So of course, acquisition of gas distribution, which is actually the company that we acquired and that will be put into our numbers as of next year will bring another CZK 1 billion, close to CZK 1 billion of EBITDA next year. Sales segment. Sales segment is very strong this year. I would say that this is a really coincidence of the market conditions. Normally, we did not have that high EBITDA in the past, as you can see compared to previous year. And that's why actually for first 9 months, actually, especially so I would think that profitability might be lower in the future coming back to normal, I would say. But by how much it is, of course, difficult to predict. You can see that actually now we are 84% higher on retail which is probably something that will be hard to repeat in the future as well. And generation data centers, there is some discussion, but we really didn't see much real, real kind of projects in the region so far, especially when you compare it to other geographic locations like U.S. power price is much higher here in Europe than in the U.S. So it's difficult to compete -- we had a few contacts with potential investors, but so far, didn't really work out. And I don't know of many new kind of huge projects in this region that will really come to final decision. So let's see how it goes. But as you said, we are tied to German price plus you have distribution tariffs. So the power is not that cheap and power is actually the commodity that you need for data centers. So maybe in the future, there are some discussions. For example, if you have new nuclear units, you would be supplying data centers directly from them. But so far, we are not there yet. We have our own data center. We are planning one more. They are all within parameters of our power plants. So they are connected directly to the power plant, taking power from the plant, not from the distribution grid, but that's for our own use. So that's it. Barbara Seidlová: We can take the next question from Oleg Galbur. Oleg Galbur: I have several actually. And let me start with a question regarding your full year guidance for the nuclear electricity generation of 31.9 terawatts, which implies quite a high utilization, both for the fourth quarter, so almost 90%, but also for the full year, 85%. So what I'm trying to understand is what should we expect going forward on the annual basis? Should, for example, this 85% be like a new normal? Or how do you comment on that? And then a similar question on the guidance for electricity generation from coal, the 14 terawatt hours guidance implies an increase in coal generation to almost 4 terawatts in the fourth quarter. And if this is really the case, how is such an increase justified by the low, if not even negative level of coal spark spreads? And lastly, according to my calculation, the proprietary trading was negative in the third quarter and significantly lower, obviously, in comparison to the first half results. So maybe you could provide a bit more details on what has caused this result in the third quarter and perhaps also shed some light on the expectations for the fourth quarter or for the full year, again, on the trading results. Martin Novák: Okay. So thank you for questions. Close to 32 terawatt hours, 31.9 terawatt hours is something that we will be hopefully seeing from time to time. The reason is that we moved actually from 12 months refueling cycle, which means that every reactor was at least for a few days shutdown for refueling every single year to 16- or even 18-month cycles for Dukovany and Temelín. This means that utilization oscillates between 80% and 85%, depending on how many outages fall into a given year. And utilization in Q4 will be high because there is no outage actually in Temelín planned. And it was actually -- there was actually outage of 8 weeks in 2024 -- in Q4 2024 in Temelín second unit. In 2026, both Temelín units will be -- will have planned outage, and therefore, nuclear utilization will be lower compared to 2025. It will be around 80%. So we would expect our power generation roughly of 30 terawatt hours. And then in 2027, again, there will be no outages. So it would be close to 32 terawatt hours. So our utilization now will be kind of oscillating between 30 and 32 depending which years will be hit by refueling and which years will be run without any interruption and any refueling. Second question, coal spark spread is actually not negative compared -- because we are hedging the power. So we actually sold power at those EUR 121 to EUR 124 per megawatt hour, while carbon credits were at a level of EUR 90, maybe at the time when we were selling it, so actually, the spread was very positive. And it's also important to note that our power plants are making most of the power and also heat because all of them are heat plants in Q1 and Q4. So Q4 is kind of a very important quarter because it's winter, it's October, November, December are usually very cold month. And that's why lignite plants are running at full speed at that season. So it's a seasonal business. The hedging or the trading results so far for first 9 months of 2025, prop trading made CZK 1.6 billion. In this segment, we are not only showing prop trading as such, but also revaluation of derivatives. Estimate till the end of the year is that they would make something like CZK 1 billion to CZK 2 billion more. So the trading could achieve CZK 2.6 billion to CZK 3.6 billion of results. Clearly, it is less than it was in the past. But on the other hand, we are back to volatility we were used to in the past, I mean, in the -- before the energy crisis in 2021 to '23 where volatility was easily EUR 500 per day. Today, it's definitely not that. It is -- the market has stabilized. And with volatility of a few euro cents per day, it's very hard to make a profit of CZK 20 billion as it was in the past. So I would say we are back to normal. Normally or usually, our trading was making something between CZK 1 billion and CZK 2 billion annually as a standard result in a standard environment. So that's it for me. Thank you. Barbara Seidlová: We can take the next question from Anna Webb. Anna Webb: Anna Webb from UBS. Hopefully, you can hear me okay. Just one question for me on the gas distribution acquisition. I was just wondering if you see kind of any synergies now controlling almost all of the gas distribution in Czechia, kind of above and beyond just the contribution from gas distribution. I mean I'm aware it's quite a modest contribution from that business you bought from E.ON, but just wondering if you see kind of synergies and cost savings for the overall gas distribution business -- as in gas distribution in Czechia, including GasNet, now you've got that kind of majority of the business. And obviously, you've now had GasNet for a year and how you see that evolving would be great. Martin Novák: Yes. Clearly, we do. And that's the reason why actually the gas distribution was acquired by GasNet and not by us directly. It makes sense to consolidate all gas distribution assets under one company. So we would expect to have synergies from technical management of the assets, all the call centers, all the financial systems, but it's too early to say how much it will be. Gas distribution is not that sizable company, as you pointed out rightly. So there would be some synergies, but now it's too early to say. And probably given the size of our overall business, they will not be very material. Barbara Seidlová: We can take the next question from Piotr Dzieciolowski. Piotr Dzieciolowski: I have 2 questions, please. First one, I wanted to ask you because there were some headlines about your total CapEx until the end of the decade. Do you think -- so the question around it would be where do you think your leverage will end up at the end of the decade? And do you think you will need to revisit the dividend policy in light of this high CapEx requirement? And the second follow-up, I have, like if you -- assuming the takeover story has some legs and the government goes ahead with it and it imposes the objective on the company to do a buyback, how much of this CapEx, the total CapEx envelope is flexible that you would not need to do it? And is it a reasonable scenario to assume that you could cut a certain amount, like 1/3 of this CapEx, if there was a need to do it to facilitate some other objectives? Martin Novák: Okay. So first question, our CapEx is [ above ] CZK 400 billion to be spent until the end of this decade. We are aiming at our target ratio of 3.5x net debt to EBITDA by then. And we should be able to make it with the projection of power prices that we are now seeing, actually, on the power exchange and also paying the dividend in the range of 60% to 80% of our adjusted net income that we are usually sticking closer to 80% rather to 60%. So all those things kind of fit the puzzle and we should have no issues to do any changes. Regarding share buyback, we don't comment at all on this topic. It was mentioned in actually proposition of the government -- of the kind of what government proposes, but it's preliminary. It has not been approved by the government, actually future government. So until it is more stable document, we are kind of not commenting on political announcements at all. Piotr Dzieciolowski: And a quick follow-up, just a technical follow-up on this 3.5x net debt. We are talking here about the financial net debt. So we would have to assume that the nuclear provisions come on top, right? Barbara Seidlová: Yes. Martin Novák: Yes. Barbara Seidlová: Okay. Next question from Jan Raška, please. Jan Raska: I have one question about once again, gas distribution company. You indicate annual EBITDA almost CZK 1 billion. As you said, GasNet was realized this acquisition. So it means 55% effective ownership share. But I understand correctly that you will fully consolidate EBITDA of gas distribution to CEZ EBITDA. Martin Novák: Yes, that's how we will normally do under accounting rules. And then actually in adjusted net income, we are actually taking out the minority share of net income that is attributable to 45% shareholders. Jan Raska: So CZK 1 billion to EBITDA and then correction at... Martin Novák: [indiscernible] Barbara Seidlová: Okay. We can take the next question from [indiscernible]. Unknown Analyst: I just had one question more on the political side in the Czech Republic. Specifically, if you had any comments about any kind of political -- potential political interference or nationalization, for example, there were a few headlines. So any update on that? Martin Novák: I already answered that we actually don't comment on any political pronouncements until they actually reach our doors, which has not happened. So that's all we can say. Barbara Seidlová: And we have a follow-up question from Oleg Galbur. Oleg Galbur: Yes. Two shorts, first of all, on the CapEx, could you please tell us what level of CapEx in the Generation segment should we expect for the full year? And maybe you can also remind us what would be the expectations for the full year CapEx at the group level? And secondly, on the acquisition of the gas distribution company in the third quarter, could you disclose the price or the multiples that you paid? Anything that would be very useful. And more of a general question. So you mentioned in your presentation that the -- due to the declining power prices, you expect also a negative impact on your EBITDA. Probably the lower generation in the coal assets due to a gradual phasing out that will also have a negative impact in the medium term. So my question is, what is the strategy or what are the measures that you are considering taking in order to at least partially offset the impact of this development on the generation business earnings? Martin Novák: So first, thank you for the questions. So first of all, CapEx. Full year CapEx is now estimated at CZK 60 billion, out of which power generation would be close to CZK 34 billion. Then mining, close to CZK 2 billion, distribution about CZK 19 billion, sales about CZK 6 billion. So this is around CZK 60 billion in total. So it's less than originally anticipated. So far, we spent close to CZK 39 billion. Usually, fourth quarter is pretty strong in spending CapEx. So we assume that we will be able to do that. Price for gas distribution is not announced. We agreed with the buyer -- with the seller that it will not be announced until we close the transaction next year, and then it will be properly reported. And third question was on. Barbara Seidlová: What can we do to offset the decline in generation. Martin Novák: Decline in generation. Well, we will be, of course, offset it through future projects and entirety of our business, but how we will actually deal with coal assets, we will definitely decline power generation. It will be run for following few years in kind of winter/summer mode of operations. So winter, it will be running, providing also heat as an interesting byproduct. In summer, it will be running much less. And towards the end of decade, those power plants will very likely be decommissioned together with coal mining activities. And generally, as a group, of course, we are concentrating more on services like ESCO activities, which will be growing distribution assets, for example, through acquisition of gas distribution and growing our distribution EBITDA and of course, replacing coal heat plants with gas plants and all the renewables and all those projects. Oleg Galbur: Okay. I was asking the third question, also in light of your comments earlier today in the press conference, at least this is what Bloomberg is writing that although you expect the lower prices to negatively impact EBITDA, you are quoted here saying that -- but on the other hand, some other acquisitions could take place, so things may look different. So I was also expecting maybe some more comments on this statement, if it's possible. Martin Novák: Yes, I think it's probably what we can say now, but that's what it is. Barbara Seidlová: Okay. Now we can take a question from Bram Buring from Wood & Co. Bram Buring: Two questions, please. The first, I guess -- well, the second, but related to the previous comment, acquisitions in distribution assets, you're kind of full up in the Czech Republic, if I'm not mistaken. Are you potentially interested in acquiring abroad? That would be the first question. And the second question, again, you've already sort of touched on it, but I'm thinking about coal generation for 2026. Will the margins allow you to produce what are we -- should we be looking for closer to 10 or closer to 6 for 2026 in the coal generation? Martin Novák: So you are right in the gas distribution, I don't think we can get more in the Czech Republic. On the other hand, we are not looking at foreign gas distributions. I think we already kind of divested actually power distribution companies abroad in a few Balkan countries. And gas distribution is interesting for us for a few reasons. First, it's in our home country where we have the same regulator for power and gas. So we are able to actually bundle the negotiations together. We also have a side effect of building a fleet of CCGTs and gas-powered heat plants where having an access to gas grid definitely helps in terms of gas connection. This is something we would not necessarily do abroad. So we are not looking abroad at gas distribution. And then power plants, it's really hard to say what will be power generation of power plants now. I think we'll announce it actually in our March press conference where we'll be announcing what will be our EBITDA expectations and power generation and so on. So it's March information. Barbara Seidlová: We can take the next follow-up question from Jan Raška. Jan Raska: No, no. No question. Barbara Seidlová: Okay. So then [indiscernible]. Unknown Analyst: My question is regarding the energy price curve. Do you think that the current curve may be too low? For example, if we assume that CO2 prices would rise, even if we assume that gas prices will be lower in a few years. So what are your expectation on the future electricity prices? Ludek Horn: Okay. I will take the answer from a trading perspective. We expect that gas prices will go down, as you mentioned, in midterm future, connected with, let's say, oversupply of U.S. LNG and so on and so on. But it's hard to say how it will be converted in electricity prices in Europe because the plants -- coal plants and gas plants are, let's say, not marginal plants as it was before so often. So maybe even with higher CO2 price, we will have on average lower electricity price. So there are different scenarios how it could look like, but it's hard to say how it finally will be. Barbara Seidlová: Okay. We can take the next question from fixed -- from a telephone line, starting with +33. Arthur Sitbon: Yes. This is Arthur Sitbon from Morgan Stanley. Yes. Apologies, the raise hand was not working on Teams. So yes, my question was about the outlook, well, beyond 2025. I imagine it's a bit too early to give precise guidance for 2026 net income, but you did share -- you did make some comments. You made some comments around the fact that in distribution, distribution EBITDA is currently higher than its normalized level. You also flagged the fact that realized power price should come down on the Power Generation segment in 2026. But on the other hand, I know there is the removal of the windfall tax. So I was thinking overall, well, first, are we missing any key moving parts in EBITDA and in profit for 2026? And second, I see consensus a significant growth in net income in 2026 versus 2025. I don't know if you can be very precise, but is a significant pickup in net income in 2026, something that you're comfortable with? Martin Novák: So you are right. You actually named it all. I think it is significant decline in power prices. I think one of the most significant declines we have ever seen in the history, EUR 30 per megawatt hour year-on-year is quite a lot. Then we will have lower generation on nuclear plants because this will be -- 2026 will be the year when we will be actually refueling Temelín power plant. Then correction factors in distribution, yes, probably lower sales results because of kind of getting back to normal on the sales side. And against it as a big positive is windfall tax to be discontinued that this year in 2025 will hit our P&L, it's CZK 31 billion to CZK 34 billion. However, I cannot really comment on 2026 numbers yet because they are not out yet, and they will be in March. But I saw some of the estimates of net income for next year. And I think they are kind of not taking into consideration those negative factors as much as they should. So that's all I can say. Barbara Seidlová: Okay. It seems it was the last question. Therefore, let me conclude this call. But as always, Investor Relations is always available if some further clarifications are needed. Thank you very much, and goodbye. Martin Novák: Goodbye. Ludek Horn: Bye-bye.
Samuel Dobson: Good morning, everyone. Thank you for joining us here. Welcome to Macquarie's First Half Financial Year 2026 Results Presentation. Before we begin today, I would like to acknowledge the traditional custodians of this land, the Gadigal of the Eora Nation and pay our respects to Elders past, present and emerging. As is customary, today, you'll hear from our CEO, Shemara Wikramanayake; and our CFO, Alex Harvey, and then we'll have an opportunity for you to all ask questions at the end. So with that, I will hand over to Shemara. Thank you. Shemara Wikramanayake: Thanks very much, Sam, and good morning, and welcome, everyone, from me as well. So as usual, we'll start by just noting the footprint of 4 operating groups we have in our business and the 4 central service groups that support them. There's no material change here. The only thing I thought I would mention is under Macquarie Asset Management that as of the 1st of September, we've moved the green balance sheet assets into the central Corporate area. And this is basically to free up the asset management team to focus on the now very growing fiduciary business in the green area that we've managed to seed and build based off the capability we built on the balance sheet, but the central team will now come in the Corporate area and work on those assets from here. The other thing I'd note on this slide is in this half, we had 16% of our earnings from market-facing sources and 56% from annuity style, which is base fees in Macquarie Asset Management, the BFS earnings and then the remaining 28% from areas like in Commodities and Global Markets, the financing, client revenues we earn and also the performance fees in Macquarie Asset Management. So turning then to this half result. As you will have seen this morning, it was up 3% on the prior comparable period at $1.655 billion. That represented a return on equity in this half of 9.6%. Even though the result was up 3%, the return on equity was down slightly, and that reflects the growing capital position we have. And in terms of the contribution to that result by operating groups, you can see here that we had increased contribution from 3 of our operating groups. So Macquarie Asset Management driven principally by an increase in performance fees in this half. Banking and Financial Services, ongoing growth in our books there at our market position. Macquarie Capital, it was actually high fee income in this half, particularly in Australia and the Americas and our ongoing growth in our private credit business. So all 3 of those up. Commodities and Global Markets, even though the revenue, the operating income was broadly in line with the prior comparable period, it's increase in our operating expenses as we invest in our platform that brought that result down. And before going into detail of those groups, I'd just note, first of all, as usual, our assets under management, they're sitting at $959.1 billion, mostly driven by favorable market movements and asset valuations, offset by some outflows in equities and unfavorable foreign exchange. This number will come down slightly when the sale of the public investments assets outside Australia to Nomura closes. So we'll update on that in the next results. And in terms of the regional makeup of our income, it's broadly consistent with what we've had for recent years, Australia making up a bit over 1/3 in this half, and the Americas a little under 1/3. Europe, Middle East, Africa, about 1/4 still, and the balance in Asia. So then turning to the operating groups, starting with Macquarie Asset Management. And I should say we've got all our Group heads here in the front row. So Ben Way is here in Australia, sitting here and able to answer questions. But the result there at $1.175 billion was up 43% on the prior comparable period. The big contributor there was performance fees, and Alex will take you through in detail in a little while where we earned those, but they are around the world. The equity under management was up 2% at nearly $225 billion. The team raised about $11 billion in the half and invested about just over $12 billion, leaving dry powder of about $23.5 billion in private markets. In public investments, as I said, the majority of these assets are due to be transferred to Nomura in a transaction that's on track to close at the end of the calendar year. So we'll probably report in more detail on the remaining Australian fixed income and equities portfolio going into the new results from here. Then turning to Banking and Financial Services, again, as I said, up on the prior comparable period, up 22% at $793 million. And that's driven by, as I said, the ongoing growth in all our books as well as our funding, our deposit funding. The home loan portfolio was up just over $160 billion, which was an increase of 13% on prior comparable period. We're now at 6.5% of the mortgage market and have been growing at 3x system there, as you will have seen. And that is supported by strong growth in deposits, which were up 12% to over $190 billion. That's representing just over 6% of the Australian market. And the business banking loan book was also up to $17.4 billion, which was up 4% on the prior comparable period. Funds on platform also up 8% on the prior comparable period. And this is all being driven by our digital offering, focusing on customer experience. And when Alex goes through it, he will talk about how our expenses went up slightly as we continue to invest in the tech platform, but all up -- earnings up 22%. And Commodities and Global Markets, as I mentioned, was the business that was down 15% to $1.113 billion. Now it was a very subdued environment globally, as you will have seen in Commodities. Despite that, we were able to have good risk management income in our North American Gas & Power business as well as our global oil business, but that was offset by hedging activity in the agriculture sector. But a couple of things I'd note that are interesting. While the commodities area has been more subdued in this period, the financial markets and asset finance businesses keep growing our franchise and the earnings continue to step up year-on-year on those. And in this half, they were actually 54% of our contribution from CGM, which typically has 60% coming from the commodities businesses. The other thing I thought was worth noting in CGM is the franchise continues to grow. So 10 years ago, I think, Simon, we were doing about $1.7 billion of revenue across CGM. When I started as CEO in 2019, we were at $3.8 billion. Last year, it was $6.3 billion. And this year, we're looking at broadly in line around that low $6 billion number. So the revenue line or operating income continues to grow. What we have had in CGM is a big investment in our operating platform as we uplift the platform for a very diverse and globally complex spread out business and also respond to regulatory requirements in that business. And again, Alex will take you through the details of how our operating expenses have stepped up, and that's the main thing driving the lower net profit contribution in this half. Macquarie Capital, up 92% at $711 million from about -- I think Michael Silverton is also with us here from New York. I think it was about $370 million in the prior comparable period. And as I said, the 2 big contributors to that are, first of all, in our fee income, particularly here in Australia and in the Americas, we had a strong half. That was a little bit of carryover from the last half transactions as well. And then our private credit book was also up $3.9 billion and continues to grow and contributed together with some repayments. Then turning to our funding and capital position. Our funded balance sheet remains strong. We have term funding exceeding our term assets and good matching in funding. We raised $15.9 billion more of term funding in this half and our deposit funding is now sitting at $198.8 billion. And our capital position as well, we remain with a surplus of $7.6 billion over our Basel III minimums down from $9.5 billion. The changes were increased for the profits that we made in this half, offset by the final year dividend we paid, business capital requirements and then other movements like the foreign currency translation reserve. The businesses absorbed $1.1 billion in the half. And you can see there in the right-hand half of that graph that the 3 businesses that did absorb capital mostly Macquarie Asset Management, $500 million in terms of co-investments underwrites as we grow the platform and invest in our funds. For alignment, BFS continued to grow by about $700 million over the half with growth in all of the home loans, business banking books, et cetera. And then CGM increased credit risk due to business growth. And also, we bought the Iberdrola U.K. smart meter portfolio in this half. Our reg ratios as well are sitting comfortably above the Basel III minimums, as you can see there. And the last thing on the results, I wanted to say before handing over to Alex was that the Board has declared a half year dividend of $2.80 per share, 35% franked. That's up from the $2.60 in the prior comparable period, and it represents a 64% payout ratio. And with that, as usual, what I'll do is hand over to Alex to take you in much more detail through the numbers. But before I do, I just wanted to note that this is the last time Alex will be taking you through these numbers in detail. I've had the privilege of partnering with Alex for 28 of these updates that we've done for you. And Alex has made just such an incredible contribution, as you've all seen. He is so across every number. He's got a razor-sharp intellect. He is very commercial. And so not just in reporting results, but we spent a lot of time on investments, on realizations, on business restructurings through a whole lot of market cycles, COVID, interest rate surges, et cetera. And he also has built an incredible team in that period in terms of financial reporting, the regulatory reporting and the uplift we've had, the tax engagement with stakeholders through corporate affairs and now the people and culture team sitting under Alex. I think we've raised over $200 billion of funding, I think, Alex, in your time as CFO and nearly $5 billion of capital. And the market cap has gone up 150%. All thanks to you, but incredible contribution from Alex. And I should just say as well, before his 8 years as CFO, that's less than 1/3 of his time here at Macquarie. He was in Macquarie Capital, leading so many entrepreneurial businesses here and up in Asia after coming across from the game-changing Bankers Trust acquisition. So we're very sorry, Alex, that we won't have you with us. We know you'll be watching closely as all our former colleagues are and Alex is working around the clock to the last minute. But also I think in finding Frank to come from Macquarie Asset Management from a big global role there to really passionately take on the CFO role. I've worked with Frank for many decades as well. He's part of the great legacy Alex leads us, not just Frank, but the whole team that are in FP. So thank you. And Alex, Frank and I look forward to engaging with all of you over the next few weeks as he finishes his last few weeks, but I will let him do his swan song, usual incredible analysis of our results. Alex Harvey: Thanks, Shem. It feels like a great risk of disappointing after that entrée. But thanks very much for all those comments. And obviously, it's been an incredible 3 decades working together and a real privilege, obviously, to have this role, but a privilege to be at the organization for such a long period of time and the opportunity to work with thousands of people all over the world, including obviously, the executive committee in front of me has been incredible real honor and a real highlight. So thank you very much for those comments. So as usual, I'll take you through a bit more of the detail. Obviously, good morning to everyone in the room from me. So starting with the income statement. You can see operating income for the year -- for the half, up 6% on where we were first half of last year. And the key drivers there at the top of the page, the net interest and trading income, up 9%. That largely reflects the growth in the average loan volumes in both BFS and in Macquarie Capital, the Principal Finance business. You can see fee and commission income up about $600 million or 18%. Two key drivers there. We saw an improved result from the advisory business in Macquarie Capital. We saw an improved result from our Asian equities business from a broking viewpoint. And obviously, we saw a big step-up in the performance fees coming through the asset management business. At the bottom of that income slide there, you can see investment income and other income down about $500 million from where we were this time last year. And there were 3 key drivers there. Firstly, as people recall, in the first half of last year, we sold 39 Martin Place that generated a profit for the group that obviously didn't repeat in this half. In addition, over the half, we didn't see the realizations that we saw in the first half of last year from our green investments on balance sheet, so they didn't repeat in the first half here. In addition to that, we also took some impairments on our on-balance sheet green assets, particularly in the offshore wind part of our portfolio, and I'll take you through that in a little more detail later. So, for a net operating viewpoint, as I said, up 6%. Operating expenses overall for the half were up 5% from the first half of last year. There's a couple of key drivers there. You can see the employment expenses line up about $200 million. And there's a combination of things there, principally related to the performance of the group. So we had increased profit share expense coming through. In addition, we saw some wage inflation coming through the group, partially offset by a reduced average headcount. So average headcount across the group is down about 3% from the first half of FY '25. In addition, we see a step-up in the other operating expenses, and that's really the investment that we're making -- large investment we're making in upgrading the platform from a technology viewpoint. A lot of those expenses obviously are in the BFS business, as Shem talked about, but also in the CGM business. So operating expenses for the half up 5%. Income tax rate at 31.8% from last year was 29.9% for the first half. The income tax expense is up a little bit from -- income tax ratio is up a little bit from where we were last year. That's a combination of the nature of the income coming through the P&L and the geography of income coming through the P&L. In addition, this half, we had some nondeductible expenses, not only the hybrid, but some nondeductible expenses that are pushing up our effective tax rate. So most of those we would not expect to repeat into future periods. So if I now just go into the business groups in a little more detail and starting with the Asset Management business, as Shem said, a really strong result, up 43% on where we were last year at $1.175 billion. And the key driver there, you can see in the middle of the page there is the increase in performance fees of $353 million. Those performance fees are arising from a range of capabilities around the world. But in particular, in this half, we saw additional performance fees from MAIF 2. MAIF 2 was able to divest another asset in Asia, really successfully divested an asset in Korea. So that gave us the opportunity to have a look at the performance fees coming out of MAIF2. And in addition, more recently, obviously, you would have seen the announcement of the successfully entering into a sales transaction for our Aligned Data Centers business in the United States. That investment is in MIP IV and MIP V. In addition to that, we have some co-investors in that asset itself. And on those co-investment agreements, we have performance fees. So we're able to bring through performance fees associated with those co-investment agreements in the first half. So the principal driver of the movement really is the performance fees. You can see base fees up $29 million, so $34 million across the private markets business, and that really reflects a period -- a good period of investing. And then strong expense control, driving what I think is an excellent result for the group. And obviously, that sets up both MAIF2 and MIP IV and to a little later extent, MIP V to deliver those performance fees in coming periods. In terms of the underlying assets under management, as Shem said, $959.1 billion for -- at the end of the half. Private markets driving most of that gain, $27.6 billion increase in private markets AUM, and that reflects a good period of investing. So we invested, I guess, $12 billion of equity, nearly $20 billion of AUM over the course of the half. We also had some net valuation changes, particularly in relation to the digital assets that the Macquarie Asset Management business manages around the world. A little bit of a drawdown on the public investment side. Markets have obviously been really strong. So you see a pickup of $40 billion. We continue to see net outflows, particularly in our equity portfolios. And obviously, from an FX viewpoint, we had a little bit of a drawdown from an FX viewpoint given the weakness of the U.S. dollar at the end of the period. So turning now to Banking and Financial Services. Again, a really strong result from $650 million this time last year to $793 million, a 22% step-up in underlying net profit contribution. And the main driver there, obviously, is the increase in personal banking. And that increase is coming from average loan mortgage balance up 21% from the first half of last year and deposit balances in average terms up 27%. So a really strong period of growth. As Shem said, over 3x system growth in the mortgage side. So again, great to see the product capability that Greg and the team are delivering to the market, really attracting a growing customer base. That's fantastic to see that. Business Bank broadly in line. We had a bit of volume growth in the business, but given up that volume growth largely in margin compression. The wealth management part of the business picking up largely as a result of the underlying performance of markets. I might just spend just one minute on the expenses side. So you can see this should be a very familiar story to people. I think what Greg and the team have done is invested heavily in the technology platform that supports the digital financial offering -- the financial services offering in this marketplace. We continue to do that. You can see the expenditure up $30 million on the technology side this year. On the other side, obviously, we're seeing benefits coming through from that digitization, that efficiency benefit. So that's drawing down the underlying cost base of BFS in those non-technology areas. In terms of the underlying story, obviously, everyone -- all the products and capabilities moving in the right direction. As Shem said, home loan is about 6.5% of the market now. I think deposits is about 6.1% of the market, but there's been a -- continues to be really strong growth across all of that capability, and that obviously augurs well for the outlook for the business going forward. Now turning to the Commodities and Global Markets business. As Shem said, net profit contribution for the period down 15% from where we were this time last year. But the underlying story, I think, is an interesting one. The operating income across CGM is basically broadly in line with where we were for the first half of last year. And you can see the real -- the pull down from a net profit viewpoint is really the expense base. So expense base has stepped up nearly $200 million over the course of the period, and I'll come to a little bit of detail in a second. But if you look at the income line for a second, so commodities were down $26 million. Risk management income up. We saw a better period of contribution from our North American Gas Power and Emissions business. We saw a better contribution from our global oil business, partly offset by a reduced contribution from the agricultural business that had a strong period of time last year. We didn't see that repeat into the first half of last year. So risk management income up $37 million. Lending and financing down $27 million. That largely reflects lower balances from our global oil financing business. And on the inventory management and trading line, down $36 million. Mostly that reflects the timing of income recognition on transport and storage contracts. So the underlying trading performance of the business was consistent with where we saw for the first half of last year. Really strong result from financial markets, again, up $52 million. I think that's about 6% growth from where we were first half of last year. And that sort of extends a trend that's been going on for now, certainly my whole time here as CFO. So nearly 8 years of underlying growth in that financial markets part of the business, which is obviously a reflection of the customer numbers and the capabilities we're providing. And on the asset finance side, up $31 million, which reflects the growth in the shipping loan portfolio in the asset finance part of that business. On the expenses side, as I said, up $200 million. There's really 3 things there. Firstly, we're continuing to invest in the platform. We're investing in the data asset. We're investing in the governance and the control environment. We're investing in the platform to make it scalable. We're using more technology in that business to make it scalable around the world. So that's one thing that's driving the expenses. Secondly, we've obviously got some remediation programs underway. Those programs will come to a conclusion. But nonetheless, we'd expect them to extend at least for another few halves. And the other thing we saw in the first half was some one-off expenses associated with transactions. For instance, as people will be aware, we bought the Scottish Meters business in the first half. There are obviously some transaction expenses associated with that, and we wouldn't expect those transaction expenses necessarily to repeat going forward. In terms of the underlying drivers, hopefully, a pretty familiar slide for everyone here. You can see the customer numbers continuing to accelerate on the right-hand side there, both across financial markets and across commodities. The operating income is still heavily weighted toward the underlying client franchise. And the regulatory capital footprint, pretty similar to where it was at March '25 and still dominated by credit capital, which is consistent with that customer-facing orientation of the business. And finally, from the business unit viewpoint, Macquarie Capital, up $711 million, a 92% increase from this time last year. You can see the drivers there, fee and commission income, up $179 million. I think that's a 27% increase. That largely reflects advisory income in Australia and the U.S. It obviously reflects the brokerage income in Asia as well. On the advisory piece, obviously, the market conditions have improved, but we also -- and we saw some large transactions coming through this half, which is fantastic for Michael and the team. We did see some pull-through from transactions that were well progressed at the back end of our '25 financial year that actually completed in '26. And so that came through in the first half. And we obviously talked about that at the AGM. And then the net income, the other piece, obviously, is the net income on the private credit portfolio up $177 million. There's really 2 drivers there. The average balance of that portfolio is up about $4 billion. So that's obviously driving margin coming through the P&L. The other thing we saw is some repayment income, early repayment income on a number of the credits coming through. So obviously, early repayment income, we wouldn't necessarily expect to repeat into future periods. And then we had lower impairments over the course of the half, reflecting better market -- macroeconomic conditions that are reflected through our ECL modeling. Good cost control, obviously continuing. In terms of the capital alongside the clients, pretty similar to where we were this time or 6 months ago. And the private credit book, now about 170 positions, well diversified in sectors that are pretty defensive and strong cash flow businesses. So all this underlying capital and credit is driving the earnings growth for MacCap. From a corporate perspective, one of the things -- obviously, we -- there's some noise coming through corporate this half, and that noise largely relates to the fact that we moved the green -- the on-balance sheet green assets from the asset management business into the corporate center for reasons that Shemara talked about earlier just in terms of the focus that MAM has on the fiduciary business. The assets we've moved into the Corio and the Cero, the platform assets that we intend to divest to third parties over time. So we thought given the changes going through the center that we'd include this bridge in corporate, and I'll talk a little bit to that. So you can see one -- these are obviously expenses, $1.548 billion of expense for the first half of last year versus $2.137 billion for the first half of this year. And the primary driver there, you can see is that investment related and other expenses up $435 million. And there's really 3 major components there. So firstly, we didn't see the recurrence of profits from the divestment of green assets in this half. So obviously, you didn't see that repeat. Secondly, we took some impairments on some offshore wind assets. And in particular, I think we've talked a lot about some of the challenges in the offshore wind industry in the U.S. So we took some impairments on our exposure to that in the first half. And obviously, we didn't see the repeat of the proceeds from the sale of 39 Martin Place. So those things are really driving that step-up -- that one-off step-up in loss contribution through the half. The second thing to note is that on the operating expenses, obviously, operating expenses in the corporate, that's largely the profit share. In addition, it includes the expense we incurred in relation to a specific or specific legal matter that came through the corporate center. So we hope that slide is useful in terms of how you think about that -- the corporate contribution, if you like, or the corporate expense going forward into the group. Now turning to a few other aspects of the financial management. So the regulatory compliance and technology spend, you can see at $649 million for the half, up about 9% on where we were this time last year. We continue to invest heavily in the platform. We continue to invest in our ability to meet our regulatory and compliance obligations in terms of data, in terms of governance, in terms of documentation, in terms of technology that's removing some of that manual process that exists in that part of the business. So we continue to invest in that. We've obviously got some programs of work to deal with, things like the license conditions associated with our OTC and derivative reporting. Those sort of things are featuring in our reg and compliance spend. And obviously, on the technology side, technology side, up about 9%. Again, Nicole and her team continuing to invest in the enterprise and things like cloud, and things like cyber and things like license fees and technology capabilities to support the scalability of the business. And technology spend is just under 20% of the overall cost of the group on a current basis. Balance sheet highlights. The balance sheet continues to be really strong. It's been a good period of raising nearly $16 billion from Frank and the team in treasury. It's obviously been very favorable conditions. Look, most of that raising has been done in the bank rather than the group. Conditions have been really supportive. And so we've taken advantage of those conditions over the course of the half. The business continues -- we continue to access a diverse range of funding sources, both from a currency perspective, a product perspective and a geographic and a tenor viewpoint, which is really important. And obviously, the weighted average life of the balance sheet continues to be quite long. The deposit base that Shem spoke about before, just under $200 billion of deposits across the group today. The deposits are obviously funding the growth, largely funding the growth in BFS. And one of the interesting things, I think, just a credit to Greg and the team in terms of the capability they've developed there. You would -- you'll note that we've got 1.9 million depositors now in our business. Last year, that figure was 1.5 million depositors. So really strong growth in the deposit customer base. And obviously, we continue to diversify and particularly focusing on savings type products, a more regular way products that are supporting the business going forward. The loan portfolio, up 9%. Mostly, that's the home loans at the top of the page there. It's obviously driving the net interest income coming through the P&L. The equity investments broadly in line with where we were this time last year. So you can see a pickup in the asset management at the top of the page as we've drawn down some exposures through our funds. Obviously, we moved some of those assets in that second line. But some assets that are on the balance sheet. Ben and the team have been able to syndicate the equity there into new products. So that's coming down a little bit. The other thing I might draw out just on this page is just at the bottom of the page there in the line described as Corporate, BFS and CGM. You can see the green energy portfolio now reflected in Corporate. So it's gone from $1.3 billion down to $1.2 billion. That largely reflects the impairments I talked about previously. And in the Corporate, another line at the bottom, it's gone up from $900 million to $1 billion. And that actually -- that step-up is mostly related to the assets we acquired as part of the settlement of the Shield Master Trust, which we acquired at fair value that are now managed in the Corporate center. From a regulatory viewpoint, lots going on from a regulatory viewpoint. So I won't spend too long on this. A couple of observations. We continue to work constructively, obviously, with the industry and with APRA in relation to some reform agendas for prudential framework for banks, insurance and superannuation. We submitted our feedback to that, and that's expected for the consultation in the first half of '26. I think everyone is aware that the hybrids for banks are phased out from the end of this year. They'll obviously be outstanding until the 1st of January as we roll those -- 1st of January '32 as we roll those off. But the other thing, of course, during the half is that APRA raised a consultation paper on hybrids for nonbanks or the NOHCs. We submitted our proposal, and there will be further guidance on that in the new year. The other thing people would have seen is that we released our CPS 511 remuneration disclosures during the half. One of those -- what we were trying to do there is address at least some element of the feedback following the AGM strike in relation to the understanding how particular matters have been incorporated in remuneration outcomes for the Executive Directors and for the 2 CEOs across the group and the bank over the course of the last period. And we've gone -- we've done that, and we've obviously extended that back to FY '21. So hopefully, there's some useful information there for people to think about the way the Board thinks about incorporating the issues that occurred across the group into people's remuneration outcomes. We continue to work with APRA on the reform programs that we've had in place for some years. Those reform programs are obviously very mature now and heading towards their conclusion. So we're pleased with the progress there. And as I said before, in relation to the various asset matters, we've stepped up programs of work to deal with the matters that are outlined on this page. Now the capital position remains very strong, 12.4% CET1 ratio from 12.8% at the start of the period. Liquidity continues to be strong. The average LCR of 173%, down from where we might have been a few years ago. That largely reflects the work that we've all done in terms of high-grading our capability and precision with which we manage liquidity. So it's great to see that coming through, and we're seeing some benefits in terms of the funding across the group from that precision. And finally, in relation to the capital management update, just a couple of things. The Board has resolved to extend the $2 billion buyback for another 12 months. As people recall, we bought just over $1 billion. So we have just under $1 billion that's available to buy back over the course of the next 12 months, pending other use for capital. And we think that gives us added flexibility to manage the capital base across the group. And in relation to the dividend and the dividend reinvestment plan, as Shem mentioned, the Board declared a dividend of $2.80, 35% franked. The dividend reinvestment plan remains in place, and we intend to have that on at a 0% discount and to buy shares on market to neutralize any applications for shares under that DRP. And so with that, I'll hand back to Shemara. Thanks very much. Shemara Wikramanayake: Thanks very much, Alex, and I'll take you through the outlook now. And it was good to see you calling me Shem still Alex because he insisted, he calls me Shemara at results but sticking to his track record. As usual, we'll go through this group by group. And starting with Macquarie Asset Management. As we said, excluding the divestment of the public investments businesses outside of Australia, we're expecting the base fees to be broadly in line. But the net other operating income, we're now expecting to be significantly up, and that's driven by the performance fees that Alex just spoke about. In Banking and Financial Services, as you can see, we're having ongoing growth in the loan portfolio to deposits, the funds on platform, but it's continuing to be impacted by market dynamics and our portfolio mix, which is driving lower margins. And as Alex showed you, there's continued investment in our digital platform and technology investment happening there. Then Macquarie Capital, we're saying we expect transaction activity for the full year to be broadly in line. The investment-related income, we expect to be up and that's supported by the private credit portfolio growth and also asset realizations that we expect in the second half of this financial year, and we'll continue to deploy in our private credit portfolio. And then in Commodities and Global Markets, as we said, we now expect the commodities income to be broadly in line, but we expect continued contribution from asset finance and financial markets as has been the case for many, many years. And then our corporate results, we expect our compensation ratio and our effective tax rate to be broadly in line with historical levels. And this is subject to, as usual, the health warning of the range of factors that in the short term can affect things, market conditions like economic conditions, inflation, interest rates, volatility events, geopolitical events all playing out, the completion of transactions and period-end reviews, the geographic composition of our income and the FX implications and potential tax and regulatory changes or uncertainties. And that's why we've always maintained our cautious stance with our conservative approach to funding capital liquidity that allows us to respond through changing environments. Over the medium term, as usual, we think we're well positioned to deliver superior performance given our deep expertise across 4 very diverse capabilities in our operating groups, supported by our ongoing investment across our operating platform, our strong and proven risk management framework and culture, our strong and conservative balance sheet and funding and within that risk our approach to patient adjacent growth into new areas, adjacent areas. Now the last thing I'll do is touch on our returns over this period and over the historical period before handing back to Sam for questions. And as you can see, we've had a 14% ROE over the last 19 years. and this year delivered 9.6% in the half year. The Macquarie Asset Management and Banking and Financial Services that have historically delivered an average of 21% delivered 20% again in this half. The Commodities and Financial Markets business, Commodities and Global Markets, I should say, in Macquarie Capital, which have delivered 17% average over past years were 12% in this half. And we talked about the big investment we're doing in platform in CGM. Also the capital requirements in that business high at the moment and up a bit in this half as well given what happened in terms of FX rates, gold prices, et cetera, we held slightly higher capital. So with that, I will hand back to Sam to take any questions you may have. Thanks. Samuel Dobson: Great. Thank you, Shemara. So we'll start with questions in the room, and then we'll go to the line. So I'll start with Matt Dunger at the middle there. Matthew Dunger: Matt Dunger from Bank of America. Shemara, I was wondering if you could expand on the comments you made earlier around the transfer of the green investments from MAM into Corporate, the rationale, why now? And on a related matter, Ben's seeing strong green investment fundraising. How is the demand for these assets? Shemara Wikramanayake: Yes. And Ben is here in the front row. So I might let you, Ben, in a moment, just comment on how the fiduciary business is going, where we're seeing very good momentum in many channels. But that segues to why we have brought these assets into the center because there's a limited number of assets now left, and we want the team and the asset manager focused on building the fiduciary business. So we've done this before with assets like, say, Sydney Airport, we managed in the center, the building behind us 39 Martin Place, we managed in the center. The team that have been working on that who are a lean team with deep expertise in these assets, have now moved over into the center. We're very well familiar with these. And so we expect that we'll use our resource better by doing that. And then Ben, did you want to comment on how the fiduciary business is going? We'll get your microphone. Benjamin Way: Thank you for the question. In terms of MAM's green business, it's grown 5x in terms of assets under management over the last 3 years. It's sitting just under $30 billion of assets under management now. The appetite for clients for those strategies remain strong. As you would have seen in the media earlier this year, we actually had our largest ever fund commitment for MGECO, our core renewables fund from ART, which was just in excess of AUD 1 billion. So I think that's a good indication of the support we're seeing for both our solutions and strategies, but also the support from institutional investors around the world. We've now expanded the distribution of those products into the wealth segment. That's also going well. And then in terms of just finding ways to match that capital with opportunities, you probably saw that our dry powder 18 months ago has come down from the sort of the mid-30s to the low 20s, a good example of the fact that we are finding around the world good deployment opportunities, generally speaking, and that includes in energy transition or decarbonization, and that's driven by just the fact that the world needs more power than ever before. The most affordable scale power to install is obviously solar -- and so those opportunities around the main markets, about 25 markets that we focus on remain very significant, and that's then extending into things like storage and the like. So I think we see decarbonization as being one of our 4 major mega themes for MAM, and we see the opportunity set as still being very significant and if not growing. Matthew Dunger: And perhaps one for Alex on the CGM side and the $200 million step-up in costs there. Just thank you for unpacking those drivers. But just wondering if you could talk to us about how much you expect to recur into the next period. Obviously, the Scottish meters seem to be one-off, but how much of the remediation is the next period? Alex Harvey: Yes. Thanks, Matt. Yes, as I said, in terms of the step-up in the cost base, it's a combination of 3 things, just to sort of repeat. So it's high grading the platform, so investing heavily in the data and the technology that supports Simon's business on a global basis. There's obviously some remediation effort going in there, particularly in relation to things like the license conditions we have associated with our OTC derivative reporting. So that's certainly some costs associated with that. And then there's some one-off costs associated with transactions and the like. The one-off costs in terms of the step-up have sort of in the range of 20% to 30% of that step-up. So obviously, we wouldn't expect those to repeat necessarily going forward. Now the remediation programs at work, obviously staff up those programs across the group. And so you'd expect, Matt, in a few periods, those would roll off. And obviously, the high grading of the platform, we'd expect to maintain going forward. So hopefully, that gives you a sense of what we think is going to happen at least in the short, medium term. Shemara Wikramanayake: And I should say briefly because we are focusing a lot on the green assets now, that portfolio, we think, warrants focus in terms of getting the best value out of it if time goes into it. And it's diverting the attention of the MAM teams who are trying to raise money and look after their investors, whereas we have a lot of time on our hands to work with. It's a very good team that have been working on that, but we -- focus -- yes, thanks Alex, good stuff. Samuel Dobson: I'll go to Jon first, and then Andrew, or maybe... Jonathan Mott: Jon Mott from Barrenjoey. A follow-up question on the green assets and specifically Corio and Cero. Can you just give us a bit more on the amount of capital tied up and specifically between how much is in solar and how much is in wind? So of the $1.2 billion, obviously, there's a lot more concern about offshore wind than there is about solar. So they're there. How much have they been marked? So there's debt in there as well, I'm sure. So what's the asset mark that's been taken down on that? And are they salable? Are these assets that there is demand for? Or are we going to see further impairments over time just given that offshore wind, in particular, is on the nose and you've seen Orsted and others come under significant pressure? Shemara Wikramanayake: Yes. I'll answer briefly and then I'll let Alexander tell you more about the detail. But basically, the biggest of the assets is the Cero portfolio, that's solar assets. And solar is an area where we're seeing still good interest. The MAM team will attest to that. But it is a development platform, and that's why we thought it was good to bring it into the center and focus on it because we need to focus on OpEx and DevEx as we develop that and the timing that's optimum to exit it to get the best return for shareholders. We have actually made impairments in this first half, and we can give more details, but it's principally been in offshore wind in the Americas is where we've seen challenges in the sector. Elsewhere, we're at $2 trillion of investment now this last year in green assets. So there is growth. So I think that's a brief summary about of the $1.2 billion. The biggest thing is the Cero. Corio is a group of offshore assets, limited in the Americas, and we've taken a provision there, but we have some in the U.K. region. We have some in Taiwan. We have some in Korea, and we're managing that asset by asset. Alex Harvey: Yes. Maybe just to add just a couple of things from me. So just in terms of the split, about 3/4 is solar and about 1/4 is wind or 25% wind, 30% wind, somewhere. So it's majority solar. Just in terms of the -- a few things to observe. So firstly, the solar market, just picking up Ben's point, the solar market is obviously quite different to the wind market. Solar, I think, it remains the case that solar is the lowest levelized cost of energy. And so it's also relatively quick to develop and take from development stage to operational stage. And so we continue to be pretty optimistic about the solar exposure across the group. So that's the first thing. The second thing on the wind story, a little bit region-specific, Jon. I mean in the U.K., for the sake of the example, the wind market continues to be a, an important source of power, but b, a market that the government continues to respond to changes in the cost of capital associated with the development and the time frames to develop. So you probably saw in recent times, the most recent contract of difference has gone up from GBP 72 a megawatt hour to GBP 81 a megawatt hour. So you're seeing the market -- you've seen the government respond with the subsidies. So U.K., a little bit different to the U.S. I think in the context of the U.S. for obvious reasons, it feels like -- at least it felt like to us that with the passage of the last 6 months, which is obviously where we've been focused, it felt like to us that the time frame and the risk associated with developing offshore wind assets in the U.S. meant that it was an appropriate time to look at the carrying value of that asset. And so as Shemara said, we reduced or Shem said, we reduced the -- we reduced the carrying value of those assets down. It was about $150 million impairment that came through, but that was largely related to wind. I mean just to sort of complete the picture, bear in mind with all these things, 2 things. Firstly, we expense a lot through the P&L in any case. So we sort of buy down our exposure to these assets. And we don't obviously remark those assets to market. And so when we're impairing the assets, we're obviously impairing it from a low cost base. And so at the time we make the judgment at 30 September, we obviously feel like the carrying value of the assets we've got left on the balance sheet is appropriate, but we'll continue to review that going forward. Jonathan Mott: And just the second question probably for Ben in front of me. Raisings in the sort of the MAM space, I think, were $10.7 billion. We've seen some really enormous funds being raised by some of your competitors. I just wanted to get a feel for whether you're comfortable with that $10.7 billion in the scheme of some of the other funds being raised. And whether you can break it down because I know when we were in the U.S. a couple of years ago, there was a big push to get into the U.S. high net worth market and private markets there. How much of the money is now coming from that channel as compared to the big industry funds and institutional money? Benjamin Way: So first of all, yes, we are comfortable with those fundraisers. We raise funds that meet our business model. We have various regional funds that we constantly have funds in the market to service clients up and down the risk curve and by different geographies. And so we think that model is working very well. I mean, we've just completed the largest exit ever out of one of those funds in the U.S. for Aligned Data Centers. I think that's a good example of what we do. We don't buy $40 billion companies. We build $40 billion companies, and then we return that capital with alpha to clients in a timely fashion. And so we're very focused on doing the things that we're good at in MAM, which is being an asset creator, being an alpha generator, and that allows us to provide solutions to a broad client mix. And you're right, increasingly, that's allowing us to take those solutions from our traditional client base, which is institutional clients into the wealth and also into the reinsurance channel. And we're starting to see a meaningful pickup in terms of those contributions. So I think over the last 12 months, wealth has contributed just in excess of about $1 billion of fundraising, and we can see that -- and that's with only 2 funds out in the marketplace. We have a third one coming out, and that will sort of be our full suite of infrastructure or real asset-related products, both on the equity and the credit side. And we'll then obviously continue to work on partnering with more wealth partners to have those into the marketplace. And I suppose as we've spoken before, Jon, the big difference is that 24 months ago, we had 2 wealth partners. And today, we have 15. So I think a good example of not just the appetite of the wealth market for what we do, but also just our ability to increasingly get into those channels. And that will pick up over time. It's still very early days, I think, for all players distributing to the wealth market. Samuel Dobson: Great. So we're going to Andrew just at the front again. Andrew Triggs: Andrew Triggs from JPMorgan. If I look at consensus expectations for performance fees, about $3 billion over the next 3 years, which I think roughly equates to probably 50 bps of AUM, which you've talked about over time. Just noting that you've just delivered sort of over $700 million for the half with a lumpy fee from Aligned co-investors, can you just give us a sense of your thoughts versus what could come through in the next few years, noting that MIP IV and MIP V haven't realized there is still performance fees coming through from MAIF2 and there's a number of other assets in various funds. Can you just talk to the broad sort of outlook versus what the market is thinking? Shemara Wikramanayake: Sure. And I'm happy to give a few comments and Ben can elaborate. But the 50 bps we gave was an average through time, and there will be points at which it's a bit lower points at which it's higher depending on where in their life cycle the funds are. So the funds that have just realized the MIP IVs, et cetera, getting to 8 years old. And so those funds are getting towards end of life, but they're whole of fund performance fees. So even though we may have a big realization early in the life of the fund, we have to look at what it generates over the entire portfolio before we start booking those fees. So I think we stick with the 50 bps through the cycle. And Ben can elaborate if you want with a bit more color on what the recent realizations mean for the particular funds they're in. But generally, we'd be saying 50 bps through the cycle. Benjamin Way: Yes. I don't really have much to add. Shemara is right. I think we feel very comfortable with the 50 bps as a rule of thumb. Clearly, this half has been higher than that. We've got MIP IV and MIP V, which will benefit from -- over the coming years from the Aligned exit, but also exits in other areas. We have other digital infrastructure and other broader infrastructure assets that are high quality and will be sold down appropriately into the market as we see that opportunity. And it's the same for something like MAIF2, where we had a very good outcome on AirTrunk. We've also sold our industrial gas business recently in Korea and have very strong multiple, and we continue to have good portfolios of assets right around the world that there is a big demand for. And that's one of the things that I think we will benefit from over the years in sense that the vast majority of investments we do are manufactured by our teams on a bilateral basis. But as more capital grows and looks to be deployed, there's a deeper market of buyers for these assets and high-quality assets. And so again, it comes back to that business model of really being able to create assets and build them to scale and then sell them into the market when there's potentially both a better owner for that -- but just as importantly, doing our job, which is not just to make investments, it's actually to exit businesses and return capital to clients, which is not something that seems to be talked about as much as you would expect. Andrew Triggs: Second question, perhaps on CGM. Just expectations for commodities income into the second half guidance has obviously been downgraded, which is understandable given the first half performance. I do think -- I do understand that April was fairly anomalous trading in the CGM business. So it does imply, and you saw that in the AGM update. So Q2 looked a lot better. Can you just talk to some of the trends you're seeing and sort of inventory positioning, I guess, heading into the key second half period? Shemara Wikramanayake: Yes. And I'll let Simon elaborate. But generally, you'll have seen from all our commodities peers that it's been a much more subdued external environment in terms of volatility and whether that is from other banks who don't have as large a position in commodities, but the trading houses, the hedge funds, the energy companies have all said it's been a more subdued environment. Despite that, as I said, generally, the revenues are holding up in CGM. But Simon, did you want to elaborate a bit? Simon Wright: Thanks, Shemara. Thanks for the question. You're right. The first quarter was more challenged for obvious reasons with geopolitical factors. We've seen some normalization to trading. But what you -- we're all desperately aware of, we think about all commodity markets, prices have been lower generally across the commodity spectrum, but also volatility much lower. And obviously, we've talked in the past about the competitive tension. There is more risk capital and more competitors. And so as Shemara just alluded to, most of our trade house peers and hedge fund peers are actually really struggling as we've seen those announcements. We've actually had a pretty good run of it in the last -- in the past second quarter. The outlook for the next year is we are market dependent. All the optionality that we have in the business remains. The second half generally in the past has been strong, but the past is no indication of the future. We are market dependent on what happens with the Northern Hemisphere winter and the demand. But we are similarly positioned. What has been pleasing for the business and what we're seeing increasingly is the client numbers are building. The amount of financing we're doing in that sector is also growing. And the build on our strategy into new markets, things like batteries and LNG continue to gain pace. So that's positioning us well for the future. So again, clients are good, but we'll be subject to market volatility and market opportunities. Shemara Wikramanayake: And the other thing briefly in CGM is the financial markets and asset finance underlying cash flows are growing a lot, especially, I think, more recently, the cross-sell into the MacCap clients, et cetera. Simon Wright: In CGM, we're obviously, originally diverse and balanced portfolio of businesses. On the financial market side, as Alex ran through, we continue to see strong growth. And that's very much more a client-centric focus, less market risk. And as a result, regardless of volatility, regardless of market prices, it continues to grow, albeit it would have grown more if there was more volatility and more higher prices. But it's a steady state, and we continue to see growth, particularly in financing, but in client solutions. So that's really encourages and underpins the business for the future. Samuel Dobson: We'll go to Andrei in the middle there, please. Andrei Stadnik: Andrei Stadnik here from Morgan Stanley. Can I ask my first question around appetite for growth in private markets asset management? Where would you like to grow? And to what extent would you consider inorganic growth options? Shemara Wikramanayake: Yes. And again, Ben, you might want to comment on this, but we started in infrastructure as our specialist asset class and then have grown into adjacent areas. And we would like to, as Ben was explaining, patiently adjacently keep growing into private credit, real estate, agriculture, which we've built capability in. But now we're doing infrastructure like private equity that we started raising in -- so I think it goes to the point Ben said is we look at where do we have the specialist expertise to deliver alpha and then patiently adjacently grow along that lines. Now having said that, we always look at inorganic growth. We certainly have done a lot in the public investments. We've also GLL, CPG done investments inorganically in Macquarie Asset Management as well. And we're very disciplined about making sure there's accretion, not just over the medium term, but quite soon when we invest, but we do keep an eye on that as well. Benjamin Way: Yes. MAM is a disciplined allocator of capital. Our business is a J-curve business. In asset management, generally speaking, it takes 5 to 8 years for any new solution or vintage to really get to scale. I think as you'd be aware, over the last 5 years, MAM has made several investments, whether it's moving into adjacent PE adjacent infrastructure, whether it's moving into opportunistic real estate, expanding our private credit offering, particularly around real estate or to do high-yielding funds, moving obviously into energy transition, but also building a reinsurer. And over the last sort of 12 months, we started to see the J-curve of those business start to sort of grow and move in the right direction to augment our core businesses. So I think our first focus is always how do we, in a disciplined and patient way, allocate capital to grow businesses organically because that ultimately gets the best returns for shareholders. Equally, if we can find something that may accelerate us from an inorganic point of view, we'll look at that and review that. But I suppose our initial priority is to really back our teams with time and capital and resources to grow businesses because we've got that track record, and that's the most efficient and effective way to do it for shareholders. Andrei Stadnik: For my second question, can I ask around private credit. And it's a broad-ranging question in the sense that there have been some concerns around U.S. private credit exposures recently, and it's interesting that Macquarie Capital paused growth in its book. It didn't grow. It was flat at $26 billion. Can you talk a little bit about that? And also that joint initiative between MAM and Macquarie Capital to bring more co-investments? Can you also maybe explain a little bit about how that's progressing? Shemara Wikramanayake: Yes. And I think if I read that correctly, there's 2 questions on the quality of the credit book and what returns we're getting and then how do we grow it. And I think what we do in that credit book, you're talking about in Macquarie Capital is mid-market direct lending that we've been doing for over a decade now and growing it very patiently in a very disciplined way, also importantly, through many, many market cycles because we haven't had a recent correction in the credit cycle. Globally, the private credit world has grown to about $2 trillion out of a $300 trillion pool of lending there is through banks, insurers, et cetera, and financial market channels. So it's not a huge proportion yet of the total credit. It's been growing fast and into areas that are higher risk, higher return. So we've had a few challenges, but we haven't had a big credit cycle yet. And the challenges we've had are quite idiosyncratic. Indeed, the first brands in the tricolor were bank-led ones, not private credit-led ones. But there'll be the odd error. We have had a very low loss ratio through multiple cycles. I think it's 0.1% per annum, 10 basis points per annum. So we're really comfortable with the credit quality. But in terms of the growth of that book, the concentration is the challenge for Macquarie Group. So we're getting into the mid-$20 billion. And our view is at that point in terms of concentration of Macquarie's portfolio, we got to the point where our allocation was slowing, and we started bringing co-investments from some of our large global investors who have been very happy to access it, but we thought the next stage of growth makes sense is a partnership between MacCap and MAM to bring in fiduciary money alongside the strategy. So I might -- because Ben has spoken quite a bit, let Michael Silverton just elaborate on performance and growth from here. Michael Silverton: Yes. Thanks, Andrei. We've invested close to $80 billion in private credit since 2009. In terms of what we're seeing, we feel very comfortable in terms of the performance of our portfolio and credit quality. And as we've said in the past, close to 90% of the portfolio is first lien corporate and real estate credit. The first brand situation was a syndicated deal that came to market very quickly. We can't comment on that, but what we can say is our due diligence process in terms of deals is very intense, and we re-underwrite these transactions as we go. So we feel good about the portfolio. In terms of growth, we do have partnerships, including with MAM in Europe and the U.S. And during the period, we actually partnered on around $600 million into those vehicles. So that's in part a start to that process of bringing in partners alongside the balance sheet. Alex Harvey: I might have... Shemara Wikramanayake: And I think we'll -- just quickly that we'll grow these funds, early funds slowly and make sure the investors have a good experience. And then as Ben was talking about, that J-curve is they'll probably get bigger, but we want the first European and North American fund to be a really happy experience and then on that track record. Alex Harvey: I mean I'll just add just a couple of things, Andrei, just to the discipline point that Michael is talking about and some of this we've spoken about before. But the first half, the team looked at about 800 deals, I think, did about 40. So there's obviously a huge amount of deal flow there, and that allows them to be selective. And it's a bit like the story that Ben is selling on the MAM side. Obviously, if you've been in the sector for a long period of time, you should see a lot of transactions. You've got experienced deal executives out there finding the better deals rather than, you know the [auto-ran] deals or the deals that everyone else is doing. So that's one point to think about. The second point is that, again, to the discipline, interesting, if you went back maybe 3 years ago, you would have said half the book was exposed to the U.S., 40% in Europe and 10% down here, roughly. Today, that split is more like 55%, 56% in Europe, I think 40% in the U.S. and whatever the balance is here. And I think that reflects the fact that the team, a, are seeing better origination opportunities with more attractive terms, not just in terms of margin, but in terms of the borrower covenants or the rest of it in the European market. And so the fact that we've got a global franchise, we're obviously not trying to do everything. We don't feel like we need to do everything. I think that's made them a disciplined investor, and we're seeing the benefit of that over time. And then the other thing I'd say to the loss point, obviously, we still hold 2.2%, 2.3% ECL against the book. So we're well covered from an ECL viewpoint. And we obviously hold initial issue discount as well. So we feel like we hold these assets at a fairly attractive net position. So yes, there'll be -- as Shem said, there'll be idiosyncratic issues. There have been idiosyncratic issues along the way. But generally speaking, I think the experience the team has got us in good stead. Samuel Dobson: Great. Ed, just in the second row there, please. Ed Henning: The first one, just circling back to CGM. You've talked about the subdued market conditions, but you also talked about investing in the platform and around regulatory expense and stuff like that. Can you just touch on, I guess, your risk limits and how you think about that versus peers with the investment on the regulatory side? Is that pulling back growth that you thought you potentially could have going forward? Has the growth rate in that business slowed from what you would have thought it would have been a few years ago with the changes you're putting through the business? And can you just talk a little bit more about the opportunities in that business, please? Shemara Wikramanayake: Yes. And again, I might let Simon and Andrew Cassidy comment. But basically, what I would say is we're not -- we have financial risk and nonfinancial risk, and we're looking at credit market risk, et cetera, with well-established approaches and strong performance there and are empowering teams to go and look for adjacent opportunities. What we're focusing on a lot more now is the nonfinancial risks, which include operational risks, but also regulatory and compliance risks. And we're investing in our operating platform to free up the business to go to an even bigger stage of growth where in BFS, and Greg can talk about this at some point, hopefully, but we have done an incredible job in bringing data under governance, using technology, the operational risk management is incredible as well as the service to the customers. But that's 3 products in one market here. In CGM, we have, Simon, somewhere between 97 or in the low 100s of products in 31 geographies. And we're trying to bring discipline around trade capture, operating platforms, et cetera, so that we can manage nonfinancial risk as that business continues to go to even greater scale. So I think that's what I'd say in terms of growth versus balancing the investment. And you and Andrew may want to talk about -- I know you're doing a lot of work on how we maintain agility while managing risk. Simon Wright: Sure. Well, I'll go first and pass to Andrew. When we think about risk, there are 3 types of risk for us. There is actually market risk, credit risk and then nonfinancial risk. So we assess all of those in terms of where we think the business is today and where we think it should be in the future. As Shemara alluded to, we have been very deliberate in setting our medium-term strategy about where we see that business. And so what we've done is -- and as we've talked about over the years, we are a client-centric business. That's our benchmark of where we start our business. We see that in the client growth in terms of numbers. So we're continuing to do that. We're continuing to look at where those -- that growth has been and what the opportunities are in the future. We've talked a bit about LNG, batteries, et cetera. And so in terms of where we have appetite for growth in partnership with Andrew and his team, we have been deliberate in deciding on where we want that growth to be. We have the appetite that we need to grow. And we've been doing that. You would have seen our capital numbers ticking up. A part of that is as a result of that growth strategy now in play. And what we've seen is going into new markets, going into new products, we've diverted resources to those. And so we're building for that future. In terms of market risk, we're well within appetite. Even now, obviously, it's quiet, but the opportunities we see going forward, we're well positioned. The optionality is still there. But that optionality is really there as a dependency upon our underlying franchise in clients. So we would only ever increase market risk appetite if we had a sustained growth in our client numbers to support it. But all of this has to be measured to help you evolve the platform for scale. So our nonfinancial risk appetite is very important at the moment. So as Alex talked about, we are investing in the platform for that scalability, for that strategy very much with that nonfinancial risk appetite in mind. Andrew? Andrew Cassidy: I probably don't have a lot to add, Simon, other than, I guess, just to reiterate that point that we are spending money in Simon's business on investing in data, investing in tech, getting our architecture right. And of course, that's so that we can ensure we're meeting our obligations today right across the range of businesses and regulators that we deal with globally with Simon's business, but also to provide a scalable platform for growth. Once you get that data right and that technology right, that will provide the scale and the platform for Simon to continue to grow according to the strategy into new markets, into new products like LNG, et cetera. So we do think that it's a necessary investment in the license to operate, but I think an important investment for the future. Shemara Wikramanayake: Yes. And I think it's evidenced a bit in the revenue growth line. As I was mentioning earlier, we were sort of $1.7 billion 10 years ago. When I took over, we were $3.8 billion. We're doing [low 6s] now. the revenues continuing to grow because the teams are able to go out there and look for franchise and trading-related growth off the back of that franchise, but the investment is what's impacting the earnings. Ed Henning: Well, maybe just to follow up on that. You talked about the investment in the platform. How much more is still to go, like significant investment? I know there will always be investment in platforms, just holding back that -- the growth of the bottom line. Shemara Wikramanayake: Yes. I think it's going to run for a couple more years in terms of the investments we're making. We're not seeing it step up materially. But Simon, again, anything you want to add to that? Simon Wright: A little bit earlier on, there are 2 aspects to that growth in that platform. There is the scalability and the -- I guess, basically synergizing that platform for a more global approach. We've been quite good at being opportunistic and adjacent. We've been much more deliberate about being holistic and being able to scale. That will give some efficiency in the future. But the second part is the remediation part. And so we invest in that platform. We invest in the remediation. And so there is a line of sight to how that runs off in the future. So then we'll be back to -- we'll never be BAU without taking that into account. That's always will always be important. But we will see a steady state through a couple of halves, I would say. Shemara Wikramanayake: And we should say, I mean, reporting end-to-end capital and liquidity on the frequency now required has meant a huge investment in data to deliver that. Once we have that done, and Alex has been leading that program across Macquarie, but ultimately, it's the upstream data that's a big driver of it. So we should see that come off once we tick that box and then there'll be the ongoing platform investment. Ed Henning: And then just my second question, just circling back to the green assets. Can you just give us a little bit more detail on them where they -- because you talked about strong demand for operational green assets, where they are on the operational side of it? How long is it going to take to get majority of the portfolio up to operational. So then potentially, it's a little bit more salable than where it is today on both the assets. Alex Harvey: Yes. So let's just talk sort of in 2 component parts here, Ed. Obviously, you've got the solar platform. And as we've talked about before, if you think about the development pipeline there within the markets that we're continuing to develop, you've probably got 10 gigawatts of solar that's sort of in that development phase. And there's probably somewhere between 0.5 gigawatt and 1 gigawatt that's either operational or heading towards operational. So a nearer-term visibility on that. And so as we've said before, plainly when you've got cash flow coming out of the asset, that becomes a conversation about the discount rate to acquire and then how do you value the portfolio or the platform, the outlook for development. So I think solar is a bit easier and a bit nearer term. And obviously, the appetite for solar assets continues to be quite strong anyway for the reasons I talked about before. I mean the reality is that the world needs more power and the shortest way is solar and solar and battery. So that's the way we see it. So we feel like there's value there. On the wind side, the -- we're obviously at an earlier stage from a development viewpoint. Most of the assets in Europe are sort of heading towards the -- what we would describe as financial close. We start to spend significant dollars in constructing those assets. Again, the U.K. market tends to be more attractive because the feed-in tariff is more attractive or the contract for difference is more attractive. And some of the pressures from a cost of construction viewpoint are actually coming out of that market, but they're obviously earlier stage, and they take longer to get from early-stage construction to operational stage. So typically, typically, the development cycle for a wind farm is going to be, I don't know, 8 to 10 years. The development cycle for a solar plant is going to be, I don't know, 0.5 year to 2.5 years or something, depending on where you are in the world. So -- and then obviously, the one that's sort of most in focus has been for us thinking through over the half has been the U.S. story. And to the point that Ben was making before, the U.S. still needs more power. But the reality is that there's quite a strong push against offshore wind. And so that was really the reason. We don't see a near-term prospect of taking that from development to operations. And so that means that you need to start to think about the carrying value for that asset. Shemara Wikramanayake: And Ed, just going back to your previous question, I think the other thing we should point out is that we historically have sat with very big liquidity buffers, capital buffers for the way we ran the business. Now that we're required for regulatory purposes to move to being much better across our liquidity real time, once we reach that, we will actually save a lot by reducing the bigger liquidity buffers, et cetera. Alex Harvey: Yes. I mean, hopefully, we dealt with your green question. You can follow up if there's any others. But I mean maybe just on the cost for a second. I think there's a blueprint sitting in Greg's business. I mean at the end of the day, right, Greg has a really great business. It's obviously a smaller set of products than what Simon is sitting on. But at the end of the day, it's based on our digital capability -- it's based on data, it's based on automation, it's based on technology, and it's based on a great customer proposition. What Simon's business has got is a great customer proposition. You can see that continuing to grow over the last 7 or 8 years. That's resulted in a doubling of revenue from '19 to this point. But what we're trying to do, and I think what the team is making progress on is actually thinking about the foundations of the scaffolding that supports that. And a lot of the same lessons and observations that Greg and the team have apply to Simon's business. And obviously, once you get to a point where you've got your data asset in good shape, you've removed manual process, you're using more technology, you're blending different data from different sources for insight to customers. That's a huge opportunity to drive efficiency into the future. What we are -- where we are at the moment, obviously, is the point we're investing to get to that level of scale. But you can see the blueprint sitting in the front row on my left there. And the cost to income advantage on the technology side becomes really significant. Shemara Wikramanayake: I was going to say Greg and the team are leaning in and working with Simon and the team to share those lessons of how they delivered that in BFS. So hopefully, we'll get the benefit... Alex Harvey: Shipping a barrel of oil won't be the same necessarily writing mortgage, but it's got some characteristics. Samuel Dobson: Right. We've got a couple of questions on the line. I think we're done in the room. So if we go to the lines, please. No questions on the line. I think we've got 2 questions on the line. If we can have those, please. Operator: Your first question comes from Matthew Wilson with Jarden. Matthew Wilson: Matt Wilson, Jarden. Firstly, Alex, all the very best. You'll be missed as a CFO. It's been a pleasure dealing with you. Alex Harvey: Thanks, Matt. Matthew Wilson: And over to the questions. I wonder if you could talk through, perhaps this might be one for Ben Way, the type of blockchain, stablecoin infrastructure investments that you may have. Your front and center global activity, more is happening globally than it's happening here. How do you see the tokenization of assets and securities, alternatives for deposits and payments playing out globally? Shemara Wikramanayake: Can we turn to Ben... Benjamin Way: I must have worn it out, apologies. We don't -- so I think the first answer is we don't have any investments in stablecoin or blockchain as an asset manager today. But do you see the ultimate tokenization, particularly in the wealth channels of asset management, that's certainly coming. And I think that's certainly part of what is often banded around the industry is the democratization, particularly of private markets where we can give different types of clients that have not normally had access, particularly wealth and retail clients access to that private market. And I think the best example is probably the way the U.S. is looking at 401(k) and reforming that and giving access, giving those pools of capital the ability to invest into private markets. And clearly, you'll need some sort of tokenization mechanism to do that, just given the types of capital you'll get and the size of capital you'll have and what you'd be matching within private markets. So that's certainly something that we're looking at very closely. We're working with our wealth partners to see how we can use tokenization, but it's not something that's currently present in our portfolio or something that we're doing. Shemara Wikramanayake: Okay. Thank you, Benjamin. Samuel Dobson: Go ahead, Matt. Matthew Wilson: Hello? Samuel Dobson: Yes, we can hear you, Matt. Matthew Wilson: I assume, perhaps you can add to how you see this thematic playing out. You've been very good at picking up early-stage investments. It's clearly moving offshore. Shemara Wikramanayake: Are we investing to that thematic? I think in the digitization thematic at the moment with infrastructure, we obviously went early with data centers, but we're very conscious that there's a lot of other infrastructure to support this fiber optic networks, towers, subsea cables. So I think the teams are working on those. And we have a portfolio still of data centers left, but we also have a lot of fiber investments around the world, et cetera. So I think we're going more that stage than doing the infrastructure for the crypto. Is that fair enough, Ben? Benjamin Way: That is true. So we continue to break apart the -- or break down, I should say, the digital thematic and look at where we can be a good and prudent investor in that. We've done that traditionally in things like towers, into fiber. We do that into data centers. We do that into different types of data centers, both hyperscale and sub-hyperscale. You may have seen that in the last few months, we've reinvested into data center platforms in the U.S. through our investment in Applied Data centers, which is focused specifically on AI data centers. So we continue to look at that opportunity. But we also look at coming at that thematic from different angles. Our industrial gas business that we sold in Korea recently was really a business that was primarily focused on supporting semiconductor manufacturers. Clearly, that's geared to the digital economy. So again, we look at where we can be a responsible and effective investor right across that thematic. And those opportunities will continue to change as the world further digitizes and as we need different types of both technology, but also the infrastructure to support that. Operator: Your next question comes from Brendan Sproules with Goldman Sachs. Brendan Sproules: Brendan from Goldman. My first question is on Macquarie Capital. A very strong results around transaction volumes and the resultant fee and commission income. I noticed in your outlook that you haven't changed the outlook. You still expect it to be broadly in line for the full year. Could you maybe talk about what you're expecting to see around transaction activity in the second half? Shemara Wikramanayake: Yes, we will let Michael, go straight to that. Michael Silverton: Thanks, Brendan. We have seen, obviously, transaction value increased quite a lot in the M&A market, up 33%, but volumes are still fairly muted. A lot of the transaction activity has been at the in the mega cap transactions where we have not been focused. Now we were -- in the first half, we had several deals that closed that were larger fee events and that has supported the result in the first half. But in the second half, looking at our pipeline, it looks very solid, but we don't have the same number of large deals looking to close. With that said, the actual commercial approvals of transactions and NDAs that we're signing are as high as they've been since 2022, which is encouraging. But many of those transactions we're working on will probably close in '27. So we just expect we're not going to have as many large fee events in the second half, which is why we have that outlook. Brendan Sproules: That's very clear. My second question, and Michael, while you got the floor, I just want to ask you about the equity realizations. I mean you've indicated that you expect to see more of these in the second half. But I did notice in this half's result, we had a kickup in net losses from associates and JVs. Just wonder how much they will also impact the overall performance in the second half? Michael Silverton: They will not meaningfully impact the second half. That's an accounting treatment on deconsolidation when a particular transaction we've merged with another company, and that's an accounting treatment on a single asset. So we would not see that as a trend. And in terms of the realizations, we're working hard on them as we always do. We've got about 100 positions. It's -- we'll sell them when the time is right, but the good news is that we have a number of assets in the market. As Ben mentioned before, there's good demand for good assets, and we'll continue to work hard on those. And hopefully, some of those will come through in the second half. Operator: Your next question comes from Tom Strong with Citi. Thomas Strong: I just wanted to follow up on the questions around CGM. If we look at the half results, the business has done well to hold the net operating income, but with the cost up 10%, and there's about $1.5 billion more capital that's gone into the business year-on-year. So the drag on the group ROE continues to increase. How should we think about the pathway to better ROEs over the long run? Is it through better operating leverage from the more scalable platform that you've talked to? Or is there a capital efficiency you can get out of the business? Or is it a combination of all of the above? Shemara Wikramanayake: Again, we'll let Simon comment. We had a slight spike, obviously, for one-off things like exchange rates in this half. But do you want to comment more medium term? Simon Wright: Yes, sure. Look, it's basically capital is up probably in 12 months, about 20%. And it's basically split into 2 halves. Half of that is through business growth through the strategy, which is accretive to P&L, which we're starting to see those grassroots, which is really pleasing, and that will continue to be the case. So as we invest in the business, as we grow the business in line with the strategy, we will use more capital, but it will be returning. And the types of things we are investing in will be accretive now, but also we'll be planning for the future. So there might be a slight drag on that, but that's not the main game. The other half of the capital growth has largely been through market moves. So we will have seen the weakening in the U.S. dollar in the first 6 months of this year, but also the very strong rally in the precious markets in gold. And so as you know, we're a very client-centric business. And so lots of client exposures, lots of credit risk exposures, which is a drag on the capital. And you think about how long that lasts for, there will be a period of time whilst those exposures run down as they naturally amortize and as they'll restructure with those typical types of deals that we do. So we think there is a path to the reduction in that -- that half of the capital through time as markets move around, but also as those exposures amortize. But also, we'll start to see more revenue accretion on the growth side of the capital. Alex Harvey: Yes. Maybe, Tom, it's Alex. Maybe just to add a couple of things for me to the point that Simon is making. Obviously, some of it is timing related. So you expect that to roll off and then we'll reset the basis, which will help from a capital viewpoint. The other thing you probably saw during the half, we obviously moved the North American Gas & Power business from the bank to the nonbank. That's a reflection of the importance that Simon and the team see LNG playing in the energy mix going forward, but also the fact that, that business requires a physical footprint, which is more consistent with what we've done in the nonbank and longer-dated contracts, which are better, I think, from a risk sensitive viewpoint from a capital against those exposures, much better positioned in the nonbank. So short term, obviously, the impact of that from a capital viewpoint has been relatively small, relatively immaterial. But as Simon and the team grow the exposure to LNG over the course of the coming years, that's a much more capital-efficient place to look at doing that business. So we're obviously -- to your broader question, what we're trying to do is continue to grow the revenue line. You're seeing that tick up with the customer base to the point that Simon is making before. We're trying to create a platform that's got the scaffolding to be scalable. We're obviously -- you get some short-term noise in the capital footprint just because of some market movements that Simon talked about. And we're trying to be strategic about where you actually house the business so that it's best positioned to be able to service the customer base going forward. Operator: Your next question comes from Brian Johnson with MST. Brian Johnson: I have 2 questions. First one, I'd like to address to Mr. Silverton, if I may. Michael, we know that the profit recognition in the private credit book is very back-ended. Can you just talk to us about this prospect of it kind of like capping out? When do we actually see the profit recognition come through from that? And then can I also just get a feel just about these private equity investment realizations that you've got in that MacCap. Can we just get a feel to whether you're still confident about the long-term kind of return dynamics that we've spoken about on the European trip? And also just the timing beyond this year of those realizations? Michael Silverton: So in terms of the word J-curve was used before the term J-curve. What we experienced, Brian, as we were scaling the private credit portfolio is that we would take upfront ECL and that may have suppressed the earnings coming from those loans. Now that we are at scale at the $25 billion, I think the earnings reflect the portfolio. And now it's a question of performance. We have the ECLs that Alex referenced before held against the portfolio and unamortized fees of around 1.5% also. But I would say that where we're at, at the moment is run rating the portfolio at its current size. So if we can continue to grow the portfolio, we'll see some further upfront ECLs, but these are 3-year weighted average life loans. And I think when it's scaled, the earnings reflect the earnings capacity of the portfolio. On the principal equity book, we've got $2 billion in infrastructure development, $2 billion in our Principal Finance business and around $2 billion of capital in tech-related assets. We've invested heavily in the last couple of years. And as we've communicated, with our whole periods on average around 3 years and we've seen IRRs of above 20%. We see that continuing. We do have a PPP business where we partner with governments. The activity there has been lower the last couple of years, but pleasingly, it's returning. And those commitments have much higher IRRs, and we're expecting that also to pick up in the next couple of years. So overall, we feel that the book is in very good shape and the return profile that we communicated at historical track record holds. Operator: There are no further questions at this time. I'll now hand back to Mr. Dobson for closing remarks. Samuel Dobson: Okay. I thought Brian might have another one there. But anyway, thanks, everyone, for your support and for your interest. And as Shemara said, we look forward to catching up with you over the next couple of weeks. Thank you.
Operator: Good afternoon. This is the Chorus Call operator. Welcome to IGD's Conference Call presenting results for the First 9 Months of 2025. [Operator Instructions] I will now turn the conference over to Mr. Roberto Zoia, CEO of IGD. Mr. Zoia, you have the floor. Roberto Zoia: Good afternoon to all of you. We released a press release and the presentation as well was released a couple of years ago. So let me start diving into a presentation, and then we'll leave room to your questions, of course. Let me start with Page 2 in the deck of slides. Well, we'd like to remind you that the path we outlined with our business plan is heading in the right direction. And over the last 9 months, we secured a loan for 600 -- Green-secured loan for EUR 615 million. And we have recently issued a EUR 300 million Bond, and we had already stated after the first funding that we would have monitored the market to catch the right window. And so in 10 months, as you could see, we've refinanced almost EUR 1 billion. So we think it's a good result, indeed, considering that both transactions enabled us, and we'll see more in detail as we proceed through the presentation to increase our maturity profile and decline the average cost of debt. Of course, we keep disposing of our assets in Romania, 3 assets were disposed for EUR 14 million, and we have already negotiations at an advanced stage always in Romania. With the rationale we've already disclosed, we're going to focus on a single asset basis, maybe it's long negotiations, but they are providing the expected results. So I am confident that even the last 40 days from now to year-end, that might be surprises because we have advanced negotiations ongoing. And also from the operating side, not on one-off, but on the recurring basis, results are very positive as to our portfolio on a like-for-like basis, end of September, we are up 3.8% versus September last year. EBITDA, core business EBITDA, always on a like-for-like basis is up 2.9%. And first and foremost, we had excellent results for our funds from operation, landing at EUR 31 million. Last but not least, let me say, is an excellent signal for each and everyone is the performance of our group net profit. And for this quarter, we started with about EUR 10 million in the end of June, we are at now EUR 17.6 million. And we are talking about -- we are down EUR 32 million, and we have a positive delta of EUR 50 million overall. So an excellent result was achieved. From an operating standpoint, tenant sales are up, and they're up 1.3%, and that is very important because this is really supporting us when we go and renegotiate contracts with tenants. And we had meaningful upsides for new contracts and relettings. Footfalls are also faring very well, they are up 3.7%. And that is much higher than the CNCC average. And of course, they are monitoring about 300 shopping centers. So the footfalls result is definitely driven by some anchor tenants that we have placed in some of our shopping center shopping malls. Primark in Livorno that is really attracting a lot of visitors. And we introduced Action into one of the shopping centers do. That is now turning out to be a very meaningful traffic generator, and it was placed in Ravenna and Casilino, Rome, with very, very interesting results. Also very interesting is the up -- 1.6% of the hypermarkets that are owned by IGD. So in our portfolio, most of our hypermarkets were downsized versus the main shopping area. And they are starting to grow in a very interestingly, I will say. If we move to Page 5, if everything is always very consistent performance wise. We have tenant sales that are growing, footfalls that are growing and occupancy as well. Over 1 year, we've grown 1% in occupancy. We have a time from here to 2027, we want to get to 98%. We're now at 96%. So time after time, quarter after quarter, we are achieving the growth. We're also working very hard on extending our contracts. You see in 4 quarters. We've been stopping at 2 years as far as our WALB is concerned. But many contracts are now due. And tenants had a break option rolling 12-month rolling, keeping 2 years, retaining 2 years, those who have all contracts for 1 year, the new contracts will be 3 years long. And from now to 2027, we want to get to 2.5 years WALB. Upside for Italy, up 1.3%. 8.3% of the malls total rent was either renewed or relet. The average of upside is 1.3%. We're up 0.3%, and its net after inflation and then you have to add inflation to it, which is also reflected in our assessment and evaluation. So world occupancy and upside are also heading in the direction that we had already identified in our business plan. On Page 6, you can see a few pictures. I mentioned Action as a new brand, they are really doing exceptionally well, especially as far as footfalls are concerned. They are a wonderful attracting brand. We focus very much on La Piadineria for food. They are currently very, very successful among young visitors, among young people. And then Mini Market, Arcaplanet, and Douglas are also really driving the performance. Page 7. And again, one of our lines of action mentioned in our business plan, we want to focus on digital transformation. We've completed 11 apps or the main shopping centers in 2025. And this digital system is really enabling us to increase profiling activities to deepen the knowledge of our customers, like clients and to come up with ad hoc promotion based on customer classes. So we're very much focusing on this. We call it IGD ecosystem, and it goes hand-in-hand with leasing activity, and we started excellent relationship with the big chains. And we came up with other apps as well already applied in 28 shopping centers, rolled out in 28 shopping centers to really increase and improve the relationship between owners and tenants. So we constantly have an ongoing dialogue with tenants for the events we organize at the shopping centers. We get their turnover every day. So we have this ongoing relationship, which is excellent because retailers have finally understood that they save time. Everything is -- where we keep track of everything and they're using these platforms really well. It's a good time also for real estate. I mean, retail real estate, you saw the results for the first 9 months they were really outstanding, meaning that a retail asset class was the top asset class, the #1 and transaction-wise, was much better than logistics and offices. So somehow, it's a close second -- sorry, hospitality is a close second. And in the past, we did have volumes, but it was either high street buildings or supermarket and hypermarket was over the first 9 months of 2025. We see comeback of shopping centers, for instance, the Veneto one, the small ones, the 2, Bennet purchased or the 2 in Rome, but eventually, we had a big transaction in the Oriocenter transaction, EUR 470 million in 1 single transaction where there's a partnership. We have launched ourselves when we first created our 2 funds. It's industrial players with financial players interacting. So if Orio, Percassi bought it back. They have built promoted and managed. So it's a big property asset manager. And of course, they work with a more financial players such as Generali. And therefore, this was indeed one of the main transactions in retail real estate. And I think this is really a good introductory factor for further development going forward. The same thing we see in Romania. Romania, we know is a very small country, transaction-wise also, but you see that retail -- practically, the retail transactions accounted for half of the overall real estate transactions. And therefore, there's a certain appetite for retail real estate in Romania, too. Let's move to Page 9, some financial highlights. We are still focusing on our goal to reduce our Loan to Value. In the first 9 months, we reduced our Loan to Value by 40 basis points, landing at 44%. And then a few more detailed pieces of information we keep reducing our cost of debt as well. Let me remind you that last year, full year, we were at 6%. Now we are at 5.3%. And post new bond issue, estimating the EUR 300 million issued on November 4. In that case, too, we would have a positive impact landing so that we land at 5.1% weighted average interest rate. And that will generate benefits for 2026 as well. So in the first 9 months, 90 basis points, that is really -- I hope it really meets the expectations everybody had vis-a-vis IGD. And very interesting as well, I'm on Page 10 now. The net rent -- net rental -- if you deduct the net rental income of disposed portfolio, food portfolio in the first few months of 2024, EUR 5.2 million. And then you start to see the erosion coming from -- of revenues coming from the disposals of Romania, but they were offset -- net rental income wise they were offset by a growth, both in Italy and Romania with -- so the changes, the delta versus 2024 is still positive, up 3.8%. So net rental income from freehold landing at EUR 75.9 million on the EBITDA wide. We -- it's slightly lower the increase because we have some costs that we have to cope with in the last quarter when we had some items to the deal with on the -- an offset on the receivables and payables side, but still EBITDA -- core business EBITDA is nonetheless growing, up 2.9%. And then on Page 12, you see our financial position. We cost saving over the first 9 months that goes from EUR 52.1 million to EUR 43.6 million. So we have a cost on nonrecurring items or charges on the one hand, but also and mainly, that will be very useful for 2026 and 2027, a financial management, where we saved EUR 8 million that will then, of course, have a positive impact on our FFO figures. Page 13, FFO. This positive EUR 8 million from our financial position coming from last year, helps us offset missed revenues deriving from disposed assets. And on the one hand, we have a delta in the consolidation scope. So we lost EUR 5.3 million of revenues, but improving our net financial position and improving our average cost of debt and improving our EBITDA delta from core business. So these two items add up to EUR 10 million. So they more than offset the EUR 5.3 million we lost due to the portfolio disposals. We had over the same time frame, so we improved our core business and our financial position on a like-for-like basis. So they more than offset the effects of our disposals. So this makes us say, we are -- we should speed up in actions in Romania. So because in addition, on the one hand, yes, we missed out on revenues, but we will improve our financial position, group net profit. Last year, we had to write down or impair our third stake and not having that charge or burden. Now we are a machine producing profit that could be more or less strong depending on the years, but our core business is really generating profits, both from an FFO wise and also from a revenue standpoint. So the group net profit landed at EUR 17.6 million, and we had to expense with the repayment of the bond in February, all the ancillary costs they have to be expensed, but they were more than offset by the operating results. I think that our new issuance, and I'm on Page 15, now the new bond issued is telling us a lot. And what do I mean by this? I mean that first of all, we are back to the capital market. And if you remember, on the -- in 2023, we performed a transaction, the last useful day at very, very costly conditions while this issuance, I really told us that market appreciated how we managed our financial position over the last year. We had orders for over EUR 1.35 billion, so more than 4x the book we were offering, that is to say we offer EUR 300 million. And that, of course, generated a cost compression we came up with a guidance at 4.7%. That was then closed at 4.45% as annual coupon. What is the benefit? It's a strategic advantage or edge, if you want. I don't -- I said I don't like to say -- I'd like to have 100% secured debt or 100% bank debt. So now we really have offset our funding sources because EUR 300 million come on the market. And we also have rebalanced secured and unsecured loans. As you see in the following slide, we are -- we have more than EUR 630 million of freed up of unencumbered assets because, of course, in case of issuance, we wanted to free up assets and we know that rating agencies like this very much. We have extended our debt maturity profile because the facilities that we have closed. Now we have added 1x per year without cliffs from 2029 and 2030, and we have improved our maturity profile. On Page 16, you see that despite of disposals, our NFP went down, Loan to Value went down too. The average cost of debt went down. And ICR, the interest cover ratio went from 1.8x to 2x. And we get net debt on EBITDA went from 7.9x to 8.1x. So with the improvements we have achieved, thanks to disposals, we should be back to a more appealing figure, let's say. And then on Page 17, you see the Group's’ Maturities Profile, the maturity we have in 2029 has now shifted to 2030. And just look at the slide and you will have a perception -- a clear perception of the work we have done so far. We're working on maturities from here to 2028. The banking is the bank loan dates back to 2022. And the idea, the objective here is to attack that funding, extend the maturity because it's also the most expensive instrument and so try and fine-tune our margin for 2026 to further cut it. You see between 2026 and 2027, we have no meaningful maturities, and we're already working on the 2028 financing. So we will extend the maturities there too. But I am confident that we will have a further decline of the average cost of debt. So we've extended maturity. You probably read that Fitch confirmed our ratings, both corporate and issued bond as well. So it's an investment-grade bond that was issued based on Fitch's Rating. And it could be improved based on the comments made by the 2 rating agency. Also thanks to the -- as we've cashed in money, so we are going to free up bonds, and we will get to EUR 776 million of unencumbered assets, as you see on Page 18. Let me say once again, market we are 37.1% and unsecured is 39.09%, almost 40% of total IGD assets, it would be, let's say, 40% of the debt breakdown on the right-hand side of the slide, both the refinancing in February and the bond were classified as were rated as green. So that's why we're very much focusing on ESG factors so that our assets are as much as possible at the level that banks and the market considered as green assets and green funding or financing, 82% of our portfolio is certified with a minimum of very good rating. We are talking about the BREEAM certification. And then we have excellent as well. And this is something that we feel is a priority. We committed to it. We're also very much working on photovoltaic systems. We signed a major contract with Edison, and Edison is investing and through our lease contract, we acquire energy from them at fixed prices and low costs that has a twofold benefit. So we're not using capital for that, and we have clean energy, renewable energy, and we have 3 cases already. We've seen that installing photovoltaic-type panels is very much appreciated in parking places, it's appreciated by users, just because in the summer, it's a shade against the sun. And in the winter, it protects them against the rain or snow. So this is another target in our business plan that we very much see priority. And [indiscernible] building energy management systems. We can work out consumption, we can see peaks when there's no need for air conditioning or lighting, the system works automatically to achieve energy savings. In the first 4 months, we had 20% saving on the used energy. So that was also a goal in our business plan that is to say, using AI to reduce energy consumption. And we are really investing heavily in this. And it will be the leitmotif also going -- our light motive also going forward. And then of course, we have some annexes. Should there be any specific questions, we gave you a breakdown of tenants and how they are placed in our portfolio, how they are we make a comparison between them and our merchandising mix locally and internationally, and then WALB & WALT, number of contracts we have. So we put in a lot of material that you can look at. I'm not going to go into it, but I'd rather answer your questions and have a dialogue with you now if you need any further info. Thank you very much. Operator: [Operator Instructions] First question comes from the line of Arianna Terazzi with Intesa Sanpaolo. Arianna Terazzi: You are moving really fast in executing our business plan. So first of all, I think you have the right pace to really beat the guidance you gave us for FFO. So could you elaborate on that? And then for 2026, financing and funding, what are your expectations as far as average cost of debt is concerned for the next year? Roberto Zoia: Good question. And as you could see, we are up EUR 31 million. Our guidance is 39 for the business plan. And given the time we are going through, so every day, there's a factor coming into place, it could be tariffs, it could be something else. So it's not easy for me because a part of it is really hyped and would like to take the guidance up because it's in the figures. But we said, let's be cautious. Let's see how this quarter performs goes and then maybe we'll come back and increase our guidance. And if you look at FFO for the last 3 quarters in the worst-case scenario, we should anyway be higher than EUR 39 million. I don't want to officially increase our guidance. I'm not in favor of that, but I'm more than confident that we can do better than those EUR 39 million, so 39, sorry. As to the cost for average cost of debt for 2026, it will further decline. Without the refinancing of 2028, we would land at 5.1%, which is what we wrote post issuance, bond issuance. It's clear. However, that started from January 1, 2026. We have to really focus on our 2028 maturity to have an expansion of that maturity and at the same time, to achieve a reduction in cost of debt. But we are talking about EUR 150 million. So if we compare it to the EUR 800 million, even if it were 50 basis points, it would still be 10, 15 at the end of the day basis points. But the objective I gave the target I gave all of my teams is to get below 5% with our average cost of debt because the EUR 300 million were placed with a coupon for 4.45% because if you think 4.45%, it's a 2.2% spread. We have financings that are almost 3%. So there's room that 70, 80 basis points for further negotiations. Of course, it's only one chunk of our debt because the bond will be carrying forward on its own for the next 5 years. But the objective for 2026 is to go below 5%. The guidance, of course, you can interpret it as you wish. I'm very optimistic and very confident. Now we are -- guidance is EUR 39 million, but we are very close to 40%, let's say. Operator: The next question comes from the line of Simonetta Chiriotti with Mediobanca. Simonetta Chiriotti: I have a question on the market. You said that the market is quite buoyant right now volume-wise, and -- could you elaborate on the transactions that they given some interesting signs as far as valuations are concerned as well or appraisal, what are the expectations for full year 2025? And also looking ahead to next year going forward? And in a more buoyant market scenario, how about your project somehow dispose of assets within your consolidation scope? Can it be really fulfilled? Roberto Zoia: Thanks for the question. Today, it's clear that, as I said before that. If we look at our market comps on rates that are eventually finally, normal or aggressive, we have audio center for actually it's the shopping center. It's a major shopping center in North of Italy, you name it. But we could see both in small transactions for small shopping malls in the Veneto region and the Bennet transaction. We've seen that we start to see a little bit of decompression, if I may say. Up until a year ago, every time people approach the shopping malls you would think of double digits. Now it's starting to go down. So my perception is we had early November, so I don't have the visibility yet over the full figures, but I think there will be an adjustment because rents will grow structurally. And also the market is so big that which should be somehow deflate or decompress or even stay flat with a 10 basis point decompression with revenue increase. But bear in mind that we have not yet seen a very strong decline in discount rates. Above and beyond what the ECB did, they did a lot of reduction. But if you look at discount rates for December and June, we have not yet seen a real decompression of the discount rate, which I hope that I am confident will materialize going forward. So the bouyant market, as we think Simonetta, and I am confident that it will lead to a slight decompression. And recently, I have met some players. We know that retail in Italy together with Spain is probably Italy and Spain are the countries that are performing best. In Spain, transaction, the later transactions were made at a very high price. So even some very big players are saying maybe it's worth going to Italy, where I still have a pricing benefit vis-a-vis Spain. And at the same time, we are aware that there are 150 basis points between Italy and Spain. So and that even splitting that in half, 75%, it would mean excellent returns for Italy anyway. This is what we get from looking at the market. Portugal and Spain are the ones that are faring best retail-wise, then comes Italy better, much better than France and Germany. And therefore, also players who, in the past, were most skeptical about this asset class, if it's a retail are changing their mind. I think there can be an excellent -- well, a good result in 2025. And at the same time, this can have a further impact in 2026. We looked and were contacted, true that -- that would be more interest in putting assets on the market, in the market and cashing in without contributing liquidity into our sync, but there are still players who think that a partnership with IGD where we are 51% and they are 49%, still, they would still have very interesting dividends. So we have this ongoing open negotiation table with very, very frequent meetings. It's a project that players, especially industrial players like very much and they still want to retain assets also from -- under a different legal form. And also for the juice fund, the one with the 6 supermarket, we've started to look around because for us, too, it could be interesting right now at this moment in history to dispose of part of the assets that belong to that portfolio. And for us, it would mean recovering equity that it's now blocked in the fund. So it's a highly dynamic market. We're very careful looking around. We are focusing on disposing of Romania, but also very much focusing on strengthening and growing alliance inc., which could be a turning point not to be committed to huge investments, but to increase to benefit from an LTV perspective to benefit from the leasing network. So we are definitely working a lot on the alliance project. Operator: The next question comes from the line of Federico Pezzetti with Intermonte. Federico Pezzetti: I have a couple of things I'd like to ask. The first one in Italy, we saw a speeding up of the like-for-like growth for you from 3.2% of H1 to 4.5% now. So a strong acceleration in Q3. Could you elaborate and give us more details on the drivers behind this growth? And then the second thing I wanted to ask is you talked about uplift that are still there, not as strong as in 2024, but we still see uplift. So what do you see for the coming quarters? Could you elaborate that a bit give us some color on that as well for uplift? And then also early still, but I'd like to ask for some hints on dividends, maybe looked on the expectation the market consensus has so [indiscernible] and could you -- maybe you could elaborate on that? I'm just trying to see. Andrea Bonvicini: No, it's okay. It's always worth to give it to try. I'm an open book as Mr. Zoia, so they're trying to at least at on me here, cloudy and all the coworkers, but I'd like to be an open book for you anyway. There's indeed a very strong acceleration on the like-for-like side and it's driven by two main factors. First of all, the upside, we achieved a very meaningful one. And then it's the occupancy factor. When I give you a net rental income on a like-for-like basis, I have two levers. First one is the revenue growth. And the second one is that I occupy if I have occupancy in certain spaces. I no longer have to share common expenses for the property. So from -- if in 2026, we can cover another extra 1% of vacancy, that indeed will an immediate impact on the like-for-like growth. It's clear that 4% is a lot, but let me remind you that in our business plan, we gave you 16%. So it's somehow it's the objective, the goal, the 4% on a yearly basis, which is driven by revenue growth and also occupancy growth. So for 2026, we are all super committed to retain that 4% to get to add up to 16% in 2020. The upside is really paying off. We made sacrifices for Prime and Action to having anchor tenants. It often means making investments, but we've seen that most retailers, when they are close to attractive tenants they are willing to somehow pay something extra. And I'm very happy. We had a peak in Q3 similar to the Q3 2024. But having this 3% above inflation in a year in which macroeconomic tensions that did play a role, as we all know, on everything. So I think that was an excellent result we achieved. Last but not least, on dividend, it's clear that as we are EUR 17 million group net profit, that is mainly driven by Italy and a CQ part. It's true that in the last quarter, we have to expense ancillary charges for the last bond. So ancillary charges for the early repayment, we will have to expense them for the early redemption. So the profit is going to be slightly less than what you saw for the quarter. But should it be EUR 20 million, I'm just saying figures to say something, 70% of whatever is mandate or 14 divided by 110, would be around 13%, so not far from 15%, which would be a magic figure would be -- would be 50% more than the 10% and we had last year. So Federico, unless there are any specific situations or holdups, it's clear that the mandatory is very close to 15 because 15x 110% is EUR 16.5 million. So EUR 16.5 million and roughly, we are in that space already. So today, as I said before, I really hope, and I am confident that our FFO will be higher going forward. And so above and beyond the dividend policy, you know that I have mandatory, 70% mandatory on the exam operation. Italian net rental income and some write-ups if there be. And we also have to bear in mind that we have Loan to Value to refer to. And I keep saying that, and I'm reiterating it today. I don't want to waste money indeed. In the past, probably to generous when there were no conditions to be so generous. Of course, we want to pay out the highest possible dividend, but also bearing LTV always in mind. That's why we are saying the objective for 2027 is getting to 40%, and that would put us in a comfort zone. If we get to 40% of LTV in that case, of course, we can have a dividend policy on FFOs and therefore, have a different approach. I'm not saying that we can -- well, we would be willing to increase our dividend by 50%, but we have to bear in mind what LTV is like, of course, if there is -- there will be nice surprises in Romania between now and year-end or the 2 months before the new year. In case we cash in some money, we would further reduce debt. We would be better off and therefore more prone to paying out dividends. But be assured, rest assured that the company, the shareholders have a common shared goal going back to paying a sustainable dividend, good dividend. But now going from making an effort to reduce our LTV of one point and then pay out 2 more points on dividends that you have -- you then have to recover with a lot, lot of effort. So it will very much depend, and here, I'm going back to Simonetta's question as well, it will very much depend on finding good year-end valuations and good prospects for -- a good outlook for 2026 valuations, and that will give us better room for dividend payout. When you say 0.15, indeed, we are somehow in sync. This is something I have in my DNA as well because it's more or less 70% of what we have our mandatory figures. Operator: The next question comes from the line of [indiscernible] with Banca Akros. Unknown Analyst: I'm referring to the last question you asked. And this year we got to 44%. What would be the ideal level? Roberto Zoia: Sorry, I could not hear whether it was FFO or -- and there, it's a question about getting to EUR 20 million. And looking at tenants, could you elaborate on the trends that you are witnessing as far as the tenant sales are concerned? Well, the question was for LTV. In our business plan, we gave a target for 40% for IGD, and also, if I look at our peers, European peers as well, it's a figure that keeps us in the market in a comfortable way. So to this -- how do we get to 40%, we have disposals. I can confirm that we are at EUR 14 million, we put in EUR 20 million in our business plan -- that means we need to have a similar -- another similar transaction, EUR 5 million, EUR 6 million roughly within this year and therefore, hitting the target of EUR 20 million. And there too, I am very confident because I see a very lively market, buoyant market. So I confirm the goal to get to EUR 20 million, we've already done EUR 14 million , LTV 40% going to product categories. For the first time, in this presentation, we are on Page 25 of our slide because I got a lot of questions on, for instance, apparel clothing. You see we broke down the merchandising mix with cloth, everything was put together. Instead here, we break it down better. If we look at clothing in general. So with average surface not specialized, we are below 30%. It's clothing on the right-hand side, it's 28.3%. And IGD's portfolio is not made up of 300 stores where we're having 30% of clothing is a lot. We have a lot less. Our biggest shopping centers have 120, 130 stores. So clothing, we try to reduce it over the years to the benefit, for instance, of sportswear, why is that? Because today, if I think of JD Sports, for instance, [indiscernible]. And they're not the [indiscernible] because it's really, really only sport, but it's sportswear. JD Sport more specifically, they have appealing turnovers, revenues, and we're working on that with them as well. What is really working is perfumes and health and beauty, so to say, because they are really doing well, electronics -- consumer electronics is finally picking up again. We have 2 resizing Actions so forth, but electronics, we've resized, but they are really promoting physical sales, and that can be seen in the figures they make and also they tell us the [indiscernible] MediaWorld, and they tend to really focus on physical sales. Considering that the cost -- considering the delivery cost they apply on online sales. The service is provided. And so electronics is doing really well. You've seen with the new openings. Of course, we have to be -- always have to be cautious because food courts should not be done everywhere with too much offering, but while we have shopping centers with a very big catchment area where you have lots of houses, offices that have evening entertainment. So we're really focusing on that. And the big chains such as Piadineria and KFC. And you know that funds took [indiscernible] upstakes are also Piadineria these players, funds took up stakes in them, so they're really focusing on their business and then health and beauty, jewelries as well we've seen very interesting results with jewelries as well. And jewelries, normally, at year-end, they help when there's variable revenues that they sell a lot during the last quarter of the year. And then services, we are also strengthening them, enhancing them. What's also interesting is that they are working a lot on the leading side on entertainment, other than movie theaters and cinemas because for -- if you go out in the evening, normally would only go to the cinema, but we've really seen that in Livorno, where it's open until 11:00 p.m. we have McDonald's, they have a sizable revenues. And there are different types of entertainment that is not necessarily a cinema or a movie theater. And they have the same level of attraction somehow and combining restaurants and entertainment. And it could be 2 meals or 1 meal and 3/4, if you're not work in the evening, then they cannot somehow keep the area retaining. I hope that's the color you were expecting. And if it would be the right mix between local and international tenant. You see in key tenants, you go from Iniditex for instance, international tenant. We have 10 stores data, for instance, Unieuro is between Italy and France, somehow. And then the big ones also in the light of the piece of info we got last night is OVS, which has everything now OVS -- means OVS, Open, Golden Point, Casanova, Sasha, you name it, Piombo. So it's a lot too. And for us, they are a partner. They are also performing really well. So we have to try and find the right balance with them as well. They were talking about OVS. OVS, we have a preferred relationship. In all of our shopping malls, we are super happy to have them. And they are doing really well because the OVS format managed to somehow be placed halfway between Primark and Zara, which somehow is already seen as medium high versus H&M or [indiscernible]. OVS is an excellent brand because they found the right balance and with their different lines such as Piombo and Golden Point? And then [indiscernible]. So within OVS, you get to have the average clothing bracket, and we have some shopping centers with OVS delivering very interesting tenant sales. Operator: [Operator Instructions] Mr. Zoia for the time being, there are no more questions in the queue. Roberto Zoia: Very well. I would like to thank you all for joining us today. And for any question or doubt or meeting or insight, I'm available 24 hours a day, 7 days a week. So if you need to have more info, please do not hesitate to contact me. Thank you very much, and have a good afternoon. Operator: This is the chorus call operator. The conference call has come to an end. You may disconnect your phones. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Yochai Benita: Welcome, everyone, and thank you for joining us on Bezeq's 2025 Third Quarter Earnings Call. I'm Yochai Benita, CFO of the Bezeq Group. Joining us from the senior management team today, we have Mr. Tomer Raved, Bezeq's Chairman; Mr. Nir David, Bezeq's Fixed-line CEO; and Mr. Ilan Sigal, CEO of Pelephone and yes. Before we start the call, I would like to direct your attention to the safe harbor statement on Slide 2 of our presentation, which also applies to any statement made during today's call. We would like to inform you that this event is being recorded. Following the presentation of our results, we will have a Q&A session. With that said, let me now turn the call over to Tomer for his opening remarks. After his introduction, I will continue the presentation of our group's financial highlights, followed by Nir, who will discuss Bezeq Fixed-Line results; and Ilan, who will cover the results from Pelephone and yes. I will conclude the presentation with Bezeq International results. Tomer, please? Tomer Raved: Thank you, Yochai, and good afternoon, good morning, everyone. Let's start on Slide 3. We continue to record stable and healthy growth across all of the group's strategic business segments, consistently meeting and beating our forecast. I am proud to announce that we have reached our 2.9 million home passed target and have completed our network deployment across the vast majority of Israel. Accordingly, starting 2026, we expect to see a gradual decrease in CapEx. This is a historic milestone that will enable us to be fully prepared ahead of the AI revolution that will transform the economy, society and the quality of life of every Israeli citizen. During this quarter, we continued to deliver significant growth in core revenues and double-digit growth in adjusted EBITDA and adjusted net profit that were also positively impacted by the yes, improved valuation. Excluding the yes valuation impact, adjusted EBITDA still grew by a healthy 4% this quarter. We continue to focus on new strategic initiatives in Bezeq Fixed-line, Pelephone and yes, which further strengthened the Group's core pillars. On the regulatory side, there was further progress in the process for the removal of structural separation with the MOC publication of a call for public comments. We are hopeful that the MOC will complete its process by year-end as planned and that we can start merging yes into Bezeq Fixed line and further enhance value to customers, operational efficiency and leverage our NIS 1.2 billion significant tax asset. Moving to the next slide. Our tech and business road map is on track to reach our midterm KPI, including at least 40% fiber take-up and consistent ARPU growth across all verticals, while leveraging our leading position in 5G and TV. On Slide 5, you can see a good snapshot of our financial highlights for this quarter, both in top line as well as in profitability metrics. Core revenues grew by almost 2% and now represent 93% of our total revenue. After adjusting for the change in yes valuation, adjusted EBITDA grew 4%, in line and actually slightly above the group's targets. Turning to Slide 6. Let me point out that even in a year with a volatile geopolitical situation, our core business continued to perform well with outstanding growth in every KPI this quarter. Total fiber subscribers as of today reached 969,000. 5G subscriber plans reached 1.36 million and cellular ARPU grew over 4%. Yes, ARPU is actually a highlight for this quarter, up 1% year-over-year and stable ARPU at NIS 189. We are pleased to see the improvement in the macroeconomic environment, the ceasefire in the region and the return of our hostages. These tailwinds, together with the group's strong performance are generating growing interest from investors in the Israeli, European and U.S. capital markets. We will continue to work to create significant value for our customers, employees and shareholders. I will now turn the call over to Yochai, who will elaborate further on the group results. Yochai Benita: Thank you, Tomer. Moving to Slide 7. We show a 1.7% increase in core revenues due to higher core revenues across all key group segments. Adjusted EBITDA grew 13.8% and adjusted net profit grew 56% due to the increase in the valuation of -- after excluding the impact of the updated valuation, adjusted EBITDA increased 3.9% and adjusted net profit was up by 0.1%. Turning to the next slide, we show the 9 months trends, which were similar to Q3 revenues and profitability. Free cash flow was impacted by Bezeq Fixed Line assessment -- tax assessment paid in the first quarter of 2025 and tax refund received in the corresponding period. Moving to the next slide, we show our operating expenses. Salary expenses decreased 8.9% due to the sale of Bezeq Online and its deconsolidation as of Q2 2025. We recorded decreases in operating expenses and depreciation expenses, mainly due to the change in yes valuation. Other expenses were impacted by higher provision for legal claims and employee retirement at Bezeq Fixed line. The next slide shows our quarterly operational metrics. Broadband retail ARPU continued to grow year-over-year. In addition, we recorded increases in telephone ARPU as well as in yes ARPU year-over-year due to fiber growth. Compared to the previous quarter, cellular subscribers grew by 16,000 and TV subscriber grew by 3,000, representing the second consecutive quarter of growth. Slide 11 highlights our balanced capital structure with net debt at NIS 4.6 billion and a coverage ratio of 1.3x. The decrease in coverage ratio was due to the increase in adjusted EBITDA as a result of the change in yes valuation. We remain committed to maintaining our high credit rating. Moving to the next slide on our 2025 outlook remains unchanged, and we are forecasting adjusted EBITDA of NIS 3.85 billion, adjusted net profit of NIS 1.45 billion and CapEx of NIS 1.75 billion. I will now turn the call over to Nir, who will share more detailed results from our Fixed line operation. Nir? Nir David: Thank you, Yochai. We continue to deliver strong results in the third quarter, reflecting the successful implementation of our multiyear strategy focused on the core actives and the acceleration, infrastructure -- acceleration, investment in advanced infrastructure nationwide. Turning to Slide 13. Fixed line core revenues increased 2.2% to NIS 991 million, driven by higher revenues from transmission and data communication, broadband and cloud and digital services. Broadband fiber customers reached 969,000 today and ARPU rose 3.8% year-over-year to NIS 136. We recently expanded our IRU agreements with Gilat Telecom. Together with partner agreements, this represent another significant milestone in our growth strategy, enabling us to better leverage the potential of our fiber networks and to expand our customer base nationwide. On the following slide, we show Q3 financial highlights. Adjusted EBITDA rose 0.5% due to higher core revenues, partially offset by lower telephony revenues. Adjusted net profit was down 10.5% to NIS 214 million, mainly due to higher depreciation and financing expenses. Free cash flow was down 3.1%, mainly due to timing differences in working capital. Turning to the next slide, we show continuous fiber deployment reaching out targets of 2.9 million homes passed with over 969,000 active subscribers in our fiber network today, representing 65% of total broadband subscribers and resulting in a take-up rate of 34%. Moving to the next slide, we show the take-up trends. Retail subscriber take-ups reached 616,000 and also fiber take-up reached 355,000 today. Fiber subscriber representing 62% of total retail subscribers. Turning to the next slide. Broadband revenues were up 1.6%, driven by growth in ARPU and fiber subscriber. Transmission and data revenues grew 4.7% to NIS 310 million and cloud and digital revenues grew 5.7%, driven by higher revenues from virtual exchange and cloud services. With that, I will now turn the call over to Ilan to discuss Pelephone and yes. Ilan Sigal: Thank you, Nir. Moving to Slides 18 and 19. Pelephone delivered strong quarterly financial results together with sustained growth across key performance indicators. Service revenues grew 4.4%, reaching NIS 381 million for the highest service revenues in a decade. Adjusted EBITDA grew approximately 6% to NIS 202 million for the highest adjusted EBITDA in 2 years. Revenue and profitability growth were driven by continued growth in postpaid subscribers, including 5G subscriber plans as well as high roaming revenues. 5G postpaid subs plans grew by 33,000, reaching 1.36 million subscribers today. 5G Max subscribers reached 115,000 today. Moving to the next slide, we show 5G postpaid subscriber plans reaching 1.36 million subscribers as of today, representing 59% of postpaid subscribers and Q3 service revenues showing consistent growth over the last few years. The next slide shows Q3 key operational metrics. We posted the highest ARPU in 6 years, reaching NIS 48, up 4.3% of NIS 2 year-over-year. Turning to yes on Slide 22. Yes has demonstrated consistent increase in revenues and subscribers along with significant growth in all profitability metrics, which have been driven by comprehensive efficiency and renewal initiatives and the completion of strategic transactions and measures we undertook. Revenues increased 1.3% to NIS 321 million due to higher revenues from the TV and fiber bundle. Pro forma adjusted EBITDA rose 69% to NIS 59 million, driven by an improvement in operations, including growth in subscribers and revenues and the reduction in expenses resulting from the completion of transactions and strategic initiatives. Total TV subscribers increased by 3,000 this quarter, representing the highest quarterly increase in total subscribers since 2022. We posted quarterly growth with 12,000 net fiber subscribers, adds reaching 111,000 as of today. Moving to the next slide. Pro forma adjusted net loss improved by 97% due to higher revenues and streamlining of expenses -- streamlining of expenses. On the next slide, I would like to highlight that this is the second consecutive quarter with a sequential increase in total TV subscribers outrose NIS 2 year-over-year growth due to higher revenues from the fiber plans. We should continue growth in IP subscribers reaching 489,000 today, representing 86% of total subscribers. With that, let me now turn the call back to Yochai. Yochai Benita: Thanks, Ilan. Moving on to Bezeq International on Slide 25. ICT businesses revenues grew 8.7% to NIS 281 million, mainly due to higher revenue from the sale of business equipment as well as cloud activity. As a result, profitability metrics grew with adjusted EBITDA up to 2.6% and adjusted net profit up to 14.3% to NIS 16 million. We are continuing with our streamlining plan, including the implementation of the employee retirement agreement for the years 2025 through 2027. Finally, I would also like to mention that we will be attending the TMT conference this week in Barcelona. In addition, we will be attending the UBS Global Media and Communications Conference on December 9 in New York. For those attending, we look forward to meeting you there. With that, I will open the Q&A session. Yochai Benita: [Operator Instructions] Chris Reimer: Chris Reimer from Barclays. Yochai Benita: First question from Chris from Barclays. Chris Reimer: Yes. Yes. I wanted to ask about the guidance, the near-term 2% growth in adjusted EBITDA. How should we be looking at that in terms of the strong impact from the revaluation of yes. Tomer Raved: Yes. So the -- as I mentioned this quarter, the growth of the EBITDA of 14% if you exclude the yes impact, we're talking about 4% growth. We talked and we are targeting to be around the 2% EBITDA CAGR in our midterm targets. But given the successful growth in our core revenues and ongoing efforts driven by Bezeq, yes and Pelephone, we're obviously trying to overachieve these numbers. You saw this year, we upgraded our guidance twice and we are very confident of being at this number, maybe slightly above. But we are going to continue and push for at least 2% or more growth in EBITDA CAGR. And I would also share that in this coming March, we will share a revised midterm guidance as a result of our very successful business initiatives across the group. Chris Reimer: Yes. That's good color. And also just touching on, yes, you announced the extension of the satellite -- using their satellite. I'm just wondering how does that correspond to a positive impact on the segment? Yochai Benita: Okay. So as you mentioned, we did announce that we will keep some satellite business, but it will be very small compared to what we have today with lower cost structure. So what we communicated of a significant saving starting the first quarter of 2026, we still see it as part of our forecast. So there is no material change from our view in this respect. Next question is Siyi He from Citi. Siyi He: I have 2, please. The first one is really follow up on the topic on Yes. And we see that yes ARPU has stabilized this quarter. Just wondering if you can give us how do you think the yes ARPU could develop given that the fiber take-up continues to grow up? Should we expect this which the ARPU will trough from now on? And the second question, just if you could give us some updates on the HOT Mobile offer. I think the news said that you just raised the offer by like NIS 100 million. Just wondering if you can give us some update on how that's been progressing and your thoughts on the pricing. Tomer Raved: Yes. I'll touch quickly. Siyi, thanks for joining. The TV market is extremely competitive. Yes, has a very unique and premium offering. And while the TV stand-alone ARPU continued to go down as expected, slightly better -- slightly lower than expected, but still a very competitive market with fiber, the accompanied ARPU and now it's significant, has stabilized and growing gradually, as you can see. So with the growing take-up on fiber from yes, you would expect the offsetting the decline in TV stand-alone offerings to basically stay stable and slightly grow as a result of the fiber offering and additional offerings that yes has opened up like advertising and others that you'll hear about soon. Ilan Sigal: I'll add only one thing that, yes, second quarter that we are gaining more customers, 3,000 this quarter and last quarter, 1,000. In a competitive market, we are enabling to grow in our subscriber base. So also impacting the ARPU. Tomer Raved: And on the question of Hot Mobile, so we submitted an offer on the process, NIS 2 billion. We submitted a revised indication of NIS 2.1 billion. We are in touch with Altice and the representative as part of the process for the past 2 months. We did update the Street today on the revised offer, and we will update the Street on any other development there. We are focusing only on the mobile unit. We believe the value to the Israeli cellular market will be very significant, especially to the networks if this consolidation happens. Yochai Benita: Thank you. Siyi. Next question is from Christina Michael from UBS. Christina Michael: Can you hear me? Yochai Benita: Yes, we can hear you. Christina Michael: Following up from the previous question, how do you see the competitive dynamic in general in the market? And if there are any other specific actions you are taking in response to the competitive dynamics and increased competition in the market? Ilan Sigal: What market? Yochai Benita: Which market are you referring? Christina Michael: The mobile market. Yochai Benita: The mobile. Okay. Tomer Raved: Yes. I'll touch and Ilan, please further elaborate. The competitive -- the Israeli market in cellular is very competitive with very low ARPU compared to the world, given the reforms that happened 10 years ago. ARPU stand around the NIS 45 to NIS 50 across the street or in euros at EUR 12 to EUR 13, much lower than Europe. So we've seen a recovery in ARPU over the past 2, 3 years, thanks to the 5G offering. We expect to continue and see this trend happening. There are 4 MNOs and 20 MVNOs, very competitive market. We believe consolidation supports a better network development. Most markets are 2- or 3-player market. This is a 24-player market. So we are glad to see the market recovering, but Israel is still behind on cellular speed, #70-ish in the world, while it's #7 on Fixed line broadband. So we believe this type of transactions will support basically the country network and evolution into 5G and 6G. Ilan Sigal: I'll just add, the 5G network is still in the baby steps, we are around 33% of the antennas nationwide are 5G. And we believe that the nation needs to be 100% very fast. So -- and also, the market is very competitive, as Tomer said, 23, 24 players and a lot of MVNOs and the pricing is very down -- is very low. So that's the market and we believe it will be still very competitive in the next few years. Yochai Benita: Okay. Thank you. So if there are no further questions at this time, just a minute, we do have another question, Sabina. Sabina Levy: First of all, congratulations on the quarter. You've mentioned previously the long-term guidance. And I just was wondering whether it takes into the consideration also potential developments in the regulatory landscape, like you've mentioned that the Ministry of Communications might decide regarding the structural separation. So I was wondering if it's in the numbers. And also, maybe you can provide us some additional color regarding the potential impact of AI implementation considering the cost base and potential savings and maybe streamlining measures in the company. Tomer Raved: Yes. Touching quickly on AI, and I promise you, you'll hear a lot more both from Nir and Ilan very soon on AI initiatives. But we play de facto 3 roles basis the infrastructure for AI. So everything that's going on with higher bandwidth speed, data center connectivity locally and globally, we are part of, given we are the incumbent. We adopted a lot of AI tools. We are ahead of the world, both in Pelephone and especially in Bezeq Fixed line. And we see cost savings and better customer service as a result. And you will also see a lot of AI solution at the customer premise. We're already offering cyber solutions, device management solution and more to come. That's on AI. You'll hear a lot more about this from us in the coming weeks. Regarding the regulatory front, we've seen a lot of activity on the regulatory front. Earlier this year, they talked about the wholesale and the removal of structural separation happening later in this year. They have been very active in the past 2 months with hearings and RFIs across both. And they set a target date to decide on structural separation structure and removal by end of this year. We are in active conversation with them, and I think the rest of the Street is as well, and we expect them to make a decision by year-end. Sabina Levy: What about? I asked about if it's reflected maybe risk-adjusted in the long term -- in your long-term guidance or aspirations. Tomer Raved: We did not -- sorry, yes, Sabina, we did not take into account any of the regulatory impacts on the long term, especially not structural separation. It's not in our guidance. Sabina Levy: So can we assume that in case there will be developments in this front in the next coming months, you will provide us more color at the annual report? Tomer Raved: Yes. We will provide more color when we have better visibility. And as you know, the 3 main impact, of course, the significant value to the customers on the service and on the price. So while putting revenues aside, there is a NIS 1.2 billion tax asset that will be used over a course of 8 to 10 years, very significant free cash flow impact as well as potential cost savings as a result of the Bezeq & yes merger. But we will provide specific numbers, hopefully, during the annual statements. Yochai Benita: Next question is from Omri Lapidot from [indiscernible]. Omri Lapidot: Yes. [indiscernible] Omri Lapidot. I want to add on the previous questions regarding the company's forecast and whether or not you are taking into account in the forecast, yes, revaluation. If I look at the EBITDA margin for the medium term, in my eyes, it seems like it didn't take it into account. It seems like the yes, revaluation added like, I don't know, NIS 400 million in adjusted EBITDA yearly. How can we think about it? Tomer Raved: I'll respond and Yochai feel free to add. We did not take into account any impact from -- yes in our initial guidance when we issued it in March. As a result of company better performance and the yes revaluation in Q2, we revised guidance and then did it again because there were 2 impacts on the yes revaluation. So both were taken into account in the revised guidance or in the second revised guidance, and that's one of the primary reasons for the revised guidance. So it's already in there, but we are not taking into account any future revaluation of yes into the guidance. I hope that makes sense. Yochai Benita: Okay. Thank you, Omri. If there are no further questions at this time, I would like to thank you all for taking the time to join us today. Should you have any follow-up questions, please feel free to contact our Investor Relations department. We look forward to speaking to you on the year-end 2025 earnings call. Thank you.
Samuel Dobson: Good morning, everyone. Thank you for joining us here. Welcome to Macquarie's First Half Financial Year 2026 Results Presentation. Before we begin today, I would like to acknowledge the traditional custodians of this land, the Gadigal of the Eora Nation and pay our respects to Elders past, present and emerging. As is customary, today, you'll hear from our CEO, Shemara Wikramanayake; and our CFO, Alex Harvey, and then we'll have an opportunity for you to all ask questions at the end. So with that, I will hand over to Shemara. Thank you. Shemara Wikramanayake: Thanks very much, Sam, and good morning, and welcome, everyone, from me as well. So as usual, we'll start by just noting the footprint of 4 operating groups we have in our business and the 4 central service groups that support them. There's no material change here. The only thing I thought I would mention is under Macquarie Asset Management that as of the 1st of September, we've moved the green balance sheet assets into the central Corporate area. And this is basically to free up the asset management team to focus on the now very growing fiduciary business in the green area that we've managed to seed and build based off the capability we built on the balance sheet, but the central team will now come in the Corporate area and work on those assets from here. The other thing I'd note on this slide is in this half, we had 16% of our earnings from market-facing sources and 56% from annuity style, which is base fees in Macquarie Asset Management, the BFS earnings and then the remaining 28% from areas like in Commodities and Global Markets, the financing, client revenues we earn and also the performance fees in Macquarie Asset Management. So turning then to this half result. As you will have seen this morning, it was up 3% on the prior comparable period at $1.655 billion. That represented a return on equity in this half of 9.6%. Even though the result was up 3%, the return on equity was down slightly, and that reflects the growing capital position we have. And in terms of the contribution to that result by operating groups, you can see here that we had increased contribution from 3 of our operating groups. So Macquarie Asset Management driven principally by an increase in performance fees in this half. Banking and Financial Services, ongoing growth in our books there at our market position. Macquarie Capital, it was actually high fee income in this half, particularly in Australia and the Americas and our ongoing growth in our private credit business. So all 3 of those up. Commodities and Global Markets, even though the revenue, the operating income was broadly in line with the prior comparable period, it's increase in our operating expenses as we invest in our platform that brought that result down. And before going into detail of those groups, I'd just note, first of all, as usual, our assets under management, they're sitting at $959.1 billion, mostly driven by favorable market movements and asset valuations, offset by some outflows in equities and unfavorable foreign exchange. This number will come down slightly when the sale of the public investments assets outside Australia to Nomura closes. So we'll update on that in the next results. And in terms of the regional makeup of our income, it's broadly consistent with what we've had for recent years, Australia making up a bit over 1/3 in this half, and the Americas a little under 1/3. Europe, Middle East, Africa, about 1/4 still, and the balance in Asia. So then turning to the operating groups, starting with Macquarie Asset Management. And I should say we've got all our Group heads here in the front row. So Ben Way is here in Australia, sitting here and able to answer questions. But the result there at $1.175 billion was up 43% on the prior comparable period. The big contributor there was performance fees, and Alex will take you through in detail in a little while where we earned those, but they are around the world. The equity under management was up 2% at nearly $225 billion. The team raised about $11 billion in the half and invested about just over $12 billion, leaving dry powder of about $23.5 billion in private markets. In public investments, as I said, the majority of these assets are due to be transferred to Nomura in a transaction that's on track to close at the end of the calendar year. So we'll probably report in more detail on the remaining Australian fixed income and equities portfolio going into the new results from here. Then turning to Banking and Financial Services, again, as I said, up on the prior comparable period, up 22% at $793 million. And that's driven by, as I said, the ongoing growth in all our books as well as our funding, our deposit funding. The home loan portfolio was up just over $160 billion, which was an increase of 13% on prior comparable period. We're now at 6.5% of the mortgage market and have been growing at 3x system there, as you will have seen. And that is supported by strong growth in deposits, which were up 12% to over $190 billion. That's representing just over 6% of the Australian market. And the business banking loan book was also up to $17.4 billion, which was up 4% on the prior comparable period. Funds on platform also up 8% on the prior comparable period. And this is all being driven by our digital offering, focusing on customer experience. And when Alex goes through it, he will talk about how our expenses went up slightly as we continue to invest in the tech platform, but all up -- earnings up 22%. And Commodities and Global Markets, as I mentioned, was the business that was down 15% to $1.113 billion. Now it was a very subdued environment globally, as you will have seen in Commodities. Despite that, we were able to have good risk management income in our North American Gas & Power business as well as our global oil business, but that was offset by hedging activity in the agriculture sector. But a couple of things I'd note that are interesting. While the commodities area has been more subdued in this period, the financial markets and asset finance businesses keep growing our franchise and the earnings continue to step up year-on-year on those. And in this half, they were actually 54% of our contribution from CGM, which typically has 60% coming from the commodities businesses. The other thing I thought was worth noting in CGM is the franchise continues to grow. So 10 years ago, I think, Simon, we were doing about $1.7 billion of revenue across CGM. When I started as CEO in 2019, we were at $3.8 billion. Last year, it was $6.3 billion. And this year, we're looking at broadly in line around that low $6 billion number. So the revenue line or operating income continues to grow. What we have had in CGM is a big investment in our operating platform as we uplift the platform for a very diverse and globally complex spread out business and also respond to regulatory requirements in that business. And again, Alex will take you through the details of how our operating expenses have stepped up, and that's the main thing driving the lower net profit contribution in this half. Macquarie Capital, up 92% at $711 million from about -- I think Michael Silverton is also with us here from New York. I think it was about $370 million in the prior comparable period. And as I said, the 2 big contributors to that are, first of all, in our fee income, particularly here in Australia and in the Americas, we had a strong half. That was a little bit of carryover from the last half transactions as well. And then our private credit book was also up $3.9 billion and continues to grow and contributed together with some repayments. Then turning to our funding and capital position. Our funded balance sheet remains strong. We have term funding exceeding our term assets and good matching in funding. We raised $15.9 billion more of term funding in this half and our deposit funding is now sitting at $198.8 billion. And our capital position as well, we remain with a surplus of $7.6 billion over our Basel III minimums down from $9.5 billion. The changes were increased for the profits that we made in this half, offset by the final year dividend we paid, business capital requirements and then other movements like the foreign currency translation reserve. The businesses absorbed $1.1 billion in the half. And you can see there in the right-hand half of that graph that the 3 businesses that did absorb capital mostly Macquarie Asset Management, $500 million in terms of co-investments underwrites as we grow the platform and invest in our funds. For alignment, BFS continued to grow by about $700 million over the half with growth in all of the home loans, business banking books, et cetera. And then CGM increased credit risk due to business growth. And also, we bought the Iberdrola U.K. smart meter portfolio in this half. Our reg ratios as well are sitting comfortably above the Basel III minimums, as you can see there. And the last thing on the results, I wanted to say before handing over to Alex was that the Board has declared a half year dividend of $2.80 per share, 35% franked. That's up from the $2.60 in the prior comparable period, and it represents a 64% payout ratio. And with that, as usual, what I'll do is hand over to Alex to take you in much more detail through the numbers. But before I do, I just wanted to note that this is the last time Alex will be taking you through these numbers in detail. I've had the privilege of partnering with Alex for 28 of these updates that we've done for you. And Alex has made just such an incredible contribution, as you've all seen. He is so across every number. He's got a razor-sharp intellect. He is very commercial. And so not just in reporting results, but we spent a lot of time on investments, on realizations, on business restructurings through a whole lot of market cycles, COVID, interest rate surges, et cetera. And he also has built an incredible team in that period in terms of financial reporting, the regulatory reporting and the uplift we've had, the tax engagement with stakeholders through corporate affairs and now the people and culture team sitting under Alex. I think we've raised over $200 billion of funding, I think, Alex, in your time as CFO and nearly $5 billion of capital. And the market cap has gone up 150%. All thanks to you, but incredible contribution from Alex. And I should just say as well, before his 8 years as CFO, that's less than 1/3 of his time here at Macquarie. He was in Macquarie Capital, leading so many entrepreneurial businesses here and up in Asia after coming across from the game-changing Bankers Trust acquisition. So we're very sorry, Alex, that we won't have you with us. We know you'll be watching closely as all our former colleagues are and Alex is working around the clock to the last minute. But also I think in finding Frank to come from Macquarie Asset Management from a big global role there to really passionately take on the CFO role. I've worked with Frank for many decades as well. He's part of the great legacy Alex leads us, not just Frank, but the whole team that are in FP. So thank you. And Alex, Frank and I look forward to engaging with all of you over the next few weeks as he finishes his last few weeks, but I will let him do his swan song, usual incredible analysis of our results. Alex Harvey: Thanks, Shem. It feels like a great risk of disappointing after that entrée. But thanks very much for all those comments. And obviously, it's been an incredible 3 decades working together and a real privilege, obviously, to have this role, but a privilege to be at the organization for such a long period of time and the opportunity to work with thousands of people all over the world, including obviously, the executive committee in front of me has been incredible real honor and a real highlight. So thank you very much for those comments. So as usual, I'll take you through a bit more of the detail. Obviously, good morning to everyone in the room from me. So starting with the income statement. You can see operating income for the year -- for the half, up 6% on where we were first half of last year. And the key drivers there at the top of the page, the net interest and trading income, up 9%. That largely reflects the growth in the average loan volumes in both BFS and in Macquarie Capital, the Principal Finance business. You can see fee and commission income up about $600 million or 18%. Two key drivers there. We saw an improved result from the advisory business in Macquarie Capital. We saw an improved result from our Asian equities business from a broking viewpoint. And obviously, we saw a big step-up in the performance fees coming through the asset management business. At the bottom of that income slide there, you can see investment income and other income down about $500 million from where we were this time last year. And there were 3 key drivers there. Firstly, as people recall, in the first half of last year, we sold 39 Martin Place that generated a profit for the group that obviously didn't repeat in this half. In addition, over the half, we didn't see the realizations that we saw in the first half of last year from our green investments on balance sheet, so they didn't repeat in the first half here. In addition to that, we also took some impairments on our on-balance sheet green assets, particularly in the offshore wind part of our portfolio, and I'll take you through that in a little more detail later. So, for a net operating viewpoint, as I said, up 6%. Operating expenses overall for the half were up 5% from the first half of last year. There's a couple of key drivers there. You can see the employment expenses line up about $200 million. And there's a combination of things there, principally related to the performance of the group. So we had increased profit share expense coming through. In addition, we saw some wage inflation coming through the group, partially offset by a reduced average headcount. So average headcount across the group is down about 3% from the first half of FY '25. In addition, we see a step-up in the other operating expenses, and that's really the investment that we're making -- large investment we're making in upgrading the platform from a technology viewpoint. A lot of those expenses obviously are in the BFS business, as Shem talked about, but also in the CGM business. So operating expenses for the half up 5%. Income tax rate at 31.8% from last year was 29.9% for the first half. The income tax expense is up a little bit from -- income tax ratio is up a little bit from where we were last year. That's a combination of the nature of the income coming through the P&L and the geography of income coming through the P&L. In addition, this half, we had some nondeductible expenses, not only the hybrid, but some nondeductible expenses that are pushing up our effective tax rate. So most of those we would not expect to repeat into future periods. So if I now just go into the business groups in a little more detail and starting with the Asset Management business, as Shem said, a really strong result, up 43% on where we were last year at $1.175 billion. And the key driver there, you can see in the middle of the page there is the increase in performance fees of $353 million. Those performance fees are arising from a range of capabilities around the world. But in particular, in this half, we saw additional performance fees from MAIF 2. MAIF 2 was able to divest another asset in Asia, really successfully divested an asset in Korea. So that gave us the opportunity to have a look at the performance fees coming out of MAIF2. And in addition, more recently, obviously, you would have seen the announcement of the successfully entering into a sales transaction for our Aligned Data Centers business in the United States. That investment is in MIP IV and MIP V. In addition to that, we have some co-investors in that asset itself. And on those co-investment agreements, we have performance fees. So we're able to bring through performance fees associated with those co-investment agreements in the first half. So the principal driver of the movement really is the performance fees. You can see base fees up $29 million, so $34 million across the private markets business, and that really reflects a period -- a good period of investing. And then strong expense control, driving what I think is an excellent result for the group. And obviously, that sets up both MAIF2 and MIP IV and to a little later extent, MIP V to deliver those performance fees in coming periods. In terms of the underlying assets under management, as Shem said, $959.1 billion for -- at the end of the half. Private markets driving most of that gain, $27.6 billion increase in private markets AUM, and that reflects a good period of investing. So we invested, I guess, $12 billion of equity, nearly $20 billion of AUM over the course of the half. We also had some net valuation changes, particularly in relation to the digital assets that the Macquarie Asset Management business manages around the world. A little bit of a drawdown on the public investment side. Markets have obviously been really strong. So you see a pickup of $40 billion. We continue to see net outflows, particularly in our equity portfolios. And obviously, from an FX viewpoint, we had a little bit of a drawdown from an FX viewpoint given the weakness of the U.S. dollar at the end of the period. So turning now to Banking and Financial Services. Again, a really strong result from $650 million this time last year to $793 million, a 22% step-up in underlying net profit contribution. And the main driver there, obviously, is the increase in personal banking. And that increase is coming from average loan mortgage balance up 21% from the first half of last year and deposit balances in average terms up 27%. So a really strong period of growth. As Shem said, over 3x system growth in the mortgage side. So again, great to see the product capability that Greg and the team are delivering to the market, really attracting a growing customer base. That's fantastic to see that. Business Bank broadly in line. We had a bit of volume growth in the business, but given up that volume growth largely in margin compression. The wealth management part of the business picking up largely as a result of the underlying performance of markets. I might just spend just one minute on the expenses side. So you can see this should be a very familiar story to people. I think what Greg and the team have done is invested heavily in the technology platform that supports the digital financial offering -- the financial services offering in this marketplace. We continue to do that. You can see the expenditure up $30 million on the technology side this year. On the other side, obviously, we're seeing benefits coming through from that digitization, that efficiency benefit. So that's drawing down the underlying cost base of BFS in those non-technology areas. In terms of the underlying story, obviously, everyone -- all the products and capabilities moving in the right direction. As Shem said, home loan is about 6.5% of the market now. I think deposits is about 6.1% of the market, but there's been a -- continues to be really strong growth across all of that capability, and that obviously augurs well for the outlook for the business going forward. Now turning to the Commodities and Global Markets business. As Shem said, net profit contribution for the period down 15% from where we were this time last year. But the underlying story, I think, is an interesting one. The operating income across CGM is basically broadly in line with where we were for the first half of last year. And you can see the real -- the pull down from a net profit viewpoint is really the expense base. So expense base has stepped up nearly $200 million over the course of the period, and I'll come to a little bit of detail in a second. But if you look at the income line for a second, so commodities were down $26 million. Risk management income up. We saw a better period of contribution from our North American Gas Power and Emissions business. We saw a better contribution from our global oil business, partly offset by a reduced contribution from the agricultural business that had a strong period of time last year. We didn't see that repeat into the first half of last year. So risk management income up $37 million. Lending and financing down $27 million. That largely reflects lower balances from our global oil financing business. And on the inventory management and trading line, down $36 million. Mostly that reflects the timing of income recognition on transport and storage contracts. So the underlying trading performance of the business was consistent with where we saw for the first half of last year. Really strong result from financial markets, again, up $52 million. I think that's about 6% growth from where we were first half of last year. And that sort of extends a trend that's been going on for now, certainly my whole time here as CFO. So nearly 8 years of underlying growth in that financial markets part of the business, which is obviously a reflection of the customer numbers and the capabilities we're providing. And on the asset finance side, up $31 million, which reflects the growth in the shipping loan portfolio in the asset finance part of that business. On the expenses side, as I said, up $200 million. There's really 3 things there. Firstly, we're continuing to invest in the platform. We're investing in the data asset. We're investing in the governance and the control environment. We're investing in the platform to make it scalable. We're using more technology in that business to make it scalable around the world. So that's one thing that's driving the expenses. Secondly, we've obviously got some remediation programs underway. Those programs will come to a conclusion. But nonetheless, we'd expect them to extend at least for another few halves. And the other thing we saw in the first half was some one-off expenses associated with transactions. For instance, as people will be aware, we bought the Scottish Meters business in the first half. There are obviously some transaction expenses associated with that, and we wouldn't expect those transaction expenses necessarily to repeat going forward. In terms of the underlying drivers, hopefully, a pretty familiar slide for everyone here. You can see the customer numbers continuing to accelerate on the right-hand side there, both across financial markets and across commodities. The operating income is still heavily weighted toward the underlying client franchise. And the regulatory capital footprint, pretty similar to where it was at March '25 and still dominated by credit capital, which is consistent with that customer-facing orientation of the business. And finally, from the business unit viewpoint, Macquarie Capital, up $711 million, a 92% increase from this time last year. You can see the drivers there, fee and commission income, up $179 million. I think that's a 27% increase. That largely reflects advisory income in Australia and the U.S. It obviously reflects the brokerage income in Asia as well. On the advisory piece, obviously, the market conditions have improved, but we also -- and we saw some large transactions coming through this half, which is fantastic for Michael and the team. We did see some pull-through from transactions that were well progressed at the back end of our '25 financial year that actually completed in '26. And so that came through in the first half. And we obviously talked about that at the AGM. And then the net income, the other piece, obviously, is the net income on the private credit portfolio up $177 million. There's really 2 drivers there. The average balance of that portfolio is up about $4 billion. So that's obviously driving margin coming through the P&L. The other thing we saw is some repayment income, early repayment income on a number of the credits coming through. So obviously, early repayment income, we wouldn't necessarily expect to repeat into future periods. And then we had lower impairments over the course of the half, reflecting better market -- macroeconomic conditions that are reflected through our ECL modeling. Good cost control, obviously continuing. In terms of the capital alongside the clients, pretty similar to where we were this time or 6 months ago. And the private credit book, now about 170 positions, well diversified in sectors that are pretty defensive and strong cash flow businesses. So all this underlying capital and credit is driving the earnings growth for MacCap. From a corporate perspective, one of the things -- obviously, we -- there's some noise coming through corporate this half, and that noise largely relates to the fact that we moved the green -- the on-balance sheet green assets from the asset management business into the corporate center for reasons that Shemara talked about earlier just in terms of the focus that MAM has on the fiduciary business. The assets we've moved into the Corio and the Cero, the platform assets that we intend to divest to third parties over time. So we thought given the changes going through the center that we'd include this bridge in corporate, and I'll talk a little bit to that. So you can see one -- these are obviously expenses, $1.548 billion of expense for the first half of last year versus $2.137 billion for the first half of this year. And the primary driver there, you can see is that investment related and other expenses up $435 million. And there's really 3 major components there. So firstly, we didn't see the recurrence of profits from the divestment of green assets in this half. So obviously, you didn't see that repeat. Secondly, we took some impairments on some offshore wind assets. And in particular, I think we've talked a lot about some of the challenges in the offshore wind industry in the U.S. So we took some impairments on our exposure to that in the first half. And obviously, we didn't see the repeat of the proceeds from the sale of 39 Martin Place. So those things are really driving that step-up -- that one-off step-up in loss contribution through the half. The second thing to note is that on the operating expenses, obviously, operating expenses in the corporate, that's largely the profit share. In addition, it includes the expense we incurred in relation to a specific or specific legal matter that came through the corporate center. So we hope that slide is useful in terms of how you think about that -- the corporate contribution, if you like, or the corporate expense going forward into the group. Now turning to a few other aspects of the financial management. So the regulatory compliance and technology spend, you can see at $649 million for the half, up about 9% on where we were this time last year. We continue to invest heavily in the platform. We continue to invest in our ability to meet our regulatory and compliance obligations in terms of data, in terms of governance, in terms of documentation, in terms of technology that's removing some of that manual process that exists in that part of the business. So we continue to invest in that. We've obviously got some programs of work to deal with, things like the license conditions associated with our OTC and derivative reporting. Those sort of things are featuring in our reg and compliance spend. And obviously, on the technology side, technology side, up about 9%. Again, Nicole and her team continuing to invest in the enterprise and things like cloud, and things like cyber and things like license fees and technology capabilities to support the scalability of the business. And technology spend is just under 20% of the overall cost of the group on a current basis. Balance sheet highlights. The balance sheet continues to be really strong. It's been a good period of raising nearly $16 billion from Frank and the team in treasury. It's obviously been very favorable conditions. Look, most of that raising has been done in the bank rather than the group. Conditions have been really supportive. And so we've taken advantage of those conditions over the course of the half. The business continues -- we continue to access a diverse range of funding sources, both from a currency perspective, a product perspective and a geographic and a tenor viewpoint, which is really important. And obviously, the weighted average life of the balance sheet continues to be quite long. The deposit base that Shem spoke about before, just under $200 billion of deposits across the group today. The deposits are obviously funding the growth, largely funding the growth in BFS. And one of the interesting things, I think, just a credit to Greg and the team in terms of the capability they've developed there. You would -- you'll note that we've got 1.9 million depositors now in our business. Last year, that figure was 1.5 million depositors. So really strong growth in the deposit customer base. And obviously, we continue to diversify and particularly focusing on savings type products, a more regular way products that are supporting the business going forward. The loan portfolio, up 9%. Mostly, that's the home loans at the top of the page there. It's obviously driving the net interest income coming through the P&L. The equity investments broadly in line with where we were this time last year. So you can see a pickup in the asset management at the top of the page as we've drawn down some exposures through our funds. Obviously, we moved some of those assets in that second line. But some assets that are on the balance sheet. Ben and the team have been able to syndicate the equity there into new products. So that's coming down a little bit. The other thing I might draw out just on this page is just at the bottom of the page there in the line described as Corporate, BFS and CGM. You can see the green energy portfolio now reflected in Corporate. So it's gone from $1.3 billion down to $1.2 billion. That largely reflects the impairments I talked about previously. And in the Corporate, another line at the bottom, it's gone up from $900 million to $1 billion. And that actually -- that step-up is mostly related to the assets we acquired as part of the settlement of the Shield Master Trust, which we acquired at fair value that are now managed in the Corporate center. From a regulatory viewpoint, lots going on from a regulatory viewpoint. So I won't spend too long on this. A couple of observations. We continue to work constructively, obviously, with the industry and with APRA in relation to some reform agendas for prudential framework for banks, insurance and superannuation. We submitted our feedback to that, and that's expected for the consultation in the first half of '26. I think everyone is aware that the hybrids for banks are phased out from the end of this year. They'll obviously be outstanding until the 1st of January as we roll those -- 1st of January '32 as we roll those off. But the other thing, of course, during the half is that APRA raised a consultation paper on hybrids for nonbanks or the NOHCs. We submitted our proposal, and there will be further guidance on that in the new year. The other thing people would have seen is that we released our CPS 511 remuneration disclosures during the half. One of those -- what we were trying to do there is address at least some element of the feedback following the AGM strike in relation to the understanding how particular matters have been incorporated in remuneration outcomes for the Executive Directors and for the 2 CEOs across the group and the bank over the course of the last period. And we've gone -- we've done that, and we've obviously extended that back to FY '21. So hopefully, there's some useful information there for people to think about the way the Board thinks about incorporating the issues that occurred across the group into people's remuneration outcomes. We continue to work with APRA on the reform programs that we've had in place for some years. Those reform programs are obviously very mature now and heading towards their conclusion. So we're pleased with the progress there. And as I said before, in relation to the various asset matters, we've stepped up programs of work to deal with the matters that are outlined on this page. Now the capital position remains very strong, 12.4% CET1 ratio from 12.8% at the start of the period. Liquidity continues to be strong. The average LCR of 173%, down from where we might have been a few years ago. That largely reflects the work that we've all done in terms of high-grading our capability and precision with which we manage liquidity. So it's great to see that coming through, and we're seeing some benefits in terms of the funding across the group from that precision. And finally, in relation to the capital management update, just a couple of things. The Board has resolved to extend the $2 billion buyback for another 12 months. As people recall, we bought just over $1 billion. So we have just under $1 billion that's available to buy back over the course of the next 12 months, pending other use for capital. And we think that gives us added flexibility to manage the capital base across the group. And in relation to the dividend and the dividend reinvestment plan, as Shem mentioned, the Board declared a dividend of $2.80, 35% franked. The dividend reinvestment plan remains in place, and we intend to have that on at a 0% discount and to buy shares on market to neutralize any applications for shares under that DRP. And so with that, I'll hand back to Shemara. Thanks very much. Shemara Wikramanayake: Thanks very much, Alex, and I'll take you through the outlook now. And it was good to see you calling me Shem still Alex because he insisted, he calls me Shemara at results but sticking to his track record. As usual, we'll go through this group by group. And starting with Macquarie Asset Management. As we said, excluding the divestment of the public investments businesses outside of Australia, we're expecting the base fees to be broadly in line. But the net other operating income, we're now expecting to be significantly up, and that's driven by the performance fees that Alex just spoke about. In Banking and Financial Services, as you can see, we're having ongoing growth in the loan portfolio to deposits, the funds on platform, but it's continuing to be impacted by market dynamics and our portfolio mix, which is driving lower margins. And as Alex showed you, there's continued investment in our digital platform and technology investment happening there. Then Macquarie Capital, we're saying we expect transaction activity for the full year to be broadly in line. The investment-related income, we expect to be up and that's supported by the private credit portfolio growth and also asset realizations that we expect in the second half of this financial year, and we'll continue to deploy in our private credit portfolio. And then in Commodities and Global Markets, as we said, we now expect the commodities income to be broadly in line, but we expect continued contribution from asset finance and financial markets as has been the case for many, many years. And then our corporate results, we expect our compensation ratio and our effective tax rate to be broadly in line with historical levels. And this is subject to, as usual, the health warning of the range of factors that in the short term can affect things, market conditions like economic conditions, inflation, interest rates, volatility events, geopolitical events all playing out, the completion of transactions and period-end reviews, the geographic composition of our income and the FX implications and potential tax and regulatory changes or uncertainties. And that's why we've always maintained our cautious stance with our conservative approach to funding capital liquidity that allows us to respond through changing environments. Over the medium term, as usual, we think we're well positioned to deliver superior performance given our deep expertise across 4 very diverse capabilities in our operating groups, supported by our ongoing investment across our operating platform, our strong and proven risk management framework and culture, our strong and conservative balance sheet and funding and within that risk our approach to patient adjacent growth into new areas, adjacent areas. Now the last thing I'll do is touch on our returns over this period and over the historical period before handing back to Sam for questions. And as you can see, we've had a 14% ROE over the last 19 years. and this year delivered 9.6% in the half year. The Macquarie Asset Management and Banking and Financial Services that have historically delivered an average of 21% delivered 20% again in this half. The Commodities and Financial Markets business, Commodities and Global Markets, I should say, in Macquarie Capital, which have delivered 17% average over past years were 12% in this half. And we talked about the big investment we're doing in platform in CGM. Also the capital requirements in that business high at the moment and up a bit in this half as well given what happened in terms of FX rates, gold prices, et cetera, we held slightly higher capital. So with that, I will hand back to Sam to take any questions you may have. Thanks. Samuel Dobson: Great. Thank you, Shemara. So we'll start with questions in the room, and then we'll go to the line. So I'll start with Matt Dunger at the middle there. Matthew Dunger: Matt Dunger from Bank of America. Shemara, I was wondering if you could expand on the comments you made earlier around the transfer of the green investments from MAM into Corporate, the rationale, why now? And on a related matter, Ben's seeing strong green investment fundraising. How is the demand for these assets? Shemara Wikramanayake: Yes. And Ben is here in the front row. So I might let you, Ben, in a moment, just comment on how the fiduciary business is going, where we're seeing very good momentum in many channels. But that segues to why we have brought these assets into the center because there's a limited number of assets now left, and we want the team and the asset manager focused on building the fiduciary business. So we've done this before with assets like, say, Sydney Airport, we managed in the center, the building behind us 39 Martin Place, we managed in the center. The team that have been working on that who are a lean team with deep expertise in these assets, have now moved over into the center. We're very well familiar with these. And so we expect that we'll use our resource better by doing that. And then Ben, did you want to comment on how the fiduciary business is going? We'll get your microphone. Benjamin Way: Thank you for the question. In terms of MAM's green business, it's grown 5x in terms of assets under management over the last 3 years. It's sitting just under $30 billion of assets under management now. The appetite for clients for those strategies remain strong. As you would have seen in the media earlier this year, we actually had our largest ever fund commitment for MGECO, our core renewables fund from ART, which was just in excess of AUD 1 billion. So I think that's a good indication of the support we're seeing for both our solutions and strategies, but also the support from institutional investors around the world. We've now expanded the distribution of those products into the wealth segment. That's also going well. And then in terms of just finding ways to match that capital with opportunities, you probably saw that our dry powder 18 months ago has come down from the sort of the mid-30s to the low 20s, a good example of the fact that we are finding around the world good deployment opportunities, generally speaking, and that includes in energy transition or decarbonization, and that's driven by just the fact that the world needs more power than ever before. The most affordable scale power to install is obviously solar -- and so those opportunities around the main markets, about 25 markets that we focus on remain very significant, and that's then extending into things like storage and the like. So I think we see decarbonization as being one of our 4 major mega themes for MAM, and we see the opportunity set as still being very significant and if not growing. Matthew Dunger: And perhaps one for Alex on the CGM side and the $200 million step-up in costs there. Just thank you for unpacking those drivers. But just wondering if you could talk to us about how much you expect to recur into the next period. Obviously, the Scottish meters seem to be one-off, but how much of the remediation is the next period? Alex Harvey: Yes. Thanks, Matt. Yes, as I said, in terms of the step-up in the cost base, it's a combination of 3 things, just to sort of repeat. So it's high grading the platform, so investing heavily in the data and the technology that supports Simon's business on a global basis. There's obviously some remediation effort going in there, particularly in relation to things like the license conditions we have associated with our OTC derivative reporting. So that's certainly some costs associated with that. And then there's some one-off costs associated with transactions and the like. The one-off costs in terms of the step-up have sort of in the range of 20% to 30% of that step-up. So obviously, we wouldn't expect those to repeat necessarily going forward. Now the remediation programs at work, obviously staff up those programs across the group. And so you'd expect, Matt, in a few periods, those would roll off. And obviously, the high grading of the platform, we'd expect to maintain going forward. So hopefully, that gives you a sense of what we think is going to happen at least in the short, medium term. Shemara Wikramanayake: And I should say briefly because we are focusing a lot on the green assets now, that portfolio, we think, warrants focus in terms of getting the best value out of it if time goes into it. And it's diverting the attention of the MAM teams who are trying to raise money and look after their investors, whereas we have a lot of time on our hands to work with. It's a very good team that have been working on that, but we -- focus -- yes, thanks Alex, good stuff. Samuel Dobson: I'll go to Jon first, and then Andrew, or maybe... Jonathan Mott: Jon Mott from Barrenjoey. A follow-up question on the green assets and specifically Corio and Cero. Can you just give us a bit more on the amount of capital tied up and specifically between how much is in solar and how much is in wind? So of the $1.2 billion, obviously, there's a lot more concern about offshore wind than there is about solar. So they're there. How much have they been marked? So there's debt in there as well, I'm sure. So what's the asset mark that's been taken down on that? And are they salable? Are these assets that there is demand for? Or are we going to see further impairments over time just given that offshore wind, in particular, is on the nose and you've seen Orsted and others come under significant pressure? Shemara Wikramanayake: Yes. I'll answer briefly and then I'll let Alexander tell you more about the detail. But basically, the biggest of the assets is the Cero portfolio, that's solar assets. And solar is an area where we're seeing still good interest. The MAM team will attest to that. But it is a development platform, and that's why we thought it was good to bring it into the center and focus on it because we need to focus on OpEx and DevEx as we develop that and the timing that's optimum to exit it to get the best return for shareholders. We have actually made impairments in this first half, and we can give more details, but it's principally been in offshore wind in the Americas is where we've seen challenges in the sector. Elsewhere, we're at $2 trillion of investment now this last year in green assets. So there is growth. So I think that's a brief summary about of the $1.2 billion. The biggest thing is the Cero. Corio is a group of offshore assets, limited in the Americas, and we've taken a provision there, but we have some in the U.K. region. We have some in Taiwan. We have some in Korea, and we're managing that asset by asset. Alex Harvey: Yes. Maybe just to add just a couple of things from me. So just in terms of the split, about 3/4 is solar and about 1/4 is wind or 25% wind, 30% wind, somewhere. So it's majority solar. Just in terms of the -- a few things to observe. So firstly, the solar market, just picking up Ben's point, the solar market is obviously quite different to the wind market. Solar, I think, it remains the case that solar is the lowest levelized cost of energy. And so it's also relatively quick to develop and take from development stage to operational stage. And so we continue to be pretty optimistic about the solar exposure across the group. So that's the first thing. The second thing on the wind story, a little bit region-specific, Jon. I mean in the U.K., for the sake of the example, the wind market continues to be a, an important source of power, but b, a market that the government continues to respond to changes in the cost of capital associated with the development and the time frames to develop. So you probably saw in recent times, the most recent contract of difference has gone up from GBP 72 a megawatt hour to GBP 81 a megawatt hour. So you're seeing the market -- you've seen the government respond with the subsidies. So U.K., a little bit different to the U.S. I think in the context of the U.S. for obvious reasons, it feels like -- at least it felt like to us that with the passage of the last 6 months, which is obviously where we've been focused, it felt like to us that the time frame and the risk associated with developing offshore wind assets in the U.S. meant that it was an appropriate time to look at the carrying value of that asset. And so as Shemara said, we reduced or Shem said, we reduced the -- we reduced the carrying value of those assets down. It was about $150 million impairment that came through, but that was largely related to wind. I mean just to sort of complete the picture, bear in mind with all these things, 2 things. Firstly, we expense a lot through the P&L in any case. So we sort of buy down our exposure to these assets. And we don't obviously remark those assets to market. And so when we're impairing the assets, we're obviously impairing it from a low cost base. And so at the time we make the judgment at 30 September, we obviously feel like the carrying value of the assets we've got left on the balance sheet is appropriate, but we'll continue to review that going forward. Jonathan Mott: And just the second question probably for Ben in front of me. Raisings in the sort of the MAM space, I think, were $10.7 billion. We've seen some really enormous funds being raised by some of your competitors. I just wanted to get a feel for whether you're comfortable with that $10.7 billion in the scheme of some of the other funds being raised. And whether you can break it down because I know when we were in the U.S. a couple of years ago, there was a big push to get into the U.S. high net worth market and private markets there. How much of the money is now coming from that channel as compared to the big industry funds and institutional money? Benjamin Way: So first of all, yes, we are comfortable with those fundraisers. We raise funds that meet our business model. We have various regional funds that we constantly have funds in the market to service clients up and down the risk curve and by different geographies. And so we think that model is working very well. I mean, we've just completed the largest exit ever out of one of those funds in the U.S. for Aligned Data Centers. I think that's a good example of what we do. We don't buy $40 billion companies. We build $40 billion companies, and then we return that capital with alpha to clients in a timely fashion. And so we're very focused on doing the things that we're good at in MAM, which is being an asset creator, being an alpha generator, and that allows us to provide solutions to a broad client mix. And you're right, increasingly, that's allowing us to take those solutions from our traditional client base, which is institutional clients into the wealth and also into the reinsurance channel. And we're starting to see a meaningful pickup in terms of those contributions. So I think over the last 12 months, wealth has contributed just in excess of about $1 billion of fundraising, and we can see that -- and that's with only 2 funds out in the marketplace. We have a third one coming out, and that will sort of be our full suite of infrastructure or real asset-related products, both on the equity and the credit side. And we'll then obviously continue to work on partnering with more wealth partners to have those into the marketplace. And I suppose as we've spoken before, Jon, the big difference is that 24 months ago, we had 2 wealth partners. And today, we have 15. So I think a good example of not just the appetite of the wealth market for what we do, but also just our ability to increasingly get into those channels. And that will pick up over time. It's still very early days, I think, for all players distributing to the wealth market. Samuel Dobson: Great. So we're going to Andrew just at the front again. Andrew Triggs: Andrew Triggs from JPMorgan. If I look at consensus expectations for performance fees, about $3 billion over the next 3 years, which I think roughly equates to probably 50 bps of AUM, which you've talked about over time. Just noting that you've just delivered sort of over $700 million for the half with a lumpy fee from Aligned co-investors, can you just give us a sense of your thoughts versus what could come through in the next few years, noting that MIP IV and MIP V haven't realized there is still performance fees coming through from MAIF2 and there's a number of other assets in various funds. Can you just talk to the broad sort of outlook versus what the market is thinking? Shemara Wikramanayake: Sure. And I'm happy to give a few comments and Ben can elaborate. But the 50 bps we gave was an average through time, and there will be points at which it's a bit lower points at which it's higher depending on where in their life cycle the funds are. So the funds that have just realized the MIP IVs, et cetera, getting to 8 years old. And so those funds are getting towards end of life, but they're whole of fund performance fees. So even though we may have a big realization early in the life of the fund, we have to look at what it generates over the entire portfolio before we start booking those fees. So I think we stick with the 50 bps through the cycle. And Ben can elaborate if you want with a bit more color on what the recent realizations mean for the particular funds they're in. But generally, we'd be saying 50 bps through the cycle. Benjamin Way: Yes. I don't really have much to add. Shemara is right. I think we feel very comfortable with the 50 bps as a rule of thumb. Clearly, this half has been higher than that. We've got MIP IV and MIP V, which will benefit from -- over the coming years from the Aligned exit, but also exits in other areas. We have other digital infrastructure and other broader infrastructure assets that are high quality and will be sold down appropriately into the market as we see that opportunity. And it's the same for something like MAIF2, where we had a very good outcome on AirTrunk. We've also sold our industrial gas business recently in Korea and have very strong multiple, and we continue to have good portfolios of assets right around the world that there is a big demand for. And that's one of the things that I think we will benefit from over the years in sense that the vast majority of investments we do are manufactured by our teams on a bilateral basis. But as more capital grows and looks to be deployed, there's a deeper market of buyers for these assets and high-quality assets. And so again, it comes back to that business model of really being able to create assets and build them to scale and then sell them into the market when there's potentially both a better owner for that -- but just as importantly, doing our job, which is not just to make investments, it's actually to exit businesses and return capital to clients, which is not something that seems to be talked about as much as you would expect. Andrew Triggs: Second question, perhaps on CGM. Just expectations for commodities income into the second half guidance has obviously been downgraded, which is understandable given the first half performance. I do think -- I do understand that April was fairly anomalous trading in the CGM business. So it does imply, and you saw that in the AGM update. So Q2 looked a lot better. Can you just talk to some of the trends you're seeing and sort of inventory positioning, I guess, heading into the key second half period? Shemara Wikramanayake: Yes. And I'll let Simon elaborate. But generally, you'll have seen from all our commodities peers that it's been a much more subdued external environment in terms of volatility and whether that is from other banks who don't have as large a position in commodities, but the trading houses, the hedge funds, the energy companies have all said it's been a more subdued environment. Despite that, as I said, generally, the revenues are holding up in CGM. But Simon, did you want to elaborate a bit? Simon Wright: Thanks, Shemara. Thanks for the question. You're right. The first quarter was more challenged for obvious reasons with geopolitical factors. We've seen some normalization to trading. But what you -- we're all desperately aware of, we think about all commodity markets, prices have been lower generally across the commodity spectrum, but also volatility much lower. And obviously, we've talked in the past about the competitive tension. There is more risk capital and more competitors. And so as Shemara just alluded to, most of our trade house peers and hedge fund peers are actually really struggling as we've seen those announcements. We've actually had a pretty good run of it in the last -- in the past second quarter. The outlook for the next year is we are market dependent. All the optionality that we have in the business remains. The second half generally in the past has been strong, but the past is no indication of the future. We are market dependent on what happens with the Northern Hemisphere winter and the demand. But we are similarly positioned. What has been pleasing for the business and what we're seeing increasingly is the client numbers are building. The amount of financing we're doing in that sector is also growing. And the build on our strategy into new markets, things like batteries and LNG continue to gain pace. So that's positioning us well for the future. So again, clients are good, but we'll be subject to market volatility and market opportunities. Shemara Wikramanayake: And the other thing briefly in CGM is the financial markets and asset finance underlying cash flows are growing a lot, especially, I think, more recently, the cross-sell into the MacCap clients, et cetera. Simon Wright: In CGM, we're obviously, originally diverse and balanced portfolio of businesses. On the financial market side, as Alex ran through, we continue to see strong growth. And that's very much more a client-centric focus, less market risk. And as a result, regardless of volatility, regardless of market prices, it continues to grow, albeit it would have grown more if there was more volatility and more higher prices. But it's a steady state, and we continue to see growth, particularly in financing, but in client solutions. So that's really encourages and underpins the business for the future. Samuel Dobson: We'll go to Andrei in the middle there, please. Andrei Stadnik: Andrei Stadnik here from Morgan Stanley. Can I ask my first question around appetite for growth in private markets asset management? Where would you like to grow? And to what extent would you consider inorganic growth options? Shemara Wikramanayake: Yes. And again, Ben, you might want to comment on this, but we started in infrastructure as our specialist asset class and then have grown into adjacent areas. And we would like to, as Ben was explaining, patiently adjacently keep growing into private credit, real estate, agriculture, which we've built capability in. But now we're doing infrastructure like private equity that we started raising in -- so I think it goes to the point Ben said is we look at where do we have the specialist expertise to deliver alpha and then patiently adjacently grow along that lines. Now having said that, we always look at inorganic growth. We certainly have done a lot in the public investments. We've also GLL, CPG done investments inorganically in Macquarie Asset Management as well. And we're very disciplined about making sure there's accretion, not just over the medium term, but quite soon when we invest, but we do keep an eye on that as well. Benjamin Way: Yes. MAM is a disciplined allocator of capital. Our business is a J-curve business. In asset management, generally speaking, it takes 5 to 8 years for any new solution or vintage to really get to scale. I think as you'd be aware, over the last 5 years, MAM has made several investments, whether it's moving into adjacent PE adjacent infrastructure, whether it's moving into opportunistic real estate, expanding our private credit offering, particularly around real estate or to do high-yielding funds, moving obviously into energy transition, but also building a reinsurer. And over the last sort of 12 months, we started to see the J-curve of those business start to sort of grow and move in the right direction to augment our core businesses. So I think our first focus is always how do we, in a disciplined and patient way, allocate capital to grow businesses organically because that ultimately gets the best returns for shareholders. Equally, if we can find something that may accelerate us from an inorganic point of view, we'll look at that and review that. But I suppose our initial priority is to really back our teams with time and capital and resources to grow businesses because we've got that track record, and that's the most efficient and effective way to do it for shareholders. Andrei Stadnik: For my second question, can I ask around private credit. And it's a broad-ranging question in the sense that there have been some concerns around U.S. private credit exposures recently, and it's interesting that Macquarie Capital paused growth in its book. It didn't grow. It was flat at $26 billion. Can you talk a little bit about that? And also that joint initiative between MAM and Macquarie Capital to bring more co-investments? Can you also maybe explain a little bit about how that's progressing? Shemara Wikramanayake: Yes. And I think if I read that correctly, there's 2 questions on the quality of the credit book and what returns we're getting and then how do we grow it. And I think what we do in that credit book, you're talking about in Macquarie Capital is mid-market direct lending that we've been doing for over a decade now and growing it very patiently in a very disciplined way, also importantly, through many, many market cycles because we haven't had a recent correction in the credit cycle. Globally, the private credit world has grown to about $2 trillion out of a $300 trillion pool of lending there is through banks, insurers, et cetera, and financial market channels. So it's not a huge proportion yet of the total credit. It's been growing fast and into areas that are higher risk, higher return. So we've had a few challenges, but we haven't had a big credit cycle yet. And the challenges we've had are quite idiosyncratic. Indeed, the first brands in the tricolor were bank-led ones, not private credit-led ones. But there'll be the odd error. We have had a very low loss ratio through multiple cycles. I think it's 0.1% per annum, 10 basis points per annum. So we're really comfortable with the credit quality. But in terms of the growth of that book, the concentration is the challenge for Macquarie Group. So we're getting into the mid-$20 billion. And our view is at that point in terms of concentration of Macquarie's portfolio, we got to the point where our allocation was slowing, and we started bringing co-investments from some of our large global investors who have been very happy to access it, but we thought the next stage of growth makes sense is a partnership between MacCap and MAM to bring in fiduciary money alongside the strategy. So I might -- because Ben has spoken quite a bit, let Michael Silverton just elaborate on performance and growth from here. Michael Silverton: Yes. Thanks, Andrei. We've invested close to $80 billion in private credit since 2009. In terms of what we're seeing, we feel very comfortable in terms of the performance of our portfolio and credit quality. And as we've said in the past, close to 90% of the portfolio is first lien corporate and real estate credit. The first brand situation was a syndicated deal that came to market very quickly. We can't comment on that, but what we can say is our due diligence process in terms of deals is very intense, and we re-underwrite these transactions as we go. So we feel good about the portfolio. In terms of growth, we do have partnerships, including with MAM in Europe and the U.S. And during the period, we actually partnered on around $600 million into those vehicles. So that's in part a start to that process of bringing in partners alongside the balance sheet. Alex Harvey: I might have... Shemara Wikramanayake: And I think we'll -- just quickly that we'll grow these funds, early funds slowly and make sure the investors have a good experience. And then as Ben was talking about, that J-curve is they'll probably get bigger, but we want the first European and North American fund to be a really happy experience and then on that track record. Alex Harvey: I mean I'll just add just a couple of things, Andrei, just to the discipline point that Michael is talking about and some of this we've spoken about before. But the first half, the team looked at about 800 deals, I think, did about 40. So there's obviously a huge amount of deal flow there, and that allows them to be selective. And it's a bit like the story that Ben is selling on the MAM side. Obviously, if you've been in the sector for a long period of time, you should see a lot of transactions. You've got experienced deal executives out there finding the better deals rather than, you know the [auto-ran] deals or the deals that everyone else is doing. So that's one point to think about. The second point is that, again, to the discipline, interesting, if you went back maybe 3 years ago, you would have said half the book was exposed to the U.S., 40% in Europe and 10% down here, roughly. Today, that split is more like 55%, 56% in Europe, I think 40% in the U.S. and whatever the balance is here. And I think that reflects the fact that the team, a, are seeing better origination opportunities with more attractive terms, not just in terms of margin, but in terms of the borrower covenants or the rest of it in the European market. And so the fact that we've got a global franchise, we're obviously not trying to do everything. We don't feel like we need to do everything. I think that's made them a disciplined investor, and we're seeing the benefit of that over time. And then the other thing I'd say to the loss point, obviously, we still hold 2.2%, 2.3% ECL against the book. So we're well covered from an ECL viewpoint. And we obviously hold initial issue discount as well. So we feel like we hold these assets at a fairly attractive net position. So yes, there'll be -- as Shem said, there'll be idiosyncratic issues. There have been idiosyncratic issues along the way. But generally speaking, I think the experience the team has got us in good stead. Samuel Dobson: Great. Ed, just in the second row there, please. Ed Henning: The first one, just circling back to CGM. You've talked about the subdued market conditions, but you also talked about investing in the platform and around regulatory expense and stuff like that. Can you just touch on, I guess, your risk limits and how you think about that versus peers with the investment on the regulatory side? Is that pulling back growth that you thought you potentially could have going forward? Has the growth rate in that business slowed from what you would have thought it would have been a few years ago with the changes you're putting through the business? And can you just talk a little bit more about the opportunities in that business, please? Shemara Wikramanayake: Yes. And again, I might let Simon and Andrew Cassidy comment. But basically, what I would say is we're not -- we have financial risk and nonfinancial risk, and we're looking at credit market risk, et cetera, with well-established approaches and strong performance there and are empowering teams to go and look for adjacent opportunities. What we're focusing on a lot more now is the nonfinancial risks, which include operational risks, but also regulatory and compliance risks. And we're investing in our operating platform to free up the business to go to an even bigger stage of growth where in BFS, and Greg can talk about this at some point, hopefully, but we have done an incredible job in bringing data under governance, using technology, the operational risk management is incredible as well as the service to the customers. But that's 3 products in one market here. In CGM, we have, Simon, somewhere between 97 or in the low 100s of products in 31 geographies. And we're trying to bring discipline around trade capture, operating platforms, et cetera, so that we can manage nonfinancial risk as that business continues to go to even greater scale. So I think that's what I'd say in terms of growth versus balancing the investment. And you and Andrew may want to talk about -- I know you're doing a lot of work on how we maintain agility while managing risk. Simon Wright: Sure. Well, I'll go first and pass to Andrew. When we think about risk, there are 3 types of risk for us. There is actually market risk, credit risk and then nonfinancial risk. So we assess all of those in terms of where we think the business is today and where we think it should be in the future. As Shemara alluded to, we have been very deliberate in setting our medium-term strategy about where we see that business. And so what we've done is -- and as we've talked about over the years, we are a client-centric business. That's our benchmark of where we start our business. We see that in the client growth in terms of numbers. So we're continuing to do that. We're continuing to look at where those -- that growth has been and what the opportunities are in the future. We've talked a bit about LNG, batteries, et cetera. And so in terms of where we have appetite for growth in partnership with Andrew and his team, we have been deliberate in deciding on where we want that growth to be. We have the appetite that we need to grow. And we've been doing that. You would have seen our capital numbers ticking up. A part of that is as a result of that growth strategy now in play. And what we've seen is going into new markets, going into new products, we've diverted resources to those. And so we're building for that future. In terms of market risk, we're well within appetite. Even now, obviously, it's quiet, but the opportunities we see going forward, we're well positioned. The optionality is still there. But that optionality is really there as a dependency upon our underlying franchise in clients. So we would only ever increase market risk appetite if we had a sustained growth in our client numbers to support it. But all of this has to be measured to help you evolve the platform for scale. So our nonfinancial risk appetite is very important at the moment. So as Alex talked about, we are investing in the platform for that scalability, for that strategy very much with that nonfinancial risk appetite in mind. Andrew? Andrew Cassidy: I probably don't have a lot to add, Simon, other than, I guess, just to reiterate that point that we are spending money in Simon's business on investing in data, investing in tech, getting our architecture right. And of course, that's so that we can ensure we're meeting our obligations today right across the range of businesses and regulators that we deal with globally with Simon's business, but also to provide a scalable platform for growth. Once you get that data right and that technology right, that will provide the scale and the platform for Simon to continue to grow according to the strategy into new markets, into new products like LNG, et cetera. So we do think that it's a necessary investment in the license to operate, but I think an important investment for the future. Shemara Wikramanayake: Yes. And I think it's evidenced a bit in the revenue growth line. As I was mentioning earlier, we were sort of $1.7 billion 10 years ago. When I took over, we were $3.8 billion. We're doing [low 6s] now. the revenues continuing to grow because the teams are able to go out there and look for franchise and trading-related growth off the back of that franchise, but the investment is what's impacting the earnings. Ed Henning: Well, maybe just to follow up on that. You talked about the investment in the platform. How much more is still to go, like significant investment? I know there will always be investment in platforms, just holding back that -- the growth of the bottom line. Shemara Wikramanayake: Yes. I think it's going to run for a couple more years in terms of the investments we're making. We're not seeing it step up materially. But Simon, again, anything you want to add to that? Simon Wright: A little bit earlier on, there are 2 aspects to that growth in that platform. There is the scalability and the -- I guess, basically synergizing that platform for a more global approach. We've been quite good at being opportunistic and adjacent. We've been much more deliberate about being holistic and being able to scale. That will give some efficiency in the future. But the second part is the remediation part. And so we invest in that platform. We invest in the remediation. And so there is a line of sight to how that runs off in the future. So then we'll be back to -- we'll never be BAU without taking that into account. That's always will always be important. But we will see a steady state through a couple of halves, I would say. Shemara Wikramanayake: And we should say, I mean, reporting end-to-end capital and liquidity on the frequency now required has meant a huge investment in data to deliver that. Once we have that done, and Alex has been leading that program across Macquarie, but ultimately, it's the upstream data that's a big driver of it. So we should see that come off once we tick that box and then there'll be the ongoing platform investment. Ed Henning: And then just my second question, just circling back to the green assets. Can you just give us a little bit more detail on them where they -- because you talked about strong demand for operational green assets, where they are on the operational side of it? How long is it going to take to get majority of the portfolio up to operational. So then potentially, it's a little bit more salable than where it is today on both the assets. Alex Harvey: Yes. So let's just talk sort of in 2 component parts here, Ed. Obviously, you've got the solar platform. And as we've talked about before, if you think about the development pipeline there within the markets that we're continuing to develop, you've probably got 10 gigawatts of solar that's sort of in that development phase. And there's probably somewhere between 0.5 gigawatt and 1 gigawatt that's either operational or heading towards operational. So a nearer-term visibility on that. And so as we've said before, plainly when you've got cash flow coming out of the asset, that becomes a conversation about the discount rate to acquire and then how do you value the portfolio or the platform, the outlook for development. So I think solar is a bit easier and a bit nearer term. And obviously, the appetite for solar assets continues to be quite strong anyway for the reasons I talked about before. I mean the reality is that the world needs more power and the shortest way is solar and solar and battery. So that's the way we see it. So we feel like there's value there. On the wind side, the -- we're obviously at an earlier stage from a development viewpoint. Most of the assets in Europe are sort of heading towards the -- what we would describe as financial close. We start to spend significant dollars in constructing those assets. Again, the U.K. market tends to be more attractive because the feed-in tariff is more attractive or the contract for difference is more attractive. And some of the pressures from a cost of construction viewpoint are actually coming out of that market, but they're obviously earlier stage, and they take longer to get from early-stage construction to operational stage. So typically, typically, the development cycle for a wind farm is going to be, I don't know, 8 to 10 years. The development cycle for a solar plant is going to be, I don't know, 0.5 year to 2.5 years or something, depending on where you are in the world. So -- and then obviously, the one that's sort of most in focus has been for us thinking through over the half has been the U.S. story. And to the point that Ben was making before, the U.S. still needs more power. But the reality is that there's quite a strong push against offshore wind. And so that was really the reason. We don't see a near-term prospect of taking that from development to operations. And so that means that you need to start to think about the carrying value for that asset. Shemara Wikramanayake: And Ed, just going back to your previous question, I think the other thing we should point out is that we historically have sat with very big liquidity buffers, capital buffers for the way we ran the business. Now that we're required for regulatory purposes to move to being much better across our liquidity real time, once we reach that, we will actually save a lot by reducing the bigger liquidity buffers, et cetera. Alex Harvey: Yes. I mean, hopefully, we dealt with your green question. You can follow up if there's any others. But I mean maybe just on the cost for a second. I think there's a blueprint sitting in Greg's business. I mean at the end of the day, right, Greg has a really great business. It's obviously a smaller set of products than what Simon is sitting on. But at the end of the day, it's based on our digital capability -- it's based on data, it's based on automation, it's based on technology, and it's based on a great customer proposition. What Simon's business has got is a great customer proposition. You can see that continuing to grow over the last 7 or 8 years. That's resulted in a doubling of revenue from '19 to this point. But what we're trying to do, and I think what the team is making progress on is actually thinking about the foundations of the scaffolding that supports that. And a lot of the same lessons and observations that Greg and the team have apply to Simon's business. And obviously, once you get to a point where you've got your data asset in good shape, you've removed manual process, you're using more technology, you're blending different data from different sources for insight to customers. That's a huge opportunity to drive efficiency into the future. What we are -- where we are at the moment, obviously, is the point we're investing to get to that level of scale. But you can see the blueprint sitting in the front row on my left there. And the cost to income advantage on the technology side becomes really significant. Shemara Wikramanayake: I was going to say Greg and the team are leaning in and working with Simon and the team to share those lessons of how they delivered that in BFS. So hopefully, we'll get the benefit... Alex Harvey: Shipping a barrel of oil won't be the same necessarily writing mortgage, but it's got some characteristics. Samuel Dobson: Right. We've got a couple of questions on the line. I think we're done in the room. So if we go to the lines, please. No questions on the line. I think we've got 2 questions on the line. If we can have those, please. Operator: Your first question comes from Matthew Wilson with Jarden. Matthew Wilson: Matt Wilson, Jarden. Firstly, Alex, all the very best. You'll be missed as a CFO. It's been a pleasure dealing with you. Alex Harvey: Thanks, Matt. Matthew Wilson: And over to the questions. I wonder if you could talk through, perhaps this might be one for Ben Way, the type of blockchain, stablecoin infrastructure investments that you may have. Your front and center global activity, more is happening globally than it's happening here. How do you see the tokenization of assets and securities, alternatives for deposits and payments playing out globally? Shemara Wikramanayake: Can we turn to Ben... Benjamin Way: I must have worn it out, apologies. We don't -- so I think the first answer is we don't have any investments in stablecoin or blockchain as an asset manager today. But do you see the ultimate tokenization, particularly in the wealth channels of asset management, that's certainly coming. And I think that's certainly part of what is often banded around the industry is the democratization, particularly of private markets where we can give different types of clients that have not normally had access, particularly wealth and retail clients access to that private market. And I think the best example is probably the way the U.S. is looking at 401(k) and reforming that and giving access, giving those pools of capital the ability to invest into private markets. And clearly, you'll need some sort of tokenization mechanism to do that, just given the types of capital you'll get and the size of capital you'll have and what you'd be matching within private markets. So that's certainly something that we're looking at very closely. We're working with our wealth partners to see how we can use tokenization, but it's not something that's currently present in our portfolio or something that we're doing. Shemara Wikramanayake: Okay. Thank you, Benjamin. Samuel Dobson: Go ahead, Matt. Matthew Wilson: Hello? Samuel Dobson: Yes, we can hear you, Matt. Matthew Wilson: I assume, perhaps you can add to how you see this thematic playing out. You've been very good at picking up early-stage investments. It's clearly moving offshore. Shemara Wikramanayake: Are we investing to that thematic? I think in the digitization thematic at the moment with infrastructure, we obviously went early with data centers, but we're very conscious that there's a lot of other infrastructure to support this fiber optic networks, towers, subsea cables. So I think the teams are working on those. And we have a portfolio still of data centers left, but we also have a lot of fiber investments around the world, et cetera. So I think we're going more that stage than doing the infrastructure for the crypto. Is that fair enough, Ben? Benjamin Way: That is true. So we continue to break apart the -- or break down, I should say, the digital thematic and look at where we can be a good and prudent investor in that. We've done that traditionally in things like towers, into fiber. We do that into data centers. We do that into different types of data centers, both hyperscale and sub-hyperscale. You may have seen that in the last few months, we've reinvested into data center platforms in the U.S. through our investment in Applied Data centers, which is focused specifically on AI data centers. So we continue to look at that opportunity. But we also look at coming at that thematic from different angles. Our industrial gas business that we sold in Korea recently was really a business that was primarily focused on supporting semiconductor manufacturers. Clearly, that's geared to the digital economy. So again, we look at where we can be a responsible and effective investor right across that thematic. And those opportunities will continue to change as the world further digitizes and as we need different types of both technology, but also the infrastructure to support that. Operator: Your next question comes from Brendan Sproules with Goldman Sachs. Brendan Sproules: Brendan from Goldman. My first question is on Macquarie Capital. A very strong results around transaction volumes and the resultant fee and commission income. I noticed in your outlook that you haven't changed the outlook. You still expect it to be broadly in line for the full year. Could you maybe talk about what you're expecting to see around transaction activity in the second half? Shemara Wikramanayake: Yes, we will let Michael, go straight to that. Michael Silverton: Thanks, Brendan. We have seen, obviously, transaction value increased quite a lot in the M&A market, up 33%, but volumes are still fairly muted. A lot of the transaction activity has been at the in the mega cap transactions where we have not been focused. Now we were -- in the first half, we had several deals that closed that were larger fee events and that has supported the result in the first half. But in the second half, looking at our pipeline, it looks very solid, but we don't have the same number of large deals looking to close. With that said, the actual commercial approvals of transactions and NDAs that we're signing are as high as they've been since 2022, which is encouraging. But many of those transactions we're working on will probably close in '27. So we just expect we're not going to have as many large fee events in the second half, which is why we have that outlook. Brendan Sproules: That's very clear. My second question, and Michael, while you got the floor, I just want to ask you about the equity realizations. I mean you've indicated that you expect to see more of these in the second half. But I did notice in this half's result, we had a kickup in net losses from associates and JVs. Just wonder how much they will also impact the overall performance in the second half? Michael Silverton: They will not meaningfully impact the second half. That's an accounting treatment on deconsolidation when a particular transaction we've merged with another company, and that's an accounting treatment on a single asset. So we would not see that as a trend. And in terms of the realizations, we're working hard on them as we always do. We've got about 100 positions. It's -- we'll sell them when the time is right, but the good news is that we have a number of assets in the market. As Ben mentioned before, there's good demand for good assets, and we'll continue to work hard on those. And hopefully, some of those will come through in the second half. Operator: Your next question comes from Tom Strong with Citi. Thomas Strong: I just wanted to follow up on the questions around CGM. If we look at the half results, the business has done well to hold the net operating income, but with the cost up 10%, and there's about $1.5 billion more capital that's gone into the business year-on-year. So the drag on the group ROE continues to increase. How should we think about the pathway to better ROEs over the long run? Is it through better operating leverage from the more scalable platform that you've talked to? Or is there a capital efficiency you can get out of the business? Or is it a combination of all of the above? Shemara Wikramanayake: Again, we'll let Simon comment. We had a slight spike, obviously, for one-off things like exchange rates in this half. But do you want to comment more medium term? Simon Wright: Yes, sure. Look, it's basically capital is up probably in 12 months, about 20%. And it's basically split into 2 halves. Half of that is through business growth through the strategy, which is accretive to P&L, which we're starting to see those grassroots, which is really pleasing, and that will continue to be the case. So as we invest in the business, as we grow the business in line with the strategy, we will use more capital, but it will be returning. And the types of things we are investing in will be accretive now, but also we'll be planning for the future. So there might be a slight drag on that, but that's not the main game. The other half of the capital growth has largely been through market moves. So we will have seen the weakening in the U.S. dollar in the first 6 months of this year, but also the very strong rally in the precious markets in gold. And so as you know, we're a very client-centric business. And so lots of client exposures, lots of credit risk exposures, which is a drag on the capital. And you think about how long that lasts for, there will be a period of time whilst those exposures run down as they naturally amortize and as they'll restructure with those typical types of deals that we do. So we think there is a path to the reduction in that -- that half of the capital through time as markets move around, but also as those exposures amortize. But also, we'll start to see more revenue accretion on the growth side of the capital. Alex Harvey: Yes. Maybe, Tom, it's Alex. Maybe just to add a couple of things for me to the point that Simon is making. Obviously, some of it is timing related. So you expect that to roll off and then we'll reset the basis, which will help from a capital viewpoint. The other thing you probably saw during the half, we obviously moved the North American Gas & Power business from the bank to the nonbank. That's a reflection of the importance that Simon and the team see LNG playing in the energy mix going forward, but also the fact that, that business requires a physical footprint, which is more consistent with what we've done in the nonbank and longer-dated contracts, which are better, I think, from a risk sensitive viewpoint from a capital against those exposures, much better positioned in the nonbank. So short term, obviously, the impact of that from a capital viewpoint has been relatively small, relatively immaterial. But as Simon and the team grow the exposure to LNG over the course of the coming years, that's a much more capital-efficient place to look at doing that business. So we're obviously -- to your broader question, what we're trying to do is continue to grow the revenue line. You're seeing that tick up with the customer base to the point that Simon is making before. We're trying to create a platform that's got the scaffolding to be scalable. We're obviously -- you get some short-term noise in the capital footprint just because of some market movements that Simon talked about. And we're trying to be strategic about where you actually house the business so that it's best positioned to be able to service the customer base going forward. Operator: Your next question comes from Brian Johnson with MST. Brian Johnson: I have 2 questions. First one, I'd like to address to Mr. Silverton, if I may. Michael, we know that the profit recognition in the private credit book is very back-ended. Can you just talk to us about this prospect of it kind of like capping out? When do we actually see the profit recognition come through from that? And then can I also just get a feel just about these private equity investment realizations that you've got in that MacCap. Can we just get a feel to whether you're still confident about the long-term kind of return dynamics that we've spoken about on the European trip? And also just the timing beyond this year of those realizations? Michael Silverton: So in terms of the word J-curve was used before the term J-curve. What we experienced, Brian, as we were scaling the private credit portfolio is that we would take upfront ECL and that may have suppressed the earnings coming from those loans. Now that we are at scale at the $25 billion, I think the earnings reflect the portfolio. And now it's a question of performance. We have the ECLs that Alex referenced before held against the portfolio and unamortized fees of around 1.5% also. But I would say that where we're at, at the moment is run rating the portfolio at its current size. So if we can continue to grow the portfolio, we'll see some further upfront ECLs, but these are 3-year weighted average life loans. And I think when it's scaled, the earnings reflect the earnings capacity of the portfolio. On the principal equity book, we've got $2 billion in infrastructure development, $2 billion in our Principal Finance business and around $2 billion of capital in tech-related assets. We've invested heavily in the last couple of years. And as we've communicated, with our whole periods on average around 3 years and we've seen IRRs of above 20%. We see that continuing. We do have a PPP business where we partner with governments. The activity there has been lower the last couple of years, but pleasingly, it's returning. And those commitments have much higher IRRs, and we're expecting that also to pick up in the next couple of years. So overall, we feel that the book is in very good shape and the return profile that we communicated at historical track record holds. Operator: There are no further questions at this time. I'll now hand back to Mr. Dobson for closing remarks. Samuel Dobson: Okay. I thought Brian might have another one there. But anyway, thanks, everyone, for your support and for your interest. And as Shemara said, we look forward to catching up with you over the next couple of weeks. Thank you.
Nathan Coe: Good morning, everyone, and welcome to Auto Trader's results for the 6 months ending 30th of September 2025. I'm joined by our COO, Catherine; and our CFO, Jamie, who will both be presenting and joining me for Q&A. You will have seen the announcement regarding Catherine moving on to become CEO at Moonpig. We are very pleased with Catherine and wish her the best as she embarks on the next chapter of her career. Catherine has been a pleasure to work with and has had a real impact at Auto Trader. She will be missed, but she leaves behind a strong team with bench strength that is both broad and deep. So we have a little worry that we will carry on uninterrupted. Our disproportionate focus on internal development over external hiring serves us well at times like this. Catherine is still with us for some time, and we will announce her leaving day in due course once we have worked through a smooth transition plan. Now on to the results. Overall, we are pleased with the progress that we've made through the period. Our profit was marginally ahead of expectations, and we have made significant progress against our strategic priorities. As expected, we have been impacted by the fast speed of sale of vehicles, but the team has delivered well on those areas that are within our control. I'm confident that the actions we are taking today will underpin growth for many years to come. Our market position remains strong with record levels of buyers and retailers using Auto Trader. As we saw last year, there has been a further increase in the number of unique vehicles advertised on our platform and high levels of engagement with those vehicles. This underpins our core proposition for buyers as we provide full choice and transparency and clearly, retailers have benefited from more vehicles moving through a similar number of advertising slots. Our annual product and pricing event in April this year went well, underpinned by the first features under our Co-Driver AI umbrella. There is significant future potential in this area as we make more AI-powered solutions available and accessible to both retailers and car buyers. We are uniquely placed to do this due to our strong brand, deep integrations with the industry, and our real time proprietary data. The first features of Co-Driver have seen strong engagement with over 10,000 retailers already using the tools. It's important to note that AI doesn't just enable us to increase the richness of the car buying experience on Auto Trader, but it does extend the opportunity across all our retailer product areas which includes advertising, data, digital retailing and now Co-Driver. We've also dramatically accelerated the adoption of Deal Builder, growing customers, stock and deals since our change in approach earlier in the year. Deal Builder will no longer be an optional add-on product available on a selection of cars, it will be the default experience for retailers and car buyers on Auto Trader. Catherine will cover this in more detail later. With a car market that will grow over the long term, our strong market position, we're comfortable that we can continue to grow through delivering meaningful improvements to the buying and retailing of cars in the U.K. Auto Trader has never been short of growth opportunities, which remains as true today as it has ever been. I wanted to thank everyone at Auto Trader and our customers, shareholders and wider stakeholders for their continued trust and support. We'll start with some of the highlights during the period. Group revenue grew 5%, operating profit grew 6% and basic EPS grew double digit at 11%. Our largest revenue area, retailer revenue, grew at 6%. This is made up of strong forecourt numbers and a 5% increase in ARPR, mostly driven by the price and product event in April 2025. AI has been a big focus for many investors recently, given its potential to significantly alter consumers' online behaviors. I'll speak to this in more detail later. However, we are confident that on any platform, we are well placed to provide the best car buying experience for users. The transaction is high value, complex and occurs over a 3-month period, not one session. The reasons car buyers choose Auto Trader come from our singular focus on the U.K., our category-defining brand, well-invested technology and the rich tools we provide both car buyers and retailers, which are all made possible by retail -- by real-time data, pardon me, at a vehicle level that only we have access to. These unique characteristics are why our market position has been not only maintained but strengthened when new platforms have emerged such as Google, iOS and Android. Now to Deal Builder. I am very proud and pleased with the progress that we've made since we changed our approach midway through the year on Deal Builder. Adoption has dramatically accelerated as we make this journey the default experience on Auto Trader. We've added 4x as many retailers this half than we did in the previous 6 months. We know from years of development and live testing that Deal Builder deepens our engagement in car buying and selling. It delivers better conversion for retailers and a more connected and empowered journey for time-poor car buyers who want to do more online when it suits them with a brand they trust. At our full year results in May, we presented this slide for the first time to better show how market dynamics not previously seen before had impacted our financial results. We have 4 charts here, which I don't intend on going through in great detail, but it is a picture of a more stable market. The key points to note are, last year, demand or visits were strong. Supply was constrained, used car prices had come down, which all resulted in an acceleration in speed of sale. This meant more unique vehicles sold through roughly the same number of slots, which doesn't benefit our business model. This year, however, demand does remain healthy. Supply is gradually coming back and used car prices have been robust, even increasing from the levels seen last year. As a result, speed of sale has not accelerated as it did last year. So the headwinds we were facing have subsided somewhat. However, we would caution too much optimism in the near term as speed of sale was still one day quicker in October. I'll briefly cover the financial results, which Jamie will cover in more detail next. Group revenue increased by 5%, with core Auto Trader revenue also increasing by 5%. Group operating profit increased by 6%. Auto Trader operating profit increased by 5% to GBP 208 million. And Autorama halved its operating losses to GBP 1.4 million. Noncash acquisition-related costs was GBP 6.5 million. Group operating profit margin increased to 63% and Auto Trader's operating profit margin remained at 70%. Basic EPS, as mentioned earlier, grew double digit at 11% and cash generated from operations was up 7%. We returned GBP 162.2 million of cash to shareholders through GBP 100.2 million in share buybacks and GBP 62 million in dividends. Finally, we are declaring an interim dividend of 3.8p per share. Now on to our operational results. The average number of cross-platform visits was up 1% to 83.3 million per month, and we continue to account for over 75% of all time spent across our main competitor set. The average number of retailer forecourts advertising with us was up 1% to 14,080. Average revenue per retailer was up 5% to GBP 2,994, mainly due to our product and pricing event implemented on the 1st of April 2025, which was underpinned by Co-Driver. Live car stock was up 2% to GBP 457,000, with this increase being due to an offer, which ran at the beginning of the 6-month period, and we delivered 3,687 new lease vehicles. Finally, the average number of full-time equivalent employees in the group decreased slightly to 1,249. In previous years, we would have covered our cultural KPIs in half year results. However, we've decided to do this now at each full year results. The KPIs and initiatives that sit behind them remain as important as they've always been. However, covering them annually better aligns with our annual employee survey. The KPIs on gender, ethnicity and GHG emissions are all included in the press release and the appendix of this presentation. As it relates to culture, it is worth noting that we have entered a new lease and are halfway through investing significant capital in a new home campus for Auto Trader, which will provide a great environment for our people to do their very best work in a space that facilitates both how we work and the other elements of our culture. I'll now hand over to Jamie to talk us through the financials in more detail. Jamie Warner: Thanks, Nathan, and good morning, everyone. I'll start by focusing on the core Auto Trader financials. Starting with revenue. Total Auto Trader revenue increased 5% to GBP 296.3 million. Trade revenue increased by 6%, with the largest component of this being retailer revenue, which also grew by 6%. Also within trade revenue, we've seen an increase in both Home Trader and other trade revenue. Consumer Services revenue decreased by 9%. Within this, private revenue generated from individual sellers was down year-on-year due to a lower number of listings compared to a strong prior year, and Motoring Services revenue was flat. Revenue from Manufacturer and Agency customers increased 13% year-on-year due to manufacturers supporting their franchise networks on both new and used car advertising. As mentioned, Retailer revenue increased 6% year-on-year. The average number of Retailer forecourts on our platform increased to 14,080, a 1% year-on-year increase and average revenue per retailer increased by 5% to GBP 2,994 per month, with more detail given on the following slide. Here, the chart on the left shows the components that contribute to the movement in ARPR compared to the prior year. As you can see, ARPR growth was driven by the price and product levers with a small headwind from stock. We delivered our annual pricing event for all customers on the 1st of April 2025, which included additional products and a like-for-like price increase, which contributed GBP 89 to ARPR growth. Product contributed GBP 64. Most of this growth was from our Co-Driver product, which is included in retailer advertising packages in April 2025. Prominence, which includes upsell to our higher-level packages, was not a contributor to the product lever in the first half. We continue to review our package staircase and have recently created an offer to incentivize customers on to higher levels, which has had good levels of uptake. This offer converts throughout the second half and will inform how we evolve these packages in H1 of next financial year with the aim of returning prominence to long-term growth. Turning now to stock. You'll see on the right-hand side of the chart that the number of live cars advertised on Auto Trader increased 2% year-on-year. Used car stock also increased by 2%, although much of this was driven by a stock offer, which we ran at the beginning of the financial year. Excluding this stock offer and private listings, which do not impact ARPR, the live stock increase was just under 1%. The stock lever was marginally lower due to a slight reduction in underutilized slots, which typically occurs when we run this type of offer. Total Auto Trader costs increased 3% to GBP 90.4 million. Salary costs increased by 6% to GBP 42 million due to higher average salaries and a small increase in the number of Auto Trader FTEs. Share-based payments increased by 1% to GBP 6.9 million. Marketing spend decreased by 21% to GBP 8.9 million due to the timing of campaigns, and we expect a greater level of marketing in the second half of the year. Other costs, which include data services, property-related costs and other overheads, increased 6% to GBP 22.9 million, primarily due to property costs for our new head office and other IT-related expenses. Depreciation and amortization increased by 31%, again, related to the cost of our new head office. As a reminder, we fully expense our technology, research and development costs, hence, our low levels of CapEx and depreciation. In addition to our investment in cloud-based and AI services, we have around 400 people in product and technology who are continuously improving our platforms and developing new products for consumers and retailers. Operating profit increased by 5% to GBP 208 million during the period, and operating profit margins remained consistent at 70%. Our share of profit generated by Dealer Auction, the group's joint venture, increased 17% to GBP 2.1 million. Having covered Auto Trader, the main part of the group, we'll briefly cover Autorama results. As a reminder, the Autorama acquisition is part of our strategy to bring attractive new car offers to car buyers on Auto Trader and to make new cars a more important part of our proposition. Autorama revenue was GBP 21.4 million, with vehicle and accessory sales contributing GBP 16.5 million and commission and ancillary revenue contributing GBP 4.9 million. Vehicle and accessory revenue relates to vehicles that flow through our balance sheet, which is not our focus for future growth. Total deliveries grew 16% to 3,687 units. As can be seen from the chart, this growth was driven by cars and importantly, more of that growth was driven by the Auto Trader platform, which saw a 6x increase in delivery volumes. Average commission and ancillary revenue per delivery decreased to GBP 1,329, reflecting the changing vehicle mix during the period. We delivered around 750 vehicles, which were temporarily taken on balance sheet, the cost of which was taken through cost of goods sold. This was a year-on-year increase driven by just over 300 extra vans, which were taken to support van volumes as they were slightly lower in the first half. Excluding the cost of goods sold, cost of GBP 6.2 million represented a 25% year-on-year reduction with all lines seeing a decrease. The Autorama segment made an operating loss of GBP 1.4 million, which is a significant reduction on last year as a result of the accelerated integration into the main Auto Trader business and platform. With group revenue up 5% and a reduced Autorama loss, we saw group operating profit increased 6% to GBP 200.1 million and group operating profit margins increased to 63%. As we grow, the strong cash generation of our business leaves us well placed to return surplus cash to shareholders. Cash generated from operations was at GBP 215.4 million. Now to briefly review net bank debt and capital policy. During the period, the group drew down GBP 15 million of its revolving credit facility and held cash and cash equivalents of GBP 20.2 million. Cash generated from operations was largely used to pay tax or return to shareholders through a combination of dividends and share buybacks. The group's long-term capital allocation policy remains unchanged, continuing to invest in the business, enabling it to grow, while returning around 1/3 of net income to shareholders in the form of dividends. Following these activities, any surplus cash will be used to continue our share buyback program and to steadily reduce gross indebtedness. That concludes the financials. I'll now hand over to Catherine to talk through progress against our strategic priorities. Catherine Faiers: Thank you, Jamie, and good morning, everyone. We have made good progress against each of our 3 strategic focus areas. These areas are closely interconnected. Our platform and our digital retailing capabilities build on the strength of our marketplace and deepen our relationships with both retailers and car buyers. Our marketplace continues to grow, and we have seen a record number of car buyers and retailers using Auto Trader. This means we are also building our unique data advantages through the growth in observations and actions that we capture. Whether it is consumer behavior and interactions or retailer actions and pricing movements, we continue to extend our data lead in this area. We have successfully executed our annual pricing and product event, which included the Co-Driver product, a set of AI-enabled features designed to drive retailer performance and efficiencies in the advertising journey. This product has seen strong engagement from retailers and the features that surface on the Auto Trader app and website have been well used by buyers. We continue to scale Deal Builder, enabling consumers to do more of the car buying journey online. At the same time, we are launching the Buying Signals product for retailers, which will provide a greater level of actionable insight to drive their performance. This year, we launched Co-Driver, a suite of transformational AI tools that utilize our unparalleled vehicle data and consumer insights to significantly improve the consumer and retailer experience. Our first Co-Driver suite is available to all retailers and includes Smart Image Management, AI-generated descriptions and vehicle highlights. As of September, over 100 retailers have used Co-Drivers to create 1 million high-performing used car and van adverts to optimize over 12 million vehicle images, and we've seen over 85 million buyer interactions with the vehicles highlights on Auto Trader. Whilst Auto Trader has been working with and delivering AI products for over 10 years, Co-Driver is the first retailer product, which has leveraged generative AI. As detailed in our FY 2025 full year results at the end of May, we decided to make Deal Builder part of our core proposition to retailers and the consumer experience for car buyers. This will enable us to increase the speed of retailer onboarding, accelerate the level of buyer adoption, materially increase the number of deals being delivered through Auto Trader and strengthen the competitive moat for our core business. As can be seen on the right-hand side chart, this decision has enabled us to scale the product faster from June onwards than in previous periods. Retailer acquisition during the period was 4x greater than the preceding 6 months, resulting in 4,000 retailers live with the product at the end of September. We also saw a significant increase in the volume of listings with Deal Builder, ending September with 128,000 adverts live. This was over 160,000 live adverts at the end of October, a 25% increase in the month. Consumer engagement has also grown considerably with 52,000 deals in the period compared to 23,000 in the previous year. The feedback on the product continues to be positive from both retailers and car buyers with deals converting twice as effectively as a regular Auto Trader lead and over half of all deals being submitted outside of traditional working hours. We are also launching a new product called Buying Signals, which leverages our unique consumer data to surface both high-intent buyers and their preferences to our retailers. Across multiple inquiry types, we have used an AI-powered buyer propensity model to apply a flag for the retailer, indicating how likely the buyer is to buy the vehicle, how local the buyer is and the type of vehicles that they are interested in. This will enable retailers to prioritize the next best action with different car buyers. The goal of this product is to drive improved conversion for retailers and to close the gap between the journey on Auto Trader and the consumer experience that the retailer forecourt, complementing the Deal Builder journey. Over time, these buy propensity models will also inform our own marketing, remarketing and optimization activities for our products and experiences. I'll now hand back to Nathan to discuss the broader AI trends we are seeing and our outlook for the remainder of the year. Nathan Coe: Thank you, Catherine. The popularity of LLMs, chat-style interfaces and agents is at the forefront of investors' minds as it relates to most businesses, and that includes marketplaces. For years now, we have used AI technology in our in-house products and platform, which informs our perspectives on this technology shift. Before we talk about Auto Trader, it is worth saying that we believe top-of-funnel research and discovery for all products, including cars, will be disrupted by these new interfaces. AI platforms reduce the need to visit multiple websites and summarize what is essentially static content very effectively. Top-of-funnel content has never been a big focus for us. And when we have experimented with it, the direct benefit to our core was unclear. For this reason, it is not a risk that concerns us as we wholly focus on the point where people want to browse and purchase real available inventory. In terms of Auto Trader then, we have 4 observations to make. Firstly, the opportunity to use AI to enhance the car buying experience and the tools we provide retailers on Auto Trader is clear and something that we have been doing for a long time now. The recent developments in AI technology, particularly LLMs, provides even greater runway for this across our advertising, data, digital retailing and Co-Driver product streams as well as our consumer experience. Secondly, brands really matter. Car buying is an incredibly complex, high-value purchase. It is almost never online only, typically involves multiple transactions, is regulated and usually takes place over 3 months, during which the selection of vehicles changes constantly. To navigate this, people use Auto Trader. Over 75% of marketplace activity happens on our site and most people come directly to us. 49% from apps, 29% from our URL or searches for Auto Trader, 18% from organic search with only 4% being paid for web traffic. This brand position doesn't just come from a trademark, it comes from the deep and rich experience we provide car buyers. It's not just about a wide selection of vehicles, it's about making sure that selection is real, available, described to a high quality, easy to navigate, comparable and not fraudulent. But this is just the listings. People need a lot more than just listings. They need a lot of high-quality real images, comprehensive and accurate descriptions, price flags, dealer ratings, valuations, checks on the vehicle, part exchange quotes, finance and so on. This is why people seek out Auto Trader, and we believe these tools will continue to be important to a car buying transaction moving forward. Thirdly, as these platforms grow, we will ensure new and existing users of Auto Trader can reach us there. We've taken this high-level approach in similar situations in the past, and it has served us well, whether it was the rise of Google when fears of disintermediation were raised, iOS or Android. In all these cases, our market position strengthened and our audience grew. This is because these platforms grow by providing the best experience to their users. For the reasons mentioned earlier, when it comes to cars in the U.K., that is what we do. There will be a myriad of technical, commercial and strategic decisions along the way, including the depth of experience and protection of our data, but these are not new decisions to us. Finally, we are confident that our deep real-time vehicle data and rich tools for car buyers and retailers will remain essential to what is a large and complex transaction. The vast majority of that data is not available on the public Internet. Agents may, over time, provide users with automated or semi-automated assistance for carrying out varying tasks on the Internet, but they too will require sources of high-quality real-time data, where they'll face similar constraints to search engines. In fact, most of these interfaces for that sort of data use the search engines we know today. For that reason, we expect that AI agents, like other client technologies, will either remain top of funnel and generalized or they'll look to provide direct integrations using standard web technologies customized for their environments. Interestingly, this is exactly what ChatGPT recently announced with their Apps SDK, and we expect others will be soon to follow. These integrations allow greater control over the experience and data that we provide such that it can bring the best of what LLMs do together with what we do best, providing another way for users to find and engage with Auto Trader. Again, there will be many decisions to make along the way, but we feel very well placed to make those. Finally, we know the landscape will evolve, and you can have confidence that we will stay abreast of these changes. We'll continue to be fully engaged in the technology and we'll maintain the ability to move both strategically and quickly when required. Now on to the outlook or not. Right, on the outlook, there is actually not a great deal to say as those of you who have read the announcement are aware, other than that the first half has pretty much played out as we expected. So our outlook for the remainder of the financial year 2026 remains the same as it was at our full year results. All that for that short sentence. Right. We'll now move to the Q&A, which Jamie will manage, and we'll take questions from analysts in the room. Jamie Warner: Yes. So we'll wait the mic and start down the front and then work our way back as usual. William Packer: It's Will Packer from BNP Paribas. Three questions, please. Firstly, thank you for the very useful comments on AI and how you're positioning yourselves. Could you help us think through investment requirements in the next 12 to 24 months. Should we interpret your comments as you're well invested and you -- the kind of formula we've seen in recent times of flattish margins or slight expansion depending on the top line is the right formula? That's question one. Secondly, could you help us think through the dynamics around the integration risks and opportunities with ChatGPT? Am I right in thinking that you have a choice in that you do have a significant inventory lead versus your nearest competitor. Some of the classifieds don't, so you'd think the hand is more forced, you can choose. And in the event that you do decide to integrate, how should we think about the split of economics versus the current status quo? My take would be you're not paying very much to Google compared to some other segments. So is there a risk that the economics deteriorate in that environment? And then finally, you've got a prominence offer. That's something which is -- we haven't heard too much about in the past. Could you think us through -- could you help us think through what that means for the upside on prominence and how that will flow through in due course? Jamie Warner: I can take the first one. So as both Nathan and Catherine mentioned, we've been investing in much of this technology for a long period of time, previous product iterations and most recently, Co-Driver. So I think there's still much work that we can do from both retailer products, consumer experiences, tools internally to help us find greater levels of efficiency and productivity. But you're absolutely right, I think we feel like because these investments have been happening for a long period of time, there's no -- certainly in that 18- to 24-month window you mentioned, no change from a guidance on margin perspective, consistent margins in the Auto Trader segment. I still think we believe at a group level with Autorama, profitability or losses improving and hopefully into profitability, the group margins can actually continue to expand. Nathan Coe: And on the second question around the integration risks and opportunities, I think that there's probably a few things that I'd say. As I said, we think that they'll go for reasonably structured integrations. The idea we've heard and seen some notes about talk of them scraping the Internet to get real-time data. We just don't think that's going to happen. I mean that technology is very, very old and nonperforming. And indeed, ChatGPT's SDK suggests that they're going to go for something more structured. What comes with that structure is a pretty great deal of control and transparency about how your data is used, what depth of experience that you provide. So you're able to manage the risks and opportunities as it turned out when we've been with Google, we've made decisions to open up our site to a certain level, but not necessarily fully. There will be those sorts of decisions. When it comes to iOS, we open up everything, but it is within a native app. So when I talked about the strategic commercial tactical decisions, they tend to sound very, very technical, but they are quite important. The SDK has not launched in Europe yet. So we haven't had a detailed look at exactly what that looks like, but we would go for something more structured, and we suspect they would as well because those platforms, and I think this is where the opportunity is, and it relates to your economics point is Google only became really, really successful because it provided and prioritized the most relevant results for users. That's going to be the true for any interface. So we think we can do that for car buying. And we think for that reason, they'll want to work with us. If they were to compromise something like that for the sake of some form of rent that they collect, that would seem to be a bit inconsistent with the pattern that has played out with these platforms. But does that mean around an app that we do, there might not be -- might be paid positions or there will clearly need to be some economics. Yes, we would expect that to be the case. But again, that is no different to Google. And by and large, most people come directly to Auto Trader. I think that is also the point that we're not getting much of our traffic at all about what, 18% plus 4% paid. So around 20% of our traffic is coming through those more generalized search engines. Most people wanting to buy a car kind of know where they need to do that. And I suspect that will still be true in the future. What we hope though is as more and more users start to use these interfaces, actually the use case for Auto Trader can appeal to people that perhaps might not have otherwise found us, that might have found the search by make and model a little bit intimidating and ChatGPT and those other kind of tools can hand off into a structured search like us, which feels like an opportunity that we don't necessarily have today. Of course, we can do it on our own site, but that is only for people that are coming to Auto Trader. Catherine Faiers: Dominance and offer. So I think we talked at the full year results about how we were doing a lot of work and imagining that in the next year or so, we would look to evolve the packaged staircase. Again, typically, we've done that every 3 to 4 years. And we're coming to a time again where we think that is the right thing to do. So you're right, we are in market with a bigger and more attractive prominence offer than we would typically have run in the past. It's had good uptake from retailers. And over the coming months, we'll be in the process of converting those retailers through to fully paid. One of the reasons for making the offer a bit bigger and more attractive is really to learn and to test the value response uplift that we're seeing and the different levels of retailer adoption, all with the view that it will inform the structure and the makeup of the packages that we look to try and then roll retailers into at some point during next financial year. Gareth Davies: Gareth Davies from Deutsche Numis. Two from me. The first with a couple of parts on Deal Builder. 2,000 onboards since, I think Catherine emphasized, June. But just kind of understanding how that's built up, should we assume it was kind of pretty straight line through that period? Or were there any sort of stumbling blocks initially that you've got through? And has that ramped into August, September? And then I think you said 25% increase in adverts in October. I mean, can we be as simple as thinking that means we're up to 5,000 by the end of October? Or is that being too simplistic? And how are you feeling sort of overall in terms of getting everyone you need on Deal Builder by the sort of March, April time line you need? So that's question one. And then the second one, you confirmed guidance for the year just in terms of the minutia. Can you talk a little bit on stock and a little bit on dealer forecourts because I think stock feels that it's sort of stubbornly at 28, 29 days. How are you feeling on that at the moment? And then dealer forecourts feels like it's running a bit stronger than I certainly expected. Catherine Faiers: Yes, sure. So on Deal Builder, we have been talking on webinars and in the trade press about being around 6,000 retailers now and about 160,000 or so live adverts. So those numbers are -- they're out there. You talked about whether the growth has been linear or not, I think we've talked before about looking, particularly for the independent retailers that work through our portal system, we've been onboarding them in waves. So it's definitely not been a linear line from June through to October. There's been waves of retailers. We've defined cohort segments that have similar attributes or similar ways of working with us and then have been onboarding them in a more scaled way than we were able to do prior to June. We're getting to the point where we are a good way through all of the independent retailers that work through our portal system. And so growth from this point onwards will be more influenced by the technology API integrations that we're putting in place with the tech partners out there in the automotive industry. So we'll continue to see, I think, a slightly inconsistent patterns of waves when we complete a tech integration with a dealer management system partner, suddenly a new cohort of retailers will become addressable, and we'll look to get those onboarded pretty quickly. So I imagine it will continue to be quite lumpy between now and March. We're hopeful that we will have made really good progress by March. I imagine, as is typically the case with the integration work that we do, I imagine we will have a tail of retailers that will need to work to get over the line beyond March, driven principally by that tech integration work, not work on our side, but work for the third parties integrating with the API that they will need to do. Jamie Warner: And on the more detailed kind of guidance for stock and forecourts, I mean I think we've been pleased the stock has improved through the half. I think at full year results, we gave the April number for the stock lever, which is sort of materially down and then obviously only marginally down for the first half. We haven't quite got into positive territory. So September was still marginally negative. And I think we are -- don't -- are probably a little bit cautious on just what the outlook looks like for these remaining 5 months or so. The fourth quarter, the first quarter of the calendar year is always slightly volatile. January is generally a very strong sales month, and it's not always easy to source stock. So I think that's why we're sort of holding that guidance at marginally down for the year. Similarly, forecourts almost sort of shown an opposite trend where obviously, the stocks got better. And if you look at the growth rates on forecourts, it is -- I think we're pleased that it was as positive as it was in the first half, but the growth rates are trending down. So we've exited the half slightly lower than the 1% growth we delivered in the first half. And again, I think in the round, holding that guidance of flat forecourts seems reasonable. Joseph Barnet-Lamb: It's Jo Barnet-Lamb from UBS. Firstly, a couple on sort of product-driven ARPR into next year. So firstly, on Deal Builder, you've obviously giving it away for free at the moment. I think you'd articulated previously, you're then going to sort of do an upsell sort of thing through next year, and that sort of, therefore, becomes a tailwind for product. So could you talk a little bit about Deal Builder into '27? You've probably got a more formulated views as to how you're going to do that. So any more color you can give us there would be great. Then secondly, on Buying Signals, which you're sort of -- is sort of being rolled out at the moment. And I think you said you're going to start commercializing that in H2. Any more color you can give us on sort of the scale of tailwind that, that's going to give product in H2 would be great? And then a final one. There's something in the release relating to a property -- Autorama property sale. Is that right? Can you give us some color on what that's about? I presume it's just getting rid of an old Autorama building, but any color you can give us there would be great. Catherine Faiers: So Deal Builder and Buying Signals and how and when we'll look to monetize both of them. You will have seen how we've positioned and talked about the product is that the 2 very much come hand in hand. So as part of Deal Builder, we are evolving, I guess, the value currency that we use to talk to retailers and evolving that to very much be anchored around the deal. And the positioning for Buying Signals is that you get all of this insight, rich insight about the buyer, their intent to purchase that vehicle, their preferences that they've been looking at and engaging with on our platform. You get all of that rich data as part of the deal. So they have become really how -- the combination of the 2 products has become how Auto Trader works for retailers. We're looking to monetize certainly the first wave of both of them because I think they're both products that have multiple iterations and life cycles for the business as part of the rate event next year. And we have -- we've been pretty open when asked by retailers in forums and webinars and have been talking about that being the case. So first wave of monetization likely to be from April next year for both combined as a package for retailers. Joseph Barnet-Lamb: And that will be as part of the pricing, but it won't be tiered. It will be a sort of bundled. Catherine Faiers: Yes, very likely to be part of the overall rate event for all with no tiering. Jamie Warner: Yes. And just to add to that, because you're asking about the second half, whether there's any second half product. The second half product I think where consensus is slightly higher is really all coming from prominence and that conversion of the offer is where that kind of product lever growth comes from. So just on the building in Hemel Hempstead, I'm delighted someone's made it to the notes in the back of the account, which might be your first questions for me. So when we acquired Autorama, they owned the building in Hemel Hempstead. You will have noticed from the accounts and the FTEs that we report that as we've kind of integrated into the main Auto Trader business and platform, the FTE numbers come down. We weren't actually -- weren't actively looking to market the building at the time. Opportunistically, someone came and said through an agent that they were looking for property space and just made sense because the building is probably bigger than we require. So we've taken a space almost next door that's smaller and fits better for us. It's just on a lease basis, and we're obviously then disposing of that asset, which I think is likely to go through in the next couple of weeks. Unknown Analyst: It's [ Kieran Darling ] from Citi. Firstly, maybe just on -- could you give us your thoughts on kind of the pros and cons of the stock-based offering you guys have at the moment? Has there been any internal debate around rather moving to an all-you-can-eat model makes a lot of sense, particularly in the context of, I guess, underlying retailers are becoming more technologically efficient and innovative and therefore, maybe that's a headwind permanently? And two, I guess, just in terms of OpenAI and a potential launch of a competitive app or I mean, could you just break down in terms of your visits, how much comes through the app versus desktop and just how much of a moat that is for you guys? And then thirdly, I guess, just in terms of speed of sale, how should we think about it going into next year in terms of comps as it gets easier, how much of a potential tailwind could that be for you guys? Jamie Warner: Yes. I'll take the first one, and Nathan can manage the second one. So I mean I think we said this at the last set of results. Obviously, the slot-based model where speed of sales has been running quicker has generated this small sort of headwind. And I think we have been doing an exercise and looking at other charging models. And obviously, we're fortunate enough to have a number of peers and everyone seems to have slightly different variations and nuances. All you can eat is always a slightly more challenging one because the nature of retailer customers is you have some customers with 4 to 5 cars and up to the biggest customer on an individual site will have 4,000. So that -- not completely insurmountable, but that makes it a little bit more complex just to run pure all you can eat. But I think we have been doing an exercise of looking at unique listings and there are many different kind of variants that you can do. And so we have been doing that work. I think at the moment, especially as the kind of speed of sale and market headwinds are not as prominent right now as they were this time last year, we still think that if you get supply easing up a little bit or speed of sale staying flat year-on-year or slightly decelerating, that should be positive with the charging model that we've got. But it's not lost on us that, you don't just want to sit there and say, well, everything will be fine, it will come back. So we are doing the piece of work. And I think it's not something that we would never consider. But I think at this point in time, especially where we are in the sort of cycle, we're reasonably comfortable with the model that we've got. Nathan Coe: Kieran, I got the second bit of your question. The first bit around OpenAI and competitors, can you just, sorry, go through that one again. Unknown Analyst: I think it's a more general point around potential competitors coming in terms of utilizing OpenAI technology. Nathan Coe: Yes. Right. No problems at all. So if I take your first question, I think OpenAI is another window to the Internet that uses kind of a highly efficient text prediction to kind of summarize answers and give people the next step that they might want to go to. And when it was Google, it's all around a page rank algorithm. What we found with Google is that their desire is to provide high conversion rates to their users to satisfy them to give them relevant. So Auto Trader tends and over time as SEO and those new releases have gone in, Auto Trader has tended to just do better and better and better. And that's not really down to our own SEO activities, although that's clearly part of it. It's because they want to get around people being able to gain those systems to just give users what's the best answer for the task. So our biggest protection, I think, is the fact that with that depth of data, our brand, people look for us, but it's not -- it isn't about the trademark, it's actually around what people know that they can get there, and it's all founded on data. So I'd say that's probably our biggest defense is we don't see a world where we really feel like we'd be threatened in terms of providing the very best car buying experience. You've got to believe that people will be willing for some degradation to never ever come to Auto Trader. I think apps have always been a really big strength to us. And I think we've always said that most of our traffic, as I laid out, about 80% of it is coming direct to us. The difference between traffic coming direct to our URL and apps is it cannot be intercepted. It is literally a direct connection. So it is about half of our visits, probably an even bigger percentage of the activity that you see when you go a bit deeper into the funnel looking at vehicles. And yes, I mean, it's an area we're always going to invest in. Some people might say we always talked about 10% of marketing being -- 10% of our audience coming from marketing. And I mentioned before, the difference is actually marketing with apps. So we do that very actively because it's a different sort of marketing. So yes, we think it is a big strength. But at the end of the day, we've just got to be the best place to buy a car, and that's hard to do in the U.K. because it requires loads and loads of data, and we've got a lot of that and other people don't. Jamie Warner: We have a question down here, Giles. Giles Thorne: It's Giles Thorne from Jefferies. First question, I guess, for Catherine, Buying Signals, was that always part of the product road map for Deal Builder? Or is it something that was introduced or accelerated when you changed your commercial approach? Secondly, coming back to this idea of the April 2026 pricing event, how transformational would you describe Deal Builder and Buying Signals is for your customers, for retailers? And thirdly, maybe back to Nathan and perhaps you're going to reference again some of your prepared materials. But as you've seen this agentic AI debate suddenly materialize in a very quick and aggressive fashion, which elements of it do you think are most misrepresented, misunderstood? I don't know, you tell me. Catherine Faiers: I take the first one. So on Deal Builder and Buying Signals, Buying Signals is built, the product was enabled because we've, for many years, been investing in building a buyer propensity model, which takes all of the sales observations data that we get from retailers, takes all of the consumer interactions and observations that we see on Auto Trader and then looks at how you connect those 2 sets of observations to know what types of behaviors or patterns do you need to see from a consumer to mean that they're very likely to convert to a sale on a retailer's forecourt. So that model and that logic has been years in the building and creating. So I think definitely Buying Signals was always a product that we had in mind that we were planning to build and launch. The timing of us testing, piloting, really, really robustly testing that model, the connection with deals anyone that submitted a deal, any buyer is clearly very likely to be pretty high intent when we talk about levels of intent. So you've immediately got a very identifiable cohort of consumers that you know are going to be very high intent. What Buying Signals does is then for consumers that might just have submitted an e-mail lead or in time buyers that we might just have seen interacting on our platform, but that haven't left any digital footprint with a retailer, we're able to predict for retailers which of their stock units are more or less likely to sell and how fast they're likely to sell. So step one is the connection to Deal Builder and delivering up, serving up a level of intent and a greater level of understanding, which we're already seeing from retailers will change like the next best action they then take with that buyer. But in the future, the evolution of this product should be to enable retailers much more actively to manage their forecourt based on all of the observed leads and deals that they would have been getting in the old world, but also every interaction that's happening on our marketplace and giving them some sense of what that really means for their forecourt. So it makes sense, I think, and the timing is right to bring it together as part of Deal Builder and to make it part of that proposition for launch. But in the future, there's lots more we can do with the buyer propensity model and that buyer signal thinking and logic to deliver more value to retailers. Nathan Coe: On the AI, I mean, we do use the technology quite a bit, but I'm going to pretend that we're right at the center of OpenAI. We do work very closely with Google and Gemini. I think as it relates to -- the first thing I would say is that when you speak to -- listen to the people that are building this technology, you tend to get quite a balanced view. I personally think and whether it's the founder of OpenAI or one of the founders of OpenAI, they do tend to give a pretty balanced view about, this is about token prediction and text prediction. There's not really a semantic understanding of the content that the models are doing, but they work very effectively because they basically say, we don't really care how you get to it. But if you can predict an output very accurately, then that's a good thing. It doesn't matter so much how you get to it. I think like 2 observations of things that I think have been a bit oversimplified is, the first I would say in relation to agentic is that there is quite a big difference between general models and what general models can do and what agents might be able to do. And those agents need to be quite specialized in order to do jobs and someone needs to do the specialization. I'll give you a really simple example. We could not use an open model to do something as simple as categorize images and write descriptions on Auto Trader. We had to augment the model, train it ourselves. And that's not even really particularly agentic. That is still a generalized model. But even that task itself, using a general model wouldn't work for it. Now do we think agents can do lots of stuff for users over time? Yes, absolutely, but they'll need to be more and more specialized. And the idea of you just being -- these general models are going to solve the whole world's problem. I don't think anyone really believes that's possible. And agentic AI itself technically is still a bit of a way to go before you see that playing out, although in some fields, it is. The second thing I would say is actually all around the real-time aspect of things. The models are trained every 6 to 9 months. Maybe that increases and they do kind of hoover up the Internet, all the information it can get to on the Internet and use that to create better and better predictions. That is very compute heavy as we can see and NVIDIA's share price suggests is true. What they don't do and don't necessarily need to solve is accessing real-time information because in order to do that, well, what they do there is they partner with search engines, ChatGPT, with Bing, Google and Claude, with -- sorry, Gemini and Claude with Google. And that's because that's a job that has been done well and replicating that, you'll run into exactly the same issues there. So for real-time data, what they do is they use their big model that's very, very intelligent to make better queries of a search engine and then bring it back and summarize it. When you come to really granular data like even listings and the data that's on Auto Trader, you probably need a level deeper than that because you can't get that through a traditional search engine. So that is why we think ending up working with one of those platforms and allowing people to access Auto Trader there is probably the way that it will go. But we can't offer any guarantees around these things. But I think it's very easy to see it as a big blob and extrapolate out. But technically, a lot of the engineers will say, well, no, that scenario is just not going to play out. And there are a few examples of it. Giles Thorne: I want to get the transformation... Catherine Faiers: Transformation, do you want to take that, Deal Builder and Buying Signals. Giles Thorne: Are you going to do bigger than normal? Nathan Coe: So it is in relation to the event. Yes, something like that. I mean, I think 1st of April pricing event, it's obviously a very live conversation internally. As Catherine explained, I think we feel like the product set of Deal Builder in itself and buying signals should particularly over a longer period of time, generate a lot of value for customers. But we still haven't quite landed at what the -- what percentage we're not going to communicate to customers until January. I mean, historically or certainly in the last 3 or 4 years, we've done 3% to 4% on price, 2% to 3% contribution to the product lever. There's nothing here that suggests would be outside of those ranges. And generally, if you say the last 3 or 4 events that we've done have been -- I think we feel like they've been good ones, then hopefully, this is another good one. Lara Simpson: It's Lara Simpson from JPMorgan. Sorry, I just wanted to come back to stock. I know it's been a big talking point. Firstly, I suppose, on the speed of sale, you said it was still 1 day faster in October. Were you surprised by that acceleration? Because it feels like a lot of the forward indicators, it should start to stabilize because we're talking about slower demand, supply coming back, but then the speed of sale keeps disappointing. So were you surprised? And then you've obviously reiterated the guidance. Interested on the stock lever guidance. What are your assumptions of speed of sale? Because I feel like in October, we should be getting to easier comps. Are you assuming that speed of sale stabilizes or slows or the status quo maintains? And then just a quick question on Autorama actually. A bit of the top line beat was actually from the vehicle and accessory sales, up 20%, I think it was. Has there been any positive surprise there? Because I thought longer term, we should be scaling down that line from a P&L perspective. So just interested on that. And if what you've seen in H1 has changed any of your strategy for Autorama, particularly in terms of the top line moving parts and then the profitability of that business? Jamie Warner: Yes. I mean I can take all of them. So look, I think stock -- I mean, if you think about the stock lever specifically. So we've guided it to be marginally down for the full year and it really is marginally down in the first half, that's implying similar in the second half. I think generally, the assumption around speed of sale is certainly what was set out at the full year is that when you hit this point, it gets to be more consistent, and a day quicker. I think in the round, it does feel more stable generally. So I think we're not expecting speed of sale to accelerate in the second half. That would probably be contrary or a downside to that guidance, yes. And I think there still is slightly -- if you look more medium term or into next year, a hope and belief that supply does start to improve as you get better flow of vehicles, better registrations coming out the back of the pandemic. I think we're just being a little bit cautious on whether we're going to see that in the second half or not. And as I mentioned, that fourth quarter is always a slightly unpredictable one. From an Autorama perspective, I think you're absolutely right that the vehicle and accessory sales is not part of the long-term strategy, and we still have a belief that over time, that will reduce or disappear. It was really a tactical decision that there were -- like I said, we took extra 300 vans that passed through the balance sheet. They didn't sit there for very long. And just because the van volumes have been slightly lower, we felt that, that was a sensible thing to do. The long-term strategy is still 100% seeing more volume delivered from the Auto Trader platform for users that are already there. And we're seeing some positive signs of that, albeit off a low base, but the Auto Trader volumes are growing or have grown pretty strongly in this first half. It is, as you'd imagine, heavily skewed towards cars over vans. And so this is -- some of what you're seeing in the first half is -- we're wearing a bit of a yield hit from that changing mix, which I think will probably play out a little bit in the second half. But if we continue to grow those volumes, we're still very optimistic in terms of hitting profitability and then hopefully seeing good growth and getting to the 20% to 30% margins that we set out when we acquired the business. It's very much part of -- there are a number of products that fit into the new car suite. It's very much part of that. Thanks, everyone, for joining us.
Operator: Good morning, everyone, and welcome to the VAALCO Energy's Third Quarter 2025 Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Al Petrie, Investor Relations Coordinator. Sir, please go ahead. Al Petrie: Thank you, operator. Welcome to VAALCO Energy's Third Quarter 2025 Conference Call. After I cover the forward-looking statements, George Maxwell, our CEO, will review key highlights of the third quarter. Ron Bain, our CFO, will then provide a more in-depth financial review. George will then return for some closing comments before we take your questions. [Operator Instructions] I'd like to point out that we posted a supplemental investor deck on our website that has additional financial analysis, comparison and guidance that should be helpful. With that, let me proceed with our forward-looking statement comments. During the course of this conference call, the company will be making forward-looking statements. Investors are cautioned that forward-looking statements are not guarantees of future performance, and those actual results or developments may differ materially from those projected in the forward-looking statements. VAALCO disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in our earnings release, the presentation posted on our website and in the reports we file with the SEC, including our Form 10-K. Please note that this call is being recorded. Let me turn the call over to George. George Maxwell: Thank you, Al. Good morning, everyone, and welcome to our third quarter 2025 earnings conference call. For over two years, every quarterly earnings call, we have met or exceeded our production guidance, consistently leading to strong operational and financial results. The third quarter was no different with NRI production of 15,405 BOE per day, which was at the high end of guidance; working interest production of 19,887 BOE was above the midpoint of guidance, and NRI sales of 12,831 BOE per day, which was also at the high end of guidance. Our production and sales performance through the first 9 months of 2025 has been so strong that we have raised the midpoint of our full year production and sales guidance by about 5%, while also further reducing our capital guidance by almost 20% and maintaining our operating expenses virtually flat. Ron will go into more detail about our guidance later in this call, but we believe that maintaining operational excellence and consistent production across our portfolio is essential to continued strong adjusted EBITDAX generation, which will assist us in funding organic growth initiatives while positioning us as a larger player in the industry. In the first 9 months of 2025, we have delivered net income of $17.2 million or [ $0.0016 ] per share and adjusted EBITDAX of $130.5 million. It is important to remember that 2025 is a transitional year, and everything remains on track with our forecast. Production came offline in Q1 at Cote d'Ivoire due to the FPSO project, and we do not expect to start the drilling campaign in Gabon until late Q4 as we await the drilling rig's completion of its current commitments. This means that the meaningful production uplift we are projecting for these major projects won't begin until 2026 and into 2027. I would now like to go through and provide a quick update on our diverse portfolio of high-quality assets, beginning with Cote d'Ivoire. In line with the project timeline, the FPSO ceased hydrocarbon operations are scheduled on January 31, 2025, with the final lifting of crude oil from the vessel occurring in early February. The vessel departed from the field in late March and arrived at the shipyard in Dubai ahead of schedule in mid-May 2025. The FPSO refurbishment is well underway in the shipyard. Significant development drilling is expected to begin in 2026 after the FPSO returns to service with potential meaningful additions to production from the main Baobab field. We now have a 10-year extension of the license on CI-40, extending it to 2038. In March 2025, we announced a farm-in agreement for the CI-705 block offshore Cote d'Ivoire where we will operate with a 70% working interest and a 100% paying interest. In Q2, we received seismic data for the block, and we are conducting a detailed integrated geological analysis to assess and mature our understanding of the block's overall prospectivity as well as the basin's overall potential. We believe the block is favorably located in a proven hydrocarbon system and is approximately 70 kilometers to the west of our CI-40 block. We have demonstrated our ability to acquire, develop and enhance value through accretive acquisitions, and we are excited about the prospects in Cote d'Ivoire. Moving to Gabon; given that we haven't drilled a well in Gabon in over two years, we are very pleased with the positive overall production results, including strong production uptime and improved decline curves on the wells in 2025. In July, we successfully completed a planned full field maintenance shutdown of the Gabon platforms to perform safety inspections and necessary maintenance. This is the first time we have had to perform a full field shutdown in Gabon since the FSO was brought online in 2022. This has helped to contribute to the strong uptime numbers in Gabon that we have had over the past several years, which can be seen in our supplemental presentation. While we secured a drilling rig in December 2024 for our 2025-2026 drilling campaign, the timing of when we start the drilling program has always been dependent on the rig's completion of its existing commitments. The rig is now being released and moving to Gabon. As we discussed in the Capital Markets Day, we have some very strong drilling opportunities and the additional data gathered during the upcoming drilling program will help us high grade and derisk additional well locations that have already been identified. We plan to begin the drilling program on the Etame field platform, and we are currently planning on moving to the Ebouri wells later in the program because of the current robust production profile of these wells. In particular, we remain very pleased with the extended flow test on Ebouri 4H well, which is continuing to surpass our initial expectations. We originally wanted to gather information on the H2S concentrations at this location to aid in equipment design and to evaluate our chemical crude sweetening process. The 4H well has now flowed for all of 2025 at a gross average of around 1,000 barrels of oil per day with the H2S concentration within our modeling expectations, demonstrating our ability to chemically treat the oil. The wells production has helped Gabon exceed its production guidance in 2025 while adding some additional production costs for chemicals. Regarding our exploration blocks in Gabon, the Niosi Marin and the Guduma Marin, we are working in conjunction with our partners and the operator, BW Energy, on plans for the two blocks moving forward. A seismic survey to fulfill a work commitment on Niosi is being planned for acquisition in late 2025 or early 2026. Given the proximity of these blocks to the prolific producing fields of Etame and Dussafu, we are excited about the future possibilities for these blocks. Turning to Egypt; in the fourth quarter of 2024, we contracted a rig and drilled two wells starting a drilling campaign that has carried into the first 9 months of 2025. We have drilled and completed multiple wells in the first 9 months of 2025 and are continuing activity into the fourth quarter. We are very pleased with the operational performance and efficiency of the drilling program, which contributes to minimizing costs. We've been able to drill more wells faster and cheaper than what we had in the budget and for the same amount of capital, which has also positively impacted the production. We also continue to workover and recomplete wells in Egypt. Both the drilling program and the workover program in Egypt add solid production and are economic even in lower commodity price environments. We are continuing to evaluate the exploration results in South Ghazalat, where the wells are encountering both oil and gas net pay zones with different levels of reservoir pressure. We are incorporating well results and updating our understanding of the area with new mapping that will determine potential additional prospectivity for the area. In March 2024, we announced the finalization of documents in Equatorial Guinea related to the Venus Block P plan of development. This summer, we began our Front End Engineering Design or FEED study. The FEED is complete and confirms the technical viability of our plan of development, but also highlights some of the risk and challenges from the shelf location. We have expanded this review to explore more efficient development opportunities through a subsea development, which would also significantly simplify the drilling operations and well design, and this is currently underway. We are very excited to proceed with our plans to develop, operate and begin producing from the discovery on Block P offshore Equatorial Guinea in the next few years. Turning to Canada; we successfully drilled and completed four wells in 2024. We also drilled a well in the Southern Acreage in late 2024 that could help us better understand the acreage and upside in that area. While we remain optimistic about the drillable inventory in Canada, we decided to postpone our Canadian drilling program in 2025 due to the current commodity price environment. We will continue to monitor the performance of our wells and plan for future drilling opportunities. Before I turn the call over to Ron, I would like to thank our hard-working team who continue to operate and execute our strategic vision and help us deliver these outstanding results. We are well-positioned to execute the projects in our enhanced portfolio and our proven track record of success in these past few years should instill confidence for our future. With that, I'd like to turn the call over to Ron to share our financial results. Ronald Bain: Thank you, George. And once again, good morning. I will provide some insight into the drivers for our financial results with a focus on the key points. Let me begin by echoing George's comments about our continued success through the first 9 months of 2025, driven by our strong operational performance. We have met or exceeded production guidance for the past 2-plus years, driven by strong production in Gabon and Egypt despite Cote d'Ivoire being offline since January -- since late January. This performance has allowed us to positively adjust the midpoint of our full year production and sales guidance. In the supplemental deck on our website, you can see that NRI production is up 900 BOE per day and sales are up 750 BOE per day. You will also see that our full year capital midpoint guidance is down almost $60 million to around $240 million in total. Finally, we have worked hard to keep our absolute production expense in line with our original guidance. But with the increase to sales and production, our production expense on a per BOE basis is down about $1 per BOE. Our overall results and ability to manage multiple assets and high profile capital projects across multiple countries are reflected in our updated 2025 guidance. For Q4 2025, we are forecasting production to be between 20,300 and 22,200 working interest BOE per day and between 15,600 and 70,300 NRI BOE per day. This is up compared to the third quarter due to the planned maintenance turnaround that occurred in Gabon in July and continued strong production in Egypt. For the fourth quarter, we are forecasting our sales will also be higher compared to Q3 due to more offshore listings in Gabon. We also expect our absolute operating costs to be higher compared to Q3 due to the additional sales, but virtually flat on a per barrel of oil equivalent basis. Finally, looking at CapEx, our Q4 spend is expected to be higher than the third quarter as we begin the drilling campaign in Gabon. We are forecasting between $90 million and $110 million, and we anticipate continued spending in CDI and Egypt in Q4 more or less in line with Q3. In the third quarter, we generated $1.1 million in net income or $0.01 per share and $23.7 million in adjusted EBITDAX. Our NRI sales for the quarter were at the high end of guidance at 12,831 BOE per day. Both sales and pricing moved against us in the third quarter, with sales down 33% due to the fewer listings in Gabon, driven by the planned turnaround and pricing was lower by about 7% quarter-on-quarter. We have seen higher volatility in the commodity price environment thus far in 2025. Our hedging program has always looked to help mitigate risk and protect our cash commitments. But with the RBL now in place, we are moving towards a more programmatic hedging program that will be more consistent over a rolling time horizon. With this in mind, we took advantage of periods of higher oil prices during the third quarter to add more hedges for the 2026 hedging program. The company now has about 500,000 barrels of remaining 2025 oil production hedged with an average floor of approximately $61 per barrel and about 800,000 barrels of oil production hedged for the first half of 2026 with an average floor of approximately $62 per barrel. We are targeting around 40% of Half 1 2026 oil production to be hedged by year-end. Our full hedge positions are disclosed in the earnings release. Turning to costs; our production costs for the third quarter of 2025 were at the low end of guidance on an absolute basis and on a per barrel basis. Absolute expense was $29.87 million, a 26% reduction quarter-over-quarter and on a per barrel basis was $25.24. G&A costs were in line with guidance and remained relatively flat quarter-over-quarter. Our focus remains on keeping our costs low to enable us to maximize margins and increase our cash flow. Moving to taxes; we reported an income tax benefit of $3.6 million for Q3 2025, which was comprised of an $8.6 million current tax expense, offset by a deferred tax benefit [Technical Difficulty] Gabon's allocation of profit oil between the time it was produced and the time it was taken in kind. Turning now to the balance sheet and cash flow statement. Unrestricted cash at the end of the third quarter was $24 million. Collections from the Egyptian General Petroleum Corporation, EGPC, since the 1st of January 2025 totaled over $103.6 million, and the company expects to receive further material payments against its arrears before year-end. We anticipate that our annual receivables balance will be half of what it was in 2024 by year-end. Monthly invoices are now paid in full and regular repayments are being made against the receivables balance. As we discussed last quarter, we added a reserves-based credit facility with an initial commitment of $190 million and the ability to grow to $300 million. Shortly after the third quarter, we successfully completed our semiannual redetermination with lenders and reaffirmed the initial commitments. As of September 30, 2025, VAALCO had $60 million outstanding borrowings, which is the same amount outstanding as we had at the end of the second quarter. In Q3, we spent $48.3 million in cash CapEx, well below our third quarter guidance of $70 million to $90 million. Additionally, we returned $6.7 million through dividends to our shareholders. We believe that our current dividend yield of around 7% is very attractive, especially considering the meaningful upside potential in production and reserve growth that we outlined in the Capital Markets Day over the next few years. In closing, we're continuing to see strong results. We are well-positioned to execute and fund a robust organic capital program that should help to increase production and reserves for 2026 and beyond. With that, I'll now turn the call back over to George. George Maxwell: Thanks, Ron. We will continue to execute a strategy focused on operating efficiency, investing prudently, maximizing our asset base and looking for accretive opportunities. As you have heard this morning, we continue to meet or exceed both our quarterly guidance and analyst estimates in the first 9 months of 2025 as we have done for the past several years. This has allowed us to increase our full year production guidance by about 5% while lowering our full year capital guidance by about 20%. By delivering on our commitments to the market, I believe we have earned the credibility with our shareholders, and we will continue to deliver on the exciting slate of projects that we have over the next few years. Our entire organization is actively working to deliver sustainable growth and strong results. We have multiple major projects underway that are anticipated to meaningfully grow production and reserves. Through the first 9 months of 2025, we have generated $130.5 million in adjusted EBITDAX, and this is with Cote d'Ivoire offline for the FPS again. Through the first 9 months of 2025, we have generated $130.5 million in adjusted EBITDAX, and this is with the Cote d'Ivoire offline for the FPSO project and no new wells drilled in Gabon. In addition to funding our capital program, we have remained focused on returning value to our shareholders. In the first 9 months of 2025, we returned around $20 million to our shareholders through dividends. With the Q4 dividend announcement, we will deliver another [ $0.0025 ] per share annual dividend for 2025, which at our current share price is a dividend yield of about 7%. We are confident in our ability to execute on the many projects ahead, largely because we have been highly successful over the past several years developing and growing our assets. Our disciplined approach to maximizing value for our shareholders by delivering growth in production, reserves and cash flow has led to outstanding results and has positioned us to continue to profitably grow in the future. Thank you. And with that, operator, we're ready to take questions. Operator: [Operator Instructions] Our first question today comes from Stephane Foucaud from Auctus Advisors. Stephane Guy Foucaud: So two questions. The first one is around CapEx. So reduction of CapEx in 2025. I was wondering what would be broadly the CapEx mix across the asset in 2025? And what it means the CapEx reduction in 2025 for 2026? In other words, how would 2026 CapEx compare broadly to 2025? So that's my first question. The second question is about South Ghazalat. In your view, in a success case, how big could be South Ghazalat or what this result means in terms of -- compared to the existing reserve in Egypt? Ronald Bain: Hi Stephane, I think -- it's Ron here. I'll take the first one on CapEx and CapEx guidance. So if you look at it between the midpoint of guidance, I think we moved about $60 million. $20 million of that is gone. That was discretionary CapEx that we took out in 2025. We've had about a $10 million increase in CDI CapEx, really just keeping that MV-10 on schedule. And that's very good news as far as we're concerned that everything is going well in relation to that project. And the rest is really a shift in Gabon from the drilling campaign due to the delay in getting the rig moving out from 2025 into 2026. What I would say, though, is on Egypt, effectively, the Egyptian CapEx is the same number as we originally guided to, but we'll have completed 8 additional wells in that time period for the same CapEx. So again, that's a very positive efficiency that the guys have brought to the table in 2025. George Maxwell: And on South Ghazalat, one of the additional wells, as you know, Stephane, was out there, and I tried to touch on it in my comments earlier. So what we've seen there in the well that we drilled, we entered the gas prone zone with lower pressures, which indicates that there's potentially some gas depletion there. And we also entered an oil proven zone that had no pressure. So what we're trying to establish now is the total extent of the oil zone, what that aerial extent could be and how large that could be for potential development and then understanding the reduced pressures around the gas zone and where that depletion may be. So having got the results of the well, we're going back to do our after-action review and establish where else within the existing structure that we understand, we'd want to drill additional wells there. There are a couple of things outstanding in South Ghazalat. Whilst we had some commitment wells that we've already completed to keep the acreage. But in addition to that, we've also got some commercial issues around the PSC that we have to discuss before we get anywhere close to some kind of preliminary field development plan. So there's more technical work to do, but there's also some more commercial work to do. We've always been hopeful that because it's such a prolific area out there in the Western Desert that this block will yield some interesting opportunities for us, but that's still to be developed and it's still to be evaluated at this time. Operator: Our next question comes from Jeff Robertson from Water Tower Research. Jeffrey Robertson: Ron, just to clarify on the CapEx, did I hear you right that about $20 million of the reduced guidance is permanent reduction, in other words, getting -- either doing things at lower cost than budgeted or getting more done with the same amount of dollars? Ronald Bain: That's exactly right, Jeff. As you know, we took Canadian drilling CapEx out very early, I think, in Q2 guidance, we pulled that out. That was about half of that. The other half is just discretionary CapEx that we pulled out over the last 3 or 4 months. Jeffrey Robertson: Are the efficiency gains that have helped in Egypt, are those sticky? In other words, does that -- you would retain those types of efficiencies if you look at a CapEx program in Egypt in 2026? Ronald Bain: Yeah. I mean what we've got, Jeff, as you know, we've reduced that spud to basically take an online cycle time quite considerably over the last three years. We continue to drill and complete and bring online those wells at a much lower level of days versus what our initial expectations were. So those efficiencies are real. They're there. And if they continue into 2026, we'll continue to see less [ AFE ] costs for drilling in Egypt. Jeffrey Robertson: Okay. And on the RBL Ron, I believe the electric commitments is going to go up to $240 million in January. Is that a reflection of asset performance? Ronald Bain: I think it's more a reflection of the current market, Jeff. I mean liquidity is going to be key for all upstream companies as we move into 2026, with softening commodity prices. And from our point of view, we have the availability there. I'd rather lock it in when we've been a position of strength than when in a position of need. Operator: Our next question comes from Christopher Wheaton from Stifel. Christopher Wheaton: Two, maybe three questions, if I may. Firstly, on Gabon production. You've not -- as you said, George, you've not drilled any wells for two years now on Gabon. And as you said, the Gabon drilling program shifted later in this year, you still delivered a pretty good production performance, and that's on uptime, if anything, slightly lower than it was last year. I'm interested, is there the geology better? Are there particular wells performing better than you expected? I'm interested in what's been driving that production uptime. And then second question on really about 2026 CapEx and your ability to flex that as you've got more of the Gabon drilling campaign falling into '26. You've got Cote d'Ivoire CapEx, obviously, as a given for '26 as well. I'm interested just what your key priorities for setting that 2026 capital budget are going to be given you've got a lot of things that you're kind of on the must do or have to do list. And therefore, realistically, are we going to see -- is there much CapEx flex below, say, 2025 levels that we might see for 2026 CapEx guidance? I'll stop there. George Maxwell: Okay. Let me start on Gabon. I mean, obviously, in the last -- ever since we've completed the reconfiguration, what's resulted from that is, I think as we've maybe discussed before, is a significant reduction in back pressure into the reservoir, which has enhanced not just well performance, but a lot of the field performance as well. We've also been working on the brewery side to continue the production in 2-H and then we've also brought on 4H. We did that deliberately to test the levels of H2S that could be managed through the [ scavenger ] program. And we've continued to see 4H produced throughout 2025 with H2S levels well within our manageable range. That's been very encouraging, and it's also will lead when we get to the drilling program leads us to not just the 2H workover potential, but then 5H to go back and redrill 5H both -- goes across a fault block to enhance the production in the buoy. So these results are -- and these test wells that we bring back on stream are really important for our understanding of how we're going to deal with the potential H2S as it comes towards us in the future. The -- you are correct in that when we look at the production profiles for the Etame field, we can see that we're producing well above the 1P decline curve and in some cases, into the 2P position. We look at that and the questions are naturally come is the size of the tank larger -- our recovery factors are going up to the 50 percentile and higher. So there's clearly some geological remapping work that's currently underway that's required to understand this field better. I keep going back to some of the decisions way back in the early 2000s when this field had a life expectancy of 5 years. And here we are 20-plus years later having produced close to 150 million barrels from the field, and it continues to give. So hopefully, the studies we've got in place over the next 6 months will start to clearly give a better definition around the geology and whether there is connectivity into the Gamba from the Dentale that's supplementing those production levels. With regard to the CapEx position of 2026. Now obviously, as Ron mentioned, the delay in the rig coming to us for 2025 has delayed our program for Gabon. We continue with the position in Gabon with a 5 firm and 5 options. So there is some flexibility in the drilling program in Gabon. But as I've mentioned before, we've been studying these drill locations now for a few years, and we've got some pretty strong targets that we want to go after. So that will give some meaningful production uplifts in Gabon. So whilst there may be not as much flexibility as we may want in the Gabon drilling campaign, that comes with the added benefit of significant additional production. With regard to Cote d'Ivoire, as Ron mentioned, we have spent a little bit more CapEx in '25 to ensure that the sail away date of the end of March for the FPSO can be met, and we've discussed that in detail with the operator. There is a drilling program, as you're aware, to start the second half of 2026 in Cote d'Ivoire. The exact timing of that drilling program is still a little bit subject to, obviously, rig availability, equipment, et cetera. So there may be some flexibility there. However, again, these investments come with significant adds to production. So -- and as we know in Cote d'Ivoire, every dollar we spend is recoverable with $1.25 back in the cost oil. So whilst the CapEx may look slightly less flexible in '26 than it was in '25, it comes with considerable benefits. Operator: Our next question comes from Charlie Sharp from Canaccord. Charlie Sharp: Can you hear me? George Maxwell: Yes, we can hear you. Charlie Sharp: Sorry about that. I was on a separate phone and here we are. So the question really is regarding timetabling of events next year. And I think you've just provided some useful information there on the planned sale away of the Baobab FPSO. I'm guessing from that, that you still expect to be back on stream there before the middle of the year in order to facilitate drilling sometime in the second half. That's one small question. And then secondly, on Gabon, should we assume that you're drilling wells about one per quarter, in which case you'll probably be drilling into 2027? And will you be completing successful wells as you go or will you batch drill and batch complete? George Maxwell: Okay. So I'll start with -- you're correct in your assumption. We're still -- the sail away date is still for the end of January after the second dry dock period. The hookup is scheduled to be late March, early April and back on production by end of April, early May. So well ahead of the drilling program. And when we come into 2026, you'll see that coming into our guidance position, and we'll be able to give you much more detail at that time. But that's the current schedule and everything on that project is currently on schedule. For Gabon, obviously, what we're trying to do here in Gabon, like I said, we spent a lot of time looking at these drill locations. Some of the -- as you may be aware, the imaging on the seismic here is not as clear as we would like it to be due to the interference of salt. But that being said, we're planning to drill pilot holes in some of these locations to establish exact levels of hydrocarbons to then allow us to pull back and redrill or complete in a different zone. So when we look at the schedule right now where we're starting on the Etame field with two pilots, we would -- if both of those come in and remind the POSGs are 80% plus, we would drill and complete as we go. So we will not do that drilling. So we potentially have three wells on Etame if we choose to elect one of the options, one well on Seent and then a workover and well on Ebouri. Operator: Our next question comes from Bill Dezellem from Tieton Capital Management. William Dezellem: Relative to the Cote d'Ivoire drilling program, you'd mentioned that that will begin in the second half of next year. Given that the FPSO will be back in the field and reconnected in May, what's the swing factor or swing factors that would drive the drilling earlier in the second half versus later in the second half? George Maxwell: Okay. So the biggest swing factor is exactly what we face in Gabon is the drilling unit arriving on time. When we look at where we are today, though, all the long lead items, the trees and the equipment, et cetera, are all ready to go. So it's all around the drilling unit and the timing of that. So when it comes off its existing contract, as you know, we may have a scheduled date, but if it's halfway through drilling a well for a previous client, then it has to complete that well before it comes to us. So it's really just the rig move would be the swing factor. William Dezellem: That's helpful. And then relative to Equatorial Guinea, you'd mentioned that you're looking at a subsea completion application. Was that part of the FEED study or are you now needing to do essentially a sidebar FEED study? George Maxwell: It's not quite a sidebar. What came out of the FEED study was what we were trying to achieve in the FEED study was how do we reduce the CapEx position that's in the POD. And what we were looking at was can we go to drill off the shelf with what we call a [ MOPU ], a self-elevating platform for production and basically put that to a leased unit rather than a capital unit. What came from that is that there are -- given the complexities of the shelf drilling, getting the exact locations for the wells are possible but complicated when you're looking for the two producers and you're looking at getting a water injector in there with a long lateral to give you an efficient flow of production from the structure. So that sweep efficiency is very key to the recovery factors and the production profiles that we've estimated from Venus. We've since and during the FEED completed a new static and dynamic model, which confirms the volumes that we announced back in the Capital Markets Day. But again, that dependency on the sweep efficiency from the water injector is critical to achieving these production levels. So when we looked at that risk factor, we said, okay, it's possible, but it contains risk. And we then looked at a vertical solution and said, do we eliminate that risk factor significantly by coming from a drillship position vertically versus coming from the shelf. And the answer to that is very clearly yes. What does that do to the cost structure? Well, it reduces the drilling times significantly, we're evaluating that, but it comes at a higher drilling day cost. But overall, the economics are far better for the -- on the drill side. The production side, we're now looking at -- and we've spent some time now looking with what we've done in Gabon and what we're doing in Cote d'Ivoire, do we get an FPSO at a reasonable price that can evacuate this oil and at an efficient level. And that's really where the study is right now. There's a lot of units available in the market right now. And because of the decline in other areas, they're at a reasonable cost. So that's really what we're looking at, have we derisked the drilling position, can we then match it up with an efficient production position. And that's really -- it's like a side bar to use your terms, but it's also looking how we minimize the risk position on the drilling side. Operator: Our next question comes from Jeff Robertson from Water Tower Research. Jeffrey Robertson: George, just a quick question in Cote d'Ivoire. When the FPSO gets back to Baobab, how long would it take do you anticipate for production in the field to go back to whatever the full rate will be? George Maxwell: Well, I mean, obviously, we've got the vessel gets back to the field. We've got the contract for the hookup and taking the flow lines back in place, and then we've got commissioning. I mean, I'm -- at the moment in the schedule, we're easily looking at 6 to 8 weeks for that. What we don't -- what we haven't yet looked at, Jeff, is the start-up sequence. So we've got the commissioning to do, and then we need to look at the start-up sequence for the wells and see exactly which sequence of wells are coming on between the injectors, obviously, and then the producers. So that's something we'll certainly guide to when we come to the next call in early '26. We'll have much more detail on the start-up sequence at that time. Jeffrey Robertson: Just one more in Gabon. With the maintenance work that you did in July, what will that do to prepare the facilities, if anything, for the upcoming drilling campaign? George Maxwell: I mean, effectively, I think there, Jeff, we did quite some upgrades to Etame on both power and water handling. So everything is now done and ready for that drilling campaign coming in. But yeah, that's essentially what was done along with the planned -- the normal planned inspection. Operator: [Operator Instructions] Our next question comes from Jamie Wilen from Wilen Management. James Wilen: Hi fellows. I wonder if you could refresh me on the H2S wells that were shut in a few years ago. How many there were? And what were their -- what was the volume per day? And what is your expectation moving forward? George Maxwell: Yeah, Jamie, we had, I think, three wells out of Ebouri that were [ shut down ] in back in 2014. The production level around Ebouri was between 6,000 and 8,000 a day, and this is from memory, if I've got those numbers wrong, I'll correct them. And as I said, we've got -- we've had 2H flowing now consistently for a number of years. 4H we took on earlier this year and has continued to perform well. And it's got to be said that we -- our expectation of this well was that it was going to last for 3 months, mainly not because of reservoir issues, but because of the ESP issues. It's an old ESP that has been in that well for probably close to 13 years. And the 5H position, we shut that down when we shut down the whole Ebouri platform. So the 5H redrill that's coming up in the program this time, that's, for me, one of the most exciting wells that are in the program because it's a redrill back into what should be a crestal position in the field, and we're anticipating some really good results from that well. So with the work on Ebouri and the test work that we've done, it just further enhances our confidence levels to be able to deal with the H2S as and when it comes towards us. James Wilen: What was the volume of that well when it was producing? George Maxwell: I'd have to check, Jamie, but I think it was probably around about somewhere between 1,500 and 2,000 barrels a day. But my position, this is going to be -- it's -- that's the old well. The new wells are a sidetrack redrill, and it's going to a much higher position in the reservoir structure. So I'm a little bit confident we may see numbers higher than that for that well. Ronald Bain: And I think what I'd add to that is George is talking gross, Jamie, all the time. Those are gross numbers. Operator: And ladies and gentlemen, at this time, we've reached the end of today's question-and-answer session. I'd like to turn the conference call back over to George Maxwell for any closing remarks. George Maxwell: Thank you very much, operator. I'd just like to close, we've had a strong third quarter and some good results in the third quarter despite the reduced volumes in net sales because of the government liftings that took place this quarter. The position that we're in coming into 2026 with the execution of our projects leaves us in a strong position. There are no concerns around where we are in the main capital project around the FPSO for Cote d'Ivoire. That project remains on track, and we monitor it very closely with our partners. I'm very encouraged that we're finally getting going on the drilling campaign, albeit there's a 4-month delay in the rig arriving. But that's very encouraging, and it shows our commitment both to Gabon and our commitment to CDI for our investment. We've seen strong EBITDAX performance over and above guidance this quarter, which maybe was a bit masked by the revenue. But again, with the lower revenue and higher EBITDAX indicates the company's focus on its cost control during this period of softening commodity prices. So I'm encouraged that when we come to talk again early Q1 that we will complete 2025 on a successful basis. As you've seen, we've narrowed the guidance to give further confidence to the market as we see our position narrowing to improve the profile through Q4. And with that, I look forward to talking to you again in Q1 2026. Thank you. Operator: And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Barbara Seidlová: Hello, everyone, and welcome at CEZ Group Financial Results Conference Call for 9 months of 2025. It's my pleasure to welcome Martin Novak, Chief Financial Officer; and Ludek Horn, the Head of Trading, who will be going through the presentation and be available for the questions. I'm now handing over to Martin to start the presentation. Martin Novák: Thank you . Good afternoon, good morning. So I will quickly go through our presentation, and then we can jump to Q&A session. So if you look at Slide 3, our total financial results, our EBITDA is about 3% higher than in the same period of last year. We achieved CZK 103.2 billion. Our net income is 7% lower, CZK 21.5 billion and adjusted net income that is a base for paying dividend is CZK 22.2 billion. Our net operating cash flow is down by 40%. This is mainly due to very strong net operating cash flow in 2024 when we were still receiving back some cash from margining from previous years. And then we had 11% higher CapEx spending that reached CZK 38.7 billion. Important slide on Slide #4, you can actually see main causes of year-over-year change in EBITDA. 3% or CZK 2.9 billion, as I already said. We have a few negative effects and a few positive effects. The negative effect is actually the strong -- by far, the strongest -- it's actually a decline in power prices. Our average achieved price for 2025 is estimated at EUR 121 to EUR 124 per megawatt hour versus something above EUR 130 in 2024. So this effect of kind of EUR 10 per megawatt hour causes CZK 10.5 billion decline on generation facilities. Another negative effect is actually lower generation volumes of hydro plants due to mild winter and not enough snow in 2025. On the other hand, positive is actually impact of fuel cycle extension and the increased capacity at the Dukovany nuclear power plant, which is CZK 3.5 billion positive and other effects, mainly higher fixed expenses of CZK 200 million. Trading activities are down by CZK 3 billion. We have low prop trading margins by CZK 2.6 billion compared to previous period. And that's -- those are actually negative effects in trading and generating. Mining is somewhat down as well due to lower coal sales volumes and lower price of coal. Positive is actually coming from 3 main factors. One is actually just distribution, meaning power distribution, which is helping us with CZK 4.6 billion. We have higher allowed revenue, thanks to growing investments in distribution assets in the past, which is CZK 2.1 billion. Then we have so-called correction factors, CZK 1.3 billion, both from 2 years before, meaning 2023 and also something that we will be handing over back in 2027, but positive effect on 2025 is CZK 1.3 billion. GasNet, important acquisition of 2024. GasNet is a Czech distribution of gas, natural gas which we actually started to consolidate as of September 1, 2024, meaning it was not in our numbers for 8 months in 2024, only the 9th month. And actually, in 2025, it is in our numbers as a full year. So that's why there is such a huge variance of CZK 7.4 billion. Sales segment is also doing better, CZK 4.3 billion improvement, mainly due to lower cost of commodity acquisition, impact of sales of undelivered commodity of CEZ Prodej when they actually had to sell some undelivered commodity in 2024 at a lower price compared to current year when they delivered it to end customers. And also proceeds from litigation with the Railway Administration that actually brought us last year CZK 1.3 billion. It didn't this year. So overall sales segment improvement is CZK 4.3 billion, and it gets us to CZK 103.2 billion. Year-on-year change in net income. By far, the most important change is actually in the depreciation and amortization line. You can see pretty significant increase in depreciation and amortization. It has a few reasons. One of them is actually consolidating GasNet that we did not consolidate last year almost at all, and it is CZK 6.7 billion higher depreciation. We also started to depreciate or accelerate depreciation of our lignite assets that are being depreciated much faster in 2025, '26 and of course, slower towards the end of 2030, basically coping hours of production, which is an allotment under accounting, IFRS accounting when you can see the end of the asset and uneven power generation. We started this type of depreciation as of October 1, 2024. So this accelerated depreciation is not in a comparable period of '24 at all because now we are comparing only 9 months. So the difference is actually net difference of CZK 5.6 billion of accelerated depreciation on coal assets. Those are the main variations. Then, of course, we have higher interest income expenses, mainly due to actually lower interest received as the interest rates go down and deposits that we have are -- bear lower interest than in the past. And that's basically it. There is lower income tax due to lower pretax profit. And finally, we get to net income of CZK 21.5 billion and CZK 22.2 billion is adjusted net income. On the next slide, you can see volumetric data, which I will skip. And we'll go to Slide 7, which is the financial outlook. We are keeping our EBITDA outlook at CZK 132 billion to CZK 137 billion. We are narrowing actually the range of our estimate for adjusted net income that was CZK 26 billion to CZK 30 billion. Now it is CZK 26 billion to CZK 28 billion. We are coming closer to the end of the year, so we are able to narrow down this range. You can see selected assumptions on power prices and carbon credits and also on the level of windfall tax, which is now estimated at CZK 31 billion to CZK 34 billion. Important milestone in our acquisition -- the territory of acquisitions, we acquired gas distribution operator on the south of the country. This is the -- it's called gas distribution, and it's actually dark green color on the chart. So now we control entire area of the Czech Republic gas distribution with the exception of Capital City of Prague that is controlled by municipal company. So this was an important add-on to our assets. We acquired actually gas distribution through GasNet. So we are not 100% owners. It makes sense to do that through the entity that already owns vast majority of gas distribution in the country. The transaction should be closed during the first quarter after all the antimonopoly decisions are made and approvals are received. It's relatively smaller compared to what we actually already own. EBITDA is about CZK 800 million, net income about CZK 100 million, no debt. So a very interesting company into our portfolio. Now let's switch to Generation Mining segment. It's important to see actually how our Generation and Mining did. I already made a few comments on that on the EBITDA slide at the beginning of the presentation. It's important to note that actually, as I said, power prices despite some positives like, for example, operating -- positive operating effects on Temelin power plant, mainly fuel cycle extensions and so on are still not high enough to beat the decline in power prices. So decline in power prices on our zero emission generating facilities on nuclear facilities is about 3% or declining EBITDA, which is mainly caused by declining power prices. On renewables, it's more significant is 26% down mainly due to insufficient water conditions in 2025, the beginning of this year. Emission generating facilities generated, as you will see later on, almost the same and will generate almost the same amount of electricity. However, EBITDA is down by 61% or CZK 6 billion, mainly due to, again, decline in power prices and narrowing margins in coal-fired power plants. Trading at CZK 1.6 billion of net income, which is 65% down compared to previous year. Entire Generation segment is -- and Mining in total is actually down 17%, reaching CZK 64.8 billion EBITDA. When you look at nuclear and renewable generation on Slide 11, you can see actually charts comparing first 9 months and also estimate for full year '25. We should be achieving pretty much highest level of our nuclear generation, close to 32 terawatt hours, mainly due to fuel cycle extension that is now longer than it used to be in the past. So there are years -- which is this year when we will be running nuclear units without interruption during that year, which is the case for Temelín power plant this year. And so that's an increase of -- planned increase of 7% year-on-year. Decline in renewables of 13% that I already commented on and total number to be achieved 35.1%. Electricity generation from coal is on Slide 12, pretty much in line with last year with one exception, which is steep decline in Poland. As many of you know, the first or second week in February 2025, we disposed -- finally disposed our Polish coal assets. And that's why there is no more EBITDA coming and generation, of course, in terawatt hours coming from those assets. That's why there is such a significant decline. There will be a decline on -- a little decline actually on the natural gas and a little decline on coal generation in Czech Republic, which will be about 2% lower. However, in EBITDA numbers, as you could see, it was about 60% decline. One of the most important slides is actually our hedging on Page 13. You can see 2026 average achieved price of EUR 94 so far declining to EUR 72 in 2029, but we are only 5% sold or secured for 2029. So it's a pretty material number. Same for carbon credits on the right side of the chart. And at the bottom, you can see the percentage of power sold, which means there will be significant decline in average sales price because average sales price for this year is estimated between EUR 121 and EUR 124 per megawatt hour, which is something like EUR 30 decline year-on-year, which is pretty significant and will definitely be seen in our sales numbers and EBITDA numbers next year. Distribution and Sales segment is doing rather well. Actually, Distribution segment is up by 75%, mainly due to gas assets that contributed CZK 8.1 billion for first 9 months versus CZK 700 million, which was a number for September 2024 because it was consolidated as of September. So CZK 7.4 billion improvement. And then on actually distribution, electricity distribution, our number is 30% better than it was last year, but CZK 1.3 billion are those correction factors as I discussed from year minus 2 and year plus 2 in total, about CZK 1.3 billion difference compared to last year. The details of Distribution segment are then listed on the slide. Another important factor is -- the most important factor, above correction factors is actually higher allowed revenue, thanks to growing investment base in distribution assets. Year-on-year development of electricity and gas distribution, electricity distribution on CEZ Distribuce territory is up by 1% in total, basically a little change. Residential customers are somewhat higher, but this is mainly due to climate. When you actually adjust for climate, it is a decrease of 0.2%. And calendar, if you adjust it for a number of days, it's decreased by -- it's increased by 0.3%. So pretty much steady distribution numbers. Gas distribution increased by 9%. Climate-adjusted consumption only by 1%. So it is colder winter '25 than '24. Sales and EBITDA -- sales segment EBITDA in total, actually CZK 10.7 billion, which is 67% improvement. You can see the details in CEZ Prodej, which is Czech retail business, 84% improvement and then ESCO companies in various countries. A few -- there were a few positive effects influencing CEZ Prodej, our retail business, one of the most important half of the difference actually -- most of the difference actually, full difference is lower cost of commodity acquisitions and lower cost of deviation, thanks to the market stabilization after it was deregulated. So that's the main chart here. On Page 18, we have volume of electricity and gas sold and number of customers. So electricity sales went up by 1%, gas by 16%. Number of customers is basically steady. We lost a little in electricity being dominant player and gained 5% actually in gas business. So in total number of customers is pretty much not changing. Their customers are much less involved in changing supplier than they were before the crisis when many of the smaller companies or even large companies went bankrupt and they had to switch to different suppliers under a fairly stressful conditions, I would say. Revenues from sales of energy services, meaning ESCO. ESCO activities are actually 8% down, but we expect them to be pretty much in line with last year or only 2% down, mainly because we had a few kind of big significant projects last year -- that were invoiced last year that did not repeat themselves now. However, organic growth is fairly reasonable, and that's why there is -- we are able to make up actually on a full year basis. And that's all for the presentation. And now I think we are ready to take questions. Martin Novák: [Operator Instructions] So the first question comes from Emanuele Oggioni. Emanuele Oggioni: The first one is on the distribution EBITDA guidance for 2025. We have seen another increase after the increase in the guidance in H1 for this business unit. So basically, from the beginning of the year, the change would have been between CZK 7 billion and CZK 9 billion. Now it's between CZK 12 billion and CZK 13 billion, so more than 50% compared with the start of the year. So probably you explained this in Slide 30. So if you could add more color on the Slide 30 and this incrementally positive distribution factor is repeatable or not in '26? And what is your expectation on '26 about this business unit as you exceeded the guidance, the original guidance to a large extent in '25. So the question is not only an explanation on '25 based on Slide 30, but also about the outlook on 2026. This is the first question. The second is on the guidance on sales, EBITDA sales. Also in this case, there is an increase -- there was an increase 2 times in a row. And also in this case, the question is if the positive drivers, the positive moving parts, which lead to this increase are also valid and visible for 2026. So we can expect structurally higher profitability after a stronger-than-expected profitability in '25 also in 2026. And the third and last question by my side for the time being is on the generation business is on the development of the data center market in Czech Republic and also in Central Europe because you are related -- that the power prices is related also to the power price of Germany. So the question is if -- what is the situation as regards to development, the projects of data centers in Central Europe and obviously, in your country. And this could change in your opinion in the midterm, obviously, not in the short term, not in the next quarter or next year, but could change something embedded to sustain the electricity prices in Central Europe, thanks to the development of data centers. Martin Novák: Distribution, as you rightly noted, there is a significant increase in distribution segment, and it's mainly due to acquisition of GasNet, which is actually natural gas distribution on the Slide 30, which is in appendices just because it was basically we did not consolidate. We did not own GasNet first 8 months of 2024. So that's why there is such a huge move. In electricity distribution, it is improvement of CZK 4 billion to CZK 5 billion compared to last year. Half of it is investments, CapEx actually increased asset base from last year's actually of investment and the rest are correction factors that 1 year go in your favor, next year, they go against you. Now actually, we have a positive effect of CZK 1.3 billion, out of which half will have to be returned in 2027. So in 2027, there will be a negative impact of something like half of this CZK 1.3 billion of this amount. So it is -- but generally, I would say that the regulatory framework, especially due to our CapEx is favorable. We would not expect other than those correction factors to decrease our profitability in power distribution in the future. However, it is a regulated business. So you don't have much space for any significant increases of EBITDA either. Gas distribution is very similar. Again, you can make certain changes, you can make certain improvements in the business. But again, it will not be -- you are not able to double the number other than through acquisitions. So of course, acquisition of gas distribution, which is actually the company that we acquired and that will be put into our numbers as of next year will bring another CZK 1 billion, close to CZK 1 billion of EBITDA next year. Sales segment. Sales segment is very strong this year. I would say that this is a really coincidence of the market conditions. Normally, we did not have that high EBITDA in the past, as you can see compared to previous year. And that's why actually for first 9 months, actually, especially so I would think that profitability might be lower in the future coming back to normal, I would say. But by how much it is, of course, difficult to predict. You can see that actually now we are 84% higher on retail which is probably something that will be hard to repeat in the future as well. And generation data centers, there is some discussion, but we really didn't see much real, real kind of projects in the region so far, especially when you compare it to other geographic locations like U.S. power price is much higher here in Europe than in the U.S. So it's difficult to compete -- we had a few contacts with potential investors, but so far, didn't really work out. And I don't know of many new kind of huge projects in this region that will really come to final decision. So let's see how it goes. But as you said, we are tied to German price plus you have distribution tariffs. So the power is not that cheap and power is actually the commodity that you need for data centers. So maybe in the future, there are some discussions. For example, if you have new nuclear units, you would be supplying data centers directly from them. But so far, we are not there yet. We have our own data center. We are planning one more. They are all within parameters of our power plants. So they are connected directly to the power plant, taking power from the plant, not from the distribution grid, but that's for our own use. So that's it. Barbara Seidlová: We can take the next question from Oleg Galbur. Oleg Galbur: I have several actually. And let me start with a question regarding your full year guidance for the nuclear electricity generation of 31.9 terawatts, which implies quite a high utilization, both for the fourth quarter, so almost 90%, but also for the full year, 85%. So what I'm trying to understand is what should we expect going forward on the annual basis? Should, for example, this 85% be like a new normal? Or how do you comment on that? And then a similar question on the guidance for electricity generation from coal, the 14 terawatt hours guidance implies an increase in coal generation to almost 4 terawatts in the fourth quarter. And if this is really the case, how is such an increase justified by the low, if not even negative level of coal spark spreads? And lastly, according to my calculation, the proprietary trading was negative in the third quarter and significantly lower, obviously, in comparison to the first half results. So maybe you could provide a bit more details on what has caused this result in the third quarter and perhaps also shed some light on the expectations for the fourth quarter or for the full year, again, on the trading results. Martin Novák: Okay. So thank you for questions. Close to 32 terawatt hours, 31.9 terawatt hours is something that we will be hopefully seeing from time to time. The reason is that we moved actually from 12 months refueling cycle, which means that every reactor was at least for a few days shutdown for refueling every single year to 16- or even 18-month cycles for Dukovany and Temelín. This means that utilization oscillates between 80% and 85%, depending on how many outages fall into a given year. And utilization in Q4 will be high because there is no outage actually in Temelín planned. And it was actually -- there was actually outage of 8 weeks in 2024 -- in Q4 2024 in Temelín second unit. In 2026, both Temelín units will be -- will have planned outage, and therefore, nuclear utilization will be lower compared to 2025. It will be around 80%. So we would expect our power generation roughly of 30 terawatt hours. And then in 2027, again, there will be no outages. So it would be close to 32 terawatt hours. So our utilization now will be kind of oscillating between 30 and 32 depending which years will be hit by refueling and which years will be run without any interruption and any refueling. Second question, coal spark spread is actually not negative compared -- because we are hedging the power. So we actually sold power at those EUR 121 to EUR 124 per megawatt hour, while carbon credits were at a level of EUR 90, maybe at the time when we were selling it, so actually, the spread was very positive. And it's also important to note that our power plants are making most of the power and also heat because all of them are heat plants in Q1 and Q4. So Q4 is kind of a very important quarter because it's winter, it's October, November, December are usually very cold month. And that's why lignite plants are running at full speed at that season. So it's a seasonal business. The hedging or the trading results so far for first 9 months of 2025, prop trading made CZK 1.6 billion. In this segment, we are not only showing prop trading as such, but also revaluation of derivatives. Estimate till the end of the year is that they would make something like CZK 1 billion to CZK 2 billion more. So the trading could achieve CZK 2.6 billion to CZK 3.6 billion of results. Clearly, it is less than it was in the past. But on the other hand, we are back to volatility we were used to in the past, I mean, in the -- before the energy crisis in 2021 to '23 where volatility was easily EUR 500 per day. Today, it's definitely not that. It is -- the market has stabilized. And with volatility of a few euro cents per day, it's very hard to make a profit of CZK 20 billion as it was in the past. So I would say we are back to normal. Normally or usually, our trading was making something between CZK 1 billion and CZK 2 billion annually as a standard result in a standard environment. So that's it for me. Thank you. Barbara Seidlová: We can take the next question from Anna Webb. Anna Webb: Anna Webb from UBS. Hopefully, you can hear me okay. Just one question for me on the gas distribution acquisition. I was just wondering if you see kind of any synergies now controlling almost all of the gas distribution in Czechia, kind of above and beyond just the contribution from gas distribution. I mean I'm aware it's quite a modest contribution from that business you bought from E.ON, but just wondering if you see kind of synergies and cost savings for the overall gas distribution business -- as in gas distribution in Czechia, including GasNet, now you've got that kind of majority of the business. And obviously, you've now had GasNet for a year and how you see that evolving would be great. Martin Novák: Yes. Clearly, we do. And that's the reason why actually the gas distribution was acquired by GasNet and not by us directly. It makes sense to consolidate all gas distribution assets under one company. So we would expect to have synergies from technical management of the assets, all the call centers, all the financial systems, but it's too early to say how much it will be. Gas distribution is not that sizable company, as you pointed out rightly. So there would be some synergies, but now it's too early to say. And probably given the size of our overall business, they will not be very material. Barbara Seidlová: We can take the next question from Piotr Dzieciolowski. Piotr Dzieciolowski: I have 2 questions, please. First one, I wanted to ask you because there were some headlines about your total CapEx until the end of the decade. Do you think -- so the question around it would be where do you think your leverage will end up at the end of the decade? And do you think you will need to revisit the dividend policy in light of this high CapEx requirement? And the second follow-up, I have, like if you -- assuming the takeover story has some legs and the government goes ahead with it and it imposes the objective on the company to do a buyback, how much of this CapEx, the total CapEx envelope is flexible that you would not need to do it? And is it a reasonable scenario to assume that you could cut a certain amount, like 1/3 of this CapEx, if there was a need to do it to facilitate some other objectives? Martin Novák: Okay. So first question, our CapEx is [ above ] CZK 400 billion to be spent until the end of this decade. We are aiming at our target ratio of 3.5x net debt to EBITDA by then. And we should be able to make it with the projection of power prices that we are now seeing, actually, on the power exchange and also paying the dividend in the range of 60% to 80% of our adjusted net income that we are usually sticking closer to 80% rather to 60%. So all those things kind of fit the puzzle and we should have no issues to do any changes. Regarding share buyback, we don't comment at all on this topic. It was mentioned in actually proposition of the government -- of the kind of what government proposes, but it's preliminary. It has not been approved by the government, actually future government. So until it is more stable document, we are kind of not commenting on political announcements at all. Piotr Dzieciolowski: And a quick follow-up, just a technical follow-up on this 3.5x net debt. We are talking here about the financial net debt. So we would have to assume that the nuclear provisions come on top, right? Barbara Seidlová: Yes. Martin Novák: Yes. Barbara Seidlová: Okay. Next question from Jan Raška, please. Jan Raska: I have one question about once again, gas distribution company. You indicate annual EBITDA almost CZK 1 billion. As you said, GasNet was realized this acquisition. So it means 55% effective ownership share. But I understand correctly that you will fully consolidate EBITDA of gas distribution to CEZ EBITDA. Martin Novák: Yes, that's how we will normally do under accounting rules. And then actually in adjusted net income, we are actually taking out the minority share of net income that is attributable to 45% shareholders. Jan Raska: So CZK 1 billion to EBITDA and then correction at... Martin Novák: [indiscernible] Barbara Seidlová: Okay. We can take the next question from [indiscernible]. Unknown Analyst: I just had one question more on the political side in the Czech Republic. Specifically, if you had any comments about any kind of political -- potential political interference or nationalization, for example, there were a few headlines. So any update on that? Martin Novák: I already answered that we actually don't comment on any political pronouncements until they actually reach our doors, which has not happened. So that's all we can say. Barbara Seidlová: And we have a follow-up question from Oleg Galbur. Oleg Galbur: Yes. Two shorts, first of all, on the CapEx, could you please tell us what level of CapEx in the Generation segment should we expect for the full year? And maybe you can also remind us what would be the expectations for the full year CapEx at the group level? And secondly, on the acquisition of the gas distribution company in the third quarter, could you disclose the price or the multiples that you paid? Anything that would be very useful. And more of a general question. So you mentioned in your presentation that the -- due to the declining power prices, you expect also a negative impact on your EBITDA. Probably the lower generation in the coal assets due to a gradual phasing out that will also have a negative impact in the medium term. So my question is, what is the strategy or what are the measures that you are considering taking in order to at least partially offset the impact of this development on the generation business earnings? Martin Novák: So first, thank you for the questions. So first of all, CapEx. Full year CapEx is now estimated at CZK 60 billion, out of which power generation would be close to CZK 34 billion. Then mining, close to CZK 2 billion, distribution about CZK 19 billion, sales about CZK 6 billion. So this is around CZK 60 billion in total. So it's less than originally anticipated. So far, we spent close to CZK 39 billion. Usually, fourth quarter is pretty strong in spending CapEx. So we assume that we will be able to do that. Price for gas distribution is not announced. We agreed with the buyer -- with the seller that it will not be announced until we close the transaction next year, and then it will be properly reported. And third question was on. Barbara Seidlová: What can we do to offset the decline in generation. Martin Novák: Decline in generation. Well, we will be, of course, offset it through future projects and entirety of our business, but how we will actually deal with coal assets, we will definitely decline power generation. It will be run for following few years in kind of winter/summer mode of operations. So winter, it will be running, providing also heat as an interesting byproduct. In summer, it will be running much less. And towards the end of decade, those power plants will very likely be decommissioned together with coal mining activities. And generally, as a group, of course, we are concentrating more on services like ESCO activities, which will be growing distribution assets, for example, through acquisition of gas distribution and growing our distribution EBITDA and of course, replacing coal heat plants with gas plants and all the renewables and all those projects. Oleg Galbur: Okay. I was asking the third question, also in light of your comments earlier today in the press conference, at least this is what Bloomberg is writing that although you expect the lower prices to negatively impact EBITDA, you are quoted here saying that -- but on the other hand, some other acquisitions could take place, so things may look different. So I was also expecting maybe some more comments on this statement, if it's possible. Martin Novák: Yes, I think it's probably what we can say now, but that's what it is. Barbara Seidlová: Okay. Now we can take a question from Bram Buring from Wood & Co. Bram Buring: Two questions, please. The first, I guess -- well, the second, but related to the previous comment, acquisitions in distribution assets, you're kind of full up in the Czech Republic, if I'm not mistaken. Are you potentially interested in acquiring abroad? That would be the first question. And the second question, again, you've already sort of touched on it, but I'm thinking about coal generation for 2026. Will the margins allow you to produce what are we -- should we be looking for closer to 10 or closer to 6 for 2026 in the coal generation? Martin Novák: So you are right in the gas distribution, I don't think we can get more in the Czech Republic. On the other hand, we are not looking at foreign gas distributions. I think we already kind of divested actually power distribution companies abroad in a few Balkan countries. And gas distribution is interesting for us for a few reasons. First, it's in our home country where we have the same regulator for power and gas. So we are able to actually bundle the negotiations together. We also have a side effect of building a fleet of CCGTs and gas-powered heat plants where having an access to gas grid definitely helps in terms of gas connection. This is something we would not necessarily do abroad. So we are not looking abroad at gas distribution. And then power plants, it's really hard to say what will be power generation of power plants now. I think we'll announce it actually in our March press conference where we'll be announcing what will be our EBITDA expectations and power generation and so on. So it's March information. Barbara Seidlová: We can take the next follow-up question from Jan Raška. Jan Raska: No, no. No question. Barbara Seidlová: Okay. So then [indiscernible]. Unknown Analyst: My question is regarding the energy price curve. Do you think that the current curve may be too low? For example, if we assume that CO2 prices would rise, even if we assume that gas prices will be lower in a few years. So what are your expectation on the future electricity prices? Ludek Horn: Okay. I will take the answer from a trading perspective. We expect that gas prices will go down, as you mentioned, in midterm future, connected with, let's say, oversupply of U.S. LNG and so on and so on. But it's hard to say how it will be converted in electricity prices in Europe because the plants -- coal plants and gas plants are, let's say, not marginal plants as it was before so often. So maybe even with higher CO2 price, we will have on average lower electricity price. So there are different scenarios how it could look like, but it's hard to say how it finally will be. Barbara Seidlová: Okay. We can take the next question from fixed -- from a telephone line, starting with +33. Arthur Sitbon: Yes. This is Arthur Sitbon from Morgan Stanley. Yes. Apologies, the raise hand was not working on Teams. So yes, my question was about the outlook, well, beyond 2025. I imagine it's a bit too early to give precise guidance for 2026 net income, but you did share -- you did make some comments. You made some comments around the fact that in distribution, distribution EBITDA is currently higher than its normalized level. You also flagged the fact that realized power price should come down on the Power Generation segment in 2026. But on the other hand, I know there is the removal of the windfall tax. So I was thinking overall, well, first, are we missing any key moving parts in EBITDA and in profit for 2026? And second, I see consensus a significant growth in net income in 2026 versus 2025. I don't know if you can be very precise, but is a significant pickup in net income in 2026, something that you're comfortable with? Martin Novák: So you are right. You actually named it all. I think it is significant decline in power prices. I think one of the most significant declines we have ever seen in the history, EUR 30 per megawatt hour year-on-year is quite a lot. Then we will have lower generation on nuclear plants because this will be -- 2026 will be the year when we will be actually refueling Temelín power plant. Then correction factors in distribution, yes, probably lower sales results because of kind of getting back to normal on the sales side. And against it as a big positive is windfall tax to be discontinued that this year in 2025 will hit our P&L, it's CZK 31 billion to CZK 34 billion. However, I cannot really comment on 2026 numbers yet because they are not out yet, and they will be in March. But I saw some of the estimates of net income for next year. And I think they are kind of not taking into consideration those negative factors as much as they should. So that's all I can say. Barbara Seidlová: Okay. It seems it was the last question. Therefore, let me conclude this call. But as always, Investor Relations is always available if some further clarifications are needed. Thank you very much, and goodbye. Martin Novák: Goodbye. Ludek Horn: Bye-bye.
Operator: Good morning. Thank you for joining us today to discuss Consolidated Water Company's third quarter 2025 operating and financial results. Hosting the call today is the Chief Executive Officer of Consolidated Water, Rick McTaggart; and the company's Chief Financial Officer, David Sasnett. Following their remarks, we'll open the call to your questions. [Operator Instructions] Before we conclude today's call, I'll provide some important cautions regarding the forward-looking statements made by management during the call. I'd like to remind everyone that today's call is being recorded, and it will be made available for telecom replay. Please see the instructions in yesterday's press release that has been posted to the Investor Relations section of the company's website. Now I'd like to turn the call over to Consolidated Water's CEO, Rick McTaggart. Sir, please go ahead. Frederick McTaggart: Thank you, Chloe, and good morning, everyone. Thank you for joining us today to discuss our financial and operating results for our third quarter of 2025. In the third quarter, our diversified water business model, which encompasses regulated utility operations, design and construction services, O&M services, and manufacturing continued to deliver strong performance. This steady progress led to a notable increase in overall revenue and earnings per share from our continuing operations compared to the same period last year. Retail water sales in the exclusive utility service area on Grand Cayman were higher than the previous year because of ongoing strength of the economy in the Cayman Islands and drier weather conditions on Grand Cayman. We experienced greater demand for water, resulting in a meaningful uptick in both sales and volumes sold. Although our Caribbean-based bulk segment revenue saw a modest decline this past quarter, primarily due to lower fuel-related charges that we pass through to customers, we achieved higher profitability in this segment. This improvement was driven by our consistent commitment to operational excellence, which allowed us to further reduce costs and enhance efficiency. Our services segment also saw healthy growth resulting from 2 construction projects that were underway this year, as well as steady gains from our recurring O&M contracts. These positive trends were partially offset by a decrease in consulting revenue, which was expected following the completion of a major plant commissioning and start-up project in California last year. During the quarter, our manufacturing segment maintained its positive momentum. We saw further revenue growth and an improvement in gross margin, reflecting the production this past quarter of higher-margin specialized products for nuclear power and municipal water customers, as well as our continued focus on maximizing both production efficiency and capacity. The completion of our new 17,500 square foot manufacturing facility expansion this past quarter is expected to further enhance efficiency and throughput in that business. As previously reported, we hold NQA-1 certifications from 2 major nuclear industry companies and see renewed interest in U.S. nuclear power solutions. These specialized manufacturing qualifications position us for continued growth. Design of the 1.7 million gallon per day seawater desalination plant for the Honolulu Board of Water Supply in Kalaoa, Hawaii, is now 100% complete, and we are focused on obtaining the remaining permits needed to allow our client to issue a notice to proceed with construction of the project. We continue to anticipate that construction of this project will commence early next year. We see this major project substantially adding to our revenue and earnings growth in 2026 and 2027. Now before getting into recent developments and our outlook for the rest of the year and beyond, I'd like to turn the call over to David, who will take us through the financial details for the quarter. David Sasnett: Thank you, Rick, and good morning, everyone. Thanks for joining us today. Our revenue for the quarter totaled $35.1 million, which was up 5% from the $33.4 million we posted in the third quarter of 2024. This increase was due to revenue increases for the retail services and manufacturing segments. Our retail revenue increased $184,000 due to a 6% increase in the volume of water sold. Revenue increase was tempered somewhat by lower energy prices, which decreased the pass-through component of our rates that we charge at Cayman Water. Our bulk segment decreased $373,000 to $8.4 million due to a decline in energy prices, similar to the situation with Cayman Water. This decreased our rates in the Bahamas operations. But as Rick said earlier, we managed to improve profitability in our bulk segment despite the decline in revenue. Services segment revenue increased by $1.6 million, primarily due to plant construction revenue increasing from $4.3 million in the third quarter of last year to $6.4 million in the third quarter of this year. Services segment revenue generated under our O&M contracts totaled $7.7 million in the third quarter of 2025, a slight increase from the amount we posted for the third quarter of 2024. Manufacturing segment revenue increased by $305,000 or 7% to $4.7 million, as compared to $4.4 million in the third quarter of 2024, and this was as a result of increased production activity. Gross profit for 2025 was $12.9 million or 37% of total revenue, as compared to $11.6 million or 35% of total revenue in the third quarter of 2024. This increase was due to increases in retail services and manufacturing revenue, which enhanced our gross profit percentage. Net income from continuing operations attributable to Consolidated Water stockholders for the third quarter of 2025 was $5.6 million or $0.34 per diluted share, and this compares to net income of $5 million or $0.31 per diluted share for the third quarter of last year. Including our discontinued operations, net income attributable to Consolidated Water stockholders for the third quarter of 2025 was $5.5 million or $0.34 per diluted share, as compared to net income of $4.5 million or $0.28 per diluted share in the third quarter of 2024. Now turning to our financial condition and balance sheet. During the quarter, Consolidated Water Bahamas received significant payments on its delinquent accounts receivable from the Water & Sewage Corporation, which resulted in a decrease of $12.5 million in its accounts receivable balances over the course of this quarter to $16.8 million as of September 30, 2025. This also represents an overall $5.7 million decrease in accounts receivables from the prior year-end for TW Bahamas. Our cash and cash equivalents totaled $123.6 million as of September 30, 2025. Our working capital was $141.7 million, and our stockholders' equity was $220.4 million. And as we pointed out on previous calls, our company presently has no significant outstanding debt. Our cash and cash equivalents totaled -- excuse me, our projected liquidity requirements for the balance of 2025 include capital expenditures for existing operations of approximately $4.5 million, and this includes approximately $1.3 million for our project in the Bahamas, and $266,000 for new equipment for Aerex manufacturing facility. We paid approximately $2.3 million in dividends in October, and our liquidity requirements may also include future quarterly dividends as such dividends are declared by our Board. We continue to evaluate how to use our ample cash balances to increase shareholder value. This completes our financial summary for the quarter, and I'll turn the call back over to Rick. Frederick McTaggart: Thanks, David. As I mentioned earlier, our services segment saw healthy growth in Q3, resulting from the 2 construction projects that were underway this year. In addition, we were awarded 2 additional water treatment plant construction projects this past quarter, a drinking water plant expansion in Colorado, and a wastewater recycling plant in California. The revenue attributable to these new projects is expected to be realized primarily in 2026, and the combined value of these projects totals approximately $15.6 million. The first project was secured by REC, our Colorado subsidiary, reflecting its entrance into the design build market by winning its first construction contract in Lochbuie, Colorado. This $3.9 million drinking water plant expansion is a very good start and helps us to pursue larger design build opportunities in Colorado. As announced earlier this month, our PERC Water subsidiary secured the other contract valued at $11.7 million to construct a wastewater recycling plant for a San Francisco Bay Area Golf Club. This innovative project, which will convert untreated wastewater into irrigation water, is expected to save 36 million to 38 million gallons of potable water annually. We expect revenue from this project to be recognized primarily in 2026. PERC is currently pursuing several design build opportunities in Arizona. We have seen an uptick in requests for customized design reports or CDRs. And in response, we are actively preparing these CDRs for several developers. As was the case with the Liberty Utilities project a couple of years ago in Arizona, we believe that some or all of these CDRs will ultimately lead to a design build contract for these important wastewater treatment facilities, but it does take time. Turning to our manufacturing business. Our new 17,500 square foot manufacturing facility expansion this past quarter will enable more throughput and allow us to manage multiple projects simultaneously. This facility expansion couldn't be timelier as we are seeing much increased bidding activity for municipal water projects in Florida. Florida has undergone significant population growth since the COVID pandemic and with more than 1.5 million new residents moving to the state. Furthermore, the state water regulator is requiring water utilities to tap into much deeper and more saline, lower Floridan aquifers for new water supply projects instead of the shallower and fresher aquifers, which have historically been used and damaged by overabstraction and saline water intrusion. This population growth and the regulatory changes have strained freshwater resources and increased water treatment costs. Various municipal agencies in the fastest-growing areas of the state are just now catching up and bidding projects to increase drinking water supply using nanofiltration and low-pressure RO systems, which are required to treat the more saline aquifer water. We believe that our extensive experience manufacturing large-scale nanofiltration and RO systems, as well as our location in Fort Pierce, Florida, position us well to continue growing that part of our business in the Florida market. So looking again at the Hawaii project, we and our clients are focused on obtaining the remaining permits needed to allow our client to issue a notice to proceed with construction of the project. This past quarter, our client received the permit to construct the 2 concentrate disposal wells for the project, which is one more big step towards commencement of construction. In addition, our client's application for a permit from the state government division responsible for the preservation of archeological and historical artifacts is currently under final review. Once we have this linchpin permit in hand, we'll be able to move forward with applications for several additional administrative permits, which are required before we can commence construction of the project. We continue to anticipate that full construction of the project will commence early next year. So as you saw, we had some new directors joined the Board in October. As part of our ongoing initiatives to strengthen our corporate governance and overall expertise related to our business, we recently announced the appointment of 3 new independent directors: Kim Adamson, Dr. Maria Elena Giner, and Geronimo Gutierrez Fernandez, and these were effective at the beginning of October. These new directors collectively bring extraordinary technical, operational, regulatory, governance and financial expertise to the Board, spanning public utility management, large-scale infrastructure delivery, international water governance and international finance. Kim brings nearly 30 years of executive level water industry experience, including as General Manager of Public Water Utilities, various water-related Board positions, and senior leadership positions at Brown & Caldwell, Kiewit Infrastructure Group and Algonquin Power & Utilities Corporation. Maria Elena has over 35 years of executive leadership experience in large-scale water infrastructure, capital planning and asset management, environmental policy and regulatory strategy. She is a former U.S. Commissioner of the International Boundary and Water Commission, where she managed multiple international water infrastructure facilities and administered a capital program of over $1 billion. Geronimo's 20-year career in senior government positions includes serving as Mexico's ambassador to the United States in 2017 and 2018, during which time he was extensively involved in the negotiations for the United States, Mexico, and Canada trade agreement. He brings to Consolidated Water deep expertise in infrastructure development and financing, was the former Managing Director of the North American Development Bank and his current position as Managing Partner of BEEL Infrastructure, a financial advisory and asset management firm in Mexico City. We look forward to their contributions and guidance as they enhance our Board's capabilities, assist with our execution of our strategies and help us continue Consolidated Water's upward trajectory. As we wrap up the year and look ahead, our strong balance sheet and ample liquidity enable us to fund growth initiatives, both organic growth and potential acquisition opportunities. We believe continuing to build our diversified business across 4 segments is the best way to deliver long-term superior returns to our shareholders. We are very optimistic about our continued growth for a variety of reasons, which include continued growth in Grand Cayman, our ongoing construction projects in the U.S., and the increased project opportunities we are seeing for our manufacturing business in Florida. We believe our recent activities and successes and the current trends in our market represent strong catalysts for continued growth, increasing profitability and further strengthening of shareholder value. Now with that, I'd like to open the call to your questions. Operator: [Operator Instructions] The first question comes from Gerry Sweeney with ROTH Capital. Gerard Sweeney: I want to start with Hawaii. It sounds like the architectural permit is coming through soon. And then separately, there's a couple of admin permits after that. I don't want to use the -- well, I'm going to use the word perfunctory, but those admin permits sort of just a perfunctory addition to what's going on and there's easily come through? Or is there anything we should be thinking about on that front? Frederick McTaggart: Well, the archeological permit, I think, is the one that is really important to get because we have to have that. And there's a lot of -- I guess there's a lot more discretion with that division than these other permits that will follow. The other permits are mainly building-related permits. So I wouldn't say they're perfunctory, but I mean, they're definitely more administrative in nature than what we've been working on over the past year. Gerard Sweeney: Administrative is probably a better word. And then assuming these come through, I would assume maybe 1 quarter, 1.5 quarters to ramp up the full sort of construction cadence and then proceeds through '26, '27, then sort of a wind down over a quarter or two. Is that sort of a correct cadence for the build-out? Frederick McTaggart: Well, I mean, if you want a more accurate sort of look at it, I mean, look at our progress payment schedule that's in the contract that we filed. I mean, generally, the middle of the project is where we're spending the most money. There will be a ramp-up period, clearing the site and all that sort of stuff -- ordering materials. But I mean, it's a typical construction project. There's nothing unique about it. Gerard Sweeney: I wasn't sure if there'd be a little bit of start and stop. Arizona, the CDR increase, is this a function of just activity picking up in the state? Or are you doing some more, I don't know, customer outreach positioning, et cetera? Frederick McTaggart: I think it's just a function of how sort of well entrenched our salespeople are in Arizona. I mean, there's just a lot -- there's always something going on with developers there around Phoenix, and our sales and marketing team really has a good understanding of these projects. So developers -- I mean, they're looking to do things that are quickest and cheapest way. So the CDR product that we offer gives them quite a bit of certainty on the cost, and we guarantee the schedule if they decide to hire us to build the project. So I think it's a good fit for those guys. That's why you see so much activity among the developers. David Sasnett: I want to point out that we bought REC, they had no design build capabilities nor were they pursuing any. So we really had to sort of build the design -- I use the word 'build' twice. We had to build the design build business in Colorado. And I think what you're seeing now with the Lochbuie project, some of the other things we're pursuing is finally the establishment of our sales activities relative to design build work in Colorado. We just couldn't walk in there and flip the switch on the design build work, but now we have a lot of momentum. And I think our salespeople established credibility, our company has established credibility in the Colorado build market. And so now they're pursuing these other projects. And I think we'll win our share of them. Gerard Sweeney: So I mean, the REC, you have a project that -- you have some reference or project references, and that could help on the expansion into Colorado as well? David Sasnett: Exactly. Gerard Sweeney: One more question, then I'll jump back in queue. I don' want to dial in there. Manufacturing obviously added 17,500 feet. How much opportunity does that open up? Obviously, it's more space, more -- you can build more, et cetera. But you also mentioned it allows you to do multiple projects at one time. So I'm not sure if it's -- it unlocks two things. One, more space for more projects, but also improves just overall flow of work through the facility, even generating additional growth opportunities or capacity opportunities. Frederick McTaggart: I mean it's really -- it's all the same thing. I mean, it significantly improves the flow of work because you're not actually cutting steel and welding and bending steel and stuff in the same area that you're trying to assemble big pieces of equipment. So the new space is more of an assembly area. So the old shop will be available for exclusive use of fabricating the actual products, piping and plate and that sort of thing. So it's a huge improvement, I think, to the workflow of the facility and allows us to build much bigger units and that sort of thing, because it provides that extra space just for assembly work. Gerard Sweeney: Then on the margin front, obviously, the nuclear work is higher end. How should we think of margins with even some of the municipal work coming through and the expansion in the facility? Can we see a step-up in margins from the flow-through work, more municipal work and just -- kind of preemptive thinking. David Sasnett: Gerry, I think we posted 3 points of gross profit this quarter. If we can get every quarter, it would be at -- I'm not expanding that, is what I'm saying. The bottom line is we believe regardless of the percentage involved with the gross profit, we believe that with the expansion, our overall gross profit dollars will improve, our revenue will improve for our manufacturing facility. The margins may fluctuate up and down depending on the product mix, and we talked about that in our [ Q ]. But obviously, the capital investment that we made in the expansion, we believe is totally justified by potential increased revenue and gross profit dollars that expansion will help us generate. Operator: [Operator instructions] Frederick McTaggart: Well, I guess there's no more questions. Anybody else? Operator: In this case, this concludes our question-and-answer session. I'd like to now turn the call back over to Mr. McTaggart. Frederick McTaggart: Thanks, Chloe. I'd just like to thank everybody again for joining and being shareholders and interested investors, and look forward to speaking with you again in March of next year. Take care. Operator: Thank you. Before we conclude today's call, I would like to provide the company's safe harbor statement that includes caution regarding forward-looking statements made during today's call. The information that we have provided in this conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding the company's future revenue, future plans, objectives, expectations and events, assumptions and estimates. Forward-looking statements can be identified by the use of words or phrases usually containing the words believe, estimate, project, intend, expect, should, will or similar expressions. Statements that are not historical facts are based on the company's current expectations, beliefs, assumptions, estimates, forecasts and projections for its business and the industry and markets related to its business. Any forward-looking statements made during this conference call are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, tourism and weather conditions in the area we serve, the economic, political and social conditions of each country in which we conduct or plan to conduct business, our relationships with the government entities and other customers we serve, regulatory matters, including resolution of the negotiations for the renewal of our retail license on Grand Cayman, our ability to successfully enter new markets and various other risks as detailed in the company's periodic report filings with the Securities and Exchange Commission. For more information about risks and uncertainties associated with the company's business, please refer to the Management's Discussion and Analysis of Financial Conditions and Results of Operations and Risk Factors section of the company's SEC filings, including, but not limited to, its annual report on the Form 10-K and quarterly reports for Form 10-Q. Any forward-looking statements made during the conference call speaks of today's date. The company expressly disclaims any obligations or undertaking to update or revise any forward-looking statements made during the conference call to reflect any changes in its expectations with regard thereto or any changes in its events, conditions or circumstances of which any forward-looking statement is based, except as required by law. I would now like to remind everyone that this call will be available for replay starting later this evening. Please refer to yesterday's earnings release for dial-in replay instructions available via the company's website at cwco.com. Thank you for attending today's presentation. This concludes the conference call, and you may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Tel Aviv Stock Exchange Q3 2025 Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded November 11, 2025. The recording will be publicly available on TASE's website. With us on the line today are Mr. Ittai Ben-Zeev, CEO; and Mr. Yehuda Ben-Ezra, CFO. Before I turn the call over to Mr. Ittai Ben-Zeev, I would like to remind everyone that this conference is not a substitute for reviewing the company's annual financial statements, quarterly financial statements and the interim report for the third quarter of 2025, in which full and precise information is presented and may contain inter-alia forward-looking statements in accordance to Section 32 to securities law 1968. In addition to IFRS reporting, we might mention certain financial measures that do not confirm to generally accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as a substitute for our financial results. However, we believe that they provide additional insight for better understanding of our business performance. Accumulations between these non-GAAP measures and the most comparable related GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call. Both can be accessed on the English MAYA site and in the Investor Relations portion of our website at ir.tase.co.il/in. Mr. Ben-Zeev, would you like to begin? Ittai Ben-Zeev: Good evening, Israel time, everyone, and thank you for joining us today. I'm happy to host you in our earnings call. We concluded the third quarter of 2025 with all-time record results across all of TASE's core business lines and activities. Revenues for the quarter were ILS 147.1 million, up 35% year-on-year. Our adjusted EBITDA reached ILS 79.5 million, up 76% year-on-year and pushing our EBITDA margin up to a record 54.1%. TASE's net profit reached ILS 50 million, up 29% year-on-year and the best quarterly profit in our company's history. These quarterly results are underpinned by the continued success in execution on our strategic plan and the significant growth potential of the Israeli capital market. Yehuda Ben-Ezra, our CFO, will discuss the financial statements in detail later in this call. Despite the ongoing conflict in Gaza, Israel continued to demonstrate both social and economic resilience throughout Q3 2025. With TASE leading indices maintaining the upward momentum and reaching new heights. September was marked by heightened volatility, driven by President Trump's 21-point framework for an agreement we come up on the end of the conflict. This immediately fueled investor expectation for a substantial reduction in security risk and the potential for wider regional resolution, causing the risk premium to decline and creating a fresh wave of increases in our equity indices which delivered impressive performances and broke all-time records numerous times. The leading TASE indices stood out in terms of returns in the first 9 months of 2025 with historical records being broken as the TA-35 and TA-90 indices topped the global return table with gains of 34% and 32%, respectively. For comparison, the Dow Jones and S&P 500 indices in the U.S. saw gains of about 11% and 15%. This positive and exceptional trend was also evident in the sectorial indices, particularly in the financial sector. Since the beginning of 2025 through the end of Q3, the TA Insurance index surged by 112% and the TA Finance Index climbed by 71%, and the TA Banks index rose by 50%. TA's equity market cap increased to ILS 1.8 trillion at the end of Q3, representing year-on-year growth of 51%. Equity average daily trading volumes hit a new all-time high, reaching ILS 3.8 billion in Q3, up 88% year-on-year. The surge in trading volumes is partially due to the net inflows into our indices by foreign investors totaling ILS 6.4 billion during the first 9 months of 2025 compared to net inflows of ILS 2.4 billion in the same period last year. The Israeli Retail segment continued to show increased interest in the domestic market this quarter and the growth in the opening of new trading accounts continued through the end of the quarter. Net inflow into our equity market for retail investors in the first 9 months of the year reached ILS 10.9 billion, a remarkable reversal compared to the net retail outflows of approximately ILS 1.1 billion in the same period last year. However, we continue to see significant potential for growth from the retail investors as this segment still accounts for only 11% of our market which is still relatively low compared to most developed western countries. The IPO market was active with 17 new companies having join TASE since the beginning of the year, raising a total of ILS 3.8 billion compared to 5 companies that raised ILS 0.8 billion in all of 2024. We saw additional IPOs in October and expect to see more new companies complete IPOs until the end of the year. We saw strong activity in our bond market with 21 new companies joining our market with ILS 5.2 billion in bond issuance. The total number of companies we take lifted bonds reached a decade long peak of 100 companies by the end of the quarter and corporate bond issuance totaled ILS 148 billion compared to ILS 87 billion in the same period last year. In our government bond segment, we saw a decline in issuance with ILS 115 billion raised by the Ministry of Finance in the first 9 months of 2025 a down from ILS 142 billion raised in the same period last year. This decline results from a combination of factors, including the appreciation of the shekel the decline in the risk premium and an increase in tax revenues alongside a lower rate of growth in government expenditure partly due to the abatement of the fighting throughout most of the year. We are advancing our strategic plan at full pace which includes initiatives to enhance the liquidity of taste listed companies. As of the end of Q3, there are 300 shelves participating in the market-making program. On our previous earnings call, I mentioned that Hapoalim joined our tailor-made market-making program for public companies, and I'm pleased to update you that since then, BankLeumi and Mizrahi Bank have also joined the program. So all 3 of the largest banks in Israel are now participating. In addition, in mid-October, Bezeq, Israel largest telecommunications company announced it is joining the program, and we anticipate more companies will follow soon. On August 10, we implemented the new trading phase trading at last, TAL, aligning us with global exchanges. I'm pleased to report that TAL has successfully penetrated the capital market with data showing a significant adoption in trading by foreign investors and domestic institutional investors across shares bonds and treasury bills. We also continue to innovate in our index segment with 11 new indices launched since the beginning of 2025 to date. In addition, as mentioned in our previous call, TASE's Board of Directors has authorized us to examine strategic initiatives in relation to our index activity including a partial or full sale of the operation or a collaboration with a leading international entity, for which the leading investment bank, Jefferies, was selected to advise us. I can now update you that we have received inquiries from a number of international entities expressing interest. We are continuing at full speed towards the transition to Monday to Friday trading. After a successful test with both local and international TASE members over the past months. The move will officially take effect on January 5, 2026. In conclusion, the Q3 financial statements reflect taste growth across all its core operations. Recent positive security development and optimism regarding a broader regional resolution could mean that the Israeli capital market is poised for continued growth. We tend to persist in our efforts to develop the market and achieve the goals set out in our strategic plan. And now I'd like to hand over to Mr. Yehuda Ben-Ezra, who will continue with a review of the third quarter results. Yehuda Ben-Ezra: Thank, Ittai. While TASE has delivered strong results in recent years in all of its business lines and core activities, our record-breaking performance in Q3 and in the first 9 months of 2025 stands out. It's a testament to the solid foundation of the Israel economy and reflects the continued confidence of both domestic and global investors in the economy and capital market. Some of the main national metrics are shown in Slide #6. Our revenues displayed substantial growth of 35% for the quarter and hit a new record totaling ILS 147.1 million. Our adjusted EBITDA at ILS 79.5 million also set a record, bringing our adjusted EBITDA margin to a record 5.1%. Our adjusted net profit increased to an all-time high of ILS 5.7 million, an 86% increase over the same quarter last year. I will continue with Slide 12, which shows some of the key highlights from our results for the first 9 months of 2025. Our total revenues amounted to ILS 414.2 billion a 25% increase compared to the same period last year. Our adjusted EBITDA totaled ILS 212 million, representing a 53% increase over the same period last year. Our adjusted EBITDA margin significantly improved to 51.4% compared to 43.3% in the same period last year. Our adjusted net profit totaled ILS 132 million, compared to ILS 80.7 million in the same period last year, a significant 64% increase. I will continue with Slide 7, we show some of the key highlights from our results in Q3 2025. Revenues totaled ILS 147.1 million compared to ILS 109 million in the same quarter last year in a case of 35% with evident across all activities. Our revenues for nonproduction and services were up 1% to reach 63% of total revenues. Expenses totaled ILS 84.5 million compared to ILS 79.1 million in the same quarter last year, an increase of 7%. The increase is due mainly to higher computer and communication expenses, operating expenses and depreciation and amortization expenses. Adjusted EBITDA totaled ILS 79.5 million compared to ILS 45.1 million in the same quarter last year, an increase of 76%. The increase is due mainly to the higher revenues, net of interest and expenses. Net profit amounted to ILS 50 million compared to ILS 26 million in the same quarter last year, an increase of 22%. The increase is due mainly to the increase in revenue from services net of the increase in cost and tax expenses. Basic EPS reached a new high of ILS 0.54, increasing by a record 94% compared to the same quarter last year. I will continue with Slide 9, where we can take a deeper look into our revenues in Q3 2025. Revenues from trading and clearing commission increased by 29% compared to the same quarter last year and total 53.9 million. The increase is due mainly to the higher trading volumes, mainly in shares, corporate bonds and mutual fund units. This increase was partially offset by a reduction of 3 trading days and a reduction in the effective commission rate mainly in shares, revenues from listing fees and annual levies increased by 14% compared to the same quarter last year and totaled ILS 25.5 million. The increase was due mainly to revenues from manual levies as a result of the increase in the number of companies and funds that pay an annual levy. In addition, revenues from listing fees and examination fees are also higher due to the increase in the volume rate. Revenue for clearing services increased by 85% and compared to the same quarter last year and totaled ILS 39.4 million. Increase is mainly due to the completion of regulation measures relating to the OTC transaction. Other factors resulting in the increase were the higher stage fees as a result of the increase in the value of the assets that are held in the custodianship and they are updating the custodian fees price lift. Revenues from data distribution and connectivity services increased by 21% compared to the same quarter last year and totaled ILS 27.7 million. The increase is due to an increase in revenue from our transition to the test indices mainly as a result of the increase in the value and the use of test indices and from higher data distribution revenues from businesses and private customers in Israel and abroad. I will continue with Slide 12, we show some of our Q3 2025 expenses. Employee benefit expenses increased by 1% compared to the same quarter last year, totaling ILS 42 million. The increase is mainly due to higher salaries, and an increase in variable compensation, which reached the maximum level set in the collective agreement. Computer and communication expenses increased by 17% that totaled ILS 3.1 million. Increase results mainly from incisive the maintenance cost of the computer system and license and from an increase in man power and projects. Marketing expenses decreased by 54% and compared to the same quarter last year and totaled ILS 0.8 million. Most of the increase is mainly due to spanning of campaigns. Other operational expenses increased by 200%, a total ILS 2.5 million. Most of the increase is due to expenses related to the market-making program. Depreciation and amortization expenses increased by 11% compared to the second quarter last year totaled ILS 15.5 billion. The increase is due mainly to new projects into new investments in software and license. Net financing income totaled ILS 2.6 million compared to the financing income of ILS 4 million in the same quarter last year. The increase is due mainly to a decrease in the balance of deposits and to decrease in gains from marketable securities. Let's go on to Slide 19, where we can review our financial position at the end of Q3 2025. Our equity totaled ILS 599.4 million. Our adjusted equity includes deferred income for listing fees and represents 76% of the adjusted balance sheet, excluding open derivatives position balances. We had ILS 429.9 million in cash and investment financial assets. The balance of the bank loan totaled ILS 101.4 million. The surplus equity, other regulatory requirements totaled ILS 500 million compared to ILS 627 million at the end of 2024. The decrease in surplus equity is mainly due to the ILS 202.4 million used for the buyback of the company's shares in the first quarter. The surplus liquidity regulatory requirements totaled ILS 225 million compared to ILS 172 million at the end of 2024. The increase in surplus liquidity is mainly due to the increase in the EBITDA and investment in test technological infrastructure. I will continue with Slide 20, where we can review our Q3 cash flow highlights. Cash flows from investing activities resulted in negative cash flows of ILS 2.9 million compared to negative cash flow of ILS 3.7 million in the same quarter last year. To share with you, mainly to a decrease in investment in property and equipment. Cash flows for financing activities resulted a negative cash flow of ILS 13.1 million compared to a negative cash flow of ILS 14.8 million in the same quarter last year. The change is due to the ongoing payment of a bank loan. TASE free cash flows increased by ILS 32 million compared to the same quarter last year and totaled ILS 61.9 million. Increase was due mainly to the increase in the EBITDA. In summary, TASE record breaking performance this quarter is a clear indication of our strong foundation and our commitment to continue to go. And with that, I will return the call to moderator to come back at the Q&A. Operator: [Operator Instructions]. Ittai Ben-Zeev: We got a message from Jefferies from the Research Analyst that he wants to ask questions. Do you see him in the queue? Operator: I don't see in the queue, and I don't see him on the line. Ittai Ben-Zeev: He is on the line. He just -- he text us it. Because we see him on the line. Dan, can you hear me? Daniel Fannon: Can you hear -- I'm here. Are you guys there? Ittai Ben-Zeev: Yes, we are here. I don't know what happened, but -- good morning. Daniel Fannon: Yes, yes. So I guess just to start, Ittai if you could just expand upon within the index and ETFs, and so that would be helpful. Ittai Ben-Zeev: Dan, sorry. There was a poll, so I didn't hear the first couple of sentences, if you can please just repeat the question. Daniel Fannon: Oh, sorry about that. Just on the new issuance activity, both from the corporate side in terms of new listings plus within ETFs as well as indexes. Just wanted to talk about just the pipeline of what's happening and how to think about where things sit today and also going into next year. Ittai Ben-Zeev: Sure. So what we've been seeing in our market that there are some companies, especially from the real estate sector, they start with issuing bonds which is a way to get to know these run institutions and to start understanding some about disclosure, now it's happening. And after a time, when they issue bonds, then they flow the equity. It doesn't mean necessarily that they will do so. But we did see in the past couple of years, some companies that started with the bonds and then switched to equity. On top of it, I think that more and more companies understand the full value proposition we bring to them in terms of getting loans through the capital markets and it's a relatively easy process. And as people expect that at some time, hopefully soon, interest rates will start going down in Israel as well. We've been seeing activity in bond segment as well, even though we've seen much more money coming in, in the past year into our equity ETF which, as I stated before, also because of the performance of the leading indices, clearly, it was a positive factor. Daniel Fannon: Understood. That's helpful. And then just in terms of -- you gave some stats in your release and on the call around foreign inflows as well as retail inflows in terms of the increase you're seeing -- can you talk about where you think you are in the, I don't know, opportunity set for that? And how -- what you're doing to increase those contributions as you think about that opportunity going forward? Ittai Ben-Zeev: Right. So as you know, years ago, we did a bunch of changes in order to facilitate and build the right infrastructure to support the future growth. I think what happened, especially in the past year that in terms of global investors that have a lot of money to invest outside of the U.S., and they compare Israel to many other companies. They see the strong fundamentals of our economy. They see the way we performed and the resilience that we've demonstrated, and they see the performance of our leading indices. I think that both from the international and of course, the retail where we started very low. And even though we grew substantially in the past year, every benchmark that we are doing to other western markets, we still see a very significant growth potential. There's still huge amount of money they're just sitting in the cash accounts of the bank. And by the way, the banks are also now paying more and more attention to retail participation and they're doing more marketing and PR in terms of getting retail to invest through them and not through the brokers who are the non-banks, we actually see I think for the first time in Israel a real competition, which is clearly something that we've been waiting for. So the way I see it, we still have a very long way before we are a mature market, both from the domestic and from the global. And I would say that part of what we are trying to get a better sense with respect to our index business, is how we can get a better global distribution because still a lot of the leading U.S. brokers are not digitally open to invest in TASE equities. And we know because we conduct also some Q&A with American investors, and we know that there are a growing demand for getting more exposure to our leading companies and we are constantly looking for ways to get better distribution for public companies. So honestly, I think it will take a few years on both aspects. Before we can be like what you call a mature market. And also, I hope and believe that the transition to Monday to Friday will also be very positive in terms of how global investors are looking to invest in our market. Daniel Fannon: Great. That's super helpful. And then, wanted to get a little bit of an update on the market-making program that you've announced, and you said in your prepared remarks another bank joining. And is there a way to discuss what the tangible impacts to velocity or volume or turnover in the context of what's happened subsequent to this program being instituted and how to maybe even think about that going forward? Ittai Ben-Zeev: Yes. So in Israel, part of the story to build the market and get the pie much bigger is an educational process with some of the Israeli public companies about the importance of it and to take the best elements from other global exchanges. So it was not easy, but eventually, we got to 300 companies that are part of this program, which is very, very important of building IR and how this whole thing is working. And on top of it, we managed in the past few months to get four big companies, three of them, the three largest banks and now Bezeq to actually pay more money to market makers. And the fact that it's been successful and why we believe it, it's just a question of time before more and more companies will join because the steps show that it brings more trading to the company, and it narrows the spreads. So I can tell you that even though we've been only a few months running this program is already a big success. We invest a few millions of shekels in supporting this program, and we are very happy from the outcome. We also did AI in terms of the English translation of biggest public companies. And we believe that over time, liquidity will become better in our market, more English report, and it will help to get more and more international investors. So overall, we are very happy from the results so far that we see. And we analyze each company. So we know on a daily basis, weekly basis, monthly basis, once the percentage of the market maker out of the total trading of the company. Daniel Fannon: Got it. Okay. And then another just follow-up here around expenses and margins. Clearly, the margin profile continues to improve. And I think you've said publicly before that you think you can, over time, get to some of the global peers, but we've seen a really nice step-up in this year so far. As you think about normalization of, I don't know, things like marketing or maybe areas where you're underinvesting that might need to pick up and might maybe stall or slow down that rate of margin expansion if that is true. Ittai Ben-Zeev: I don't see anything that should -- which is under invested in the company. We do anything we can, we believe it's crucial to foster and support this growth. As I stated in the past, there is no fundamental reason why this company should not continue to grow over time. And as I mentioned before, even though we are focused on the double-digit growth, we are always remain very focused on the expense side. I think that we've been growing in the past years on the nontransactional items. But clearly, this year has been a very successfully in terms of trading volumes. And because of the nature of the business, you see the results because the penetration of the retail and also global investors, is not as high as we expect. And because we still have some services and products that have been -- haven't been deployed fully yet I believe that we will continue to grow in the next few years. So nothing that should hold up in -- with that respect. Operator: [Operator Instructions]. There are no further questions at this time. This concludes the Tel-Aviv Stock Exchange Q3 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Hello, everyone, and thank you for joining us today for the DCC interim presentation for the 6 months ended 30th of September 2025. My name is Sami, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Donal Murphy, Chief Executive of DCC, to begin. Please go ahead, Donal. Donal Murphy: Good morning, and welcome to DCC's interim results presentation for the 6 months ended the 30th of September 2025. Thank you all for joining us this morning on our webcast. I'm joined today by our Group CFO, Conor Murphy. Here's our standard disclaimer. Thankfully, I don't have to read it out. So this morning, I will outline the significant strategic progress we have made to build DCC into a simpler, stronger and more focused business since announcing our change in strategy this time last year. Conor will give you an update on the trading performance in the first half of the year, and we'll finish with our outlook statement and a summary before we open up the session for your questions. So let's get started with an overview of the significant strategic progress we have made over the last 12 months. On the 12th of November 2024, we announced a strategic plan to maximize shareholder value by focusing solely on our compelling opportunity in our energy business and simplifying the group's operations through portfolio actions. Over the last 12 months, we have made very significant progress to simplify the group with the majority of the planned changes now complete. More on this shortly. We announced in May that we intended to return up to GBP 800 million of the proceeds from the sale of DCC Healthcare to shareholders. We completed the initial on-market buyback of GBP 100 million in September, and we will shortly commence a tender offer for GBP 600 million of our equity. On the 21st of October, we announced that we had acquired 2 liquid gas businesses in Europe, a priority development area for the group. And last, we have to perform while transforming the group. I am pleased that our trading performance improved through the first half of the year after a difficult start in a challenging environment and that we are maintaining our guidance for the year as a whole. So let's look in a little bit more detail on our strategic progress over the past 12 months. The plan we announced last November to maximize shareholder value had 3 actions. Firstly, we said the group will now focus solely on our most compelling growth opportunity, our energy business. Secondly, we launched the process to sell DCC Healthcare. Thirdly, we said that within the next 18 to 24 months, we would review our strategic options for DCC Technology. We have made significant progress since last November. In September, we completed the sale of DCC Healthcare. In May, we commenced an initial GBP 100 million share buyback program, which we completed in September. We will shortly commence a tender offer, returning a further GBP 600 million of the proceeds to shareholders. On the 14th of July, we announced that we had reached agreement for the sale of DCC's Info Tech business in the U.K. and Ireland to AURELIUS, a globally active private equity investor. The business had revenues of approximately GBP 2 billion and represented approximately 1% of DCC's continuing profits in FY '25. We announced on November 3 that the sale completed. While the cash proceeds to DCC are not material, the business was responsible for about half of our intra-year working capital swing for the group. It was also the only business within the group availing of supply chain financing. The removal of both factors further strengthens DCC's financial position. The final component of DCC's Info Tech activities is a very small and unprofitable business in the Netherlands, which we will exit in the second half of the year. We have commenced the proprietary work for the sale of the remaining part of DCC Technology. This business is a global leader in the sales, marketing and distribution of specialist Pro AV, Pro Audio and related products and services. It is predominantly based in North America. We are on schedule with the integration plan we outlined last November. It is our intention to have reached agreement for the sale of our Specialist Technology business by the end of calendar 2026. To set DCC up for growth as a single sector energy business, we have made a number of leadership changes, both at Executive Director level and at management team level. The new DCC leadership team is fully in place, has extensive experience in the energy sector and the commercial agility and drive to build DCC into a global energy leader. DCC is a unique energy business, providing multi-energy solutions to our customers for 5 decades. We operate across solutions, energy products and energy services and mobility. We have built a strong capability in engineering-led decentralized energy solutions, particularly in our liquid gas business. Our ambition is to be a global leader in the sales, marketing and distribution of energy products and services, delivering high growth and high returns for our shareholders. We have a scalable growth opportunities across our sectors, particularly in liquid gas and energy services. Our strategy is to grow our customer base by being the provider of choice for secure, competitive and cleaner energy products and to sell more services to our energy customers, driving higher organic growth rates. How do we win? We leverage our strong market positions being typically #1 or #2 in most of our markets and with our deeply embedded customer relationships. Our aim is to be the best customer company in the energy sector. We are strong operators in the energy sector and have significant experience in consolidating fragmented energy markets. By delivering our strategy, we will drive organic growth of 3% to 4% and acquisition growth of 6% to 8% on average per annum to achieve our ambition of delivering double-digit growth in earnings. We aim to turn approximately 90% of our profits into cash and always to deliver returns on capital employed in the high teens. Looking ahead, demand for secure, cleaner, competitive energy is stronger than ever. Our commitment to carbon reduction is clear. We will continue to provide innovative offers to support our customers with the multi-energy solution capability we have built over the last 5 years in biofuels and energy services. Emissions reduction will be an output rather than a driver of our strategy. We still believe that energy systems are going to decentralize and move closer to the customer. That is where we win through our closeness to our customers, meeting them where they are at. Now to focus on the large capital return to shareholders. The sale of DCC Healthcare enabled us to return GBP 800 million of capital to shareholders. As I mentioned earlier, the process began in May with an on-market share buyback program of GBP 100 million. Following the completion of the sale of DCC Healthcare on September 9, we announced our intention to return GBP 600 million to shareholders shortly after these half year results via tender offer. The final GBP 100 million return will take place after the receipt of the unconditional deferred consideration within the next 24 months. The tender offer will commence shortly and will be completed by the end of calendar 2025. The strength of DCC's balance sheet and the cash-generative nature of our business provides significant capital for growth to deliver on our 2030 vision. In May, we outlined the exciting growth opportunities we have across our energy activities. In Energy Products, we have an opportunity to scale our liquid gas business in many remaining fragmented markets in Europe and in the U.S. This opportunity in liquid gas is a key part of our plan to reach GBP 830 million of operating profit by 2030, double our 2022 total. DCC has been in the liquid gas business since 1977. We've built leadership positions in 6 countries and established growth platforms in a further 3 markets. Overall, DCC is just 5% share of our total addressable market in Europe and the U.S. Yet in the markets where we already operate in Europe, we have built approximately 30% market share. In these consolidated European markets, our leadership positions drive higher returns. We drive higher returns by, for example, leveraging network effects, better routing and scheduling of our fleet and optimizing the depot infrastructure, reducing the cost to serve our customers and indeed the cost to acquire new customers. We are strong operators, so we often have opportunities to optimize margin management and drive synergies through procurement. We have a very loyal customer base with low churn rates. These relationships typically last more than 10 years. The infrastructure we install on our customer sites makes it costly for them to move to another supplier or energy type. Liquid gas is seen as a transition fuel in Europe. With its lower carbon characteristics, we are attracting new customers from other higher energy carbon energy sources, so who want to reduce their emissions. We have significant opportunities to scale our business by expanding into new fragmented markets and by further consolidating in our existing markets. This is a core competence of DCC. On the 21st of October, we announced that we have agreed to acquire FLAGA in Austria and a cylinder business in the U.K., both from UGI International. FLAGA founded in 1947, serves over 15,000 customers from its nationwide network in Austria across both bulk liquid gas, where average customer lifetime is more than 15 years and via a significant cylinder business. The acquisition extends DCC's leadership position in the Austrian energy market, where we already have a leading liquid fuels business and a growing presence in energy services. In the U.K., the acquisition of the UGI cylinder business is highly synergistic and further strengthens our liquid gas cylinder proposition in the market. I'll now hand you over to Conor, who will take you through the performance for the first 6 months of FY '26. Conor? Conor Murphy: Thanks, Donal, and good morning, everyone. This is my first results presentation since sitting into the CFO seat. I'm really excited to be here, and I'm focused on making sure that we continue to get our messages across in a simple and clear term, particularly as we transition the group to a single sector energy business. As Donal talked through, it has been probably the most significant 6 months of strategic progress that we have ever had in the group. In contrast, the 6 months to September is the seasonally less significant part of the year from a trading perspective, with the first half representing approximately 1/3 of our expected full year operating profits. Before I start, by way of reminder, the results from our former Healthcare business and Info Tech business in U.K. and Ireland are now classified as discontinued. What we have set out in this presentation comprises our continuing operations, which is our Energy business and the remaining part of DCC Technology. Prior year comparatives have been restated accordingly. In the 6 months to September 2025, our revenue was down from GBP 7.9 billion to GBP 7.4 billion on a continuing basis. I will go through the details of the declines when talking through Energy and Technology. At a high level, the main drivers were the fact that volumes were down in energy and that commodity pricing is also significantly lower year-on-year by approximately 15%, which impacts our revenues, but is not reflective of our underlying trading. Operating profit is down 5.4% on a reported basis and 5.3% on a constant currency organic basis. Again, I'll talk through the detail in a moment when walking through Energy and Technology. Our adjusted EPS is down 4.2%, which is lower than the decline in operating profit as a result of the lower finance costs in the first half. The lower finance costs are a result of lower interest rates generally, but also the lower average net debt that we had in the group over the 6 months. We are declaring a 5% increase in our interim dividend. The Board is conscious of the importance of our dividend to our shareholders, and the increase represents the confidence that we have in the business as we enter the seasonally more material second half of the financial year. Finally, our net debt at the end of September was just GBP 522 million, reflecting the proceeds from the disposal of Healthcare, as mentioned earlier. On a pro forma basis, this will be GBP 600 million higher once we complete the capital return by way of tender offer, which is expected to complete by the end of the calendar year. I won't delay on this divisional results slide. It sets out the split of our operating profit between Energy, which now accounts for 84% of the operating profit in the first half and technology, which accounted for 16%. Given the weighting of energy to the second half of the year, we expect that the full year weighting will be more like 88% energy and 12% technology. Focusing on our energy results for the 6 months ended 30 September 2025. In the full year results presentation in May, we presented energy in a more intuitive way and in the way that it is managed commercially. We split energy between our Solutions business, which itself splits between Energy Products and Energy Services and then our Mobility business. Overall, DCC operating profit was 5.2% behind the prior year and 5.9% on a constant currency basis. In our trading statement in July, we highlighted that the first quarter was in line with our expectations, although behind the prior year. We knew that the business had a tough set of comparative numbers in the first half of the prior year and particularly in the first quarter. It has been good to see that energy was slightly ahead of the prior year in the second quarter. Solutions operating profit declined by 10%, driven by Energy Products, while Mobility operating profit increased by 2.8%. I will now take each of these in turn. In Solutions, our Energy Products business accounted for 50% of profits in the first half, though it is a larger proportion of our profitability in the full year. Energy Products encompasses our liquid gas, liquid fuels, on-grid gas and power businesses. Energy Products volumes were 4.9% lower in the first half and operating profit was down by 12.8%. There were 3 main drivers of the decline. Firstly, our businesses experienced warm weather in the early part of the first quarter in France, U.K., Ireland and North America. This impacted on the volume demand in each of these markets. And while we maintained our market shares, profitability declined. Secondly, we disposed of our Hong Kong and Macau business in the prior year. The removal of that business impacted both volumes and profitability, accounting for 4 percentage points of the decline in the Energy Products business. Thirdly, we are seeing the impact on demand of a number of softer economies, particularly impacting commercial and industrial volumes. To give a little more color on this, Continental Europe was primarily impacted by warmer weather, mainly in France. The decline that we experienced in the U.K. and Ireland was driven by our natural gas and power business in Ireland after a very strong performance in the prior year, a significant factor in the tough comparatives that we faced overall. Performance in our liquid gas business in the Nordics was a little difficult, however, with lower demand from commercial and industrial customers. Finally, in Energy Products, our U.S.-based business performed ahead of the prior year despite warmer weather. We've had a number of cost initiatives in the business, driving better margins and operational efficiencies. The smaller part of Solutions is our Energy Services business, which grew its operating profit by 8.5%. The largest and most mature part of our business in Energy Services is our business based in France, and it again grew very strongly during the period, continuing to increase revenues and profits while making good progress in integrating acquisitions completed in the prior year. Although the market backdrop in Germany was difficult, our business there achieved good growth. Our energy service businesses in the U.K. experienced difficult market conditions with the poor economy impacting the willingness of commercial customers to invest. Our business in Ireland has continued to perform well. Our mobility business grew its operating profit by 2.8%, which was mostly organic. Volumes were behind the same period a year ago as we proactively manage margins across each of the regions in which we operate. The continuing trend towards electrification also impacts volumes, though this, of course, benefits our nonfuel revenues and margins. We stepped away from a number of lower-margin, higher-volume contracts, in particular, in Nordics and the U.K., giving the business a sharper focus. In addition to the fuels which we provide at our stations, we offer a range of nonfuel offerings at our service stations, including EV charging, car wash and convenience retail in a select number of sites. In the 6-month period, we developed these across our markets and in France and Luxembourg in particular. The larger part of our nonfuel services encompasses fleet services across fuel cards, telematics and digital truck offerings. We delivered strong organic growth across all of these areas, complemented by a modest contribution from acquisitions. Our nonfuel gross profit grew by 3.5% year-on-year as we expanded our customer offerings. In our full year results presentation, we set out this important slide, but we didn't dwell too much on it in May. I'm going to spend a little more time on it today as it provides much more granular detail on our Energy business and is helpful in telling the story of the first half. Firstly, to highlight the split of profits between Solutions and Mobility. In the full year, this was a 77% weighting of profits to Solutions and 23% to Mobility. It skews quite significantly towards mobility in the first half, which represented 41% of our operating profits. There's a lot more on-road driving done during the summer months across all the markets in which we operate retail networks. And conversely, our energy products businesses are comparatively quiet in the summer months given the commercial and residential weighting in those businesses, although energy demand does tend to be higher. I highlighted that our Energy products volumes were 4.9% behind in the first half, and I've talked about the main drivers of this decline. We set out in the table both the gross margin at a total level and on a pence per liter basis. The pence per liter decline is really a function of mix resulting from the shape of the volume decline. Firstly, the volumes lost from the disposal of the Hong Kong and Macau business were at relatively high margins and the warmer weather reduced domestic demand, thereby resulting in a lower pence per liter margin. Overheads are down in excess of the volume decline. However, the mix impact results in operating profits declining by 12.8%. In Energy Services, it was pleasing to see the revenues continue to grow, 14.3% ahead of the prior year and gross profit further ahead, achieving 16.3% growth. Operating profit grew by 8.5%, although being lower than gross profit growth. We've continued to invest in the businesses which we've acquired, particularly those that were owner-managed, and we've invested to upgrade their infrastructure and management capabilities into the PLC environment. Finally, in Mobility, similar to energy products, we experienced a 4.6% decline in volumes. We increased fuel gross margin per liter from 6.2p per liter to 6.6p per liter, highlighting the resilience of the mobility business model and our proactive margin management. This drove our fuel gross profit up by 2.3% year-on-year. At the same time, nonfuel gross profit decreased by 3.5% -- increased by 3.5%, which demonstrates the focus which we've had on developing and investing in this area of the business. All of this drove 2.8% growth in our operating profit. Moving on to DCC Technology. Revenues in DCC Technology declined by 2.7% in the first half of the year. And with a slight reduction in gross profit, this resulted in operating profit declining by 6.9%, which was a 2% decline on a constant currency basis, given the weighting to U.S. dollar profits that we have in our business. In our North American business, the Pro Specialist product business performed well, increasing our market share where we are the market leader. Our Lifestyle and consumer-focused products segment experienced weaker consumer demand and some stock availability issues impacting the performance of the business in certain categories. As you can imagine, this sector has been more difficult with tariffs leading to uncertainties and consumers somewhat reluctant to spend. The first quarter was the stronger quarter for the business as customers look to pull forward stock orders in advance of the impact of tariffs. Understandably, this led to a slower second quarter as customers work through this stock and as the impact of tariffs became clearer. Our smaller European business delivered growth, particularly in the Nordic region. As we announced on the 3rd of November, we've completed the disposal of DCC Technology's Info Tech business in the U.K. and Ireland to AURELIUS. We continue to prepare the remaining DCC Technology businesses for sale next year, and we've made good progress in the integration and operational efficiency program in North America. Our capital allocation framework. We had set out this framework at the time of our results presentation in May of this year. Given the strategic progress that we've made over the last 6 months, I think it's important to reiterate this framework to recommit to it and to put the progress that we have made in the context of this framework. We've allocated over GBP 70 million to capital expenditure, continuing to invest in our businesses and their organic development. The vast majority of this investment has been in energy. We are declaring a 5% increase in our interim dividend, underlining the strength of the business and our confidence in it. We've committed approximately GBP 60 million to acquisitions over the period, including most recently the acquisition of 2 liquid gas businesses in both Britain and Austria. Finally, we have returned GBP 100 million to shareholders by means of the on-market share buyback and we'll shortly be launching a GBP 600 million capital return by way of tender offer, all following on from the completion of the disposal of DCC Healthcare. And we've done all this while maintaining our strong balance sheet, which we remain committed to. And recently, we have had our investment-grade rating reaffirmed by credit rating agencies. With that, I'd like to hand back to Donal for a summary. Donal Murphy: Thanks, Conor. So just before we open up to Q&A. So what makes DCC unique? Global energy demand will grow. Customers need secure, cleaner and competitive solutions. We scale growth opportunities in new and existing markets, market-leading positions and long-term customer relationships. We're strong operators, and we have an agile, entrepreneurial and resilient business model founded on a strong balance sheet and cash generation, self-funded double-digit growth. And we're a highly experienced compounder, almost 400 acquisitions at high returns. I am confident that this will deliver sustainable, high returns and compounded growth for all our shareholders. So in summary, our outlook for FY '26. DCC continues to expect that the year ended 31st of March 2026 will be a year of good operating profit growth on a continuing basis, significant strategic progress and ongoing development activity. So in summary, we've made excellent strategic progress over the last 12 months, and most of our simplification project is behind us. We are in the process of making a material return of capital to you, our shareholders. And looking ahead, we have an excellent opportunity to grow our unique multi-energy business while delivering high returns for our shareholders. We are well on track to deliver our ambition to double profits by 2030 from 2022. And we are focused on the future, confident that we will build DCC into a global leader in the energy sector. Thank you all for listening, and we look forward to answering your questions. Operator: [Operator Instructions] Our first question comes from Rory McKenzie from UBS. Rory Mckenzie: Here. Two questions, please, on the new Energy divisions and the new KPIs. So firstly, on Energy Solutions products, can you help us understand what a sensible outlook is for H2 after volumes were down 5% year-over-year in H1. I think the margins pence per liter were also down quite a bit. It sounds like quite a lot of that pressure came in Q1 with the disposal and heating volumes. So how do we kind of read those trends as we go into the significantly bigger part of the year? And then secondly, in Solutions Services, I appreciate profits were up overall in H1. But if I assume most of the M&A was going into that segment, that would imply that organic profits were down about 8% year-over-year in H1. So can you also talk about where you are in terms of the integration of M&A in that division and what a kind of fair profit growth outlook should be from here? I know you're doing a lot around customer strategy and repositioning. So where are we with that? And what should we expect for H2? Donal Murphy: Thanks, Rory. And we'll start with just your first question. So when we look at the 2 big impacts in the first half of the year were weather and Hong Kong and Macau. Hong Kong and Macau is kind of easy to deal with. We only had it in the first quarter last year. So we have lapped the Hong Kong and Macau being within the group. And I say, it was a higher-margin activity. On the heating side, and we see this, like the March last year and into April was a very mild period. So we had weakness in our heating demand. That will bounce back in the second half of the year. So we're very confident that the activity that wasn't there in the first half will flow through in the second half. It is higher margin activity that will impact clearly or benefit the margins in the second half of the year. And that's why we're so confident in terms of reiterating our guidance for the year as a whole. So there's nothing really to read into the numbers in the first half of the year. On the services side, actually, there is modest organic growth in the first half of the year. The contributions from acquisitions were pretty small really. And overall, the business is growing very strongly in France and the markets outside of France, demand has been weaker. And that's, I think, been well publicized by many of our peers. I don't know, Conor, if there's anything you'd like to add to that. Conor Murphy: No, no. I think you've covered it well, Donal. I mean the -- as Donal said, the progress in the first half, we will see that maintained, if you like, in -- for the full year. So second half broadly flat, maybe a small bit of growth on the services side. Operator: Our next question comes from David Brockton from Deutsche Numis. David Brockton: And weather, I think you also called out weaker commercial volumes. Can you just sort of give us an update as to what your planning assumptions are for H2? Do you expect those commercial volumes to improve? Or do you expect growth elsewhere to offset it? And if so, where? And then the second question in relation to technology. from memory, you were looking to drive, I think it was GBP 20 million to GBP 30 million of profit improvements in that business before you sold it. Can you give an update on that, please? Donal Murphy: Sure. David, we missed the first part of your question didn't come through, but I think it was weather related and then it went into the commercial... David Brockton: Commercial volumes? Yes. Donal Murphy: Yes. Yes, the commercial volumes. Yes. Look, the -- again, there was nothing kind of overly dramatic in the commercial volumes, like the 2 or bigger impacts in the first half were the weather effect and Hong Kong and Macau. So there was a number of the that we were in a little bit up in Scandinavia, where some of our large commercial customers, their demand was a little bit weaker. We really don't see anything particular flowing through into the second half of the year. Energy business typically is very resilient regardless of what's happening in the energy cycle so -- or in the economic cycle, so people need their energy. You might have a little bit of softness as economic activity is down, but it tends to be around the edges. Conor Murphy: Around the edges. And I guess there's nothing -- the second half forecast we're not forecasting any major pickup from a commercial industrial perspective. So if there was a significant drop off, it would impact, but that's as is baked into the forecast. Donal Murphy: On technology, David, there was -- and there was probably 2 quarters or 2 different quarters in the first half of the year. We actually -- the business in North America performed well in the first quarter. There was probably a little bit of pull forward of business with concerns over tariffs it was weaker in the second quarter. So tariffs and the impact of tariffs had an impact on the business during the first half, but we had the flow-through of that activity in terms of integrating the 2 North American businesses together. So we're actually well on track to deliver on the -- and there's a big range between EUR 20 million and EUR 30 million, but we're certainly well on track to be on the mid side of that range at the moment and heading towards the side of that range. But the market is tough, and that is offsetting some of the benefit that we're seeing coming through from the integration activity. Operator: Our next question comes from James Bayliss from Berenberg. James Bayliss: Two for me, please. Within Energy's Mobility segment, you noted fuel gross margin uplift was in part driven by procurement initiatives, I think it was. How should we be thinking about the direction of travel from here on that side of things? Is there more to be done? And equally, was there a contribution within that gross margin uplift from mix shift within fuel type? And then my second question on capital allocation, admitted M&A in the period was about half of what it was in the prior year. Can you just provide some context around that? Is that the natural ebbs and flows of the pipeline? Or are there any considerations around market backdrop or indeed management's focus on the ongoing group simplification? Donal Murphy: Super. Thanks, James. And maybe just on the mobility side, and there was just -- I suppose just to remind everyone that a chart that we had in our results presentation last May showing the increase in margins over the last decade within the mobility business, it was a CAGR of 13%. So this business and the industry is good at growing margins year-on-year, and we see the benefit of that. There is a little bit of volume margin offsetting one another. So there's times in the year and there was in the first half of the year, particularly in France, where some of our competitors were very aggressive on the pricing side, and we chose not to play, impacted a little bit on our volume. But as you can see, the margin performance was good. The procurement activity is -- it's a good call out, James. And we are seeing significant change in the supply landscape on the energy side as refineries are changing hands, some of the integrated energy companies are pulling back in some of the markets. And as a customer-focused company with significant volume requirements, that's playing into our strength. So we have more opportunities on the supply side than we probably would have had in the past. And that is an opportunity, and it will be an opportunity for us going forward to drive margin improvement. We have -- as part of our simplification process, we have set up central procurement teams so that rather than looking at buying our products locally within each market, we're looking at opportunities to leverage the scale across the energy activities that we have. And we're a substantial buyer of product within the market with a very strong balance sheet. So we see procurement being an area of focus to drive profit margin improvement going forward. Conor, I don't know if there's anything you want to add. Conor Murphy: No. I guess working capital improvement as well. As Donal said, we've -- what the technical guys call the short that we have into the market, the demand that we have into the market is really important to those suppliers, and we will leverage that as best we can to make sure that we're giving our customers the best offer that we can and the best pricing that we can. Donal Murphy: Sorry, capital allocation. Yes, look, the -- in ways, it has been -- say this morning, it's been a quieter period for us on the acquisition side. And that is -- it's not -- we've not been distracted with the divestments. It's just M&A, and we've talked about this over many years, M&A ebbs and flows, and it doesn't come on a consistent basis. We have talked about and talked earlier just about the services area being a little bit more difficult. So we're probably a little bit more measured in terms of capital deployment in that area. But we are very focused on growing our liquid gas activities, in particular, on the product side. So the 2 acquisitions that we announced were very timely. We have a decent pipeline actually and a growing pipeline of opportunities at the moment. So we're certainly very confident that we will be deploying more capital in this financial year. Operator: Our next question comes from Christopher Bamberry from Peel Hunt. Christopher Bamberry: Three questions. In Energy Services, could you please explain the factors behind the lower growth in operating profit compared to gross profit in the first half? Secondly, in Mobility, you intentionally see some lower margin volumes in the Nordics and the U.K. What do you expect to be annualized impact from this and there's potentially some more sharpening of focus to come? And finally, in technology, has the shortage of certain lifestyle products been resolved? Donal Murphy: Okay. And Chris, just to take the first one on Energy Services, we have been -- so we bought quite a number of businesses, and we talked about that a little bit earlier. We're integrating businesses together. Some of that results in investment within the businesses. We -- and we're investing in terms of building our sales organization. And some of that is the business demand was very strong. There was plenty of orders coming to the businesses. We need to be much more proactive now within the business. So there's investment going into these businesses, which we always had planned to do post acquisition. So the big differential between the gross profit growth and the operating margin is really investments that we're making within the business. On the mobility volume side, again, as I said earlier, there is a little bit of margin volume that we play. So it is -- we don't really kind of try and call and say, well, actually, the volume -- that volume will bounce back or volume will be a bit higher in the second half of the year because there could be activities by competitors in markets, and we'll choose not to play on that. I think the lower-margin business that we talked about walking away from, that's done. There's not -- we don't have other business in that category. So it's really down to -- it's down to competitor activity in the markets. But we'd be very confident that we will deliver good organic profit growth within our mobility business for the year as a whole. And finally, just the lifestyle products piece. So again, particularly the uncertainty around tariffs and price points on those tariffs. So a lot of those products that we sell on the lifestyle side come in from China and other markets and are imported into the U.S. So the price of products went up pretty significantly with the tariffs that impacted on demand. That's probably washed its way through the market at the moment. But the consumer in the U.S. is probably not the healthiest at the moment. And that kind of weighs into the outlook for the year. Thanks, Chris. Operator: Our next question comes from Joe Brent from Panmure Liberum. Joe Brent: Three questions, if I may. Firstly, interested to hear your views on what the peer group is saying in solutions. Secondly, if memory serves, I think you were targeting double-digit EBIT growth in services given the first half and what you're saying, does that now appear a bit of a stretch? And then finally, on tariffs for the rest of technology, you've told us kind of where you're at in the first half and the Q1, Q2 split. Could you just give us a little bit more on your thoughts around pricing and consumer sentiment in the second half and how you see the second half playing out for the rest of technology? Donal Murphy: Joe, could you just repeat the start of your first question? Joe Brent: The first one is just your views on what the peer group are saying in solutions. Donal Murphy: Yes. Yes. Okay. Sorry. Look, and I think it's well publicized that, that whole services market is slow on the solutions? Conor Murphy: Services solutions. Donal Murphy: Services solutions. Yes. And Joe, like it is -- where we're seeing, as I say, in France, we have a particularly strong order book we've had going into this year. So we are -- we see the profits are fairly baked in for this year as a whole and actually into next year. In some of the other markets we're in, the demand has been weak for a while, and we're seeing that -- we're very much seeing that across the peer group. And just while we're on it like the peer group generally on the product side, you would see very much the same factors impacting. I think we have been outperforming any of our peers and growing our shares. Conor Murphy: On the double-digit services growth, Joe, like we won't see that in the second half. That's absolutely right. And -- but I think it is something that we are confident in over the medium and longer term. That's absolutely where the demand is going to go, where the business is going to go. When you think about the energy transition, our customers are going to transition into looking for more services, looking for solutions that give them power and energy that is more affordable and cleaner and more independent, and that's going to drive the growth in that area. So look, we're confident in the medium term. We always knew that there was going to be a certain amount of volatility in the shorter term in this business, but we're committed to growing a long-term business from there. Donal Murphy: And just on the tariffs and product demand side, I think like the bar changes or further changes within tariffs, we're a pass-through business. So the increase in the price of the products have been passed into the market at this stage. I suppose the question in terms of the next 2 months really in the -- particularly on the consumer product side is what will demand look like. And we've probably been conservative in our views on what we think the demand will be like in our guidance for the year as a whole. Operator: Our next question comes from Ken Rumph from Goodbody. Kenneth Rumph: Two questions. One is to go back to your expectations for the full year and products and kind of that needing to catch up and start growing in the second half and continue growing as it did in the first quarter. Your comments seem to be that sort of you'd suffered previously from a mild spring. I mean, would another mild spring throw you off course? Or would it merely be kind of just as it was before, and therefore, you expect growth? I mean to try and understand sort of why you were confident that you were going to see that second half growth to sort of recover what was lost in the first half? The second question is just a little bit more kind of technical in a sense, which is you've not given us a price for the tender offer today, which I confess I expected. What's the sort of timetable? We get it on a certain date and then there's a certain number of days for it then to proceed. You've said it's going to finish by the end of the calendar year. I assume that's not kind of Christmas. So what's -- when we do get a figure, what's the timetable? Donal Murphy: Okay. And Ken, just on the weather piece, like -- and been around this for a very long period of time. And you get ebbs and flows from a weather perspective. It is always more acute in the first half of the year because April is a significant heating month as you come out of the winter. And then as Conor said earlier, the rest of the summer, it's a lower level of impact. So your ability to catch up in the first half is very limited. But people buy like a typical average domestic customer will take 2 orders from us a year. The 2 orders will come in the second half of the year. And so you'll get the catch-up on the heating side. Clearly, if we got an extremely mild winter, that would have an impact on our profits for the year. We're not going to be immune from that. But all we can guide on is on the basis of normal weather conditions. The other side that impacted clearly in the first half was Hong Kong and Macau, and we have lapped that. So that is behind us. And finally, we had a very strong first half last year and actually a weaker second half. So the comparatives were tough in the first half, and they're a little bit more benign in the second half. So we're -- as I say, we're very confident in our outlook for the year. On the tender, Ken, there's really nothing more we can say than in the statement. It's clearly all pretty market-sensitive stuff. So all we can say is it will be completed by Christmas, and it will start shortly. And there will be an RNS clearly when the Board has made those decisions, and that will go out and it will detail the steps. There is quite a number of precedents out there. So there's places you can look to see the process. And anyway, it's probably all I can say on that at this stage, Ken. Thank you. Operator: Our next question comes from Annelies Vermeulen from Morgan Stanley. Annelies Vermeulen: I have 2, please. So firstly, just on the M&A pipeline. You've spoken in the past about the opportunity for liquid gas in North America. You've done 2 deals in Europe so far this year. So could you talk a little bit about that pipeline in the U.S.? Is that still interesting? Is there anything going on there in terms of the multiples or the opportunity set that means that we should see less M&A spend in the U.S. going forward? If you could comment on that? And then just coming back on the tech piece in North America, it sounds like there was some destocking in the second quarter. As the dust begins to settle from all these tariff discussions, are you reconsidering your supply chains at all? I know you've spoken about procurement in the energy business, but just wondering in technology, whether there's more to do there on the procurement side as well. Donal Murphy: Thanks, Annelies. The North America is and will remain a very important growth market for us. We have less than 2% of the propane market in the U.S. It's -- and maybe that's a slightly misleading number because these are they tend to be more local businesses. So there are states where we'd have double-digit market shares, and they would have similar characteristics to the more consolidated markets. We see in Europe where they have higher margin benefits, operating margin benefits through leveraging routing and scheduling and all the things I talked about earlier. But there's lots of states where we have very low market share. So we are very active in building our pipeline and talking to players within the market. We're very confident that we will deploy more capital into the U.S. market. But a bit like the conversation earlier, the way M&A comes along, we never force the pace and at least because if you try and force the pace, you overpay for assets. So -- but we certainly don't see anything in the characteristics of the market that would say that we are unlikely to be deploying capital over there. And over time, we'd like to deploy capital at scale into the U.S. market. On the procurement side, it's probably slightly different, at least because we distribute branded products. So we're really not the originator, if you like, of where the product comes from. So it's more down to the supply chain approach of the vendors that we work with. So the big AV vendors, we have seen some movement in where they produce the final assembled products, and that drives the market that we will import the product from. We do have quite an amount of our own branded products. So we do have an opportunity there to look at other markets. But it's not as easy to do that because you have manufacturing partners that you've been working with for many, many years. So our focus has really been much more on passing through the price increases into the market than ultimately looking to change where the product is manufactured. But we do -- as I say, we do think about all those things. Operator: We currently have no further questions. So I'd like to hand back to Donal for some closing remarks. Donal Murphy: Super. Well, look, just to thank everyone for joining us today. Thank you for your time. This has been a period of very significant strategic change for the group as we simplify the business to become a much more focused energy business. And we're very confident in our ability to build DCC and DCC Energy into a global leader in the energy sector. So I know we'll be meeting many of you over the coming week and indeed months, and we look forward to continuing our conversations. Thank you all very much, and see you soon. Bye.
Operator: Good morning. I will now turn the call over to Elizabeth Hamaue, Aya Gold & Silver's Director of Corporate and Financial Communications. Please go ahead. Elizabeth Hamaue: Thank you, operator, and welcome to everyone who has joined Aya's Third Quarter 2025 Earnings Conference Call. Here with me today, I have Benoit La Salle, President and CEO; Ugo Landry-Tolszczuk, Chief Financial Officer; Elias Elias, Chief Legal and Sustainability Officer; Raphael Beaudoin, Vice President of Operations; and David Lalonde, Vice President of Exploration. We will be referring to a presentation on this conference call, which is available via the webcast and is also posted on our website. As we will be making forward-looking statements during the call, please refer to the cautionary notes included in the presentation, news release and MD&A, as well as the risk factors included in our AIF. Technical information in this presentation has been reviewed and approved by Raphael Beaudoin, Aya's Vice President of Operations; and David Lalonde, Aya's Vice President of Exploration, both of whom are Aya's qualified persons as defined under National Instrument 43-101 Standards of Disclosure for Mineral Projects. I would also like to remind everyone that our presentation will be followed by a Q&A session. With that, I would now like to turn the call over to Benoit La Salle. Benoit? Benoit La Salle: Elizabeth, thank you very much. Hello, everybody, and welcome to our Q3 conference call. Q3 is a strong quarter. We're delivering across all key pillars of our strategy. On the production side, we have solid operational KPIs. We have produced for the quarter 1,347,000 ounces. The mill plant ramp-up is near complete, and we have ongoing targeted improvement to the mine plan. So for the financial results, we have $54 million of revenue in Q3 only, and we have $22 million of cash flow from operations. So it is a very strong quarter. We finished the quarter with $129 million in cash that -- the cash that's not restricted and $16 million in restricted cash with EBRD. On the drilling program, on the exploration front, we had a very strong quarter. We'll review this. The drill programs are continuing both at Zgounder and at Boumadine. And just after the end of our quarter, we've announced the Boumadine PEA results, which I will review with you as well. On the ESG front, we continue to progress in the strengthening of our positioning in country. We're also advancing towards an ISO 14001 environmental certification. So 14001 environmental certification is being done at the moment. Focusing on health and safety, we had another strong quarter on site at Zgounder. So the financial position is strong. The balance sheet is strong. And we have the money to develop Zgounder to what it is right now and to continue the drilling. But most important is, we have the money to develop Boumadine. And that is extremely important as Boumadine is becoming a world-class Tier 1 asset. Going to slide on Page #5, you -- just a couple of KPIs for you to see that we are really, really progressing. So as you know, we're look -- let's look at the plant to start, so the ore process and the milling rate. So the ore process here, you recall, the plant has been built for 2,700 tonnes a day. This is where we were at Q1 2025. Then we went up to 3,000 tonnes a day in Q2. By Q3, we were running at 3,300 tonnes a day. We've also indicated that at the end of September, we were at 3,600 tonnes. And currently, in November, we've been hitting 4,000 tonne a day. We don't believe that the 4,000 tonne a day will be sustained throughout the quarter. We're more towards 3,700 tonne, 3,800 tonne per day. But understanding that from a design and a construction of 2,700 tonne a day, this is a major success. And I recall again, we did this for $140 million, less the money we've received from the EPC contractor for the damage that -- the fact that they were late delivering to us the plant. So technically, we did this construction for about $133 million. So it's quite spectacular in the mining space. On mill recoveries, well, the mill recoveries, you know, is always something very sensitive. In silver, mill recoveries often are more in the mid-70s, while we were in Q3 at 92.5%. And on mill availability or plant availability, let's call it this way, we were at 96%. There was a little bit of preventive maintenance in the quarter because on the previous quarter, in Q2, we were at 98% plant availability. So you see the ramp-up momentum is continuing. We are now at capacity. The ramp-up has been very smooth. And the execution is on track with a very strong plant that is processing way above the plant capacity. For the mine, the mine is also on Slide #6. The mine is running smoothly. The underground mine at a steady state of 1,300 tonnes per day, running at 159 gram per tonne. So you recall, the KPI that was giving us a little bit of headache [indiscernible] was the grade and the dilution of the grade we are getting better every quarter with the underground mine. So that's where it started at the beginning of the year, where we were having issues. This is now really coming through, and the grade of the underground mine is better, and it's getting better every quarter. On the open pit, we have been focusing on the Northeast stripping. We've done a lot of stripping. And this is why on the slide, when you look at the total tonnage done in the quarter, it looks like the total tonnage done is lower. It's true because that's ore, but actually, we are much higher in total ore transported because we did focus on opening up the large pit. So we are currently running on a daily basis at moving 45,000 tonnes to 50,000 tonnes of not only ore, but also of [indiscernible]. And this is because we're preparing the large pit. So we have been doing extremely well at the underground mining. The throughput is increasing. The grade is getting much better. And now, we're working on the open pit, where we do still need to improve in the open pit mining selectivity and operational control. We know, and this is of the 5 KPIs that was the last one, and now it's half of it that we still need to attend to it, but we are attending to the grade in the open pit. But the throughput of the underground and the throughput of the open pit is there. You know our objective is to be at 4,000 tonnes per day at 1,500 tonnes coming from the underground, we're there today, and 2,500 tonnes coming from the open pit. We're not there right now, but we'll be there for year-end. So of the 5 KPIs that we've been managing for the ramp-up, all the plant KPIs are done and are doing better than expected. The throughput of the mine is there, and it's only -- still we are working on the grade coming from the open pit. So it is a ramp-up process. And this is why going to Page #7, you look at -- on the left-hand side, if you look at the cost, the cost for the quarter is a little bit higher than what we wanted it to be. The cost -- though it's lower than Q2, it's at $20. Our goal was to be more towards $18.50. And the reason for the cost -- it's not the cost per tonne. Our cost per tonne is excellent. It's the cost per ounce, and the reason is the grade coming from the open pit. Also, in 2025, the price of cyanide really went up considerably. And right now, we see it coming down. On a per tonne basis, it's coming down almost like $3 per tonne. Now we are seeing it. We are completing our purchasing for 2026, and the cost of cyanide is coming down lower than it was for 2025. But again, as we've been saying quarter-over-quarter, look at the margin on that chart. Look at the margin in Q1. We were working with $13 margin, $31 less $18. In Q2, we were working with $12, $13 margin. In Q3, we're working with almost $20 or $19 margin. And in Q4, at the moment, as we speak, silver is at $50. We've been selling in Q4 silver between $48 and $51. So you're looking at $28 margin for Q4. So yes, and the costs have to come down, and this is the objective that we have for Q4 and for 2026, but the margin is really strong and getting stronger. So when you look on the right-hand side of that slide on Page 7, you see the growth in revenue, which is, of course, due to the increase in production, but also the increase in silver price. So the higher volume is about plus 20% and silver price is plus 18%. So for Q3, you have record revenue of $54 million, and you have record net income of $12.4 million, which when we convert that on a per share basis, it is $0.09 per share. I would like to draw your attention, when you look at the cost, we have the stock option costs that are put into each quarter, which amounts to $0.024 per share. This is a program that was put into place in 2020 and that we've repeated in 2025 -- for the year 2025. It's the retention program of the senior management team. Those options vest over time, and the cost of the option, if you look at the G&A section of the financial statement, it's $0.024. So, on an adjusted earnings per share, if you remove those which are continuing over time for quite a long period, if you look at the option package that I have or Mustapha El Ouafi has, we haven't touched those options in the past 5 years, and we don't intend to touch them in the near future, but we do take the expense on a quarterly basis. So we're looking at $0.09 per share after stock option plan or stock option cost, but before, it's more $0.114 million on a per share basis. The actual cash flow is also very, very strong. As we've indicated, we've generated cash flow from operations. You have that on Page 8, sorry, I didn't say that earlier. On Page 8, you have cash flow from operation of $22 million. And this, again, was working with a much smaller margin in Q3 than we have in Q4. You have the CapEx and the exploration program of '22. The EPC compensation is a tribute to how well we structured the construction contract, and we were able to get a compensation of $8 million less the legal fees associated with the court case if you -- or the negotiation of that in Spain. So we had legal fees of close to $1 million. So we did receive $8 million, but we've accounted for $7 million, and that $7 million goes against the CapEx in our -- on our balance sheet. So it doesn't go against the cost. It goes against the CapEx. We have a strong cash position of USD 129 million, obviously, million. And we do have an undrawn credit facility with EBRD of $10 million. Talking about exploration, moving to Slide #9. Again, you see Morocco. Morocco, again, is more and more now seen as a top-tier jurisdiction in the world. It's because of the speed of permitting, because of the quality of the geology. As you know, there's 3 elements that count is geology, is jurisdiction and the people who run this. In this case, jurisdiction is fantastic, geology is fantastic. So at Zgounder, our budget for the year was 20,000 to 25,000 meters of drilling. We are at quarter-end at 19,659 meters drilled. The cost of drilling all-in in Morocco is USD 150 a meter. So it's really a fraction of the price of drilling anywhere else around the world. So we've been drilling at Zgounder. We've been drilling at Zgounder at the mine and have been putting out fantastic results. We're drilling on what we call Zgounder [indiscernible], so very close to the mine and Zgounder regional as well where we do have many, many targets. So you've seen over the quarter some very good results of 1,164 gram per tonne over 3 meters, and we're continuing to have very, very good grade coming out of the drill program. The regional as well -- and at one point, we'll have much more -- a longer presentation on the regional play at Zgounder, but we're adding permits to the region. We're doing a lot of work on the region, and we're finding a lot of very good structures that we intend to -- that we are drilling and that we intend to drill in 2026 as well. So it's continuing to be a fantastic project with a very, very strong geological potential. The next one, the Boumadine is our bigger asset because it's got a bigger resource because we have a bigger footprint. We have a goal to drill 140,000 meters this year. By quarter-end, we were at 109,000 meters drilled, and it's continuing to -- all drills are turning. We have shown you the PEA, which requires additional drilling, but the drilling this quarter confirmed continuity of the Boumadine main zone, the Tizi zone, and we've been extending the zone continuously in the Imariren zone, as well as now a striking of 1.2 kilometers. In the PEA, we only took into account the main permit, which is 32 square kilometers out of a district that we control of about 800 square kilometers. So we took into account just these 3 zones, Boumadine, Tizi and Imariren, into the PEA. We had other very important hits on these 3 zones, but also on new satellite zones that we have discovered in the past few years and one which is called [indiscernible] which is very, very interesting because it's a gold zone. It has also a little bit of copper. It's been drilled in very wide spacing on 8 kilometers. We are seeing the mineralization on 8 kilometers, but we have now extended the anomaly on more than 20 kilometers. So it's -- and that's not in the PEA. This is a new zone, which is more gold than polymetallic, but also very interesting. And in the quarter, we've added 2 new mining licenses, which is quite spectacular. We have many, many mining licenses in this district because you understand that we control a district. It's not just a permit or 2, it's a mining district where we are the only player in the district. We've increased our land package that's permitted to 339 square kilometers, but we also have a 600 square kilometer exploration license. So it's just showing us the footprint that we have at Boumadine is really exceptional. So just quick on the outlook. We're confirming the outlook that you have on Page 11. That is not changing. We know that the recovery will be -- not the recovery, sorry, it will be a bit higher and the grade will be a bit lower. But globally, the production will be aligned with the guidance, most likely the lower part of the guidance, but our goal is to be within the guidance. Continuing with the presentation, going to page -- the following page on the Boumadine PEA. Just a quick summary. It's the most, today, important project, I believe, in the mining world because of the fact that it is permitted, that the financing is spoken for with our financial partner, EBRD, with the offtaker who are going to be buying the concentrate, and the fact that we have as well liquidity, and we're bankable in country with banks in Morocco. So we -- the funding is spoken for. It's not done because obviously, we understand that the bankable feasibility is not completed. We're missing the drilling. So -- and we are launching as of now a 360,000-meter drill campaign that is going to be executed over the next 2 years. But the project at our base case at $2,800 gold and $30 silver has an NPV on a post-tax of $1.5 million. And as I said during the presentation, we're looking at both the post and the pretax because we have not yet done the tax structuring of this project, something that we've discussed today because as I'm talking to you -- I am in Casablanca. We have had meetings on Boumadine and on the tax structuring and how we want to position this project if we have time because the project needs 2 years of drilling and the feasibility study. So there is time, but it's super important that we have the proper tax structure. The NPV to CapEx, the CapEx intensity is absolutely unique. It's between 3:1 to 5:1. And this is at the base case, the internal rate of returns between 47% and 69% and the payback between 2 years and 1.3 years. So it's a very robust project. Why? It's because of the low initial CapEx at $446 million, CapEx that we control extremely well because $50 million of it is pre-strip of the open pit. It's the water system, it's the electricity, all the things that we've just done at Zgounder, which we're going to repeat at Boumadine. And the beauty of it is it's low AISC. The AISC for the first 5 years is $928. The ASIC over the mine life is $1,021. But all of that is -- does not take into account the 140,000 meters of drilling of 2025 and all the additional drilling that we're going to be doing over the next 2 years. So why we're focusing on the first 5 years because that's where we have kind of clear visibility. After that, it's -- yes, it's what we have, but it's going to be a lot bigger than this. Like there's no doubt in our mind that this is going to be a lot bigger. So when you look at it as a silver company because we are a silver company -- this project is a silver equivalent, is adding 37.5 million ounces per year of silver production on an equivalent basis. So moving to the next slide, why this is such a compelling story because it's a district scale land package, like we owned the Red Lake District. We own the Abitibi belt. We own all of the Carlin Trend, like it's all part of the same company. It's got exceptional economics because it's low capital because in Morocco, the cost of construction is about 1/3 the cost of construction of any other asset around the world, and it's very, very well built. So it's low capital intensity and very rapid payback. It's a low-risk project. It's based on a simple model. It's 3 concentrate, lead, zinc and pyrite concentrate. We have MOUs with 3 of them for all the concentrates. So we will then be selecting how we're going to go forward with this. Financing, I said it, it's spoken for. We just have not finalized it. We have many, many options. The proven track record in the region because we just built Zgounder. So whoever is doing the excavation at Zgounder and the open pit mining will be bidding to do the open pit mining at Boumadine. It's 5x the size. Whoever is doing the underground development will be bidding for the underground development. So we're looking at a situation where the same suppliers are going to be coming in to work with us. We know them, they know us. We work very well together. And don't forget, all of that is possible because we've built it, because the money is available in country and because we do have a mining license in hand. So we're not waiting for the government to approve an environmental license or a mining license or, I mean, we have our mining license in hand, and we can start. We cannot start now because we need to complete the drilling on a 50-by-50-meter spacing so that we can move our resource into the measured and inferred category in order to put them into the feasibility study. So we've covered the main point of the PEA, which we have on the next slide, the low CapEx, strong economics, revenue driven with gold, silver, lead and zinc. It's open pit and underground, but the first 2 years will be open pit. And based on the extension because you will see over the coming months, there's going to be more drill results, showing additional structures that can be attacked either through open pit or underground mining. We keep drilling, and we have been putting out results because, don't forget, all the drilling of 2025 is not in the study. So to conclude, what are the catalysts for 2025? We're, of course, almost done. This is mid-November, but the drill programs, which you have on Slide 15, the drill programs are continuing. We will finish the year with almost 200,000 -- almost 200,000 meters of drilling. We're heading into 2026 with most likely 250,000 meters, maybe 300,000, depending on the drill contractors and how fast and we can do the drilling. But we are moving into between 250,000 and 300,000 meters. We've delivered in 2025 as we wanted the PEA on Boumadine, which is a starting PEA because it only takes the resource until the end of 2024. In our catalysts for 2025, we wanted to reach 3,000 tonne per day processing. We're actually now touching 4,000 tonne per day processing. So we are really, really showing that the plant is well built, very robust and exceeding nameplate capacity. People were looking for an update on the Boumadine metallurgy. So that is checked. There's no metallurgy issue because we're going to be sending the concentrate to a smelter -- or to smelters, not one, but many. So the recoveries are in the high-90s. The payability is lower because we do share on the payability, but the recoveries are in the high-90s. And we also have shown you that we can also use a roaster if we want to reduce our cost of transport because if you look at the [ ASIC ] at $1,000, there's $300 of transport and process and all that. We want to remove that and we do a roaster or a smelter in country, and actually, we do. We won't do that ourselves, but with partners. We know that people are looking at this project, and there is a source of sulfuric acid in country to the country that's probably the largest buyer in the world of sulfur for the fertilizer. Well, that source of sulfur is something that's drawing a lot of attention right now because it's in country, it's available to produce sulfuric acid. It can produce power, and it would also liberate the gold and silver. So on the metallurgy Boumadine, it's done. It's -- we should never talk about that anymore. It is done. It's either going to go through a smelter in Asia or in Europe, or it will go through a smelter in Morocco or a roaster in Morocco. So it's -- I mean, it's -- that discussion is done. The last element that we're now working on, which I said last time after we're done the PEA and where we will finish the updated Zgounder model, we are almost there. Again, something we were discussing today, we're almost there, and we will be updating the market about the new Zgounder model, the new Zgounder mine plan and going forward. And as again, as I said, Zgounder has a lot of upside potential. The geology is there. And now, it's a question of working and getting more drilling done and new structures for Zgounder to have a very long mine life. It has already a long mine life, but even a longer mine life. So, that completes my presentation for Q3 2025. Operator, I would like to turn it over to you for the question period. Thank you. Operator: [Operator Instructions] Our first question comes from the line of Justin Chan with SCP Resource Finance. Justin Chan: Congrats, Benoit, David and the rest of the team if you're on, Alex. My first question is on the open pit, I'm just curious how the next few quarters look. When I was at site in my notes, I had about 2,000 tonnes a day from the open pit and 1,000 from the underground. The underground is doing really well. You're already above that rate. I'm just curious on the open pit, when in the next few months or quarters, do you think you'll be done the stripping you want? And how many tonnes do you think is your new target for tonnes per day? Or is it still that 2,000 number? Raphael Beaudoin: Justin, thank you. Yes, we're very happy with the underground. Let me start with that. We've been working all very hard. We've got new stops going. We're comfortably above 1,000 tonnes per day, and grade has been sustained around 150 lately, 160 even. About the open pit, as you all know, we increased the total tonnage move per day in the open pit by essentially tenfold. We were at 4,000 tonnes per day by the beginning of the year. In October, we were close to -- in September, we're close to 40,000 tonnes per day total material moved. And now we sit at around 45,000. We will continue marginally increasing it. We had a high stripping in the third quarter. That's why the ore per day was a bit lower, but we did a lot of ways to put us comfortable, especially in the Northeast section of the open pit to have flexibility in the open pit. So everybody worked really hard, especially in Q3, to ramp up to finalize the stripping of the Northeast sector, and we now have 45,000 tonnes per day of total material move. And to answer your question, that brings us to 2,000 tonnes per day. Even on higher strip month on lower strip months, we'll reach even 3,000 tonnes per day and perhaps even a little bit more depending on the month. But we're trying to plan conservatively to make sure we always have the flexibility in the pit. And I would say at this point, the ramp-up is essentially done. The short-term stripping is also done. We have a longer-term stripping. Next year, we'll do another pushback, but that's towards the end of next year. For the year to come, we're well positioned for the open pit to sustain above 2,000 tonnes per day in the open pit. Justin Chan: Got you. And with the plant doing 3,700 tonnes a day now, I guess, in the long term, how do you envisage filling that mill? What's the split between open pit and underground? And could you push even beyond that 3,700 tonnes rate? And what would you need to do on the mining front? Raphael Beaudoin: So on the underground, we can probably push a bit at 1,500. We're not looking to go really above that. We want to take our time and do it right to make sure we control the cost. For the open pit, we'll take the rest. We have options, either we go -- either we mine faster in the open pit because we have room. We can even include -- we still have stockpile, right? Don't forget, we still have 150,000 tonnes of stockpile and it's decreasing slower now, and we want to stabilize it. And finally, we still have marginal ore. We do stockpile marginal ore. We compile it as waste and it's included in our cost, but it still has silver grade and especially at the silver price, the mill will always be full. This is not the issue here. Justin Chan: Okay. Got you. And on grade from the open pit, when we were on site, we talked a lot about managing dilution. Is the current grade situation more about managing dilution going forward to improve it? Or is it more of a sequencing issue where you'll get higher grades in the sequence naturally? Just curious what the -- how the path to improvement is. Raphael Beaudoin: So when we -- as we did stripping in the Northeast, there was still ore in it, like we did produce about 1,000 tonnes per day of ore. So those were in more sparse and disseminated region in the open pit. So it's a bit harder to control. And as we mine the open pit and we get to more bulky ore zone, dilution will be easier to control. So we're also focused on ore recovery. And as I explained a bit before, we increased the tonnage in the open pit by tenfold. So there's also a learning curve for a team. We need to stabilize the work routine, the work procedures. And the first step was to do stripping, make a nice surface area to be able to work comfortably. And now, we can focus on steady-state tonnage, and we can focus the team on grade control rather than stripping and ramping up and making room to work. Justin Chan: Got you. Just one last follow-up, and I'll free up the line. So modeling that grade inflection from the open pit, is that something you're hoping to do in Q4? Or is it first half of next year? Just trying to get a sense of how to model it timing-wise. Raphael Beaudoin: [ It's Raph ]. Justin, as you're asking when do you see grade change, grade inflection for the open pit, is it in Q4, or is it at the beginning of next year? Well, I would say at the beginning of next year, Justin. We're finalizing to tidy up the pit. There was a lot of ways to move. Now, we're slowly getting into ore and we produce ore, but the highest grade is as we go deeper in the pit. So we should see that coming more in Q1. Operator: Our next question comes from the line of Bryce Adams with Desjardins. Bryce Adams: Just a follow-on to those questions just asked now about the revised open pit underground split for filling the mill at 3,800 tonnes per day. I was wondering what's the base case processing rate that will be included in the new Zegunda mine plan? Is that going to be 3,000 tonnes per day and those 3,700, 3,800 tonnes per day are upside scenarios? Or is it 3,800 tonnes per day, is that the new base case that will be included in the Zgounder mine plan? Benoit La Salle: Bryce, this is Benoit. So look, the new Zgounder mine plan is going to be done in the next 2 to 3 weeks. We are still reviewing it. We're looking at all the scenario. The plant is capable to run at 3,800. We're showing it, but we haven't yet finished the new case or the new mine plan, where we're working on it at the moment. Also something very interesting is, we just have recruited somebody on the team that's working with [ Raph] and Mustapha on mining underground and open pit mining. So we are bringing in somebody with many, many years of experience to just complete the team. And so, we're working with that person and our own team to have this new mine plan available, as we always said in Q4. So look, obviously, we're not going to bring the throughput down to 2,700, but we're going to look at different scenarios, different grade, as you know, different cutoffs. So we haven't yet finalized the plan. So it's hard to comment on throughput and grade and all of that. But that will be available in a couple of weeks. Bryce Adams: So yes, if some of those -- like that's a key input to the study. if that's still up in the air and you haven't yet settled on sizing the mine and the mill and the long-term throughput capacity, what's the chance that the Zgounder mine plan update goes into next year? Could it be a January update versus December? Benoit La Salle: Well, 99%, it's a December update. And it's not that we haven't decided on throughput on all of that as we're just going through the final reviews, the final analysis, what we have. David and his team have completed the resource. Patrick and his team have completed the new mine plan. [ Raph ] is looking at it with his team. So we're putting all of that together. So we're almost there. We've committed that it would be coming out in December, and we will try to try. We are 99% confident that we're going to meet that. But if somebody comes through and says, you know what, oh, by the way, we've just found this or there's a new sector that we should look at, I mean, it could get delayed, but I would tell you, it's very, very unlikely. Operator: Our next question comes from the line of Ingrid Rico with Stifel. Ingrid Rico: I have a couple of follow-up questions on Zgounder and the throughput, which clearly has outperformed and now aiming to that 3,700 tonnes per day. I guess, my question is, the sustainability, you debottlenecked the buck end of the plant, but the sustainability and perhaps what are the risks that you can't really maintain that throughput rate? Unknown Executive: So yes, thank you for the question. We've been -- it goes without saying we've been milling also a bit of oxidized ore from the top of the pit. And as we get deeper in the pit, the ore hardness also change, but we have experience with that mining from underground. So it will be a question of blending, and we also have time to continue working and adjusting the plant. That plant has been running for less than a year. We're still learning. We've done some changes over the year to get there, and we also have other ideas to get there. If we're ever to get in trouble with ore hardness as we go deeper and deeper in the open pit, I mean, we have solutions for that, relatively cheap solutions. If we must, we can add a tertiary crusher. This is something that can be done relatively fast. It's not something I'm nervous about. We have -- we can address it. We can address it. The ore has been a bit soft. So the bottleneck was more in the tailing on the refinery, and we've been working on that. So that's been the bottleneck. And we have good visibility for the near future. And as we go down the mine, if we must add another crusher, we'll just do that. Ingrid Rico: Okay. Understood. And then, just on the grade and your answer to Justin's question and seeing the open pit grade having that inflection point more into 2026, so perhaps just to understand and going back to the site visit in June that you were already kind of making some implementation on the dilution minimization, so how can we -- should we see an improvement in Q4? Or what's happening on that implementing that? Unknown Executive: So, in the open pit at Zgounder, we focus on several aspects. Productivity: so we had to increase productivity in the mill that's done. We also started to modelize ore movement, okay, to make sure to recover every single ounce possible in that open pit. And as we go faster and our mining rate increases, we need to make sure to have good ore recovery. We also need to make sure we don't make mistakes, meaning we want to minimize external dilution as much as possible. So there's a bit of a change in philosophy whereas what we've been doing at very small tonnage versus what must be done at a higher tonnage. Now that we mine at over 2,000 tonnes per day, which is 50,000 tonne material move, our main focus is to reduce external dilution, mine a bit larger block, make sure to mobilize it properly and then recover the whole thing. So that will result into less external dilution because we'll control the block, we'll mine bigger blocks and we'll make less mistakes. It will also include partially into an increase in internal dilution as we want to control block movement, we want to mine bigger block and make sure they have good ore recovery and reduce costs and sustain productivity. So, a bit more internal dilution and what we predict is we'll have much less external dilution, so we'll see a grade increase. The reason why I'm seeing -- we will see that more in Q1 is there is also a learning curve. We've been implementing [indiscernible] as a software and implementing good procedure in the pit to control ore movement with blasting, also working with our contractor for blasting method. There's all sort of learning curve into that. So we're about 1 month into -- 1.5 months into implementing this, and we need to let the team to work before we start judging of the results of that. So I'm expecting results the faster we can, even maybe in Q4. But that's the reason why I say I see Q1 is to make sure that we have the time the team to really implement this fundamental change with an increase in productivity of tenfold. Ingrid Rico: Excellent. If I can just squeeze one more question and more on the sort of cash flow and looking at, you drew down $15 million on the credit facility, yet your cash balance is pretty strong and your operating cash flow was strong this quarter. So just a bit of understanding why you drew down the $15 million. Benoit La Salle: Yes, Ingrid, this is Benoit. If you recall, when we put the $25 million facility with EBRD at the time, which was at the beginning of the year 2025, many people were questioning our balance sheet because our cash position was below $50 million and as an operating company. So when we negotiated with EBRD, the $25 million line of credit, there was an undertaking that we would draw at least one time on the facility because they've put it into place and they went to credit committee, and we went to Board. And so it was just part of our undertaking. Of course, the money as we have it, is in our bank account. the difference between what we earn and what we pay is extremely small. We have very good return on our -- and we're taking no risk on our liquidity. And as you know, EBRD is on SOFR plus and SOFR has been coming down. So the little amount of the point in between what we pay and what we receive is super small, and that was part of the agreement. Clearly, we do not need to have that money. It's -- there's still $10 million available, but that was part of the undertaking when we put the money, the debt in the company. You know that we did after that in June, a financing of USD 100 million, obviously, made the $25 million really, really not necessary, but we did have an agreement with EBRD. And EBRD is our financial partner. They gave us $100 million. They gave us $25 million when we wanted to strengthen our balance sheet. They've committed themselves to be there for Boumadine for -- to be the main lender. They are our financial partners, and we just respected our agreement. But I understand your question, it's kind of bizarre why did we draw on it, but it was part of the agreement. Operator: [Operator Instructions] Our next question comes from the line of Don DeMarco with National Bank. Don DeMarco: Good to see the just continued improvement in operational metrics. So [ Raph ], I think I heard you say that grades are running at 150 to 160-ish per underground, improving quarter-over-quarter. Is that the range that you're looking for, for Q4 to reach the guidance? Or would the open pit come in at the same or higher grade? Raphael Beaudoin: Well, I'll try not to speculate too much on future grades. Right now, we're focusing on the metric I've mentioned before. Underground, grade has been stable, even improving even with higher tonnage. And underground, when you get a good stope, you get good stope, and we have many good stopes ahead. So in underground, there'll be more volatility as we had. And now, we're in very good stope, and that's the result of the work we've been doing over the last year. So in underground, what 150, 160, and that's quite stable. Whereas the open pit, I've commented already in the open pit, we want to stabilize throughput. We want to control dilution, and we'll keep on learning to this. So I do expect grade to increase, especially early next year. Don DeMarco: Okay. Great. And with this upcoming Zgounder mine plan, Bryce had asked about throughput. Just continuing with grade, I'm just curious about your approach for forecasting grades over the life of mine in light of the volatility that you've had and some variability stope by stope and dilution and so on. Are you feeling pretty comfortable with your ability to estimate the reserves and have that reflected in the mine plan? Raphael Beaudoin: So as we review our reserves and our approach to the mine plan done, it goes without saying we learned quite a bit in the last few years at Zgounder. So we'll have a more aggressive approach, just like we've been having over the last year on tonnage, mining bigger blocks and controlling dilution with bigger blocks and focusing on unit cost and focusing on tonnage and production. Don DeMarco: Okay. Great. And then, just as a final cost question rather, Year-to-date, the costs are running above the guidance range. Are you looking for a significant improvement in Q4? I heard some comments about the consumable costs dropping and so on. Just curious about what your expectations are looking ahead to this quarter. Benoit La Salle: Look, we -- this is Benoit, Don. Definitely, we're managing the cost per ton extremely well. We just had a Board meeting. We reviewed every line item on a per ton basis. And the one that was the outlier was the cyanide, a little bit on the consumption because of the oxide material and -- but definitely on the variance on price. So there was a quantity variance, but there was mainly a price variance with cyanide. I would tell you the rest is pretty straight on budget where we want it to be. So it is coming down, though the contracts that we were referring to were mainly for 2026 because as you know, you buy these boats of cyanide ahead of time. So look, we'd love to see Q4 being below 20. There are many things that come into play, the strip ratio, a couple of expenses that we know we won't have in Q4. But the target is absolutely to bring cost down. Yes, in Q4, it is a target, but -- and it is a target for next year as well. We would like it to be lower. There's no doubt about that. No doubt. So we don't expect it to be higher in Q4. That's for sure. And our goal would be to be below [ 20 ]. But again, it's too early to tell. But in cyanide is going to kick in more in 2026 than 2025. Operator: We have a follow-up question from the line of Justin Chan with SCP Resource Finance. Justin Chan: I just wanted to follow up on the underground. I mean, it improved so much. I think no one is asking about it anymore. But I guess what are the steps for getting tonnes and grade to both improve so much? I guess, going forward, is it -- was it just a matter of getting more faces open and it's majority cut and fill? Or is it -- is there still some long hold in there? Yes, [ Raph ] , can you give us a bit of color on how you improved so much this quarter? And then, what, if any, changes you expect going forward? Raphael Beaudoin: Well, Justin, the whole team has been working on this for a while. And we kept on saying tonnage is going to increase, grade is going to increase. As you're all aware, underground is all about planning, multiplying phases, multiplying levels. So we're still in cut and fill. The team is getting better. We have some continuity within levels. We've been opening new levels, especially at deeper levels. So this is -- I mean, this is the result of the last year's work. And now, we also -- if you remember, initially, we're targeting more 2,000 tonnes per day underground. We've reduced that a little bit to 1,000, 1,500 tonnes per day, depending on the sequence that also allows more time for better planning, better grade control. We're also working a bit more in bulk, and we've really improved our geological control, channel sampling, remodeling the fronts, remodeling the stopes and closing the loop of planning. So that's all work that we owe to the team on site, and they've been very good at it. So now what's next for underground is to continue our mine plan and to get to the lower level to a good rate to make sure we can close the upper levels in a timely manner to leave room for the open pit. Justin Chan: Okay. Got you. So maybe to summarize that a bit, so you got your practices right and that's brought dilution down improved grade and maybe the faces -- getting more faces in open areas allowed you to get enough mining areas to hit the tonnes as well. Raphael Beaudoin: Yes, that's correct. And we've always said that like -- at Zgounder, some stopes are larger, other are smaller. The larger stopes are definitely more continuous and the smaller one have shown more challenges in the past. And now, we are in a good zone. So we continue to learn from these, and we also mine larger blocks, like I said, and lower mistakes, and we want to repeat that experience in the open pit. Don DeMarco: Okay. Got you. Just one last one, if I may. Just on income tax, I noticed there's now tax going through the income statement line. What's the best way to model? Is it just -- is it maintained similar percentages of earnings? And then, in terms of, I guess, paying cash tax, is there any timing to be aware of? Raphael Beaudoin: Yes. Justin, yes, income tax is 35%. You can take that. Obviously, it's not always a perfect divider just because we pay based on our local P&L and not on a consolidated basis. But I think on an average run rate, I think it's a pretty good estimate. And we pay -- we have quarterly installments based on previous year's taxes. And so, tax are variable year-to-year, a quarterly payment is good. Operator: Ladies and gentlemen, that concludes our Q&A period. I would now like to turn the call back over to Benoit for closing remarks. Benoit La Salle: Thank you, everyone, for today's call. Look, we had a very good quarter. The questions were excellent, and you are questioning exactly what we are questioning and attending to. But today, at Zgounder, we have 4 top priorities. I mean, we know and we've always said it, we want to reach the 500,000 ounces of production per month. That's our goal. That's our target. That's what we're aiming for as quickly as possible. And the team is all aligned with this. The grade is something that we've been managing. And as Justin pointed out, we have managed it in the underground. We are very pleased the way the team is working in the underground. The open pit, we knew there was a learning process. We expected that. It's maybe taking a little bit longer than what we would have liked to, but it's getting better, and we know it's going to get better in Q4. And for next year, it's something that we hope will be stable. obviously because we want to do 500,000 ounces per month, and that requires a stable grade, obviously. Cost is an element that once the ramp-up is done, once we're in steady state, we were reviewing the staff [ that Raph ] was confirming that a lot of the consultants completed their jobs this quarter. We had many expats who were there helping with programming, helping with the plant, helping with different aspects of the business and which is normal. The ramp-up team, most of them, I think, except for one, they're all gone, and we had many of them for a while. So that has a direct effect on our costs, and we are working on controlling our costs, obviously. Now, you also know that the price of silver is $51. And clearly, when we mine and we see a marginal ore, we expense that, but we take it out. We don't leave it underground. So we -- or in the pit. We take it out. We have a pretty big pile of marginal, and it's expense. It's gone through the expense, but we have it -- we have a stockpile of marginal ore. And the last item for Zgounder is the optimal plan. And Ingrid asked the question, and we are not limited in our thinking. We have money. We are cash flow positive. You saw that we generated a very strong $22 million last quarter. We believe that Q4 will be even stronger. So we're not limited to our thinking. We can think outside the box. But the beauty of Zgounder, and you saw the picture, some of you visited the plant, it's like open space construction. So we don't need to move the roof or to push some of the plant, it's open space. So we can add a crusher or we can add a ball mill if we want to, if the team decides that, that's the way to go. The cost of increasing throughput is not very, very high. It can be done in our open space construction. And yes, we are looking at the optimal plan, given the new silver price, given the new grade, given the new cost. So, that is taken into account. And obviously, it was part of Bryce's question and Ingrid's question on where do we go next, and we understand. Boumadine, nobody was asking question about geology. David is right beside me. He was hoping for some very good question on geology. But Boumadine is a star asset with the main zone and all these regional zones. So that will be something that we will keep exploring and keep drilling. As we mentioned, we're looking for next year at probably over 200,000 meters of drilling, 180,000 on infill drilling and between 20,000 and 40,000 on exploration drilling on the regional play. So there's a lot of things coming from Boumadine over the next quarter and over the next year. And look, we are extremely pleased with where we are. And furthermore, the jurisdiction in Morocco is getting better for -- as an investment jurisdiction as it's -- and we're seeing it now. There will be a major event in Marrakesh in 2 weeks on mining in Morocco, and we expect to see a lot of people there. So look, we have a first-mover advantage. We do have a very large footprint. We have 2 well-understood assets. We need to work on them, and we expect to have another strong quarter in Q4. Thank you for your time. Thank you for being there, and we will see you some in Europe over the next few days or a few weeks as there are many conferences. Otherwise, we'll see you in Toronto at the Scotia Conference or others, we will see you in Toronto as we are in town to meet some of our shareholders. Thank you very much, and have a good day. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.