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Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Box, Inc. Third Quarter Fiscal 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 a second time. Thank you. And I would now like to turn the conference over to Cynthia Hiponia, Vice President of Investor Relations. You may begin. Cynthia Hiponia: Good afternoon, and welcome to Box, Inc.'s Third Quarter Fiscal 2026 Earnings Conference Call. I am Cynthia Hiponia, Vice President, Investor Relations. On the call today, we have Aaron Levie, Box Co-Founder and CEO, and Dylan Smith, Box Co-Founder and CFO. Following our prepared remarks, we will take your questions. Today's call is being webcast and will also be available for replay on our Investor Relations website. Supplemental slides are now available also on our website. On this call, we will be making forward-looking statements, including our fourth quarter and full-year fiscal 2026 financial guidance, and our expectations regarding our financial performance for fiscal 2026 and future periods, including gross margins, operating margins, operating leverage, future profitability, net retention rates, remaining performance obligations, revenue and billings, and the impact of foreign currency exchange rates and deferred tax expenses, and our expectations regarding the size of our market opportunity, our planned investments, future product offerings and growth strategies, our ability to achieve our revenue, operating margins and other operating model targets, the timing and market adoption of and benefits from our new products, pricing models, and partnerships. Our ability to address enterprise challenges, enhance our product capabilities, and deliver cost savings for our customers, the impact of the macro environment on our business and operating results, and our capital allocation strategies, including potential repurchase of our common stock and settlement of our convertible debt. These statements reflect our best judgment based on factors currently known to us, and actual events or results may differ materially. Please refer to our earnings press release filed today, and the risk factors and documents we file with the Securities and Exchange Commission, including our most recent quarterly report on Form 10-Q, for information on risks and uncertainties that may cause actual results to differ materially from statements made on this earnings call. These forward-looking statements are being made as of today, December 2, 2025, and we disclaim any obligation to update or revise them should they change or cease to be up to date. In addition, in today's call, we discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release and in the related supplemental slides, which can be found on the IR page of our website. Unless otherwise indicated, all references to financial measures are made on a non-GAAP basis. Thank you. With that, let me turn the call over to Aaron. Aaron Levie: Thanks, everyone, for joining us today. Building on the momentum and strong results we delivered in the third quarter of 2026, revenue exceeded our guidance, growing 9% year over year and producing operating margins of 28.6%. We drove a net retention rate of 104%, ahead of our expectations of 103%, driven by both price per seat increases and seat expansion. Our ongoing strategic investments in go-to-market and products are driving growth, reflected in our Q3 billings growth of 12% year over year and RPO growth of 18% year over year. Our strong financial results clearly demonstrate that our intelligent content management platform is building momentum in the market. Just a few weeks ago, I met with dozens of CIOs and IT leaders in New York. What struck me was how the conversations have evolved over time, where the vast majority of these discussions now focus on new use cases for Box, around using AI agents for extracting structured data and insights from documents, using AI agents to automate knowledge worker tasks, or leveraging AI agents to democratize access to expertise across their organizations. The full power of AI agents is delivered when you can begin to augment knowledge worker tasks with infinitely scalable automation. But as companies try to do this, they quickly come to the same conclusion. The key to success is ensuring agents have access to the right data, in the right format, and can process it effectively and securely at scale. When trying to solve this problem, most enterprises experience how difficult this can be. Enterprises are understanding that not only do you have to excel at everything required for AI on unstructured data, which could mean combining and keeping up with dozens of different technologies, you also need a platform that can handle the security, compliance, access controls, creation, sharing, and storage of all of this enterprise content. The problem is only getting harder as more platforms emerge that need to talk to the same unstructured data assets. You cannot easily replicate your files across agentic systems like Salesforce, Google, ChatGPT, ServiceNow, and hundreds of other platforms, all of which have different security and governance models, access controls, and more. Companies will increasingly need a trusted AI platform to manage their most important enterprise content that can work with all of their agentic AI platforms. This is what we are building with the Box AI platform. Box is the secure, neutral AI content platform for the most important enterprise content. It is the single source of truth that connects AI models and agents, prevents the content sprawl and security risks of DIY solutions, and ensures data governance and compliance. Best of all, we integrate with OpenAI, Google, Anthropic, AWS, IBM, and more, so customers can use any model without fragmenting their enterprise content. As we have shared, we introduced Enterprise Advanced less than one year ago to bring together our full suite of powerful AI intelligent workflow automation capabilities. Enterprise Advanced continues to drive both upgrades and new logo wins across verticals, segments, and geographies. Examples in Q3 include a leading financial services organization that upgraded from Enterprise Plus to Enterprise Advanced to improve management and search across repositories, including an archive of historical records. By using Box apps and metadata extraction, the organization is streamlining workflows in claims management, HR, legal, member services, and migrating nonmember documents from legacy systems to Box. This supports AI-assisted research into over a century of corporate history and provides updated interfaces for data management. A leading international law firm, an early adopter of Enterprise Advanced in 2025, expanded its use of Box by hundreds of seats in Q3. Driven by Box's proven ability to deliver secure solutions and AI-driven workflows, our platform will support projects with government clients requiring FedRAMP high compliance, enabling lawyers to collaborate securely and efficiently on sensitive matters. Finally, a leading renewable energy company in EMEA, a new logo for Box, chose Enterprise Advanced to modernize its document management and collaboration processes across multiple departments, including legal, compliance, security, and IT. By implementing Box, the company aims to streamline document workflows, improve metadata management, and enable secure external collaboration with partners and regulators. To build on the momentum we are seeing with customers, we recently announced a new set of next-generation AI agent and automation features at BoxWorks to drive intelligent workflows in the enterprise. This included Box Extract, a data extraction solution powered by AI agents that delivers accurate data and insights from a multitude of content types, including documents, presentations, images, and more. This new capability allows enterprises to easily extract any structured data and insights from their unstructured documents, from contracts and invoices to healthcare records to insurance claims and more. We also announced Box Automate, an agentic workflow automation solution designed to orchestrate work across agents and teams. Box Automate allows customers to design sophisticated workflows, leverage their content in Box, as well as connect to other systems via APIs to power any end-to-end document workflow. Additionally, we announced powerful AI capabilities for Box apps, our no-code solution for quickly building content apps that will continue to get major product upgrades that enable our customers to power more advanced business processes on Box. We announced Box Shield Pro, a powerful new suite of security capabilities powered by AI, allowing customers to automatically apply AI-driven classification, accelerate threat response with agentic insights, and proactively strengthen their security posture against an evolving threat landscape like ransomware attacks. As we have seen, the rate of innovation continues to accelerate from AI model providers, and Box is quickly evaluating and enabling updates for our customers to access the latest features and models directly in Box. We have announced integrations for the newest models from Mistral, Anthropic, OpenAI, and Google, including being a day-one launch partner of GPT 5.1, Gemini 3, and 4.5. We have added support for OpenAI's agent kit so customers can bring Box content into their agentic workflows. Made Box AI available in Gemini Enterprise through the Google Cloud Marketplace, and introduced support for Slack's new work objects to bring Box's intelligence capabilities directly into Slack conversations. We have also strengthened our long-term strategic partnership with AWS with a recent announcement of a multiyear AI collaboration agreement to transform agentic AI capabilities on enterprise content. Box will become available in the AWS Marketplace to streamline procurement and accelerate the value of both platforms. We are incredibly excited about this partnership and our ability to bring the Box and AWS platforms together more deeply. Now looking forward, in Q4, we are going to be focused on delivering against the major announcements we shared at BoxWorks. In particular, I am incredibly excited for the upcoming release of Box Extract. Enterprises are awash in unstructured data that they can now tap into for the first time with AI agents processing and extracting relevant data from these documents. Box Extract makes this easier than ever. We will also be releasing other major updates to Box AI agents in Box, including an all-new centralized experience where you can interact with any AI agent from Box from one central location, allowing you to use AI agents to find relevant data or answers in Box or handle much more complex work on content in Box. We will also be upgrading Box AI Studio to support improved agent capabilities, like attaching existing knowledge to agents and streamlining the agent creation flow to make it easier for anyone to build their own agents in the enterprise. Turning to go-to-market, we are driving the adoption of Enterprise Advanced and continue to see pricing improvements for Enterprise Advanced over Enterprise Plus at the higher end of our 20 to 40% target. Our focus has been and will continue to be on driving adoption of our AI-powered solutions in Enterprise Advanced, including custom Box AI agents, Box apps, and looking forward, Box Extract, and Shield Pro across our customers' workflows. Our market positioning emphasizes Box's unique strength as a trusted platform for unstructured data with built-in AI governance and security. We are continuing to double down on our Enterprise Advanced sales motion, driving more emphasis across key verticals like financial services, life sciences, government, professional services, and more. Our partner-led business is a critical part of our strategy as we power more advanced verticalized solutions for customers. We saw continued momentum with partners, delivering double-digit revenue growth in partner-led wins. These wins include, in Q3, a leading global automotive company that upgraded from Enterprise Plus to Enterprise Advanced to centralize its expanding design ecosystem and replace over 75 fragmented content repositories. A leading housing administrator in EMEA partnered with Deloitte and Box to modernize its digital housing and tenant communications. Box powers the solution for managing documents and inquiries from housing applicants, tenants, and affiliated organizations, improving efficiency and collaboration. We also launched a new partnership with Tata Consultancy Services, one of the world's largest systems integrators, to deliver AI-powered content management solutions to accelerate digital transformation. By combining Box's intelligent content management platform with TCS's global scale and industry depth, we expanded our reach across key industries, from financial services and healthcare, manufacturing, retail, and the public sector. Before I turn it over to Dylan, let me update you on how we are expanding an AI-first approach at Box, using Box AI as customer zero. As I have shared before, we are focused on Box becoming the leading AI-first company, and we want to use AI agents to augment our productivity, increase our capacity, and better serve customers. For instance, in go-to-market, we have purpose-built Box AI agents that streamline each step in a sales or customer success process. We have a research agent that analyzes the prospect's goals and challenges, maps them to Box capabilities. A discovery agent recommends the best use cases for a customer type using win-loss signals from past deals. Coaching agents give reps tips after every customer interaction and more. In customer success, a feature adoption agent suggests use cases, target personas, and enablement materials to boost adoption. All of these agents free up our sales and support teams to serve more customers and with greater personalization. This is just in go-to-market. Across Box, we are doing the same in our HR and recruiting workflows, IT organization, legal, and compliance, and product management and engineering. Outside of Box AI, for instance, in engineering, we are leveraging Cursor to accelerate our product development velocity, and we are expanding AI-assisted coding across the code base to ship features faster. AI is the biggest shift in work that we have ever seen in our lifetimes. Boxers are embracing the opportunity to demonstrate to our customers they can transform how they work with content and AI. We are seeing customers discover new use cases that tap into the value of their data, made possible with our intelligent content management platform. With that, I will hand it over to Dylan. Dylan Smith: Thanks, Aaron. Good afternoon, everyone. In Q3, we delivered another strong quarter with revenue, billings, and operating margin all exceeding our guidance. This outperformance was the result of continued execution against our FY 2026 priorities, investing in key go-to-market initiatives and enhancing the AI capabilities of our intelligent content management platform, generating efficiencies across the business, and executing on our disciplined capital allocation strategy. We delivered Q3 revenue of $301 million, above the high end of our guidance. This represents 9% year-over-year growth with sequential acceleration to 8% year-over-year growth in constant currency. We now have more than 2,000 customers paying us at least $100,000 annually, up 7% year over year. Suites customers now account for 64% of our revenue, an increase from 59% a year ago. We ended Q3 with remaining performance obligations, or RPO, of $1.5 billion, growing 18% year over year and up 19% in constant currency. Short-term RPO grew 14%, both as reported and in constant currency. This growth is being fueled by strong customer demand for AI, resulting in a pronounced upgrade cycle and longer contract durations. We expect to recognize roughly 55% of our RPO over the next twelve months. Q3 billings of $296 million were up 12% year over year, both as reported and in constant currency, driven primarily by strong bookings in the quarter. Billings growth exceeded our guidance of approximately 10% and includes an FX headwind of approximately 220 basis points versus our prior expectations. We ended Q3 with a net retention rate of 104%, up from 103% in Q2 and 102% in the year-ago period. This trend is being driven by strong Box AI and Enterprise Advanced momentum, resulting in accelerating bookings and lower dollar churn. We continue to see improvements in both seat price and seat expansion. We now expect to exit FY 2026 with a net retention rate of 104%, one point higher than our previous expectations. Q3's gross margin was 81.7%, exceeding our guidance of 81%. Excluding the tailwind from data center equipment sales in Q3 of last year, this represents an increase of 50 basis points year over year. We delivered Q3 operating income of $86 million and an operating margin of 28.6%, exceeding our guidance. In Q3, we delivered EPS of $0.31, in line with our guidance. This includes a headwind of approximately $0.15 from FX versus our prior guidance. I will now turn to our cash flow and balance sheet. In Q3, we generated free cash flow of $61 million and cash flow from operations of $73 million, up 717% year over year, respectively. We ended Q3 with $731 million in cash, cash equivalents, restricted cash, and short-term investments. Turning to our share repurchase plan, in Q3, we repurchased 2.4 million shares for approximately $77 million. As of October 31, we had approximately $35 million of remaining buyback capacity. Additionally, our Board of Directors recently authorized a $150 million increase to our share repurchase program. Before turning to guidance, I wanted to address our $250 million of convertible notes due to mature on January 15, 2026. At that time, we intend to settle the outstanding convertible debt principal with cash. With that, let me now turn to our Q4 and FY 2026 guidance. As a reminder, approximately one-third of our revenue is generated outside of the U.S., with roughly 65% of our international revenue coming from Japan. Since we last provided guidance, the U.S. Dollar has strengthened versus the yen, and the following guidance includes the expected impact of FX, assuming current exchange rates. For the 2026, we expect Q4 revenue to be approximately $304 million, representing approximately 9% year-over-year growth or 8% in constant currency. We anticipate our Q4 billings growth to be in the low single-digit range, including an expected tailwind from FX of approximately 70 basis points. We expect Q4 gross margin to be approximately 82%. We anticipate our Q4 non-GAAP operating margin to be approximately 30%. We expect our Q4 non-GAAP EPS to be $0.33. Weighted average diluted shares are expected to be approximately 147 million. For the full fiscal year ending January 31, 2026, we are proud to have delivered strong year-to-date results driven by customer demand for our enterprise-grade AI capabilities, translating into the momentum we are seeing in Enterprise Plus and Enterprise Advanced. As a result, we now expect our full-year revenue to be approximately $1.175 billion, representing approximately 8% year-over-year growth or 7% in constant currency. Adjusting for currency movements, this represents an increase of approximately $5 million versus the midpoint of our prior guidance. We expect our FY 2026 billings growth to be in the 9 to 10% range. This includes a tailwind of approximately 130 basis points from FX, 100 basis points lower than our previous expectations. Adjusting for currency movements, this represents an increase of 150 basis points versus our prior guidance. We expect FY 2026 gross margin to be approximately 81%. When adjusting for the tailwind from data center equipment sales last year, which also flows through to operating margin, this represents a year-over-year improvement of 40 basis points. We expect our FY 2026 non-GAAP operating margin to be approximately 28%, including a tailwind of approximately 10 basis points from FX. We now expect FY 2026 non-GAAP EPS of approximately $1.28, including an expected tailwind of approximately $0.02 from FX. This represents an increase of $0.01 versus the midpoint of our prior expectations and an increase of $0.03 normalizing for currency movements since our previous guidance. Weighted average diluted shares are expected to be approximately 149 million. We are proud of the strong results we delivered in Q3, with demand for Box AI and adoption of Enterprise Advanced driving an acceleration in top-line metrics. With our ongoing strategic investments in go-to-market initiatives and our intelligent content management platform delivering strong returns, we are well-positioned to capitalize on the opportunity ahead while delivering significant long-term shareholder value. With that, Aaron and I will be happy to take your questions. Operator? Operator: And we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is 1 if you would like to join the queue. Our first question comes from the line of Matt Balik with Bank of America. Your line is open. Matt Balik: Great. Thanks for the question here. I wanted to ask kind of a high-level question. Kind of turning back the clock to the March Analyst Day where you outlined several growth levers that you would be able to use to get to that 10 to 15% growth target over the long term. I guess, since March, could you comment directionally on how you are feeling about each of those growth levers as contributors? Are we ahead of schedule, kind of in line? How should we think about that? Aaron Levie: Yeah. So if you look back at a lot of those growth levers, I would say that certainly, all of those are tracking quite well. The adoption, just the timing of when we started to see the impact of Enterprise Advanced and some of our newer AI capabilities, is exceeding our expectations. That shows up in a lot of the trends around pricing as well as an improvement in net seat growth. So that is kind of the upsells and seat expansion dynamic. The new customer acquisition has certainly been tracking well, especially given some of the green shoots we are seeing in EMEA, and we hope to supercharge that with a lot of partner and SI investments and relationships that we are building. Finally, related to Enterprise Advanced as well, that platform expansion, especially in the form of AI units, is tracking nicely as well. Yep. So all three, certainly. Matt Balik: One quick call if I could. Aaron Levie: Oh, sorry. Go ahead. Matt Balik: Awesome. Thank you. Yeah. Appreciate it. I have also noticed sales and marketing has gradually improved as well. Maybe if you could help unpack the drivers of that sales and marketing efficiency and help us think about general Salesforce productivity, maybe your hiring intentions for this year and next year, whether or not that is in line and tracking. Or if those improvements in productivity are making you more willing to hire on the go-to-market front. Aaron Levie: Yes. We kind of laid out that this was a year where we wanted to be investing incrementally more in sales capacity, some of our vertical efforts, going deeper with system integrators and our partner ecosystem. We shared that at Financial Analyst Day and, obviously, throughout this year, various updates. We are very happy with the results that we are seeing thus far on those investments, both in the near-term productivity but also more of the qualitative impact that we are seeing. Building long-term partnerships, building more pipeline around those, as we shared today. Being listed in the AWS Marketplace, which is coming soon, will add additional channel distribution support for us. We called out the Deloitte deal, what we are doing with TCS, Slalom, DataBank, IBM, and many others. That partnership channel is going to continue to build out. We continue to believe and are bullish on the overall go-to-market investments that we have made as well as our platform investments. I think you will continue to see that from us going into next year. Operator: And our next question comes from the line of Brian Peterson with Raymond James. Your line is open. Brian Peterson: This is John for Brian. I want to start on FedRAMP High on the FedRAMP High authorization you received earlier in the year. Any details you can share on how the federal vertical is doing for you guys? Maybe how we should think about the pipeline of business there? And if the government shutdown had any impact on late-stage deals and type? Then I have a quick follow-up. Aaron Levie: Yes. So FedRAMP High was very important for us to be able to get into many of the more sophisticated and complex government deals. That is increasing our ability to serve DOD customers for more and more mission-critical work. We are seeing good momentum there on the sales conversations and pipeline build. We also announced the partnership with OneGov out of the GSA, so I think we are getting even more support and general air cover within the federal government IT ecosystem. While we did see a couple of incremental shifts on deal timing as a result of the shutdown, we feel very confident in the momentum that we are seeing now coming into Q4. Overall, we are finding the federal business to be fairly strong at the moment. Brian Peterson: Great. Great color there. I think the last few quarters, you have mentioned the return to seat growth. I want to dig in there a bit more. Is that being driven somewhat by the macro recovery? Is that fair to say that it is being driven somewhat by the macro recovery? But just more by AI-enabled workflows expanding seats? While I realize you are not guiding to it for next year, how should we think about the seat dynamics as we head into next year? Thanks. Aaron Levie: Yeah. So I would say, certainly, there is a macroeconomic back element to our business, but it does not seem as though that has been changing a whole lot over the last couple of quarters. I would mostly point to the impact we look at the deals and where we are seeing those seat expansions really coming from the newer use cases and the expansions that Enterprise Advanced and the AI capabilities enable, so we primarily point to that. Going forward, we have said that over time, we do expect that net retention rate to continue to improve from where we are and for those seat trends to continue moving in the right direction over time as well. To your point, having given specific numbers for next year, over time, we do expect continued strength, and those trends continue as well. Just actually, if I can, the one thing I was going to add to my prior comment was, we did see healthy deals in Q3 in the public sector. Obviously, the government shutdown was more later in the quarter, but we had a bunch of good wins and expansions in the public sector in Q3. Operator: As a reminder, it is star one if you would like to ask a question. Our next question comes from the line of Josh Baer with Morgan Stanley. Your line is open. Josh Baer: Great. Thanks for the question. Aaron, I was just wondering, I mean, Box and you have been very forward-thinking and strategic, innovative with all things AI and agents. What does that do for the broader core content management opportunity? Just from a competitive perspective, thinking about incumbents, legacy vendors, does it serve as a catalyst with all the market focused on AI and innovation to see some of the differences in how you have approached those changes versus legacy vendors? Aaron Levie: Yeah. So I think it is interesting. There are maybe two dynamics at play. As I mentioned in some of the conversations in New York a few weeks back, you can imagine it is sort of most of the major banks and private equity firms that we spend time with in the city. What is happening is you have two dynamics playing out. One is there is just an instant obvious recognition of, okay, if we could finally structure our unstructured data, which is take equity research, take credit data, loan origination documents, any of that information where today, you are doing a lot of manual reviews of that information. Now agents can go and extract that data from the documents, put it into the Box metadata system so you can query it. You can run analytics on it. You can import it into Snowflake or a Salesforce data cloud so you can manipulate it like structured data. But again, the source material is all this unstructured content. All of our conversations were around being able to tap into this vast array of unstructured data. The first thing that is going to happen is the content management market in general is going to grow as a result of now all of these new use cases that companies can do for the first time. I would say maybe 70 to 80% of the conversations that I had against dozens of conversations, there was not even a legacy infrastructure or document management system in the conversation. It was net new use cases where for the first time ever, a company could tap into the value of what is inside of this unstructured data. I think you are going to see just a TAM increase for the overall content management market. That will benefit us, I think, disproportionately, but it will benefit generally the space, which is great because we have sort of all been living in this world in the content management space of there is so much value in this data that companies have not been able to tap into. Now for the first time ever, they can, which will increase the overall investment and excitement around the category. The second component, which really gets to the legacy takeout, is we had a number of customers that basically say, well, okay, if I am going to now run agents on my unstructured data and I am going to plot all these insights or automate a workflow or build a Box app to power a business process, well, now I want to move even more of my data into Box to be able to go and handle that. That is really where you are seeing more and more customers say, okay, how do I get rid of a legacy ECM system? What is that migration path? That conversation also came up multiple times just in this a few weeks ago as just one interesting example. It is happening across the board. We are seeing way more interest and energy momentum around legacy takeouts and migrations where AI is the catalyst that is opening up the new use cases that are causing customers to say, okay, now is sort of time to go move our infrastructure to the cloud. We saw that a few years ago with security as one of those catalysts, but AI is going to be much bigger because you are actually now generating real new value propositions for the customer in the process. Josh Baer: Awesome. Thanks, Aaron. Aaron Levie: Yep. Thanks. Operator: Our next question comes from the line of George Kurosawa with Citi. Your line is open. George Kurosawa: Hey. Thanks. I am on for Steve Enders. I wanted to follow up on this line of thinking. When you first announced Enterprise Advanced, the obvious big opportunity was on the price per seat and the pricing uplift side. It has been interesting to hear you guys talk more and more about use case expansion and the seat growth side. I would just love to hear more on what you have seen there. How meaningful you think that could be from an NRR standpoint over the long term. Aaron Levie: Yeah. Maybe just to highlight, we are seeing continued strength in both components. What we thought Enterprise Advanced would impact the business and customer economics, but just more recently, over the past couple of quarters, been highlighting that net fee for a net growth dynamic because that is really what has changed, whereas the pricing has gotten stronger. We have been really pleased with the impact it is having. It is just that had been a driver of NRR and growth for a longer time period. In terms of the overall impact, we would say certainly, the overall seat dynamics are where we see probably the biggest area of upside. That is also when you looked at the trend and where things had declined previously, that was also the biggest driver. We do see that as probably the most variable part and biggest opportunity for the net retention rate to improve. At the same time, as we get more and more customers moving into Enterprise Advanced and adopting some of the other capabilities of the platform, we continue to see both seat count, as well as pricing, to be pretty important levers in that algorithm. George Kurosawa: Okay. Great. Then I know I am a quarter early here on asking about FY '27, just when we think about the exit revenue growth rate of 8% constant currency relative to billings growth of 12%, CRPO growth of 14%, maybe you could just help us think through your kind of confidence on maybe a path towards acceleration into next year and what that might look like? Aaron Levie: Yeah. As noted, we are squarely focused on returning to double-digit top-line growth. I would say that some of those leading indicators, billings, especially on a quarterly basis, and even current RPO, are not perfect leading indicators because of some of those dynamics around contract durations, the kind of midterm upsells that we have been seeing, and things like that that help fuel the number. I would say that the underlying momentum that you can see in the business, the trajectory of revenue, is a pretty good indication of the momentum that we are seeing in the business. Certainly, to your point, we will share a lot more about our expectations and the different parts of growth and how we are thinking about it in just a few months on our Q4 call. George Kurosawa: Thanks for taking the questions. Aaron Levie: Thank you. Operator: Our next question comes from the line of Fredrik Gooding with William Blair. Your line is open. Fredrik Gooding: Patrick Gooding here. I am just curious. I guess, slightly piggyback on the previous question, but also backing it up a little bit in terms of broader AI adoption. I guess, are we nearing an inflection point in terms of enterprises overcoming some of those barriers of AI adoption? It would be great to also get some slight additional color in terms of some of the specific capabilities within the Box platform where you are seeing some of these use cases really being unlocked. Aaron Levie: Yeah. I think we have always been in the sweet spot of AI, which is we have embedded the more kind of productivity-oriented, helping you with your daily knowledge work just into all of our plans. Instantly, customers get this added value proposition just by virtue of using Box. The capabilities that we really monetize are showing up in Enterprise Advanced. Those are going after very, very pragmatic workflow use cases, again, often oriented around data extraction being the kind of core of what the customer is trying to do. At least that is the ingredient into the workflow that they are trying to automate. We are seeing conversations across the board. I will start with the kind of most obvious ones, and then we can expand. The super obvious ones are customers are saying, hey, I have 10,000 or 50,000 or 100,000 contracts or millions of contracts in some large enterprise cases. I want to be able to extract the data from those contracts and then be able to automate workflows around them. Think about the same use case for an invoice or a lease agreement or a loan origination process. That type of conversation is causing a lot of the Enterprise Advanced upgrades to happen right now because to get access to Box apps where you would build and construct the data views and the dashboards and the applications around that, you need access to Enterprise Advanced. With Box Extract coming live in Q4, it is only going to further accelerate the adoption of Enterprise Advanced because now customers have an interface opposed to just doing the data extraction with our agentic APIs. They will be able to do that now directly built into the Box interface. That is the initial tailwind. What is really cool is we are starting to see use cases that customers have, and this is what makes us again so bullish about the overall category, where the customer was likely not in a data extraction addressable market previously. Where agent agents being able to now read documents and process them and provide insights in them or extract information is sort of expanding the use case of workflow automation around documents. These are things like where customers might have healthcare records or medical billing claim data where they were manually processing this data previously. They have never been able to really bring any form of AI automation to the workflow before. Those kinds of workflows are being automated on the platform, which just for us increases the addressable market of now what we can bring automation to. We are seeing a lot of these types of use cases emerge. There is not really the kind of typical maybe headwinds you would see, which is, okay, you have an AI adoption council or governance committees because this is squarely workflow automation where agents are just enabling the workflow to get automated. I do not think we are going to see a lot of headwinds on the momentum on this front. It is really just up to our own execution and our ability to get the whole customer base to be educated on the capabilities and to drive that upgrade cycle. Fredrik Gooding: Okay. Thanks for the color. Then, Dylan, for you, it would be great if you could rank order in terms of some of the priorities of go-to-market investment. I know you touched previously in terms of investing in the system integrators and partner ecosystem, but I am wondering if we throw in the multiproduct, multi-product slash cross-sell motion in there, and then also trying to balance that in terms of margin expansion or potential margin expansion for 2027, how should we think about that as well? Dylan Smith: Yeah. In terms of the initiatives, a lot of the focus areas, if you think about whether it is the increased focus on verticalization or really driving Enterprise Advanced, that cross-sell, upsell, that you mentioned, that is really embedded in the way that we are just enabling our entire Salesforce. From a pure investment standpoint, we are growing the size of the Salesforce, but it is hard to parse that out as individual stack-ranked priorities. In terms of the specific areas of investments, certainly one of the big ones is around the partner SI ecosystem. Another big area, in addition to just a lot of the reps we have, is really that verticalization of the Salesforce. Bringing in that industry-specific expertise, which we already have in a lot of cases, but really doubling down there, especially given the types of use cases that Enterprise Advanced enables, are a couple of big investment areas on the sales side. Really continue to scale a lot of the high ROI marketing programs that we have been delivering as well. Really pleased with the results there. That will be another area of investment. As it relates to the big picture view of the business, again, we will certainly give more specifics on our Q4 call when we talk about specific numbers for next year. Overall, we have been very pleased with the results of the go-to-market investments that we have been making this year. As Aaron has been talking about, we are in the midst of a massive AI transformation. If we continue to see the strong ROI of those investments, we plan to invest to really capitalize on that opportunity and to deliver another year of moderate operating margin expansion. Certainly remain committed to the long-term target model that we laid out at Analyst Day. Given the opportunity in front of us and what we are seeing in the business, we are very much focused on continuing those go-to-market investments. Operator: That concludes our question and answer session. I will now turn the conference back over to Cynthia Hiponia for closing remarks. Cynthia Hiponia: Great. Thank you, everyone. I appreciate you joining us here this afternoon, and we look forward to updating you again on our Q4 call in early March. Operator: Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.
Dave Gennarelli: Hi, everyone. Welcome to Okta's third quarter fiscal 2026 earnings webcast. I'm Dave Gennarelli, Senior Vice President of Investor Relations at Okta. Presenting in today's meeting will be Todd McKinnon, our Chief Executive Officer and Co-founder, and Brett Tighe, our Chief Financial Officer. Eric Kelleher, our President and Chief Operating Officer, will join the Q&A portion of the meeting. At around the same time that the earnings press release hit the wire, we posted supplemental commentary to our IR website. Today's meeting will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding our financial outlook and market positioning. Forward-looking statements involve known and unknown risks and uncertainties and may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date made. Information on factors that could affect our financial results is included in our filings with the SEC from time to time, including the section titled Risk Factors in our previously filed Form 10-Q. In addition, during today's meeting, we will discuss non-GAAP financial measures. Though we may not state it explicitly during the meeting, all references to profitability are non-GAAP. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP financial measures versus their closest GAAP equivalents are available in our earnings press release. You may also find more detailed information in our supplemental financial materials, which include trended financial statements and key metrics posted on our investor relations website. In today's meeting, we will quote a number of numeric or growth changes as we discuss our financial performance. And unless otherwise noted, each such reference represents a year-over-year comparison. And now I'd like to turn the meeting over to Todd McKinnon. Todd? Todd McKinnon: Thanks, Dave, and thank you everyone for joining us this afternoon. We're pleased to report another solid quarter of results. In Q3, we experienced strength with large customers and Okta workforce upsells, particularly with new products like Okta Identity Governance. These results are driven by our unique ability to solve complex identity challenges across the entire enterprise landscape. In my comments today, I'm going to expand on our success with new products. I'll also share how Okta secures AI, which represents a significant new opportunity and a catalyst for growth. Brett will then cover our financial performance and provide an update on the progress we're seeing with the expanded go-to-market specialization. Okta's new products continue to make meaningful contributions to our results. Customers that are frustrated trying to manage sometimes dozens of different identity systems are turning to Okta for a modern, neutral, and unified identity platform. We have been investing in innovation, and our portfolio of new products is allowing customers to dramatically reduce complexity while significantly improving their security posture. New products include Okta Identity Governance, Okta Privilege Access, identity security posture management, identity threat protection with Okta AI, Okta device access, and fine-grained authorization. Many of these new products can now be delivered as part of product suites, which provide more value and further simplify the way customers can do business with Okta. We believe these new products will continue to provide incredible value to our customers and will be a growth driver for many years to come. Earlier in Q3, we had a record number of customers and partners come to Oktane in Las Vegas to hear how Okta secures AI. The simple way to think about it is that Okta is helping customers both build more secure AI agents and manage their AI agents in a secure and scalable way. The emergence of a Genentech technology is redefining the identity security landscape. AI security is identity security. AI agents represent a new powerful identity type. However, without proper security governance, they are also highly vulnerable. Securing AI agents and nonhuman identities is not a feature. It's essential for any business looking to safely scale their deployment of AI. If an organization does not secure its agents today, they risk undoing years of security improvements and leaving themselves vulnerable to new identity-based attacks. Okta has prioritized our efforts to focus on helping customers solve this business imperative and capture what we believe will be the next catalyst for growth and meaningful market within the identity security space. Okta's neutral and unified platform, coupled with our installed base of over 20,000 customers, positions us best to become the identity layer for AI agents. That's why we're so excited about the recent launch of Auth0 for AI agents. Auth0 for AI agents allows customers to build secure agents, APIs, and users more effortlessly across their B2B, B2C, and internal app ecosystem. Based on our conversations, customers are expecting Okta to deliver the capabilities to help build and manage their AI agents. They're already turning to us to help guide them through the new security challenges that AI brings. Over just the past few months, we have experienced a surge in inbound interest for our AgenTek security solutions to manage agents. Okta for AI agents, these organizations are looking for a single control plane to observe and manage agents of all types in a way that offers flexibility as the technology continues to evolve. They also want a solution that gives them control, like the ability to embed fine-grain access into every agent. Okta is here to deliver. The excitement is real, and the interest is tangible. It's very early days on this front, but we have already been engaged with over 100 of our current customers, which combined represent over $200 million in existing ARR. To give you a sense of the interest, I want to share a great early win with Okta for AI agents. It's with a financial services customer that is in the midst of deploying AI agents across their operations. Given the sensitive nature of their data and the need to remain compliant with the regulatory environment, securing these agents was not optional. It was critical. They selected Okta for AI agents to secure their AI footprint and provide them with enhanced visibility and remediation capabilities for the agent identities. Enforce access control, identity governance, and threat detection. It was a great win-win. Okta is helping the customer to safely deploy across their business, and the addition of Okta for AI agents represented a significant ACV uplift compared to their prior contract. We are successfully executing on our strategy to capture this emerging opportunity, and this deal demonstrates our ability to lead the market by moving beyond human identities to securing agentic identities. Okta is the essential identity layer to help customers build, observe, and manage AI agents. We're the only company that is able to secure AI with a modern and neutral platform, allowing us to deliver even greater value to our customers. In addition to helping customers build and manage AI agents, Okta is driving the industry to an architecture identity that is more valuable and more secure. Last quarter, you heard me talk about Okta's role in the development of cross-app access, which brings visibility and control to both agent-driven and app-to-app interactions. This allows IT teams to decide what apps are connecting and what information AI agents can access. I'm excited to share that as of last week, cross-app access is now an extension of model context protocol known as MCP, which helps validate that identity providers like Okta will act as the indispensable control plane for the AI enterprise. To wrap things up, we're pleased with another solid quarter of results, and we believe we're best positioned to win the exciting new market segment of Securing AI. In this rapidly evolving environment, organizations of all sizes are looking to Okta to deliver modern and scalable identity security solutions that can seamlessly integrate across their networks. We are confident in our strategy and enthusiastic about the momentum of the business as we head into our seasonally biggest quarter of the year. I want to thank the entire Okta team for their tireless effort and also thank our loyal customers and partners who put their trust in us every day. And now here's Brett to cover the financial commentary and talk about how we're positioned for long-term profitable growth. Thanks, Todd, and thank you everyone for joining us today. Brett Tighe: My commentary will provide insights into our Q3 performance and then move into our outlook for Q4 and FY 2026. We remain pleased with the overall progress we're making to further specialize our go-to-market teams. Importantly, we continue to see improvement in sales productivity. Partially driving this is our average AE tenure, which has remained strong on the back of healthy attrition levels. The continued positive trends we are seeing across our go-to-market KPIs reinforce our confidence that this specialization strategy is the right path to accelerate long-term growth. Another area of sales specialization where Okta has seen strength over the past few years is the public sector. All things considered, the government shutdown didn't meaningfully change the outcome of our Q3 results. We remain very optimistic about expanding our presence with US government agencies as well as state and local agencies as we move forward. Over the past couple of years, we've done well to improve our margins to healthy levels while making investments for growth. Our disciplined investment areas remain clear: improving sales productivity through go-to-market specialization, relentless product innovation, and further leveraging our channel partners. More recently, we've expanded our investment areas to drive future growth by increasing the number of quota-carrying sales reps. Our recent results and business momentum give us confidence to add sales capacity in order to service the demand next year and beyond. Moving on to our balance sheet. In September, the 2025 convertible notes reached maturity, and we settled the remaining principal amount of $510 million in cash. We had another great quarter of cash flow in Q3 and ended the quarter with a strong balance sheet consisting of nearly $2.5 billion in cash, cash equivalents, and short-term investments. We regularly evaluate our capital structure and capital allocation priorities, which include investing in the business, M&A, and opportunistic repurchasing of the 2026 notes, of which $350 million remains outstanding. Now let's turn to our business outlook. For Q4 and FY '26, we continue to take a prudent approach to forward guidance that factors in current market conditions. For the '26, we expect total revenue growth of 10%, current RPO growth of 9%, non-GAAP operating margin of 25%, and free cash flow margin of approximately 31%. For the full year FY '26, we are raising our outlook and now expect total revenue growth of 11%, non-GAAP operating margin of 26%, and a free cash flow margin of approximately 29%. We will issue FY '27 guidance on our Q4 earnings call, which will provide a more informed view of FY '27, especially as we exit this quarter, which is seasonally the biggest quarter of the year. To wrap things up, we're enthusiastic about the trends we're seeing across the business, from the adoption of new products to customer interest in how Okta secures AI. This gives us confidence to continue making critical investments to accelerate top-line growth. We're pleased with another solid quarter of results, and now look to close out FY '26 strong and build on this year's success. With that, I'll turn it back to Dave for Q&A. Dave? Dave Gennarelli: Thanks, Brett. I see that there are quite a few hands raised already, and I'll take them in order until the time of the hour. And in the interest of time, please limit yourself to one question. With that, we'll take the first question from Gray Powell at BTIG. Gray Powell: Okay. Thank you very much, and congratulations on the good results. Can you hear me okay? It looked like I froze there. Todd McKinnon: Not unclear, Gray. Gray Powell: Alright. Great. So, yeah, it's good to hear the commentary on platform momentum. And at a high level, I definitely think it makes a lot of sense. But I do have to admit, sometimes we pick up on conflicting data points in our fieldwork. Some partners say it's great. Others are a little skeptical. So I guess from your perspective, what gets customers over the hump and convinces them to consolidate IAM, governance, PAM, customer identity, and any other components to Okta? Are there any commonalities between customers who consolidate? Can you just kind of talk about why you see those win rates? Todd McKinnon: I think the answer is it's always wrapped up in some other technological change. If you're not changing your data center, you're not changing your apps, if you're not investing in AI, you're not going to change identity. So in all the customers I work with, it's about some other catalyzing technological change. For many years, it was cloud and building mobile apps and still cloud transformation too, but what we're seeing more and more is companies are trying to move technology so they can take advantage of AI. They're modernizing apps. They're modernizing their security stacks so they can give AI agents access to all of their data resources, and that's been a catalyzer. I think on the partner side, we had actually a pretty strong quarter with the partner channel. Many of the largest deals went through a partner. It's an area of strength. I think just compared to other companies, a lot of times, we're not as deep and relying on partners. So maybe that's why some of the partners are coming up inconsistently. But in increasing that reach with partners and presence with partners has been a focus. And I think on all our internal data, it's manifesting itself prevalently. So we're very excited about that. Eric Kelleher: Yeah. I would add to that, Gray, and thanks for the question. I think another area to consider with customers and as far as consolidating all these use cases with Okta, as their identity partner, is enterprises as they get more and more mindful of the importance of securing identity across human, nonhuman, and agentic, they're realizing that the legacy architectures they've built with multiple products or multiple vendors and multiple stacks are fragile. And with that fragility comes insecurity. It's harder for them to have confidence they're managing securely all their identity use cases in a way that they're confident in their ability to protect against identity-based cyber attacks. And so they see value in consolidating on one partner with Okta so that they have confidence they've got a single pane of glass to manage all of that. So by removing complex vendor distribution, consolidating on Okta's platform, they're able to better manage and be more confident in their security posture against threat actors. Gray Powell: Understood. That's helpful. Thank you. Dave Gennarelli: Let's go to Itay Kidron at Oppenheimer. Itay Kidron: Thanks, guys. Solid quarter. I guess, Todd, a very interesting commentary, needless to say, about AI and the 100 customers who are trialing it. Can you give us a little bit of color on, a, do I have to be an Okta customer to specifically deploy your AI capabilities? Or those could be applied to any company even if they don't use you for core access management, number one. Number two, when you think about the full deployment of this, how do I think about the dollar potential here when you have customers that are spending $100k with you? By how much can AI truly elevate that total bill for them? Todd McKinnon: Yeah. I've been personally, and the entire company is blown away by how interested our customers and prospects are in this capability. I haven't seen anything like this in my experience at Okta. A new capability or new product set. So it's very, very exciting. And if you step back and think why, everyone, no surprise, big shock, they're trying to take advantage of AI and build AI workflows into their enterprise workflows. And a lot of them are stuck. And I think it's why you see some of the adoption rates of some of these platforms like Salesforce or ServiceNow or others is, you know, below what people want. And they're stuck because right now, they have a couple of choices. They can either deliver agentic apps that look very much like they don't have any access to the company's data. They look very much like public Gemini or public ChatGPT, generic chat bot, and they can't get any insight from the company's data. That's one choice. Or the other choice is you take the company's data and you shove it in a big data warehouse like or Databricks or Palantir, and then the agents have way too much access. They can just see everything, and they do unintended things. So people are stuck in their pause, and they're saying, wait a minute. Not gonna roll these things out. And there's a huge, huge number of companies that are trying to do something there, and they're stuck. And then they come to us because what we can do is what we're very good at is figure out who can access what. Not only for people, but now for AI agents and help them filter who has access to what, how you deploy these applications in a way that gives the right information to the agent in the right security level, lets them observe the behavior and build the right use cases for the business without over-permissioning at all. It is early days. Like, we announced and released these products, you know, just in the last couple of months after our conference in September. So it's early days. But we do have several deals that have been transacted for these products. We gave the example of the financial company that is rolling out these agents and purchased the product. It's early days, but it's incredibly exciting. And I think it's because longer term, you look at our market, we have a $50 billion TAM for workforce identity, a $30 billion TAM for customer identity, owning and governing the agentic identity layer, and securing AI can be a bigger TAM than both of those. I mean, it's several years out, and it's gonna be a lot in change and growth there, which, by the way, I think one of the reasons why companies are coming to us is because it's a dynamic environment. You have a new model release coming out every couple of months, and Gemini is better now. OpenAI is better, and then Anthropic is better. And technology is all shifting around it. And customers don't wanna get locked in. They're hesitant to commit to the Microsoft stack or the Google stack. They want flexibility. And by doing this access layer in an independent neutral third party, they feel like they're gonna have choice as this amazing platform of agentic enterprise unfolds. So it's very exciting that we've the company's number one priority now is to take advantage of this opportunity. So we're very clear in our R&D and our go-to-market. We're gonna focus on this opportunity. That's how big we think it is. So it's incredibly exciting. Itay Kidron: Todd, do you think that the go-to-market around this can change? Meaning, instead of you selling it to the enterprise, actually talk to the agent companies and have them bundle already ahead of time your identity security with their agents such that the customer needs to do this? Todd McKinnon: Absolutely. And we're already doing this with trying to set the industry standards around access. We've mentioned before cross-app access, which is an industry standard around how you actually give access to these agents across multiple agent platforms connecting to multiple end repositories of information, whether it's a database, a warehouse, an application. And we're really excited that the MCP standard now recognizes cross-app access as an extension of MCP. So think about that now if you're using MCP protocol to standardize some of these interactions between agents and resources, cross-app access fits right into that now. So it's a very insightful question, and we're working hard on that as well. Eric Kelleher: And just as an example for our customers, customers that are using Auth0 for AI agents to build agents will get support for cross-app access out of the box, meaning any agents that they build with Auth0 for AI agents will be discoverable by an IDP that also supports the model context protocol. And Okta's IDP, so it's Okta's IDP also supports cross-app access to model context protocol. So customers developing agents with our technology will be producing agents that any company can secure more precisely. And the Okta platform will help customers discover agents that have been deployed and then manage those agents as well. So we're already well on the path to ensuring that we're productizing this opportunity using our existing capabilities. Itay Kidron: Thank you. Dave Gennarelli: Let's go to John DiFucci at Guggenheim. John DiFucci: Thanks, Dave, and listen. Guys, in the past, I'm gonna ask the question that I think we're all gonna have to answer. But in the past, you've given an early look to next year. And you didn't do that this year, which I think is the right call given how much next year depends on the fourth quarter, like Brett said. I also realized that there are other reasons to give that early look because there are other things happening at the company in prior years. But even if no new numbers, you don't give any numbers, can you give just some subjective commentary about how the world looks for Okta over the next year just generally even? Because this quarter, this quarter looks good. The stock's down a little bit after hours because I think what I'm saying of you didn't give that guide and people are used to it, but, you know, they'll get over that. This quarter does look good. It sounds like there's a lot of even more traction. Behind the numbers happening. So just a little commentary on that would be helpful. Brett Tighe: Todd, do you wanna take it? I can talk to the guidance I was just gonna say well, then I was gonna say about the fourth quarter is it is it is our big seasonally, it's our biggest quarter of the year. And the opportunity is tremendous for us in Q4, and we're very focused on executing that well across all of the product lines and all the regions and all the ways we execute in the course for the fourth quarter, and we're set up to deliver success there. And so that's very optimistic. Brett, maybe you can talk about the just a little bit of guidance philosophy. Brett Tighe: Well, I was actually gonna touch John on just the business momentum. Before I get into the guidance because I think that's more of your question than I'm happy to give it to you, which is, you know, look, Q3 was another really solid quarter for us. You heard Todd talk about it. You heard Todd me talk about it. Sure Eric will touch on it throughout this call, but we're pleased with the traction that specialization is getting. We're seeing that a productivity number, the number you've heard me talk about for years now, get into a region that we're quite pleased with. Yes. It's not perfect everywhere. But it is exciting to see it from an overall because that means the specialization is working. We're excited about that. And what that's doing is that giving us that's giving us confidence to be able to start to add more reps into the system. So, you know, for a while, that's something you and I have talked about. I know a bunch of us on this call have talked about is do we have the right amount of capacity out in the field to be able to address the demand? And so we started adding capacity last quarter. We've added more in Q3. We expect to add more in FY '27. So that tells you we have we're gonna add more in Q4. Confidence in the opportunity for a whole host of reasons. Right? It could be what Todd has talked about earlier, you know, Okta securing AI is a massive opportunity for us. You can talk about the other new products like governance, PAM, highly regulated identities on the Auth0 side, feel like the organization is headed in the right direction, and that's why you see us growing sales and marketing expense the last two quarters. Year over year. That's something you haven't seen in a while. Because we're having that confidence in the organization to be able to go out and address this opportunity. And so we're excited about what we're seeing in the business. And so, hopefully, that gives you more of the context. I'm happy to talk about the guidance. I mean, I can get into that for a second just so we're all on the same page. Todd touched on it a second ago. Because Q4 is so large, it creates a need for us to be able to embed an amount of conservatism in there that makes a guidance five quarters out not that helpful. And, frankly, the whole point of guidance is to be helpful. If it's not helpful, we shouldn't do it. We're not gonna do it this time, and we will update all of you after we get past our seasonally largest quarter of the year at the '4. And so then we can give you a much cleaner look at the world and not have to embed some conservatism associated with our largest quarter. Now with that said, John, I gotta bring up current RPO because I know we've gotta talk about it. And if you look at if you want a number for FY '27, or if you want to approximate a number for FY '27, I would take a look at the Q4 guided current RPO and apply a coverage ratio to it. That annualized coverage ratio you guys have all heard me talk about for the last few years. Go ahead and take current RPO divided by the coverage ratio and then add some professional services on the top. And that's going to get you to a rough approximation from a revenue perspective. Now, obviously, the formula the piece of the formula I haven't given you is the coverage ratio. That coverage ratio, I probably would use something in the region of FY '26. So, hopefully, that gives you a little bit of John, on how the business is doing and why we're excited and optimistic and also a little bit why we decided to hold off on giving a guidance about Q4 and, frankly, beyond Q4 for FY '27 because we didn't feel like it was being helpful to all of you anymore. John DiFucci: That all makes I really appreciate all that. Thank you. Eric Kelleher: Just a little added color commentary to Brett's comments as well. We've talked throughout this year on the changes we made in February to go to market to specialize in the platforms. And we've talked about one of the key reasons for that strategy is we had decided that specializing in the buyer persona was important, but also that our pace of product innovation on both the Okta platform and Auth0 platform had accelerated to the point where it was just really hard for one seller to keep pace with all the capabilities coming out in the platform. And we talked in Q1 about how we were on track for our plan for this year to implement that change and absorb the cost of change management. We talked about having a solid Q2. You've heard us here talk about a solid Q3. One indicator that we've shared of how successful we're being executing that strategy is what Brett talked about earlier that our AE attrition right now is near a multi-year low. And our AE tenure is near a multiyear high. And AE productivity is sequentially increasing. And so when we think about how we're doing implementing that significant shift in territory assignments and account assignments and then go-to-motion overall, we've got a lot of indicators that this strategy is the right strategy for us. And it's also created space in our sellers to be able to take on new initiatives. Like, we're talking today about Okta Secure's AI, and how just how impressed we've been with how much that story is resonating for our customers right now is a hugely strategically important need. We can attack that need now because we've got more focus on that particular use case for that particular buying persona. So we're very optimistic on the strategy playing out. John DiFucci: That all makes sense, Eric. Thank you. And it's showing. It's showing. Thanks. Dave Gennarelli: Next up, we'll go to Fatima Boolani at Citi. Fatima Boolani: Hey. Good afternoon. Thank you for taking my question. Can you hear me okay? Todd McKinnon: Loud and clear, Fatima. Fatima Boolani: Great. Todd, this one's for you. We've been really fascinated with the broader themes around agentic commerce. So I wanted to get your pulse on where the portfolio is most relevant to capitalizing on that opportunity? And where do you see effectively your customer identity business playing a very meaningful role in that? And I guess, Eric, just to even loop you into the conversation, how are conversations with customers trending with respect to building a stack behind some of these really interesting opportunities that are gonna unfurl in the next couple of years? Thank you. Todd McKinnon: I think it's a big deal. I think AgenTek Commerce if you have a website, and you're or that's doing customer support or ecommerce, you're gonna have some version of agents on there very quickly if you don't already. And if you're building those agents, Auth0 for AI agents is the right solution. It shortcuts the ability to have those agents connect to multiple systems on the back end. It helps you put fine-grain authorization inside of your agentic flow, so it's purpose-built and we're, I think it's a big trend we're talking about here. It's the same trend we're talking about here. You know, whether you're managing agents for internal deployment to help get work done in their enterprise workflows or your on your B2C use cases moving toward a more agentic interface versus the person interface in the past. It's a big trend we're talking about. Eric Kelleher: Yeah. And I'll add to that. We talked about at our in the quarter at our user conference talk team, we talked about the customer conversation around this challenge, and we shared a survey that we had run of a few hundred enterprise customers reporting that 91% of them had agents in production, and only 10% of them were confident they had them secured. The need is very acute and it's very urgent and it's a key reason why this is elevated in such a prominent conversation. Todd talked about one example of where our customers are struggling with this, and he and fine-grained authors. So for builders of agents, they need to solve for at least two distinct challenges. One is ensuring their agents can be discovered, and the second is ensuring that agents are only authorized to do specific things, that they have access to specific corporate assets and not others. And Auth0 provides the capabilities to solve both of that with support for cross-app access and model context protocol. Agents built through Auth0 can be discovered and managed properly. And Auth0's fine-grained authorization allows agents to be built in a way that their privileges can be very finely tuned, which is hugely important to our customers in that space. But the second part of that challenge that our customers have is they don't know. They tell us they don't know what agents are deployed in their environment. They don't know what their users have turned on and what their users' agents don't have access to. And this is the challenge of discoverability and being able to discover agents. So on the Okta platform side, identity security posture management product scans corporate networks to find service accounts and the privileges of those service accounts, but it will also now help discover agents that are implemented and deployed as long as they support the cross-app access protocol, the extension to MCP. So the problem of discoverability is something they need help with, and we're well positioned to help them with that. And the other related challenge is not only knowing that they exist, but then protecting the identity of those agents to ensure the agents can't themselves be impersonated by a threat actor, and to ensure that those agents are properly authorized to take the actions that they're attempting to access. So the Auth0 platform on the build side is hugely important for our customers. And the Okta platform on the discover and manage side is important for them as well. That also includes things like privileged access, allowing the agents to have tokens that are appropriately vaulted, and governance, having them provisioned and deprovisioned based on just-in-time requirements. So they don't agents live with standing privileges when they don't need to be standing. Fatima Boolani: Yeah. Commercial impact in both your businesses as opposed to what intuitively I would think would just be on the customer identity side. Todd McKinnon: Yeah. I think, Fatima, I could think of a meeting I just had a couple of weeks ago and this was how it all comes together. So there's this company is a large mortgage company online mortgage company. And they think about it as when people come to their website and they start browsing for mortgages, and they answer the customer's question in an agentic workflow, and then it actually flows all the way through their origination business on the back end, which is very much workflows where people have to use human in the loop system to make approvals for mortgages that are over a certain amount. They have to maybe automate the entirety of the mortgage process so they can fulfill it without anyone, any person. So it's like, external facing on their website in a B2C, it also goes all the way back into the enterprise. And they want that all together, and the business value for them is very simple. It's their conversion rates on the mortgage is up, you know, 5x if it's there's no delay. There's no delay in the approval, or they don't have to go for some other thing. So it's a very clear ROI. And before they were talking to us, they're really stuck on these questions we're talking about. Like, how do we make sure that the web-facing agent has the right access to the back end systems? How do we make sure that the enterprise-facing agents have the right permissions? We automate some of those workflows and don't over give overly permissive access to these agents in the enterprise. So it all comes together in that very concrete example. Fatima Boolani: I appreciate that. Thank you. Dave Gennarelli: And next up is Josh Tilton at Wolf. Josh Tilton: Hey, guys. Thanks for sneaking me in. Can you hear me? Todd McKinnon: You can. Josh Tilton: You're good, Josh. Brett, not to put you on the spot here. I do appreciate the color on how to think about next year's revenue. To kind of simplify it without the math, bookings growth year to date is kind of growing where Street is for revenue growth next year. So, like, how do we think about that? You know, what you're doing so far this year, what it implies for next year, are you comfortable with where the street sits, but I'm just trying to understand them. Bookings growth has been good. It's kind of in line with the implied or where the street is for revenue next year. Like, how do you feel about where the street sits today? Brett Tighe: I think in general, if you were to take our comments and boil them into a couple of little simple things, which is one, you can feel the business momentum growing. Right? Eric talked about it a few minutes ago around we had to make some changes at the beginning of this year to further specialize the field. Can feel that business momentum growing as we go into Q4. And we think that that business momentum on the back of us specializing the field is helping in addition to the market seems to be in a good place for us for all these new products, whether it's Okta securing AI, whether it's governance, or all these new products that we've talked about over the last several quarters. So I don't have an exact answer for you in terms of the street is and bookings growth and all that sort of stuff, but the really important thing is you can see the growing confidence in the organization. And you can see the productivity. You can see the optimism. You can see all these things. Headed in the right direction, and that's why you can kind of hear the tone from the three of us and the way we've been talking about it. Throughout this call as being very positive, and we feel like the goal that we've been talking about for a while of accelerating growth in the medium term is something that is on the horizon for us, which is exciting. I'm not saying when it's gonna happen or how it's gonna happen. I'm just saying that we do feel that that business momentum is headed in the right direction, and that's why we're adding capacity, like I said, a few minutes ago to go out and address that demand. Josh Tilton: Super helpful. Thank you. Dave Gennarelli: No problem. Next up is Jonathan Ho at William Blair. Jonathan Ho: Hi. Good afternoon. Wanted to see if you could update us a little bit on your sales realignment efforts earlier this year and how, you know, maybe the product suites have had an effect on that go-to-market. Lastly, how do we think about sort of the pace for net retention over time? It's been sort of sitting at this 106 level for a bit. I know that's from prior periods, but how do we think about maybe the mechanics of that recovery? Thank you. Eric Kelleher: Yeah. Hi, Jonathan. I'll take the first part of that question. I'll let Brett take the second part. The go-to-market specialization for us is as we've said throughout this call, we feel it's been very effective. And there's a few ways that that has played out for us. On the front end, the top of the funnel, we have specialized our demand gen teams for their brand generation work, their pipe generation work, and we are pleased with the pipe that we've been able to generate in the business. We also have had more focus on our distinct personas. So we've had an opportunity in our field to get closer to the very specific granular needs of our CIO and CSO buyers and of our developer. And we've been able to focus our R&D efforts on the Okta platform and the Auth0 platform on those personas. And so we've seen significant innovation improvements tying specifically more specifically to a discrete buying persona. Which has allowed us to continue to capture market. Things like Okta customer identity, which we talked about last quarter, has really come back as part of our refocusing on the Okta platform for the enterprise buyers. So that specialization has been very helpful. One of the questions this group has raised in prior quarters is how the field organization was feeling about specialization, whether they felt this was a positive or something that was a concern, their ability to be successful. And as I mentioned earlier, we're seeing right now our sales is near a multiyear low, and our sales tenure is near a multiyear high. We're feeling very confident in not only in the model's capability to produce financial results, but we're feeling very confident that our own field organization is very engaged and feels that they're being successful in this model, which is what we expected, and we're pleased to see it playing out the way that we expected. Jonathan Ho: Yeah. Brett Tighe: Okay. So I'll talk about NRR in a second, Jonathan. But the thing that Eric was saying made me think of around the specialization. One of the reasons why the new product introduction percentage has remained quite healthy is as a percentage of total bookings, you know, we've talked about it over the last three, four quarters. Because people are starting to really get into the details on the product to be able to sell it directly to a specific economic buyer, and it helps them just be more familiar with anything. Anytime you're more familiar with something, you're probably gonna be better at it. And so that's been the theory behind why we did this, and it seems to be playing out in that regard. Jonathan Ho: And that's a great call out. Brett Tighe: In terms of the NRR, the one thing I would say before we get into NRR is gross retention remains healthy. It's one of those things that we're quite proud of. And we expect to continue over the long run with that given the value that we drive for our customers day in, day out. In terms of where the range is and where it could be, you know, 106 is right in the range we've talked about. You know, you've heard me talk about it every quarter for a while now, and this is where the range we thought it was going to be. So it's traveling in the range that we expect it to be. We probably think it tracks in this range, or we do think it tracks in this range for Q4. I don't have a great answer for you beyond that, Jonathan, because we are still early in our fiscal year planning. But, obviously, if we wanna grow faster, this is something we're gonna focus on. Because it's on the back of that strong gross retention. How can we keep doing these upsells and doing more NPI and more Okta secures AI to be able to help ourselves in that number over the long run. Obviously, there are dynamics that go in there. Like, if we sell more new business, it's, you know, a little bit of a headwind to new NRR. And if we sell more upsells, it's a tailwind. So there's always a balance in that number that we should keep an eye on when we're looking at the overall total business. Jonathan Ho: Right. Thank you. Brett Tighe: No problem, John. Dave Gennarelli: Next, we'll go to Alec Balman at Jefferies. Alec Balman: Hi, guys. I'm on for Joe Gallo today. Thanks for taking our question. Brett, you've been very candid in the level of prudence and guidance the last couple of quarters. But you've also seen larger beats historically in 4Q over the past couple of years. So can you comment on the puts and takes to guide in 4Q? Talked about conservatism there, but just suppose to take us to it. And then also, is the guidance framework still in line with what we've seen historically? Brett Tighe: Yeah. I mean, just in general, just to answer your second question first, we're still trying to get closer to the pin. Now we had a nice beat this quarter on current RPO because the team just flat out outperformed. They did a really nice job. And so, you know, I'm happy to be wrong in that situation. But, you know, we wanna get closer to the pin. That's been our stated goal now for several quarters. And if you look at Q4, we've removed any specific line items. Right now, it's just down to market conditions and our own internal expectations. So it's real simple. And we're looking forward to executing in Q4 as best we can because you've heard us talk about it. It is our seasonally largest quarter, and we wanna finish a strong FY '26 with a bang. Dave Gennarelli: Great. Next up, we'll go to Shrenik Kothari at Baird. Shrenik Kothari: Yeah. Thanks for taking my question. There was a question on consolidation and then a lot on agent. Try to combine the two. Like, I believe as you guys head into '26, planning cycles, and, Todd, you did mention there's a desire for a single control plane to manage a GenTech as well. Are you seeing signs that buyers are also thinking about consolidating AI IT governance around a vendor? And just based on whatever you saw so far in terms of those 100 plus engaged customers, can you walk us through, like, the typical conversion timeline from interest towards the ACV booking ARR? Thanks. Todd McKinnon: Yeah. You're right. The two trends are very related. This thinking about the agentic future for these customers and then thinking about what that means for their identity stacks in the short term. We're working with one of the largest Fortune 50 customers of ours on a wholesale replacement of Ping Identity, SailPoint, CyberArk, and several other identity vendors across our whole stack to standardize on Okta products. And the driver there is two things. It's cost. They wanted to have less cost in their environment, and they wanted to have more better functioning integrated products. That's part of the driver, but the bigger driver was something very simple, which is this company has 5,500 applications. And only all these years these legacy vendors, they only had 500 of them hooked up to their central identity system. So they're thinking about an agentic future where they wanna give their agents and their agent infrastructure access to every application that they have. And they only had a paved path for 1,500 of them because they only were able to get that many on their identity platform with the old technology. So when they think about standardizing, they think about moving all 5,500 applications to Okta. And then that cuts cost. It makes the system work better because governance is integrated to access management, is integrated privilege. But more importantly for them, I think it enables this agentic future where they can give access in a controlled, governed, managed way to all these agents doing all these workflows. That's behind the standard IDP. So they're all kind of interrelated, but I think they all point north for which is a very good position to be in. Dave Gennarelli: Next up, we'll go to Brad Zelnick at Deutsche Bank. Brad Zelnick: Great. Thanks a lot, David. Nice to see everybody. Guys, in Q3, I think you've added more headcount this quarter than you have in three years, which I take as an expression of confidence. Especially knowing how devout followers you guys are about rule of 40. That's in addition to a lot of other constructive commentary tonight. But just to follow on to Fuji's question and Josh Tilton's question as well, if I take, Brett, your comments on CRPO coverage ratios, quick back of the envelope gets me to, like, nine and a half percent revenue growth for next year. And I just wanna make sure that I heard you correctly and I'm interpreting that right. Brett Tighe: Yeah. The simple math is just current RPO. Right? And you take the coverage ratio and the coverage ratio just to make sure everyone is clear on what that is. We could let's say we can let's calculate the FY '26. Coverage ratio together. All you do is you take Q4 FY '25 current RPO, and you divide it by next year's use the guide or the no. I'm saying for the coverage ratio that you're gonna apply to current RPO. Right? Because it's current RPO guidance, times the coverage ratio, plus professional services. Brad Zelnick: Yep. Brett Tighe: K. So you've got Q4 current RPO guidance. We just gave it to you. Right? $2,450,000,000. Yep. The coverage ratio is the most important factor in the math that you don't we don't have an exact number for, but I'm trying to give you a rough approximation. And if you wanted to use have to use FY '26, but it's the closest in years, so might make sense or somewhere in that ZIP code. So the FY '26 version, all it is is Q4 FY '25 current RPO, which was $2,250,000,000 and you divide that by the FY '26 subscription revenue and that's gonna get you a number. We haven't given you a guide for a subscription revenue, but you can figure it out, Brad. It's I got pretty easy. That number is probably about seventy-nine percent or thereabouts. Brad Zelnick: Understood. And then you just put that in the formula. And then professional services, I think, guys can come up with a rough estimate. And then that's all you do. So Q4 FY '26, 2.45 divided by point seven nine plus whatever you're gonna put in for professional service. I'm giving you advice to use FY '26 as a rough approximation. I'm not saying that's what you have to use. Just seems logical given it's the closest year to what we're about to do in FY '27. That's all. Brad Zelnick: Totally get it, and I appreciate you making it very clear. Maybe just on the other part of my question. When I see you guys hire like this, it really, to me, makes a statement, and I wanna make sure I'm interpreting that signal the right way. Am I to assume that the bulk or strong mix of those headcount adds are go-to-market? Is there anything else to know about the composition of all those heads that you're you've added in Q3? Brett Tighe: Yeah. It's a mix of both go-to-market because of what we've talked about already today and then also continuing to add into some of the lower-cost regions. Be able to bulk up the capacity in places like R&D. Or other areas that can help us be able to build product faster or in G&A, be able to become more efficient and be able to get through things faster. So it's really a variety of areas for us, but it's really go-to-market and then lower-cost regions are really the two places that we're adding in. You're on mute there, Brad. Brad Zelnick: Thanks very much. Brett Tighe: No problem. My first ever algebra lesson on an earnings call. Thank you, Brett. Brett Tighe: Brad wanted to dive in, so I felt like it was necessary. Dave Gennarelli: Alright. Next up, we have Yoon Kim at Loop Capital. Yoon Kim: Alright. Thanks, David. Hey, Todd. So for some of the early adopters of AI agents that you're working with, are these agents from software vendors like Salesforce and ServiceNow or are they custom-developed AI agents? And is your approach to securing AI agents different for these two types of agents given that Auth0 for AI agents is really targeted at developers? Todd McKinnon: It's a really good question, and it's every customer we talk to, they're worried about all of the above. I would say that the actual most concrete implementations are agents they've built themselves. I think that the deployment from some of the package application vendors you talked about are maybe a little bit more behind. Of deployments. But the ones the companies that are building their own, that's their first and foremost concern. But everyone's concerned about they know it's gonna be a multi-platform world in this. There's so much value to be delivered. There's so many frameworks. There's so much innovation. There's so many models. They understand that it's gonna be a multiplatform world, which is why our message is really resonating, which is, like, hey. If you get identity security and a GenTech security is absolutely critical, you can't just give agents access to everything. You have to govern and control and monitor the access. Now if you choose to do that in one security platform or one cloud platform, everyone understands that you're gonna be it's gonna be strong lock-in. You're gonna be stuck with those models, those frameworks. And have gravity in that environment. And people are leery of that because they know that it's a fast-moving environment, and they you know, it'd be kinda like when I talk to customers, it'd be kinda like you had to choose one streaming platform. You just won and you couldn't switch. What would you choose? Right? You'd be careful because all the good stuff is on the other one. Like, you choose Netflix, you'd wanna go over to Prime. If you Prime. You'd wanna go over to Paramount, and they don't wanna choose one platform. They want flexibility. They wanna be able to use different platforms and pick the best content off of different platforms. So that's really resonating with customers, which is what's driving this interest, which is why we're working so hard to capitalize on. Yoon Kim: Okay. Great. Thank you. Dave Gennarelli: Next, we'll go to Mike Cikos at Needham. Mike Cikos: Great. Thanks for taking the question here, guys. I just wanted to come back to the net retention comment. Understood on you guys are in that ZIP code around the 106. But I think historically, the company has not incentivized or split up the team between hunters or farmers and allowed sales reps to choose how they wanna retire quota. Could you just provide an update for where we are in thinking about the sales capacity you're hiring? Are we thinking about setting up a specific team focused on new logo acquisition or first orders, or is it still and I guess, let the reps choose, are we putting in place any sweeteners of any kind? I just wanted to get an update on that front. Eric Kelleher: Yeah. Thanks, Mike. We have in fact started looking at and carving territories for new logo acquisition. We announced a year ago that we were bringing a hunter-farmer assignment into, at that time, our US commercial business. And we talked last quarter, then six quarters into that change, how that was progressing. We're very pleased with the productivity of how that's been carved off. That was in the US commercial business. We have not extended that into our enterprise business yet. We're seeing rather the focus of platform specialization on the buyer is allowing our reps to balance both new logo acquisition and getting deep within their existing accounts. But that's always something that we look at. And as we look for opportunities to expand new logo acquisition, thinking about adding hunter capacity as part of our planning process every year. Mike Cikos: Excellent. I'll keep it to one. Thank you. Todd McKinnon: Yeah. I think a lot of the growth and a lot of the focus and planning is on larger deals. You saw the cohort of million-dollar deals this past Q3 grew 17%. Very excited about that. And in general, a lot of our growth and focus is gonna be on larger deals. Sometimes with our products now, that can be in a segment of smaller customers, but most of the time, it's in a larger enterprise or strategic account patch. And so just in general, that's where the business is going. That's where the growth is, and that's where we're investing. Dave Gennarelli: Let's go to Tomer Zuberman at BofA. Tomer Zuberman: Hey, guys. Yeah. I think you've previously spoken about the opportunity to price AgenTeq as an extension of a per-seat license. But we've been hearing in the market some concern around seat count reductions at customers. So one, as you think about your opportunity next year and you're doing your planning, are you seeing any concern around that with your customers? And two, how do you think about the offset of any potential reduction of headcount versus the opportunity to upsell AgenTeq? Todd McKinnon: The AgenTeq products are priced similarly to our current products. Our current products are priced per user. The AgenTeq products are priced per agent. So sometimes that can be a one-to-many relationship. You might have a few agents for a person. Sometimes they might be agents on their own. So I think we're set up in a way that gives us flexibility as these things evolve in terms of how companies wanna deploy agency to augment headcount, what they wanna how they wanna deploy agents. At the front end of processes before it ever gets to a person. This is one of the advantages we have with all these customers and all this interest. We can figure this out quickly, and we can iterate on this quickly, and that's how we've gotten to this pricing model. Because this is a new thing. You know, it's exciting because a lot of the traditional vendors you know, it's like being locked in or being owning a certain market, it's not it's not owned yet. We have the opportunity to win this massive new market, and we're well positioned with the customers and with the products and with what people expect us to do. And we're gonna go out and define it and win it, and it's gonna be really exciting to do that. Eric Kelleher: And the other comment I'd add to that, Tomer, is we feel very well diversified from a use case and product perspective. So to the immediate question, we are not, you know, like everyone, we're looking at what changes will happen in the global workforce at companies as they lean more on AI and technology to run their businesses. We're not yet feeling a material headwind from some you mentioned seat reductions in the business, but were we just to see that we're confident in our customer identity business offsetting that. We're confident in our agentic identity business offsetting that. So in the aggregate, we view this shift in the industry as net upside for Okta. And everything you've heard us talk about in our product strategy today and our focus of innovation the conversations we're having with customers is embracing the in to help them solve an emerging, very acute urgent customer need for securing AgenTeq identity. We see that as upside to the overall business, not as just for replacing the existing business. Tomer Zuberman: Got it. Thank you. Dave Gennarelli: Next, we'll go to Joe Vandrich at Scotia. Joe Vandrich: Yep. You got Joe Vandrich on for Patrick Colville here. Todd, you mentioned a surge in inbound interest for managing agents. So can you talk about what's getting more traction? Is it the Auth0 solution? Or the workforce side? And then what do you think represents the larger opportunity and why? Todd McKinnon: I think they're both getting about the same amount of traction. I think it's a little bit different. I think a lot of the interest in the AI agents, it's more online. You know, developers. Right? So they find out about it on the website. They do self-service, upgrade to enterprise, a little bit of a different motion. The Okta for agents, which is for IT and security, it's very much you know, have an enterprise architecture with a CSO or security influence buyer or an IT influence buyer. So they're both getting interest, but all it's pretty early on both of them. We resist the urge to draw too many patterns on the couple of months. It's really been out there in the market. And we're really on ourselves on being able to iterate quickly and adjust as we define this market and make sure we not only deliver something incredibly valuable for customers, but something that'll take advantage of both of these personas, which is IT on one side and then developers on the other. Joe Vandrich: Thank you. Dave Gennarelli: Got about four minutes left. Let's try to get the last three questions. Next up, we have Rudy at DADCO. Rudy Kessinger: Hey. Great. Thanks for taking my questions, guys. Brett, I wanna go back to a comment in the script on sales productivity. You said you are continuing to see improvements there. Is that you know, was it improved quarter over quarter? Was it improved year over year? I'm curious on that. And then secondly, on the sales hiring front, certainly, we've seen that. Your sales job openings up over 100% year over year the last couple of months, and our data. What is the level of sales capacity additions you're planning to add? You know, I'm not sure what time frame you wanna use last quarter through Q1 or you know, just what's the level of sales capacity addition you're looking to add as you think about the FY '27 plan? Thank you. Brett Tighe: Yeah. Absolutely. And I'll let Eric step in a little bit here too on productivity. But to answer your question, it is up quarter over quarter and is up year over year. And so it's all of the above, Rudy, which is a good sign for us. And also, at the same time, like I said, we added capacity in Q3, and we started to add capacity in Q2. In terms of the exact numbers of how much we're gonna add, we're gonna be methodical about that. We wanna make sure that we are maintaining high productivity and not overdoing it. In terms of adding in capacity. Because as Eric told you a second ago or whatever, twenty minutes ago, you know, our AE attrition is quite good right now. Our tenure is quite good. We don't wanna disrupt that, and so we wanna be methodical in our approach to add the capacity into the system. Make sure it works, and then move on. Evaluate the success, and then step onto the next level of what we think is possible because we do have a great field right now. We are very confident. Great. Actually, I should've said this at the beginning of the call, great job at a sales team. And all the go-to-market teams in Q3, and we look forward to having them execute in Q4. So yeah, I think that pretty much covers it, Rudy. I don't know if Eric, you'd have anything else to add. Eric Kelleher: You hit the key points. I would say in addition to productivity being up, it's implied with your comments, Brett, but attrition is down. And so from a field engagement standpoint, we feel quite positive with our team's ability to be successful and their belief that they can be successful. So as we add capacity, we wanna make sure we add it in a metered fashion to ensure that we're confident our field continues to have the opportunity to be very successful with Okta. So that is an important part of our philosophy because we don't want to see a return to where attrition starts to creep back up. We wanna keep our tenured reps because they're much more productive. Rudy Kessinger: Super helpful, guys. Thanks, and congrats on the quarter. Brett Tighe: Thanks, Rudy. Dave Gennarelli: Next, we'll go to Taz at Roth. Taz: Taz, you there? Dave Gennarelli: Now let's quickly go to Gabriela at Goldman. Gabriela Borges: I'm here. Can you guys hear me? Dave Gennarelli: Oh, here we go. K. Let's go to Gabriela, and then we go finish off with Taz. Gabriela Borges: Todd, I wanted to ask on this topic of agents that are bespoke versus from the package software vendors. And when we start to see adoption from the package software vendors, how do you think about the identity functionality that may be embedded in the application? And this is in the context of ServiceNow announcing their plans to acquire VEZ this morning. Thanks. Todd McKinnon: Yeah. One of the interesting things about being the clear leader in identity security is we kinda have a right of first refusal on all the acquisitions. So we looked at Vesa. It's interesting. It's a pretty narrow use case in terms of identity management. And the big picture idea is what's gonna be, like, the system of record for access. And to do that, you really have to have an IDP sitting in the middle of the transaction to really get the governance and control. So I think you're gonna see what's played out a lot of times over the last ten years, Gabriela, is every platform company is gonna try to take their own identity from their own platform. And make it generalizable. Sometimes they'll buy something. Sometimes they'll try to build it themselves. But it's really hard to cover all the use cases and cover all the integrations to all the different systems and environments. If you're not totally focused on it. And I think you'll continue to see that benefit us for a long time. Gabriela Borges: Thanks very much. Dave Gennarelli: Okay. We'll take the last question from Taz at Roth. Taz: Thanks, guys. Thanks for squeezing me in. I got two questions. Todd, first one for you. You mentioned the customer example with the large AI deal. And my question is can you talk about the, you spoke about one-to-many relationship between humans and agents. Can you talk about what that was in that scenario? And maybe kind of bake off a competitive landscape? Like, who are the other players involved in that deal? For AI security? Todd McKinnon: Yeah. I think we just it's pretty simple. I think a lot of companies think about agents as, you know, like, software engineering is a great example. As a software engineer, you're gonna have these agents working for you all the time. They're gonna be reviewing code. They're gonna be doing security reviews. They're gonna be checking code in. They're gonna be running tests. And all those agents are gonna be working on your behalf in some cases and have their own identity in others, and it's just having the flexibility to support all those different use cases in addition to agents that would just run on their own. Customer support agents or your agents sitting on your website, accepting commerce are gonna be on their own. Gonna need access control, but they're not bound to a user until maybe it gets lower down in the workflow. So all those. Taz: What's that relationship been? So, like, in the example that you've seen so far, what's it, like, one to ten, one to 20? And if you compare the human agents that you have or the human entities that you have, versus the agent that you secure, is that number is there a ballpark number that you have seen so far in the companies that you've sold to? Todd McKinnon: I think it's, like, five to ten per person. Taz: Cool. Got it. Brad, just one for you. Even as growth has slowed down in the last few years, margins have gone up quite a bit. And if you look at your, you know, margins plus revenue growth, you've always been above that rule of 40. Should we expect that to continue going forward in fiscal twenty-seven? Do you expect that rule of 40 to sustain? I know you didn't give us a revenue guide. You gave us some ballpark guide, but combining that with what to expect for free cash flow, multiple margin next year, should we expect that rule of 40 to sustain going forward? Brett Tighe: Yeah. I mean, from an overall perspective, we are gonna continue to employ the rule of 40 frameworks when we manage the business, something we've been quite consistent with, I guess, is probably the right way to put it. And as you said, we have a tremendous amount of margin increase over the last three years. Thank you for saying that, Taz. I really appreciate it. When we look at the overall formula, I'm not gonna be able to comment on what we're gonna do next year for FY '27. Let's get through the plan, and let's get through Q4 and see how everything goes. I'll give you an update then. But, ultimately, when you think about it, we wanna lean into the growth side of the equation more. You've heard us talk about that. That's been our goal is to accelerate growth. For quite some time. You can hear the optimism from the call today about that desire and confidence. And so we're still gonna manage through that rule of 40, but we really wanna lean more into that growth acceleration side of the house. And once we have our finalized plans for FY '27, I'll be able to give you some more succinct detail at the next earnings call. Taz: Very helpful. Thank you. Thanks, guys. Dave Gennarelli: Well, thanks, everybody. But before you go, just wanna let you know that Okta will be hosting several on-site and virtual bus tours in December and January. And we'll also be attending the virtual Needham Growth Conference on January 8. So we hope to see you at one of those events. Thanks, everyone.
Operator: Hello, and welcome to CrowdStrike Holdings, Inc.'s Fiscal Third Quarter 2026 Financial Results Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, we will conduct a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the call over to Andy Nowinski, Vice President of Investor Relations and Strategic Finance. Andy, please go ahead. Andy Nowinski: Good afternoon, and thank you for your participation today. With me on the call are George Kurtz, Chief Executive Officer and founder of CrowdStrike Holdings, Inc., and Burt Podbere, Chief Financial Officer. Before we get started, I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives, growth, including projections, and expected performance, including our outlook for the fourth quarter and fiscal year 2026 and any assumptions for fiscal periods beyond that, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our outlook only as of the date of this call. While we believe any forward-looking statements we make are reasonable, actual results could differ materially because the statements are based on current expectations and are subject to risks and uncertainties. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise. Further information on these and other factors that could affect the company's financial results is included in the filings we make with the SEC from time to time, including the section titled Risk Factors in the company's quarterly and annual reports. Additionally, unless otherwise stated, excluding revenue, all financial measures disclosed in this call will be non-GAAP. A discussion of why we use non-GAAP financial measures and a reconciliation schedule showing GAAP versus non-GAAP results is currently available in our earnings release, which may be found on our Investor Relations website at ir.crowdstrike.com or on our Form 8-K filed with the SEC today. With that, I will now turn the call over to George. Thank you, Andy. And a warm welcome to the CrowdStrike Holdings, Inc. team. George Kurtz: Andy is no stranger to many on this call, and I'm glad to have him with us to lead investor relations. I'm excited to share CrowdStrike Holdings, Inc.'s fantastic Q3. It was a record quarter as the business continued accelerating. On the back of record attendance at Falcon Global and Falcon Europe, the momentum we're seeing with customers, prospects, and partners drives my conviction in our near-term and long-term growth. Last quarter, Q2, we delivered our forecasted reacceleration a quarter early. This quarter, we furthered the trend with relentless execution. Across the entire CrowdStrike Holdings, Inc. team, I'm extremely proud of our Q3 with highlights including one, record Q3 net new ARR of $265 million, which grew 73% year over year, beating our expectations by more than 10%. Two, ending ARR of $4.92 billion, which accelerated to 23% growth year over year. Three, record Q3 free cash flow of $296 million or 24% of revenue. Four, all-time record operating income of $265 million or 21% of revenue. This is the second consecutive quarter of record operating income. Five, broad-based ending ARR acceleration across cloud, next-gen identity, and next-gen SIEM collectively, as well as acceleration in our endpoint business. And six, more than $1.35 billion in ending ARR from accounts that have adopted the Falcon Flex subscription model, growing more than 200% year over year. Underpinning these financial highlights is the CISO, CIO, and board feedback I regularly hear. CrowdStrike Holdings, Inc. is mission-critical in today's agentic society. No matter how the market swings, geopolitical tensions evolve, or what technologies are in vogue, our digital society mandates cybersecurity as a necessity. And now more than ever, synonymous with that, CrowdStrike Holdings, Inc. is a necessity. Our growth is driven by pervasive, durable, and thematic market forces. Organizations of all sizes are in the midst of AI transformations, investing in the future of workforce productivity in the name of speed, scale, and cost benefits. In the midst of this societal shift, what I've shared over the past few years and quarters is unfolding before our very eyes. One, AI is rapidly expanding the attack surface. Businesses are onboarding a whole new type of workforce today, the agentic workforce. Humans, using agents to do more, and agents working by themselves, each with access to data, applications, compute, and sometimes even other agents. While the benefits of this newfound workforce are exciting and increasingly vital for market competitiveness, the rapidly expanding risk profile of this realm cannot be ignored. Every single agent expands the attack surface, necessitating protection. CrowdStrike Holdings, Inc. is both the armor and intelligence layer that keeps each agentic identity secure. The intelligence layer provides visibility and context to organizations from agentic threats and risks. And the armor protects agents from attacks, influence, exfiltration, and data manipulation. In addition, CrowdStrike Holdings, Inc. is also present as the foundational protector of the underlying technologies powering the AI revolution. Providing security by design, for the world's clouds and token factories. Two, the democratization of destruction wasn't just a bold prediction. It's already today's reality. Businesses every day are having jarring, light bulb moments witnessing AI-powered adversarial tradecraft firsthand. Just a few weeks ago, a major AI company shared that China's state-sponsored adversaries were using their LLM to create and operationalize active cyber intrusion agents. This is just one of the many AI-enabled attacks we've seen. The AI cyber battleground is no longer theoretical; it's now real. Now just as anyone can use AI to vibe code and become a software engineer, anyone can now also vibe hack, becoming a sophisticated adversary with AI. Three, cybersecurity in the agentic era demands a single platform. The criticality in being able to operate with agility, efficacy, and speed to stop breaches is having the data, the controls, and the actions in a single platform, not multiple platforms. Because when you have multiple platforms, by definition, you don't have a platform. Tab switching and context switching cost time, data stitching doesn't scale. These are the seams and cracks where adversaries thrive. The leaky lifeboat of PowerPoint platforms and point product fragments simply cannot offer the protection, scalability, and cost benefits or the ease of use of a single platform solution. CrowdStrike Holdings, Inc. wins as the market's broadest and only single platform solution. Taking my three points together, one, we've built the right architecture, a single console, single data back end, single sensor, AgenTeq Hyperscale platform, that is frictionless, and one of a kind in cybersecurity. Two, it's the right time with the rapid growth of AI agents raising the threat risk profile and driving a holistic technology shift. And three, we're in the right position. CrowdStrike Holdings, Inc.'s technology innovation engine and ecosystem position us as the operating system of cybersecurity for the Agentic era. Market demand is high because the need is real. We have the right architecture. We have the right products. And we're in the right market position to continue taking share. Successful AI adoption requires cybersecurity transformation, necessitating a new operating system to create a structure around the next chapter of enterprise security programs. Falcon NextGen SIEM is the foundation of our platform, turning CrowdStrike Holdings, Inc. into our customer's operating system for cybersecurity. NextGen SIEM has become a scale disruptor in a market that has historically been slow to evolve as customers embrace the speed and efficiency advantages versus legacy competitors. And with the acquisition of Onum, we're making it even easier to build on CrowdStrike Holdings, Inc. with a hyper-scalable telemetry detection pipeline that brings CrowdStrike Holdings, Inc. even closer to all our customers' critical data. FalconXion SIM had a record net new ARR quarter. A clear outcome of the deliberate strategic choices we've made over the past several years. We know that the value of the technology is only as good as the platform on which it's delivered. So we invested heavily in integrating next-gen SIEM to create a unified single platform. This isn't just a single console. It's a truly integrated and unified data back end that brings together all of CrowdStrike Holdings, Inc. in one place. Delivering not just economies of scale, but far superior outcomes. And with Charlotte as the agentic sock orchestrator, now FedRAMP High approved, we're delivering the AI SOC of the future today. Furthering our position as the operating system of cybersecurity, we recently announced our expanded partnership with AWS. Through this announcement, all of AWS's millions of customers will have access to Falcon NextGen SIM, natively within their AWS security console. Enabling them to immediately access, interact with, and analyze AWS telemetry directly in NextGen SIEM. Going a step further, we've also enabled federated search so that AWS customers can query their data from a single console. We're incredibly excited about what the future holds, and thank AWS for both our amazing partnership and for the validation of FalconXion SIM as the best choice for their customers. A large European bank renewed their more than 500,000 workload EDR deployment, adding next-gen SIM, ONEM, and Charlotte in a large 8-figure expansion deal. With our acquisition of Ownham, this financial institution was able to eliminate their existing streaming pipeline point product as well as migrate off Splunk. Competing against hyperscalers and firewall vendor SIEMs, Falcon NextGen SIEM won the hearts and minds of the security and IT team as the easiest solution, fastest to see value, and best agentic SOC transformation platform. Our identity business continues to perform exceptionally well. While the demand for our ITDR offering has increased, it's the launch of both our PAM and Falcon Shield offerings that has our customers increasingly excited. FalconShield had a record net new ARR quarter, growing nearly 50% sequentially as market demand for SaaS application security has become a mainstream necessity. Securing SaaS app misuse from human and nonhuman identities has never been more important or challenging. Nefarious agentic behavior is targeting data-rich SaaS applications that have quickly become a feeding ground for breaches. From on-prem apps to cloud apps, we stop these breaches. A Fortune 500 logistics company used Falcon Shield to uncover exfiltrated CRM data in less than thirty minutes from deployment resulting in a 7-figure deal. A leading customer experience platform saw a Shield demo and activated the module via Flex within an hour. And lastly, a Global 500 personal care leader conducted a shield assessment uncovering 25 unknown shadow instances of their CRM. This customer quickly transacted a 7-figure expansion bringing their SaaS environment under control. As these examples illustrate, today's elevated third-party SaaS risk environment demands visibility and protection. Falcon Shield delivers near-immediate time to value and is a product that we can land new logo accounts with even without endpoint deployments. Turning to the cloud where we delivered Q3 record net new ARR. While CrowdStrike Holdings, Inc. continues to benefit from M&A-related market disruptions, it is our customers' embrace of best-in-class runtime protection that continues to push us forward. As the cloud security market matures, customers are realizing that posture doesn't equate to prevention. Security teams now understand that they need active defense within their cloud environments and this can only be delivered in runtime. CrowdStrike Holdings, Inc. is the cloud runtime security leader as validated by the most recent Frost and Sullivan CWP report. And with our recent acquisition of Pangea, we're now positioned to protect the entirety of our customer's AI infrastructure. At our recent analyst day at our Falcon conference, we discussed how protecting AI is akin to protecting a building. Security teams don't want a non-integrated, fragmented series of solutions to protect their critical AI infrastructure because they know this complexity creates gaps that are increasingly exploitable by AI-enabled adversaries. CrowdStrike Holdings, Inc. Falcon cloud security offers customers a unified, integrated, end-to-end solution that enables secure adoption of transformative technology without slowing the end user down. A Fortune 500 consumer packaged goods company grew their Falcon deployment with Falcon Cloud Security and a 7-figure expansion deal. This customer took the opportunity to displace Wizz bringing their cloud security program to Falcon for the benefit of our consolidated CSPM, ASPM, CIEM, and CDR approach. The outcome delivered is single platform management, better visibility, and the ability to stop cloud breaches versus simply alerting on them. This was just one of multiple Wizz replacements. In addition, Falcon cloud security was selected to protect a leading Neo cloud in an 8-figure transaction. This token factory decided it was time to secure AI from the source so that enterprises of all sizes would trust and build with confidence on them. Cybersecurity became a differentiator and business enabler, not a cost. And finally, I wanted to touch on our endpoint business. Our endpoint business accelerated in the quarter, on the heels of AI-driven demand. In the world of AI, so much is being pushed to the edge. Employees are now deploying new applications such as Claw Desktop and ChatGPT directly onto their machines driving both rapidly improved productivity and also significant new risks. This is further exacerbated by the rapid adoption of new AI browsers such as Common at Atlas, which bring new opportunities and concurrently new vulnerabilities and threats. AI adoption is supercharging renewed interest in the endpoint as the endpoint is the epicenter of human and nonhuman interaction with AI. In this new agentic world, the endpoint has quickly become the risk point, the productivity point, and the opportunity point. A large government agency took the opportunity to modernize, replacing more than 75,000 endpoints of legacy AV with Falcon, as well as deploying us in their AWS environment for cloud protection in what was a strong federal quarter for CrowdStrike Holdings, Inc. In addition, brought us into a Fortune 500 health care account where in just a few months we were able to modernize the endpoint, cloud, and sim environments, an 8-figure end-to-end flex expansion deal, where we displace two sims, Defender for Endpoint, and a Point Cloud security product. Frequently imitated but never duplicated, Falcon Flex makes it easier than ever for our customers to experience the full power of the Falcon platform without procurement friction. The flex model cultivates more platform utilization, accelerating module adoption. Falcon Flex is an unlock, not an ELA. Flex customer ending account ARR more than tripled year over year. But what has us even more excited is the momentum we're seeing in Reflex activity. The number of Reflex accounts more than doubled quarter over quarter to more than 200 with 10 customers reflexing more than two times their initial flex subscription. This demonstrates that flex customers can and do increase their ARR and TCV spend with CrowdStrike Holdings, Inc., which is contrary to the ELA model. Where all the economic value is realized once upfront. When we launched Flex, we believed that it would allow customers to more quickly benefit from the full value of our platform, and that's exactly what's happening. As customers and partners alike continue to embrace Flex, as the best way to adopt Falcon, we expect it to become our licensing standard. Our community, or crowd, powers our technology, and that's who we build for. Our ecosystem partners continue leading us to new heights, affirming CrowdStrike Holdings, Inc.'s market and category leadership. Our alliance team delivered a record quarter in terms of deal value closed with partners. CrowdStrike Holdings, Inc.'s market position comes to light in mission-critical times. F5 asked us to partner with them to further secure their BIG IP hardware and virtual appliances. We rapidly deployed our sensor on BIG IP, which they certified, and F5 took the opportunity to purchase Falcon and Overwatch licensing for their install base in a large flex transaction. We are pleased to be taking our industry-leading protection capabilities to new insertion points designed to enhance network perimeter protection. Today, hundreds of F5 customers are now securing their F5 appliances with CrowdStrike Holdings, Inc. Many of whom weren't CrowdStrike Holdings, Inc. customers prior. Partners take us into new account environments implementing Falcon as part of their broader AgenTic enterprise architecture vision. Experiencing the success of next-gen SIEM in the market, took a bold step to standardize their SIEM practice on Falcon in a large 7-figure transaction. Is migrating accounts for which they own and operate multiple legacy SIEM technologies. Consolidating on CrowdStrike Holdings, Inc. Additionally, is a leading global partner of ours for next-gen SIEM implementations taking numerous Fortune 500 accounts through the journey from legacy SIEM to next-gen SIEM migration. Deloitte announced next-gen SIEM in their MXDR practice, replacing their legacy SIEM provider. And Wipro, too, has standardized security delivery and incident response on Falcon. The GSI community is quickly seizing the SIEM and SOC transformation opportunity that only our single platform provides. The ecosystem embrace of partner-led services on Falcon is correlated to the opportunity we represent. A recent Canalys report showed that our ecosystem creates up to $7 in services opportunities for every dollar of Falcon product sales, illustrating the large ecosystem opportunity surrounding the Falcon platform. I want to return to yesterday's announcement that we made with AWS. AWS selected Falcon NextGen SIEM as the default SIEM for all their customers. Offered in their Security Hub console. This brings Falcon NextGen SIEM with pre-populated AWS data to millions of AWS customers in a product-led growth motion. Our intent is to convert next-gen SIEM usage into flex subscriptions as more accounts experience the power, speed, and actionability of their AWS data, CrowdStrike Holdings, Inc. data, and other third-party data in NextGen SIEM. Our next-gen SIEM helps AWS fill a critical market gap now competing with other hyperscaler SIEMs and doing so with Falcon. Our next-gen sim delivers value for AWS customers, even those who don't yet use Falcon. Because we've become a federated, pre-populated, and affordable security data lake, for observability, triage, threat hunting. And Charlotte is there to help operate the whole system on a customer's behalf. In addition, Accenture is our launch partner with AWS helping AWS customers leave their legacy SIEM for Falcon NextGen SIEM on AWS. Our partnership with AWS continues from strength to strength, with CrowdStrike Holdings, Inc. announced as AWS's global security partner of the year and AWS's global marketplace partner of the year yesterday at re:Invent. We're excited about the opportunity to engage AWS accounts onboarding them to Falcon, and serving as their operating system for cybersecurity. Lastly, I want to share a noteworthy MSSP partnership which we've announced today with Kroll, a leading mid-market professional services firm. Kroll's cybersecurity division performs thousands of incident response engagements yearly for mid-market firms around the world. Largely from their cyber insurance panel inclusion. Had been using a point product DVR in their incident response and managed detection response business. Now Kroll exclusively uses Falcon, and in an almost 8-figure rip and replace transaction, Kroll is migrating nearly half a million endpoints to Falcon, which were previously running on a point product SMB EDR, and up leveling their own MDR service with Falcon Complete for service providers. With our Falcon Complete team becoming the SOC for Kroll. This partnership announcement illustrates the value that only CrowdStrike Holdings, Inc. can deliver. The best technology platform with numerous expansion opportunities to help customers and partners alike consolidate the services opportunities partners need to see value, whether that be an incident response, proactive assessments, managed detection response, or SOC transformation, and our skilled and agentic MDR teams to up level partners so they can focus on selling, and client services while we focus on stopping breaches as the world's SOC. We've improved Kroll's technology stack, displaced an inferior point product, improved their margins with Falcon Complete, and they migrated their entire practice to us. This transaction highlights the power of Falcon to be a business creator for our ecosystem. We're not selling products. We're delivering outcomes. Introducing the world to a whole new way of performing cybersecurity and risk management. In closing, this was one of our very best quarters in company history. Acceleration is back. We're winning and we're living the company's mission of stopping breaches. AI represents our largest opportunity and demand driver yet. We're using AI to revolutionize cybersecurity. And even larger, we're securing the world's use of AI, so businesses of all sizes can adopt more AI faster, securely, and with confidence. The takeaway is this, AI adoption necessitates the right cybersecurity. It necessitates CrowdStrike Holdings, Inc. Jensen Huang summed up our market position best saying, quote, I can't imagine a better defender than CrowdStrike Holdings, Inc. End quote, on the stage at NVIDIA GTC in Washington DC. The transformative work we're doing with NVIDIA is representative of how we're securing AI at its very source all the way down to its human and nonhuman users, and its outcomes. I see this as a generational opportunity for the company. AI is but one of many tailwinds continuing to propel CrowdStrike Holdings, Inc. to new heights. One thing is certain, whenever our customers engage in technology change and transformation, cybersecurity has been a constant necessity, and that constant is CrowdStrike Holdings, Inc. With that, we have a big Q4 opportunity in front of us. A robust demand environment, and no shortage of breaches to stop. Cybersecurity doesn't slow down for the holidays, and neither do we. Stay safe, happy holidays, and I'll pass the call over to Bert Podbere, CrowdStrike Holdings, Inc.'s CFO. Burt Podbere: Thank you, George, and good afternoon, everyone. As a quick reminder, unless otherwise noted, all numbers except revenue mentioned during my remarks today are non-GAAP. Additionally, the results we are reporting today include the acquisitions of Oum and Pangaea, which closed during the quarter and were de minimis to revenue and ARR. We delivered an exceptional third quarter driven by organic growth, exceeding expectations across all guided metrics. We achieved record Q3 net new ARR of $265 million, exceeding our expectations by double-digit millions and more than 10 percentage points. Net new ARR growth accelerated to 73% year over year, and ending ARR reached $4.92 billion, accelerating to 23% growth over last year. As George highlighted, our performance reflects the success of our single platform strategy as organizations prioritize cybersecurity in the agentic era and customers consolidate on Falcon, as the operating system of the SOC. We delivered acceleration across the platform, with cloud, next-gen SIEM, and next-gen identity all delivering strong results. Momentum was broad-based across customers of all sizes. From enterprise to down market and MSSPs achieving record results in our corporate business and strong performance in the public sector, particularly in US federal and higher education. Falcon Flex continues to be a powerful driver of platform consolidation with over $1.35 billion in ending ARR from accounts that have adopted the flex subscription model. Falcon Flex is quickly becoming the standard licensing model as it makes it easier for customers to adopt more of the Falcon platform faster. Customers continue to leverage Falcon to consolidate their security needs and lower their total cost of ownership resulting in higher retention rates, over the prior quarter and increased module adoption rates. As of Q3, 49% of subscription customers are now using six or more modules, 34% are using seven or more, and 24% are using eight or more modules. With our business momentum increasing and our all-time record pipeline entering Q4, we have strong conviction in our ability to deliver profitable growth as we finish FY '26 and look into FY '27 and beyond. Moving to the P&L, total revenue exceeded our guidance range and grew 22% over Q3 of last year to reach $1.23 billion. Subscription revenue grew 21% over Q3 of last year to reach $1.17 billion, and professional services revenue was $65.5 million. The geographic mix of third-quarter revenue consisted of approximately 67% from the US and 33% from international geographies, with both US and APAC year-over-year revenue growth accelerating compared to Q2. Total non-GAAP gross margin was 78% and non-GAAP subscription gross margin increased to 81% of revenue. Total non-GAAP operating expenses in the third quarter were $703.2 million or 57% of revenue. In Q3, we saw a typical step-up in sales and marketing expenses from our annual Falcon conference we hosted in September, which was our biggest selling event of the year and set multiple records with over 8,000 attendees joining us. Non-GAAP operating income was a record $264.6 million, and operating margin was 21%, exceeding our guidance. The outperformance was driven by our strong top-line performance, gross margin improvement, and sales execution underscoring our commitment to profitable growth as we balance accelerating net new ARR growth with operational excellence. GAAP net loss attributable to CrowdStrike Holdings, Inc. was $34 million, which included $26.2 million of costs associated with the July 19 incident and related matters, and $5.6 million of acquisition-related expenses. Non-GAAP net income attributable to CrowdStrike Holdings, Inc. was a record $245.4 million or 96¢ on a diluted per share basis, exceeding our guidance. Moving to cash, our cash and cash equivalents were $4.8 billion. We generated record cash flow from operations of $397.5 million and record Q3 free cash flow of $295.9 million or 24% of revenue. Payments for incident-related and strategic plan costs impacted Q3 free cash flow by approximately $53 million. Moving to our outlook and modeling notes. The AI-driven demand environment combined with our record pipeline and the continued momentum in customer platform consolidation on Falcon gives us strong conviction as we finish Q4 and look toward FY '27. While we do not guide to ending ARR or net new ARR, our revenue guidance includes the following assumptions. Low to mid-teen sequential net new ARR growth Q3 to Q4 bringing ending ARR growth for FY '26 to 23% year over year. At the midpoint of our net new ARR assumptions, we expect second-half net new ARR growth of at least 50% year over year well above our previously provided assumptions of at least 40% year over year driven by our strong Q3 outperformance and record pipeline. Additionally, we continue to expect FY '27 year-over-year net new ARR growth of at least 20% from our now increased FY '26 net new ARR assumptions. As we discussed during our September investor briefing, as a result of our successful CCP and related partner programs, our ARR to subscription revenue assumptions include a separation of $13 million to $15 million in Q4, consistent with what we noted at Falcon, this gets you to the midpoint of our FY '26 revenue guidance. Which we have raised by $24.1 million at the midpoint to reflect our strong Q3 outperformance and record pipeline. We ask that you please be mindful of these dynamics when updating your models. Moving to cash, we expect Q4 free cash flow margin to be 27% and include cash payments of approximately $33 million in connection with incident-related costs. This brings our full-year FY '26 free cash flow margin expectation to 25%. Finally, we remain confident in our previously provided assumptions for FY '27 partner rebates, non-GAAP operating margin, and free cash flow margin, which are detailed in the modeling assumptions slide of our Q3 FY '26 earnings presentation. Available at ir.crowdstrike.com following our prepared remarks today. Moving to our outlook. For the '26, we expect total revenue to be in the range of $1.29 to $1.3 billion, reflecting our year-over-year growth rate of 22 to 23%. We expect non-GAAP income from operations to be in the range of $315 to $319 million and non-GAAP net income attributable to CrowdStrike Holdings, Inc. to be in the range of $282 to $287 million. We expect diluted non-GAAP net income per share attributable to CrowdStrike Holdings, Inc. to be approximately $1.09 to $1.11. Utilizing a 21% tax rate and weighted average share count of approximately 258 million shares on a diluted basis. For the full fiscal year of 2026, we currently expect total revenue to be in the range of $4.797 to $4.807 billion reflecting a growth rate of 21 to 22% over the prior fiscal year. Non-GAAP income from operations is expected to be between $1.036 and $1.04 billion. We expect fiscal 2026 non-GAAP net income attributable to CrowdStrike Holdings, Inc. to be between $950 and $954 million. Utilizing a 21% tax rate and approximately 256 million weighted average shares on a diluted basis, we expect non-GAAP net income per share attributable to CrowdStrike Holdings, Inc. to be in the range of $3.70 to $3.72. George and I will now take your questions. George Kurtz: Thank you. Operator: If you would like to ask a question, please click on the raise hand button that can be found on the bar at the bottom of your Zoom window. You may remove yourself from the queue at any time by lowering your hand. When it is your turn, you will hear your name called and receive a message on your screen notifying you that you may unmute yourself. In the interest of time, participants will be limited to one question. Our first question will come from Brian Essex with JPMorgan. Please unmute and ask your question. Brian Essex: Great. Thank you for taking the question and nice results. And, Andy, congratulations on the new role. Maybe for George, great to hear the acceleration in the endpoint segment of the business. And I know you guys aren't giving any update until year-end on the emerging segments of the business. But could you offer a little bit of color on how those segments are behaving as you kind of lap the initial CCP initiatives of last year? And then maybe for Bert, I know you're not offering any kind of impact from Pangea on ARR, but any sense of the seasonality organic seasonality for net new ARR? Thank you. George Kurtz: Hey, Brian. Thanks. Yeah. When we look at, obviously, the emerging products, which was the heart of your question, they performed fantastic. If you look at NextGen SIM, it's been an all-star standout for us. We've seen just incredible results from a perspective and what they're able to do and driving down the cost to get better outcomes. Identity as well. That's key to securing the AI in an enterprise. And then, obviously, cloud, we talked about some of the big wins throughout the quarter. So when we look at those and as you mentioned, we'll be reporting out on those next quarter, we're very, very pleased with the results. And customers are embracing the technology and the consolidation the single platform delivers. So from that standpoint, I think we're very happy. And then as we lap the CCP, CCP was designed to do exactly what we delivered. Right? We helped customers through a situation. And, also, we provided a way to accelerate flex adoption, and we've seen that with our flex license adoptions throughout the quarter, which we called out. And then, obviously, we had a fantastic endpoint quarter, which continues to help drive all the other modules. So overall, I couldn't be happier with the quarter that we just put up. Burt Podbere: Yeah. And on your question with respect to, you know, Pangea, you know, I think that I called out that you know, we had got a de minimis impact both the revenue standpoint and the new ARR. And we're excited that, you know, those are gonna roll into the platform in Q4. So that's how we think about it. Andy Nowinski: Thanks for the question, Brian. Operator, next question. Operator: Your next question will come from Saket Kalia with Barclays. Saket Kalia: Hey, great. Hey, guys. Thanks for taking my great quarter and congrats, Andy. George Kurtz: George, maybe for you. I just wanna pick up on your comment earlier on SIM. It feels like the SIM market is starting to see more velocity of displacements. You just maybe talk about what sort of value you're able to capture in those opportunities compared to what customers were maybe spending before? And then maybe relatedly, how do you kinda think about the timetable for legacy SIM renewals in the coming quarters, years, which, of course, I imagine you'd be targeting. Thanks. George Kurtz: Yeah. So I'm I'll try to wrap this up into, you know, one answer here. But, Saket, let me just kinda lay this out. If you look at the journey that we've been on and how we've been able to replace legacy AV, it feels a lot like that market in the early days when we think about replacing legacy SIM. Customers are looking for better outcomes. They're looking for faster results, and they're looking for lower cost. And because we already have the EDR data in the platform, we can offer disruptive pricing versus our competitors. The stickiest data that's out there is the EDR data. We already have it. And, really, what it becomes is a journey to activate NextGen SIM for our customers. So when we think about the opportunity to work with customers and how we get in and, you know, the opportunity going forward. Keep in mind all of our customers are next-gen SIEM enabled. All of our customers are next-gen SIEM enabled. It's a huge difference between us and everyone else in the marketplace, and all we need to do is go through the licensing, exercise, and Flex is helping to accelerate that. So we can offer competitive disruptive pricing and then overall grow our total wallet share with the customer over time. So it's a multiyear long tail journey that feels very similar to the displacement of legacy AV. Andy Nowinski: Very helpful. Thanks, doc. Andy Nowinski: Thanks, Saket. Operator, next question. Operator: Your next question will come from Matt Hedberg with RBC. Matt Hedberg: Great. Thanks for taking my question. Congrats from me as well in the quarter, Andy, to you as well. George, building on your next-gen SIEM success and ONAM, and a little bit related to Saket's question, do you see a further push into observability? Obviously, there's been some movement with some of your cyber competitors to go deeper into observability. Just curious on kind of how you view that market? And is that consolidation opportunity for you as well? George Kurtz: Well, we do view it as a consolidation opportunity, and I'll remind everyone on the call that when we acquired Shumio, which became LogScale, 50% of their business was actually in observability. So we have all of the technology. And in fact, because the platform is collecting so much data and so much telemetry, we have customers today that are using it for observability use cases. You combine that with our agent technology, which does deep inspection within its platform, and we have data that goes well beyond security data that is already being consumed by customers. Then you combine that with ONEM, the pipelining technology, the data fabric which, again, has the ability to take IT data, and we have a fantastic in front of us to consolidate in those areas, which, you know, again, this is nothing new to us. We've actually been doing this. And this has been, you know, part of our selling motion as well as what customers are embracing. So it's already there, and there's certainly more that we can do and certainly more we will do. Andy Nowinski: Great. Thanks, Matt. Operator, next question. Operator: Next question will come from Gabriela Borges with Goldman Sachs. Gabriela Borges: Hi. Good afternoon. Thank you. Question for Bert. So CrowdStrike Holdings, Inc. has years and years of data on customer cohorts and how your customer cohorts typically expand with you over time. You've now got several quarters of data on Flex and how the Flex customers expand with you over time. There's a piece of this which is structural, which is, you know, making it easier for customers to consolidate with you. But I'm wondering if there's also a dynamic where you see an elevated tailwind to NRR for a period of time because of Flex, and Flex starting with your best and most excited customers and then perhaps normalizes lower. So my question for you is how do you think about that dynamic? How do you think about the tailwind that Flex is driving in the model and how sustainable that is? Thank you. Burt Podbere: Thanks, Gabriela. So the way I think about this is our flex license, it's continuous. Net ARR will be continuous throughout time. And the beauty of this whole program is that it's designed for customers to easily buy more. So over time, you know, we're excited about the opportunity as we bring more products to market and offer more availability to our customers easily. And I think that's the biggest piece that everybody on the call should just remember is that that's exactly what Flex was designed to do, make it easier for customers to buy, make it very easier for us to, you know, be able to deploy, and be able to give value and lower TCO. That's how we think about it. And the benefit is that we're seeing bigger deals and longer deals. And that's all good for us, and it's great for the customers. You know? And I think what I think the most important thing is and not get lost in, you know, in things I've just said is consolidation. You know, we started this company talking about consolidation, the ability for customers to do more with us, spend more with us, and lower their total TCO by spending more with us. So I think that's the biggest point. That I wanna drive home. Andy Nowinski: Thanks, Gabriela. Operator, next question. Operator: Your next question will come from Dan Ives with Wedbush. Dan Ives: Yeah. Thanks. And also congrats on the Mercedes deal, George. Can you just talk about AI? Like, as you're starting to see more and more deployment, talk about how that's changing the conversations with customers. Even over the last three, six, nine months relative to where CrowdStrike Holdings, Inc. sits. Can you just maybe just give some, you know, some insight into how those have changed from your perspective? George Kurtz: Yeah. Great. Thanks, Dan. Thanks as always. Yeah. When we think about the conversation of AI, what customers have realized is that CrowdStrike Holdings, Inc. is probably the only company in security that's moved beyond chatbots. And what I mean by that is Charlotte AI and its related agents are deeply embedded into the platform. Our last Falcon in Europe, we talked about 11 AI agents and agent work which allows our customers to actually create their own security agents, which we think is gonna be a massive opportunity for us. So it's moved from chatbots to actual doing work, and this is something that we continually hear differentiates us from our competitors. Our competitors are still stuck on chatbots where we've done the within the platform. We've created models around each of our model. Modules, and we're delivering results, you know, things that would take four days of work, we're delivering in minutes for customers. And at the various events that I was at both, in Las Vegas for Falcon and in Europe for our Falcon In Europe, I had customers talk about just the evolution of Charlotte, the maturation of it, and how it's become a key part of their success in their stock. And it gets back to what I said earlier. You know, CrowdStrike Holdings, Inc. has become the operating system for the SOC. And Charlotte is a big piece of it. Andy Nowinski: Alright. Thanks, Dan. Operator, next question. Operator: Your next question will come from Joseph Gallo with Jefferies. Joseph Gallo: Hey, guys. Thanks for the question, and congrats, Andy, on the new role. It was awesome to see you guys maintain the fiscal twenty-seven net new ARR growth of 20% on higher numbers. You mentioned several key components of business accelerated in 3Q. Is there one or two products that you think have an outsized growth impact for upside next year? And then as a part of that, you know, security for AI feels necessary, but very early. Is that accounted for in your preliminary fiscal twenty-seven guidance, or is that more longer term? Thank you. Andy Nowinski: Yeah. Sure. So George Kurtz: I think when we look at next year, again, seeing the momentum that we talked about with next-gen SIM, again, it's an all-star product. It delivers a lot of value. Which is key in this market when you're talking about consolidation. And it's enabling customers to do things that they haven't been able to do. And I think one of the areas that maybe is really not appreciated is that many organizations of all sizes are making a decision in the past to not collect certain data because of the cost. With CrowdStrike Holdings, Inc., we can actually open the aperture and we can provide value to collect all that data. So in general, we're expanding the wallet share, but we're giving them more value because we're collecting data they didn't have seen, and we're giving them outcomes that weren't available to them previously. So I would look at that as an all-star. I would look at cloud. We'd look at the displacements that we talked about in the call. We looked about the we talked about the runtime protection, which is key. Customers want that protection. And then we look at Falcon Field, which is, you know, again, cloud and identity. But it is a key technology to help protect the SaaS applications. So these are all fantastic opportunities for us, you know, in the coming year, and we'll continue to double down on Andy Nowinski: Alright. Thanks, Joe. Next question, please. Operator: Your next question will come from Fatima Boolani with Citi. Fatima, may unmute and ask your question. Fatima Boolani: Oh, here I go. Thank you for taking my questions. George, wanted to direct this to you. You gave us a lot of information about the strength of your strengthening partnership with AWS. Your proximity to AWS as a customer and a very, very strategic partner has only cemented further. So I wanted to ask you a very high-level strategic question. This proximity that precludes you or influences you or potentially maybe even complicates your relationship with other hyperscalers, and your customers who would, you know, presumably have multi-cloud footprints. Would love for you to sort of dive into some of those dynamics a little bit. Again, just by virtue of the strengthening partnership with AWS and the availability of the full Falcon suite, in a very deep integrated way inside AWS. Thank you. George Kurtz: So first, we couldn't be more excited about this partnership. And really, I think this is something that's gonna be incredible for AWS customers as well as customers at CrowdStrike Holdings, Inc. The fact that now natively, you can actually flow data from AWS into next-gen SIEM, it's right in your console, and it's gonna be a tremendous enabler, new customer acquisition. And it's a needed technology for AWS customers. So, you know, overall, fantastic relationship and we're excited to be deeply integrated. And when we think about the current environment, as you know, there's always an area to cooperate with many different companies that are out there. Just look at the AI space and, you know, how many people work with different companies that are out there. I think if you look at that and you apply it to security, of course, we're gonna work with other players that are out there. They're gonna leverage the best technology in the market, which is CrowdStrike Holdings, Inc. And we're there to support, you know, all of our customers and potential partners. So it doesn't preclude us from doing that, but, again, this reinforces what a great relationship we have with AWS. We've been able to partner with them, not only in the technology side but also in the marketplace. And you've seen the evidence of that by the awards that I called out. So overall, extremely excited about what the future brings. Andy Nowinski: Thanks, Fatima. Operator, next question, please. Operator: Your next question will come from Meta Marshall with Morgan Stanley. Meta Marshall: Great. Thanks. You noted core EDR acceleration in the quarter, and you kind of noted AI as a catalyst for that. But just is that kind of more endpoints getting protected as they become more intelligent or just existing customers looking to modernize as part of general AI adoption? George Kurtz: Sure. When you think about endpoints and the adoption of AI, a lot of it takes place at the endpoint. Think about all of the various technologies that are out there. Where people are running these as a user on their endpoints. I mean, we've seen some big announcements from consulting firms and others that are leveraging AI in their business because they have to, and they have to drive efficiencies. So what that means is that that creates opportunities and exposure for companies. So they're gonna need to monitor what sort of queries go in. They're gonna need to monitor what data comes out. They're gonna need to monitor what other services are connected into those AI desktop technologies. And that becomes another threat factor. So this becomes a catalyst. Again, I think this is underappreciated as a new risk factor that we hadn't had over the last number of years. Now with the adoption of this, this isn't AI creation. It's AI adoption. And that's, I believe, is gonna be a massive market for us. So that's where we see that. And, you know, overall, as I always say, 50% of the market is still legacy AV, and there's still a long runway in the endpoint business to be able to take that legacy market share. Andy Nowinski: Thanks, Meta. Operator, next question, please. Operator: Your next question will come from Patrick Colville with Scotiabank. Patrick Colville: Alright. Thanks, Andy, for having me on. I guess this one's for George. I wanna ask about discounting levels. Because if I think about this time last year, we had the CCP program, but we also had CrowdStrike Holdings, Inc. you know, very correctly being aggressive to cement and extend its position through, you know, through discounting. Know, that was the right strategy, and these results prove that. But as I think about, you know, the quarter we've just had, fiscal 3Q, as we look towards fiscal twenty-seven, I guess, you just talk about how you're thinking about just discounting a normal course of business discounting? Are those levels gonna diminish over time as we have the Falcon outage further and further in the rearview mirror and your position is looking very strong? George Kurtz: Sure. Well, I when you look at this market and you look at, say, enterprise sales, I mean, there's always some level of discounting. That's not unique to us. It's not unique to security, and it's, you know, not unique to software companies. It just happens as a normal course of business. And I think we've been very prudent in how we operate in those areas. And, you know, we've tried to focus on things like CCP, which, again, allow customers to take new technologies in, but protect the price point, and allow us to, basically capture them in a flex opportunity. So gonna use the tools available to us to be competitive. We continue to take share. We continue to drive new customer business. And, you know, we don't see anything out of the normal course of business, but we've got various tools in our toolbox and we tend to use those judiciously. And we're again, where it makes sense, for us and for the customer. And that just drives the growth that you've seen. And I'll also point out, you know, the 81% gross margin. Like, you have to look at the margin as well. And we've been able to be successful, and we've been able to protect the margin. Andy Nowinski: Thanks, Patrick. Operator, next question, please. Operator: Your next question will come from Eric Heath with KeyBanc. Eric Heath: Hey, great. Thanks for taking the question. Nice set of results. George, I wanted to ask about the partnership with F5. I thought that was pretty interesting. But me if I'm wrong, but I believe this part of the infrastructure stack historically was never able to support endpoint agents before. So does this expand the endpoint TAM? How meaningful can this be? And are there other areas of the infrastructure stack you think this is applicable to? George Kurtz: Yeah. This is a great and insightful question. I'm really glad that you asked it because it does. And what we've seen over the years is that customers have been asking for a long time to protect these appliances. And in many cases, the appliances have not been available to us, the underlying operating if you will, to be able to protect, but there's been a huge demand there. So we worked with F5 in great partnership, and very quickly to be able to certify our agent to run on their platform. And we do think that this will create a model, a working model, that will open it up to other appliances. Vendors to be able to have it protected. And I can tell you just some anecdotal stories. You know, there was a story just last week of a noncustomer never used CrowdStrike Holdings, Inc. had the opportunity to actually use our technology because of F5, and was blown away. And within a week, we had him in an EBC and now we're getting into a proof of value. So this play works, and we're going to expand our market and be very forward-leaning in being able to protect other appliances that are out there. Which you probably have seen are the tip of the spear for many of these nation-state breaches. Andy Nowinski: Thanks, Eric. Operator, next question. Operator: Your next question will come from Roger Boyd with UBS. Roger Boyd: Great. Can you hear me okay? George Kurtz: Yes. Roger Boyd: Awesome. Well, congrats, Andy, on the new role. Wanted to double-click on the Kroll partnership. I know MSP has been a growing part of the channel for CrowdStrike Holdings, Inc. for the past couple of quarters. Can you walk us through that longer-term opportunity as you expand with Kroll and other beyond kind of the initial endpoint landing point? Landing spot. Thanks. George Kurtz: Sure. Yeah. We were excited about this opportunity. We took out another EDR vendor that was in there. We're providing a much better solution for them and their customers. And they're in a segment that allows us to bring our technology too. You know? There's a lot of incident response engagements they're doing. They're part of the insurance panels. And it opens up a market opportunity with one customer and just accelerates our ability to penetrate that. So these are the type of models that we like to create. We've been very successful in the MSSP market. This is just another proof point of us working with customers like Kroll and the reach that they have and the trust that they have. So the idea is to create more Kroll opportunities and certainly grow the opportunity that we have with Kroll, which I feel very confident we will. Andy Nowinski: Thanks, Roger. Operator, next question. Operator: Your next question will come from Tal Liani with BofA. Tal Liani: Hi, guys. I'm trying you're a $5 billion revenue company, and you only provide one number. Revenue or ARR. There's no breakdown. So I'm trying to understand a little bit of the kind of any segmentation of your revenues and the question I have is, can you discuss verticals like contribution of SMB and trends in SMB, kind of new market opportunities that were not in your core before and how you are addressing them. And also new customers versus upsell to existing customers, are you the NRR and GRR I know you stopped doing it a few quarters ago. Thanks. Burt Podbere: Actually, let me take the last part of your first. So, basically, we are gonna be giving out about retention and growth generate at the end of the year. So that's what we've that's what we've talked about, and we will do that, Tal. So I think you'll be you know, you'll you'll get that information. At the end of Q4. So and we do it every Q4. Now with respect to breaking out, you know, how we think about our business, you know, whether it's enterprise or SMB or MSSP, the great the great news about our business is that we sell all of it. We're successful with all of it. We're successful at the you know, with small deals. We're successful with large enterprise deals. And and for us, you know, we have that great technology that it's the same. It's the same technology for if you're a five-person shop, you're the largest company in the world. And the beauty of, you know, how we're able to deliver deliver, you know, our technology that it's up and running in seconds. So when you think about, you know, segmentation and you think about you know, who we sell to, it really is everybody. You know, our ability and our success is is agnostic. We are really driving new wins and displaying competitor the competitors, on a daily basis. Right? And for us, you know, to continue to invest in the business, and for us to be able to continue to make sure that we're able to deliver in a very timely manner, these are the successful things that we look at to be able to sell to all of our customers, whether big or small. So we're excited about that. And we're also rare. In in the entire security community to be able to do that successfully. Andy Nowinski: Alright. Thanks, Tal, for the question. Operator, next question. Operator: Your next question will come from Mike Sikos with Needham. Jeff Hopson: Hi. This is Jeff Hopson on for Mike. Thank you for the question. With the increased amount of M&A activity in security we've seen this year, including CrowdStrike Holdings, Inc. recently, how are you guys approaching the buy versus build when it comes to a technology like AI that's developing pretty quickly? Thank you. George Kurtz: When we look at the market, certainly, there's a lot of activity out there, and you know, it's probably isn't a week that goes by that we don't talk to some bankers that are, you know, talking about other companies. The great news is we've got a tremendous balance sheet. We're in a fantastic position. To be able to build or buy or partner. And I think we've been very thoughtful about our act and a big part of our strategy has been the integration. And when you look at Pangaea, we're really starting to sell that in Q4 because we wanted to take the time and effort to integrate it. It's not just kinda stitched together. The single platform, which I talked about, is very important to our customers. So we're gonna continue to be thoughtful. We're gonna continue to buy what we perceive as best of breed in the market, not legacy technologies. We're gonna integrate them, which is part of our customer brand promise. And we're gonna continue to grow them within our sales motion and the channel that we built. So we'll be opportunistic, but we'll also be very strategic in what we buy. Andy Nowinski: Thanks for the question. Operator, last question, please. Operator: Your last question will come from Adam Borg with Stifel. Adam Borg: Awesome. And so much for the question, and, Andy, congrats on the role. Maybe just on the identity business, it's great to hear the stronger quarter there qualitatively. I know we've talked in the past about being almost like a one dot o product. Love to hear more about how you're thinking about that product particular and the maturity in coming quarters. Thanks so much. George Kurtz: Yeah. So identity as as we've mentioned, super important in an AI era. Something that we got into many years ago, and we continue to evolve that. And we've seen some really nice wins specific to our PAM technology. You know, we have to look at what customers are telling us and, and basically, you know, skate to the puck of where where they're going, which is they're looking for more modern identity solutions. They're looking for solutions that can do just in time and you know, some of the kinda legacy vaulting they'd like to to move away from. So those are areas of focus for us. We'll continue to build out our identity stack. It's been very successful for us. But, certainly, there's more to do. There's more to build out, and there's more in front of us. The good news is there's demand from customers, as you've seen lots of market, movement. And as customers think about what they're gonna do next, they wanna make sure they set them themselves up for really in the next era of agentic identity, and that CrowdStrike Holdings, Inc. will be there for them. Operator: This concludes today's question and answer session. I would now like to turn the call back to George Kurtz for closing remarks. George Kurtz: Thanks, everyone, today for your time. We appreciate your continued support. We'll actually be presenting at the UBS Conference tomorrow. And a live webcast and replay of the presentation will be available on our IR website and we look forward to seeing many of you at the conference. So thanks so much. Stay safe, and we'll talk soon.
Operator: Good afternoon and welcome to the Marvell Technology, Inc. Third Quarter Fiscal Year 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this event is being recorded. I will now turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Thank you. You may begin. Ashish Saran: Thank you, and good afternoon, everyone. Welcome to Marvell's Third Quarter Fiscal Year 2026 Earnings Call. Joining me today are Matt Murphy, Marvell's Chairman and CEO; Willem Meintjes, CFO; Chris Koopsmans, President and COO; and Sandeep Bharathi, President, Data Center Group. Let me remind everyone that certain comments made today include forward-looking statements, which are subject to significant risks and uncertainties that could cause our actual results to differ materially from management's current expectations. Please review the cautionary statements and risk factors contained in our earnings press release, which we filed with the SEC today and posted on our website as well as our most recent 8-K, 10-K, 10-Q and other documents filed by us from time to time with the SEC. We do not intend to update our forward-looking statements. During our call today, we will refer to certain non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is available in our earnings press release. As we discussed in our second quarter earnings call, going forward, we are consolidating our non-data center end markets into a single new communications and other end market. The composition of our data center end market remains unchanged. Our earnings press release for the third quarter reports revenue by end market in both the prior format as well as the new go-forward format. Please note that today's call will be longer than typical as we will be discussing the acquisition announced today in addition to a number of extensive updates on our business. You may also find additional details on this transaction in the press release and Form 8-K be filed with the SEC today and a presentation posted on our website on the Investor Relations page. Let me now turn the call over to Matt for his comments on the quarter. Matt? Matthew Murphy: Yes. Thanks, Ashish, and good afternoon, everyone. Settle in, okay? We have a lot of good stuff to talk about today. For the third quarter of fiscal 2026, Marvell delivered record revenue of $2.075 billion, reflecting a 3% sequential increase and strong 37% year-over-year growth. Revenue was above the midpoint of guidance, driven by stronger than forecasted demand in our data center end market. As a result, non-GAAP earnings per share of $0.76 exceeded the midpoint of guidance by $0.02. Excluding revenue from the divested Automotive Ethernet business, the implied revenue growth for Marvell's go-forward business was approximately 6% sequentially and 41% year-over-year. Momentum in our data center business remains strong with revenue growing 38% year-over-year, fueled by robust AI demand. We also saw a strong recovery in our communications and other end market, where revenue grew 34% year-over-year as reported and nearly 50% year-over-year, excluding the Automotive Ethernet business. We expect growth to continue in the fourth quarter with total company revenue forecast at $2.2 billion at the midpoint. We expect this momentum to continue throughout next fiscal year and beyond. I will provide more context on our numerous growth drivers later in the call. Strategic Acquisition of Celestial AI Matthew Murphy: Before discussing our end market, I'm excited to share details on the strategic acquisition we announced today of Celestial AI, which brings an entirely new disruptive technology, a photonic fabric platform purpose-built for next-generation scale-up interconnect. This acquisition is the latest in a series of decisive moves to further strengthen our data center portfolio. Since 2019, we have continued to increase our focus on data center, divesting our WiFi business and acquiring Avera, Aquantia, Inphi and Innovium. These transactions have driven significant revenue growth and scale and have each proven to be an absolute home run. This year, following the divestiture of our Automotive Ethernet business, we are continuing to double down on data center with the acquisition of Celestial AI. This positions us to further capitalize on the massive opportunity in accelerated infrastructure. The acquisition is expected to close in the first quarter of next year, subject to customary closing conditions, including regulatory reviews in the United States and will remain a separate independent company through the regulatory process. Matthew Murphy: AI is reshaping data center architecture at an unprecedented speed. Next-generation accelerated systems are no longer confined to single rack, they are evolving into multi-rack scale-up fabrics that connect hundreds of XPUs in a high-bandwidth ultra-low latency any-to-any fashion. These advanced fabrics demand purpose-built switches interconnects, engineered to deliver the performance and efficiency required at scale, creating a new TAM for companies like Marvell. Industry analysts are forecasting the merchant portion of the scale-up switch market to approach $6 billion in revenue in 2030. On the interconnect side, we are seeing the dollar content for optics of the same magnitude as a scale-up switch as the optical interconnect attaches to both the XPU and the switch, the opportunity actually doubles, meaning over $10 billion. These are both very large and exciting incremental opportunities for Marvell. Matthew Murphy: As we first evaluated Celestial AI, it reminded us of our early look at Inphi and the products we saw in their PAM technology to transform the scale-out interconnect market. We see even greater potential for Celestial AI's photonic fabric to transform the scale up interconnect market. Interconnect technology is as critical as switching and scale up networks to enable hundreds of XPUs to be tightly coupled together. This is driving a massive increase in the number of links in the network and overall system bandwidth, therefore, creating the need for a fabric which can span across racks. Copper-based interconnects used in today's scale-up systems are approaching their fundamental limits in reach and bandwidth, creating compelling need for optical solutions. Celestial AI's photonic fabric technology platform was purpose-built for this inflection. It enables large AI clusters that scale both within and across racks using a high bandwidth, low latency, low power and cost-effective optical fabric. This breakthrough enables a true optical solution with greater than 2x the power efficiency of copper interconnects, but with far longer each and significantly higher bandwidth. In addition to exceptionally low power consumption, Celestial AI solution provides nanosecond class latency and excellent thermal stability, which enables deeper levels of optical interconnectivity into XPUs and switch systems. The thermal stability of Celestial AI's photonic fabric technology is a significant competitive differentiator. It enables reliable operation in the extreme thermal environments created by large multi-kilowatt XPUs. This allows the photonics technology to be co-packaged vertically with the high-power XPUs and switches in a 3D package, enabling the photonic connection to be made directly into the XPU rather than from the edge of the die. This stands in sharp contrast to many other CPO implementations for the photonics engine sits adjacent to the XPU and must connect at the die edge. Celestial AI's approach results in a more compact and integrated solution, freeing up highly valuable die edge beachfront which can be repurposed to significantly increase the amount of HBM within the XPU package. Eliminating beachfront I/O constraints also significantly increases the amount of package bandwidth possible for XPUs and switch systems. Matthew Murphy: Celestial AI's first-generation product is a photonic fabric chiplet or PF chiplet, which integrates all the required electrical and optical components, including drivers, TIAs, equalizers, SerDes, microcontrollers, modulators, photodiodes and waveguides, all into a compact form factor. This is the industry's first scale-up optical solution delivering an unprecedented 16 terabits per second of bandwidth in a single chiplet, 10x the capacity of today's state-of-the-art 1.6T ports used in scale-out applications. Its compact form factor allows multiple PF chiplets to be co-packaged with XPUs and the scale-up switches on the other side of the link to further increase total bandwidth. Celestial AI is deeply engaged with multiple hyperscalers and ecosystem partners who recognize the disruptive potential of this technology. Notably, Celestial AI has already secured a major design win with one of the world's largest hyperscalers who plans to use Celestial AI's PF chiplets in its next-generation scale-up architecture. These PF chiplets will be co-packaged into both the hyperscalers custom XPUs and the scale of switches providing connectivity. This is expected to be the industry's first large-scale commercial deployment of optical interconnects for scale-up connectivity. Matthew Murphy: Beyond connecting XPUs and scale-up networks, the photonic fabric technology platform can enable a wide range of transformational applications over time. First is a pooled memory appliance that uses Celestial AI's photonic fabric to optically connect multiple XPUs to large shared external disaggregated memory bank. A second use case for Celestial AI's photonic fabric to replace traditional electrical die-to-die connections in multi-die packages. This is just the beginning of a broad set of new applications which can be enabled from this technology. After close, we expect meaningful revenue contributions from Celestial AI to begin in the second half of fiscal 2028. Our base case forecast show Celestial AI's revenue reaching a $500 million annualized run rate in the fourth quarter of fiscal 2028, doubling to a $1 billion run rate by the fourth quarter of fiscal 2029. Following the close of the transaction, we look forward to welcoming the Celestial AI team to Marvell. Celestial AI brings one of the industry's strongest photonic interconnect engineering groups with deep expertise in optics, advanced packaging and high-speed interconnect architecture and systems. In addition, the CEO, founders and key executives from Celestial AI will assume leadership roles at Marvell, continuing our successful integration blueprint from prior acquisitions. These leaders have been at the forefront of innovation and scale up switching and photonic interconnects and their technical depth and strategic insight will play an important role in shaping Marvell's next phase of growth. Marvell's Strong Fiscal 2027 Outlook Matthew Murphy: Okay. Now let me transition back to Marvell's current business and outlook. As you may recall, on September 24, I hosted a virtual call with investors where I outlined a framework for Marvell's revenue growth for fiscal 2027. At that time, we indexed our data center growth potential to cloud CapEx, which was expected to grow 18% next year. Since then, cloud CapEx growth expectations have increased to over 30%. Additionally, we have seen strong demand increases for our products for next year. As a result, our outlook for next fiscal year is even stronger than the expectations we discussed in September. We expect our Interconnect business, which is roughly half our overall data center revenue to continue growing faster than cloud CapEx next year even with the higher outlook. We expect our custom business, roughly 1/4 of our overall data center revenue to grow by at least 20% next year, also from higher than prior expectations. As a reminder, in the near term, this business remains tied to a few specific sockets. We expect custom growth next fiscal year to be higher in the second half and do not expect any air pockets in custom revenue. Next year's custom revenue forecast comprehends a transition to a next-generation XPU at a large customer. And I would note that we already have purchase orders for the entirety of next fiscal year's current forecast for this next-generation program. Our revenue forecast for this program remained consistent with our prior expectations. As we look beyond fiscal '27, we have several high-volume customer designs in development with meaningful revenue expected from these programs in fiscal 2028, consistent with our prior communications. For the remaining quarter of our data center business which includes storage, switching and other products, we now expect revenue to grow by at least 15% next year, up from our prior expectation of 10% growth, driven in particular from increased demand for our switching products. Adding all of this up, we now expect Marvell's data center revenue to grow year-over-year by more than 25% next fiscal year. Please note that this forecast does not include any revenue from the pending acquisition of Celestial AI. And for our communications and other end market, we continue to expect 10% revenue growth next year. Putting it all together, we are looking forward to a strong fiscal 2027. Detailed Business Trends Matthew Murphy: Let me provide more details for each of our end markets. In our data center end market, we delivered record third quarter revenue of $1.52 billion, representing 2% sequential growth and 38% year-over-year growth. Revenue exceeded our guidance for flat sequential performance driven by increased demand across our networking portfolio. Our industry-leading PAM DSPs, TIAs and drivers continue to see strong demand, with revenue from our optical interconnect businesses growing by double digits sequentially on a percentage basis. Our data center storage and switch businesses also posted double-digit sequential revenue growth on a percentage basis. As expected, this strength was partially offset by a sequential decline in our custom revenue due to lumpiness in demand. Looking ahead to the fourth quarter, we expect revenue growth from our data center end market to accelerate growing sequentially in the high single digits on a percentage basis and approximately 20% year-over-year. This growth is expected to be driven by a rebound in custom and continued growth in interconnect, switching and storage. Matthew Murphy: I'll start with our interconnect business, where we offer the industry's broadest and most comprehensive high-speed connectivity portfolio. As our PAM DSP products enter into their fifth year of 800-gig production, demand for our solutions continues to accelerate underscoring strength of the platform we have built through more than a decade of sustained investment in core technology. Our playbook is simple. First to market, first to ramp with timely follow-up optimized solutions to maintain leadership. We did this at 400 gig, 800 gig and now 1.6T, where we established early leadership with our first 5-nanometer solution, which sampled in February 2024, we then accelerated the launch of our optimized 1.6T solution and sampled our 3-nanometer product just 1 year later in February 2025. As a result, we are enabling volume production of pluggable 1.6T transceivers across the industry. We began shipping our 1.6T products in the second half of this fiscal year and are seeing exceptionally strong demand heading into next year. This consistent execution enables us to secure qualifications at major customers well ahead of competitors, reinforcing market leadership. While 1.6T has a long life cycle ahead, we have already demonstrated at the Optical Fiber Conference this past April, 400 gig per lane technology to drive the next industry transition to 3.2T. The demonstration was on 3-nanometer technology but we expect production deployments which are expected in calendar 2028 to require 2-nanometer solutions to optimize module power. In addition to our PAM portfolio, we are also enabling longer reach connectivity with our Coherent lite solutions to support campus-wide data centers in the era of million GPU AI clusters. We introduced our 1.6T Coherent lite solution last year, expect to start shipping next year, and we are on track to deliver our 3.2T solution the year after. Now complementing our DSPs, our high-performance analog TIAs and drivers remain foundational to our electro optics leadership. Our TIAs have a significant performance lead at 1.6T, and we are seeing strong broad-based demand for our products, which are enabling the entire ecosystem. We have also secured several LPO sockets across multiple hyperscalers and are leading this emerging category as well, although deployments remain relatively small today in the context of a very large transceiver market. Matthew Murphy: Turning to 2 of our newer interconnect growth drivers, AECs and retimers. Both markets are undergoing a shift to high-speed PAM-based solutions, an inflection point that is perfectly aligned to Marvell's strengths. For the past year, we've been collaborating closely with the cable ecosystem to enable 100 and 200 gig per lane AECs and we are now on the cusp of substantial product ramps. We have secured design wins with significant share positions at 2 Tier-1 U.S. hyperscalers, along with multiple wins at emerging hyperscalers. We are seeing strong demand for our AEC DSPs, and we expect our share to continue to grow as PAM-based 100 and 200-gig technology becomes dominant. Our PCIe Gen6 retimers are also gaining broad traction. We are currently engaged with more than 30 customers and partners, including hyperscalers, cable partners and system OEMs and ODMs. We already designed in more than 10 sockets, and we expect to enter production in the second half of next year with full revenue contribution in fiscal 2028. We expect our AEC and retimer revenue in aggregate to more than double from this year to next year. Matthew Murphy: Turning to our data center switching business which continues to gain momentum. We expect revenue to exceed $300 million this fiscal year. We expect strong sustained demand for 12.8T products, reflecting our key customers' plans to rely on 12.8T as a workhorse in their scale-out network for several more years. In parallel, we've begun shipping our next-generation 51.2T products with a strong ramp expected next year. As a result, we now expect our day center switch revenue to surpass $500 million next fiscal year faster than what I had indicated last quarter. We will also introduce our 100T products next year as we continue to execute our long-term road map. We are also accelerating our scale-up switch efforts. These next-generation solutions are complex as 100T scale-out switches with high radix supporting up to 576 ports. We are fast tracking our scale-up switch development by leveraging our in-house high-speed, low-power SerDes and experience in developing extremely large reticle size chips. We are deeply engaged with key customers and partners and are on track to sample our UALink 115T and 57T solutions in the second half of fiscal 2027 with volume production expected in fiscal 2028. In parallel with our UALink development, we are also collaborating closely with key customers under ESUN solutions, completing a scale-up road map to address both standards. Matthew Murphy: Turning to our custom business. We expect accelerated growth over the next several years. fueled by our growing portfolio of design wins. At our custom event in June, we disclosed a total of 18 XPU and XPO attach socket design wins. Several of these are already in volume production with the remainder on track to ramp over the next couple of years. Since that event, our team has secured additional custom sockets, which represent more than 10% of the $75 billion lifetime revenue opportunity funnel we outlined in June. These new wins include multiple XPU attached sockets and XPU, an emerging hyperscaler and most recently, a design win for an electrical I/O chiplet inside an XPU. This is a new trend we see emerging where customers and partners are partnering with Marvell to gain access to our high-performance networking technology to be integrated along with their core compute engines within multi-die packages which are becoming more prevalent in a reticle size constrained world. This provides Marvell another avenue for custom growth and sockets, which were otherwise not available to us as full XPUs. Matthew Murphy: Now let me provide additional perspective on the rapidly developing XPU attach market. These attached devices offload specific functions such as network I/O, memory expansion and security, memory expansion and security from XPUs, GPUs and CPUs, freeing them up to exclusively focused scarce compute resources on the primary AI workload. We now have more than 15 XPU attach wins, and today, let me highlight 2 major use cases emerging across multiple hyperscalers as they architect their next-generation custom accelerated infrastructure. The first use case is for custom foundational and Smart NICs, and Marvell has already secured multiple design wins across several hyperscalers. Our customers plan to attach these NICs, not only to their custom accelerators, but increasingly to their broader AI server fleets, which at large hyperscalers can exceed 1 million units or more annually. The second use case we are seeing emerge in the XPU attached market is for CXL-based products that enable memory expansion and acceleration to overcall the memory wall challenge. We made early strategic investments in CXL several years ago, and we have now secured 5 unique sockets across 2 Tier 1 U.S. hyperscalers and are deeply engaged with the third. The first custom CXL design win started shipping already in the first quarter of this year and is entering volume production now. A second socket focused on near-memory compute is expected to enter production a year from now. The remaining CXL design wins are slated for production in calendar 2027. Our solutions technical advantages include support for both DDR4 and DDR5, larger memory capacity and compression along with deep partnerships with the leading memory and CPU providers. While our initial wins centered on offloading from CPUs, more recent wins attached directly to XPUs, which are deployed in far greater numbers were several upcoming high-volume CXL production ramps, Marvell is leading the transition to next-generation memory architectures. We expect the XPU attached market to continue to evolve at a rapid pace, and we are very encouraged to see the attach rate of our solutions exceeding our initial expectations. Based on designs we have already won just for the NIC and CXL use cases, we have line of sight to revenue exceeding $2 billion by fiscal 2029 and a significantly higher forecast in the following years. This is why we are so excited about our data center business, interconnect switch, XPU, XPU attach, storage, scale up, scale out, we are everywhere in the AI rack. And we are just getting started with what we expect to be a massive TAM ahead of us. Communications and Other Market Matthew Murphy: All right. Let me now move to our communications and other end market, where we delivered $557 million in third quarter revenue, which grew 8% sequentially and 34% year-over-year. Excluding revenue from the divested Automotive Ethernet business, the implied revenue growth for Marvell's communications and other end market for the third quarter would be closer to 20% sequentially and 50% year-over-year. These strong results were driven by normalizing customer inventory levels and strong adoption of our refreshed product portfolio at both our enterprise networking and carrier infrastructure customers. Looking ahead to the fourth quarter, we expect revenue from our communications end market to grow sequentially in the low single digits on a percentage basis with year-over-year growth of approximately 25% as reported and closer to 40% year-over-year, excluding our former Automotive Ethernet business. We expect strong sequential growth from carrier and ongoing growth from enterprise to be partially offset by a steep seasonal declines in our consumer business. We expect the enterprise networking portion of our communications end market to reach an annualized revenue run rate of approximately $1 billion in the fourth quarter which would reflect the complete normalization of customer inventory levels in that business. Going forward from this $1 billion annualized revenue run rate, we expect this business to grow in line with enterprise IT spending. While our carrier business has also been recovering and our fourth quarter guidance implies the business to almost double from the year ago quarter, we see continued recovery until this business also settles into its long-term growth trajectory, which would be in line with carrier CapEx. Summary, Guidance, and Financials Matthew Murphy: So in summary, during the third quarter of fiscal 2026, we continue to expand operating margins, grow earnings per share and set new revenue records. We executed our $1 billion accelerated stock repurchase program in addition to repurchasing $300 million of stock through our ongoing buyback program funded by our growing operating cash flow. Looking ahead, we expect momentum to continue in the fourth quarter with total company revenue forecast at $2.2 billion at the midpoint, representing 6% sequential and 21% year-over-year growth. Excluding revenue from our former Automotive Ethernet business implied year-over-year revenue growth for Marvell's go-forward business would be approximately 24% at the midpoint of our forecast for the fourth quarter. As I noted in my opening remarks, we are seeing robust demand signals and strong bookings across our entire portfolio, positioning us for a strong fiscal 2027 and even faster growth in fiscal 2028. Customers are planning to add substantial AI capacity over the next several years and are partnering closely with us on long-term technology road maps and coordinated capacity planning. In addition to benefiting from rapid market expansion, we have several of our own unique growth drivers. Taken the other, we expect strong market tailwinds and new product cycles to drive significant growth inflections ahead of us. As a result, we see a path for our data center revenue growth in fiscal 2028 to accelerate meaningfully above the 25% growth we expect in fiscal 2027. So look, we covered a lot of ground today. And so before I close, let me just quickly highlight a few key takeaways. First, we have activated Marvell's M&A playbook and expect to close the transformational acquisition of Celestial AI in the first quarter of next fiscal year, enabling us to fully capitalize on the massive scale-up opportunity. Second, our interconnect business is firing on all cylinders. Our electrooptic interconnect platforms continue to lead the market with world-class road maps across the board and accelerating demand. Finally, when you put it all together, we are positioned for several years of exceptional performance, building on this fiscal year's projected revenue growth of more than 40%. And I look forward to updating you on our progress over the coming quarters. And with all of that, I'll turn the call over to Willem for more detail on our recent results and outlook. Willem Meintjes: Thank you, Matt, and good afternoon, everyone. Let me start with a summary of our financial results for the third quarter of fiscal 2026. Revenue in the third quarter was $2.075 billion, growing 37% year-over-year and 3% sequentially. Data center is our largest end market, contributing 73% of total revenue. Our communications and other end market contributed the remaining 27% of revenue. GAAP gross margin was 51.6%. Non-GAAP gross margin was 59.7%, an increase of 30 basis points sequentially. Moving on to operating expenses. GAAP operating expenses were $712 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs and acquisition-related costs. Non-GAAP operating expenses came in at $485 million, in line with our guidance. Our GAAP operating margin was 17.2%, while our non-GAAP operating margin was 36.3%. I'm pleased that we drove a 150 basis point sequential increase in non-GAAP operating margin. For the third quarter, GAAP earnings per diluted share was $2.20, including the gain from the divestiture of the Automotive Ethernet business. Non-GAAP earnings per diluted share was $0.76, reflecting year-over-year growth of 77% which is more than double the pace of revenue growth demonstrating the significant operating leverage in our model. Non-GAAP earnings per diluted share increased 13% sequentially. Willem Meintjes: Now turning to our cash flow and balance sheet. Cash flow from operations in the third quarter was a record $582 million, growing approximately $121 million from the prior quarter. Our inventory at the end of the third quarter was $1.01 billion, a decrease of $37 million from the prior quarter. During the quarter, we executed our $1 billion accelerated repurchase program. In addition, we repurchased $300 million of our stock through our ongoing capital return program and returned $51 million to shareholders through cash dividends in the quarter. As of the end of the third quarter, our total debt was $4.5 billion, with a gross debt-to-EBITDA ratio of 1.47x and a net debt-to-EBITDA ratio of 0.58x. Our debt ratios have continued to improve as we have driven an increase in our EBITDA. As of the end of the third fiscal quarter, our cash and cash equivalents were $2.7 billion, an increase of $1.5 billion from last quarter reflecting the addition of proceeds from the divestiture of our Automotive Ethernet business and ongoing cash generation from operations, offset by a capital return of $1.35 billion between stock repurchases and dividends. Willem Meintjes: Turning to our guidance for the fourth quarter of fiscal 2026. We're forecasting revenue to be in the range of $2.2 billion, plus or minus 5%. We expect our GAAP gross margin to be between 51.1% and 52.1%. We expect our non-GAAP gross margin to be between 58.5% and 59.5%. Looking forward, we anticipate that the overall level of revenue and product mix will remain key determinants of our gross margin in any given quarter. For the fourth quarter, we project our GAAP operating expenses to be approximately $741 million. We anticipate our non-GAAP operating expenses to be approximately $515 million, growing from the prior quarter as we continue to invest in the business, and anticipate higher employee bonus payouts, reflecting a strong expected finish to the fiscal year. For the fourth quarter, we expect GAAP and non-GAAP other income and expense, including interest on our debt to be approximately $30 million. We expect our non-GAAP tax rate of 10% for the fourth quarter. We expect our basic weighted average shares outstanding to be 850 million, and our diluted weighted average shares outstanding to be 857 million. We anticipate GAAP earnings per diluted share in the range of $0.31 to $0.41. We expect non-GAAP earnings per diluted share in the range of $0.74 to $0.84. Willem Meintjes: Looking ahead to fiscal 2027, Matt already provided an update on our strong revenue growth expectations. We intend to continue to invest in growing our business while driving operating leverage and expect our non-GAAP operating expenses to increase at roughly half the rate of the revenue growth next fiscal year. Keep in mind that we typically see a mid-single-digit sequential increase in OpEx on a percentage basis in the first quarter. This forecast for next year's OpEx does not include any additions from the acquisition we announced today. I will provide that forecast separately. Regarding taxes, we expect our non-GAAP tax rate to move to approximately 12% next fiscal year. Turning to the acquisition we announced today. Post closing, we expect the addition of Celestial AI to add approximately $50 million in annual operating expenses. We expect Celestial AI to start generating meaningful revenue in the second half of fiscal 2028, at which point it is expected to become accretive to our non-GAAP earnings. We plan to fund the acquisition through a combination of stock and cash on hand and do not intend to take on additional debt. We have a strong balance sheet and are generating robust operating cash flow. As a result, in parallel with paying for the acquisition, we plan on continuing to return capital to stockholders through dividends and buybacks. In summary, we're executing on our strategy to drive strong revenue growth while delivering operating leverage. In addition to organic investments, we are actively deploying our strong balance sheet to acquire a transformational asset that we expect to further strengthen our capabilities and increase our addressable market. With that, we are ready to start our Q&A session. Operator, please open the line and announce Q&A instructions. Thank Thank you. Operator: [Operator Instructions] Our first question is from Ross Seymore with Deutsche Bank. Ross Seymore: Matt, I appreciate all the details you gave about how to think about next year. If I run through those numbers, basically, it sounds like you're implying somewhere around $10 billion in revenue for next year. So I guess, first of all, is that in the right ballpark? And then back in June, you gave a longer-term target for fiscal '29 for your business, especially on the AI side of things. How does what you're looking for next year gets you aligned to those long-term targets? Matthew Murphy: Yes. Thanks, Ross. I think that's actually a great way to tee-up the Q&A here. So yes, a couple of things. I think you're absolutely in the ballpark when you add up the numbers I gave you on $10 billion for next year. And I think that's a great target, actually, by the way, that -- motivational for us as a team to go drive. And just as a reminder, this is just based on the Marvell organic plan, no M&A contribution. A couple of things about next year, an then I'll actually give you some commentary on how you think about that slope we're on for next year. Another thing I would note, I didn't say in my prepared remarks but we do expect sequential revenue growth next year, every quarter. So year-over-year, we see a nice growth throughout the year. But I would say the second half of the year stronger than the first and with, I think, a really, really compelling exit rate to fiscal '27. Now it's a little far out to go all the way to '29, let's say, but let me just give you a path sort of on where we're headed and how we think about fiscal '28 and how we build on that strong second half we see next year. So a couple of things maybe to talk about those same businesses. So first on custom. And just as a reminder, I mean, basically, we quadrupled that business from calendar '23 to '24, we doubled it from founder '24 to '25, we're saying it's going to be up about 20% this next year. But then when I look at the year after with all this goodness from XPU attach plus a new meaningful XPU socket ramping and the other programs continuing, we see the custom business action in fiscal '28 doubling off of '27. So we see a reacceleration big time in that year. And that puts us on a nice trajectory towards our growth targets fiscal '29 in custom coming off a strong second half next year and then in fiscal '28. On interconnect, look, it's early, but we do expect that business should continue to outgrow CapEx. It's done that for a long time. Look, if you just said, hey, 20% CapEx growth in fiscal '28 and nobody knows what that number is, but just peg that in there for now, we'll definitely grow above that. I would say our customer forecast support a much higher number than that. But just as a base case, just assume CapEx is 20% that year. And so -- so optics will grow faster. And then for storage switch and the other part of data center just assume 10% growth in fiscal '28 over '27. I think that's a reasonable set of assumptions to use based on what we see. And so when you actually add all that together, you come up with a number, bottoms up, which looks more like 40% growth in data center in fiscal '28. So that's what I was talking about in my lead-in, which was strong data set -- 45% growth basically this year in data center, targeting 25% next year and then 40% the year after. And if you actually look at it over like the cycle where we started back in calendar '23, that's like a 50% kind of compounded growth rate, we'll be growing our data center business. So the '28 numbers I'm laying out for you are not totally crazy. And then just for reference, if you just sort of plug in comms and other growing at GDP for fiscal '28 just to keep it simple. Again, it's too far out you basically get Marvell growing like another 30% in fiscal '28, which would be above where we're looking for '27. So kind of a long answer, but maybe what's been on a lot of investors' mind is how do you get from where we are to where we're going, but certainly, we're very optimistic about our outlook over the next couple of years. And then things like Celestial AI and some of these other big growth drivers, those are going to kick in starting in fiscal '28 but then really in '29 and '30 and beyond. And I think through the end of the decade, it's looking very bright for Marvell. Thanks for the question. Operator: Our next question is from Harlan Sur with JPMorgan. Harlan Sur: Congrats on the Celestial acquisition. Today, Matt, your lead AI customer announced their next-generation 3 nanometer AI XPU product. And I think you just said you have secured purchase orders for this program for the entirety of next year. But your lead customer also preannounced their next-generation 2 nanometer XPU product today as well, which we believe you're also involved with, especially now with the Celestial team. I remember at the June custom AI event that the team talked about concurrent design programs. In other words, at the same time, you're towards the tail end of your customer's 3 nanometer design. You're already starting to work with customers on their next-generation 2 nanometer designs. During our fireside chat in September, you talked about the team being heads down focused on 2 nanometer designs. You even talked about next-generation A16 and A14 technologies. Can you just give us an update on your sub 3 nanometer design win pipeline does include both XPU, XPU attach programs? And what's the time line for these programs to ramp into production? Matthew Murphy: Yes. Thanks, Harlan, for the question. And yes, just in the spirit of customer confidentiality and details, I can't go into too much. But what I would say, which is incorporated into our numbers is that our product transition from where we are today with our lead XPU customer to the next one is baked into all the numbers I gave you, and yes, I got the backlog and I got the orders and we got great visibility there. On the 2 nanometer, very exciting. I mean there's a number of programs that we're working on in this area, and that's going to be a workhorse process technology for us. But same as I said, and I would just say that the design funnel keeps increasing there. And the power benefits you see are compelling. And I think that will continue. I mean that's really where AI has sort of kicked in to keep the Moore's Law train running is really the just the power savings are worth real OpEx dollars when you can save power dissipation from one generation to the other. So nothing really new to report there other than just heads-down execution and do see strong product ramps coming over this time period I gave you, especially in the fiscal '28 where you'll start seeing some of the 2 nanometer products ramp. And my team internally just to give them a shout out is executing extremely well. The whole team you saw that got up there at the AI investor event in June by engineering leadership, executing extremely well across the board on the core IP, the nodes, the packaging, you name it. So we're really firing on all cylinders internally. Thanks, Harlan. Harlan Sur: Great execution. Operator: Our next question is from Tore Svanberg with Stifel. Tore Svanberg: Yes. Congratulations on the acquisition. I had a question on Celestial AI, Matt. So when you gave those $500 million and $1 billion target, would that be for the PF Link products only? Or would that also include some of the potential businesses with memory? Matthew Murphy: Yes. Yes. A couple of things to note, maybe at the highest level. The first is, yes, the revenue targets and also the earnout that we're all going to drive for is all based on Celestial AI in totality. Now the reality is from a lead perspective, the PF chiplet is sort of what's going to go first. But everything is on the table, and there's just tremendous activity that, that team has driven, punching way above the weight in the industry in terms of the engagements they have. So those are all in numbers but clearly going to be driven more from the PF chiplet side in terms of the revenue build in end of fiscal '28 and then the end of fiscal '29. Operator: Our next question is from Chris Caso with Wolfe Research. Christopher Caso: Also a question about Celestial. And with that revenue ramp that you're expecting at the end fiscal '28, beginning of fiscal '29, can you talk about the breadth of that? And obviously, I'm sure you're not willing to name the customers right now. But is it a fairly narrow customer base, what's the -- and going over time, how diversified is that revenue stream? Matthew Murphy: Yes. No, great question, Chris. I think that the engagement is certainly broad but remember, we're -- there's a bold effort across the industry to really bring this product into volume stable production, and it's going to take real big companies and a few of them to do that. And so yes, we have strong engagement across the board, but there will be -- and we're fortunate with this that we have -- as I said on the call, we have one Tier 1 hyperscaler that's -- we're engaged with on this that I think is a great partner and a great teaching customer and a great customer to collaborate with to really go make this happen. So it's very exciting to see Celestial come into Marvell because -- just as a reminder, we have an incredibly strong internal silicon photonics organization. I mean this team that we got from Inphi pioneered this technology. We drove it into high-volume production and market leadership in the 100 and the 400-gig ZR business, now 800 gig. It's all the DCI stuff they enable. That's on the back of very, very innovative silicon photonics technology. So we have a ton of know-how here. So then when we bring in Celestial, we're all going to benefit from that common set of learnings and then having a lead customer pulling us through is very exciting. So I think this is just the first phase here, Chris, that you're going to see. But certainly, the interest is there across the industry. And this is just so evident to us over the last couple of years and really pronounced at the last strategic review. It's a process I run every year where we do our capital allocation review with everybody, and I was a couple of months back, and we're just staring at this just giant transition to photonics inside the data center in that TAM. And we looked at, could we do it ourselves, could we do it with the partner and we just concluded this is a home run to bring them in with our internal team plus really a lead customer to pull us through the first wave. But beyond that, we see very broad adoption beyond that time frame. Operator: Our next question is from Harsh Kumar with Piper Sandler. Harsh Kumar: Congratulations, Matt and the team and a lot of good things happening. Matt I had two. So I'll just ask them both together. The first one is on custom. You specifically mentioned at least 20% growth for next year. Seems like you've got a lot of good things happening, a lot of good stuff ramping. And I was hoping that you could book in that number for us. So at least 20% to me seems like that's what's in the bag. But maybe you could give us a sense of what -- if everything worked out right for you, what could be a normalized 2027 FY growth rate for custom? And then the second question was you gave us a lot of color all the way to FY 2028. And this is kind of not the norm on Wall Street, most companies go out a quarter, as you well know. So my question is, and this we've been getting from a lot of investors already is, what is your comfort level? And what is the visibility on some of this long-term revenue materializing that you're talking about? Matthew Murphy: Yes, sure. A lot in there, but let me unpack it. I think the first is, you should definitely model the 20%, and I think that's -- that is a good number. That's a good safe base case number. And remember, it's a handful of programs today. So I think I would just go for that now. Clearly, we're going to be ready if people want to do more, but I am also mindful of some of the history on this custom business where either people got ahead of themselves or there's a lot of noise in the system and it's just -- look, we've got strong backlog, we got that covered. That's great. If we do better later, we'll definitely update you guys. But we got a very, very good outlook for next year in that business. And then obviously, the year after it really builds. And kind of part of your question is it's not 20% sort of linearly, meaning the second half, especially in custom and the exit rate is much higher than where we are now. And that's simply because we're building all this momentum into fiscal '28. And then yes, on the sort of guide quarter at a time, that's definitely been our MO historically. I think given the multiyear cycles we're looking at now in the AI infrastructure build and also, quite frankly, just being sensitive to investor feedback about looking at some pretty ambitious targets we've set for the company several years out. And then wondering, well, how do you see yourselves getting there? And I just view it as it's incumbent on me to paint the picture for folks and share what I see as kind of base case assumptions, as I mentioned. I mean these are what I view as the base case, not dream the dream, not putting anything in that we -- is sort of a maybe. I think it's very rational how we came up with our fiscal '27 outlook and even our fiscal '28 if you just look at it, bottoms up on the custom, we should definitely be able to do that because we know those programs. I mean if I say CapEx is growing 20%, it certainly may do better, and our optics business is growing way above CapEx, so that has some legs to it. And then look, even in a quarter, that other category in switching and storage and other has also floated up. So there's still a lot of goodness out there. But I think just from a modeling perspective, that's what you should think about. And I would say, finally, it really though is tied to our customer planning. I mean they're realizing to go get all this build to happen. They've got to provide visibility several years out. That's giving us increased confidence in our outlook because we're having to plan around that. Our R&D schedules, our capacity, our ramps, all that stuff has got to go kind of 6 to 8 quarters out now to really be ready. So that's also part of why I felt it was worth sharing this perspective for investors. And again, I think it's timed well as well with Celestial because then that thing just kicks in beyond the time frame I'm talking about fiscal '29 -- I mean some of it in fiscal '28 but then early '29, '30 and beyond. So hopefully, that was helpful. Thank Thank you so much for the question. Operator: Our next question is from Blayne Curtis with Jefferies. Blayne Curtis: I want to ask you, Matt, I know it's always tough to talk about customers, but you did file an 8-K and it says you graded Amazon a warrant for 1 million shares to buy photonic fabric. So I guess, one, very simply, is that your lead customer? And if you can maybe talk about that expanding relationship, obviously, there's been a lot of back and forth your status to the customer, but this seems like a positive in terms of your engagement for the next generation? Matthew Murphy: Yes. And great job checking out the EDGAR website, Blayne, you're always one step ahead. Yes, I think it's great. So first, we did file Form 8-K talking about really an extension, if you think about it to the warrant agreement we have, which is effectively adding a new swim lane. I mean if you can believe it was only 1 year ago that we announced with AWS a warrant and strategic arrangement with them. Back then, a year ago, it was really bucketed between AI, custom products and then networking products. And so think of this as just adding another swim lane of photonic fabric products to the mix. And all in, the potential of each of these is quite significant. So that's a positive on the first one, that's out there. Also pleased to get a very, very strong support in our press release for the acquisition from AWS that was positive. And so when you sort of look at all the things we're saying and all the data that's out there, you can sort of figure out where we're headed with this and who is helping drive this technology forward. We're very, very excited about where we can go with this technology, especially with our lead Tier 1 hyperscaler but then also the rest of the market, which I think will be shortly behind them once we can really put the full force of Marvell behind this. So thanks for catching that and giving me a chance to talk about it. It's pretty exciting to see. Really, if you think about it, we've got the warrant agreement, we got an aggressive earnout that the team is driving, which is a $2 billion number, by the way, through the end of fiscal '29. So all this adds up to just a great sort of set of incentives for everybody to go execute like crazy and bring this into production. Operator: Our next question is from Vivek Arya with Bank of America. Vivek Arya: Matt, I had 2 kind of questions on the data center, one on optics and one on custom. So on optics, why correlated to cloud CapEx? Why not do growth of AI accelerators, which is expected to be much faster than the 30%? And then on the custom side, you mentioned 20% as the baseline growth. Is that because the second customer is supposed to come on board? Or is it because you will grow with that first customer? And I ask about the second customer because they don't have a history of ramping, big ASIC program. So I just wanted to get your overall views on optics and why correlated to CapEx. And then on the custom side, just kind of puts and takes of the second customer that's supposed to come onboard. Matthew Murphy: Yes. Thanks, Vivek. Yes. So on your first question, I mean, just the rationale was just to give just a broad proxy to the investment community about how to think about our business of sort of a very common metric, which is CapEx. I agree with you. The optics business is fundamentally driven by AI and AI acceleration. And that's why it's been growing so far above CapEx each year. And -- but I think this was just in the interest of providing some pretty broad brush strokes but you should certainly assume that the optics piece is tied to AI which is growing faster than CapEx. So that's a fair assumption. But just this was really in the spirit of making this a proxy. And then on the growth next year, yes, that's all still driven by -- the way to think about it is mostly our current business today. So there's a product transition with our lead customer from one generation to another in there. There's some XPU attach that's kicking in, in the second half that's going to lead to the '28 and '29 revenues I was talking about. But the next bigger XPU customer we have, not much of that really you should count on for next year. It's really the year after and that's captured in the doubling from fiscal '27 to '28. But I think we've got a very rational base plan for that, that we think is achievable. And then obviously, if things improve or get better, then we would up those numbers. But I think what we're trying to do right now, Vivek, is just paint a very rational, clear picture for people, and then we'll obviously update along the way more on a granular basis as we go forward. . Operator: Our next question is from Christopher Rolland with Susquehanna. Christopher Rolland: Congrats on the results. So I think your main competitor in ASIC has moved to providing racks, not just silicon. And then with this acquisition and kind of given the increasing complexity we're seeing out there, might you be moving to systems and then perhaps even rack-level solutions as well? And do you have the capabilities to do that? Matthew Murphy: Yes. Thanks, Chris, for the question. And I would sort of answer the second part, which is, we are very much looking at this as a rack-level solution in totality and that is all the various flavors of optical interconnect. I rattled through a bunch of those. We're the one-stop shop, right, from AECs, traditional DSPs, retimers, LPOs, photonic fabrics and then scale up and scale out switching and XPU attach sockets and circuits to make all this work. And then working closely with our customers with that vision on how we enable that entire end-to-end and enable them to do that. That's our current strategy. And most of the people we're working with have that capability themselves today. They're very good at it but we also add quite a bit of value in how to think about how to pull it all together. So we absolutely have a rack scale vision, and this is where Celestial AI really fits in. But we don't have any system-level revenues comprehended in anything I've talked to you about over the next 2 years. But certainly, from a strategic standpoint, it's imperative, right, that we go to market in a very comprehensive way, Chris, and not in a point solution way, but rather be able to provide all the fundamental pieces right from the biggest XPU chip all the way down to a retimer on the board. Operator: This was our final question for the evening. I'd now like to hand the call back over to management for any closing comments. Matthew Murphy: Yes. Fantastic, and thanks for all the great questions, and I appreciate everybody listening. I know it was a lot. I think this was the world record for the longest prepared remarks I've ever done. But like I said at the beginning, settle in, because there's a lot of good stuff. And there really is a lot of great things happening with Marvell. I'm just really pleased with how our team has executed. I want to say thank you to all of them. we have a phenomenal setup for next year, as I indicated, and even through the next year, we just have very good visibility. Programs are on track. We are playing offense in this company, okay? We're out doing strategic acquisitions like Celestial AI, and we're thrilled to welcome them to the Marvell team. And I think our future is very bright where we're headed. So appreciate everybody's interest. I look forward to follow-up conversations and appreciate all the investor interest in following Marvell and our journey. Thank you, everybody. Have a great day. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Accsys Technologies plc investor presentation. [Operator Instructions] Before we begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Accsys Technologies plc, Jelena, good afternoon. Jelena Arsic Os: Good afternoon, Jake, and thank you very much for this opportunity. We are here today to present our H1 results of FY '26 and also to give a little bit broader view on what is company doing and how is our transformation journey going forward. We are today going to talk a little bit about us, the introduction from me and Sam, H1 FY '26 overview. We will skip to the financial review, business review and then give finally outlook for the rest of this financial year. My name is Jelena Arsic van Os. I'm CEO of the company that joined the company 2.5 years ago. I spent over more than 25 years operating in the chemical business sectors, running large businesses for international companies, most of my career for the AkzoNobel and later on for the company called Imerys. Sameet Vohra: And I'm Sam Vohra, I'm the CFO of the company. I've been with the company since September 2024. So just over 14 months. I'm a U.K. trained chartered accountant, but I spent over 20 years working for U.K. listed companies and over half of that time was working for engineering and manufacturing companies. Jelena Arsic Os: So a little bit about Accsys Technologies plc. Company has a very strong purpose of changing wood to change the world. What does this mean? We see ourselves as disruptors in this industry space, in the space of building materials. We are taking fast-growing, sustainably harvested wood and passing it through our proprietary process that is protected with more than 300 patents across 45 countries. We give that wood superpowers, superpowers in terms of durability, in terms of dimensional stability, in terms of resistance to rot. Company today is producing 3 main products: Accoya, Accoya Color and Tricoya. Accoya is acetylated wood. Accoya Color has additional step of coloring impregnation of acetylated wood, so coloring impregnation of Accoya that is the first step. And then Tricoya starts with Accoya wood that is being shredded in a small pieces and then mixed with a little bit of resin, and we are producing the panels that are going to sustain a very, very long time exposed to the environment. All of our products are having warranty of 50 years above the ground and exposed to the environment in the outside applications and then 25 years in the ground or in the water. Today, most of our applications, most of our wood is used in the windows -- making windows and doors, cladding, decking, fencing, outside furniture or submerged in the water, protecting the canals in the Netherlands or even siding the canals along the dams in the U.K. We have all the sustainability credentials. We are very, very passionate about sustainability. And if you are looking at as a carbon capturing product, every single person that is working for Accsys is actually here because of that fantastic product that we make. Today, we have 3 production sites, 2 acetylation plants, one in Arnhem in the Netherlands that has 4 reactors and 80,000 cubic meters in the production capacity. That is operational since 2007. We have a second acetylation plant in Kingsport, Tennessee, which is a joint venture with the Eastman Chemicals Company. Accsys is holding 60% in this joint venture and Eastman is holding remaining 40%. It is operational since September last year, and it has a capacity. It has 2 reactors installed, so the capacity of 43,000 cubic meters today. Barry in Wales is our coloring facility. So wood from Arnhem, acetylated wood from Arnhem or Kingsport will come to Wales to be colored impregnated by -- through the core to produce Accoya Color. The Arnhem plant is actually supplying, strategically positioned to supply Europe and the rest of the world and our Kingsport facility is supplying local U.S. market, including Canada and Mexico. So why the company has a unique value proposition for our investors. We have genuinely very unique product, really innovative product in our portfolio with this unrevealed warranty of 50 years that we are offering, and there is no industry match that can compete with the durability and performance of Accoya. So there is a very clear product differentiation. Product and technology is protected by patents. We have 27 patent families, so more than 300 patents across 45 countries that are protecting the product and the technology. We have a unique and very known brand among the wood products in the market for all Accoya, Accoya Color and Tricoya. And last but not least, certainly not least, the company has established manufacturing footprint. And if you know that building Accoya plant of acetylation plant, you need an investment that is around EUR 150 million. Having established 2 manufacturing sites in the 2 largest and the most profitable wood markets in the world, the premium wood markets in the world, does create a significant barrier to entry to any newcomers and giving us a very good position for growth in this -- in the building materials industry. Now Accoya Color and Tricoya have a significant market share opportunity in our core markets that are driven by the trends of population growth in the need of more housing being built everywhere. It doesn't matter in which country in the world you look, there is a general housing shortage everywhere. But there is also the sustainability trend materials that are looking on a carbon footprint in the building industry as being one of the most impactful for the carbon emissions are very much needed and also our products are having quite a nice natural look so that biophilic design is very much wanted at the moment, is very trendy at the moment. But looking besides the trends, if you look what are the addressable markets for our products today, we operate in 2 large ones. Our oldest home market, I would say, is Europe, including U.K. And there, we are talking about 1.9 million cubic meters of addressable market for Accoya in the application we are playing today. If we look at the available capacity that we have in Europe and even with the plants completely full, it is very obvious that the market share for Accoya is in the low single digits. In the U.K., we have a market share of circa 4%. So there is still significant opportunity for us to grow and develop in Europe and U.K. On the other hand, looking at U.S., cladding, decking, windows and doors market, it is by far the largest premium market for Accoya. It is almost 4x, if not more -- higher, bigger than the one in Europe. And looking at our available capacity, even if we have things called completely full, the market share in the U.S. is going to be less than 1%. So there is enough space for Accoya to establish itself and to grow and still not reach even a very single digit of the available market we have in those 2 important geographical regions for us. Now when we look at Accoya, how does it compete with other products, we certainly focus on a premium market segment. When we are talking about premium, we are also having a pricing premium that is reflecting the value that our products are adding. So here, you can see all the other available products that you can find in cladding, siding, decking or windows and doors. Depending on the current cost and the performance, you see that Accoya with this green dot is always on the completely right side with critical performance attributes that are far above any other competitive material, but that also comes with a premium values. So we are very proud that our critical performance attributes are certainly stability -- dimensional stability of our products that remains -- would remain stable over -- even in the very extreme conditions. That means that if you -- that your maintenance cycles are quite lower. So value in use is getting a benefit over time. In the decking market, for instance, our products have a significant decay resistance. So that means that they are going to outlast any other wood option in the 10-year test. So people who are looking for durability are certainly counting on Accoya in that segment. And for windows and doors, again, low maintenance for coatings because our material is very stable when you put a coating over it because wood below is not moving, that coating can stay significant time longer. So on our windows that we have on the test field, we have a window just sitting there 15 years with no maintenance. So we are very proud that Accoya is certainly a flagship product, if you like, in this space of wood building materials. Coming now to the H1 and how the company performed for the first half of the financial year '26. We have delivered excellent first half with significant improvement in profitability. Accoya sales volume increased 22% across different regions with 61% of growth in U.S., where we, since September last year have our new production plant. Group revenue delivered was EUR 76.1 million, which is a 23% increase in group revenue on a like-for-like basis versus the first half of last year when we are talking about like-for-like basis in the first half last year and this half last year -- in the first half last year, we have transferred 13% of group volume and 14% of the group revenue to be produced and supplied from our new production site in the U.S. So if you take that volume out of equation, then you look that underlying Accoya and underlying group revenue grew 23% because we were able to replace all of this transferred volume with the new business in our Arnhem plant. This is a significant positive news and significant success. And why is that? Because underlying building material market didn't really grow in this period of time. So because our growth is double digit and high double digit, if you look on what is happening in the U.S., but also in the rest of the Europe, that means that Accoya is gaining market share compared to all the other building materials. At the same time, we are continuing our pricing and our cost discipline. So we were able to contain EUR 2.3 million of savings from our transformation program, which is helping us, of course, now in improving that profitability line that significantly changed since last year. Just to remind you that for the full financial year last year, company made EUR 10.8 million EBITDA -- adjusted EBITDA. And for this first half of the year, we have delivered EUR 10.4 million adjusted EBITDA going from EUR 4 million last year. So this is a significant improvement, and Sam is going to tell you a little bit more later on when we dive deeper into the financials. Company is above gross margin target of 30%. And very -- we are very, very pleased to show progress on deleveraging our balance sheet with the refinancing that was completed just in the first week of October. Our leverage ratio end of September was 2.1% compared to 2.5% at the end of March, so at the end of the financial year last year. And if we look on where we are on all the targets that company actually put forward in our Capital Market Day, we are tracking quite spot on, on each one of the KPIs that we said that we are going to measure ourselves on. So we are very, very happy with where first half of the year is, and I'm going to take you later on, on the -- where we are going to after Sam explain a little bit more details on the financial, how do we see the rest of the year progressing with this. Okay. Sorry, we are continuing to build a strong and sustainable platform for growth. In January last year, we had a Capital Market Day. In the Capital Market Day, we said that we want to build Accsys to become fundamentally strong, operationally efficient, customer-centric and preferred with the United team safe and sustainable company going forward. If we look how do we track on those pillars, fundamentally strong, we are showing much stronger financial performance than what we have in the past. Business is considerably de-risked with now 2 fully operational manufacturing sites that are operating in the 2 largest and most profitable markets in the world. And we are strongly positioned to grow from that position of strength. We also have a refinancing completed. So we have now funds in place to basically fund the growth for the next -- until October of 2029. So that is for the Phase 1 and Phase 2 of our strategy. Operationally efficient, our like-for-like gross margin increased 1.1%. So this is at the same time when we are growing the top line and the bottom line. As I mentioned on the previous slide, EUR 2.3 million of benefits of business transformation are still kept. And we are also finalizing now the investment in our acetyl storage in Arnhem, which is one of the significant CapEx that we did this year. We spent EUR 2.5 million for this project, and Sam is going to walk you a little bit later on to more details around it. Everything what we do, we are doing because of our customers. They are core on every single activity company is performing. We are seeing good significant market share growth of Accoya in every single region. We are adding new distributor partners. In this first half of the year, 3 new distribution partners are added to our customer portfolio. We rebranded Accoya, and we are continuing to be specified for the high-profile projects around the world. At the same time, following a very strong demand for our Accoya Color, we are seeing doubling of capacity in Barry. We invested in operation adding the second shift. So now we can produce double than what we did last year. We are strengthening our talent across the sites. We are investing in revenue-generating headcount and also the headcount that is in the operational sites, our finance teams and key management functions on our locations. And last but not least, we have launched our sustainability strategy just a couple of weeks ago and invested in a new stacker hall safety improvement and environmental improvement in Arnhem. So it was quite a busy and quite a successful first half of the year. So with this, now I'm giving it to Sam to walk us through the financials. Sameet Vohra: Great. Thank you very much, Jelena. So over the next couple of slides, I'm going to go through a lot more detail on the financial performance and talk about a number of the key financial metrics and show how they progressed during the period in terms of waterfall graphs. So really, what we're seeing here is a summary of the financial performance that we saw for the first half of the year. And as Jelena mentioned, it really was a very strong performance and an excellent first half of the year for us. Whilst sales volumes by the group, which excludes the joint venture, were up 1% on a like-for-like basis, when you do exclude the volumes that were transferred to the joint venture in the previous year, the group sales volumes did increase 15%, which is very, very strong, and it shows the strong growth that we've had in all of our key regions that we operate in. Total sales volumes for Accoya, which is a much stronger indicator of global demand for Accoya were up 22% to 38,618 cubic meters, a really, really strong performance. So then when we think about revenue, revenue growth, as Jelena mentioned, like-for-like revenue growth was 23% which is really demonstrating that volume growth plus the focus on strong pricing that we have and aggregated revenue, which includes our share of the joint venture was up 21% to EUR 89.9 million. When you start to think about this joint venture in Kingsport in America, only commenced operations in September 2024, it's done EUR 23 million of revenue just in H1 itself. So with that EUR 23 million and the EUR 76 million, Accsys and the JV's gross revenue is effectively the best part of EUR 100 million first 6 months of the year. When you think -- it was only a few years back in 2021 that the business only used to do EUR 100 million revenue for the whole financial year. It shows how we've successfully scaled up the capacity, produced it, sold it and at the same time, increased our pricing to gain market share, which is a very, very strong performance for the group. Our gross profit margin increased over 110 basis points on a like-for-like basis and remains above our 30% strategic target number, and I'll talk more about that slightly later on. Underlying EBITDA was up 29% and the margin was up 260 basis points, which is a very, very strong performance. And that is excluding the joint venture, so EUR 10.7 million underlying EBITDA for the first half of the year. Really, really strong point for us for this year was the joint venture. So the North American operation only commenced operations, as I mentioned, in September 2024. And we've always said that for the first 12 months of operations, it would be loss-making, because it's a start-up. There's always those initial costs that you incur as the business ramps up. We then said at our Capital Markets Day that we expect this business to be profitable at an EBITDA level for its first full financial year. So for the first half of the year, the business was close to breakeven. The share of the loss of the JV was only EUR 0.3 million loss, which is a very, very remarkable progress that has been made there. And that was really off the back of particularly strong growth in North America with 61%, but also a really good manufacturing environment that's been created with very tight controls over costs and a really strong operational base there. So overall, our -- adjusted EBITDA, which is our main profitability performance measure, was up 160% year-on-year from EUR 4 million to EUR 10.4 million. And when you think in our last full financial year, say, the year ending March 2025, the group, including the joint venture delivered EUR 10.8 million of adjusted EBITDA profit. Well, we nearly achieved that just in H1 of this year, which is very good. The adjusted margin was 11.6%. At our Investor Strategy Day, we said we would like to be at 12% adjusted margin at the end of FY '27, while we're nearly there now some 18 months in advance. And then really from an overall debt position, our net debt stood at EUR 39.8 million, which was a leverage ratio of 2.1x, and that was an improvement from the 2.5x that we saw 6 months before at March 2025. And now I'll go into more detail about revenue, profitability, margin and also our cash flow growth over the first half of the year. So from a revenue perspective, you only mentioned earlier that when you start factoring in the volumes that were transferred to the joint venture in the first half of the previous year, it was just over 3,800 cubic meters. That represented 13% of volume, but it was 14% of revenue. So when we exclude that, then like-for-like revenue growth was up 23% to EUR 76.1 million. And that's really off the back of very strong growth, and Jelena will talk about our regional end markets later in the business review. But the other key thing is around the pricing discipline. We operate a premium product in a niche market, and we don't have to discount to gain market share. So as a result, during the year, we were actually able to increase our average selling price by 1.7%, which is a really, really strong performance in a broader market that is flat. License fee and royalties represents the return that we get from our joint venture. We get an ongoing percentage royalty on every dollar of sale they make and the license fee actually relates to the construction and establishment of the plant. So license fee was effective in 3 phases. One when the JV agreement was signed, one when the plant was completed, and the final license fee payment, which was made in September of this year was really when the plant passed its final performance test. That showed that the plant was operating exactly to the same specifications and tolerances as the Arnhem facility, and that gave rise to that final license fee income. Our return now from the joint venture is effectively a percentage royalty on all of the sales. So overall, very strong growth in revenue. Total aggregated revenue, including the joint venture was GBP 89.9 million, and that was after a translational FX gain of another 1% or so. So aggregated like-for-like revenue was also up 23% as well as like-for-like revenue. So from a gross margin perspective, very strong improvement. On the face of it, it looks like the gross margin, while still being over our strategic target of 30%, looked like it dropped by 20 basis points. But when we factor in the volume that was transferred to North America in the previous year, it was 13% of volume, 14% of revenue, but 18% of gross margin and 23% of EBITDA, primarily because sales to North America command a far higher average sales price than the rest of the world. Then we saw 110 basis points increase in our gross margin through volume growth, favorable sales mix where we were able to increase our proportion of Accoya Color sold in the first half of the year. We added a second shift to the Barry facility in June. It wasn't a CapEx investment. We've added 4 heads to the operation. So the facility operation is now producing over 2 shifts, and that with a combination of external drying of the Color resulted in a more than doubling of capacity from 6,000 to 14,000 cubic meters per year. That took place in June. So we had a couple of months benefits of higher Color production, but we're continuing to see strong Color demand over the year. The license fees and royalties I mentioned earlier. From a production cost perspective, about 62% of our cost base relates to our raw materials, so wood and net acetyls, which is used in the acetylation process. So wood we buy from New Zealand from about 15 sawmills that we work with, and really over H1 -- compared to H1 of the previous year, the wood cost was pretty flat year-on-year. Even though we saw a slight increase in the cost of appearance grade wood, that was more than offset by a reduction in wood chip grade wood, which we effectively use for the Accoya, Tricoya product. From a net acetyls perspective, we actually saw a favorable benefit here in terms of our gross margin. And that was really because of an improvement in the usage of anhydride that we use in the production process. So we can still access the same quantity of wood using a slightly lower amount of anhydride, which leads to a reduction in the unit cost of production, which hence improves your gross margin. We also benefited from a change in our supplier mix, but also given one of our suppliers for anhydride is a U.S.-based company, which invoices us in U.S. dollars, we saw a favorable FX benefit because of the weakness of the dollar against the euro in the first half of the year. So overall, GBP 23.2 million gross margin with a 30.5% gross margin percentage, which remains above our strategic target level. From an overall perspective in terms of looking at profitability, we more than doubled our adjusted profitability from EUR 4 million to EUR 10.4 million, that was a 160% increase year-on-year or a 620 basis points improvement in the margin, a very, very strong performance. That was driven by the gross margin improvement that I mentioned before, but also keeping those operating costs, so SG&A costs below gross profit really under tight control. We only grew our OpEx cost by EUR 0.2 million year-on-year. And as Jelena mentioned, we've retained EUR 2.3 million of the benefit from the business transformation program undertaken in FY '24, that's retained even after we've made additional investments in terms of adding sales and marketing staff, but also upgrading the talent we have in the operations in health and safety and finance and other key functional areas. Any costs to do with the Hull business or Tricoya U.K. have all completely gone. That business was put into liquidation in December 2024. So you've got a EUR 1.6 million swing in profitability H1 on H1 because the Hull is no longer part of our group. And then you can see the big benefit from the performance of the joint venture, which last year was a EUR 4.3 million loss, and now we're pretty close to breakeven. So a big EUR 4 million swing in the profitability of the joint venture over that time period. So what does this mean from an overall segmental perspective? So the first bar here shows the operating assets of the Accsys Group. So it excludes the joint venture and really focuses just on Arnhem and Barry. And that showed a significant improvement in profitability to EUR 12.7 million and an improvement in the margin to 16.7%, which is really, really strong performance. Corporate costs, which really represent the cost of the listing. So it's the corporate functions in head office, the cost of the listing fees, the Board of Directors, anything to do with our listing on AIM and also Euronext reduced by EUR 0.4 million to EUR 2 million in the year. And that was really, again, because of the tight cost control we have, but also there were a couple of one-off costs in the previous year. So the overall -- the middle bar, which is the light green bar shows Accsys Group, and that's excluding the JV. So that shows the underlying profitability of EUR 10.7 million, which is up from EUR 8.3 million in the previous year, but really that big improvement in the margin, which is up 260 basis points to EUR 14.1 million -- 14.1%, sorry. The JV, as I mentioned earlier, was close to breakeven with our share of the loss of EUR 0.3 million, which took our adjusted EBITDA profitability up to EUR 10.4 million or 11.6%. And as I mentioned before, that 11.6% is very close to the 12% target that we set ourselves to be at March 2027. So nearly there, but some 18 months in advance. So net debt overall. This chart shows the progression of net debt. And we ended the year at EUR 39.8 million of net debt with a 2.1x leverage ratio. Our working capital increased during the first half of the year by EUR 4.2 million, but that's really all to do with wood. Our target is to hold 3.5 months of raw wood in stock. This is basically wood that we buy from our sawmills primarily from New Zealand. And we keep 3.5 months in stock because of really that long lead time. We then keep about 1.5 months' worth of stock as finished goods to meet customer demand and to provide availability of SKUs to our end customers. So given the substantial growth that we've seen in H1 with 23% growth and the forecast growth that we're seeing in H2 compared to the previous year, it's necessary for the business to carry higher levels of working capital or to meet that demand. There's also a feature of timing here because the cutoff point is effectively 30th of September, the end of our first half of the year. But effectively on the 1st of October, the Arnhem business undertakes this annual maintenance stop. So the plant closes of 3 weeks while we maintain and clean the plant and eventually make sure that all the parts are in working order and any maintenance CapEx is undertaken. So really ahead of that maintenance stock, you build up inventory levels and then during the month of October, when the plant isn't producing anything, you're selling out of finished goods. So there is a slight feature there in terms of working capital as well. Net interest went up by GBP 2.3 million, of which about half of that relates to our convertible loan notes. CapEx investment in H1 was EUR 2.9 million, and that comes from a couple of projects. So the largest project was a project we internally call Project Elm Tree 2, and this was really about increasing our acetyls storage capacity in the plant in Arnhem. So we can now store about 7 days of acetic acid and anhydride in the plant. Previously, we were reliant on tanker deliveries. So if there's any scheduling issues with tanker deliveries, it could have a knock-on impact on production. And that's been taken away by the introduction of Project Elm Tree 2. The CapEx involved was front half loaded with the project being effectively connected to the rest of the plant during October, and it will then go live later this month. We also made a good investment in terms of improving the health, safety and environmental conditions of our stacker hall in Arnhem to improve soundproofing, light and ventilation, which makes it a much better working environment for our operators who operate in that hall. Tax received was EUR 0.7 million in respect to previous tax years. And hence, the overall net debt was EUR 39.8 million with 2.1x leverage. And really, the final slide for myself is just summarizing that excellent first half of the year where we saw a significant improvement in profitability. We saw total sales volume growth of 22% with sales accelerating in North America, which grew 61%, which is particularly strong. The JV was close to breakeven, and we saw a big improvement in adjusted EBITDA with that margin very close to our Phase 1 target already. We've continued to deleverage the balance sheet was, again, one of our strategic aims with a good improvement in our leverage ratio. And the refinancing that we've just recently completed in October by introducing a new banking partner to our banking group has really strengthened our capital structure and given us significantly more financial flexibility on improved financing terms. So with that, I'm now going to pass over to Jelena, who's going to talk you through the business review. Jelena Arsic Os: Thank you, Sam. Thank you very much. So my business review, I will start first just mentioning some of the fantastic projects that we realized in this first half of financial year '26. You saw a couple of them passing through the slides as we went through it from the NEMO Museum in the heart of Amsterdam, where we have a new terrace on the rooftop that is now being done in Accoya and also benches and tables that are going to be done in the future. We had a library in Barcelona, where beautiful cladding was chose because of the durability and resistance to harsh environment of the sea air in that area. Here, you see a beautiful hospital cladding in New Zealand that is important market for Accoya as well. Let me remind you first about where do we stand on -- with our focused strategy and the targets that we gave ourselves in January 2025. As we said, strategy is going to be delivered across -- along the 3 phases. And in the first phase, that is focusing on resetting operationally, maximizing returns and cash flow from the existing assets and increasing and reinforcing the fundamentals, including reducing the debt and optimizing our capital structure. Our first half year results demonstrate excellent progress against the Phase 1 targets. We are spot on, if you like, on delivering almost each of the KPIs that we gave ourselves as a target. With our sales volume on a run rate of 77,000 for the full year, we are very good on the target -- of making this target of 100,000 that was at the end of our Phase 1. Significantly improved profitability, moved from 5.4% of adjusted EBITDA margin from last year to 11.6% this year, which is very, very close to the adjusted EBITDA margin target of 12% for the first phase of our strategy. Importantly, we are deleveraging and derisking the business, placing company in a much stronger position for growth. Our successful October refinancing is giving us more favorable payment terms with a reduction in quarterly payment -- capital payments going forward. So if you look at where do we stand on the first phase, I would probably say that with the good efforts of the team, we are ticking basically each one of those boxes. Now going what is happening in our markets. We see quite a strong demand across all the geographies. U.K. and Ireland demonstrated growth of almost 14%, rest of the Europe, 22%; rest of the world, 28%, and fantastic 61% in North America. At the same time, we are keeping our pricing on the pair. So group average sales price was maintained with a 1.7% average increase across of our region. So that means that despite the premium or in addition to the premium parsing, Accoya is gaining market share globally. If you know that underlying market are almost stagnant or growing 1% or 2% in some of the countries. At the same time, we are doubling Accoya Color production capacity and our decking collection is underway to be launched in the second half of this financial year. The confidence of our distributors and our customers in availability of supply of Accoya and also fantastic performance credential are helping us to deliver this growth. We -- as we also said, we are particularly proud on the excellent performance in the JV, 61% growth in the U.S. for the first half of the year, 8,000 cubic meters of Accoya was sold. And as you know, and Sam went into the details of it. So Accoya USA is almost on a breakeven on their EBITDA. We promised to the market that the joint venture is going to be -- show breakeven EBITDA in this financial year and then cash positive in the next financial year. So we are actually on that path, delivering very, very good performance for the reporting period. There was one of the negative impacts or negative potential news in the reporting period, and that were the import tariffs on the softwood coming from New Zealand or any country importing in the U.S., we were able to react and increase our average sales price as from 1st of November. Tariffs were announced in the first weeks of October. So we are passing this without too much troubles to the market. I think everybody in the U.S. is adjusting now and adjusted now to overall inflation and everything. So we are confident that we will be able to manage this impact quite successfully going forward. If -- here, we are going a little bit in depth on what is happening in this U.S. market. Our sales in the U.S. are outpacing overall market growth, allowing us to gain share from competitors. With forecast indicating strong and sustained demand for modified wood overall -- over alternative materials, we are confident that Accoya USA will continue to expand its presence in the growing -- in this growing market. Our main drivers in -- our main application in the U.S. are cladding and decking. And those -- both of these segments are showing very strong growth rates for modified wood. As you can see it from the table, they are showing double-digit growth forecast for the decking. Traditional timbers like hardwoods are seeing sharp declines in demand in a customer who are opting now for the higher-performing modified and engineering solutions. And furthermore, the increased regulation on the import of hardwoods like ipê and cumaru from Brazil had quite a good and positive benefit for Accoya in the U.S. as supply was quite limited for those species. And as you can see from the table, we are expecting them to further contract going forward. Our growth in the U.S. is coming predominantly from our existing distributors, our long-lasting partners who are with Accoya from its start, also investing together with us for many years. But we are also adding some new distributors like hardwood specialty products or GMX Group that is focusing more on a decking and more retail side of the business. And we also add a new -- our first distributor in Mexico, who is having also a milling capacity. So they are capable of not only distributing us on Accoya, but also making more finished product out of it. In Arnhem and Barry, we continue driving operational efficiencies to maximize our returns on our assets. As I said, the underlying gross margin showed an increase of 1.1%. We will continue to work on those efficiencies to drive this margin even higher going forward. And you can also imagine that as we approach the nameplate capacity as we grow our volume, most of that profitability, given that we do not have really a lot of people in our operations, most of that benefit is going to go to the bottom line. We have invested in Arnhem in a new Elm Tree, I think Sam already mentioned a very important capital investment, which is going to give us additional batches, so additional capacity of a couple of thousand in the year and also allow us to be more flexible with the shipments and receiving of our chemical finished goods or raw materials during the week and not doing it in the weekend. In Barry, we see fantastic 56% year-on-year growth for the Accoya Color sales volumes. We invested in a second shift, and we will continue to build the market and also the supply of this very nice product Accsys is having today. Last but not least, we have launched our sustainability strategy where the first time in the company history, we are actually committing to the decarbonization target. Sustainability is in the core of everything what Accsys does. So we are very happy that we are finally at the stage to make the commitments to the market and keep tracking on the progress as we go forward. This will bring me -- this is the last slide that we are talking about existing business, and this is now bringing me to the outlook, and I would like to summarize today's messaging. We have delivered very strong H1, and we are entering the second half of the year from the position of strength. Our trading is remaining robust going into H2, and it is supported by the sustained global demand for our premium differentiated products. We expect to see this continuation of sales acceleration in North America and also noticing the impact of recently announced tariffs, we expect joint venture to be EBITDA positive for the financial year. While we also have to be mindful that the underlying market conditions are relatively soft in the building and building material industry. So there are continuing macroeconomic challenges. The Board is really confident that company will continue to deliver further growth and profitability improvement for the year ahead, which is consistent with the expectations, and we will continue to make further progress towards our strategic targets. With this, I would like just to remind you why Accsys is showing a compelling investment case and sustainable growth opportunity. Company has very unique product that is really backed up with a significant patent portfolio. And we see ourselves as an industry disruptor and generally innovative product that is operating in a growing and sizable addressable market that are underpinned by a very, very strong brand. We have established manufacturing footprint. Even though this technology is known for more than 100 years, nobody in the industry was having a commercial site and available commercialized manufacturing location and be able to actually provide to the customers acetylated wood and knowing that building a plant cost EUR 250 million, then it also creates a sustainable and high barrier to entry for any newcomers. We are improving, and we are showing quite a strong financial performance. And now with the funds in place with the refinancing that we did in October, we do have enough funds to deliver on our focused strategy that we showed in the first half of this calendar year. So we do believe that the company is at an inflection point to deliver significant shareholder value. I don't believe that the markets are recognizing fully with the share price. All of this great work that teams are putting in and this significant improvement in all the results, but nevertheless, if you look where we were in January with the Capital Market Day where the share price was and where is it today, it is almost 60% higher, so significantly higher, and we will continue to work very hard and to -- as we improve and further strengthen the company, this recognition will come, I'm absolutely sure. So with this, I'm going to finalize this presentation, and we are going to open the stage for the Q&A. Operator: Perfect, Jelena, if I may just jump back in there. Thank you very much indeed for your presentation this afternoon. [Operator Instructions] I just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can all be accessed via your investor dashboards. Guys, as you can see that, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. But guys, at this point, if I may just hand back to you to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Thank you. Jelena Arsic Os: Thank you, Jake. So I will start with the first question from Michael H. Can I ask what you are doing for the share price as you have been CEO now for 2 years, and the share price hasn't given shareholders any returns at all. Why is that? Michael, thank you. This is a very good question. And as I just mentioned at the end of my presentation, I do not believe that share price is giving the justice on all the excellent work and excellent progress that is being done in the last couple of years. Of course, the moment when I joined the company, company was on the -- with some difficult decisions needed to be made. We had 2 unfinished big capital projects, one in the U.S., one in Hull at a time with a company of our size, having 2 large capital projects unfinished means significant risk on the company results. And I do believe that, that's why share price reacted at that time as it was. We have done a lot of improvements. Today, we have -- at that time, we had 1 site. Today, we have 2 acetylation plants and 1 coloring plant, a much, much stronger financial performance, completely derisked with this exposure to the unfinished projects. We have a strategy in place that is really proving that it is working. And again, as I said, as from the Capital Market Day that we had in January this year, our share price increased almost 60%. We are going to -- we are very much committed to continue delivering on this road map. And I'm absolutely sure that with the team that we have in place, with the talent that we have in place, that we are continuing investing, we are going to continue showing progress and as a company, continue to show the progress, share price will come. Sameet Vohra: Great. Next question. Can I ask why you changed brokers from Numis to Liberum? Yes. So, good question. And it was in April this year, we did move from Deutsche Numis to Panmure Liberum. But really, why do we do that? And Deutsche Numis are very, very good, but we felt it was time for a fresh pair of eyes from both a broking and a NOMAD perspective. And it's always good to refresh your advisers periodically to bring fresh ideas and fresh initiatives as well. And really linked to Jelena's last point about driving that share price higher, it's about introducing us to new investors, people who are excited about the strategy just as we are. And really, we felt that by changing brokers that we could get those introductions to potentially new shareholders who could help drive that share price higher. Jelena Arsic Os: We have a question from Nigel. Given that Phase 1 of the focus strategy targets improved utilization of existing assets, what is your current planned utilization rate? And how much further headroom remains before requiring new capital investment? We are today at around 70% of utilization rate. We will not need any new investment at least through the first 2 phases of our strategy. So no expansions at least in the next couple of years. Sameet Vohra: Great. Next question. As utilization of your existing capacity increases, do you see opportunities through efficiency gains, product mix improvements or pricing to move gross margins above the 30% target? What indicators should investors watch to assess this? So I think really, we have said we want to maintain a gross margin of 30%, but we want to improve that each year. And it is through a combination of all of those above things. So it is operational efficiency. How do we get more through -- coming through the plants, looking at cycle times, looking at our costs. I mean just over 60% of our costs are wood or net acetyls. So through procurement activities, looking at overall efficiency about how the plant operates, how we engage with our suppliers and partners and also pricing, which remains a firm part of what we do. But you can't just rely on pricing to drive your -- to drive revenue forward and drive the gross margin forward. It has to be accompanied with operational efficiency. So what indicators should investors look for? Well, I think every 6 months as we're reporting, you're seeing volume growth and revenue growth. And you can see that in terms of how that is benefiting gross margin. So next question, which is probably one for me. What are the terms of the new bank loan? So yes, so we undertook a refinancing of our banking activities that concluded in October of this year. So just in the second half of the year. And really, it was important for us to diversify our banking partner base. So I mean, ABN AMRO have been very, very supportive to the business for a number of years and continue to do so. But we wanted to introduce a further bank. So as we get to the end of Phase 2 of our strategy, as we start looking at expansionary growth for Phase 3, you don't want to just put all your eggs in one basket and be reliant on one banking partner to effectively provide the debt funding to do that. Having a second bank gives you greater optionality and ability to fund growth through debt, and we couldn't be more delighted than getting a partner of the strength and caliber of HSBC. So I mean the key terms, I mean, I'm not going to go into terms of the commercial terms, but it is at least 1 percentage point better on pricing and the pricing is now linked in terms of the margin pricing to our level of leverage. And also, we get to keep more of our cash in the business. So the capital repayments on the loan are significantly improved on the -- compared to the previous facility. So you could think that overall, the business will be approximately after FY '26, EUR 2 million a year better in cash terms than under the previous facility. Jelena Arsic Os: We have a question from Michael. Is it worth it having 2 share price quotes on Euronext and AIM? It's an excellent question, Michael. And it was worth it having 2 share price quotes because if you know the -- all of our investors, 60% of our investors are family office from the Netherlands listed on Euronext, and then 40% of the investors is listed on AIM. At the time when company needed the funds for the big capital expenditure, all of those listings were quite logical. It is a little -- it is complicated for us as a company of our size to be listed on 2 markets. But at this moment in time, we are really focusing more to deliver operationally and listing is not in our priority in this moment of time. Then we have a next question from Johan. Johan, AU backed research presented through the life Tricoya results indicates promising long-term potential for Tricoya. What role do you see Tricoya playing in Accsys future? Thank you, Johan. This is an excellent question. Tricoya -- company still has patents and technology as important assets for us. At this moment in time, we are focusing on getting returns from our existing assets of Accoya and focusing on Accoya as a product range. But nevertheless, I could imagine that in 1 or 2 years, as we are -- if -- when Accoya USA is fully cash positive when the growth is there, when the factories are full, that we are going to very, very actively look at Tricoya again. Sameet Vohra: Next question from David S. What financial measures do you utilize to approve CapEx? What are the hurdle rates? How do the current CapEx projects compared to those hurdles? So the key thing is, you know, we have a very disciplined governance approach to evaluating CapEx. We look at a number of metrics, NPV, cash payback, IRR. And the key thing is the CapEx for expansionary growth projects has to be in excess of our overall cost of capital from an NPV and an IRR perspective. But there are effectively 3 categories of CapEx we look at. One is expansionary growth where we can then effectively apply that hurdle rate evaluation and the projects like Elm Tree 2 absolutely beat that hurdle significantly. But then we have 2 other types. One is regulatory, where we just have to do it because there are compliance -- legislative compliance reasons why we have to do it. And the other is health and safety. So I mentioned before the improvements we made to the stack in Arnhem. Well, that is to improve the working conditions for our staff in there in terms of lighting, ventilation, sound proofing. You don't apply hurdle rates to CapEx like that. It's really important from a health and safety perspective as to why we do that. Jelena Arsic Os: And since this is our last question, I would like to -- just to summarize the presentation for today. So looking ahead, we remain confident in the long-term potential of our technology and our strategy. We have a clear road map. We have a market-leading product in attractive growth markets and a fully funded manufacturing base that position us to deliver significant shareholder value. I continue -- we continue to be very excited by the prospects of our business. We are transforming, we are delivering and we are growing. Thank you very much for your attention and interest in Accsys. Sameet Vohra: Thank you. Operator: Perfect, Jelena, Sam, if I may just jump back in there. Thank you very much indeed for updating investors this afternoon. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of Accsys Technologies plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon.
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