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Nathan Coe: Good morning, everyone, and welcome to Auto Trader's results for the 6 months ending 30th of September 2025. I'm joined by our COO, Catherine; and our CFO, Jamie, who will both be presenting and joining me for Q&A. You will have seen the announcement regarding Catherine moving on to become CEO at Moonpig. We are very pleased with Catherine and wish her the best as she embarks on the next chapter of her career. Catherine has been a pleasure to work with and has had a real impact at Auto Trader. She will be missed, but she leaves behind a strong team with bench strength that is both broad and deep. So we have a little worry that we will carry on uninterrupted. Our disproportionate focus on internal development over external hiring serves us well at times like this. Catherine is still with us for some time, and we will announce her leaving day in due course once we have worked through a smooth transition plan. Now on to the results. Overall, we are pleased with the progress that we've made through the period. Our profit was marginally ahead of expectations, and we have made significant progress against our strategic priorities. As expected, we have been impacted by the fast speed of sale of vehicles, but the team has delivered well on those areas that are within our control. I'm confident that the actions we are taking today will underpin growth for many years to come. Our market position remains strong with record levels of buyers and retailers using Auto Trader. As we saw last year, there has been a further increase in the number of unique vehicles advertised on our platform and high levels of engagement with those vehicles. This underpins our core proposition for buyers as we provide full choice and transparency and clearly, retailers have benefited from more vehicles moving through a similar number of advertising slots. Our annual product and pricing event in April this year went well, underpinned by the first features under our Co-Driver AI umbrella. There is significant future potential in this area as we make more AI-powered solutions available and accessible to both retailers and car buyers. We are uniquely placed to do this due to our strong brand, deep integrations with the industry, and our real time proprietary data. The first features of Co-Driver have seen strong engagement with over 10,000 retailers already using the tools. It's important to note that AI doesn't just enable us to increase the richness of the car buying experience on Auto Trader, but it does extend the opportunity across all our retailer product areas which includes advertising, data, digital retailing and now Co-Driver. We've also dramatically accelerated the adoption of Deal Builder, growing customers, stock and deals since our change in approach earlier in the year. Deal Builder will no longer be an optional add-on product available on a selection of cars, it will be the default experience for retailers and car buyers on Auto Trader. Catherine will cover this in more detail later. With a car market that will grow over the long term, our strong market position, we're comfortable that we can continue to grow through delivering meaningful improvements to the buying and retailing of cars in the U.K. Auto Trader has never been short of growth opportunities, which remains as true today as it has ever been. I wanted to thank everyone at Auto Trader and our customers, shareholders and wider stakeholders for their continued trust and support. We'll start with some of the highlights during the period. Group revenue grew 5%, operating profit grew 6% and basic EPS grew double digit at 11%. Our largest revenue area, retailer revenue, grew at 6%. This is made up of strong forecourt numbers and a 5% increase in ARPR, mostly driven by the price and product event in April 2025. AI has been a big focus for many investors recently, given its potential to significantly alter consumers' online behaviors. I'll speak to this in more detail later. However, we are confident that on any platform, we are well placed to provide the best car buying experience for users. The transaction is high value, complex and occurs over a 3-month period, not one session. The reasons car buyers choose Auto Trader come from our singular focus on the U.K., our category-defining brand, well-invested technology and the rich tools we provide both car buyers and retailers, which are all made possible by retail -- by real-time data, pardon me, at a vehicle level that only we have access to. These unique characteristics are why our market position has been not only maintained but strengthened when new platforms have emerged such as Google, iOS and Android. Now to Deal Builder. I am very proud and pleased with the progress that we've made since we changed our approach midway through the year on Deal Builder. Adoption has dramatically accelerated as we make this journey the default experience on Auto Trader. We've added 4x as many retailers this half than we did in the previous 6 months. We know from years of development and live testing that Deal Builder deepens our engagement in car buying and selling. It delivers better conversion for retailers and a more connected and empowered journey for time-poor car buyers who want to do more online when it suits them with a brand they trust. At our full year results in May, we presented this slide for the first time to better show how market dynamics not previously seen before had impacted our financial results. We have 4 charts here, which I don't intend on going through in great detail, but it is a picture of a more stable market. The key points to note are, last year, demand or visits were strong. Supply was constrained, used car prices had come down, which all resulted in an acceleration in speed of sale. This meant more unique vehicles sold through roughly the same number of slots, which doesn't benefit our business model. This year, however, demand does remain healthy. Supply is gradually coming back and used car prices have been robust, even increasing from the levels seen last year. As a result, speed of sale has not accelerated as it did last year. So the headwinds we were facing have subsided somewhat. However, we would caution too much optimism in the near term as speed of sale was still one day quicker in October. I'll briefly cover the financial results, which Jamie will cover in more detail next. Group revenue increased by 5%, with core Auto Trader revenue also increasing by 5%. Group operating profit increased by 6%. Auto Trader operating profit increased by 5% to GBP 208 million. And Autorama halved its operating losses to GBP 1.4 million. Noncash acquisition-related costs was GBP 6.5 million. Group operating profit margin increased to 63% and Auto Trader's operating profit margin remained at 70%. Basic EPS, as mentioned earlier, grew double digit at 11% and cash generated from operations was up 7%. We returned GBP 162.2 million of cash to shareholders through GBP 100.2 million in share buybacks and GBP 62 million in dividends. Finally, we are declaring an interim dividend of 3.8p per share. Now on to our operational results. The average number of cross-platform visits was up 1% to 83.3 million per month, and we continue to account for over 75% of all time spent across our main competitor set. The average number of retailer forecourts advertising with us was up 1% to 14,080. Average revenue per retailer was up 5% to GBP 2,994, mainly due to our product and pricing event implemented on the 1st of April 2025, which was underpinned by Co-Driver. Live car stock was up 2% to GBP 457,000, with this increase being due to an offer, which ran at the beginning of the 6-month period, and we delivered 3,687 new lease vehicles. Finally, the average number of full-time equivalent employees in the group decreased slightly to 1,249. In previous years, we would have covered our cultural KPIs in half year results. However, we've decided to do this now at each full year results. The KPIs and initiatives that sit behind them remain as important as they've always been. However, covering them annually better aligns with our annual employee survey. The KPIs on gender, ethnicity and GHG emissions are all included in the press release and the appendix of this presentation. As it relates to culture, it is worth noting that we have entered a new lease and are halfway through investing significant capital in a new home campus for Auto Trader, which will provide a great environment for our people to do their very best work in a space that facilitates both how we work and the other elements of our culture. I'll now hand over to Jamie to talk us through the financials in more detail. Jamie Warner: Thanks, Nathan, and good morning, everyone. I'll start by focusing on the core Auto Trader financials. Starting with revenue. Total Auto Trader revenue increased 5% to GBP 296.3 million. Trade revenue increased by 6%, with the largest component of this being retailer revenue, which also grew by 6%. Also within trade revenue, we've seen an increase in both Home Trader and other trade revenue. Consumer Services revenue decreased by 9%. Within this, private revenue generated from individual sellers was down year-on-year due to a lower number of listings compared to a strong prior year, and Motoring Services revenue was flat. Revenue from Manufacturer and Agency customers increased 13% year-on-year due to manufacturers supporting their franchise networks on both new and used car advertising. As mentioned, Retailer revenue increased 6% year-on-year. The average number of Retailer forecourts on our platform increased to 14,080, a 1% year-on-year increase and average revenue per retailer increased by 5% to GBP 2,994 per month, with more detail given on the following slide. Here, the chart on the left shows the components that contribute to the movement in ARPR compared to the prior year. As you can see, ARPR growth was driven by the price and product levers with a small headwind from stock. We delivered our annual pricing event for all customers on the 1st of April 2025, which included additional products and a like-for-like price increase, which contributed GBP 89 to ARPR growth. Product contributed GBP 64. Most of this growth was from our Co-Driver product, which is included in retailer advertising packages in April 2025. Prominence, which includes upsell to our higher-level packages, was not a contributor to the product lever in the first half. We continue to review our package staircase and have recently created an offer to incentivize customers on to higher levels, which has had good levels of uptake. This offer converts throughout the second half and will inform how we evolve these packages in H1 of next financial year with the aim of returning prominence to long-term growth. Turning now to stock. You'll see on the right-hand side of the chart that the number of live cars advertised on Auto Trader increased 2% year-on-year. Used car stock also increased by 2%, although much of this was driven by a stock offer, which we ran at the beginning of the financial year. Excluding this stock offer and private listings, which do not impact ARPR, the live stock increase was just under 1%. The stock lever was marginally lower due to a slight reduction in underutilized slots, which typically occurs when we run this type of offer. Total Auto Trader costs increased 3% to GBP 90.4 million. Salary costs increased by 6% to GBP 42 million due to higher average salaries and a small increase in the number of Auto Trader FTEs. Share-based payments increased by 1% to GBP 6.9 million. Marketing spend decreased by 21% to GBP 8.9 million due to the timing of campaigns, and we expect a greater level of marketing in the second half of the year. Other costs, which include data services, property-related costs and other overheads, increased 6% to GBP 22.9 million, primarily due to property costs for our new head office and other IT-related expenses. Depreciation and amortization increased by 31%, again, related to the cost of our new head office. As a reminder, we fully expense our technology, research and development costs, hence, our low levels of CapEx and depreciation. In addition to our investment in cloud-based and AI services, we have around 400 people in product and technology who are continuously improving our platforms and developing new products for consumers and retailers. Operating profit increased by 5% to GBP 208 million during the period, and operating profit margins remained consistent at 70%. Our share of profit generated by Dealer Auction, the group's joint venture, increased 17% to GBP 2.1 million. Having covered Auto Trader, the main part of the group, we'll briefly cover Autorama results. As a reminder, the Autorama acquisition is part of our strategy to bring attractive new car offers to car buyers on Auto Trader and to make new cars a more important part of our proposition. Autorama revenue was GBP 21.4 million, with vehicle and accessory sales contributing GBP 16.5 million and commission and ancillary revenue contributing GBP 4.9 million. Vehicle and accessory revenue relates to vehicles that flow through our balance sheet, which is not our focus for future growth. Total deliveries grew 16% to 3,687 units. As can be seen from the chart, this growth was driven by cars and importantly, more of that growth was driven by the Auto Trader platform, which saw a 6x increase in delivery volumes. Average commission and ancillary revenue per delivery decreased to GBP 1,329, reflecting the changing vehicle mix during the period. We delivered around 750 vehicles, which were temporarily taken on balance sheet, the cost of which was taken through cost of goods sold. This was a year-on-year increase driven by just over 300 extra vans, which were taken to support van volumes as they were slightly lower in the first half. Excluding the cost of goods sold, cost of GBP 6.2 million represented a 25% year-on-year reduction with all lines seeing a decrease. The Autorama segment made an operating loss of GBP 1.4 million, which is a significant reduction on last year as a result of the accelerated integration into the main Auto Trader business and platform. With group revenue up 5% and a reduced Autorama loss, we saw group operating profit increased 6% to GBP 200.1 million and group operating profit margins increased to 63%. As we grow, the strong cash generation of our business leaves us well placed to return surplus cash to shareholders. Cash generated from operations was at GBP 215.4 million. Now to briefly review net bank debt and capital policy. During the period, the group drew down GBP 15 million of its revolving credit facility and held cash and cash equivalents of GBP 20.2 million. Cash generated from operations was largely used to pay tax or return to shareholders through a combination of dividends and share buybacks. The group's long-term capital allocation policy remains unchanged, continuing to invest in the business, enabling it to grow, while returning around 1/3 of net income to shareholders in the form of dividends. Following these activities, any surplus cash will be used to continue our share buyback program and to steadily reduce gross indebtedness. That concludes the financials. I'll now hand over to Catherine to talk through progress against our strategic priorities. Catherine Faiers: Thank you, Jamie, and good morning, everyone. We have made good progress against each of our 3 strategic focus areas. These areas are closely interconnected. Our platform and our digital retailing capabilities build on the strength of our marketplace and deepen our relationships with both retailers and car buyers. Our marketplace continues to grow, and we have seen a record number of car buyers and retailers using Auto Trader. This means we are also building our unique data advantages through the growth in observations and actions that we capture. Whether it is consumer behavior and interactions or retailer actions and pricing movements, we continue to extend our data lead in this area. We have successfully executed our annual pricing and product event, which included the Co-Driver product, a set of AI-enabled features designed to drive retailer performance and efficiencies in the advertising journey. This product has seen strong engagement from retailers and the features that surface on the Auto Trader app and website have been well used by buyers. We continue to scale Deal Builder, enabling consumers to do more of the car buying journey online. At the same time, we are launching the Buying Signals product for retailers, which will provide a greater level of actionable insight to drive their performance. This year, we launched Co-Driver, a suite of transformational AI tools that utilize our unparalleled vehicle data and consumer insights to significantly improve the consumer and retailer experience. Our first Co-Driver suite is available to all retailers and includes Smart Image Management, AI-generated descriptions and vehicle highlights. As of September, over 100 retailers have used Co-Drivers to create 1 million high-performing used car and van adverts to optimize over 12 million vehicle images, and we've seen over 85 million buyer interactions with the vehicles highlights on Auto Trader. Whilst Auto Trader has been working with and delivering AI products for over 10 years, Co-Driver is the first retailer product, which has leveraged generative AI. As detailed in our FY 2025 full year results at the end of May, we decided to make Deal Builder part of our core proposition to retailers and the consumer experience for car buyers. This will enable us to increase the speed of retailer onboarding, accelerate the level of buyer adoption, materially increase the number of deals being delivered through Auto Trader and strengthen the competitive moat for our core business. As can be seen on the right-hand side chart, this decision has enabled us to scale the product faster from June onwards than in previous periods. Retailer acquisition during the period was 4x greater than the preceding 6 months, resulting in 4,000 retailers live with the product at the end of September. We also saw a significant increase in the volume of listings with Deal Builder, ending September with 128,000 adverts live. This was over 160,000 live adverts at the end of October, a 25% increase in the month. Consumer engagement has also grown considerably with 52,000 deals in the period compared to 23,000 in the previous year. The feedback on the product continues to be positive from both retailers and car buyers with deals converting twice as effectively as a regular Auto Trader lead and over half of all deals being submitted outside of traditional working hours. We are also launching a new product called Buying Signals, which leverages our unique consumer data to surface both high-intent buyers and their preferences to our retailers. Across multiple inquiry types, we have used an AI-powered buyer propensity model to apply a flag for the retailer, indicating how likely the buyer is to buy the vehicle, how local the buyer is and the type of vehicles that they are interested in. This will enable retailers to prioritize the next best action with different car buyers. The goal of this product is to drive improved conversion for retailers and to close the gap between the journey on Auto Trader and the consumer experience that the retailer forecourt, complementing the Deal Builder journey. Over time, these buy propensity models will also inform our own marketing, remarketing and optimization activities for our products and experiences. I'll now hand back to Nathan to discuss the broader AI trends we are seeing and our outlook for the remainder of the year. Nathan Coe: Thank you, Catherine. The popularity of LLMs, chat-style interfaces and agents is at the forefront of investors' minds as it relates to most businesses, and that includes marketplaces. For years now, we have used AI technology in our in-house products and platform, which informs our perspectives on this technology shift. Before we talk about Auto Trader, it is worth saying that we believe top-of-funnel research and discovery for all products, including cars, will be disrupted by these new interfaces. AI platforms reduce the need to visit multiple websites and summarize what is essentially static content very effectively. Top-of-funnel content has never been a big focus for us. And when we have experimented with it, the direct benefit to our core was unclear. For this reason, it is not a risk that concerns us as we wholly focus on the point where people want to browse and purchase real available inventory. In terms of Auto Trader then, we have 4 observations to make. Firstly, the opportunity to use AI to enhance the car buying experience and the tools we provide retailers on Auto Trader is clear and something that we have been doing for a long time now. The recent developments in AI technology, particularly LLMs, provides even greater runway for this across our advertising, data, digital retailing and Co-Driver product streams as well as our consumer experience. Secondly, brands really matter. Car buying is an incredibly complex, high-value purchase. It is almost never online only, typically involves multiple transactions, is regulated and usually takes place over 3 months, during which the selection of vehicles changes constantly. To navigate this, people use Auto Trader. Over 75% of marketplace activity happens on our site and most people come directly to us. 49% from apps, 29% from our URL or searches for Auto Trader, 18% from organic search with only 4% being paid for web traffic. This brand position doesn't just come from a trademark, it comes from the deep and rich experience we provide car buyers. It's not just about a wide selection of vehicles, it's about making sure that selection is real, available, described to a high quality, easy to navigate, comparable and not fraudulent. But this is just the listings. People need a lot more than just listings. They need a lot of high-quality real images, comprehensive and accurate descriptions, price flags, dealer ratings, valuations, checks on the vehicle, part exchange quotes, finance and so on. This is why people seek out Auto Trader, and we believe these tools will continue to be important to a car buying transaction moving forward. Thirdly, as these platforms grow, we will ensure new and existing users of Auto Trader can reach us there. We've taken this high-level approach in similar situations in the past, and it has served us well, whether it was the rise of Google when fears of disintermediation were raised, iOS or Android. In all these cases, our market position strengthened and our audience grew. This is because these platforms grow by providing the best experience to their users. For the reasons mentioned earlier, when it comes to cars in the U.K., that is what we do. There will be a myriad of technical, commercial and strategic decisions along the way, including the depth of experience and protection of our data, but these are not new decisions to us. Finally, we are confident that our deep real-time vehicle data and rich tools for car buyers and retailers will remain essential to what is a large and complex transaction. The vast majority of that data is not available on the public Internet. Agents may, over time, provide users with automated or semi-automated assistance for carrying out varying tasks on the Internet, but they too will require sources of high-quality real-time data, where they'll face similar constraints to search engines. In fact, most of these interfaces for that sort of data use the search engines we know today. For that reason, we expect that AI agents, like other client technologies, will either remain top of funnel and generalized or they'll look to provide direct integrations using standard web technologies customized for their environments. Interestingly, this is exactly what ChatGPT recently announced with their Apps SDK, and we expect others will be soon to follow. These integrations allow greater control over the experience and data that we provide such that it can bring the best of what LLMs do together with what we do best, providing another way for users to find and engage with Auto Trader. Again, there will be many decisions to make along the way, but we feel very well placed to make those. Finally, we know the landscape will evolve, and you can have confidence that we will stay abreast of these changes. We'll continue to be fully engaged in the technology and we'll maintain the ability to move both strategically and quickly when required. Now on to the outlook or not. Right, on the outlook, there is actually not a great deal to say as those of you who have read the announcement are aware, other than that the first half has pretty much played out as we expected. So our outlook for the remainder of the financial year 2026 remains the same as it was at our full year results. All that for that short sentence. Right. We'll now move to the Q&A, which Jamie will manage, and we'll take questions from analysts in the room. Jamie Warner: Yes. So we'll wait the mic and start down the front and then work our way back as usual. William Packer: It's Will Packer from BNP Paribas. Three questions, please. Firstly, thank you for the very useful comments on AI and how you're positioning yourselves. Could you help us think through investment requirements in the next 12 to 24 months. Should we interpret your comments as you're well invested and you -- the kind of formula we've seen in recent times of flattish margins or slight expansion depending on the top line is the right formula? That's question one. Secondly, could you help us think through the dynamics around the integration risks and opportunities with ChatGPT? Am I right in thinking that you have a choice in that you do have a significant inventory lead versus your nearest competitor. Some of the classifieds don't, so you'd think the hand is more forced, you can choose. And in the event that you do decide to integrate, how should we think about the split of economics versus the current status quo? My take would be you're not paying very much to Google compared to some other segments. So is there a risk that the economics deteriorate in that environment? And then finally, you've got a prominence offer. That's something which is -- we haven't heard too much about in the past. Could you think us through -- could you help us think through what that means for the upside on prominence and how that will flow through in due course? Jamie Warner: I can take the first one. So as both Nathan and Catherine mentioned, we've been investing in much of this technology for a long period of time, previous product iterations and most recently, Co-Driver. So I think there's still much work that we can do from both retailer products, consumer experiences, tools internally to help us find greater levels of efficiency and productivity. But you're absolutely right, I think we feel like because these investments have been happening for a long period of time, there's no -- certainly in that 18- to 24-month window you mentioned, no change from a guidance on margin perspective, consistent margins in the Auto Trader segment. I still think we believe at a group level with Autorama, profitability or losses improving and hopefully into profitability, the group margins can actually continue to expand. Nathan Coe: And on the second question around the integration risks and opportunities, I think that there's probably a few things that I'd say. As I said, we think that they'll go for reasonably structured integrations. The idea we've heard and seen some notes about talk of them scraping the Internet to get real-time data. We just don't think that's going to happen. I mean that technology is very, very old and nonperforming. And indeed, ChatGPT's SDK suggests that they're going to go for something more structured. What comes with that structure is a pretty great deal of control and transparency about how your data is used, what depth of experience that you provide. So you're able to manage the risks and opportunities as it turned out when we've been with Google, we've made decisions to open up our site to a certain level, but not necessarily fully. There will be those sorts of decisions. When it comes to iOS, we open up everything, but it is within a native app. So when I talked about the strategic commercial tactical decisions, they tend to sound very, very technical, but they are quite important. The SDK has not launched in Europe yet. So we haven't had a detailed look at exactly what that looks like, but we would go for something more structured, and we suspect they would as well because those platforms, and I think this is where the opportunity is, and it relates to your economics point is Google only became really, really successful because it provided and prioritized the most relevant results for users. That's going to be the true for any interface. So we think we can do that for car buying. And we think for that reason, they'll want to work with us. If they were to compromise something like that for the sake of some form of rent that they collect, that would seem to be a bit inconsistent with the pattern that has played out with these platforms. But does that mean around an app that we do, there might not be -- might be paid positions or there will clearly need to be some economics. Yes, we would expect that to be the case. But again, that is no different to Google. And by and large, most people come directly to Auto Trader. I think that is also the point that we're not getting much of our traffic at all about what, 18% plus 4% paid. So around 20% of our traffic is coming through those more generalized search engines. Most people wanting to buy a car kind of know where they need to do that. And I suspect that will still be true in the future. What we hope though is as more and more users start to use these interfaces, actually the use case for Auto Trader can appeal to people that perhaps might not have otherwise found us, that might have found the search by make and model a little bit intimidating and ChatGPT and those other kind of tools can hand off into a structured search like us, which feels like an opportunity that we don't necessarily have today. Of course, we can do it on our own site, but that is only for people that are coming to Auto Trader. Catherine Faiers: Dominance and offer. So I think we talked at the full year results about how we were doing a lot of work and imagining that in the next year or so, we would look to evolve the packaged staircase. Again, typically, we've done that every 3 to 4 years. And we're coming to a time again where we think that is the right thing to do. So you're right, we are in market with a bigger and more attractive prominence offer than we would typically have run in the past. It's had good uptake from retailers. And over the coming months, we'll be in the process of converting those retailers through to fully paid. One of the reasons for making the offer a bit bigger and more attractive is really to learn and to test the value response uplift that we're seeing and the different levels of retailer adoption, all with the view that it will inform the structure and the makeup of the packages that we look to try and then roll retailers into at some point during next financial year. Gareth Davies: Gareth Davies from Deutsche Numis. Two from me. The first with a couple of parts on Deal Builder. 2,000 onboards since, I think Catherine emphasized, June. But just kind of understanding how that's built up, should we assume it was kind of pretty straight line through that period? Or were there any sort of stumbling blocks initially that you've got through? And has that ramped into August, September? And then I think you said 25% increase in adverts in October. I mean, can we be as simple as thinking that means we're up to 5,000 by the end of October? Or is that being too simplistic? And how are you feeling sort of overall in terms of getting everyone you need on Deal Builder by the sort of March, April time line you need? So that's question one. And then the second one, you confirmed guidance for the year just in terms of the minutia. Can you talk a little bit on stock and a little bit on dealer forecourts because I think stock feels that it's sort of stubbornly at 28, 29 days. How are you feeling on that at the moment? And then dealer forecourts feels like it's running a bit stronger than I certainly expected. Catherine Faiers: Yes, sure. So on Deal Builder, we have been talking on webinars and in the trade press about being around 6,000 retailers now and about 160,000 or so live adverts. So those numbers are -- they're out there. You talked about whether the growth has been linear or not, I think we've talked before about looking, particularly for the independent retailers that work through our portal system, we've been onboarding them in waves. So it's definitely not been a linear line from June through to October. There's been waves of retailers. We've defined cohort segments that have similar attributes or similar ways of working with us and then have been onboarding them in a more scaled way than we were able to do prior to June. We're getting to the point where we are a good way through all of the independent retailers that work through our portal system. And so growth from this point onwards will be more influenced by the technology API integrations that we're putting in place with the tech partners out there in the automotive industry. So we'll continue to see, I think, a slightly inconsistent patterns of waves when we complete a tech integration with a dealer management system partner, suddenly a new cohort of retailers will become addressable, and we'll look to get those onboarded pretty quickly. So I imagine it will continue to be quite lumpy between now and March. We're hopeful that we will have made really good progress by March. I imagine, as is typically the case with the integration work that we do, I imagine we will have a tail of retailers that will need to work to get over the line beyond March, driven principally by that tech integration work, not work on our side, but work for the third parties integrating with the API that they will need to do. Jamie Warner: And on the more detailed kind of guidance for stock and forecourts, I mean I think we've been pleased the stock has improved through the half. I think at full year results, we gave the April number for the stock lever, which is sort of materially down and then obviously only marginally down for the first half. We haven't quite got into positive territory. So September was still marginally negative. And I think we are -- don't -- are probably a little bit cautious on just what the outlook looks like for these remaining 5 months or so. The fourth quarter, the first quarter of the calendar year is always slightly volatile. January is generally a very strong sales month, and it's not always easy to source stock. So I think that's why we're sort of holding that guidance at marginally down for the year. Similarly, forecourts almost sort of shown an opposite trend where obviously, the stocks got better. And if you look at the growth rates on forecourts, it is -- I think we're pleased that it was as positive as it was in the first half, but the growth rates are trending down. So we've exited the half slightly lower than the 1% growth we delivered in the first half. And again, I think in the round, holding that guidance of flat forecourts seems reasonable. Joseph Barnet-Lamb: It's Jo Barnet-Lamb from UBS. Firstly, a couple on sort of product-driven ARPR into next year. So firstly, on Deal Builder, you've obviously giving it away for free at the moment. I think you'd articulated previously, you're then going to sort of do an upsell sort of thing through next year, and that sort of, therefore, becomes a tailwind for product. So could you talk a little bit about Deal Builder into '27? You've probably got a more formulated views as to how you're going to do that. So any more color you can give us there would be great. Then secondly, on Buying Signals, which you're sort of -- is sort of being rolled out at the moment. And I think you said you're going to start commercializing that in H2. Any more color you can give us on sort of the scale of tailwind that, that's going to give product in H2 would be great? And then a final one. There's something in the release relating to a property -- Autorama property sale. Is that right? Can you give us some color on what that's about? I presume it's just getting rid of an old Autorama building, but any color you can give us there would be great. Catherine Faiers: So Deal Builder and Buying Signals and how and when we'll look to monetize both of them. You will have seen how we've positioned and talked about the product is that the 2 very much come hand in hand. So as part of Deal Builder, we are evolving, I guess, the value currency that we use to talk to retailers and evolving that to very much be anchored around the deal. And the positioning for Buying Signals is that you get all of this insight, rich insight about the buyer, their intent to purchase that vehicle, their preferences that they've been looking at and engaging with on our platform. You get all of that rich data as part of the deal. So they have become really how -- the combination of the 2 products has become how Auto Trader works for retailers. We're looking to monetize certainly the first wave of both of them because I think they're both products that have multiple iterations and life cycles for the business as part of the rate event next year. And we have -- we've been pretty open when asked by retailers in forums and webinars and have been talking about that being the case. So first wave of monetization likely to be from April next year for both combined as a package for retailers. Joseph Barnet-Lamb: And that will be as part of the pricing, but it won't be tiered. It will be a sort of bundled. Catherine Faiers: Yes, very likely to be part of the overall rate event for all with no tiering. Jamie Warner: Yes. And just to add to that, because you're asking about the second half, whether there's any second half product. The second half product I think where consensus is slightly higher is really all coming from prominence and that conversion of the offer is where that kind of product lever growth comes from. So just on the building in Hemel Hempstead, I'm delighted someone's made it to the notes in the back of the account, which might be your first questions for me. So when we acquired Autorama, they owned the building in Hemel Hempstead. You will have noticed from the accounts and the FTEs that we report that as we've kind of integrated into the main Auto Trader business and platform, the FTE numbers come down. We weren't actually -- weren't actively looking to market the building at the time. Opportunistically, someone came and said through an agent that they were looking for property space and just made sense because the building is probably bigger than we require. So we've taken a space almost next door that's smaller and fits better for us. It's just on a lease basis, and we're obviously then disposing of that asset, which I think is likely to go through in the next couple of weeks. Unknown Analyst: It's [ Kieran Darling ] from Citi. Firstly, maybe just on -- could you give us your thoughts on kind of the pros and cons of the stock-based offering you guys have at the moment? Has there been any internal debate around rather moving to an all-you-can-eat model makes a lot of sense, particularly in the context of, I guess, underlying retailers are becoming more technologically efficient and innovative and therefore, maybe that's a headwind permanently? And two, I guess, just in terms of OpenAI and a potential launch of a competitive app or I mean, could you just break down in terms of your visits, how much comes through the app versus desktop and just how much of a moat that is for you guys? And then thirdly, I guess, just in terms of speed of sale, how should we think about it going into next year in terms of comps as it gets easier, how much of a potential tailwind could that be for you guys? Jamie Warner: Yes. I'll take the first one, and Nathan can manage the second one. So I mean I think we said this at the last set of results. Obviously, the slot-based model where speed of sales has been running quicker has generated this small sort of headwind. And I think we have been doing an exercise and looking at other charging models. And obviously, we're fortunate enough to have a number of peers and everyone seems to have slightly different variations and nuances. All you can eat is always a slightly more challenging one because the nature of retailer customers is you have some customers with 4 to 5 cars and up to the biggest customer on an individual site will have 4,000. So that -- not completely insurmountable, but that makes it a little bit more complex just to run pure all you can eat. But I think we have been doing an exercise of looking at unique listings and there are many different kind of variants that you can do. And so we have been doing that work. I think at the moment, especially as the kind of speed of sale and market headwinds are not as prominent right now as they were this time last year, we still think that if you get supply easing up a little bit or speed of sale staying flat year-on-year or slightly decelerating, that should be positive with the charging model that we've got. But it's not lost on us that, you don't just want to sit there and say, well, everything will be fine, it will come back. So we are doing the piece of work. And I think it's not something that we would never consider. But I think at this point in time, especially where we are in the sort of cycle, we're reasonably comfortable with the model that we've got. Nathan Coe: Kieran, I got the second bit of your question. The first bit around OpenAI and competitors, can you just, sorry, go through that one again. Unknown Analyst: I think it's a more general point around potential competitors coming in terms of utilizing OpenAI technology. Nathan Coe: Yes. Right. No problems at all. So if I take your first question, I think OpenAI is another window to the Internet that uses kind of a highly efficient text prediction to kind of summarize answers and give people the next step that they might want to go to. And when it was Google, it's all around a page rank algorithm. What we found with Google is that their desire is to provide high conversion rates to their users to satisfy them to give them relevant. So Auto Trader tends and over time as SEO and those new releases have gone in, Auto Trader has tended to just do better and better and better. And that's not really down to our own SEO activities, although that's clearly part of it. It's because they want to get around people being able to gain those systems to just give users what's the best answer for the task. So our biggest protection, I think, is the fact that with that depth of data, our brand, people look for us, but it's not -- it isn't about the trademark, it's actually around what people know that they can get there, and it's all founded on data. So I'd say that's probably our biggest defense is we don't see a world where we really feel like we'd be threatened in terms of providing the very best car buying experience. You've got to believe that people will be willing for some degradation to never ever come to Auto Trader. I think apps have always been a really big strength to us. And I think we've always said that most of our traffic, as I laid out, about 80% of it is coming direct to us. The difference between traffic coming direct to our URL and apps is it cannot be intercepted. It is literally a direct connection. So it is about half of our visits, probably an even bigger percentage of the activity that you see when you go a bit deeper into the funnel looking at vehicles. And yes, I mean, it's an area we're always going to invest in. Some people might say we always talked about 10% of marketing being -- 10% of our audience coming from marketing. And I mentioned before, the difference is actually marketing with apps. So we do that very actively because it's a different sort of marketing. So yes, we think it is a big strength. But at the end of the day, we've just got to be the best place to buy a car, and that's hard to do in the U.K. because it requires loads and loads of data, and we've got a lot of that and other people don't. Jamie Warner: We have a question down here, Giles. Giles Thorne: It's Giles Thorne from Jefferies. First question, I guess, for Catherine, Buying Signals, was that always part of the product road map for Deal Builder? Or is it something that was introduced or accelerated when you changed your commercial approach? Secondly, coming back to this idea of the April 2026 pricing event, how transformational would you describe Deal Builder and Buying Signals is for your customers, for retailers? And thirdly, maybe back to Nathan and perhaps you're going to reference again some of your prepared materials. But as you've seen this agentic AI debate suddenly materialize in a very quick and aggressive fashion, which elements of it do you think are most misrepresented, misunderstood? I don't know, you tell me. Catherine Faiers: I take the first one. So on Deal Builder and Buying Signals, Buying Signals is built, the product was enabled because we've, for many years, been investing in building a buyer propensity model, which takes all of the sales observations data that we get from retailers, takes all of the consumer interactions and observations that we see on Auto Trader and then looks at how you connect those 2 sets of observations to know what types of behaviors or patterns do you need to see from a consumer to mean that they're very likely to convert to a sale on a retailer's forecourt. So that model and that logic has been years in the building and creating. So I think definitely Buying Signals was always a product that we had in mind that we were planning to build and launch. The timing of us testing, piloting, really, really robustly testing that model, the connection with deals anyone that submitted a deal, any buyer is clearly very likely to be pretty high intent when we talk about levels of intent. So you've immediately got a very identifiable cohort of consumers that you know are going to be very high intent. What Buying Signals does is then for consumers that might just have submitted an e-mail lead or in time buyers that we might just have seen interacting on our platform, but that haven't left any digital footprint with a retailer, we're able to predict for retailers which of their stock units are more or less likely to sell and how fast they're likely to sell. So step one is the connection to Deal Builder and delivering up, serving up a level of intent and a greater level of understanding, which we're already seeing from retailers will change like the next best action they then take with that buyer. But in the future, the evolution of this product should be to enable retailers much more actively to manage their forecourt based on all of the observed leads and deals that they would have been getting in the old world, but also every interaction that's happening on our marketplace and giving them some sense of what that really means for their forecourt. So it makes sense, I think, and the timing is right to bring it together as part of Deal Builder and to make it part of that proposition for launch. But in the future, there's lots more we can do with the buyer propensity model and that buyer signal thinking and logic to deliver more value to retailers. Nathan Coe: On the AI, I mean, we do use the technology quite a bit, but I'm going to pretend that we're right at the center of OpenAI. We do work very closely with Google and Gemini. I think as it relates to -- the first thing I would say is that when you speak to -- listen to the people that are building this technology, you tend to get quite a balanced view. I personally think and whether it's the founder of OpenAI or one of the founders of OpenAI, they do tend to give a pretty balanced view about, this is about token prediction and text prediction. There's not really a semantic understanding of the content that the models are doing, but they work very effectively because they basically say, we don't really care how you get to it. But if you can predict an output very accurately, then that's a good thing. It doesn't matter so much how you get to it. I think like 2 observations of things that I think have been a bit oversimplified is, the first I would say in relation to agentic is that there is quite a big difference between general models and what general models can do and what agents might be able to do. And those agents need to be quite specialized in order to do jobs and someone needs to do the specialization. I'll give you a really simple example. We could not use an open model to do something as simple as categorize images and write descriptions on Auto Trader. We had to augment the model, train it ourselves. And that's not even really particularly agentic. That is still a generalized model. But even that task itself, using a general model wouldn't work for it. Now do we think agents can do lots of stuff for users over time? Yes, absolutely, but they'll need to be more and more specialized. And the idea of you just being -- these general models are going to solve the whole world's problem. I don't think anyone really believes that's possible. And agentic AI itself technically is still a bit of a way to go before you see that playing out, although in some fields, it is. The second thing I would say is actually all around the real-time aspect of things. The models are trained every 6 to 9 months. Maybe that increases and they do kind of hoover up the Internet, all the information it can get to on the Internet and use that to create better and better predictions. That is very compute heavy as we can see and NVIDIA's share price suggests is true. What they don't do and don't necessarily need to solve is accessing real-time information because in order to do that, well, what they do there is they partner with search engines, ChatGPT, with Bing, Google and Claude, with -- sorry, Gemini and Claude with Google. And that's because that's a job that has been done well and replicating that, you'll run into exactly the same issues there. So for real-time data, what they do is they use their big model that's very, very intelligent to make better queries of a search engine and then bring it back and summarize it. When you come to really granular data like even listings and the data that's on Auto Trader, you probably need a level deeper than that because you can't get that through a traditional search engine. So that is why we think ending up working with one of those platforms and allowing people to access Auto Trader there is probably the way that it will go. But we can't offer any guarantees around these things. But I think it's very easy to see it as a big blob and extrapolate out. But technically, a lot of the engineers will say, well, no, that scenario is just not going to play out. And there are a few examples of it. Giles Thorne: I want to get the transformation... Catherine Faiers: Transformation, do you want to take that, Deal Builder and Buying Signals. Giles Thorne: Are you going to do bigger than normal? Nathan Coe: So it is in relation to the event. Yes, something like that. I mean, I think 1st of April pricing event, it's obviously a very live conversation internally. As Catherine explained, I think we feel like the product set of Deal Builder in itself and buying signals should particularly over a longer period of time, generate a lot of value for customers. But we still haven't quite landed at what the -- what percentage we're not going to communicate to customers until January. I mean, historically or certainly in the last 3 or 4 years, we've done 3% to 4% on price, 2% to 3% contribution to the product lever. There's nothing here that suggests would be outside of those ranges. And generally, if you say the last 3 or 4 events that we've done have been -- I think we feel like they've been good ones, then hopefully, this is another good one. Lara Simpson: It's Lara Simpson from JPMorgan. Sorry, I just wanted to come back to stock. I know it's been a big talking point. Firstly, I suppose, on the speed of sale, you said it was still 1 day faster in October. Were you surprised by that acceleration? Because it feels like a lot of the forward indicators, it should start to stabilize because we're talking about slower demand, supply coming back, but then the speed of sale keeps disappointing. So were you surprised? And then you've obviously reiterated the guidance. Interested on the stock lever guidance. What are your assumptions of speed of sale? Because I feel like in October, we should be getting to easier comps. Are you assuming that speed of sale stabilizes or slows or the status quo maintains? And then just a quick question on Autorama actually. A bit of the top line beat was actually from the vehicle and accessory sales, up 20%, I think it was. Has there been any positive surprise there? Because I thought longer term, we should be scaling down that line from a P&L perspective. So just interested on that. And if what you've seen in H1 has changed any of your strategy for Autorama, particularly in terms of the top line moving parts and then the profitability of that business? Jamie Warner: Yes. I mean I can take all of them. So look, I think stock -- I mean, if you think about the stock lever specifically. So we've guided it to be marginally down for the full year and it really is marginally down in the first half, that's implying similar in the second half. I think generally, the assumption around speed of sale is certainly what was set out at the full year is that when you hit this point, it gets to be more consistent, and a day quicker. I think in the round, it does feel more stable generally. So I think we're not expecting speed of sale to accelerate in the second half. That would probably be contrary or a downside to that guidance, yes. And I think there still is slightly -- if you look more medium term or into next year, a hope and belief that supply does start to improve as you get better flow of vehicles, better registrations coming out the back of the pandemic. I think we're just being a little bit cautious on whether we're going to see that in the second half or not. And as I mentioned, that fourth quarter is always a slightly unpredictable one. From an Autorama perspective, I think you're absolutely right that the vehicle and accessory sales is not part of the long-term strategy, and we still have a belief that over time, that will reduce or disappear. It was really a tactical decision that there were -- like I said, we took extra 300 vans that passed through the balance sheet. They didn't sit there for very long. And just because the van volumes have been slightly lower, we felt that, that was a sensible thing to do. The long-term strategy is still 100% seeing more volume delivered from the Auto Trader platform for users that are already there. And we're seeing some positive signs of that, albeit off a low base, but the Auto Trader volumes are growing or have grown pretty strongly in this first half. It is, as you'd imagine, heavily skewed towards cars over vans. And so this is -- some of what you're seeing in the first half is -- we're wearing a bit of a yield hit from that changing mix, which I think will probably play out a little bit in the second half. But if we continue to grow those volumes, we're still very optimistic in terms of hitting profitability and then hopefully seeing good growth and getting to the 20% to 30% margins that we set out when we acquired the business. It's very much part of -- there are a number of products that fit into the new car suite. It's very much part of that. Thanks, everyone, for joining us.
Operator: Good day, and welcome to Westport's Q3 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Ashley Nuell, Vice President of Investor Relations. Please go ahead. Ashley Nuell: Good morning, everyone. Welcome to Westport Fuel Systems conference call regarding its third quarter 2025 financial and operational results. This call is being held to coincide with the press release containing Westport's financial results that was issued yesterday after markets closed. On today's call, speaking on behalf of Westport will be Chief Operating -- or Chief Executive Officer and Director, Dan Sceli; and Chief Financial Officer, Elizabeth Owens. Attendance on this call is open to the public, but questions will be restricted to the analyst and an institutional investor community. You are reminded that certain statements made on this call and our responses to certain questions may constitute forward-looking statements within the meaning of U.S. and applicable Canadian securities laws. And as such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties. With that, I'll turn the call over to you, Dan. Daniel Sceli: Thank you, Ashley, and good morning, everyone. To start, I want to welcome Elizabeth Owens to her first conference call following her appointment as CFO at Westport. We are thrilled to have her at the helm. And for her first CFO conference call, I'm happy to have Elizabeth run through some financial details first, and then I'll cover some of our business and strategy updates afterwards. Over to you, Elizabeth. Elizabeth Owens: Thank you, Dan. First, I want to say thank you for welcoming me to my first conference call as CFO of Westport. It's an honor to serve shareholders in this new capacity. Now getting into the details of our Q3 results. Westport reported revenue of $1.6 million for the quarter. Our reported revenue this quarter reflects the expected decline from the $4.9 million reported in the same quarter of last year based on some changes I'll address in a moment. On an upward trend, however, it was great to see Cespira increased its revenue by 19% over the same period last year to $19.3 million in the quarter. As you know, our heavy-duty segment was utilized to capture revenue generated by a transitional service agreement, or TSA, in place to facilitate the transition of Cespira to a stand-alone organization. As intended, the TSA concluded in the second quarter of this year, and we, therefore, did not record any revenue related to it this quarter. Revenue this quarter was representative of our continuing High-Pressure Controls & Systems segment, which produced $1.6 million in comparison to $1.8 million in the same quarter last year. Our adjusted EBITDA for the quarter was negative $5.9 million as compared to the negative $0.8 million reported for the same quarter of last year. The change was primarily driven by lower gross profit related to the divestiture of the light-duty business, partially offset by lower operating expenditures. Our net loss from continuing operations included some extraneous items. The net loss from continuing operations of $10.4 million for the quarter is compared to a net loss from continuing operations of $6 million for the same quarter last year. This was primarily the result of an increase in operating expenditures in research and development and SG&A, a decrease in profit of $0.2 million compared to the prior year and a negative impact from a swing in foreign exchange impact by $3 million. Further on this topic, for the 3 months ended September 30, 2025, we recognized foreign exchange losses of $1.3 million as compared to a foreign exchange gain of $1.7 million for the 3 months ended September 30, 2024. The loss recognized in the current period primarily relates to unrealized foreign exchange losses resulting from the translation of previous U.S. dollar-denominated debt in our Canadian legal entities. Additionally, this quarter, we incurred onetime costs of approximately $1 million for severance and restructuring. Looking ahead, we expect more cost reductions on a relative basis in the near future as we adjust to become a smaller organization after the divestiture of the light-duty segment. Looking at our specific business units, High-Pressure Control Systems -- High-Pressure Controls & Systems revenue for Q3 of 2025 was $1.6 million, a slight decrease over Q3 of 2024. As Dan mentioned, we are in the process of moving these production lines in the facility in Italy that was part of the divestiture of the light-duty business to sites in Canada and China. Prior to the move, our team worked to increase inventories to ensure our customers experience minimal impact from the move. Construction at these facilities is ongoing through the fourth quarter with the majority of the capital spending to be wrapped up by the end of this year. The facilities in China as well as our Canadian site are anticipated to be producing initial product late this year. Gross profit for this business was largely unchanged, increasing slightly as a percent of revenue was driven by the higher margin with respect to engineering services revenue. Moving on to Cespira. It generated $19.3 million in Q3 2025, up 19% from the same period last year, driven by higher volumes. Gross profit was negative $1.1 million for Q3 2025 as compared to negative $0.2 million in Q3 2024. Gross profit continues to be negative as Cespira needs higher volumes to achieve a positive margin on a per unit basis for its systems sold. Regarding liquidity, as of September 30, 2025, our cash and cash equivalents totaled $33.1 million with only the EDC term loan remaining and reflects a significant increase in cash from the sale of our light-duty business. Net cash used in operating activities from continuing operations was $4.5 million, a significant improvement over $11.7 million used in operations in the same quarter last year. The improvement is primarily a result of decreases in working capital partially offset by an increase in operating losses. Proceeds from the sale of the Light-Duty business drove improvements in net cash provided by investing activities of continuing operations. We recorded $14.5 million in Q3 2025 as compared to $9.4 million in Q3 2024. Capital contributions to the Cespira joint venture of $11 million were also made in the quarter. As a reminder, in Q4 2024, we received proceeds of $9.6 million from the sale of shares to Volvo related to the formation of the Cespira joint venture and on the sale of our investment in Weichai Westport Inc. Net cash used in financing activities of continuing operations was $1 million compared to $4.4 million in Q3 2024. Our outstanding debt currently sits at $3.9 million with a maturity date of September 2026. To date, in 2025, we have reduced our debt and have strengthened our balance sheet and helped to reduce the complexity of our corporate structure. Our business is focused on the right markets for us, and we are continually looking at ways to streamline our operations. With that, I will pass the call back to Dan. Daniel Sceli: Thank you, Elizabeth. As our CFO noted, our third quarter results reflect the continued execution of the transformation we began earlier this year, anchored by our commitment to sharpen Westport's focus, strengthen our financial foundation and position the company for growth. The successful completion of the Light-Duty segment divestiture marked an important milestone in simplifying our business and concentrating on our core heavy-duty and alternative fuel systems. Operationally, our third quarter performance highlights the early benefits of our disciplined approach. While revenue declined as an expected outcome to the Light-Duty divestiture, we achieved a stronger gross margin of 31% in Q3 2025 compared to 14% in Q3 2024, driven by higher margin engineering services revenue, and we demonstrated tighter cost management year-to-date versus the prior year. As noted by Elizabeth, adjusted EBITDA results were impacted by the Light-Duty divestiture, partly offset by decreased operating expenditures, providing a more efficient and focused underlying business. We also remain disciplined in strengthening our balance sheet, ending the quarter with $33.1 million in cash and less than $4 million in debt while keeping cost efficiency and operational agility at the forefront. This solid financial position enables us to execute our strategic priorities and engage more proactively with OEM and fleet partners who are increasingly seeking affordable, low-carbon solutions. The Cespira joint venture continues to play a central role in Westport's growth strategy during the quarter. Deliveries increased year-over-year, supported by aftermarket sales growth as supply chain constraints continue to ease. This progress reinforces our belief that Cespira provides a scalable, high-impact platform to accelerate the adoption of the HPDI systems in the key markets worldwide. We continue to make progress on Westport's strategic transformation. Westport is taking the necessary steps to execute on a new focused and integrated competitive strategy. The divestiture strengthened our balance sheet and provided liquidity to begin to fund our growth through new system and related market expansions, including North America and our recently announced CNG solution when combined with the on-engine HPDI fuel system. We are in the process of evolving a new, more focused Westport that we can support and drive into more sustainable transportation industry. We recognize that we're operating within an evolving macroeconomic environment, which is enabling us to capitalize on renewed market momentum, especially as it relates to the use of natural gas as a transport fuel in the North American market. CNG has gained acceptance as an alternative to diesel fuel for long-haul trucking in North America, driven by its affordability and abundant supply. Westport's innovative and proprietary CNG solution hope to set a new standard for high-efficiency performance while delivering superior economics. As I mentioned last quarter, Westport will be focused on the following key drivers. On-engine, Cespira is pursuing strategic market expansion via technological leadership in heavy-duty transportation and truck OEMs. Off-engine, high-pressure controls and systems complement the energy transition regardless of the powertrain and a variety of financial initiatives. Westport's goal for Cespira is to deliver demonstrated volume growth over the coming year, driven by expanding into new geographies and adding new OEM customers. Cespira is seeing success here, delivering revenue growth of almost 20% in the third quarter and recently adding a second OEM customer in the form of a customer truck trial with a leading OEM utilizing Cespira's-HPDI components. The trial will include several hundred sets of key components and is designed to assess the [Technical Difficulty] is also expected to form the basis upon which the OEM will decide whether to make a further investment toward commercializing the system. Regarding our High-Pressure Controls & Systems business, we are currently developing components that are critical to performance and reliability. As a reminder, we are selling into 3 primary markets: China, Europe and North America. Following the close of the Light-Duty transaction, we have focused on moving our manufacturing to Canada and China. Both facilities are in the final stages before start of production, and we anticipate both to be online at the end of the year. The global truck market continues to expand and is expected to reach 1.95 million units in 2025. The long-haul truck market has historically struggled to decarbonize. Fleets around the world are focused beyond just reducing emissions and now prioritizing the total cost of ownership, natural gas is affordable, infrastructure is ample, and RNG production is growing at a fast pace. We are ideally positioned for this. What sets Westport apart from our competitors is our ability. We have solutions that can meet growing demand, delivering a total cost of ownership that is compelling to customers. We are optimistic about the company's future as well as that of Cespira. We have strengthened our balance sheet through the sale of our light-duty business and made a strategic return to our roots by developing innovative new technology to transform the Heavy-Duty market. In addition to new growth opportunities, we are making difficult economic decisions to enhance future shareholder value through planned reductions of 60% in CapEx and 15% in SG&A in 2026. Regardless of the unknowns or uncertainties ahead, we are paving our own path in the transportation industry that we believe will truly make a difference. Thank you to everyone who joined the call today. Your continued support is important to us. We continue to move through 2025 with purpose to create value for our shareholders. Thank you again. Operator: [Operator Instructions] And our first question will come from the line of Eric Stine with Craig Hallum. Eric Stine: Just wondering, can we start on the new OEM development with Cespira. I mean, just if you could provide a little more detail there? I know that, that OEM needs to go through a number of steps to make the decision about moving towards the development agreement and then beyond that, a commercial agreement. But what are kind of the signposts that we should look for over -- whether it's over 2026 and beyond? And how do you kind of envision this playing out as Volvo obviously wants more OEMs than just their use of HPDI? Daniel Sceli: Yes, absolutely. And I'll just remind everybody listening that in this industry, the OEMs are very, very protective of their commercial strategies. And so we are completely unable to talk about the who and any specifics and that's not going to change, unfortunately. We'd love to be able to talk about it, but that's the business we're in. This is a typical development, not unlike what we went through with Volvo originally, trialing the technology on trucks. The development programs going forward, to be more [indiscernible] we're almost 10,000 trucks in 31 countries. But it is a development cycle that will follow their standard path in the industry. And -- so we think we're going to start to get some feedback from that OEM probably mid-'25. And we'll be talking about it at that point, I hope that we're in a position to communicate that we're moving to the next phase. Eric Stine: Got it. And yes, that's what I was getting at. Is this typical, but also because you've got Volvo in the market, is it something that potentially is shorter than what you've seen in the past? And it sounds like, yes. Okay. Maybe sticking with the joint venture, any -- I mean, any thoughts on additional OEMs? And again, I know that the nature of this business is you can't give details, names, et cetera, but just maybe what that pipeline looks like. And I also know that Volvo is looking at growth with their HPDI truck in other markets? I think you mentioned India, South America last quarter. So maybe an update on that as well. Daniel Sceli: Sure. Well, we continue we continue to talk to all the OEMs about HPDI through Cespira. And clearly, volume is the key to getting this business to the place where we all want it to be. We've got the interest of many OEMs. I think we're at a point where we don't have to prove the technology anymore. And simply, when does the timing fit for the OEM in terms of their specific markets and their business cases. So the technology is proven, the performance is proven and Volvo continues to expand its reach where they want these trucks. I did mention India and South America. Those are beachheads that are being opened up. And we expect continued volume increases, at least that's what we're hoping for. One of the big tickets will be in Europe, the legislative changes to the system. And biogas being credited for the emissions standards in Europe is a really big deal that we're hoping will come in the next year. Operator: One moment for our next question. And that will come from the line of Rob Brown with Lake Street Capital Markets. Robert Brown: On the Cespira joint venture, you made a capital contribution in the quarter. Does that sort of set you for a while? Or what's the capital needs over the next sort of 12 months there? Daniel Sceli: Yes. So I think we've talked about this a number of times over the last at least 18 months here. There was -- there's always been a 3-year build-out setting this business up to be completely stand-alone. So the joint venture was always structured to have about a 3-year build-in of capital contributions to get it set to stand-alone. And obviously, we're in year 2 of that now. So yes, there's additional capital will be needed next year. Robert Brown: Okay. I guess -- and then on the High-Pressure Controls business, when do you expect to have that fully -- the manufacturing fully moved out of Italy and under your operations? Daniel Sceli: Sure. Well, it's all out of Italy now completely. We're in the process now of installing the equipment in both our Cambridge site and our Chinese plant site [Changzhou] and expect to have both those facilities up and running by year-end. . Robert Brown: Okay. Great. And will you have a, I guess, lower revenue run rate during that period? Or do you have a stock that can carry through? Daniel Sceli: No, it will be a bit lower revenue. And I mean there is some stock, but there's -- it will be a bit lower revenue. And then I mean the underlying theme here is that we want further -- the Chinese market is the biggest market for hydrogen components today. And it was very important for us to manufacture it locally for a couple of reasons. One, geopolitically, it's just a lot easier to make it there and for that market than it is to ship it in from Europe. Two, cost, right? We can be a lot more competitive out of a Chinese plant. And then of course, the North American market is starting to turn on natural gases, as we've talked about. It's a pendulum swing that we're very excited about. And we want to be in a position to take advantage of that market from a Canadian site. Operator: Our next question will come from the line of Chris Dendrinos with RBC Capital Markets. Christopher Dendrinos: I wanted to ask on the CNG solution announcement here. I think it was last week at this point. What's the timing look like for potential deployment there? And does your partners, Cespira, need to, I guess, move trucks over to the United States? Or I guess, how does that sort of, I guess, time line look for potential development? Daniel Sceli: Yes, sure. The intention isn't for trucks to come from Europe to North America at all. We're developing a CNG solution that is what we call the off-engine side of the thing. The on-engine, the Cespira's HPDI on-engine stuff is fully developed and ready to go. And so what this CNG strategy in North America will do for Cespira is bring additional volume. What it does for Westport, the -- what we call the back of cab system, the storage system for CNG combined with our high-pressure controls and our AFS engine control system is -- it's a full package that can be deployed into North America. The initial steps are going to be demonstration fleets. We're going to have trucks built with the CNG systems that fleets are going to run and trial. And certainly, our anticipation is that they'll be screaming for commercialization. Once we're through the demonstrations and have it proven out, we'll be working with the OEM to build out a commercialization plan. Again, the on-engine side is fully developed with HPDI. It's just a matter now of certifying a back of cap and doing the EPA certification, which is just simply miles on trucks. Christopher Dendrinos: Got it. And then maybe just shifting gears a little bit to the engineering revenue that you all recognized in the quarter. I mean, is that sort of an ongoing, I guess, revenue stream? Or was this sort of a onetime, I guess, recognition this quarter? Daniel Sceli: Well, yes. So in our High-Pressure Controls business, we are paid for a lot of development work for the hydrogen systems from our OEM customers. And so that's an ongoing thing. And we'll be spending R&D money over the next 3 years and the customer pays for it at start of production. So we have a bit of a run here of cash out for R&D before we get the customers' payment to cover it. But it's an ongoing part of this business. These are very complex components that the customers, the OEMs look to us to develop the technology for them. Operator: I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Dan Sceli for any closing remarks. Daniel Sceli: Thank you. Well, it's a pleasure always to share our story with our investors and the market. Thank you for your participation, and have a great day. Operator: This concludes today's program. Thank you all for participating. You may now disconnect.
Peter Hoetzinger: Good morning, everyone, and thank you for joining our earnings call. We would like to remind everyone that we will be discussing forward-looking information under the safe harbor provisions of the U.S. federal securities laws. The company undertakes no obligation to update or revise the forward-looking statements, and actual results may differ from those projected. Throughout our call, we will refer to several non-GAAP financial measures, including, but not limited to, adjusted EBITDA. Reconciliations of our non-GAAP measures to the appropriate GAAP measures can be found in our news releases and SEC filings available in the Investors section of our website at cmty.com. With me today are my co-CEO, Erwin Haitzmann; and our Chief Financial Officer, Margaret Stapleton. After our prepared remarks, we'll open the call for questions from analysts. We announced solid third quarter results yesterday afternoon. Net operating revenue was $154 million, driven by strength in the East and Midwest regions as well as in Canada, offset by weakness in the West region and in Poland. The quarter started out really well. EBITDAR in July was up 7%. August was even better with EBITDAR up 22%, but September saw a sharp year-over-year decline due to the following onetime effects. In September of last year, Colorado received a $1 million breakup fee from Tipico. Also in September of last year, Mountaineer had a bonus accrual for $0.5 million reversed. In this September, Poland had extra costs but no revenue from a closed casino. As such, you can attribute the EBITDAR decline in Q3 all to Poland and the onetime effects in September I just mentioned. Adjusting for those, Q3 EBITDAR would have increased by about 5%, beating consensus estimates and demonstrating the continued operating momentum across various segments of our business. Not bad at all, definitely better than it looks at first sight. During the third quarter, play from our high value and core customers continued its long-term growth trend, but we did not see further improvements from our low-end customers. The upper customer segments continued to perform well, showing 8% growth, helping to offset a 9% decline in the lower-end segments. Therefore, total rated GGR was essentially flat. Retail play increased by 4%, resulting in a 2% GGR increase across the U.S. portfolio. Visitation statistics show a similar picture, visits by high value and core customers increased 4%, while visits from low segment players declined. Before I hand it over to Irwin, let me come back to Poland for a second. From now on, no license expirations are coming up for at least 3 years. So Poland should be at its normalized EBITDAR run rate for many quarters to come. In any case, however, we remain committed to divesting our Poland operations and we'll provide updates on the divestment process in the coming months as appropriate. Now over to Erwin for more color on our individual properties and markets. Erwin Haitzmann: Thank you, Peter, and good morning, everyone. Let me start with our results for the third quarter beginning in Missouri. Our Century Casino and Hotel Caruthersville, which just celebrated its first anniversary, continues to exceed expectations. Gaming revenue grew strongly across all segments. High Value up 82%, core, up 29% and retail up 22%. In total, gaming revenue was 29% higher than last year, and EBITDA increased 35% to $6.1 million, up from $4.5 million. Rent expense rose about $1.1 million, reflecting the VICI lease that funded the new property and operating margins remain high. It is worth noting that with our new land-based facilities, we're now reaching new markets. This is particularly evident in the significant increase in customers leaving 75-plus miles from Colorado Springs. Colorado Springs has been an outstanding success, modern, efficient and exceptionally well received by our guests. Our thanks to the entire team for a fantastic first year. Now to Century Casino and Hotel Cape Girardeau. Cape delivered $6.1 million in EBITDA, only slightly below last year's record quarter. The property continues to perform very well against competition from Illinois. Sports betting launches in Missouri on December 1. And in partnership with BetMGM, we will open a BetMGM branded sportsbook-owned property and BetMGM will launch its online sportsbook using our skin. We expect sports betting to elevate Cape's profile and create new revenue streams for the property. Now moving to Colorado. At Cripple Creek, EBITDA was $1.8 million, flat year-over-year. In the quarter, our high-value and core segments grew while pace in retail declined. Retail play now represents about 30% of total gaming revenue. We believe that Chamonix may capture a larger share of the retail market still driven by the novelty effect. At Central City, rated play was up 6%, but total revenue was down 4%, again, due to fewer retail players. EBITDAR came in at $1.2 million, up 20% on a comparable basis as last year's EBITDA of $2 million included a $1 million onetime payment from Tipico. At both Colorado properties, we have replaced live table games with electronic table lounges, which generate about the same revenue at significantly lower cost. That's a solid win for both operations. Now to the East. At Mountaineer in West Virginia, EBITDAR was $4.4 million, flat to last year. Apples-to-apples, though, EBITDAR was up $0.5 million as last year's EBITDAR was inflated by the reversal of a $0.5 million bonus accrual. Performance across the board was steady and parimutuel handle rose 26%, driven by improved scheduling and race mix. At Rocky Gap in Maryland, EBITDAR increased 7% to $4.9 million as we expected our first clean quarter without weather disruptions since the beginning of the year. Growth came from high-value players, while other segments held steady. Now to the West and the Nugget Casino Resort in Reno Sparks. While the Nugget had a standout August, mainly due to our signature Best in the West Nugget Rip Cookoff, overall, the quarter was still challenging. We experienced a record EBITDAR for August of $4.1 million, the highest single month result in nearly 3 years, but that was offset by a weaker July and September. Throughout the quarter, we enhanced marketing programs to grow both local and destination play. We are also building out our 2026 concert season. Tickets for Brooks and Dan in April are already selling extremely well. We began converting unused space into an additional 11,000 square feet of convention space, a 10% increase in square footage to be completed by year-end. The additional space will first be used by a major group event that is booked for January 2026. At the Nugget, we're executing on a clear repositioning strategy, shifting away from low ADP players who are no longer profitable and focusing on core players in Reno Sparks and Northern California. In sync with the enhanced marketing to play in the core segment, we are working on further improving the F&B offerings. It takes time, but we are seeing -- we are starting to see the results already. Now to Canada and Europe. In Alberta, slot coining was up 5.8%, total revenue up 1.6% and EBITDA up 11.1% to $5.4 million. Growth was broad-based, supported by disciplined cost management. Century Downs in St. Albert led the way with St. Albert benefiting from this year's upgrade of the facade. In Poland, we're nearing the end of a challenging period marked by license delays and relocations. The main headwind this quarter was the closure of our Wrocław Hilton Casino, which contributed an EBITDA of $1.3 million last year versus a negative $0.5 million this quarter. Our relocated Wrocław Casino is ramping up well and the second Wrocław location will open in January 2026, further strengthening our position there. All current licenses, as said before, are valid through 2028, so we expect stable operations going forward. With that, back to you, Peter. Peter Hoetzinger: Thank you. And before we cover a few balance sheet and capital items, let me explain what led to the filing delay of a couple of days. As described in the 8-K we filed with the SEC yesterday, we discovered an error during impairment testing for goodwill and ROCE GAAP that required us to restate our 2024 10-K and the 10-Qs for the first 2 quarters of this year. The correction of the error will reduce our goodwill balance with an offsetting increase in net loss less the tax impact. The estimated impacts are described in the 8-K. This does not change our revenue or adjusted EBITDA for any of the periods being restated. We are finalizing our review of the amended financial statements and anticipate filing these with the SEC within the next 5 business days. All right. Now back to the balance sheet. Our cash and cash equivalents at the end of the quarter were $78 million compared to $85 million at the end of Q2. That includes $5 million we spent in CapEx and $1.5 million we spent on the share buyback program. We also paid the annual table games license fee of $2.5 million in West Virginia as well as about $1 million in closing costs in Poland. So all in, we were about flat in cash from operations. Total principal amount of debt outstanding was $339 million, resulting in net debt of $261 million. At the end of the quarter, our net debt-to-EBITDA ratio was 6.9x. On a lease-adjusted basis, the ratio was 7.6x. Let me also note here that we have no debt maturities until 2029. And there is no need for significant CapEx this year or next. This year, we'll spend a total of $18 million, of which we have spent $15 million already. As we look ahead, we are very confident in our business prospects. Last year was a transitory period for us, but now we see a clear path forward to higher EBITDAR and cash flow for 2026 and beyond. Now it's all about harvesting what we have invested last year. When you sort through the noise I mentioned at the beginning of the call, we are encouraged by the trends in our business. While we recognize the level of economic uncertainty, we are more confident in the long-term prospects of our company than we were at any point last year. While the fourth quarter has just started, it's worth noting that the positive customer trends have continued into October, including improved play from both core and retail customers. Preliminary results for October show EBITDAR up well over 20% compared to last year. And as we head into next year's tax season, we believe that our core customers around the country will benefit from the tax bill passed by Congress this summer, including new deductions for tips and overtime and an additional deduction for seniors as well as larger standard deduction for all taxpayers. As you know, we are in the midst of a comprehensive strategic review process. At this stage, no decisions have been made, and there can be no assurance that the review will result in any transactions or particular change. We do not intend to make further public comments on the process unless and until the company's Board of Directors approves a specific course of action, which we do not expect before Q1 of next year. With that, I ask for your understanding that we will not take questions on this topic in our Q&A session as we cannot share any incremental information at this time. All right. That concludes our prepared remarks. We'll now open the call for Q&A with the analysts. Operator, go ahead, please.[ id="-1" name="Operator" /> [Operator Instructions] And our first question will come from Jeff Stantial with Stifel. Daryl Young: This is Don Young on for Jeff Stantial. Maybe starting off on the strong results in your Canada portfolio. Can you sort of expand a bit on what's driving that broad-based growth? And as you continue to evaluate the broader portfolio, do you view these as more noncore with the increasing U.S. exposure? Or do you see real synergies with the broader portfolio? Erwin Haitzmann: Thank you. I think I'll take that question. Starting the other way around. With regard to your second question, we see a little bit of synergy, but it's more incremental. So it is probably to be seen as a stand-alone conglomerate of operations the Canadian properties that we have. Concerning the drivers, we have -- the one visible driver is that St. Albert, where we redid the facade outside completely, and that had a really good impact. And the rest of it is just, I think, very motivated management that's really continuing to sharpen the pencil, looks on the cost side, looks on the revenue side. And we have recently been up there. We have a very motivated crew that is really eager to perform well. It's good to see. And I think we have some more upside also given the macroeconomic situation in Canada, which seems quite far less impacted or has been impacted than in the United States. Daryl Young: Great. That's helpful. Turning to the Nugget. Can you give us an idea of how you're thinking about timing for the group and convention business to normalize? And to sort of put some numbers around it, how many more room nights can this add? And then on some of the new entertainment programming, can you help us think about how you're underwriting that uplift and how confident you are that this will attract those visits and corresponding gaming revenues that you're underwriting? And then that's all from us. Erwin Haitzmann: Okay. So you're asking about the timing of the improvements as we see it, the impact it will have on room nights and the impact and the progress of the consult, correct? Daryl Young: Yes. Erwin Haitzmann: Yes. Okay. With regard to the timing, it's hard to say. But as I mentioned earlier and Peter mentioned as well, we already see in October that a number of the things that we've been fine-tuning on the marketing side is starting to take effect. And we are confident that we should see the full impact of what we are continuing to refine -- I mean already now, but certainly going into 2026 as well. And we're looking on the one hand, on the revenue side of the casino -- but combined, but also independent from that, we are also focusing on the retail side of the hotel business as a separate exercise because there continue to be -- there's a market segment that comes to the Nugget just to stay in the hotel, and they may not -- may or may not be gambling at all. It's not necessarily connected. And in that same context, also, as mentioned earlier, we have decided that we continue to focus more intensely on the F&B side, possibly expand the offer, but certainly also continue to work on upgrading at least 1 or 2 of our outlets. It's hard to quantify with regard to room nights, but it's -- let's put it like that. We have 3 segments for the hotel. The one is the casino side, which is mainly comped and that is intertwined with what we do with our overall comping program and how much we give back to our customers. The second one is the convention and group business. And we said earlier that smaller groups, we can do short term, but the larger groups have quite a long lead time. We're now talking about as far as 2030, 2031 with some of the larger groups. As it looks now, we think that the group business in 2026 will be either the same or better than in 2025. And the third one is the retail business, which we market also separately, and we have seen an increase in the retail segment already in '25, and we believe that more can be done in 2026. Concerning the concerts, we have learned that to give you numbers last year in 2024, the concert stand-alone made a profit of around $850,000. This year, the concerts are making a loss of about $300,000. So the reason for that is twofold. First of all, we just couldn't book what we wanted to book. It's not so easy. It depends when you target an act. It depends on what their route is and whether they are in that part of the United States, whether you can book them at the price that one would be willing to pay. But oftentimes, it's not even a price question, they are just not there. And obviously, I'm not willing to travel east-west without intelligent planning. So we've not been very successful and lucky in that respect. The second thing is that -- so that led to the result that we couldn't get as many country acts as we wanted to. In 2026, we think that will be better. And the second thing that we have learned is that we thought in order to reduce the risk of the -- which is quite high in the concerts when you cannot sell the tickets, we rather book acts that cost a little bit less than, for example, Stew so. And that probably was not a good decision. So we are now turning back into trying to book maybe fewer acts, but very good acts like books and done. So with that, we think we can fix the concert side. And we see that -- our goal is that the concepts stand on their own. But from at least half of the concepts, we see a very positive overflow into the hotel, casino and F&B business. [ id="-1" name="Operator" /> Our next question today will come from Jordan Bender with Citizens. Jordan Bender: You're seeing -- it sounds like you're seeing some pretty good success from the ETGs that you put in Colorado. Do you think this strategy -- if a strategy you would look to implement across any of your other U.S. assets, just given the cost side helps margins at the end of the day? Erwin Haitzmann: Yes. However, not necessarily by replacing -- completely replacing table games with ETGs. So we do have ETGs in other casinos are parallel to those. We still keep the nice game. But in Colorado, it was just a question of the -- it was just so obvious that it's smaller operations, it wasn't worth keeping the few tables. But in the larger casinos, we do have ETGs on the one hand and table games on the other hand. And as we see it now, we'll keep that also. Jordan Bender: Great. And on the follow-up, I think you mentioned you bought shares back in the quarter. I'm just curious where your balance sheet sits today, where the cash balance sits, how do you kind of think about buying back shares here versus continuing to pay down debt as we head into '26? Erwin Haitzmann: Absolutely. Peggy, why don't you take that question, please? Margaret Stapleton: We're currently analyzing the stock buyback versus paying back debt and have not made any real decisions on how to proceed into 2026. [ id="-1" name="Operator" /> We'll take our next question from Ryan Sigdahl with Craig-Hallum Group. Ryan Sigdahl: 20% or greater than that EBITDAR growth in October, improved play from the core and retail players, if I caught that right in the prepared remarks. Can you elaborate, I guess, on specifically, is that pretty broad-based across the portfolio? And then as you look to November and December, are there any weird comps or anything to be aware of on the plans for this year where that's not a good assumption to kind of continue throughout the rest of the quarter? Erwin Haitzmann: We don't see anything that -- anything unusual that would impact the one or the other way the fourth quarter. But with regard to the customer trends that Peter mentioned that led to the 20% plus in October, we just hope that the consumer sentiment continues to improve because that has impacted us negatively in the lower end of the database in anybody's guess, but I think there is at least a hope that the consumer sentiment will improve during the next, hopefully, remaining 2 months of this year. Peter, would you like to add to that? Peter Hoetzinger: Yes. I think the one and only difference we'll see is that last year, in the first week of November, we did open the Caruthersville land-based -- the new land-based facility. So in the year-over-year comparison, that one property from the first week of November on will probably not have the same growth rates that we have seen over the last 12 months. But with all other properties, also I don't see any abnormalities. Ryan Sigdahl: Great. Then just on the Nugget, July, September were weaker. Curious, I guess, think going back year 2, it was the convention business was building. It was going to really be inflecting kind of middle to late this year into '26. I guess, is there a reason did you have any cancellations? Or curious, I guess, the weakness in July and September as my view, I guess, could have been partially incorrect, but was that the convention business was going to really start to ramp up here? Erwin Haitzmann: Yes. The weakness in September mainly came from the fact that we -- as I mentioned earlier also that in '24, we had 2 powerful, very good concepts. One of them was Chase and Eldion and in September, we didn't have any. Then also in September, we had what is called a bingo blow a large bingo event in September, which now -- which we didn't have this September. And with regard to the conference business, there was also less conference business in July and September of '25 as compared to '24. But that was -- that couldn't be changed in the short term. [ id="-1" name="Operator" /> And we'll move next to Chad Beynon with Macquarie Group. Chad Beynon: I wanted to ask about Caruthersville. You touched on the growth that you continue to see in the operating leverage of that property. Are you still on track to hit the returns that you originally laid out on the construction CapEx? And then secondarily, where do you expect most of the growth to come from? Will it be that further out customer in the neighboring states? Or are there still opportunities in the closer in catchment area? Erwin Haitzmann: Yes, we -- first question, yes, we are on track with regard to what we expected. And secondly, we think that growth will come both from the geographically closer and further away group of people with more potential in the 75-plus miles. We think that we can reach out even more into that segment than we did so far. So more growth from the more distant areas, but still growth from the closer areas as well. Chad Beynon: Okay. Great. And then going back to the weakness that you saw in the retail customer, which it appears based on the 20% growth in October, that's abated. Do you know why this -- is there any evidence in terms of that this will remain stable? Anything else to point to in terms of why it fell off during the period? Was it -- could it have been weather-related, comparable related, local CPI or unemployment? Just any evidence that will give us confidence that retail could improve here in Q4 and beyond? Erwin Haitzmann: Yes, it's hard to say, but we believe that it has to do with the insecurity around tariffs and the impacts that tariffs may possibly have to the consumers. And that is a worry that typically is more prevalent in the lower end of the database. And we see that also in places like Rocky Gap, for example, where the household income of the catchment area is significantly lower than in other markets that we are active in, that certainly has a strong effect. I'm not as good as others to speculate about the increasing consumer sentiment going forward. But if we had to say something, we would think it looks -- there is a friendly outlook, but you probably could make a better judgment on that. Chad Beynon: Okay. Great. And are there initiatives or cost improvements that you could make if this customer remains volatile? Erwin Haitzmann: There's always a possibility to look for more and tighten the be further. But I think if it's not -- I don't think that it will get any worse than it was in the worst month of this year. And we've maneuvered through them well. And I think if necessary, we could do that again. There is always, as I said, if you keep looking and then there's always a way to save more. The danger always is that you don't go too far in what you are doing. [ id="-1" name="Operator" /> Our next question comes from Connor Parks with CBRE. Connor Parks: Maybe another capital allocation one, maybe separate from the debt paydown versus share repo discussion. Just in the context of the cash on the balance sheet and some of the EBITDAR growth you've seen this year with all the CapEx rolling off to Missouri. I guess, how are you weighing the reinvestment plan at this point? Is there anything maybe outside of nugget you mentioned that you would like to build or reinvest in or any low-hanging fruit type projects in Missouri again that you're weighing at this point in time? Erwin Haitzmann: Yes. Let me start out and then hand over to Peter and Peggy. We will -- we're thinking about doing a little bit of facade upgrade also in the Canadian -- 2 of the Canadian properties. That is not a large CapEx item, but there is some CapEx. And as I said earlier in St. Albert, it was very beneficial for the revenues and for the business there. We may spend a little bit of money in connection with food and beverage at the Nugget. And that would be probably it apart from the routine upkeep and then investment into mainly slot products of our properties. Peter, can I hand over to you? Maybe you would continue want to expand on that some more. Peter Hoetzinger: Yes, sure. Connor. We don't expect any significant or large moves, not on the stock buyback front and also not on the paydown of the debt currently because, as you know, we are in the midst of the strategic review process. And it will depend on the outcome of that. We could sell something, then we would have significant amounts of money to pay down the debt. We could do some other transaction that is still up in the air. So until we have concluded that process, you won't -- you will not see any significant stock buybacks or pay down of debt. Connor Parks: Great. And then maybe as my follow-up, you've mentioned in this quarter and in prior quarters, the expected uplift potential in regional gaming around the benefits from the upcoming tax season. I guess have you provided any barriers or try to quantify any of these benefits around customer bases, spending habits or anything of that matter for any of the areas of which you operate in? Erwin Haitzmann: I wouldn't have to make a guess here. It's hard to say. Peter back over to you, do you think you could quantify? Peter Hoetzinger: No, not really see it. As Erwin said before, mostly the low ADT players, the lower segments of our database are impacted by that. And depending on which property, it's about maybe 15% to 20%, 25% of our customers are in that lower segment. But in general, we are making steps to move away from that and to move towards mid-tier and upper tier customers in our marketing approach and in everything we are doing. So that should lessen that impact. But I agree, we don't want to quantify that not enough hard facts that we have [ ever ]. [ id="-1" name="Operator" /> And that is all the time we have. If we did not get to your question, please reach out to the company using the Investor Relations page at cnty.com. I will now turn the call back to Mr. Hoetzinger for closing remarks. Peter Hoetzinger: Yes. Thanks, operator, and thanks, everybody. We appreciate you joining our call today. I will talk again when we present the 2025 full year results. Until then, thank you, and goodbye. [ id="-1" name="Operator" /> This does conclude today's conference. Thank you for attending.
Operator: Ladies and gentlemen, good afternoon. At this time, I would like to welcome everyone to the QuickLogic Corporation's Third Quarter Fiscal 2025 Earnings Results Conference Call. As a reminder, today's call is being recorded for replay purposes through November 18, 2025. I would now like to turn the conference over to Miss Alison Ziegler of Darrow Associates. Miss Ziegler, please go ahead. Alison Ziegler: Thank you, Bon, and thanks to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer, and Elias Nader, Senior Vice President and Chief Financial Officer. As a reminder, some of the comments QuickLogic makes today are forward-looking statements that involve risks and uncertainties, including, but not limited to, statements regarding our future profitability and cash flows, expectations regarding our future business, and statements regarding the timing, milestones, and payments related to our government contracts, statements regarding the use of the company's ATM program, and statements about our ability to successfully exit Central. Actual results may differ due to a variety of factors, including delays in the market acceptance of the company's new products, the ability to convert design opportunities into customer revenue, our ability to replace revenue from end-of-life products, the level and timing of customer design activity, the market acceptance of our customers' products, the risk that new orders may not result in future revenue, our ability to introduce and produce new products based on advanced wafer technology on a timely basis, our ability to adequately market the low power, competitive pricing, and short time to market of our new products, intense competition from competitors, our ability to hire and retain qualified personnel, changes in demand or supply, general economic conditions, political events, international trade disputes, natural disasters, and other business interruptions that could disrupt supply delivery of or demand for the company's products, and changes in tax rates and exposure to additional tax liabilities. For more detailed discussions of the risks, uncertainties, and assumptions that could result in those differences, please refer to the risk factors discussed in QuickLogic's most recently filed periodic reports with the SEC. QuickLogic assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates of any new information or future events. In today's call, we will be reporting non-GAAP financial measures. You may refer to the earnings release we issued today for a detailed reconciliation of our GAAP to non-GAAP results and other financial statements. We've also posted an updated financial table on our IR webpage that provides current and historical non-GAAP data. Please note QuickLogic uses its website, corporate Twitter account, Facebook page, and LinkedIn page as channels of distribution of information about its business. Such information may be deemed material information, and QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD. A copy of the prepared remarks made on today's call will be posted on QuickLogic's IR webpage shortly after the conclusion of today's earnings call. I would now like to turn the call over to Brian. Go ahead, Brian. Brian Faith: Thank you, Alison. Good afternoon, everyone, and thank you all for joining our third quarter 2025 conference call. We have made very significant progress since our August conference call. Last quarter, I stated that we focused considerable engineering to accelerate storefront design wins for our strategic RadHard FPGA and expand our served available market to very high-density eFPGA hard IP designs targeting advanced fabrication nodes. I'm proud to say our engineering team has executed beautifully, and we are realizing these goals. We expect to begin recognizing storefront revenue in early 2026, and that it will provide a meaningful contribution to total 2026 revenue. The interest from large defense industrial base entities or DIBs in the SRH test chip we funded is notably higher than I anticipated. We have significantly expanded our ability to address the lucrative markets for very high-density, discrete FPGAs and ASICs that require large blocks of eFPGA. New contracts and engagements are for much larger blocks of eFPGA and on advanced fabrication processes. The value contribution of eFPGA in customer designs has grown substantially. Our penetration in commercial market sectors is expanding, and with this progress, the rate of new contract closure is accelerating to the point that license revenue may surpass NRE revenue for the first time this quarter. We believe these trends will accelerate going forward. Before I get into the tangible data that support these points, I want to take a moment and provide some color for the revenue guidance Elias will share in his presentation. Based on our backlog and forecast provided to us by our customers, we are targeting total revenue of $6,000,000 for Q4. The majority of the contracts that support this outlook are already on the books or have been forecasted by customers to be awarded during the coming weeks. However, a contract valued at nearly $3,000,000 for a commercial application targeting an advanced fabrication node has been forecasted by the customer to be awarded late in the quarter. If this contract is awarded on or very near the date forecasted, we will be able to recognize a large portion of that revenue in Q4, and with that, realize our $6,000,000 objective. We have a very high level of confidence in winning this contract, but note that it could push into Q1 2026, and that would result in lower Q4 2025 total revenue. Due to this, Elias will present an unusually wide guidance range. And now let's walk through our accomplishments. In early August, we delivered design files to GlobalFoundries to fabricate our SRH FPGA test chip using its 12 LP process. This test chip was designed to meet the requirements of certain large DIBs that have programs in development today that are good candidates for this device. We expect delivery of test chips in early Q1 2026 and believe we will have our SRH dev kit ready for shipment to customers shortly thereafter. This initiative was financed by QuickLogic and is independent from our contract with the US government. Our decision to invest the money and resources to develop this test chip was based on our belief that it is critical in our quest to secure strategic design wins and accelerate our storefront business model. Since our last earnings conference call, I have personally met with a number of the DIBs that worked with us through the development process, and I cannot emphasize enough the potential of our SRH storefront initiative. In prior meetings, all I had to show were PowerPoint presentations, and now with a test chip in fabrication, the level of enthusiasm is palpably higher. As a matter of fact, we already have commitments for SRH dev kit orders that we expect to receive by the end of this month. I see this as our first tangible step towards the hundreds of millions of dollars in potential storefront business we can win in the coming years. The importance of demonstrating our SRH FPGA test chip goes well beyond the storefront designs we believe it will enable us to secure. FPGA is the number one spend category for semiconductor devices by the defense industrial base, and custom ASICs are a close second. Together, we believe these two categories make up roughly half of the DIB semiconductor TAM. We expect many of the new strategic designs that require various levels of radiation hardness will use either discrete FPGA devices that we can storefront or eFPGA hard IP we can license in new ASIC designs. By delivering a discrete SRH FPGA test chip fabricated on 12OP process, we are demonstrating the broader capability of our eFPGA hard IP for ASIC applications that will meet program requirements ranging from radiation tolerant to strategic RadHard. There are three very important points I want to highlight here. First, DIBs are already using GlobalFoundry's 12 o fabrication process for radiation tolerant and SRH ASICs. Second, government contracts require the use of onshore fabrication for strategic programs when devices are available. As it stands today, we will be the only source for strategic RadHard FPGAs and SRH eFPGA hard IP that is fabricated in the US by a US company. Third, in my meetings at large DIBs, engineering managers have clearly stated that being able to design with our Aurora FPGA user tools for both our SRH discrete FPGAs and our eFPGA hard IP and ASIC designs is a huge plus. During our last conference call, I stated that Q3 would mark the low point for revenue recognition for our US Government SRH FPGA contract this year. Funded by the current tranche, revenue recognition from the contract will rebound significantly in Q4. Beyond that, we anticipate an increase in quarterly revenue recognition in 2026 that will be funded by the next tranche. During our last conference call, I forecasted the award of a mid 7-figure contract from a DIB during Q4 that targets Intel 18A. Unfortunately, there has been a delay in funding that pushes this contract into 2026. We are highly confident that we'll be awarded this contract, but at this juncture, our customer has limited visibility on the timing of funding. While we await funding for this 7-figure deal, it is worth noting that we have already been awarded multiple contracts by this strategic customer during 2025. We delivered customer-specific eFPGA hard IP for this customer's first Intel ATNA test shipped last April. We expect to receive our allocation of test ships from this contract during Q1 2026 for our internal verification and characterization. We were subsequently awarded a mid 6-figure contract for a second Intel ATNA test chip. We delivered customer-specific eFPGA hard IP for this test chip during Q3. In addition to these Intel ATNA test chip contracts, during our last conference call, I announced this customer awarded us a contract for a $1,000,000 feasibility study that we are scheduled to deliver next week. We are anticipating a follow-on order in the coming weeks associated with this feasibility study that will enable the customer to tape out a very high-density Intel ATNA proof of concept device during the second half of 2026. The architectural changes we implemented in this feasibility study can be leveraged across all advanced fabrication nodes, which we define as 12 nanometers and below. With these changes, we can now address the lucrative markets that require very high-density eFPGA blocks in ASIC design and very high-density discrete FPGAs. This significantly expands our SAM for eFPGA hard IP and discrete devices, including our SRH FPGA, chiplets, and other storefront opportunities. We initiated our digital proof of concept chiplet program earlier this year as a strategy to accelerate our storefront chiplet initiative. Internally, we refer to this as POC. With the support of our large strategic partners, we have leveraged our existing eFPGA hard IP and readily available third-party IP to move forward rapidly and with minimal investment. In line with the forecast I shared in our last conference call, we completed the initial phase of the digital FPGA chiplet POC where the eFPGA IP is connected to UCIE IP and the necessary interface logic for the IPs to communicate. This digital simulation of the POC is available now and can be further developed to meet different customer requirements. Together with our ecosystem partners, we are engaging with prospective customers in the defense aerospace, industrial, and commercial markets. We plan to move forward with the next phases of the FPGA chiplet POC once external funding is committed. This phase will include incorporating additional IP, such as programmable GPIOs, AXI bus, DSPs, data converters, and interfaces such as PCI Express, to meet specific customer requirements. We are optimistic that our POC initiative will lead to storefront revenue in 2026. On October 2, we announced a new $1,000,000 EF hard IP contract for a high-performance data center ASIC that will be fabricated on TSMC's 12 nanometer process. In this ASIC, our eFPGA hard IP will be the primary IP in the design. This contract is a great illustration of our success in several of the points I mentioned earlier. The need for larger blocks of eFPGA, the increasing value contribution of eFPGA in customer designs, winning contracts for designs targeting advanced fabrication processes, and our growing success in commercial market sectors. We will soon announce the expansion of our involvement with a DIB that specializes in cybersecurity for strategic and tactical weapon systems. This DIB designs secure system-on-chip processors that leverage the enhanced security that only eFPGA can provide. Running these processes in hardware is inherently more secure than software solutions. With eFPGA at the heart of the designs, the hardware can be altered to respond to new threats and updated algorithms. We are proud to have been chosen as a trusted supplier of eFPGA hard IP for these designs. Last April, we announced an eFPGA hard IP contract with a new defense industrial base customer valued at $1,100,000 that will be fabricated on the GF12LP process. This application utilizes a large block of our eFPGA hard IP for critical functions, which is a trend we are seeing, particularly in designs targeting advanced fabrication nodes. With the cooperation of this DIB and its end customer, we are leveraging the large eFPGA core into a new 7-figure contract we expect to announce in the coming weeks. In the scope of this new contract, we will be provided with test chips that we will incorporate in an evaluation kit. The evaluation kit will be compatible with common third-party development environments used by both 12 o p test chip or our eFPGA hard IP in an ASIC. We anticipate having evaluation kits available in late 2026. With that, I will turn the call over to Elias for his presentation of financial data. Elias Nader: Thank you, Brian, and good afternoon, everyone. Total third quarter revenue was $2,000,000 and aligned with the midpoint of our guidance. Total revenue was down 52.5% from Q3 2024 and down 45% compared to Q2 2025. Rounded to the nearest $100,000, new product revenue in Q3 was $1,000,000 and mature product revenue was $1,100,000. New product revenue was down 73.1% from Q3 2024 and down 67.3% compared to Q2 2025. Mature product revenue was up from $700,000 in 2024 and up from $800,000 in 2025. Non-GAAP gross margin in Q3 was a negative 11.9%. This compared with non-GAAP gross margin of 65.3% in Q3 2024 and 31% in Q2 2025. The primary reasons for the lower Q3 gross profit margin are unfavorable absorption of fixed costs due to lower revenue and the fact that $300,000 of R&D cost were allocated to COGS. Non-GAAP operating expenses in Q3 were approximately $2,900,000. This was approximately $300,000 below the midpoint of our outlook due to the COGS allocation I just mentioned. This compares with non-GAAP operating expenses of $3,300,000 in 2024 and $2,500,000 in 2025. Non-GAAP net loss was $3,200,000 or $0.19 per diluted share. This compares to non-GAAP net loss of $900,000 or $0.06 per diluted share in Q3 2024 and a non-GAAP net loss of $1,500,000 or $0.09 per diluted share in 2025. The difference between our GAAP and non-GAAP results is related to non-cash stock-based compensation expenses, impairment charges, and restructuring costs. Stock-based compensation for Q3 was $800,000. Stock-based compensation was $1,200,000 in Q3 2024 and $800,000 in Q2 2025. Impairment charges were $300,000 in Q2 customers accounted for 10% or more of total revenue. At the close of Q3, total cash was $17,300,000 inclusive of utilization of $15,000,000 from our $20,000,000 credit facility. This compares with $19,200,000 inclusive of usage of $15,000,000 from our $20,000,000 credit facility at the close of Q2 2025. Net of approximately $200,000 raised with our ATM in July, cash usage during Q3 was approximately $1,900,000. This was primarily driven by tip-outs and wafer costs associated with our internally financed SRH FPGA test chip. In addition to these one-time costs, there were also expenditures related to revenue contracts and repayments for finance tooling and equipment. Now moving to our guidance and outlook for our fiscal fourth quarter, which will end on December 28, 2025. Based on backlog and customer forecast, we are targeting total revenue of $6,000,000 for Q4. Many of the contracts that support this outlook are already on the books or have been forecasted by customers to be awarded during the coming weeks. However, the customer for a contract valued at nearly $3,000,000 for commercial application has forecasted the award late in the quarter. If this contract is awarded, on or very near the date forecasted, we will be able to recognize a large portion of that revenue in Q4, and with that, realize our $6,000,000 objective. We have a very high level of confidence in winning this contract but note that it could push into Q1 2026. And that would result in Q4 revenue of $3,500,000. Due to this, our guidance range for total Q4 revenue is $3,500,000 to $6,000,000. At $3,500,000, we expect total revenue to be comprised of $2,500,000 in new product revenue and $1,000,000 in mature product revenue. At $6,000,000, we expect $5,000,000 in new product revenue. Based on the anticipated Q4 revenue mix, non-GAAP gross margin for the fourth quarter is expected to be approximately 45% at $3,500,000 of revenue and 68% at $6,000,000 of revenue. At the low end of the range, the primary reason for lower gross profit margin is attributed to less favorable absorption of fixed costs. Taking the range of our Q4 outlook into consideration, our full year 2025 non-GAAP gross profit margin is expected to be 38% plus or minus 5%. Our Q4 non-GAAP operating expenses are expected to be approximately $3,000,000 plus or minus 5%. With this, we are modeling full year 2025 non-GAAP OpEx would be approximately $11,300,000. Please note that given the nature of our industry, we may occasionally need to classify certain expenses to COGS versus OpEx, or capitalize certain costs. These classifications are related to labor and tooling for IP contracts with customers. This may cause variability in our quarterly gross margins and operating results that will usually balance out on the operating line. After interest and other income, at the low end of the revenue range, we forecast a Q4 non-GAAP net loss of approximately $1,900,000 or $0.11 per share. At the high end of our revenue range, we are projecting a non-GAAP net profit of approximately $600,000 or $0.04 per share. The main difference between our GAAP and non-GAAP results is related to non-cash stock-based compensation expenses. In Q4, we expect this compensation will be approximately $800,000. This is the same as Q3 2025 and down slightly from Q4 2024. As a reminder, there will be movement in our stock-based compensation during the year, and it may vary each quarter based on the timing of grants. Even at the low end of our revenue guidance range, we anticipate cash flow in Q4. However, the timing of payments from our US Government contract could negatively impact this outlook. Given the fact that we raised approximately $2,000,000 using our existing ATM in October, we're well prepared for any delayed payments associated with the US government contract. Thank you. With that, let me now turn the call over to Brian for his closing remarks. Brian Faith: Thank you, Elias. We have logged considerable progress during the last few months, and we are leveraging that progress to produce tangible results. Earlier, I talked about those results, and now I would like to take the next few minutes to help you understand the industry trends that are driving these results. With that understanding, I think you will appreciate what is driving the increased interest in FPGA technology, and why more companies are incorporating larger blocks of at the core of new ASIC designs. The overarching trend in both commercial and DIB designs is smart systems. Smart systems rely on algorithms for their intelligence. Algorithms can be processed much faster and with much lower power consumption in hardware than software. Hardware processing is also inherently more secure against cyber threats than software. The challenge here is that algorithms must be updated over the lifecycle of the product. This means hardware must be programmable so it can adapt to changing algorithms. This has led to the need for larger blocks of eFPGA at the heart of ASIC designs versus past use cases where small blocks of eFPGA were more commonly used as programmable connectivity bridges. This means both the need and the value proposition for eFPGA are increasing. Sophisticated smart systems designs typically target advanced fabrication nodes. This means higher fixed costs and longer design cycles for ASICs. To favorably offset these higher fixed costs, ASIC designs must deliver longer life cycles than in the past. Designs that employ eFPGA can adapt to changing algorithms, evolving functional requirements, and external changes that are not evident during the design cycle. This flexibility lengthens the lifecycle of ASIC designs and provides program managers with the confidence to move ASICs to production more quickly and with lower risk. This shortens design cycles and lowers development costs. Last but certainly not least, there are many programs in development today that must be compliant with rigorous environmental requirements ranging from radiation tolerant to strategic RadHEART. Our internally funded development of an SRH FPGA test chip is designed to address the full range of these requirements and accelerates our ability to pursue design wins. By using the same onshore 12OP fabrication process that DIBs have used for SRH ASICs, we are optimizing our chances of winning discrete FPGA designs we can storefront and contracts for eFPGA hard IP that customers can incorporate in designs. Further enhancing our position is the fact customers can execute designs with our Aurora user tools for both. The fact this investment by QuickLogic has been received very well by strategic DIBs is underscored by the commitment we have for SRH dev kit orders that we anticipate receiving by the end of this month. Before I turn the call over for Q&A, I want to take a moment to recognize Veterans Day and express my heartfelt gratitude to all those who have served our country. This day has personal meaning for me, as several members of my family have served, and I have deep respect for the sacrifices made by veterans and their families. It's something we honor at QuickLogic, especially as we develop technologies that contribute to our nation's defense and security. Operator, I would now like to open the call for questions. Operator: Thank you. We will now be conducting a question and answer session where selected analysts will be invited for questions. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star keys. Our first question comes from Quinn Bolton with Needham. You may proceed with your question. Neil Young: Hey, everyone. It's Neil Young on for Quinn Bolton. Thank you for letting me ask a question. First question I wanted to ask, hey. That's you know, like I said, on for Quinn. Sorry about that. So what is the or what impact is the government shutdown having on your business? Based on the prepared remarks, it sounds like you've seen some delays of projects. Have you seen any cancellations? And then, you know, given the ongoing shutdown, although it is allegedly supposed to end soon here, what gives you confidence in a rebound of the US strategic radiation Arden FPGA program in 4Q? Then I have a follow-up. Thanks. Brian Faith: Yeah. I think, firstly, let's zoom out. Programmable logic has been a big part of the defense industrial base for decades, and that's not changing. It's pervasive across, like, 75% of defense systems. And as I mentioned earlier, a very large percentage of the total semiconductor spend by the DoD. So that demand is not going away. The question is, as you get down to the nuts and bolts of these programs, is the funding gonna be there based on the budgets and whatnot? So I think that from the programs that we have today on contract, we're not seeing any delays with those. Elias did mention in his conversation about the cash usage for the quarter, or I should say net cash gain in the quarter. We did use the ATM in October sort of as anticipation in case there was something like this that happened as far as funding goes. So if there's a delay in funding, then we have no issue with that. If there's no delay, then we'll have a good positive cash flow for the quarter. Aside from that, if you look at other contracts coming down the pipe, I mean, you could find this all publicly that a lot of the new RFIs or RFSs or RFT that were coming out from the government for various development programs. Some of those were actually paused. And I think that's largely because some of those workers that were driving that were put on furlough. Again, I don't anticipate those going away permanently. It's more once the government's funded and people get back from furlough, these are gonna be full steam ahead. So you might see a delay in some of those new programs but not the ones that we're fully executing on today. I just don't see that change because this is not an experimental technology. There are actual programs of record that need this today. And moving forward on that. Does that answer your first question? Neil Young: Yeah. Very helpful. Thank you. And then the second question I wanna ask. So sounds like storefront revenue in 2026 is supposed to have a meaningful step up. If possible, I was wondering if you can maybe size the range of storefront revenue you think is possible. And then know, if not, maybe could give us some idea of what could drive upside to your internal you know, on the other side, perhaps drive downside to those expectations? Thanks. Brian Faith: Sure. I'll start with the what, and then I'll answer with the why. So on the what side, I mean, I would say significant for us is gonna be the 10% or thereabouts of total revenue. Without giving the exact number because we haven't put numbers out for 2026 yet, we think that the storefront revenue associated with these developments that we've been talking about is gonna be meaningful, meaning it'll be in that 10% range. And, yes, I do think next year's revenue will be notably higher than this year's total revenue. As you get into why do I feel like that, think if you go back to my opening remarks about the strategic radar initiative, I cannot tell you how many meetings I've had in the last quarter since the last conference call face to face with these DIBs. That see what we're doing, they like the fact that we've done this tape out that we talked about. And, you know, even as of today, lots of calls and emails asking for when they can get their hands on this. And so when you start to see people pulling for the technology and you know the projects that are under development public projects. Right? Strategic defense system is going under a major modernization. That's all public knowledge. And then if you throw into that this notion of hypersonics and golden dome, a lot of these programs are gonna need some level from strategic strategic radar down to radiation tolerant. The part that we've got in the fab now is designed to address those needs. So as we get it out, we start moving to these orders for dev kits. We start getting those out. Hopefully, by the end of Q1, I think we're gonna be a prime a real prime spot to monetize that and start turning talk that I've had for two and a half years into actual revenue and bottom line contribution. But it's not just one here. We're talking about all the major DIBs that we've been talking to. I think there's good demand for that. So that's why we think it's gonna be meaningful for next year. Does that answer your question? Thank you. Neil Young: Yes. Thank you very much. Great. Operator: You're welcome. Our next question comes from Richard Shannon with Craig Hallum. You may proceed with your question. Richard Shannon: Great. Thanks, Brian and Elias, for taking my questions. Quality of the audio here is pretty poor on my end, so hopefully you can hear me. Apologize. You can't hear. We can hear you just fine. Okay. Let's go. I guess at least one of us can. Lot of detail on the call here, and it's really interesting stuff going on here. Let me ask a kind of a big picture high-level question here. With your new initiative on the GF 12 LP process or initiative here. I guess, how do we think about the opportunity for FPGAs versus ASICs, it would include your hard IP in here. And are the dynamics here for timing for each of these markedly different than the other? Brian Faith: Well, I'd start by saying for 12 o p, that is a very commonly used process by the defense industrial base. Think the heritage of that is that that was the most advanced process that GlobalFoundries had, and GlobalFoundries is US owned and operated. So if you wanted to have something that was manufactured onshore by a US company, that was sort of the most advance you can get. Global has since come out with 12 o p plus, which is in it more advanced version of 12 o p. But if you think about what's involved in doing an ASIC or an SOC, you need lots of IP available, and you need lots of test data characterization on all that IP in order to feel comfortable to move forward with that on your ASIC. And in terms of the defense community, it's very risk-averse community as they should be. As they're designing these systems. There's a wealth of IP on 12 o p that there is it's today, it's known, it's understood, the characterization data, and the government, again, this is all publicly findable, the government has been, you know, helping people do ASICs on 12 o p. A lot of IP is available. There's government-funded multi-project wafers and all those things to encourage development on that node. So from that standpoint, I think you're gonna see TOFO p a lot. You've seen it in the past. You're gonna see it in the future. So then the question for us is, okay. We have our IP on 12 o p. Now we can build devices from that, or we could build or we could license that for people doing their own ASICs. And I think we've already talked about IP licenses that we have on ASICs. And you've heard timing on that. So people will start to be taping out those and going to production hopefully in the next few years. So there's a near-term license opportunity. There's a back-end royalty opportunity for us on that. And we definitely plan to monetize that to several million dollars a year. On the device side, that gets interesting because we've obviously taken our commercial total PIP, and we've done a RadHard implementation of that. So the goal behind that is to do this strategic RadHard FPGA and having taped that out. If you fast forward to when we could do that actual product dive for production on that, once that's out, that's gonna be a significant step function increase in the revenue potential for us personally because devices of that nature are always gonna have a much higher ASP than what a royalty contribution would be. So I think total p is critically important for us. And it's sort of a land and expand strategy on that now where we wanna license it to as many people as we can. We wanna have this strategic router FPGA capture. For revenue, and that's, I think, the basis of what could be hundreds of millions of dollars in revenue. I know if I answered your question. It's an entirety. If I didn't, just tell me. Richard Shannon: Did for the most part. I'm just trying to circle around this a bit here from a very high level. Might ask another pretty high-level question here, Brian, which is comparing the opportunity you're you've now undergone with GFS 12 LP, or how do you compare the opportunity to what you've been doing with RadHard with other foundries you've announced with I guess, a total perspective over, I'll let you pick a time frame. But how do you see the relative size of each of these opportunities for Brian Faith: By the other founders, you're referring to Skywater and Honeywell or somebody else? Richard Shannon: Those are the ones. Yes. Okay. Brian Faith: So I think without getting into programmatic details, I think that the 12 l p opportunity for us is a larger opportunity. Because it has the strategic pattern FPGA it also has IP licensing as an option. And one of the nice things, and I you know this, is that as you get smaller process technology, you get denser transistors you get more capability, you can stuff in a die, and there's gonna be higher value. To that. And we enumerate that as far as, like, where we're taking our eFPG architecture, but the same is true at 12 nanometer and 12 o p. The more transistors and functionality we can stick on that dye, the higher the value of the part's gonna be. And I think, again, the interesting part about 12 o p here is that we can get a lot of capability running on our FPGA. 12 o p. And maybe somebody doesn't even need to do an ASIC now. For 12 o p. That's huge. If we can start helping people address the needs of admission without having to go off and do a custom ASIC, you're talking about saving a customer or the government literally tens of millions of dollars in years of development. Cost and time. And that's the real benefit, I think, to getting our FPGA on 12 nanometer given that it's strategic at heart and so capable of a node. Now as you've talked about those other foundries, those are older process geometries that they've talked about. And so there's gonna be a difference in what you can do on the die. There's a difference in what you can do capability-wise. Not bad. It's just different. But I think the bigger bucket of revenue for us is gonna be what we're gonna be able to do at 12 nanometer on these for the time being. And I don't wanna get into more details on that just because that's a little too much programmatic information if I go further. Richard Shannon: Yep. I get that. Just that high level here is very helpful to think about. Brian, thanks for that. You mentioned expecting orders for your new dev kits here, I think, the end of the end of this month and delivering those sometime next year. Can you give us a sense of how many dev kits and how many customers do you expect to ship that to? And then what's kind of the design cycle once customers get that in hand in terms of their next steps? Brian Faith: So I'm not gonna give numbers. Probably not surprised to hear that. But it's gonna be enough that it will be a significant revenue number so not just the rounding. Number on the income statement. And we've you know, Elias talked about the money that we spent in Q3 on that. We've intentionally bought enough DAI that we can provide enough for these customers that wanna test these things out both in terms of dev kit and on just raw devices themselves on their own boards. Now the way this works from an evaluation perspective again, this is a very cautious and risk-averse community that we're talking about. They're gonna wanna do their own testing on these things, and that generally takes you know, a couple quarters to go off and do all of your exercising of your design and the different environmental tests that need to need to be done on those devices. You've probably read the TRL levels, technology readiness level. You know, we wanna get customers as quickly as possible to t r l five. And t r l five is where they can actually say that they've taken the part and they've run it through the rigorous testing that's representative of the environment that they're gonna operate in. And so we hope to be able to support our customers to get through that at some point. Through the middle of next year, and then at that point, start intercepting actual programs of record with us. And moving into you know, pretty late stages of the design, hopefully, with them. And again, that's why time is so critical. That's why we took the leap of faith to do their own design and to fund our own tape out knowing that MPWs don't come along very often, we wanted to make sure that we're on one that still gave us enough time to have the part come out, verify it, and get into the hands of the DIB. So they can start playing with it in their own labs. Not just trust our own data. Richard Shannon: Okay. Great, great perspective there, Brian. Last question. I'll jump out of line. A lot of irons in the fire that you have going on here, which is great to see here. And QuickLogic, obviously, is a fairly small company here. Seems like it might need a bit more support to a broad range of customers coming your way here very soon. How do we think about the spend levels we need to see next year, you know, whether it comes through OpEx or stuff that gets allocated to COGS here. How do we think about where could go if things go really well and you get a lot of attention? Lot of, lot of activity in these dev kits you're sending out. Brian Faith: So I'll start answering, and I'll ask Elias to chime on those. So from an engineering perspective and the go-to-market team perspective, you know, we obviously have identified certain critical hires. Some of them, you could find on our website today, and these are all about getting the right resources to get the devices out into the hands of the DIB as soon as possible. I mean, you can find that on our website. Engineering, field application engineering, and so on. As we move from test chip to actual product chip, there will be more expenses. There will be other things that need to be paid for. And I think that we have a good line of sight on what those are gonna be. And it's not gonna be outrageous for next year. I think it's gonna be very mindful of where we are. Financially as a company, and tied in with getting these customers on board with test jobs so that any investments we do make coming from the perspective of knowing what our customer wants, knowing the problem that our solution solves, and in some cases, even perhaps getting funding from customers to co-invest in these things so that they have skin in the game and it offsets the upfront cost for QuickLogic to get it to market. Elias Nader: Yep. Correct. And in fact, Richard, if I may add like, example, we have three new hires we're looking for. All engineers. And as such, you know, OpEx is definitely headcount moderating. So I don't anticipate even with all the additions that Brian is describing, probably we'll be looking at probably 3 and a half million of OpEx per quarter probably next year, but starting in Q2 or so. I think for now, we're okay with about under three. Richard Shannon: Okay. That's great detail, I will jump the line. Thank you. Brian Faith: Thanks, Richard. Operator: Before our next question, as a reminder, if any analysts like to ask a question, our next question comes from Rick Neaton with Rivershore Investment Research. You may proceed with your question. Rick Neaton: Thank you. Hi, Brian, and hi, Elias. Elias Nader: Hello, Rick. Rick Neaton: I'd like to understand your Q4 guidance. Are you proposing an either-or situation where we're either gonna have 3 and a half million plus or minus or 6,000,000 plus or minus? Is that what you're saying? Elias Nader: Yes. Because there's an issue with timing. Right? So if the order comes in, for example, to complete it to 6,000,000, it would come in late in the quarter. And we may be able to recognize certain portions of that revenue. But if it comes in and we're not able to deliver in that quarter, let's just say it comes in on the day of our close, of the day after, it's definitely Q1 at that point. So it's almost a timing issue, Rick. And that's why we went to great pains to identify the difference between 3 and a half million revenue and 6,000,000 revenue, and really it's one order. And as such, it's all about timing. So it's very difficult to answer a question now to someone saying, okay, would you be able to recognize a 100% of it? And the answer is clearly no. If it comes in in Q4. So that is why Brian and I agreed if that's the case and we anticipate that order coming in, let's just hope it does. At least in Q4, we at least have the possibility of beating the high end of the range. Rick Neaton: Thank you for that explanation. Sure. What do you forecast as your share count for 2025? Elias Nader: Well, $1,717,090,252 thousand shares. That's all I've outstanding right now. Rick Neaton: Okay. One final question. Elias Nader: Yeah. Rick Neaton: Yeah. No. That's fine. So that's your ending share count would be $17. Three months ago, you described your expected revenue decline for 2025 with the adjective modest. And now your Q4 guidance suggests 2020 to 30% decline in annual revenue from 2024. What changed since August to cause what I would describe as a significant double-digit percentage-wise revenue decline? Brian Faith: Rick, that's the challenge with having large IP contract values. And when we're talking $3,000,000 type ASPs for these. So I think in the call, mentioned one clearly is in 2026. So that goes from this year into next year. And then some other smaller ones that contribute to that, but again, when you have $3,000,000 IP contracts, if they don't happen in the year the fiscal year, there's gonna be a big change in percentage-wise from the revenue levels that we're at today. Once that becomes more of the norm and we get more of these higher value contracts, like, we're talking about now, that starts to smooth out some of that lumpiness. But when we're at the stage where we are now, there's almost unavoidable if something moves out that's gonna materially impact the percentage of that. Rick Neaton: Okay. Thanks for that explanation. And thanks for having me on the call. Brian Faith: Thanks, Rick. Of course. Operator: This now concludes our question and answer session. I would like to turn the floor back over to Brian Faith for closing comments. Brian Faith: Yeah. I want to thank everybody for joining us today. Hopefully, we'll connect with some of you at one of our upcoming events, including the Craig Hallum Alpha Select 101 Conference in New York on November 18, the semiconductor-focused annual New York summit also in New York on December 16, or the Annual Needham Growth Conference in early January 2026. Thank you, and have a good day. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.
Operator: Please stand by. We're about to begin. Good afternoon, everyone. My name is Beau, and I will be your conference operator today. At this time, I would like to welcome everyone to NEXGEL's Third Quarter 2025 Financial Results Conference Call. At this time, I'll turn things over to Mr. Valter Pinto, managing director of KCSA Strategic Communications. Please go ahead, sir. Valter Pinto: Thank you, operator. Good afternoon, and welcome, everyone, to NEXGEL's third quarter 2025 Financial Results Conference Call. I'm joined today by Adam Levy, Chief Executive Officer, and Joseph F. McGuire, Chief Financial Officer. Before we begin, I'd like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of risks, uncertainties, and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to the press release issued this evening and filed with the SEC on Form 8-K, as well as the company's reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliation of the non-GAAP to GAAP financial measures and certain additional information are also included in today's press release. With that, it's my pleasure to turn the call over to Mr. Adam Levy. Adam, please go ahead. Adam Levy: Thank you, Valter. And thank you everyone for joining us today to discuss our third quarter 2025 financial and operating results. For the 2025, we reported revenue of $2.9 million, flat year over year and slightly higher sequentially. While our revenue remained steady during both periods, gross profit margins improved year over year, coming in again in the low forties for the third quarter, and our adjusted EBITDA loss trend to $354,000 continued to narrow sequentially from a loss of $500,000 in Q1 to $419,000 in Q2, and now in Q3. Consistent performance in contract manufacturing consumer branded products while maintaining discipline and consistently improving our operational efficiencies were key factors in these results. I'll now provide an update on both our contract manufacturing and consumer branded product businesses. Starting with contract manufacturing. This segment of business has played a pivotal role in our growth, led by increased demand from existing customers as well as the successful onboarding of several new global corporations. For the third quarter, contract manufacturing revenue totaled $907,000, a slight increase year over year and sequentially. Our performance in contract manufacturing is led by our ongoing relationship with Cintas, which remains strong, and our SilverSeal product continuing to be included in their wound care kits and cabinets for businesses throughout the country. We began shipping initial orders to Cintas in Q4 of last year, and reorders for deliveries have continued each subsequent quarter and remain strong and steady. This partnership reflects the consistent value our advanced hydrogel technology brings to Cintas' customers and underscores our commitment to long-term recurring commercial relationships. The institutional review board study conducted under FDA guidelines and funded by our partner Innovative Optics is complete, and we are waiting on final data to be published. This 30-patient clinical trial evaluated the use of our hydrogels when applied prior to laser hair removal treatments. The primary goal of the study was to assess its efficacy in reducing the release of carcinogenic plume during these procedures. We have been in contact with the journal and do expect publication before year-end. As many of you know, in May, we signed an agreement with iRhythm, a publicly listed company on the Nasdaq and a leading digital healthcare company that creates trusted solutions that detect, predict, and prevent disease, to supply our hydrogels as part of their Zio ECG heart monitoring system. Zio is a single-use ECG heart monitor that provides a continuous single-channel recording for up to fourteen days. The monitor is worn on the patient's upper left chest, and it features NEXGEL's advanced hydrogel. After the conclusion of the fourteen-day monitoring period, the patient simply removes the device and mails it back to iRhythm for analysis. We anticipate iRhythm's first direct orders from us this quarter. The integration of our hydrogels into iRhythm's Zio Heart Monitor showcases another impactful application for our skin-friendly dermatologically safe technology. We look forward to growing this relationship as iRhythm scales their product. There are many other opportunities we are actively pursuing. Our new customer pipeline remains robust, with several of them now approaching launch. We expect contract manufacturing and white label to continue being a major driver of our expansion and success moving forward. Turning our attention to our consumer products segment, revenue remained stable year over year and sequentially. During the quarter, there were some unforeseen logistical delays that affected the movement of inventory, which delayed some of our product launches until late September. These have all been resolved, and we anticipate a very strong fourth quarter including these new products. In late Q2, heading into Q3, we began to see strong performance from the first of Silly George's new product launches, we previewed earlier this year. In addition to the continued growth of our core lash, we introduced an expanded beauty line of five new shades of lip gloss. While we only launched our new lip gloss in very late September, the launch has gone well so far, and we are looking forward to seeing how this product does as we head into the holiday season along with our other new product offerings. Similarly, Kenco Derm will double the size of its product portfolio with the launch of new products expanding into solutions for eczema, tapping into an even larger market opportunity for the brand that is leveraging its strong reputation as a leader in sensitive skin care. We expect these new products to hit the market in the next few months. Metagel has expanded its product line with the launch of several new offerings, including the Silver Seal wound and burn kit and the moist burn pads. These products are doing extremely well on Amazon, and we look forward to their continued growth. We have also just received approval from Health Canada to sell SilverSeal in that territory. Lastly, we could not be more excited about our expanding partnership with Stada, a European leader in consumer health. Building on the strong performance of HistoSolve, we recently amended our agreement to broaden the collaboration considerably. Together with Stada, we are planning to soft launch one new product in December with several more slated for early 2026. Gluticin, a digestive enzyme for gluten sensitivity, will be the product soft launched in December with a full marketing and promotional plan for January. This next phase of the partnership includes the planned launches of additional digestive enzyme formulas and skin solutions targeting scars and stretch marks, products we're now positioned to bring to the North American market. As you all know, Stada provided $1 million in non-dilutive financing that is now on our balance sheet to support the upcoming product launches and marketing initiatives, a show of confidence in our partnership. Before I turn the call over to Joseph F. McGuire for a review of our financial results for the third quarter, I would like to discuss our outlook for the fourth quarter and full year. For the fourth quarter, we do expect revenues to increase sequentially, and Q4 will be a record quarter for the company. However, conservatively as we sit today, I expect full year 2025 revenues of between $12 and $12.5 million, with the higher end of the range taking into account a strong consumer branded products holiday season. As I have said many times, for me, even more important than top-line growth is a path to profitability. In the third quarter, we narrowed our adjusted EBITDA loss to $354,000, and with the sequential growth that I expect in Q4, I see that narrowing even further to very close to adjusted EBITDA breakeven. Thank you to our shareholders for your ongoing confidence in our team and mission. Your support remains essential as we continue to execute our growth strategy and build long-term value together. I would now like to turn the call over to Joseph F. McGuire, our Chief Financial Officer. Joseph F. McGuire: Thank you, Adam. Today, I'll review our key financial results for the 2025. For the 2025, revenue totaled $2.9 million, flat as compared to $2.9 million for the 2024. Contract manufacturing and branded product revenue remained stable year over year. Cost of revenues totaled $1.7 million for the third quarter 2025, as compared to $1.8 million for the 2024, a decrease of 5.2%. The decrease in cost of revenues is primarily due to a decrease in materials and finished products, and a decrease in amortization and depreciation offset by an increase in commission and contract fees and an increase in equipment production and other expenses. Gross profit totaled $1.24 million for the 2025, slightly higher than gross profit of $1.16 million for the 2024. Gross profit margin for the 2025 was 42.4%, an increase as compared to 39.3% for the 2024. Selling, general, and administrative expenses totaled $1.96 million for the 2025, as compared to $1.94 million for the 2024. The slight increase year over year is primarily attributable to increased compensation and benefits, fair-based compensation, and professional and consulting fees, offset by a decrease in advertising, marketing, and Amazon fees. EBITDA loss, a non-GAAP financial measure, totaled negative $550,000 compared to negative $533,000 for the 2025, and negative $577,000 for the 2025. Adjusted EBITDA loss, a non-GAAP financial measure, totaled negative $154,000 compared to negative $419,000 for the second quarter 2025 and negative $500,000 for the 2025. Net loss attributable to NEXGEL stockholders for the 2025 was $653,000, as compared to a net loss of $693,000 for the 2024. As of September 30, 2025, the company held a cash balance of approximately $938,000 and a restricted cash balance of $920,000, related to receiving $1 million in non-dilutive capital from Stada to support upcoming product launches and marketing efforts. As of November 10, 2025, NEXGEL had 8,143,133 shares of common stock outstanding. I would now like to open the call for questions. Operator? Operator: Thank you very much, Mr. McGuire. Ladies and gentlemen, at this time, if you have any questions, please press 1 at this time. And if you find your question has been addressed, you can always remove yourself from the queue by pressing 2. Once again, 1 for questions. We'll go first this afternoon to Nazibur Rahman with The Maxim Group. Nazibur Rahman: Hi, everyone. Thanks for taking my questions. I just have a few. First, I just want to start on the logistical delays you mentioned. Could you elaborate a little bit more on that? Like, how many days worth of sales did it end? And, I guess, how much could those sales have been worth? I guess I'm trying to get a sense of what the underlying demand could have been or the impact. Adam Levy: So hi, Nazibur. It's good to hear from you again. So the total delay was varied on different products. A lot of it had to do with stuff getting stuck in customs and trying to create new ways of getting the product into the country because everything was sort of held up with the new regulations and changing. It probably impacted the existing products not too severely. But where it really mattered was we were hoping for a late August early release on the lip gloss as it results. It was only released on September 27, right at the very end of the quarter. And that happened with a couple of products. So, you're probably talking about $100,000 to $200,000, maybe depending on what it would've done during that period of time. So, not devastating, but it was frustrating at the time. Nazibur Rahman: Got it. Thanks. And just kinda going off that. So I think on the call, you said you expect you revised down to $12 to $12.5 million for the full year. Obviously, the last couple quarters have been flat. I guess what kinda gives you confidence in that number now, especially, like, the top end of that number? Are you seeing any tailwinds or any data points that would suggest you could get there, or is it more just the seasonality you expect? Adam Levy: No. Actually, this is a great point, which is we appear to be and we are flat from third quarter last year to third quarter this year. But understand in third quarter last year and fourth quarter last year, we launched with two new customers on the contract manufacturing side that were quite large. So Q3 of last year was a record for us because Owens and Minor was onboarded. And for example, and I'll use this just as an example with round numbers, in Q4, we had very, very large sales, call it $400,000 from the initial orders of Cintas. Well, this year, the initial orders of Owens and the initial order of Cintas are replaced by repeat orders at about 50% of the size and volume. The reason we're flat is because the rest of the business is still growing, the rest of the customers are still growing. So without onboarding anybody new in Q3, yes, we're gonna have that drop, we maintained where we are. Well, in Q4, but we still have the growth offsetting it of the rest of the products. And we'll be shipping some new customers, like iRhythm. So we already kinda know that the fourth quarter will be a very large contract manufacturing quarter and will be up. What we're not as sure about is how big are the new products and the existing products gonna do during the holiday season. That's always the wildcard with the economy and everything else. So that's really, you know, we know it's gonna be fourth quarter is always the strongest. We know sales will also increase there. Just how much is difficult to tell. Does that answer the question? Nazibur Rahman: Got it. That was helpful. And one last question, if I may. I know previously you talked about AbbVie and the restarting device. I know AbbVie took a large impairment charge on the recycling device recently. Do you know if they're still planning on launching a product and just what's kinda going on with that? Adam Levy: So it's really puzzling and very frustrating. On October 24, I received an email from AbbVie saying that they put in the RF and that we'd be receiving our first PO shortly, which I was hoping to announce on this call. And then I've heard from others that they've actually taken that charge. So I'm not sure where AbbVie stands. It might be the worst case of one hand not knowing what the other hand is doing that I've ever seen. But it is a frustrating situation trying to get to the bottom of it, but I am very concerned about it. And, honestly, I really don't know. Nazibur Rahman: Okay. Understood. Thanks for taking my questions. Adam Levy: Sure. Operator: Thank you. And just a quick reminder, everyone. Star one for questions today. We'll go next now to Kirtan Patel, private investor. Kirtan Patel: Yes. Hello? So what is the current order book like from the contract manufacturing side? Adam Levy: So it's strong. I don't wanna get into too much detail as to what it is, but all of the existing continue to order. We're seeing growth, you know, along the CAGRs of their growth of their medical devices across the entire segment. We've got a pretty robust and full pipeline of potential new customers, some of whom will be onboarding this quarter, next quarter. So we're very bullish on how our contract is going to grow over the next two or three quarters. At least we have visibility that far out. Kirtan Patel: Got it. And do you still have a strong cash position to be able to fulfill those orders? Adam Levy: Yes. Yeah. And contract manufacturing orders are something that we do very well. We built our inventory raw material side for the contract manufacturing in Q3. So now Q4 is where we start to recoup some of that money, reduce that receivable somewhat, reduce that inventory somewhat by shipping the products and then collect the receivables. So Q4 has generally been a very strong cash sort of position for us because you do get all of those direct-to-consumer sales that you get paid very, very quickly. And we have built inventory for what we think will be a strong quarter. So as we move through that inventory, that'll help our cash position even further. Kirtan Patel: Got it. And from your last quarter, are you still expecting to achieve a positive EBITDA by the end of the year? Or has that changed? Adam Levy: Yeah. We think so. If not, it's gonna be super close. But we think it's really gonna depend on the consumer products. We think that, you know, we were hoping to chop more off. I'll be honest with you. I was hoping to chop more off in Q3 than we did. But with what we see coming is a very strong fourth quarter in contract, as well as if we can get a very good quarter in terms of consumer products in Q4, I think we have a chance to get there. We'll see. Kirtan Patel: Got it. Thank you. And that's about it. Thank you so much. Adam Levy: Sure. Thank you. Operator: Thank you. And just a final reminder, ladies and gentlemen, any further questions this afternoon, please press 1, and we'll pause for just one moment. And, gentlemen, it appears we have no further questions this afternoon. So that will bring us to the conclusion of today's NEXGEL third quarter 2025 financial results. We'd like to thank everyone for joining us this afternoon, and wish you all a great remainder of your day. Goodbye.
Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oklo Third Quarter 2025 Financial Results and Business Update Call. It is now my pleasure to turn the call over to Sam Doane, Director of Investor Relations. Please go ahead. Sam Doane: Good afternoon, and thank you, operator. Welcome, everyone, to Oklo's Third Quarter 2025 Earnings and Company Update Call. I'm Sam Doane, Oklo's Director of Investor Relations. Joining me today are Jake Dewitte, Oklo's Co-Founder and Chief Executive Officer; and Craig Bealmear, our Chief Financial Officer. Today's accompanying slide presentation is available on the Investor Relations section of our website. Before we begin, I'd like to remind everyone that today's discussion, including our prepared remarks and the Q&A session that follows, will include forward-looking statements. These statements reflect our current views regarding trends, assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those discussed today. We encourage you to review the forward-looking statements disclosure included in our supplemental slides. Additional information on relevant risk factors can also be found in our most recent filings with the SEC. Please note that Oklo assumes no obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required by law. With that, I'll now turn the call over to Jake Dewitte, Oklo's Co-Founder and Chief Executive Officer. Jake? Jacob Dewitte: Thanks, Sam. The first half of this year brought an incredible wave of momentum across the advanced nuclear sector from new federal programs and executive actions to growing customer and investor interest in clean, reliable power. That momentum has continued into the third quarter and is creating a very different environment for deployment than even a year ago. We strongly believe Oklo is uniquely positioned to thrive in this environment. Our mission at Oklo continues to be focused and clear. To deliver clean, reliable, affordable energy at a global scale. We started this company with the belief that Advanced Nuclear Power could play a transformative role in the world's energy future. That meant rethinking everything? Are we design reactors, how we license and feel them and how we operate them and engage customers. That same vision continues to guide us today and it remains fully aligned with where we believe policy, technology and customer demand are headed. Our competitive advantages come from the intersection of several core strategies. Our business model, our scalable design and our proven technology. First, our build-own-operate model allows us to sell power directly to customers under long-term contracts. That creates recurring revenue and streamlines the regulatory process by keeping ownership and operational control within Oklo. Second, our small scalable design means we can deploy assets quickly and incrementally, matching customer demand while leveraging existing industrial supply chains and factory fabrication. That reduces on-site construction risk, lowers cost and supports faster rollout. And third, our liquid metal [ stadium ] cool technology is built on a foundation of more than 400 combined reactor years of operating experience worldwide, including the experimental [ breeder reactor 2 ], which operated successfully for 3 decades in the United States. That operating record is one of the most tested, demonstrated and validated in advanced nuclear history, and it gives us deep confidence in the performance, safety and reliability of our design. It's also the reason we can move directly into commercialization without the need for costly time-consuming demonstration plans. Oklo was building on that proven foundation to become the hub for metal fuel and fast reactor innovation, integrating design, licensing, fuel supply and recycling into a unified platform. This gives us a significant flexibility across fuels, [indiscernible], recycled material and down-blended alternatives and positions Oklo at the center of how this next phase of Advanced Nuclear Power will scale. Additionally, Oklo's work across areas needed to deploy its reactors to position the company to benefit from capabilities, including products and services from fuel fabrication recycling and isotopes to go along with power and heat sales from its reactors. Together, these advantages position Oklo to deploy at speed and scale with the model built for long-term growth and leadership in advanced nuclear energy. We have continued to make meaningful progress this quarter across every part of the business, from licensing and project execution to fuel development partnerships and the customer pipeline. On the regulatory front, we were selected for 3 projects under the Department of Energy's new Reactor Pilot Program, or RPP, giving Oklo access to Department of Energy authorization pathways that accelerate deployment time lines and complement our ongoing NRC work. And we submitted our principal design criteria topical report to the NRC and received notice of acceptance in just 15 days, about half the time typically expected. NRC also indicated that the draft evaluation is expected in early 2026 which would be less than half the traditional review time line. And just before the RPP announcement, Oklo also completed a readiness assessment with the NRC for the Phase 1 of its [ coal ] application, which found no gaps to application acceptance for review. We also broke ground on the Aurora INL, marking the start of physical construction activities. We also advanced plans for Atomic Alchemy Pilot Project under the RPP. Finally, we successfully completed fuel assembly flow testing, demonstrating progress in the fabrication and handling systems that will serve many Oklo powerhouses. In fuel and recycling, we announced Oklo's Advanced Fuel Center up to $1.68 billion investment that anchors our long-term fuel supply chain and were selected for the Department of Energy's Advanced Nuclear Fuel line pilot program, which accelerates U.S. fuel fabrication capacity. We achieved a key regulatory milestone with the Department of Energy's approval of the Nuclear Safety Design Agreement, or NSDA for the Aurora fuel fabrication facility. The NSDA, the first approved under the DOE's fuel line pilot projects was completed in under 2 weeks and demonstrates a new authorization pathway that can help unlock U.S. industrial capacity, strength in national energy security and accelerate domestic fuel production under the executive order, deploying advanced nuclear reactor technologies for national security. The approval reflects the strength of our technical submissions and proactive DOE engagement and builds on our Aurora INL groundbreaking to advance an integrated model of fuel production, plant construction and power delivery. We also strengthened our partnership with Idaho National Laboratory through a new agreement with Battelle Energy Alliance, the labs management and operations contractor. The collaboration focuses on advancing fuel and materials research that supports Oklo's and other companies' commercial deployments and takes advantage of Aurora INL's unique ability to generate real-world data during operation, including fast neutrons for testing and research. That data will help us characterize materials faster, characterize fuels faster, improve designs more efficiently and continue driving innovation across the nuclear technology landscape. In other words, this partnership is about expanding the Aurora INL's mission to include fast neutron radiation capabilities. These are capabilities that have been lacking in the U.S. for decades. We signed new international partnerships with European nuclear companies Blykalla and newcleo to advance joint technology and field manufacturing capabilities and demonstrate our emerging technical leadership in this space. On the customer pipeline side, we're evaluating potential power sales with the Tennessee Valley Authority as part of our Tennessee Fuel Center initiative and we're continuing to advance discussions with both previously announced and new customers as we expand our commercial pipeline across data centers, utilities and defense markets. We are also exploring potential fuel offtakes with the Tennessee Valley Authority as part of our Tennessee Fuel Center as well. And financially, we closed the quarter with a strong balance sheet, approximately $1.2 billion in cash and marketable securities with cash burn tracking in line with expectations. Following the close of the third quarter, we also filed a new shelf registration to maintain flexibility and access to capital markets as we scale. Taken together, these milestones reflect the execution momentum behind Oklo's potential for near-term success, licensing, acceleration, supply chain buildout and commercial traction all living in parallel. This quarter marked a major milestone for Oklo with our selections under the Department of Energy's reactor pilot program. The [ RPT ] was established earlier this year following new executive actions that directed [ UE ] to take a leading role in advancing next-generation reactor deployment as part of the broader U.S. energy renaissance. Nuclear power is a federal priority with strong bipartisan support, reflecting the shared recognition that Advanced Nuclear Energy is essential to meeting America's energy security and economic objectives. Oklo received 3 of the 11 granted awards, 2 led by Oklo and 1 by our subsidiary, Atomic Alchemy. The awarded projects include [ local ] Aurora INL, our first powerhouse, atomic Alchemy Pilot plant for radioisotope production and Oklo's Pluto, a test reactor supporting advanced fuel and component development. Participation in the reactor pilot program gives us access to a Department of Energy Authorization pathway, aligning our projects with federal review and creating the potential to accelerate construction and operation time lines. Just as importantly, the RPP provides a venue for generating operating data that will help derisk commercial licensing for future powerhouses, strengthening our overall regulatory foundation. This selection positions Oklo's one of the first advanced reactor companies moving from design to build under DOE oversight, reinforcing that the momentum behind nuclear energy in the United States is broad-based, durable and growing. The DOE's authorization pathway represents one of the most important policy shifts we've seen for advanced reactors in decades, expanding regulatory tools without reducing safety expectations. For Oklo, it effectively provides a structured approach and process to begin constructing our first powerhouse under DOE oversight while maintaining full alignment with NRC standards. The DOE pathway enables faster demonstration of clean power while maintaining the same rigorous safety expectations and provides an opportunity for a rapid transition to an NRC license for full commercial operation. Here's what changed. In May, new executive actions established a clear DOE authorization process for first-of-a-kind nuclear plants, a process that now complements rather than replaces traditional NRC licensing. Within months, we moved to qualify our Aurora INL powerhouse under that framework. We expect to finalize our other transaction authority or OTA agreement and have approval of our Nuclear Safety Design Agreement, or NSDA, with the DOE by the end of the year. So here's how it works. DOE will authorize construction and initial operations under its modernized framework, which allows us to begin building while the longer commercial NRC transition proceeds in parallel. We don't need full operating approvals to finalize construction, which reduces idle time without compromising safety. Once the initial data is collected, the project can then transition to NRC oversight. This approach builds on DOE's decades of experience managing nuclear facilities with an exceptional safety record from naval propulsion to national laboratory programs. It doesn't lower the bar. It simply puts the right reviewers in the right place. From a broader perspective, this model has the potential to unlock U.S. industrial capacity, strengthen national energy security and create a repeatable template for future advanced reactor deployment. Importantly, DOE and the NRC are complementary, not competitive. Their teams have a long history of collaboration, and we expect continued coordination throughout this process to ensure a smooth handoff when conversion occurs. For investors and customers, this change hopefully means less time line risk, better capital efficiency and earlier validation of cost and performance. The bottom line is that DOE authorization derisks the Aurora INL regulatory path and allows Oklo to focus on building and operating powerhouses while maintaining the same safety rigor and establishing a scalable modern pathway for the next generation of advanced reactors. As we pursue authorization under the DOE, we're maintaining steady momentum with the NRC to prepare for full commercial licensing. This is a parallel engagement strategy, not competing reviews, but coordinated progress that lets us move faster while maintaining regulatory rigor. Our work with the NRC remains focused on 2 priorities: first, completing ongoing pre-application reviews and topical reports for the Aurora INL and future sites; and second, leveraging data from DOE authorized operations to further inform NRC licensing for the broader commercial fleet. In practice, this means we'll finalize DOE authorization documentation and begin Aurora INL construction and operations under DOE oversight while continuing NRC pre-application work for follow-on deployments. The learnings from real-world performance data, fuel behavior and operating experience will feed directly into the NRC's combined license process, which we expect could compress the time line from the Aurora INL 2 fleet deployment. We expect to submit licensing actions next year to support construction for subsequent sites, and our goal is to use operating data from the Aurora INL to strengthen each subsequent submission. This strategy ensures that as DOE authorizations advance early construction and operation, the NRC pathway continues in parallel, creating a repeatable data supported model for commercial powerhouse deployment. We expect the result to be a clear regulatory sequence, build and operate under DOE, then transition to NRC oversight. Acting on lessons learned, we will demonstrate a replicable commercial licensing framework for the next generation of Oklo powerhouses. Idaho National Laboratory, we've officially broken ground on our first Aurora powerhouse, marking a major milestone in Oklo's transition from design and permitting to active construction. As mentioned, we're progressing under DOE's reactor pilot program, which provides federal oversight and coordination as we move from preparation to build. [indiscernible] has mobilized major equipment to the site and earthworks began October 27 to be followed by controlled blasting in mid-November, targeting full excavation in early January. For Oklo, this is a defining moment. It represents the shift from planning to physical build with the same discipline and execution framework that will carry through our future projects. This first site establishes the template for our [indiscernible] powerhouses demonstrating our ability to execute as we move toward operations. With construction now underway at INL, we're also making strong progress on the procurement and supply chain front, securing the long lead components and supplier commitments that are scheduled on track. This quarter, we completed major procurements for in-vessel and ex-vessel handling machines primary and intermediate sodium pumps, the reactor trip system and fuel assembly nozzle fabrication. These are some of the most technically significant systems in the powerhouse and having them under contract early locks in pricing time lines and fabrication slots with qualified vendors. It also demonstrates the maturity of our supply chain, a key differentiator for Oklo, showing that we can sort of put components through proven industrial partners rather than relying on bespoke first-time suppliers. We are procuring these components in a dynamic and continually evolving environment. I mean fluctuating tariffs, supply chain pressures and inflation. These challenges make procurement especially challenging. But our business model and the repeatability of our asset deployment plans will allow us to learn from our experience over time, even if costs are higher or there are other unexpected developments that impact our first few powerhouses. We have the opportunity to iterate and improve as we scale up our operations to ultimately build a reliable and cost-effective supply chain. It is also worth noting that the future reactor deployments may benefit from a reduction in costs compared to the Aurora INL in part due to the required additional fuel and core testing capabilities. This progress builds real confidence in our ability to execute efficiently and scale repeatedly as we move from this first powerhouse to a broader fleet under the DOE's reactor pilot program and future commercial deployments. Our wholly owned subsidiary, Atomic Alchemy also achieved a major milestone this quarter with its selection under the Department of Energy's reactor pilot program. The selection makes the Atomic Alchemy pilot facility eligible for DOE authorization, creating a faster pathway to construction and operations. The pilot facility is designed to prove isotope production validate supply chain readiness and derisk the deployment of a larger commercial scale VIPR facility. In the near term, the team is finalizing [ dely ] authorization documentation and advancing site selection and procurement with the intent to be operational by mid-2026. Over the medium term, Atomic Alchemy will begin at a separate lab scale facility, production and initial isotope sales, creating an early revenue stream while expanding commercial and operational experience. Longer term, the focus shifts to securing an NRC license for full-scale VIPR facility, scaling to multiyear offtake agreements and carrying forward the procedures and quality assurance systems, proven in the pilot facility to streamline future deployment. What's important here is that Atomic Alchemy isn't just an adjacent business. It's a strategic extension of Oklo's technology platform. The business creates near-term production revenue potential and represents a paradigm shift in an underserved high-potential market. The Atomic Alchemy VIPR Reactor or Versatile isotope production reactor is also quite a bit different than Oklo's Aurora. The VIPR reactor is designed to produce isotopes and therefore produce neutrons. It is an open water cool type reactor that is not pressurized and uses conventional 17x17 pressurized water reactor fuel bundles fueled with LEU at a shortened type. This means the reactors can be built and supplied quickly and produce a variety of isotopes that serve health care, defense and industrial applications. Isotopes are, generally speaking, vastly undersupplied in the U.S. and can play a similar role to critical minerals in terms of national resilience and security. Our unique and differentiated approach to fuel brings together several complementary sources to cover near, mid- and long-term needs. Near term, we're drawing on DOE materials like [ EBR 2 ] fuel and potentially plutonium-based feedstock to fuel early units. Midterm, our partnerships with Centrus, Hexium and others expand fresh HALEU [indiscernible] and reduce single vendor risk. Longer term, our Tennessee Advanced Fuel Center positions us to recycle and fabricate our own fuel domestically at scale from used fuel inventories. Taken together, this strategy reduces cost and schedule risk strengthens U.S. energy resilience and ensures we can keep building regardless of how the enrichment market evolves. Fuel remains one of the most important inputs for advanced nuclear power and one of the most complex to forecast right now. The reality is that the cost environment for HALEU and related materials looks very different today than it did in 2024. Tariffs, supply chain constraints, inflation and [indiscernible] sanctions have all changed the market dynamics. The global investment landscape is still shifting and so are the pricing assumptions that come with it. This is challenging work, and we're owning it. We're building the most resilient, diversified fuel strategy in the sector because we know fuel optionality will determine who scale successfully in the years ahead most quickly. We don't yet know where HALEU costs will ultimately land. But what we do know is that Oklo has more pathway than flexibility than other companies in the space. We'll continue refining our cost models and expect to share more detailed updates next year as the pricing picture becomes clear, but the takeaway today is straightforward. Fuel markets are changing and Oklo is built to adapt, especially in the current fuel environment with additional government materials becoming available to serve as bridge fuel supplies. We think it's useful to spend a little time eliminating HALEU's supply chains and how they work. The current models in the U.S. and in the world, generally speaking, involve several steps starting with your [indiscernible] mining to then [indiscernible] to then conversion, to the enrichment, to then [indiscernible] conversion and then ultimately to fuel fabrication. Next-generation models might change this significantly. This is one of the reasons why we take a multipronged approach in partnering with HALEU providers, not just to work with those operating today in the supply chains that fit today's models, but also for next-generation technologies that have the potential to have lower capital and operating costs that can simplify the processes and offer value chain consolidation and operate more flexibly, which can all together mean opportunities for lower cost HALEU. And beyond HALEU, Oklo's also taking a multipronged approach for sourcing fuel both in the near term as well as the long term. We discussed this a little bit already, but there are several major pools of material to think about for fueling our reactors going forward. For one, there are significant government uranium reserves. Some of this material stands in highly enriched form and can be downloaded into fuel for reactors. Some of it might also be in prior or previously irradiated fuel that can be recovered and then produced in the fuel for reactors. That is where we're getting the first 5 tonnes of fuel for our first plant, 5 tonnes to fuel produced from EBR-II fuel that has been recovered and downblended to make fuel suitable for use in our Aurora plan. An important feature about some of that material is that it carries impurities because it's the time in a reactor. Those impurities do not necessarily make it suitable for all reactors to be able to use it, but our reactor by being a fast reactor and by being designed to be versatile and its fuel can use it. Additionally, the government has significant reserves of plutonium that it is now making available as a bridge source of fuel for commercial power plants. This is significant because the government recently announced up to 20 tons being made available in tranches, that could be made into about 180 metric tons of Aurora fuel. This is a massive bridge supply of fuel that can get us beyond not just our first few plants, but out into our first 10 to 20 plants within an opportunity to scale beyond that with commercial enrichment sourcing as well as recycling. And the way this works is by taking the plutonium and blending it with unenriched uranium to make a fuel that can be used in our reactors. That negates and avoids the need for any enrichment and can accelerate time to market as well as reduced total capital investments needed to actually produce fuel for our plants. We are exploring the opportunities to use this material given that it can be a significant bridge to future supplies. Those future supplies really comprised of 2 main approaches is how we think about it. There are the conventional enrichers that, in many cases, are already producing LEU and are either actively or exploring expanding production into HALEU as well as advanced enrichers that bring forward different technologies and centrifuges that have unique upside and potential but may, in some cases, stand lower on the technology readiness development spectrum. But these technologies offer opportunities for value chain consolidation, lower cost of production, lower cost of operation and ultimately, the ability to use lower-cost feedstocks. This can ultimately translate to lower cost HALEU at scale as well. And ultimately, recycling is a key part of our fuel strategy because of how significant it is in unlocking significant reserves of fuel. I use that term duplicity on purpose, significant because it is hard to overstate how much material there is in the U.S. that can be made into fuel. The reason this is the case is because reactors in general, only use a few percent of the fuel in one path. So today's reactors, for example, only use about 5% of the fuel in a single path through the reactor. That means the use fuel that's discharged or often refer to as waste actually has about 95% of its fuel remaining. With our recycling technologies, we can tap into that, pull that material out and reuse it as fuel in our reactors. We can also recycle the fuel from our reactors as well as other advanced reactors that will likely get built. This positions Oklo well to have a long-term, very durable supply of fuel going forward. Continuing on recycling. One of our biggest advancements this quarter was the announcement of our Advanced Fuel Center in Tennessee, beginning with the fuel recycling facility located at Oakridge. This is the first privately funded recycling facility of its kind in the U.S., representing an investment of up to $1.68 billion in creating more than 800 permanent jobs. In addition to the fuel recycling facility, this investment is expected to include other Oklo assets, such as one or more [ POWERHOUSE's ] and a fuel fabrication facility. The facility has another layer of vertical integration to Oklo's business, enabling us to convert use fuel into new metal fuel for our powerhouses. It strengthens U.S. capability and gives Oklo more supply chain control on our path to scale. We're tracking towards an initial production ramp-up in the early 2030s with regulatory engagement already underway through the NRC pre-application process. We're also working with the Tennessee Valley Authority on potential collaboration around used nuclear fuel feedstock transfer as well as power generation from are powerhouses. This project isn't just about fuel supply. It's about creating a durable domestic foundation for advanced nuclear power. It anchors Oklo's long-term fuel strategy and positions Tennessee as a national hub for clean energy manufacturing and innovation. In parallel, there's growing federal support for advanced fuel recycling. Just last week, the Senate Energy and Public Works Committee announced the Nuclear Refuel Act of 2025, which proposes updates to the Atomic Energy Act to provide regulatory clarity for licensing advanced fuel recycling facilities. If enacted, this legislation could further streamline the licensing process for our Tennessee facility. Building on the momentum from the Tennessee Fuel Center, we were also selected by the Department of Energy for the Advanced Nuclear Fuel Line Pilot Program. This program is designed to accelerate construction and operation of domestic fuel fabrication facilities, strengthening U.S. capability and ensuring that advanced reactors like ours have a reliable long-term supply of fuel. Under this initiative, DOE awarded 3 Oklo led fuel-related projects, allowing us to build and operate facilities that directly support our powerhouse deployments and complement the work underway at our Advanced Fuel Center and Aurora INL fuel fabrication facility. The Fuel Line Pilot Program nears the intent of the reactor pilot program to create alternative pathways for advanced nuclear deployment that move faster, streamline reviews and leverage private investment alongside federal oversight. For Oklo it does 3 important things. It presents an opportunity to secure near-term fuel for early [ PowerHouses ], producing one of the biggest bottlenecks facing the industry. It reinforces U.S. manufacturing and fuel independence supporting the national effort to rebuild the [indiscernible] nuclear capacity and it stacks directly with our Tennessee facility, creating a vertically integrated ecosystem for recycling and fabrication and deployment. Together, these programs, the reactor pilot and fuel line pilots form the backbone of a modern U.S. new [indiscernible] strategy. And Oklo's one of the few companies positioned across both with the capabilities to deliver on near-term milestones while building the infrastructure for the long term. With that, I'll pass it to Craig to share progress on our strategic partnerships and financials. Craig? Richard Bealmear: Thanks, Jake. As Jake mentioned, Oklo is leading the advanced nuclear effort here in the United States but we are also experiencing growing international momentum around fast reactors and metal fuel technology. This quarter, we signed new transatlantic partnerships with Blykalla and newcleo, 2 European companies advancing fast reactor and fuel fabrication technologies. These collaborations strengthen our supply chain strategies, expand our technology base and align with broader trends across both the United States and Europe for a renewed commitment to nuclear innovation, manufacturing and partnership. With Blykalla, we entered into a joint technology development agreement to collaborate in key areas where there's mutual benefit such as balance of plant components, regulatory learnings and fuel strategy. We also co-led their recent funding round building across Atlantic partnership that benefits both companies. With newcleo, we've launched a strategic partnership to develop advanced fuel fabrication and manufacturing infrastructure in the United States under domestic oversight. Newcleo could invest up to $2 billion through an affiliated vehicle to expand U.S. capacity and support our metal fuel platform. Taken together, these collaborations represent the next step in Oklo's evolution and could help us accelerate cost reduction, leverage international capital and extend our reach into markets where demand for advanced nuclear power is growing rapidly. Oklo is combining proven fast reactor technology with a global ecosystem of partners suppliers and investors who are equally focused on delivering scalable, zero-carbon baseload power. I'll now provide a summary of our financials. Oklo's third quarter operating loss was $36.3 million, inclusive of noncash stock-based compensation expense of $9.1 million. Oklo's loss before income taxes in the third quarter was $29.2 million, which reflects our operating loss adjusted for net interest income of $7.1 million. On a year-to-date basis, when adjusting for noncash stock-based compensation charges, changes to working capital and deferred income tax benefits, the cash used in operating activities equates to $48.7 million. We still expect on a full year basis, our cash used in operating activities to be within our guided range of $65 million to $80 million that we disclosed at the start of this year. In addition, to build on earlier discussion point in this company update, we have started to make modest capital investments in 2025, which include advancing deployment of activities at INL for our Aurora powerhouse and fuel fabrication facilities as well as for the reactor pilot programs for which we have been selected. The reactor pilot program not only includes work in our power and fuel businesses, but also the award received by Atomic Alchemy. This spin has been enabled by various accelerators we have seen across the business in 2025. Finally, in the third quarter, we successfully completed an at-the-market fundraising program generating $540 million in gross proceeds, providing the company with additional cash on hand to deliver our enhanced growth agenda. As a result of the capital raise, we ended third quarter with approximately $1.2 billion in cash and marketable securities on our balance sheet. As we wrap up, I want to connect the key themes you've heard today to what makes Oklo a compelling investment opportunity. We are now executing not theorizing on Advanced Nuclear Power. Our proven fast reactor technology is designed for speed, simplicity and scalability. And our first powerhouse at INL is under construction. We've built a fully integrated fuel strategy that few others can match. From early access to fuel for the Aurora INL powerhouse, to fabrication under the Department of Energy's field line pilots to long-term recycling through our Advanced Fuel Center in Tennessee. We have based our strategy on feedstock integration and multiple long-term fuel cycle delivery pathways that should provide cost stability and supply security as we grow our fleet. Our radioisotope business has a high-margin adjacent revenue stream that leverages a similar technology base, regulatory pathway, facilities and core competencies to further diversify our earnings potential. And our build-own-operate model creates recurring revenue through long-term power contracts, driving margin visibility and capital efficiency. Finally, our growing customer pipeline for power spans data centers, defense, utilities and industrials confirmed strong durable demand from what we are building. In short, Oklo is delivering on its plans, proven technology, a differentiated field strategy global partnerships and a business model designed to scale. We're executing today and positioned to lead the next era of clean, reliable energy. Operator: We are now ready to take questions. Our first question comes from the line of Ryan Pfingst with B. Riley. Ryan Pfingst: Just want to make sure I'm clear on the DOE authorization. Does the INL plant shifting to the DOE pathway, change your requirement to submit a [ cola ] with the NRC for that project? Or is that something you still have to do? And has the government shut down impacted your ability to do that at all? Jacob Dewitte: Thanks for the question. I think -- so yes, we no longer need to do a [ colo ], right? So we're going through the DOE authorization process, which is inherently quite different. So we don't have to do that anymore. At the end of the day, to build. At the end of the day, we'll still do some kind of combined license type application to the NRC, Part of it is being a little bit redefined and developed based on even just this MOU signed between the NRC and DOE, which was a pretty big deal just last week or the week before. It sets the stage for how the facility would then become a commercial operating NRC license plans at some point after we get through some of the initial startup and operational kind of frame or [indiscernible] paradigm, I should say. But yes, now it's just through a different DOE process. What's huge about this, is this -- this is a muscle that if you think about it, there's 3 major agencies have, right, to do nuclear authorization on permitting. Obviously, the NRC then the Department of Energy and then the Department of War. And those 3 agencies have those abilities. DOE and DOW haven't really used those very much recently, but they have that history. And so they are like they've used them and they do have continued oversight of the programs, but they're using them now a lot more. And this, by the way, wasn't just something that happened overnight. Like this goes back to the Nuclear Energy Innovation Capabilities Act, NEICA that was passed into law in 2018 that's at the stage of this. It was just following the executive orders that really supercharge this effort. And DOE has really leaned into it, and it's kind of empowered that ability to do these things. What's cool about it, is it changes the cadence compared to what the NRC had. The industry framework said, you have to do a lot of upfront licensing work before you can build and operate the plant meaningfully. Part of why we're able to break ground and move into meaningful construction is because the DOE process gives you the flexibility to build while you're going through the different steps of basically authorization up until leading fuel and turning it on. And that gives you a lot more flexibility to just move into a build mode and iterate a lot faster. Something that I think is really important and that you see in pretty much every other industry. So in many ways, it has taken off a huge run of the regulatory risk has changed the paradigm that we can build in parallel and is open the path for a different kind of approach. And remind you, the Department of Energy has a long history of doing regulatory oversight and authorization of setting fast tractors like we're developing, they were the ones that provided the regulatory authorization for EBR-II for [ FFTS ] and continue that oversight into operations. They know how to do this better than probably anybody. So it's a really great kind of fit. We looked at this pathway as it existed before back in the past but it wasn't in any way modernized. And then since NEICA pass and then following the EOs, it has been, which made a ton of sense then for us to move into that space. Not to mention kind of the enhanced work between the NRC and DOE to obviously leverage this. The interesting thing is, right, DOE reviewers, NRC reviewers as well. They would all also use our national laboratory experts in this country, one of the key kind of things we have in the country. And what's great about that is that actually means that there's going to be residual expertise and experience gained through [indiscernible], are approaching us through DOE that will also help us in the NRC space. So it's a huge kind of change in many, many positive ways that is going to let us move faster to build and turn on the plant and also then convert over to commercial operations and scale from there. Doesn't take away NRC licensing. It just changes the cadence to kind of accelerate the ability to get something built and get into NRC licensing in the commercial space in a meaningful way, which is really, really accelerative for us. Ryan Pfingst: Got it. Appreciate that detail Jake. And then my second question, I've asked you this one before. But curious if your thinking has changed regarding order conversion from pipeline to more of something firm? And if it's starting to make more sense to try to lock in a PPA with a customer as we get closer to '26, '27 and ultimately, that first plant being built? Jacob Dewitte: Yes. Well, our view has always been find and build the right partnerships and deals with customers and takes time to do that in the most constructive way possible for the company and not necessarily rush into PPA timing but rather build better offtake structures because doing this inherently is not the same exact thing as sort of just doing a power offtake purchase from like a solar project, which is what much of the I would call it legacy conventional PPA structure has been built for. There's a lot of room to be also more creative. And that opens the door to do a lot of things that are important for frankly, derisking a lot of things for us that the off-takers are also incentive aligned to do with us. So yes, I mean, we've continued to develop customers in the market, and we continue to do that here and that is part of kind of our intentional cadence and strategy to do that. And I think as we work towards what we're executing against we expect to be able to kind of mature those in the places that do make sense for everybody to kind of build a really constructive usual relationship that is part of an offtake agreement that also helps derisk some of the stuff today into that for them, for their power offtake that's pretty powerful. So that's kind of where our focus -- I shouldn't say kind of that is where our focus has been for the last over 12 months or so. And we're continuing on that pace because that's what the market is quite supportive and receptive to and we expect that to continue and position us well so that going into the next year and beyond, we'll start converting those into that kind of -- those kinds of structures as it works. Each of these different off-takers and groups is going to have different knobs and levers and things to turn that work better for them, respectively, than maybe their peers or competitors. So we got to make sure we were kind of with the right ones that can kind of lean into this in the right ways in cadence and then focus on moving that into the kind of execution phase. So that's how we think about that. I think 1x factor that's interesting is part of the executive order structure includes the government's ability to be -- and also as we've seen in their policy actions, and I think as we hear about policy actions that are still developing around the AI side of things, enhancing the ability for them to be host and/or even some kind of middlemen or some kind of enabling structure for data center development at DOE sites. So this is still developing and speculative in many ways but there's some interesting potential based on what the EO is put into law, put into executive action that could enable sort of interesting structures too, to expand deployments under the DOE authorization that are providing to the government for their own use cases as they think about critical resource needs and critical capability needs, resource needs, meaning AI and compute needs. So it's kind of cool to see what that might look like, too, which is interesting. So that's probably the biggest shift that a lot of this has opened the door for. Otherwise, we've continued to work at pace in saying, hey, let's find the most constructive way to work with our customers and ultimately convert them forward based on what -- how we can work together and what we can do to sort of more or less guarantee success in this project in a beneficial way. Operator: Our next question comes from the line of Brian Lee with Goldman Sachs. Tyler Bisset: This is Tyler Bisset on for Brian. Wanted to follow up on a prior question. I just wanted to confirm, are you guys still targeting commercial operations at INL to commence between late '27 and early '28 or the shifting to the DOE pathway, accelerate that time line? And it sounds like full activation is targeted for early January. So what are the next sort of milestones we should be watching out for that supports that time line beyond January? Jacob Dewitte: Yes. I mean this is what's really exciting about the reactor pilot program. It opens the door for quite a bit of different ways of doing things and thinking about things in terms of cadencing these milestones. So a couple of big things to pull back. We have 3 pilot programs awarded to us. We talked about those a little bit in earnings. One as you were, I know the other is for the [indiscernible] pilot prototype production reactor. That is on pace for that plant and specifically in place to turn on in June, July of next year, 2026. It's incredible, it's awesome, it's really cool to see how that's progressing. So that's a pretty big set of milestones alone to achieve that. So obviously, we'll continue to update the market as we hit milestones on that front as we execute into that. Then there's the Pluto reactor, which is basically plutonium fuel testing reactor that will have a continued set of milestones as well. That bridges well into serving both research and development purposes for us to serve that for the government. We announced earlier today partnering with Idaho National Laboratory, the Battelle Energy Alliance about providing fast neutron radiation capabilities. Pluto will kind of expand on that capability set, but that has an incremental set of milestones that will march forward about moving towards basically [indiscernible] driving fuel systems and critical assemblies and test reactors that are happening on a pretty fast time scale as well that we'll continue to update the market over the course of the next 6 -- well, the next 3, 6, 9, 12 months out. And then back to part of where your question was on the Aurora INL plant. The authorization path that's important here it allows us to move into the construction activity much more quickly, so we can start building the plant. We broke ground in September. We're moving into major excavation work here coming up shortly and then moving through the full-scale procurement and activities as we speak, including something we've already done, so we're ramping forward into. That is going to be pretty important for us to be able to turn that plant on. We are still targeting in the '27, '28 time lines for that plant to commence operations to turn on and go. There are some things that might be accelerative to benefit that but some of that can also just help take out or accommodate some slack and other things in the system. It's just important that you can move fully into the build stage so that you can move through these things more iteratively. And then on top of that, the key thing that's enabling all of this is the ability to actually like fabricate fuel to put into these reactors. And that's a critical part of the supply chain that we've been focused on for a very long time. And with the reactor pilot program and then the associated fuel pilot program allows us to move into. And as we talked about and we announced earlier today, we see some pretty sizable milestones there in a really compressed time window and illuminate objectively how clearly beneficial these things are for us. We are building a fuel fabrication facility to make fuel for Aurora plant in Idaho, where you can partner with the government, we're using existing building in Idaho National Laboratory to do that. That building needs to have some refurbishment and then have equipment go into it. That building going through the traditional kind of legacy DOE because it's the DOE facility. DOE authorization path before the executive orders, we were moving at a pace that was in the order of like 2 years to kind of get close to a milestone that then when we reset the process under the pilot program, starting from 0 there. Grant, we had some work done so we can kind of copy-paste over that, but we moved in 2 weeks to hit this significant milestone that is now allowing us to actually do the construction work there and sell equipment and fabricate fuel much more quickly. So there's clear benefits that we're seeing that we are going to be in pace to have things moving faster and be able to deploy in term at plant on. I will caveat that, that plant in Idaho, it is not going to be selling commercial power to the grid under the authorization. That's not what is intent is. You might be able to do some work selling into not just power, but a radiation services to the lab complex and the Department of Energy as part of the authorization. But the point is we get this built more quickly, get the initial operational experiences and everything else, and then we can take that path over to the NRC. And as indicated by the expanded MOU, signed the MOU signed by DOE and NRC just in the last week or 2, they made it clear that the NRC is going to build on the DOE work for that. So we expect -- look, there's some new work, obviously, to do that kind of thing, but it's supportive that they're already getting in front of that. Part of why they're looking at that as to build off the success that we can do under the DOE. And again, the feature DOE have compared to the NRC. The NRC has been doing a lot of work to get ready to the license advanced reactors. DOE has been licensing in tractors for a long time. So they already have those muscles internally, now they're just using them a little bit differently, externally, and that's hugely beneficial because then NRC going to be able to build off on reference testing. So it kind of keeps the same pace and cadence of operations for what we're trying to do for the Aurora plant but opens the door for accelerated milestones on that. And then additional accelerated milestones for other things going on. Analyst: Awesome. Super helpful. And then really appreciate the incremental details around the 20 tons of plutonium reserves potentially being made into 180 tons of Aurora fuel. Can you help me understand what underpins that conversion math or your assumptions because that was a lot more than what we were estimating. And then is this an opportunity for your fuel recycling facility? Or would processing this material require a separate NRC license facility? Because it sounds like that fuel source could accelerate your deployment schedule. Jacob Dewitte: So one of the things that we got -- I love that question for so many reasons. And I'm sure some folks are probably going to be a little nervous going to spend the whole time getting into the technical details, which I'll try not to because [indiscernible] a pre-recorded practice sessions we were thinking about getting really, really deep on all this. Let me rephrase that. I was just doing that because this is one of my favorite things technically. So to answer your question, Yes. So the key thing about plutonium right, is it's an incredibly useful fissile material as a fuel source. In other words, if you think about HALEU is 19, it's up to 20% less than 20% rich [indiscernible] the balance here in [ 2028 ]. And the fast reactor, pretty much all the [ isotopimplitonium ], but especially the stuffing available, which is mostly [ 239 ] with some [indiscernible] [ 40 and 41 ] in there. But that material, it's a great bridge fuel because it can be a direct replacement for the [ U-235 ] without needing any enrichment right [indiscernible]. So you blended in with uranium. And in our case, you have in zirconium obviously making toll-fuel, but you just blended [indiscernible] with uranium to make a HALEU equivalent [indiscernible]. Now the thing about plutonium is it's an even better fuel than uranium. So you need less of it to get commensurate performance. So on average, and it depends by the variations in flavors in the fuel, but on average, if you basically it's about 11-or-so percent equivalent. So about 11% or so plutonium is equivalent in our reactors and behavior and performance to about 19 -- just under 20% [indiscernible] uranium. So that's where that conversion in math comes from. So that's why it's such a potent fuel form, so to speak. So that's pretty cool. That's obviously very accelerated for a lot of things. And for that facility, that's one of the things that was encompassed in the pilot program, the fuel pilot program awards and being able to do that kind of work there. at an initial stage on initial scale. So it may, at the end of the day, convert over to a larger scale kind of commercially licensed facility, but to get through some of the initial sources of that material and initial supplies, assuming that that's fully made available and we have access to [indiscernible] on that, then we have the DOE fuel pilot program selections to support that. It's hard to overstate the significance of the government moving this material away from a $20-plus billion taxpayer funded liability to bury it literally mix it with [indiscernible] sand and burying the desert in New Mexico versus making it available to be a bridge fuel for the advanced reactor industry. And completely changes the [indiscernible] where you knew longer or feel constrained because of that. It's huge, and what's significant about that, obviously, is not just that you can build more reactors sooner but that means you can scale more powerful and significant orders to the enrichment market as well as what we're doing on the recycling side. It's incredible. It is absolutely incredible. So for me, like that was one of the most exciting things to have happened this year because of what that catalyzes for building more things sooner without like having to be dependent on other factors. And then instead using that basically the ability to build more plants to convert to more fuel orders to then help scale that fuel supply side more quickly. So for a long time at Oklo, we've been working to advocate for government bridge fuel supplies as a key enabler to kick start the commercial fuel supply chain. And I think we're seeing that really take root and open the doors for that to move in a totally different way. Yes, seriously. It's a really, really significant policy move to enabling the deployment of more nuclear power quickly, more quickly. And I'll just add one little piece for that. Like not all reactors and fuel fabrication approaches and benefit from plutonium the same. It has different characteristics to it. We just know it works really well in fast tractors because we spend a lot of time developing and researching it for that. So that obviously is part of the benefit of fast reactors and their ability to be quite fuel-agnostic and feel flexible. Operator: Your next question is from the line of Vikram Bagri with Citi. Ted: It's Ted. I wanted to ask about the Pluto test reactor. So it looks like it's going to be deployed after the first reactor at INL. Is this going to be the template for all the future reactors? And what are the differences to Aurora? Is it only that it's going to be run on plutonium? Should we also assume a 75-megawatt size for it? And then just lastly, what are the main learnings that you hope to obtain from this test reactor? Jacob Dewitte: Yes. It's a great set of questions. So basically, it's a little bit different as bespoke to enable the accelerated sort of fast neutron radiation testing capabilities at a system like that can afford. That's important for a couple of reasons. Like part of what we've talked about is at the company right? If you think about what Oklo does, obviously, the reactor part is what people focus a lot on. We sell power, we sell heat. We have these other parts of the business that we had to build to deliver into that [indiscernible] fabrication, which will help us, obviously, make fuel for our reactors, potentially for others, too, which is part of what some of the investments in partnerships, which we announced this quarter touched on. Additionally, we talked about recycling, which is great because we can make fuel for ourselves as well as potentially for others and sell various materials and isotopes coproducts from that as well as possibly recycling services, all great. And then obviously, the isotype side of the business, which is specifically focused on that. Part of the reactor part of the story, though, and also somewhat ties over to the isotope side is we are a fast tractor, we use fast. We make fast [indiscernible]. We will have [indiscernible] terms to help test and characterize materials and fuels. That is not a capability that we've had in this country in 30-plus years. And it's not a capability that the Western world has had in a similar time frame, so like in 20 years or so. So it's an important thing that we're bringing to bear. The government set forward on building a big dedicated test reactor, but it was a government program. So it actually had a lot of sort of challenges around it. What we're doing with Aurora plant and our ability to do that and therefore, also offer that as a potential revenue-generating aspect of the company, which is hey, we have [indiscernible], we can provide rate-easing capabilities, not just for our own use but for others as well as what we're doing on the Pluto side, which expands that and gives us that cadence of experience in a plutonium-based system is pretty accelerative to opening the door for moving into better deals and different materials and expanding the fuel performance envelope so that we can maximize what we do. We're in a good spot to be able to build and operate, that's great, but there is going to be so much more we can get out of these materials with more end fuels in terms of timing the reactor and just ultimately better economic performance with more data that we can generate using us. So that was part of the incipient to look at doing the Pluto test reactor. It's a smaller system. It's not producing electric power. It's a primary job. I mean as of now, its primary job is focused on making fast neutron. And it's a culmination of activity so I think of it more as a program than just a single reactor that will involve taking simpleton critical, getting some experience doing that with our national lab partners, doing some work around the [indiscernible] handling and management and then moving that into obviously the full scale like Pluto reactor. The reactor will be smaller in its power production and will also be optimized these plutonium. These plutonium is inherently in the nuclear space, higher worth to use that terminology fuel means we can actually use less overall fuel if we concentrate up the plutonium a bit more, which is what generally speaking process reactors have done. So that means we can kind of use a higher loading of plutonium total less -- total fuel mass, get more thermal power out of it, and therefore, more neutrons to test things with it. And it's a pretty favorable thing to do with that. But the system will give us a very significant amount of repetition about doing the actual work around plutonium fuel fabrication going forward. The fuel will look, generally speaking, very similar to the Aurora fuel, if we use plutonium in it. In terms of form factor and pipe, it would just use a lower amount of plutonium in it because we have -- what we're designing to in the oral plan is going to be interchangeable between HALEU, [indiscernible] fuel and transgenic [indiscernible] fuel. And that means you kind of dilute the plutonium more compared to what Pluto will do. When you think about Pluto as a program, it's the cadence to build on top of the fuel [indiscernible] fuel fabrication piece in physical plutonium-reactor part. So over the course of the next year, we're gaining experience with plutonium criticality and work around that. and then we'll move that into the next up of actually building the plants going forward. Those are high-level kind of perspectives on where it goes, but it's a pretty significant enabler for getting those repetitions in our belt and start fueling Aurora plants with plutonium bearing fuel. Now just to put a number on this, like the thing that's really powerful about moving in this space, like building out these fast neutron radiation capabilities, yes, it opens the door to do additional things for radiation services. You tend to do some additional isotope production using different material types. And yes, it's important because it helps us with ourselves as well as other companies can come to us or government programs should come to us and either rent or buy radiation type time, radiation time or similar types of kind of exposure in the environment to help bring some materials that are quite mature, but need a little bit more to go over the finish line that are inherently basically economically better than what we have to use based on what the experiences are today. Those are still great because we can make that work. But that looks -- this is a platform for R&D and margin improvement. There's one way to think about it. So anyway, that's kind of the cadence of how we see things. Got it. That's super helpful. And then I just had one follow-up. On Slide 9, it mentions the breakdown of CapEx by components. And I think it's lifted by number of components. Are you able to share just directionally what that is in dollar terms? Jacob Dewitte: Yes. I mean, I guess I'll kind of hand this over for Craig, if you want to kind of answer some of it, and then I can chime in. Richard Bealmear: Yes. So I think directionally, we would expect the dollars to be similar to the components. In terms of an actual dollar breakdown, we're still refining a lot of our cost estimates now that we've got [indiscernible] onboard and now that we're deepening some of our procurement activities, and we'll probably have more to share on that going probably into 2026. Operator: Our next question comes from the line of Jed Dorsheimer with William Blair. Jonathan Dorsheimer: I guess first, I don't know if Jake want this or Craig, but just if you could talk a little bit about backlog. I think it was 14 gigawatts, has that changed at all? And maybe just a little bit of color on the discussions that you're having. Is it mostly utility? Is it mostly hyperscaler? Just that breakdown, if you would. And then I have a follow-up. Richard Bealmear: Yes. Jed, I can take that. So I'd say the 14 gigawatts is still predominantly made up of data center and hyperscaler customers. I think I mentioned to you last time we were on the phone. We've also got other potential customers in the mix that aren't identified customers as part of that 14 gigawatts that could maybe even cause that number to go up. I know the bigger question is, when do you convert that into a PPA. And I'd say we are [indiscernible] on that, with pace and urgency and actively exchanging term sheets. I never want to promise an exact date on when we might announce something because it takes Oklo to be on the same page with the customer. But I'm really pleased with kind of how those commercial discussions are progressing. And not just on the PPA price, but I think we're also seeing good traction on -- similar to what we were able to achieve with [ Equinix ], which was a prepayment for power. We're also progressing conversations with customers that could convert into prepayment for power or prepayment for fuel or some other asset-oriented contribution to the deal itself. Jonathan Dorsheimer: Got it. That's helpful. Just along those lines, the discussions does as Atomic Alchemy in having that standing up a fueling recycling, even if that's in the future, has that kind of moved some of those discussions along from a supply chain risk? And -- sorry yes, that's... Richard Bealmear: Well, I would say Atomic Alchemy is probably -- the types of conversations we're having around feedstock for isotope production taking customer discussions into contract conversion. The steps are the same, but it's definitely with different counterparties on both the feedstock side, the supplier vendor side and all of that. But I think we are excited around the tremendous progress that the team is making around the reactor pilot program that Atomic Alchemy was awarded. And in addition, we're also making good progress on the lab scale facility that will be down the road at INL. And I think, as I've said earlier, there is the possibility for the lab scale project that we could be generating revenue and gross margin. It's going to be in the single million dollars, not anything bigger than that, and it won't be exactly ratable. But we're excited about what we might be able to do to actually turn some of that -- the lab scale facility, especially in the gross margin in the first half of next year. Jonathan Dorsheimer: Got it. And then just one for Jake. If I just look at using an EBR for isotope production and isolation, do we need to wait until you get the VIPR up for sort of an [indiscernible] tailoring? Or can that be done in between? I ask because [indiscernible] is really well suited for cobalt and Lutetium, which are being used for sort of the radioisotope or radiopharma market right now? And just curious on the EBR side, whether or not you need that tailored reactor before you can do that or if there's an in-between? Jacob Dewitte: Yes, it's a good question. I mean there's a couple of steps actually to parse that out. So one, there are some things we can do in the near term without a reactor in terms of isotope sort of consolidation and recovery that we are making progress we talked about any update towards in Idaho, where you'll be able to actually have infrastructure and facility capabilities to actually do some of that work and start producing some of the isotopes from those kinds of sources. But for sort of the most meaningful, and that's great because we get some practice repetition, maybe help accelerate revenue which is cool. But at the end of the day, it helps position us with experience to then move into the next stage, which is where the reactors really unlock significant differentials in performance. And yes, [indiscernible] do that. They're also not in the U.S. And there's a pretty important focus on these production capabilities being in the U.S., not even in our nearest neighbors, right? And so -- and [indiscernible] limited. They can do some things pretty well but they can do everything very well. And the [indiscernible] production reactor design is designed to do pretty much most everything pretty well that you can do with thermal neutron key caveat. So the nice thing about that reactor is we'll have its prototype up running by the middle of next year. It uses standard pressurized water reactor fuel bundles that are just shorten in height at commercial scale. And that's often instilled with LEU. And it's part of what we were drawn to with this business was it wasn't trying to design because some of the margins and the numbers that these radios isotopes bringing to you. Have drawn some folks in the field to look at really exotic reactors because you can pay for it because of that. So you kind of build like a Formula 1 custom reactor to produce these isotopes when maybe all you need is like a [ 4 to 50-year ] something, something to that. It doesn't have to go quite as fast or be quite as exotic and therefore, way cheaper and easier to build. And that was one of the things that really attracted us to Atomic Alchemy, is we were working with them. So that's one of the features here is what that will enable. But then there's the other part, which is some isotope, really I would say you best produce, if not uniquely produce in a fast spectrum environment, you need fast neutrons to really do that. And that's where being able to harvest some of the fast neutrons in our fast reactors will unlock those capabilities pretty attractively and then tie that in to the Atomic Alchemy kind of sales channels and global productization and sales channels. And that's a pretty cool feature set that we'll be able to have. If you look back in the analyst history, the [indiscernible] facility, one of the reactors from which we derive our legacy as a reactor that our Chief Technology Officer has been Chief Technology Officer, spent a lot of time at had quite cool set up to do a bunch of fast neutron like isotope production work, like a ton and pretty attractive economics to go with it. And that was in a somewhat constrained way of thinking about it. And then on top of that, the Russians have been significant players in the isotope market at a global scale because they've been using our fast neutron capabilities to do that, too. So it's a pretty significant game changer that does diversify away from capabilities that you can't do with just thermal [indiscernible] reactors. But at the end of the day, those are pretty important things. One other thing I'll just throw out that we've talked a little bit about, but it's important to kind of illuminate to go back to the VIPR reactor, one of the things that's designed for is also being able to do silicon radiation which is, generally speaking, the or one of the gold standards for achieving silicon doping right? If you do phosphorus like type vapor deposition or infusion, it's kind of limited in wafer thicknesses and other things like that. Neutrons permeate the material much more uniformly and will then transmute and make that phosphor [indiscernible] happened naturally, and it's a pretty attractive thing. That capability used to be used when it existed in the way because the ability to do that radiation kind of on the way. So we're also -- that's one of the cool things about VIPR, it could do stuff like that too, right? So a lot of flexibility that you couldn't otherwise do without a system design that be versatile in nature. Operator: Your next question comes from the line of Jeffrey Campbell with Seaport Research. Jeffrey Campbell: Congratulations on all the progress. I hadn't planned this one, but I found the last discussion brief as many. So Jake, let me just ask, when you get around to trying to do isotope radiation with an Aurora, are you going to be able to do it in a way that won't interrupt your fuel cycle? You mentioned the Russian reactors, it has kind of a peculiar fuel cycle that allows it to go in periodically and do the irradiation. And of course, they can't do it without any interruption. But typically, reactors have to match their refueling cycle with their radiation. So I'm just wondering if you think about that? Jacob Dewitte: Yes, it's a great question. By and large, like the focus of those reactors is really power production, but some of the flexibility that will be afforded to us by, for example, the word, Idaho as well as the Pluto reactors will give us a lot more flexibility to do more work around those things. So think of it more as imagine some like 4 normal commercial optics, we want to harvest on those neutrons because it makes sense we're going to have to fit it into the power cadence because that's the primary driver. But we'll have some flexibility and some other reactors that will give us more flexibility to kind of match that accordingly because we're going to be doing other testing work. So there's going to be some interesting planning in coordination like it is for other test reactor or radiation and test reactors to sort of optimize to that and do the trade-offs. But generally speaking, yes, for the vast majority of the focus, if we're going to use any of their fast neutron capacity, would be largely skewed towards minimizing, if not completely avoiding interference on the power operation schedule, while there will be a couple that we'll have more flexibility that we can kind of optimize to on the isotope side if it makes sense to do so. So it's kind of one of those acknowledgments of yes, we're going to have to look at possibly parsing some of the asset operation schedules, if it makes sense to do, and that's the key question is if it makes sense to do. Jeffrey Campbell: Okay. Yes, that makes sense. The other question I wanted to ask you is, if you could give us any update on your proposed natural gas or Aurora partnership with Liberty Energy. Liberty has recently spoken about it at a high level, and they seem to indicate they've been aimed towards large projects. I wondered if there's been any diminished appetite on Oklo side as its progression to Aurora construction has accelerated? Jacob Dewitte: Yes. I think in general, we still see it as a pretty powerful bridge. I think we've seen now several other groups be talking at a broad thematic about the gas to nuclear [ camo ] and bridging capabilities and features that offers. So we continue to see that as a positive thing in different customer discussions. I think what we see in general though, and this is a bit anecdotal. So take it for that. But I think some of the near-term focus and priorities at the moment is around utilizing stuff that's basically on grid to be the nearest term operation will kind of preference, where that will be a key enabler for getting some stuff built or powering [indiscernible] already being built and filling in the power to either meet additionality goals or other kind of feature sets that this can do. And then that is in parallel happening, but just the temporal nature of the project planning isn't kind of followed by the benefits of being able to bring gas into enable power at a site for either a colocation or near location or even behind the meter approach that gas [ Canadian ] will pretty successfully. So I mean it's still a pretty powerful feature in market conversations and discussions. But I think at the end of the day, like I don't think there's much diminishment on it. I think if anything there's a lot of validation that it's valuable and it's a future and it continues to kind of evolve and progress. One of the challenges I think we see in the commercial markets. I don't know if you call it a challenge, but one of the things we've observed is a lot of focus on the hyperscalers has been on the energy objectives they have over the next -- on multi-month scale time frames, right? Maybe that [indiscernible] to 24 months or less but like stats where they're obviously really, really focusing most of their activities is making sure they're in a good position for all of what they need them. And they're increasingly looking at the longer-term views, just given how constrained the power markets are as a whole, realizing they need to expand those horizons and that systematically continue to see evolve and gas as an ability to bring power to a facility or site sooner is pretty powerful. I still think -- I'll say that I still think that the understanding of the benefits that making fuel government fuel availability, like was it increasing government fuel availability like the plutonium side, which can be quite accelerative to building new [indiscernible] plants faster and more plants fasters. It's still being digested in the market. So like that may have an ability to help show a path to bringing nucleon even sooner, and that's, I think, pretty potent. And I think it's still very early innings for folks understanding of what that means given the nature of it's still pretty fresh. Jeffrey Campbell: Yes, that makes sense. But at least I wasn't completely irrational. So I appreciate the color. Operator: Your next question comes from the line of Derek Soderberg with Cantor Fitzgerald. Derek Soderberg: Just one question for me. Is there a level of prepayments you need to make to secure some of these long lead time items in either the nuclear, nonnuclear supply chain? And wondering if you can quantify how much capital it will require to just ensure access to those long lead time items as you scale? Richard Bealmear: I can take that one. So like we're currently working on progressing I don't want to mention the vendor specifically, but some of the other supply chain partnerships we've already announced, and there might be some form of a prepayment, but it's in the -- it's in that 10% range. So it's a number, but it's not significant. And I think one of the reasons, though, that we're so glad about the success we've had around the capital raise is that we can -- we don't need to have capital be a constraint that if we find an opportunity and it makes sense in terms of the returns to do a prepayment because we can get a better price point on the asset, then we can go forth and do that. Operator: Your next question is from the line of Sherif Elmaghrabi with BTIG. Sherif Elmaghrabi: Just a 2-parter on the fuel line pilot at INL. Do you have a target online date? And then the facility was also selected for a DOE program, which you mentioned. And I'm wondering if there's an economic opportunity there as soon as the facility comes online or if that's also something that needs NRC approval to monetize? Jacob Dewitte: Yes. So I just want to understand the Aurora plant, so that is going through DOE authorization to get built and turned on initially and get through some of the initial operational cycles. And then the intent is to move that over into a commercially operating space. I will flag like moving that over to [indiscernible] license is the most likely path. It's not impossible, though, that given some of the dynamics of what's happening on the DOE side that there might be pathways to kind of sell into the government that could exist. We're not planning that that's exactly where it is, but that is something that has been and it was in the EOs and that might be something that does evolve, but the plan is to convert that over to a [indiscernible] that experience you gained. Were sitting to the day is great because you point to real data with the real plant and just move some of that stuff pretty constructively forward. The Atomic Alchemy plant in Texas, the intent we have on there is to primarily be serving where DOE is. It's not impossible that we go convert it over to a license as well. There's some optionality potentially there. But the general view is keep the DOE facility get the experience of living running it, giving some radiation work, provide them some support to DOE emissions and possibly opening the door for other things. But at the end of the day, that's kind of how we see that and that similarly is kind of how we think about the Pluto reactor as well. Again, it's possible that there's a feature set to convert many of these facilities or convert these to energy license, all of them to energy licenses, that's a possibility, but the general [indiscernible] is we kind of see the Aurora now being the one that would make the most sense to do that with the other 2, not necessarily, but it depends on some factors that may evolve. One other thing I'll flag is coming out of the executive orders, one of the things that's mentioned and clearly defined in there, just to highlight is the fact that DOE authorization or DOE authorized facilities can support and provide clinical product right? Whether that be power or heat or isotypes, or whatever it is, to the Department of Energy use cases, that can then by how these things are defined can be and proceed and be built like -- sorry, things that do that work can be under basically authorized under DOE authorization. And that could mean, for example, we are in a position where we build more plants under DOE authorization because they're serving DOE. So that could be something that also occurs. There's nothing firm on that, but just given that the EOs put that out there and it does open the door for the possibilities that, that might be something else. The nice thing and the key thing here that's so important for why we felt confident and excited to move in this pathway that's accelerative is because it's clear that the understating view, we are working well together and working together to, I would say, be efficient in how work done by one will be complementarily kind of informative to the other. And that's an important kind of capability set. And again, that's evidenced pretty clearly by the recent MOU between DOE and NRC which is supportive of the fact that getting DOE authorization and going through the technical work to do that will be constructive in NRC either licensing in version and or, I should say, really and future NRC license applications for future commercial plans. Operator: And our final question comes from the line of Craig Shere with Tuohy Brothers. Craig Shere: What are the prospects for rounding up remaining fuel needs to maximize your made in INL powerhouse to 75 megawatts? And if you don't have it upfront as you commence operations, the later get NRC approval and can commence full commercial sales. At that time, could you refuel to maximum capacity? Jacob Dewitte: Yes. Although given the recent activities and traction around a multitude of kind of fuel policy arrangements as well as what we're seeing in the commercial fuel supply markets. I think we feel increasingly confident that we'll be able to have the fuel needed to run that facility if not immediately at the onset and full power pretty close to the immediate onset of full power. Not that this is the plan because we feel, again, increasing confidence that there's going to be extra HALEU that we can use for that facility from actually a variety of sources, which is the diversity sources as part of the confidence the inspiration of the company. The other part of it is we can in that reactor if we needed if we were able to get, for example, access to some of that plutonium piece stock, make that into fuel that could be located in commingled with the reactor fuel there. It just means some assemblies would have sound-bearing fuel, some would just be [indiscernible] fuel and you can design it to work just fine in that configuration manner. And given that, that material exists in a pretty much ready to fabricate form, it gives us a lot of confidence in how that can actually kind of proceed. So that's how we see that kind of playing out. Craig Shere:Great. And last for me. To the degree you start employing, which sounds like a great opportunity, this plutonium mix to help bridge quicker plant deployments. Does that have any implications on NRC regulatory process? Do they have to shift because of the new fuel mix and having some plutonium in there? Does that have any proliferation concerns of any kind? Jacob Dewitte: Yes, it's a great good question. There are some inherent things that are a little different. To go back in the history of this plutonium kind of its legacy and policy history. The President's executive orders directed 34 tonnes that was slated for diluted disposed to be made available for reactors [indiscernible]. Before the program of diluted disposed, which is are we going to spend $20-plus billion of tax rate money to just blend the stuff up to [indiscernible] sand and bury it. The program before that was actually fabricated into fuel as part of a joint treaty with Russia at the time for stockpile reduction. And the plan was to take that material fabricated into fuel for light water reactors and then use one reactor what was called the [ MAX ] program and the facility in South Carolina to do that. That program -- you could spend a long time and for time sake, I'll keep it very simple and a little bit simplistic. That program had significant struggles because plutonium fuel and light water reactors while very doable is inherently something very different than what we do as a country here. So the infrastructure to do all that wasn't necessarily in place because plutonium does behave notably differently in a slow neutron reactor than a fast reactor. It's still behave differently the uranium and the fast reactor, but the difference is more amplified and accentuated in the thermal spectrum or slow neutron reactor, especially water cooled reactor. And it wasn't something the utilities were really one thing. Fuel markets were not constrained. It was not something that there was a market for. And it was a [indiscernible] government run approach where the facility got way out of controlling costs and everything else because it wasn't mainly driven by a kind of a more, I would say, entrepreneurial or enterprising kind of dynamic. So the recommended options, the best path coming out of that program basically not being in a spot to not proceed was to actually the technical analysts were to say, okay, the best thing would be to put it in fats factors. But we don't have any fast reactors. So the next best option is just to dilute and dispose it. Well, now we're going to have fast reactors, right, based on what we're doing. So our view is, hey, this is great because [indiscernible], there are other companies developing reactors and other things that can use this material, and there is a fuel crunch. So now we're in a different world or how they think about that. That facility that I talked about under the light water [ MAX ] program was actually going through and have gone through a -- like all of that was set up to be under NRC per view, generally speaking. And so there's a lot of infrastructure in place and experience around that. So there are some differences with things you need to do on the regulatory side for this. But it's not -- it's generally speaking pretty well known. But what's really powerful too, is that DOE spending kind of with the [indiscernible] program to include the fuel pilot program to help fuel these reactors under the pilot program. They also are sending their authorization capabilities, and they are the ones that already oversee from a [indiscernible] and authorization perspective [indiscernible] work. So it's great to be able to kind of tie in with that. And we've been expanding our partnerships with some of the national labs who have experience doing all that work. So it kind of helps us drive and build out that expertise set in partnership with the experts that we have in this country and kind of accordingly kind of be able to scale that forward. So that's like -- that's how this core sort of charts. I've got some things that are a little bit different than the earnings side, but nothing significantly departed and stuff that's largely like noble manageable. I mean again, there's controls and elements to it. But generally speaking, this is -- this has a history and [indiscernible] behind it in a multitude of way between DOE and NRC. Where there is -- and to your other part of the question, where there is kind of an exciting opportunity around this, is the story in the conversation around proliferation. And I say that because the kind of only way to permanently destroy plutonium out of this universally sufficient. So by putting it in the reactors, you're visioning it and you're trying to get into 2 [ fission ] products that like stars have a really hard time synthesizing through Super Novas and to back into plutonium. So that's a [indiscernible] way of saying like this is a pretty good way to get rid of it and generate power in doing so and solve a fuel crunch while doing so. So if anything, our view is pretty strongly is you obviously apply all the relevant state-of-the-art. And this is something we've leaned into because of our work and recycling in other fields. Applying state-of-the-art capabilities on safeguards and security around managing this material from receipt into fabrication and then into reactors and then in the reactors you're just [indiscernible] in it. So it's actually a pretty cool setup and something that as a country we were due to do. There are some, I would say, predicts out there, mostly just pretty clear antinuclear. [ ADVOCATE ] to have said, "Oh, this is a [indiscernible] concern." I've never understood that because destroying plutonium I think is the best way to get rid of it. Isn't objectively the best way to get rid of it. So yes, it's just a pretty elegant solution to actually get rid of the material. I think what it really distill that was just like, oh, this is different, and then it's just change. It takes a little bit of time [indiscernible] and people like makes a lot of sense. The other concern is like well, we'll incentivize other countries to do the same, which I would also argue, well, I think if we incentivize other counties to destroy their plutonium that's also kind of a feature in the [indiscernible] world. So not necessarily the worst thing on that front. And then I think what's important, too, is this is legacy material from [ weapons ] program. As we think about the future and recycling, you're not separating out pure plutonium using state-of-the-art technology, which again gets back to how I think at a policy level, we should be thinking about leading in the world stage. If we, as a country, are as what we announced in Tennessee, recycling material in a manner that does not ever produce pure separated plutonium instead produces uranium transuranic mix that's [indiscernible]. That's that's a good spot to kind of lead from. And so that's kind of how I think about the space. Operator: And with no further questions in queue. I will now hand the call back over to Jake Dewitte, CEO and Co-Founder of Oklo. Please go ahead. Jacob Dewitte: Thank you. Thank you all for joining in today. We appreciate it. There's -- this is the second call since the executive orders were signed. The first call since we had the reactor pilot program and fuel pilot program selection. So it has significantly changed how we think about the regulatory landscape and the regulatory strategy we're employing accordingly. It's significant in its accelerated features but also in its regulatory derisking features. This aligns pretty well with what we're also seeing in the policy landscape driving sort of a continued focus and effort on modernization not just the Department of Energy, but the Nuclear Regulatory Commission. Our work with the NRC has not stopped. It still continues. But now it gets the benefit and the accelerating benefit of working with the Department of Energy and the National Laboratory ecosystem that supports this, that will help NRC reviews and generally seeking, enable a world where NRC reviews will be accelerated and made more efficient and generally speaking, improved by the experience is already done by the DOE. DOE have a tremendous track record of safely authorizing and reviewing and overseeing nuclear facilities. And the NRC and DOE, don't forget were born from the same entity, the Atomic Energy Commission. And so there's a lot of kind of common threads. They worked together for a long time, and we're happy to see that, that's kind of continuing and in some ways, they're even getting closer again to work together. And I mean that in a constructively independent way where NRC can use DOE's best resources and information because one of the best ways you can do safety analysis and safety oversight is good understanding of what the system is you're overseeing and leveraging our nation's leadership, technically speaking, that the DOE has, the national labs have to help support that. It's a pretty powerful combination. So I like to think that we're now kind of moving into this next chapter of this new wave of nuclear that's leveraging the best features of government to its maximum ability and that's a benefit for all of us. Additionally, the opportunities around making more fuel sources available. For example, this plutonium material as well as continued traction and efforts to stand, to build out and invest in and expand the uranium's fuel supply chain are pretty accelerative because the bridge fuel opportunities that the plutonium gives us is a game changer and building more reactors more quickly and using that to help accelerate the investment and development of the uranium enrichment market. Uranium enrichment is radically undersupplied in this country, practically meaning like 18%, 20%. We need more of it for just our existing plants. And we also needed, of course, where we're making less than 1 time a year, but for HALEU. And so things we can do to help signal more powerful optics orders and investments and therefore, expansion in the HALEU side, supported by building more reactors sooner using bridge fuel is pretty accretive to realizing more fuel supplies and to use maybe a bit of a silly term, dual leadership in [indiscernible] because back in the 1980s, we as a country, had more fuel production capacity, meaning conversion enrichment, de-conversion fabrication in the rest of the world combined. And now we definitely don't. So a big opportunity for how that's proceeding. And bridge fuels are a really important piece of that. And then on the reactor front, one of the great things about the pilot program and the benefits there is an ability to move into building a big thing that we have long thought from policy would be very supportive of nuclear is to move the front-loaded paperwork to be developed largely or largely as in parallel as possible with the actual building of facilities so that you can do the kind of learning of building while you do the regulatory work so that you know what you're building on to and you know what your licensing. But also you can have a build and then you get the final authorization before you actually load the fuel and actually run the plant. And the DOE pathways allow us to do that. So we can accelerate time lines. And it's bringing forward an ability to start going from -- going from greenfield and the design of a reactor to turning reactors on. And what looks like it's going to be less than 12 months for at least what we're doing on the Atomic Alchemy side as well as some other companies that are pursuing this that were selected under the program. That's as someone said recently, kind of Manhattan project level speed of being able to do these things. And that's a real feature to moving all of this excitement and enthusiasm into real-world application and the iterations that come from being able to build and build more quickly. So this is a bit of a dream set of scenarios that I think [ Carolyn ] and I long dreamed about when we were starting the company, and it's all coming together in a very, very accretive time for us, not just to be positioned to take advantage of it because of where we are as a company and the maturity we have but also the resources we have to bring to bear to it. So we're very excited that we are selected for 3 of those reactor pilot programs as well as the fuel line programs and executing on that as we also scale forward with additional customer development and future sites and deployment opportunities. So thank you all. Operator: Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.
Operator: Good afternoon. Welcome to the MicroVision Third Quarter 2025 Financial and Operating Results Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Drew Markham. Please go ahead. Drew Markham: Thank you, and good afternoon, everyone. I'm here today with our CEO, Glen DeVos; and our CFO, Anubhav Verma. Following their prepared remarks, we will open the call to questions. Please note that some of the information you will hear in today's discussion will include forward-looking statements, including, but not limited to, expectations regarding business product and go-to-market strategies, products and solutions and market needs and timing, status of commercial engagement and future demand, level of customer and partner engagement, market landscape and opportunities, acquisition benefits and risks and collaborations, projections of future operations and cash flow, cash, liquidity and the impacts of recent financing activities, availability of funds and conditions for raising capital as well as statements containing words like believe, expect, plan and other similar expressions. These statements are not guarantees of future performance. Actual results could differ materially from the future results implied or expressed in the forward-looking statements. We encourage you to review our SEC filings, including our most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These filings describe risk factors that could cause our actual results to differ materially from those implied or expressed in our forward-looking statements. All forward-looking statements are made as of the date of this call, and except as required by law, we undertake no obligation to update this information. In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's Regulation G. For reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure as well as for all the financial data presented on this call, please refer to the information included in our press release and in our Form 8-K dated and submitted to the SEC today, both of which can be found on our corporate website at ir.microvision.com under the SEC Filings tab. This conference call will be available for audio replay on the Investor Relations section of our website. Now, I would like to turn the call over to Glen DeVos, our Chief Executive Officer. Glen? Glen DeVos: Thank thank you, Drew, and it's great to be with all of you today. I'd like to start today's call by answering a question I've been asked quite a bit over the past few months, which is why did you joined MicroVision? The reason I joined first as CTO back in April and now as CEO is that MicroVision has a unique opportunity to transform the lidar industry. I've been directly involved with this industry for more than 10 years from the first CES automated car demonstrations in 2015, the autonomous cross-country drive, our robotaxi fleet deployments in Singapore and Vegas and the very first Level 3 OEM system deployments. These were truly exciting times for lidar. But as of today, the adoption rate of lidar sensors has been very limited, and we remain a niche product. The reason for this is simple. It's cost. Lidar sensors are too expensive, and this has limited our market penetration. There are 3 developments that are required to bring costs down to the levels required for mass adoption. The first is the move from electromechanical systems to solid state. The cost floor for electromechanical systems is significantly higher than that of solid state. As a result, lidar is only used when it is not possible to do the job with cameras or other lower-cost alternatives. For example, while automotive Level 2+ systems would benefit greatly from the use of lidar, they are typically deployed with only vision and radar. We must move from -- we must move to wafer-level processes that have a much lower cost structure than current electromechanical systems can ever achieve. Roughly 25 years ago, radar started as large, complex and expensive assemblies with very limited adoption. So where are we now? In 2024, over 140 million were produced for the automotive market alone. Lidar can follow a very similar path. The second development is related to system architecture and the move to satellite sensors. We started this in automotive roughly 15 years ago with the introduction of satellite radar and camera sensors, working with the central ADAS domain controller. This approach breaks down the perception challenge and simplifies the individual sensors, delivering the highest level of performance at the lowest total system cost. The third is to further simplify and reduce the cost of the hardware through software. We'll talk more about this in future calls, but solving the perception and the processing challenges in software enables the further optimization of the hardware, again, resulting in lower total cost. These are the steps to mass adoption. And if they sound familiar, it is because this is exactly what has been done for vision, radar and other sensing modalities. And this is exactly what we're doing at MicroVision, and it is the reason why I am so excited to be part of the MicroVision team. So let's talk about Q3 and how it relates to the key issues we just covered. I'll start with our recent announcements at IAA in Munich in September, where we introduced both MOVIA S and our Tri-Lidar architecture. MOVIA S is an industry-leading ultra-wide field of view solid-state sensor. The MOVIA S 180-degree field of view sensor we demonstrated at IAA is the first of a full family of short-range sensors for the automotive, industrial and defense sectors. It is easily configurable and can deliver full perception and advanced lidar-based driver assistance features such as MicroVision's localization and collision avoidance functions or simply provide a clean point cloud. It is the right product at the right time, delivering performance at a breakthrough cost level enabled by its solid-state design and MicroVision's proprietary image and signal processing software. This is that first step to achieving mass adoption, dramatically lowering the cost of lidar perception for our customers. MOVIA S is an amazing stand-alone product, but it also enables the implementation of the satellite architecture I referred to earlier, what we call Tri-Lidar for automotive applications. Low-cost, compact, high-performance sensors are the key to unlocking satellite architectures, and it is exactly what vision and radar have accomplished. It's why in most cars today, they have between 3 to 5 radar and 6 to 9 cameras. Lidar can and will follow the same path, not just for fully autonomous systems such as Level 3 or 4 cars or AGVs and AMRs, but for driver and operated assistance systems as well. The industry refers to this as the democratization of safety, and that's what MicroVision's products are enabling. MOVIA S is currently being demonstrated with numerous customers and its production launch is planned for Q4 of 2026. Additionally, we announced the asset purchase agreement of Scantinel Photonics. This is a key move for MicroVision as it gives us access to 1550 nanometer FMCW ultra-long-range lidar technology. Scantinel's ultra-long-range capability perfectly complements our current 905 and 940-nanometer time-of-flight portfolio of MOVIA and MAVIN products. MicroVision will be unique in its ability to offer our customers a complete range of solutions for their perception challenges across all end market sectors. We will share more details of our ultra-long-range product plans and timing at the upcoming CES. Regarding our defense-related activity, I'm excited to share a few more details about our recently announced Aerial Systems team, which is responsible for our drone-based lidar developments. The addition of this team dramatically accelerates our work in the space of drone-based real-time mapping, ISR and denied environment navigation. We are on track to complete the initial proof-of-concept phase for both fixed wing and rotor drones by the end of the year, and the aerial systems team is now up and operational at our airstrip and office in Virginia. We've also been working closely with our Defense Advisory Board and have started initial customer engagements this month. We'll share more details about next steps and about the technology at CES in January. Now let me shift to our commercial engagements. In the Q2 earnings call, we talked about the number of ongoing industrial and automotive RFQs and RFIs. These remain active, and we continue to be engaged with our customers as they work through their sourcing processes. What has changed significantly are the post-IAA engagements where we have experienced strong interest in both MOVIA S and our Tri-Lidar Architecture offerings. We are currently demonstrating MOVIA S to a number of automotive OEM, industrial and autonomous vehicle customers. Another key differentiator for MOVIA S beyond price point, compact size and its ultra-wide field of view is its open software framework, which enables our customers to embed their software on the MicroVision sensor. This dramatically changes how perception systems are developed. MicroVision's open software framework gives our customers the ability to develop, optimize and validate their systems with the most advanced and most efficient software DevOps model. This is another example of how MicroVision is leading the industry and how we are helping our customers solve their perception system development and their deployment challenges. We also see tremendous interest in our MOVIA lidar collision avoidance system, what we call LCAS. These are for applications where the customer wants to have a solution that is ready to go out of the box, easily installed with preprogrammed and configurable LCAS feature libraries that they can set up and operate on their own. We are currently demonstrating our LCAS system with several customers and plan to launch in Q2 of 2026 with our MOVIA L platform. Finally, let me bring you up to speed on several developments as we strengthen our leadership team. Fraser McMahon has joined MicroVision as our Vice President of Global Sales. Fraser brings decades of sales and commercial experience in the automotive and adjacent markets. Fraser will be expanding our commercial team, and I'm looking forward to working closely with him as we accelerate our customer acquisition plans. Also, [ Greg Scharnbrock ] has joined as our Vice President of Global Engineering. With his experience with Toyota, Delphi as well as Intel, Greg brings proven technology leadership and management capability for our global engineering organization. These are key additions to ensure that MicroVision has the leadership capabilities as well as the experience to execute and deliver our growth plans across the automotive, industrial and defense markets. We have the opportunity to transform the lidar industry, and MicroVision is making that happen. As I said at the beginning, that is why I'm here with you today. With that, thank you for your attention, and I'll turn it over to Anubhav for his remarks. Anubhav Verma: Thanks, Glen. I want to start by welcoming our new CEO, Glen, and marking a new era for MicroVision. The progress we've made under his leadership in just a few short months has been phenomenal. The lidar industry is ready for a revolution, much like the one we saw with radar. Glen was a key architect of that evolution, and he's now bringing his 30 years of automotive experience to do the same for lidar. I'm excited about the MicroVision's game-changing strategy. Number one, the simplified sensor architecture, our Tri-Lidar system transforms the traditional single sensor model into a cost-effective trial of sensors, 2 short range and one long range. And the second is economic disruption. We're setting a new industry standard with solid-state products priced at $200 for short-range and $300 for long-range sensors. This strategy addresses OEM demands and positions MicroVision to accelerate lidar adoption while securing a competitive edge. To accelerate our long-term vision, I am excited to announce our strategic investment in Scantinel, a leader in 1550-nanometer FMCW lidar technology based in Bavaria, Germany. This partnership secures our leadership in next-generation ultra-long-range lidar. Just as FMCW revolutionized radar with superior performance and interference resistance, it is ideal for long-range sensing in lidar. This move positions MicroVision as one of the few companies offering both FMCW and time-of-flight technologies, enabling us to deliver a comprehensive product suite that meets the diverse and evolving needs of OEMs. After the success related to the MOVIA S launch, we are very energized by it and are now driving momentum in the industrial AGV, AMR market to drive near-term revenue opportunities, leveraging our perception software and MOVIA hardware to solve complex business problems. Since MOVIA S has a significantly lower price point than MOVIA L, most of our customers are looking to migrate from MOVIA L to MOVIA S. We believe this will be a transformational for the industrial and warehouse automation markets. Our prior visibility of $30 million to $50 million over the next 12 to 18 months was primarily driven by the MOVIA L product. However, with our new strategy to transition customers to MOVIA S and ongoing delays on part of our customers, we anticipate that this revenue pipeline will take longer to realize. Given that we're moving away from MOVIA L, we're actively managing our production commitments with ZF as we plan to bring up manufacturing capabilities for MOVIA S next year. We plan to provide an update as part of the Q4 earnings and full year 2025 results early next year. Moving on, we continue to press ahead with our pursuit of revenue opportunities in the defense vertical. We recently added a small team in Virginia in the Greater D.C. Metro area with deep experience in aeronautical engineering and avionics. We will be demonstrating a complete solution with multimodal sensors and our full stack software capable of enabling unmanned drones to complete specific missions in first half of 2026. I'm also excited about the addition of key executives with rich backgrounds from Intel and Visteon to join us and build the engineering and go-to-market functions of MicroVision. Now let's review our third quarter financial performance. For the third quarter, we reported revenues of $0.2 million. This quarter's revenue was driven by our sales in industrial and automotive verticals. From a cash burn standpoint, in the third quarter of 2025, our R&D and SG&A expenses totaled $12 million. This includes $1.2 million of severance payments related to CEO transition, $1.6 million of noncash income related to a stock-based compensation expense reversal resulting from the forfeiture of executive PRSUs from former CEO's departure as well as $1.4 million in noncash charges related to D&A. Excluding these items, our core R&D and SG&A expenses were approximately $11 million for the quarter, flat with respect to the second quarter, in line with our expectations. The cash burn for the quarter was $16.5 million. That includes a onetime $3.2 million payments related to the inventory buildup of MOVIA L. Q4 CapEx was $0.1 million, in line with our expectations. Now looking ahead, we anticipate an increase in current spending levels to support several strategic initiatives. These include the onboarding of the aerial systems team and related costs for our new D.C. office, several senior hires aimed at strengthening our engineering and go-to-market functions. Additionally, we will incur expenses related to the Scantinel acquisition in Bavaria, Germany. We plan to provide further updates on this transaction and associated funding during our next call once the closing occurs later this year. We anticipate that these new initiatives will lead to an increase in our annual spending by approximately $1.5 million to $2 million per quarter. To summarize, we're modestly ramping up our expenses from Q4 onwards to invest in 3 key areas: number one, accelerate product readiness; number two, invest in industrializing our products; and number three, accelerate time to revenue by investing in go-to-market and sales organization for building a solid pipeline for the products. We look forward to sharing more updates and providing full year cash burn guidance for 2026 in conjunction with our 2025 year-end earnings. Now let's talk about our balance sheet. We finished this quarter with $99.5 million in cash and cash equivalents. In addition, the company has availability of an additional $46.2 million under our current ATM facility and $30 million of undrawn capital under the convertible note facility as of Q3. As of today, approximately $18 million in principal is outstanding on the convertible note. That converts at a fixed price of $1.60. With $99.5 million cash at hand at the end of third quarter, we are adequately capitalized to make these debt payments in cash or through stock if the holders choose to exercise their option due to favorable market conditions. The $30 million second tranche remains undrawn. As previously highlighted, MicroVision's average trading volumes have experienced a substantial increase since last year, driven in part by committed investments exceeding $90 million from a single investor. This investment has also enabled the company to raise approximately $30 million in net proceeds during the third quarter through its ATM program, strengthening our balance sheet. While we will continue to pursue opportunistic capital raising strategies as appropriate, the combination of recent funding activities and our operational cost management has extended our financial runway into 2027. The lidar industry is evolving with the one's biggest lidar company by market cap, which is now facing significant financial challenges. In contrast, MicroVision stands out due to its strong capital structure, financial discipline, corporate governance and superior product portfolio. Our approach remains centered on diversifying revenue streams through targeted disciplined investments. This long-term outlook makes MicroVision an attractive investment for large-scale institutional investors and has notably increased this visibility within the institutional investment community. We're confident that our new leadership team is well positioned to successfully execute our current business strategy to be the frontrunners of the autonomy enablers for the 3 end markets with significant TAMs. Operator, I would now like to open the call for questions. Operator: Your first question is coming from Casey Ryan from WestPark Capital. Casey Ryan: Sorry, I was on mute. A lot to discuss today. Thank you for the update. So the acquisition in Germany of FMCW technology is really interesting in light of your comments about driving the cost point down. In general, I guess, my view has been that's been an even costlier product, but do you think you can get it down to the targets that you talked about for your core products in terms of lidar and the ASP being consumable, because I guess a lot of the FMCW, I think, has been concentrated in long-haul trucking and sort of higher kind of ASP end markets previously. Glen DeVos: Yes. Maybe, Anubhav, I'll take this. Casey, yes, the key here is where FMCW is today, and you're spot on, historically, it has been a higher cost alternative in terms of material cost. But ultimately, the technology gets you to essentially wafer level and chip scale packaging or really where all the high-value silicon is. And that -- basically that evolution of going from discrete components into highly integrated chip scale packages is where you drive the cost down. And then as well, longer term, it's fundamental advantages that it has relative to eye safety, the ability for getting real-time relative velocity measurements as well and overall range capability, that brings that total system cost. So as we road map it, we do see this being able to hit the kind of cost targets that we think are required to be able to initially be attractive for commercial vehicle. That's where the initial market looks most advantageous as well as ultimately for pass car. It also has another advantage of it's -- when you operate it behind the windscreen, it just has less losses associated with transmission through the windshield of the vehicle. And again, that's another way that fundamentally, you're not having to compensate for that, and so you can deliver a lower cost system. But right now, that's the whole plan that we have with Scantinel is to accelerate that road map. Casey Ryan: Okay. Terrific. So you're raising one other thing that I'll try to be quick about, which is the importance of putting a lidar sensor behind the windscreen versus a bubble or some other part of the car. Are you hearing from customers that that's a really important component for solutions to be able to operate behind the windscreen and operate effectively? Glen DeVos: Yes. In general, it's just an ideal location. If you think about in the vehicle, the rearview mirror for a passenger car and that area in front of it, that's where typically your cameras are mounted today. It has the advantage of the cleaning system of the windshield, basically the windshield wiper and the frost functions on the windshield. So heating and cleaning are basically already in place. It has a disadvantage of having to basically transmit through the windshield itself. So that's where transmission losses become concerning. But that -- we're seeing that emerge as both from a vehicle packaging standpoint. So you don't have that bump in the top of the car when you put it on above the roof line. So from a vehicle packaging standpoint and then from an inherent cleaning and heating standpoint, and then finally, from a point of view standpoint, what I mean by that is the long-range lidar being mounted there gives it the best viewpoint in terms of its field of view, looking down the front of the car and looking down the road. So when you think about all 3 of those factors, it's a very attractive location for it. That said, it's a crowded space up there. You've got cameras, you've got the roof module controls, ultrasonic glass breakage detectors, switches. There's a lot out there. And so that's why miniaturizing that sensor to the greatest extent possible becomes so important. Casey Ryan: Okay. Yes. That's helpful and actually quite exciting. Quickly, another quick detail, I guess, should we expect Scantinel whenever it's closed and sort of fully integrated, does that business already have revenues is my question? Will we see some revenue show up from that? Or is it sort of a low for sort of de minimis revenue type business today? Glen DeVos: No, in the immediate -- go ahead. I'm going to... Anubhav Verma: No, go ahead, Glen. Glen DeVos: No, no. I was going to just say, at this point, no, there's -- it's pre-revenue. And really, what we'll be doing right now, and this is what I'll talk about here and as we come into CES and end of the year is we're putting that plan together to take that technology and industrialize it into an automotive-grade sensor. So where MicroVision can basically wrap around Scantinel's technology, all the supportive processing, packaging, hardware, software, integrating their 1550 FMCW imaging capability. That's how the 2 really combine effectively. We'll put that plan together now, and then we'll be sharing specific dates and expectations on timing of product and revenue here later this year. Anubhav Verma: Yes. And if I can just add, Casey, that's why we don't anticipate this acquisition to add a lot of cost into the system because as I mentioned in my remarks, we're really only getting about 20-odd engineers adding them to the workforce because we would be utilizing some of the talent that we have at MicroVision as well to develop some of the packaging capabilities, et cetera. So all in all, I think the cost that we're adding to the system is not going to be more than $2 million a quarter from that perspective. Casey Ryan: All right. Okay. And then correct me if I'm misstating, but I believe you all have an office in Germany. And will the offices be combined or are they near each other? Or does that not matter? Anubhav Verma: No, they're not near each other because the other office we have is in Hamburg, while the Scantinel office is in Bavaria, South of Germany in a city called Ulm, so near Munich and Stuttgart. Casey Ryan: Okay. All right. One last big area that was exciting on the call was, I think, Anubhav, you started laying this out, sort of talking about a target ASP of $200 for short-range and $300 for long-range. Did I hear that right, first of all? Anubhav Verma: Yes. Casey Ryan: And did you put a target date? I mean, even if it's aspirational, I wasn't sure if I heard that or if that was just a long-term goal. Anubhav Verma: No. I think our goal is to get that product for MOVIA S out in next year. So we will be providing more exact dates probably as part of our next earnings call because that's sort of what we are accelerating right now in the product readiness to get from MOVIA L to MOVIA S, and obviously setting up the manufacturing capabilities, et cetera, to be able to fulfill customer demands starting next year. Casey Ryan: Because those price points are extremely competitive with radar in particular, right, and then functionality versus cameras and would certainly put you well ahead of, as far as I know, any competitors in the lidar space from like an ASP perspective. Does that track with what you guys are thinking? Anubhav Verma: I think that’s why... Glen DeVos: Yes. No, that's exactly right. And that gets us -- I think that's the price point that really gets Level 3 or maybe even Level 2+ systems essentially a great value for the OEMs where they can sell those systems at a very high -- at the right price for their end customers and still have a really high margin with that. Long term to get into ADAS, you have to drive it further down. Casey Ryan: Really. Okay. And tell me if you think -- is it right to be comparing it against camera and radar ASPs? And is that relevant? I mean, yes, it's relevant in some sense, but is it more just about the overall sensor cost is maybe a concern or an issue for some concepts for cars and maybe some categories of cars, mid-tier cars and low-end cars and things like that? Glen DeVos: Yes. If you think about radar and cameras, which are now fully commoditized, cameras as a passive sensor, which frequently kind of hit somewhere between the $50 to $100 range. Radar for short-range below $50, between $50 and $100 for long-range. When you think about those price points, lidar, as it achieves, I mentioned the $140 million a year for radar, When you get into those kind of numbers and you really standardized across an industry, yes, we would expect to be sub-$100 in that range as an active sensor with lens and lens assemblies and everything else. So it's going to be in that neighborhood, $100 or less. Now that's a ways off, obviously, but you got to get there stepwise. And the first big step we want to take is with MOVIA as a short-range sensor getting down to $200, unlocking the satellite sensor architectures for lidar. And then as volume comes and you continue to standardize, continue to drive that cost down. Casey Ryan: And then the second piece of my question was, it feels like that would put you in a fairly dramatic leadership position from an ASP standpoint against potentially all the, let's call them, Western lidar competitors. I don't know what they're seeing out of China. But does that sound accurate to you that like the gap between what I'm hearing from other Western vendors is significantly higher when we talk about ASPs? Glen DeVos: Yes, that's exactly right. And we think that's where you have to be in this market to drive volume. And we're very mindful -- we're very mindful of where the price points in China are, and we know we have to be competitive with those as well. And so at the end of the day, this is where you got to get to. And so the team has done a great job really designing the cost and coming up with a product that gets us on that path. Casey Ryan: Yes. Okay. Last question, I promise. With defense and the opportunities with defense, it feels like there's a significant push to sort of enable new platforms and new form factors. And do you find that price is a key consideration? Or is it more just about functionality and maybe availability of product are sort of more important in those markets today? Glen DeVos: Price is still -- cost is still a factor. I mean it -- if you think about drones in particular, sometimes you can describe them as attritable assets. And with an attritable asset, cost is a factor. Now the reality is ASPs in those applications are significantly higher than what we've been talking about with regard to automotive or industrial. But it's still a factor. And that's where our sensors with the scale and the design approach that we've taken because we can use exactly the same sensor that we're developing in automotive that we're developing in industrial. We can use that for what we're doing with drones and defense. And ultimately, that makes it very attractive, both from the functionality it brings, but also from the fact that it is a very cost-effective solution. It's just a different price point -- a very different price point. Casey Ryan: Right. Okay. Terrific. Thank you for the feedback and the answers to these questions. It's a very exciting update, Glen, for your first call, and we look forward to the next one for sure. Operator: I will now turn this call back over to Anubhav Verma to read questions submitted through the webcast. Thank you. Anubhav Verma: Thank you, Matt. All right. So the question is, what is the status of the RFQs? Are there any updates on the timing? Are we stuck? What more do OEMs want? And how can we compete against the Chinese lidar makers? Glen DeVos: So the RFQs, and I mentioned this in my remarks, the RFQs that we talked about last quarter, they're still ongoing. And it's not question being stuck. It's more that we're following the pace of the OEMs. Let me talk to automotive first, and then I'll pivot over to industrial. For automotive, I mean, we've seen it in the news, the amount of churn that the OEMs are going through on their platform definitions, ICE platforms versus electrification, how they're managing costs. It's -- there's a lot happening there. And as a result, the sourcing process for the -- basically the safety systems that go in those vehicles is also taking quite a bit of time. And that's not unusual, especially for new type of features that lidar enables. But we're continuing to process through that. What typically happens is we -- the OEMs go through a broad round with the supply base. They get a lot of feedback and a lot of different proposals. They analyze those and then the next wave comes out, reflecting what they've learned, the OEM has learned through that initial wave of responses. And that's the process that we're in now. So in terms of what more they want, they're going to want more updates and more Q&A sessions as they go. But that's just going to take the time it takes. And so we're still engaged with those and following them. Relative to industrial, not very similar to that. In terms of the kind of the bigger engineered solution activities that we're involved with, those are still proceeding through their evaluation phases. So that's continuing on, and we're supporting those customers as they do their evaluations. So nothing new to announce this call. But again, we continue to stay engaged with those and driving those to a successful outcome. But that's -- and then the last comment regarding -- or question regarding Chinese lidar, I think you kind of picked a little bit up on that in the last questions that we had. Ultimately, and I've been doing this myself for 25 years now competing with Chinese suppliers across all areas of -- certainly the automotive space. And how do you compete with them is you can't just simply compete on price and hardware. That's very difficult. You have to compete through other innovation channels. And one of those is like I talked about, the open software framework where we can provide a sensor that is highly flexible and fully transparent to what the perception system integrator or developer wants to do. They can put their software on it. We can provide greater levels of innovation through how we use our software. So there are levers that we have that we can use to position our product to be competitive with the Chinese, either adding more value or more price competitive. And that's just the reality of the automotive market and the industrial market today is you got to be -- if you're not competitive, you're not going to win the business. We feel that with our approach, we have a competitive offering against really all of the participants in this space. Anubhav Verma: Thank you, Glen. Next question. We're concerned that the $200 price tag could be unprofitable and/or unsustainable customer deals, the type of deals that led to Luminar losing money on every unit being sold to Volvo. How are we going to be different? Glen DeVos: Yes. That's a great question. You can't get yourself into a position where volume production is upside down on margins. That's just simply not an acceptable outcome. You do all that work to develop -- win a business, develop a product. And then every product is costing you money to ship it. And we're not in a position to do that, and we don't have to. Relative to that $200 price point, the reason we're confident in stating that is because that was based on a detailed buildup of costs from the ground up and looking at what is it going to cost us to produce the product that can provide that kind of performance and looking through all of those cost elements and as well as manufacturing and the capital it takes to support production. So we're confident in the cost model associated with that. That is what then guides our design and development direction for that part. And then I can tell you, and this is just my experience, certainly with automotive over these years, you just have to be maniacal about those costs. You can never -- you have to watch them at every step, constantly be working them down. And I'm confident that our team can do that. So for me, it's the $200. It's a great number to have and to start with. But our goal, just to be clear, is to drive the cost well below that. Anubhav Verma: Thanks, Glen. Glen, you indicated in public comments at IAA in Munich that MicroVision has been working with a couple of customers on what I would call predevelopment contracts to validate our system. We expect those products to be sold very quickly. Can you clarify those comments as a predevelopment because a predevelopment would indicate that we are in early stages of engagement, but prior comments by management indicated that the company was much further along in testing and validation with those customers. And where do we stand with these customers today and the timing for sales? Glen DeVos: Yes. Great question. And so for me, predevelopment is that whole phase before really launching the production platform. And so when I was talking about predevelopment here, what I'm referring to is where we have sensors where we're still -- the customers are still evaluating and looking at the -- how that feature would work on their system. An example of that is the bolt-on LCAS system that we talked about based on the MOVIA L, where they're just doing exploratory work and looking at, "Okay, how does -- how do we feel about this? How does this work? How would we integrate it?" So the customer really hasn't kicked off a formal development activity on that. We're also doing, as you just mentioned, we're also in what you would call qualification phases where the customer has our product on their vehicle or on their robot and is actively qualifying or validating the technology to make sure it can hit the KPIs they think they need to hit to move forward with a lidar solution and MicroVision as the provider of that lidar. So we're doing both. And really, the feedback we're getting has been very positive. Ultimately, we have to get it over the line to a commercial contract. But both activities are occurring. A lot of uptick in that predevelopment area with interest in LCAS as well as in MOVIA S. And my expectation is that will move fairly quickly. But ultimately, we work at the pace of our customers. But based on kind of how they're looking at it, how they've -- the feedback we're getting on it, I'm excited about it. I think my belief is that we'll be successful there. Anubhav Verma: Thanks, Glen. Next question. How does the recent upheaval at Luminar affect our opportunity to make inroads at Volvo Automotive and Volvo Trucks? Glen DeVos: Yes. I maybe not speak to the specifics involved in the whole situation. But I would tell you, historically, when -- if there's a supplier that has issues providing or with an OEM, whatever those might be. And typically, that provides the opportunity for those programs to be reopened and for those OEMs to look at alternate sources. And so we need to be mindful of that and take advantage of those opportunities as they develop. That's just a -- this certainly wouldn't be the first time that this kind of thing has happened in the industry and the OEMs, they're very active in terms of their risk management and we will look for alternate sources or how to protect their vehicle builds. That said, it also just puts that much more importance on your credibility as a supplier that you have a product that's mature, that's proven, you have a product that you can produce at volume, you have supply security and resilience that you're going to be there for the long haul and essentially that you don't pose a risk to them and you don't -- you will never jeopardize their production. And so it just is another point to emphasize that as a supplier to the OEMs, you have to have that credibility. You have to have those pieces put together, which I'm confident the MicroVision team has. But again, those are opportunities that we'll watch very carefully and see what kind of opportunity that truly present for us. Anubhav Verma: Thanks, Glen. Next question. Are the industrial deals still in play? How should investors think about the timing when the efforts in the industrial sector start to show revenue? And perhaps the same question for defense and automotive. Glen DeVos: Yes. So for the first point, yes, industrials are still in play with MOVIA L and we're now expanding those with MOVIA S. We would expect revenue really in 2026, more on the MOVIA L platform with MOVIA S launching in fourth quarter of 2026, maybe a little bit of revenue in the tail end of the year from that platform. '27 will really be about MOVIA S for industrial and either as a stand-alone product or integrated as part of an LCAS solution. For auto, the timelines we're talking about with auto, whether it's robotaxis or it's traditional pass car tend to be, in my opinion, in the '29 time frame. Some still show a '28. We're going to be here in '26 in 2 months that would be highly aggressive. I think '28 could be some, but I think it would be fairly minor. '29 really strikes me as more of a viable launch year for automotive revenue, again, starting and then building out more in '30 and '31. As it relates to defense, a little bit too early to predict at this time. I think you can see there's a lot of activity there over the course of the next year or 2, as we come into it, I think our timing is very good to catch that wave. We'll be able to demonstrate and go public essentially with our product offerings here going into next year. And I think at that time, we'll generate a lot of interest, and we'll be able to give a much better feeling for what we think the revenue projections and when that market would develop for us. Near term, it will probably be more on the kind of the nonrecurring engineering piece of it, the development costs getting paid to develop. But obviously, longer term, we want it to be more on the product sales side. And with defense, given what drone technology is now in terms of the platform itself is fairly ubiquitous. commoditized, you've got what we're developing is going to be very mature coming into next year. This could have a shorter time to market, if you will, than auto. So kind of fits in between industrial and auto. The other comment I would make about this question, I think it highlights something important is we do get the question about why the 3 markets. And I just want to point out, for all 3 of these markets, it's the same core technology that we're providing in terms of the imaging hardware, the sensor itself, the image processing software and then the perception, whether it's mapping, localization, navigation or it's LCAS. It's all -- all of it is the same technology that underlines each of those end markets. So that means we have really nice revenue diversity across our business. So these aren't all -- these markets don't move in the same cycle that auto or industrial does. So it's a nice revenue diversity, which is very, very attractive for a business to have in terms of top line resilience. So I would, again, put defense kind of in between auto and industrial. We'll know more about that coming into next year. Anubhav Verma: And actually, perhaps a related question for me. This question is MicroVision had $6.1 million inventory on 6/30, and this number has gone up on the 9/30 balance sheet. Where are these sensors? What happened to them? And what's the plan? And why is the stockpile without sales? So let me answer that question because I think this just adds context to what you just described. We have built this inventory for MOVIA L from the ZF automotive-grade quality product line in France. And I think this was in anticipation of the demand from the industrial customers, which was ultimately fueling our visibility of the $30 million to $50 million pipeline. We still think that while there are some delays, but as the opportunities open up for LCAS and some of the attractive price points, because I think the single most important price point that I think we're very excited about at the price at which you can sell the sensors to the customers because we are significantly lower than the nearest competitor. And I think as we sort of build up our commercial organization and bring on quality people and build out the sales team, we do expect to see traction on the revenue side from this inventory that's being built up to translate into revenue next year just from MOVIA L. And obviously, MOVIA S is expected to be started up next year, but this is in anticipation of the sales that we can get to next year from the commercial traction that we have gotten since Glen has come on board. Next question. Does the Scantinel acquisition replace MAVIN? Or is it complementary? And is FMCW technology better than TOF? How does the Scantinel product compare with Aeva, which is the nearest FMCW product in the market? Glen DeVos: So 3 questions. So it doesn't replace MAVIN. Those are complementary, not in conflict. And where MAVIN really shines is kind of that 50 to 200-meter range, where Scantinel's tech shines is really more than 50 to up to 1 kilometer. And so -- but for commercial vehicle applications, we really look more at 400 meters and those kind of numbers. So they're very complementary technologies, not just a replacement or overlapping. In terms of FMCW and kind of what -- you have to think not so much where it's better than time-of-flight or one is better than the other. It's more about what is each one really good at. And time-of-flight has certainly some advantages for our shorter-range detection, works very well. We can use, in many cases, off-the-shelf components, and so we get to a lower cost point sooner. FMCW, on the other hand, has, as we talked earlier tonight, has some really attractive performance with eye safety, inclement weather, range, as well as transmission through the glass and then the inherent measurement of velocity with the waveform. So at the end of the day, they offer different pros and cons, but that's why having all 3, MAVIN -- MOVIA MAVIN and now Scantinel is really an advantage for us. And then ultimately, our goal has to be how do we then bring down that cost of the FMCW technology so that it can ultimately get on to pass cars and not just on CV or higher cost applications. In terms of how it compares with Aeva, I'm going to hold off on that, particularly for the short term as we kind of finish our plans. We'll come out later this year with a much more detailed description of what our Scantinel, what the MicroVision, Scantinel product will look like, how it performs and be able to compare it head-to-head. But I can say that the thing that impressed me about what the Scantinel team had done was the work they had done to get it into a single -- basically a single photonic IC and again, getting the wafer level packaging for really the whole imaging head unit or the imaging part of the system. So I think that's the part that's exciting. We'll talk a lot more about that in the future, but that's the work the team is doing right now, pulling those plans together. Anubhav Verma: Thanks, Glen. Next question. It's about the AR vertical. Does the company have any plans to update investors on the status of the vertical? And is the technology being actively marketed to potential customers? And there has been talks of HoloLens 3 launching in 2026. Is MicroVision tech in HoloLens 3? Glen DeVos: Yes. I'll maybe start with the last question first, not to our knowledge. So -- and that's consistent with the fact that we're really not actively pursuing AR-related markets at this time. We have the IP, we have capability. We'll kind of monitor those. But right now, if you think about our resources and where we're allocating our capital, it's really in the 3 verticals that we've talked about with industrial, defense and automotive. And AR is always an interesting topic. At this point, we're just watching to see does that -- can that be interesting for us. But there's no active development or pursuits in that space as of today. Anubhav Verma: Thanks, Glen. Next question. Each MicroVision CEO can be seen as failing. The promise of the MicroVision technology was not realized by any CEO. Will Glen carry us to the promise land and how? How does Glen propose to succeed where all others have failed? And by what measure should you be held accountable and within what time frame? Glen DeVos: Yes. So great question. I would kind of put this in the context, not necessarily just MicroVision. I would kind of broaden the context to the whole industry. You look across the industry and it has -- if you think back to that exciting time that I talked about in 2015, '16, '17, kind of the late teens, where there was a lot of optimism and very great expectations around where lidar would go. And the reality is we haven't realized those expectations so far. And as I mentioned in my remarks, the issue has been cost. It's just an expensive system. And at the end of the day, if you can't afford to put it on your product, you figure some other way to do it, like I said, vision or radar, ultrasonics or something else. But I am confident, and again, this is why taking on the role of CEO of MicroVision was so interesting for me. I am confident that when I look at what we did with radar and I look at what we do with vision systems and early ADAS systems, we can do the same thing with lidar. There's really no reason not to. Lidar is a brilliant sensor technology. And it works just perfectly with radar and vision. It's that trimodal package gives you the highest performing perception system. Now it's up to us, though, to drive the cost down such that it can fit into the budget of the vehicles or the platforms that want to use it. And that's what we're doing. Now we're not going to take 25 years to do it like radar did. Radar -- first radar I was involved was back in 2000. And 25 years later, $140 million. Well, we're not going to take that long. We need to do it now and really achieve that market penetration, maybe not to $140 million by 2033 or '34, but really get on that growth curve where we're accelerating the adoption and we're on the path to mass adoption -- on the path to mass adoption for the technology. And as I look at the team we have with MicroVision and the IP and the technologies we have, I'm very confident this team can deliver that. And so what measures are there for me as CEO? Well, it starts with, are we hitting the product milestones that we talked about. We talked about the launch of MOVIA S in Q4. We talked about LCAS in Q2 with MOVIA L. We've talked the Scantinel plans, and we have to deliver on those. We have to hit those dates with the right content, with the right product and the right technologies at the right cost to be able to move the market. The other part is we have to be able to convert from showing great technology to commercial contracts. And that's why we're strengthening the commercial team with Fraser and his guys, and he'll be adding to his team to make sure we have the right sales motion to be able to convert to contract. And that has to be reflecting in backlog bookings over the course of next year and into '27 and a robust and a really resilient backlog, volume that doesn't go away. And so that's what my Board, all my bosses will be looking at. Ultimately, our goal is always, hey, we have to be able to drive shareholder value by delivering and driving customer value. And I'm convinced we have the team to do it. We have the dates in place when we got to do what, and now it's a matter of execution. And so that's as CEO, that's what I have to focus on and then share progress with this group, the shareholders and the analysts along the way to give you confidence that we're on track. So I think we have a good plan and we have a good team. Now it's about executing. Anubhav Verma: Thanks, Glen. We are over time, but maybe I'll take one last question, and it's a tough one, so maybe that's why I won't answer this question. Why did the company sell so many shares and caused dilution in the last 6 months? And how do we plan to sustain the company? The reason why I call this a tough question is because I do get a lot of e-mails and concerning e-mails from investors. And while I realize that because I myself am a shareholder in the company. But I think what I would like to take the credit on behalf of MicroVision management and the Board is the reason why we are here talking to you guys, and you have seen the others, the mighty have fallen. It just sort of represents the ethos of what this company has been all about. We have been very disciplined. We have been able to fund the company, and we have been fortunate enough to attract people like Glen. I mean, having somebody like Glen and the senior executives he's bringing to the table, it kind of never happened in this company's history. And to have people like Glen leading us through this time is sort of a statement which I think I can be -- we can, as a company, be proud of because no other company has an experienced professional or a resume and experience like Glen. And that's why I'm very confident more than ever of what the future looks like because we have the priorities right to not make the best product, but to make the most efficient product for customers at the price point that will drive the volumes. And part of -- the tough part is you have to incur dilution in the initial phases to have that runway, to have that stability to attract talent. And also keep in mind, this is a game about customer stability because I have been here 4 years. And in my 4 years, the number of lidar companies, which are now I can call competitors, I can literally count them on my single hand before I joined 4 years ago, there were so many companies. And I think this will continue to change. And I think the -- I continue to iterate, this is a game of the survival of the fitness and the guy who will survive this game. And I think our financial position puts us in a very good position of standing and also our continued partners who -- the High Trail guys who have continue to help us as well to get to this point. So I am very confident, and you can perhaps see the increasing positions in our institutional investor holdings, which is also a representation of the fact that we are here to stay. We are here for the long run, which is why I'm very excited. And maybe last comment I will make is the recent financing for Aeva, the debt funding actually is a very positive sign for the entire industry. That actually tells you that the quality of credit investors and the quality of credit is actually increasing with more significantly large institutions coming to play in the lidar sector, which just means that the business and the sector itself is gradually becoming or moving up the chain from equity financing of convertible to someday in future debt flow finance, and we would be having revenue growth and cash flow. So all in all, while dilution is painful, but I think it is the necessary tool to put us in a spot where we can compete and have a future, which is truly, truly bright. With that, I would like to thank everybody. I know we went over the hour mark, but we look forward to chatting with you at our year-end call early next year. Thank you, everybody. Operator: Thank you. This concludes today's conference. All parties may disconnect, and have a great day.
Operator: Good afternoon. Thank you for joining us for Stereotaxis' Third Quarter 2025 Earnings Conference Call. Certain statements during the conference call and question-and-answer period to follow may relate to future events, expectations and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company in the future to be materially different from the statements that the company's executives may make today. These risks are described in detail in our public filings within the Securities and Exchange Commission including our latest periodic report on Form 10-K or 10-Q. We assume no duty to update these statements. [Operator Instructions] As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to your host, David Fischel, Chairman and CEO of Stereotaxis. David Fischel: Thank you, operator, and good afternoon, everyone. We are in an exciting period with a lot of progress on multiple fronts. We've discussed our strategy and efforts more comprehensively on previous calls, so I'll keep today's remarks focused on a few key commercial and innovation updates. Our commercial activity can be viewed as 2 primary efforts: first, to scale robotic system sales with continued adoption of Genesis and the initial launch of GenesisX; and second, to build a robust, high-margin recurring revenue business with our portfolio of novel catheters. These 2 efforts are independent, but obviously synergistic and together support an attractive razor-razorblade business model that can deliver substantial long-term growth. On the capital side, we were pleased to receive hospital orders for 2 Genesis robots since our last call. Both orders came from European hospitals establishing entirely new robotic programs. We expect both robots to be installed and to begin clinical use in the first half of 2026. These Genesis orders are reflective of the healthy pipeline and continued interest we see across our regions particularly in Europe, where we are slightly ahead in having a more complete product ecosystem approved and commercialized. These orders add to our existing system backlog, which had over $10 million, supports a study baseline of robotic system revenue as demonstrated by our results over the last several quarters. The launch of GenesisX significantly enhances our system opportunity by removing structural barriers that limited physician interest from translating into tangible adoption. We're delighted yesterday to announce FDA approval for the GenesisX system. This is a landmark approval for Stereotaxis. There are very few companies that can successfully develop, gain regulatory approvals and deploy complex surgical robots that operate reliably in daily clinical use. This is Stereotaxis' second such robot in 5 years and a reflection on our unique expertise and our capacity and commitment to significant innovation. We are initiating a limited launch of GenesisX, while we await approval for the MAGiC catheter work to enhance compatibility of the robot with various x-rays and refine our supply chain manufacturing, installation and commercial processes for a full launch. While we are pleased with the steady demand for Genesis, we expect GenesisX orders to outpace the tempo of Genesis orders following full launch. Turning to our recurring revenue. The key driver of growth over the coming years will be our budding portfolio of proprietary catheters. Stereotaxis' recurring revenue has to date been predominantly driven by service contracts and a small single-use disposable with relatively little revenue per procedure. Catheters are the primary disposable in any procedure and Stereotaxis did not previously benefit from this revenue stream. The dearth of robotically steered catheters reduced interest in our technology and limited our revenue opportunity and razorblade business model. Over just the past year, we have started to demonstrate the tangible reality and commercial impact of our catheter portfolio, with growing sales of Map-iT catheters following our acquisition of APT last year, adoption of the MAGiC ablation catheter in Europe, following CE Mark in the first quarter and over just the past 2 months, adoption of the MAGiC Sweep high-density mapping catheter in the U.S. following the FDA approval this summer. MAGiC Sweep has been a particular recent highlight. On our last call, we described the importance of high-density mapping in the EP field and have the introduction of robotic HD mapping promised several clinical and workflow benefits. It is also important to note that MAGiC Sweep is Stereotaxis' first catheter launch in the U.S. and the first catheter innovation that allows our robot to be used in new ways, enabling clinical care that was previously not possible. We began commercial launch of sweep in late August and have had a very exciting reception to date. Physicians have shared multiple examples of MAGiC Sweep allowing them to better diagnose the source of arrhythmia safely and efficiently in areas of the heart that were otherwise inaccessible with manual mapping catheters. The clinical interest in the catheter has translated into a strong commercial start with over $300,000 in sweep revenue in the first 2 months of launch. We are still in the earliest innings of the launch with only about 1/4 of robotic accounts in the U.S. ordering the catheter to date as we work through multiple hospital approval processes. We are excited to see the catheter continue to scale this impact in the U.S. as well as gain approval and launch in Europe. The commercial impact of MAGiC Sweep, measured in direct revenue and as importantly, in the halo effect it creates for robotics in our field demonstrates the significant impact of innovation. We have a robust pipeline of innovation efforts that will continue to strengthen our commercial results. These include multiple products in the late stages of regulatory review development projects approaching submissions and earlier-stage efforts that haven't yet been disclosed. They span technologies, including robotic systems, software solutions and several EP and vascular catheters and devices. I'll add a few brief updates and comments on 3 specific projects most impactful in the short term, MAGiC in the U.S., post-field ablation and the Synchrony digital cath lab system. MAGiC is our proprietary robotically navigated ablation catheter that will replace the older J&J catheter used with our robot. We received CE Mark and launched the catheter in Europe earlier this year, have been working through manufacturing ramp-up and country-by-country commercial processes and are working diligently with FDA to advance U.S. approval. Late in the third quarter, we responded fully to a body of questions that represented FDA's outstanding questions upon a comprehensive review of all modules in our submission. We maintain regular dialogue with FDA and appreciate their collaborative effort during the review. Post-field ablation, PFA, has been a dramatic impact -- has had a dramatic impact on the electrophysiology field over the last couple of years, driving billions of dollars in market growth and significant share shift among the large med tech players. On previous calls, we described having a few earlier-stage PFA collaborations with different partners working through the preclinical testing process. Last month, we were pleased to announce successful completion of preclinical testing and entering into a collaboration agreement with CardioFocus to their PFA system with our magic catheter. The agreement provides a framework for how we will advance this first-ever robotic PFA solution or a first-in-human clinical study, regulatory approval and commercialization. CardioFocus' PFA generator and our MAGiC catheter both already have regulatory approval in Europe. And so the effort to add compatibility to our label is expected to be relatively contained. We are preparing formal regulatory documentation to initiate first in human testing, expected to perform these procedures in the coming few months and believe it's possible to see MAGiC approved for PFA use in Europe before the end of next year. Finally, let me make a brief comment on Synchrony and SynX, our digital solution that streamlines modernizes and introduce secure remote connectivity to the cath lab. In October, we announced that we obtained CE Mark in Europe and had submitted technology for FDA approval. The technology has received less attention than most of our other innovation efforts but it holds significant promise as an entirely new business pillar. We have spent over 6 years and many millions of dollars developing Synchrony and SynX, benefiting from our previous experience with our Odyssey system but completely rearchitecting it with an improved technological foundation. Synchrony and SynX are central to our digital surgery efforts to modernize the interventional lab with enhanced workflow and remote connectivity and smart AI capabilities. The technology improves the robotic cockpit, but we believe all cath labs tend to benefit from improved workflow, connectivity, collaboration and intelligence. We have the opportunity recently to leading EPs and technology administrators to evaluate the system. The feedback was very positive, describing it as the most well-designed cath lab display technology they have seen. We expect Synchrony to contribute at least a couple of million dollars of revenue in the first year of launch, and a growing installed base will provide the foundation for an attractive software-as-a-service revenue stream from our SynX connectivity app and future AI features. Kim will now provide additional commentary on our financial results, and then I will make a few financial comments as well before opening the call to Q&A. Kim? Kimberly Peery: Thank much, David, and good afternoon, everyone. Revenue for the third quarter of 2025 totaled $7.5 million, system revenue of $1.9 million and recurring revenue of $5.6 million compared to $4.4 million and $4.8 million in the prior year third quarter. System revenue reflects partial revenue recognition on 1 Genesis system and ancillary devices. Recurring revenue growth over the prior year reflects a full quarter's contribution of Map-iT catheters and initial sales of Stereotaxis' new robotically navigated devices: The MAGiC ablation catheter and the MAGiC Sweep high-density mapping catheter. Gross margin for the third quarter of 2025 was 55% of revenue. Recurring revenue gross margin was 67% and system gross margin was 19%. Gross margins remain impacted by fixed overhead allocated over low production levels. Operating expenses in the third quarter of $10.7 million included $4.1 million in noncash charges for stock compensation expense, mark-to-market adjustment for acquisition-related contingent earn-out consideration and amortization of acquired intangible assets. Excluding these noncash charges, adjusted operating expenses in the quarter were $6.6 million, a decrease from $7.2 million in the prior year third quarter primarily due to lower general and administrative expenses. Operating loss and net loss in the third quarter of 2025 were $6.6 million and $6.5 million compared with $6.3 million and $6.2 million in the previous year. Adjusted operating loss and adjusted net loss in the quarter, excluding noncash charges, were $2.5 million and $2.4 million compared with $3.1 million and $3 million in the previous year. Negative free cash flow for the third quarter was consistent with the previous year at $4.2 million. At September 30, Stereotaxis had cash and cash equivalents of $10.5 million and no debt. including the $4 million Stereotaxis will receive in the upcoming second closing of the registered direct financing announced in July, Stereotaxis would have had $14.5 million in cash with no debt. I will now hand the call back to David. David Fischel: Thank you, Kim. As mentioned in our press release, we expect revenue this quarter to exceed $9 million with system revenue of approximately $3 million and recurring revenue greater than $6 million. This will provide results -- this will result in over 20% annual revenue growth for the full year 2025, in line with our previous guidance of double-digit annual revenue growth. While we are not yet providing formal guidance for next year, we want to offer directional color to help with modeling. We expect sustained growth of both systems and recurring revenue through 2026, with system revenue benefiting from our existing Genesis backlogs and the launch of GenesisX and recurring revenue continuing to ramp with increased adoption of MAGiC, MAGiC Sweep and Map-iT catheters. We expect quarterly revenue to surpass an average of $10 million per quarter in 2026. We continue to advance technologically and commercially while remaining prudent with expenses. We see significant leverage in our business with increased revenue. We expect to enter 2026 with a healthy balance sheet that allows us to advance our new technologies to market and launch them with a balanced focus on accelerating growth while also ensuring improved margins, earnings accretion and achievement of profitability. We will now take your questions. Operator, can you please open the line to Q&A. Operator: [Operator Instructions] And we will take our first question from Josh Jennings from TD Cowen. Joshua Jennings: Congratulations on the GenesisX approval. I was hoping to ask about GenesisX a couple of questions. I guess, first, just maybe an update on the sales pipeline for GenesisX mostly in Europe now with approval in the U.S., but they talk about any pent-up demand in the U.S. and just how we should be thinking about the mix of orders going forward? I think you talked about GenesisX outpacing them, but should we think about more GenesisX placements next year? Or will there still be a healthy amount of Genesis placements in centers, old customer accounts that are replacing their Niobe systems? David Fischel: Josh, thanks for the good questions. And so GenesisX, I'd look at it as additive to Genesis. As you see just in the last quarter, even with GenesisX being approved in Europe, we continue to see demand for Genesis and from sites that have been engaged with us for longer periods of time in the process that are either replacing existing labs or like the 2 hospitals that are establishing new robotic programs. They're building new wins to the hospital, new areas and the construction process then isn't that much of a factor for them. And so we continue to see demand for Genesis that has generally been at a pace of approximately 1 to 2 systems a quarter. And so I think that's going to continue for the foreseeable period, both in the U.S. and Europe. GenesisX is really additive to that by offering access to robotics to many physicians that otherwise would have wanted it, but just couldn't advance through the process because of the challenges logistically at the hospital level. And so we have been engaging with multiple hospitals in Europe over this past year. We've done a little bit of work in the U.S. with a few hospitals, and so we have to start to have a pipeline of physicians and hospitals that are interested in engaging with us. And we predominantly focused in the earlier periods on the sales process. And we have historically always only sold our robot. And we start to -- as we ramp manufacturing, and we feel comfortable with the ability to supply the system at a higher scale, we will also be opening up the model to leases and placements with significant disposable commitments. And so that's really kind of over the next few months. Our goal is to make sure that manufacturing is in place to demonstrate that the system is working reliably in the real world, in regular clinical use and then to be able to start a full launch. And we expect, once we start a full launch that the rate of orders for GenesisX and sales of GenesisX is going to be meaningfully higher than what it's been to date with Genesis. Joshua Jennings: I appreciate that, David. And then just a reminder, is GenesisX going to be sold at a price point that's similar to Genesis or at a premium? And then just as you think about or as we think about the high-level color you provided for 2026 and quarterly revenues averaging at $10 million-plus range, within that, are you assuming that GenesisX systems are sold to non-EP accounts or neurovascular, endovascular centers in 2026? Or maybe just help us think about when that could kick in? David Fischel: Sure. So GenesisX is a new technology. It's a premium system. We expect the system to save a hospital materially on their own expenses, and we are pricing the system at a premium to Genesis. It's in the same ballpark, but at a premium price to Genesis. And so we're comfortable with that decision. And we believe the market is accepting of that as a reasonable appropriate price. And when it goes to your second question on non-EP applications, we do expect to have our first at least 1, 2 non-EP centers next year that will start using the robot in non-EP procedures. We still do not have approval for guide catheter or guidewire. And so that is still -- the guide catheter is in -- it was submitted earlier this year. And we're still working through the regulatory process there, the guidewire we expect to submit for regulatory approval early next year. And so as those come to market, I would expect the majority of their use to be in existing robotic accounts where every EP department is part of an interventional cardiology department, there's easy access to the system for interventional cardiologists who want to start using the robot and experimenting with it in a range of other procedures. But we do also believe that there will be a few sites that do not currently have the robot where non-EP applications are the driver of adoption. Operator: Your next question comes from the line of Adam Maeder from Piper Sandler. . Adam Maeder: I actually wanted to piggyback off of Josh's line of questioning. And maybe starting on the approval in the U.S., it sounds like that will be a limited launch phase for at least a couple of months, if I'm hearing correctly. But David, are you able to put a finer point on when we should expect that to kind of move to full launch? It certainly sounds like you're working through supply chain a little bit. Understand you're waiting on the MAGiC RF approval in the U.S. I don't know if you can give a time line update there as well. But just trying to think about when we move from the limited launch phase to kind of full steam ahead? And then I had a follow-up. David Fischel: Sure. So the 2 things you mentioned, obviously, getting the MAGiC approval in the U.S. and then kind of ramping our manufacturing are the kind of 2 major factors in transitioning from a limited launch to a full launch. And in terms of MAGiC in the U.S., I gave some color on the prepared remarks about our interactions with FDA. I believe those interactions are going well. Things like the recent permit shutdown, while they have some impacts on FDA activity, they don't seem to have any impact on the review of MAGiC, which is funded as a PMA submission previously. And so even in very, very recent discussions, there seems to be no impact whatsoever from the shutdown on the FDA's review. And so I think that's kind of advancing well, and we expect overall likely approval in line with what we've described previously. I would think that kind of as we have that approval, also on the manufacturing side, we continue to grind through the process and to improve it. And so I think on our last call, we described having produced the first GenesisX commercial system in the early summer period. We've kind of built now another system. We are kind of ramping the manufacturing and the supply chain overall well, and that's just kind of a steady progress there. I'd say that kind of you should expect probably a transition to a full launch of GenesisX sometime in the earlier parts of next year at the latest, the natural time to do so would be at the era and HRS conferences, which are in the spring that will be kind of the latest natural time to do so. Adam Maeder: That's really helpful color, David. Appreciate all that. And the second question is around the early commentary for 2026. And I was hoping you could give us just a little bit more color in terms of how you're thinking about the revenue mix? You talked about the average of $10 million per quarter. but how that kind of bifurcates between system revenue and consumable revenue? Just any additional thoughts there would be much appreciated. David Fischel: Sure. So that's always the split between systems and disposables is always difficult because systems are somewhat lumpy. And like you see in this quarter, we're at the low end of the $2 million to $3 million range that we kind of said we expect every quarter. In the fourth quarter, we'll be at the high end of that range. And so it's kind of -- there's a lumpiness to that, that shift percentage distribution between system and recurring revenue in any given quarter. Generally, if you're modeling this year's system revenue of about $10 million and recurring revenue in the low mid-$20 million range. We expect the recurring revenue to scale relatively linearly as we get kind of the catheters further approved and then further launched in each geography. And I'd expect that to kind of continue to just scale as we go account by account and gain adoption. And then systems will fluctuate, but generally, you should expect numbers clearly in the teens or high teens in terms of the system revenue amount. And so that probably takes you where system revenue is going to end up being somewhere between 30% to 50% of overall revenue. Operator: Our next question comes from the line of Frank Takkinen from Lake Street Capital Markets. Frank Takkinen: Congrats on the GenesisX approval. Wanted to start with maybe some additional questions around the MAGiC FDA interactions. Can you talk to some of the questions that the FDA had for the Q3 response that you spoke to on the call? Any significant areas outstanding that they're still looking for? And then I realized it just went in at the end of Q3, but any response from them from that? David Fischel: Sure. So the FDA's questions, which we were able to respond to at the end of the third quarter, we're a comprehensive review. There's many modules included in the PMA submission. So you have obviously preclinical testing and clinical data you have biocompatibility and sterility information, you have packaging information. You have your label, you have all the technical testing of the device. So it's really kind of -- there's many, many modules to the PMA, many kind of sets of data. Their questions were explained to us as the result of their comprehensive review of all the available data that they had reviewed, which they viewed as kind of comprehensive for the submission. And then so there was a range kind of across the different modules, definitely some on the clinical data on the various kind of stability, biocompatibility portions, but really kind of it was a comprehensive set of questions. We responded to those. We felt good about our response. There was nothing kind of strange or particularly troublesome in the questions. So it's still an effort to respond to everything, but we felt kind of good with the tone and the content and the questions we good with our responses. And as described in the prepared remarks, we do maintain regular dialogue with FDA on all our submissions. But obviously, MAGiC is a particularly significant one and communication since then, nothing in writing. We feel overall good with them having received the response and able to review the response fully and access all the documentation that we provided. And so we see things kind of continuing to progress as would be wanted. Frank Takkinen: Okay. That's helpful. That's great. And then maybe just one on the Q4 guide. I think originally, we were expecting something like $7 million in revenue in the disposables and service line for Q4. I think now that's at $6 million, maybe talk through some of the change in assumptions for Q4. Now I realize you said at least $6 million, so at least the door open for higher than that, but just curious if there's any change in assumptions. David Fischel: Sure. So we provided the original guidance at the beginning of this year. At the beginning of this year, we didn't know exactly when we would receive FDA approvals for the various devices or CE marks for the various devices we've had from the catheter perspective, main drivers of recurring revenue growth. We're going to be MAGiC Sweep and MAGiC in both geographies for both catheters. So far, we've gotten 2 out of the 4 approvals done. We got MAGiC approved in Europe. We got MAGiC Sweep approved in the U.S. and we're still working on the 2 other approvals. And so I think just given the timing of those approvals and given what we've seen to date in the ramp, we're happy with the ramp of the devices, particularly MAGiC Sweep. I think it's a reflection of the U.S. market environment where there's far fewer structural barriers to gaining adoption. But so we've been overall very pleased with the tempo of adoption, but we're still in the earliest innings. And so we think that guidance kind of feels appropriate at this time. Operator: [Operator Instructions] Our next question comes from the line of Kyle Bauser from ROTH Capital Partners. . Unknown Analyst: This is [ Kevin ] on for Kyle. And congrats on the GenesisX. Just kind of starting with the GenesisX and all the new catheters, how should we be thinking about the head count of the commercial organization expanding over the next 12 to 24 months? David Fischel: Kevin, thanks for the question. And so we've discussed in the past that as we -- on the clinical side of the business, we have about a total commercial team of approximately 40 people globally, about 20 of them in the U.S., 15 or so in Europe, and then a smaller team in Asia. We've talked about how the clinical team, particularly will see meaningful growth over the coming year or 2. We expect, as we are scaling catheter revenue that we will shift more and more to a model where you can have a one-to-one relationship between clinical reps and hospitals. That is something that in our field -- typically, there's more than 1 clinical rep per hospital. We've always had 1 for every 3 or 4 hospitals. And so having catheter revenue as part of our product mix allows you to sustainably and attractively grow your clinical team to have that style of coverage that can be done kind of in a profitable fashion that can also kind of then help drive greater utilization. And so that's kind of probably the largest source of growth will be in that clinical team. On the capital side, we've done everything to date with a very, very lean dedicated capital team and some additional contribution from sales management. As we've shipped to a full launch of GenesisX are comfortable that we can scale China FX system sales to the dozen, a couple of dozen in short order, then we will kind of start to invest incrementally in probably a handful or so dedicated capital reps that can really kind of push that model much further. Unknown Analyst: Great. That's very helpful. And then maybe just kind of focusing in on the disposables business and catheters. I know with the launches of MAGiC and you're working with CardioFocus on the PFA and that collaboration there. But longer term, are there any other opportunities with the disposables business and maybe building out this portfolio that you're kind of looking at? David Fischel: Definitely. There's a lot of thought and a lot of energy being spent on the disposables side of the business. I think that's where, obviously, most businesses make most of their money, most of the revenue from catheters and most medtech companies, and that's to see the higher-margin aspect of the business. And strategically, there is also something that our robot has in reliable and kind of special in allowing physicians to do things that were otherwise impossible. A robot is only as good as the catheters that can also deliver. And so a robot by itself without a portfolio of catheters has limited value. And so I think there's a lot of opportunity now that we have a catheter R&D and manufacturing expertise and infrastructure in-house, there's this kind of beautiful breadth of fresh air in terms of being able to play with ideas and to think about things much more aggressively than we have in the past. I think that kind of the overall portfolio mix of having 3 main portfolios of interventional devices and makes a lot of sense for the coming few years. And that is really the MAGiC family of catheters, which are robotically steered ablation cardiac completion catheters, so both therapeutic and diagnostic robotically steered catheters into cardio ablation field, then imagine, which are and for stents for endovascular magnetic interventions, our various interventional guidewires, guide catheters, microcast or similar devices of that sort for vascular navigation and then Map-iT, which are manual diagnostic EP catheters. So I think you're going to see continuous innovation in those 3 categories. There's a pipeline beyond that, which has been disclosed to date. There is a pipeline that we have been working on. And so I think you're going to see a steady tempo of innovation beyond what we've discussed today. Operator: There are no further questions. I will now turn the call back to Mr. Fischel for closing remarks. David Fischel: Okay. Thank you for all the questions. We'll work hard on your behalf to finish the year strong and to set things up for a very successful 2026. Thank thank you very much. Operator: The meeting has now concluded. Thank you all for joining. You may now disconnect.
Operator: Thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Spruce Power Third Quarter 2025 Earnings Results Conference Call. I would now like to turn the call over to Julia Gasbarre, Investor Relations. Julia, please go ahead. Julia Gasbarre: Thank you, operator. Good afternoon, everyone, and welcome to Spruce Power's Third Quarter 2025 Earnings Conference Call. Joining me today are Chris Hayes, Spruce's Chief Executive Officer; and Tom Cimino, the company's Interim Chief Financial Officer. Before we begin, I would like to remind you that we will comment on our financial performance using both GAAP and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to the comparable GAAP measures is included in our earnings release for the third quarter of 2025, which has been posted on the Investor Relations page of our corporate website. Our discussion will also include forward-looking statements. These statements are not statements of historical fact. They reflect our current expectations and are subject to risks and uncertainties that could cause actual results to differ materially than those expressed. There can be no assurance that actual performance will not differ materially from any future expectations or results expressed or implied by these forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statement, except as required by applicable law. Please refer to our earnings release and our other SEC filings for further discussion on Spruce Power's risk factors and other important information regarding our forward-looking statements. All comments made during today's call are subject to that safe harbor statement. With that, I will turn it over to Chris. Christopher Hayes: Thanks, Julia, and hello, everyone. Before we dive into details of the quarter and our outlook, I want to express to you the excitement we feel at Spruce. Our actions over the past few months, while difficult, position us for outstanding performance in the quarters ahead. Even as many peers in our sector struggle or face bankruptcy, [ upper ] balance sheet, cash position and resilient business model give us an ironclad foundation for success. Just looking at our third quarter results, you can sense the change in direction and the exciting outlook for our business. We believe Spruce is ready to blossom in the year ahead, thanks to the efforts this year of everyone on our team. Okay. Let's start with highlights of the KPIs by which we measure ourselves. This quarter, we achieved positive free cash flow, increasing our total cash to $98.8 million now from $90.4 million at the start of the quarter. Revenue grew 44% compared to the year earlier period. Operating EBITDA jumped an even better 48% year-over-year. The growth primarily reflects the positive impact of the November 2024 acquisition of approximately 9,800 rooftop assets from New Jersey Resources as well as sizable growth in solar renewable energy credits or SREC revenue. Furthermore, our core operating expenses, which include both SG&A and operations and maintenance, or O&M, was $14.8 million in the aggregate, down 15% from the year earlier period. I want to emphasize that nothing is more important to us than generating positive free cash flow. Now let me give you some perspective on the residential solar market and our position in it. Our market faced challenges this year and certain business model proved that they were not sustainable. Notably, recent policy changes in Washington, D.C. eliminated some residential solar energy tax credits. These changes are expected to negatively impact cash loan deals and origination of new assets. We believe that many players will not be able to adapt to this changing environment. In contrast, Spruce's resilient business model is fundamentally different, we are not dependent on aggressive new customer acquisition strategies, externally financed working capital or continuous growth in new installations. In contrast to installers, our business produces steady cash flows from our operating assets. So we are not hostage to the origination treadmill. Moreover, our business does not depend on IRA tax credits. Spruce's model is designed to maximize the value of existing solar assets through operational efficiencies, maintenance and superior asset management. Today, we own and manage a portfolio of approximately 85,000 home solar assets and customer contracts. We also provide servicing to roughly 60,000 residential solar systems owned by others. As a third-party owner, we buy systems after installation and after any tax credit has been monetized. The installations we acquire generate stable, long-term contracted cash flows. Simply put, our differentiated model does not bear the same risks as the installer model. Now let me offer context on our market penetration capacity for growth. According to a September 2025 analysis from the Solar Energy Industries Association, or SEIA, residential solar installations declined 9% year-over-year. However, there are over 5 million solar installations in the United States, 97% of which are on residential rooftops. If residential solar installation growth slows due to recent policy changes, Spruce still has significant room to grow. With only 145,000 systems and contracts, our portfolio size is just a fraction of the addressable market. We can grow whether new installations are growing or not. To be clear, we do not believe the solar energy industry has peaked. According to the same report, solar accounted for over half of all new electricity generating capacity additions in the first half of 2025. The need for power, especially distributed generation is significant and increasing in the U.S. Individuals and companies are experiencing higher costs as rates rise, driven by load growth from data centers, the electrification of everything and reshoring industrials. This underscores the need for an all-of-the-above energy strategy. Spiking power demands, rising utility rates and the phaseout of the 48E tax credit in 2027 should drive a shift towards the third-party owner or TPO channel. With most regulatory uncertainty behind us, Spruce is taking advantage of market changes to actively pursue 3 key opportunities to grow our business. These are: one, the acquisition of installed systems; two, programmatic offtake partnerships; and three, the expansion of our Spruce Pro servicing business with both primary and backup servicing contracts. The first revenue driver is opportunistic M&A. When we acquired portfolios of installed systems, and then sell in additional services, we command a higher return on opportunistic acquisitions because of our M&A expertise, cash discipline, relationship with underwriters and low servicing costs. These advantages, coupled with a limited pool of potential buyers, enable us to only pursue agreements that meet our deal terms. Our NJR acquisition last year is a recent example of this type of transaction. We expect to secure more attractive deals as installers seek to recycle their capital and/or recognize that they do not have the expertise or resources to efficiently manage all their systems. Indeed, the bid-ask spread has narrowed considerably this year. In addition, some interesting assets could become distressed as the entry transition following the elimination of certain IRA tax credits. This could lead to a renewed urgency to complete new TPO deals by the end of 2027. We are actively evaluating new portfolios as we speak. Importantly, we are not just passive acquirers. We actively maximize value from the installations we acquire. For example, the NJR acquisition included many New Jersey SRECs, in August, we entered into a multiyear agreement to sell New Jersey SRECs to an energy sector conglomerate. The transaction is expected to generate a total of $10 million in revenue through 2029. This partnership is part of a broader initiative to leverage our platform and experience to capture the benefits of our SRECs. These are low-cost, low-risk opportunity to generate capital-light, high-margin cash flow for Spruce. The SREC transaction is another example of our ability to maximize value from our assets while hedging against future price movements. The forward contract provides an important ongoing hedged revenue stream and reinforces the dependability of Spruce's cash flow generation. We anticipate similar opportunities may be available in certain Northeastern states as well as California, which we are actively pursuing. The second revenue driver is programmatic offtake. We are working to secure our first programmatic agreement and are enthusiastic that this strategy can drive derisked revenue. With programmatic offtake, we seek to acquire or service newly installed systems on an ongoing basis as our partners complete them. These partners may include homebuilders as well as legacy solar originators that are pivoting into TPO ownership leases and PPAs. Our model is one where programmatic partners bear the risk of getting systems through construction to operational status and only then [ when ] we buy or begin servicing these nearly new installations at an agreed-upon price. Partnership opportunities did slow this year as many waited for clarity on the budget bill and IRA tax credits. Some originators revamped their business models in recent years to eliminate dependency on IRA tax credits and are poised to grow without any government support. We are in active conversations with these strong industry players. We believe that our programmatic offtake initiative should ultimately generate double-digit IRRs as we acquire a steady number of new installations each month. The third revenue driver is Spruce Pro, our third-party servicing platform. For this channel, we leverage the company's decade-plus experience in managing our wholly-owned residential solar assets to offer a suite of services that can be tailored for third-party owners of distributed generation assets. Our service offering covers financial asset management, billing and collections, asset operations, account services, homeowner support, IT support and implementation and SREC management. Customers leverage our experience to maximize productivity, uptime and efficiency. We have a growing pipeline of potential Spruce partners that include traditional residential solar players, large owners of solar installations, developers, private equity and numerous midsized and local companies that own either residential or commercial and industrial solar sites. Our servicing model and deep expertise enables us to offer our customers significant flexibility when it comes to meeting the needs of their business. While each of these third-party agreements will be customized, we are confident the company can source other partnerships like ADT. Servicing is a durable competitive advantage for Spruce and we are benefiting by leveraging previous investments. We are delivering capital-light growth through this initiative and are proud to have announced several new wins this quarter. These include a full-scope deal, servicing residential solar and storage in North Carolina and a backup servicing role for a Puerto Rico-based solar financing platform. Spruce will pursue both primary and backup servicer roles to meet the needs of this market. Importantly for us and our shareholders, Spruce Pro is unlevered, and there will be no debt financing associated with these agreements. Even as we pursue these new growth initiatives, Keep in mind that the revenue and cash flows generated by the installations we already own and service remain highly predictable regardless of conditions in the residential solar sector or changes to the high IRA. We are confident in our ability to identify, structure and execute new agreements that add shareholder value. Next, I want to dissect the other half of our strategy to sustain positive cash flow. Top line growth is complemented by aggressive cost containment, and we are seeing results from recent cost reduction initiatives. In September, we announced a program to meaningfully improve operational efficiency, drive long-term profitability and optimize our financial position. The program will reduce SG&A expense and lead to approximately $20 million in annual savings. Actions included workforce adjustments, the closure of the Denver office and consolidation of certain roles. These changes will redirect resources to accelerate sales of Spruce Pro investment in IT systems and automation and improved scalability across the entire business. Furthermore, we drove a sequential decrease in operations and maintenance expenses for the third consecutive quarter, reversing the earlier-than-expected O&M spike that began in 2024. We revamped our system to more efficiently route service calls from customers. We rightsized inventory on our trucks, and we appropriately managed customer contracts. This resulted in lower spending on third-party contractors. Meanwhile, our in-house service team is fully operational in New Jersey, where we have a heavy concentration of systems. This team can handle most of the service calls in-house, further driving down third-party contractor spend. The platform and methodical operational strategy we implemented in late February has produced thoughtful system issues management and is gaining ground. We believe these improvements are sustainable and will continue to levelize O&M expenses into 2027. We believe the reduction in SG&A and O&M expenses will increase positive free cash flow through the end of 2025 and into 2026. These changes are moving the company toward a more sustainable business model that will support our long-term strategy for future growth. Before concluding, I want to highlight that we do not need to refinance any of the nonrecourse debt associated with our portfolios in 2025. With that said, the lines of communication are open with creditors, and we continue to receive feedback that we can roll over our first debt maturity associated with our SP1 portfolio due in April 2026 and on like-for-like terms, if we choose to proceed. In addition, we have identified additional potential credit options that could be more favorable, although those other options and our ability to roll financing on a like-for-like basis will be subject to changing financing market conditions. Finally, taking a step back, we are motivated by the progress we are making as we execute our strategy and realize our vision. Our revenue opportunities and operational improvements can deliver a combination of performance, flexibility and value that is compelling to customers, partners, creditors, investors and other key stakeholders. Customers and partners recognize that Spruce is a mature industry leader and a low-cost service provider with an established and high-functioning portfolio management and service offering. We are well positioned as more players seek solar TPO deals, both PPA and lease and as individuals and companies take energy matters into their own hands in the face of escalating rates. Now I'll pass the call to Tom Cimino, who will provide a detailed review of our financial results and outlook. This is Tom's second quarter serving as CFO at Spruce. Tom hit the ground running since joining us and is doing a great job in maximizing operational efficiencies and executing growth strategies. Tom, go ahead. Thomas Cimino: Thanks, Chris. Good afternoon, everyone. I will start with the details on the company's third quarter financial results and the tangible progress we are making to strengthen our financial position and enhance our operating efficiency. Third quarter revenue was $30.7 million, down from $33.2 million in the second quarter but up from $21.4 million in the prior year period. The 44% increase from the prior year period is primarily attributable to the NJR acquisition and the resulting lease and SREC revenue. Third quarter core operating expense, which we define as SG&A and O&M was $14.8 million in total. This is down from $17.2 million in the previous quarter and $17.5 million in the prior year period. We are pleased with this trend, but not content with the 15% decline in our core operating expense from the prior year period. Breaking this out, our O&M expense was $1.8 million in the third quarter, down from $2.1 million in the second quarter and $3.9 million in the prior year period. This represents an annual decline of 51%. SG&A expense was $12.9 million in the third quarter, down from $13.5 million in the prior year period. As evidenced here, we have already made strides to decrease our core operating expenses. However, this does not yet reflect the cost savings initiatives Chris discussed earlier. We expect to see our core operating expenses continue to decline through the end of 2025 and into 2026. Contributing to the above, Bruce generated a net loss attributable to stockholders of $860,000 compared to a net loss of $3 million in the previous quarter and a loss of $53.5 million in the prior year period. The significant loss in the prior year period is in part attributable to a goodwill impairment charge recognized in that quarter. Moving to operating EBITDA. As a reminder, we consider operating EBITDA a key metric in evaluating the company's financial performance, which is defined as adjusted EBITDA plus select items that represent material cash inflows from our ongoing operations. Operating EBITDA was $26.2 million, up from $24.6 million in the second quarter and 48% higher compared to the $17.7 million in the prior year period. This increase was due to the NJR acquisition, resulting in both higher lease and SREC revenues as well as our continued lower core operating expenses as we efficiently manage our costs. Turning now to cash flow. We were also pleased with the continued improvement in our cash flow from operations. In the third quarter, we generated $11.2 million in cash from operating activities. Net cash generated from operations in the quarter improved $17.4 million from the prior year period. When adjusting for the recurring proceeds of our SEMTH master lease agreement and proceeds from our sale of solar energy systems, we generated $20.2 million in adjusted cash flow from operations during the third quarter of 2025 and $26.5 million for the 9-month period. Moving further down the cash flow statement. For the third quarter 2025, we generated $8.6 million from investing [ activities ], including the above-mentioned proceeds from the master lease and solar system sales. Regarding our financing activities, we used $11.4 million in the quarter for debt repayment. And for the 9-month period 2025, we have used $25 million, further driving down our net debt balance. Finally, let me close with a brief discussion on our capital and liquidity position. At the end of the second quarter, total cash, inclusive of unrestricted and restricted cash was $98.8 million, $53.6 million of which was unrestricted versus $53.5 million at the end of the second quarter. Our total debt principal was $705.6 million at the end of the third quarter with a blended interest rate of 6.1%, including the impact of our hedge arrangements. Our debt principal was down from $730.6 million at the end of 2024. All debt consists of project finance loans that are nonrecourse to the company itself or nonrecourse debt is incurred at the project level. At the quarter end, all of our floating rate debt instruments were materially hedged with interest rate swaps extending into the early 2030s. These hedge arrangements had a net mark-to-market value of $12.2 million at the end of the quarter. With that, thank you very much. And now let me turn the call back over to the operator. Operator: your first question comes from the line of Will Hamilton with Kestrel Merchant Partners. William Hamilton: Congrats on the great quarter. I was wondering if you could just give us a little bit more breakdown of the revenue. What was the solar renewal credit revenue in the quarter? Christopher Hayes: Yes. Thanks for the question, Will. Tom, do you want to break that up, please? Thomas Cimino: Yes. Sure, Will. We break it out in our Q, but the SREC revenue, I think, that you're referring to was about $6.5 million of the $30 million for the quarter. It's slightly lower than it was last quarter. And then $11.5 million of PPA, $9.7 million of lease revenue and the rest is the other, including some of the ADT and other revenues that we have. William Hamilton: Okay. And since some of these kind of are newer to this game, could you speak to a little bit how we should think about fourth quarter in terms of revenue given maybe the seasonality and the electricity generation? Christopher Hayes: Yes, for sure. So what I would say about that, obviously, being in the Northern Hemisphere, we do have seasonality in the numbers. At this point, we are not giving guidance, so I can't really provide more clarity than that other than to say we do get less sun in this part of the world, and that does drive some of the top line revenues down. William Hamilton: Right. Okay. Got it. That's helpful. And then in terms of just capital allocation from here, I mean, given the improvement in cash flow, it sounds like you are looking more and more at deals. Can you give us just some color in terms of how to think about valuation of some of these deals that you might be looking at, whether it's portfolio acquisition versus, say, the programmatic offtake opportunities that you mentioned, too? Christopher Hayes: Yes, for sure. So I'd say this, Will, we feel pretty great about the forward-looking impact of the cost cuts that we made. It was obviously a hard decision, but we think it was the right decision. So that does materially change our financial position. And we have continued through this period to look at both programmatic deals and larger M&A deals, much like the New Jersey Resources we did, which was 9,800 systems. I'd say this, we don't give particular guidance on the exact return profile that we look for, but we care quite a bit about what state they're in, what the average FICO scores are of the homeowners. And then as you'd expect, the IRR, which we have said consistently is in the teens. And lastly, we want to figure out what technologies are used in the system, age of the system, what's the tenure. And based on that, we will then make the decision to go, no go [indiscernible]. And I would say, lastly, on that front, look, we've been in this business for a long time. And what that means is from an origination perspective, we are always beating the bushes, but we do get a lot of inbound calls, right? I mean players know Spruce has been doing this for a long time. We certainly don't buy everything. We don't swing at every pitch, but we do look at a lot of stuff. And so we're doing a bunch of underwriting now. And I would hope that we have an announcement, but I certainly can't promise that. Operator: That concludes our question-and-answer session. I will now turn the call back over to Chris Hayes for closing remarks. Christopher Hayes: Sure. Thank you, operator. Our focus through the end of 2025 is on containing costs and scaling our platform, driving down improved financial performance and shareholder value. We really appreciate your interest in Spruce Power and for participating in our call today, and we look forward to updating you again next quarter. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good afternoon, and thank you for waiting. Welcome to Braskem's Third Quarter of 2025 Results Conference Call. With us here today, we have Mr. Roberto Ramos, Braskem's CEO; Felipe Jens, Braskem's CFO; and Rosana Avolio, Investor Relations, Strategic Planning and Corporate Market Intelligence Director. Please note that this event is being recorded. The presentation will be held in Portuguese with simultaneous translation into English. [Operator Instructions] Now I will repeat the same instructions in Portuguese translated into English. The presentation is being held in Portuguese and simultaneous interpreting into English. [Operator Instructions] The audio for this event will be available on the Investor Relations website after it ends. We remind you that participants will be able to submit questions for Braskem, which will be answered after the end of the conference by the IR department. Before we proceed, please note that any statements that may be made during this conference call regarding Braskem's business prospects, projections, operational and financial goals constitute beliefs and assumptions of the company's management as well as information currently available to Braskem. Future considerations are not a guarantee of performance and involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions, industry conditions and other operational factors may affect Braskem's future results and may lead to results that differ materially from those expressed in such future conditions. Now I'll turn the conference over to Ms. Rosana Avolio, Investor Relations, Strategic Planning and Corporate Market Intelligence Director. Ms. Avolio, you may begin your presentation. Rosana Avolio: Good morning, everyone. Thank you for participating in Braskem's earnings conference call for the third quarter of 2025. As indicated in the agenda described on Slide 3, I will begin the presentation with the company's main highlights in the period, starting on Slide 4. In the third quarter of 2025, the industry's performance continued to be impacted by the prolonged downward cycle. Utilization rate at petrochemical plants in Brazil were lower than in the second quarter due to the scheduled maintenance stoppage at the Rio de Janeiro plant and the continued implementation of the strategy to optimize production at naphtha-based plants, which takes into account demand levels and spreads on the international market. In the United States and Europe, the increase is mainly due to the normalization of operations and the rebuilding of stocks in the United States, while production levels in Mexico remained lower given the first general maintenance stoppage since the start of production, which was completed at the end of July 2025. With regard to safety and nonnegotiable value, Braskem recorded an average accident frequency rate of 0.75 events per million hours worked, down on the previous quarter and well below the global industry average. In the quarter, the company recorded consolidated recurring EBITDA of $150 million, 104% higher than that in the first -- second quarter of '25, with Brazil, South America segment standing out. With regard to operating cash flow, despite the better EBITDA recorded in the quarter, the company had operating cash consumption of approximately $62 million. Braskem's cash position at the end of the quarter was approximately $1.3 billion, sufficient to cover debt maturities over the next 27 months without taking into account the international standby revolving credit line in the full amount of $1 billion and maturing in December 2026. The company's total liquidity, including this credit line was approximately $2.3 billion at the end of the quarter. Let's move on to the next slide. In the third quarter of 2025, the global macroeconomic scenario was marked by moderate growth, the accelerated inflation, high interest rates and strong geopolitical and trade tensions. And considering the still volatile scenario, we have seen a significant impact in the regions where we operate, resulting in lower industrial activity in resin processing and a typical downturn in demand for the period, reflecting the challenges faced by the industry on a global scale, especially in Brazil and Europe. In addition, most international petrochemical spreads fell in the period, remaining at historically low levels due to excess installed capacity, which together with weakened demand continue to put negative pressure on the sector's profitability at the global level. Moving on to the next slide. The performance of each of the company's segments will presented below, starting with Brazil on Slide #7. In Brazil, the utilization rate at the petrochemical plants was lower due to the scheduled shutdown of the Rio de Janeiro petrochemical plant and the strategy of optimizing production at naphtha-based plants in face of demand levels. Resin sales in the Brazilian market were lower, mainly due to the higher volume of polyethylene imports and lower demand for polypropylene. This reduction was offset by higher sales of key chemicals. In the quarter, recurring EBITDA was $205 million, higher than in the previous quarter. This increase is explained by the prioritization of sales with higher added value, the implementation of the commercial strategy to supply the Brazilian market and the initiatives of the resilience program. Let's move on to the next slide, please. In the third quarter of 2025, the utilization rate of green ethylene plant was 40%, 31 percentage points lower than the previous quarter, impacted by the continued implementation of measures to optimize stock levels, which is part of the resilience program. Sales were lower compared to the second quarter due to lower demand from Asian markets. In relation to the strategy of accelerating the production of new bioproducts and with the aim of seeking opportunities to create value, Braskem GreenCo was created at the end of 2023, a company that already owns the green ethylene assets in Rio Grande do Sul and which will concentrate the growth of Braskem's green portfolio. Next slide, please. The utilization rate in the United States and Europe segment was higher due to the normalization of operations and the rebuilding of inventories in the United States. The lower sales volume compared to the previous quarter is mainly explained by the lower industrial activity in Europe and the weakened demand in the United States. The segment's results continued at negative levels, impacted by weakened demand in the regions pressured spreads and higher ship expenses. These effects were partially offset by the lower inventory effect of feedstock acquired in previous periods in the United States. Moving on to the next slide, we will talk about the Mexico segment's performance in the quarter. The utilization rate for the quarter was 47%, still impacted by the first general maintenance stoppage since the plant start-up, which was concluded on July 31. With regard to ethane supply, the lower volume of ethane supplied by PEMEX compared to the previous quarter was offset by the increase in the volume imported through Fast Track and the start of supply from the ethane import terminal. In this scenario, the volume of polyethylene sales was lower than in the second quarter. Recurring EBITDA of the segment for the period was negative by $37 million, also impacted by the higher idle expenses in the quarter due to scheduled stoppages and lower provisions for fine receivable for delays in the construction of the terminal of ethane imports compared to the second quarter of 2025. Now let's move on to the next slide. The general maintenance stoppage at Braskem Idesa petrochemical plant was completed at the end of July with the participation of more than 30,000 people. This was the first scheduled maintenance stoppage at the petrochemical complex in Mexico since its inauguration in 2016. In addition, the start of ethane supplies from Terminal Química Puerto México in September 2025 marks the beginning of a new chapter in the history of Braskem Idesa with the reduction of the need to use Fast Track solution and guaranteeing the possibility of access to 100% of Braskem Idesa's feedstock at lower logistics costs. This ethane will be transported using two ethane transport vessels leased by Braskem Trading and Shipping, which are dedicated to this operation. TQPM is connected to the petrochemical complex in Mexico via pipelines, guaranteeing greater reliability to the operation when compared to the Fast Track solution. It's worth noting that in September, TQPM supply of ethane to Braskem Idesa amounted to approximately 11,000 barrels per day. Next slide, please. In the next chapter, we will discuss the company's consolidated results. Consolidated recurring EBITDA in the third quarter was $150 million. The increase in relation to the previous quarter is mainly explained by the prioritization of higher value-added sales, prioritization of supply to the Brazilian market, positively impacting the contribution margin, lower inventory effect in the United States and the implementation of the resilience plan initiatives with emphasis on reducing fixed costs in general. These effects were partially offset by higher idle expenses due to scheduled stoppages in Brazil and Mexico and by the appreciation of the real against the dollar. Moving on to the next slide. By the end of September 2025, all work fronts in Maceió were progressing according to plan. The relocation and compensation front continue to show progress in its indicator and ended the quarter with 99.9% execution of the residents relocation program. The same percentage applies to the number of proposals submitted for the financial compensation and relocation support program of which around 99.6% were accepted and 99.5% were paid out. At the same time, the closure and monitoring of the salt cavities is being implemented after all the actions have been taken, if necessary, to ensure that the 35 cavities reach a maintenance-free state in the long term. This quarter, we highlight the achievement of the technical filling limit of cavity 16. As a result, six cavities have now been naturally filled, six cavities have been completed, three have reached the technical filling limit and seven cavities are being filled. Additionally, as announced by the company through a material fact, Braskem and the state of Alagoas signed an agreement related to the Alagoas geological event, providing for a total payment of BRL 1.2 billion, of which around BRL 139 million had already been paid. The outstanding balance is to be paid in 10 variable and adjusted annual installments, mainly after 2030, taking into account the company's payment capacity. The state agreement establishes compensation, indemnification and/or reimbursement to the state of Alagoas for full operation of any and all state property and of patrimonial damages and granted the company full discharge for any damages arising from and/or related to the geological event in Alagoas, including the extinction of the Alagoas state suit in action. The signing of this agreement represents a significant and important step forward for the company in relation to the impact resulting from the geological event in Alagoas. Therefore, in relation to the final provision, the total provision related to Alagoas event was around BRL 18.1 billion, of which around BRL 13.6 billion have already been disbursed and approximately BRL 1.5 billion have been reclassified to other obligations payable, including those related to the agreement signed with the state of Alagoas as mentioned above. As a result, the total provisioned balance at the end of the third quarter of 2025 was BRL 3.8 billion. Now let's move on to the next slide. In the third quarter of 2025, the implementation of resilience measures, especially the optimization of inventory levels was important in partially mitigating the consumption of working capital. The company had an operating cash consumption of BRL 334 million, impacted mainly by the higher seasonal disbursement of operating investments, including the scheduled stoppage at the Rio de Janeiro petrochemical plant and in Mexico. Recurring cash consumption was mainly impacted by higher half yearly interest payments on debt securities issued on the international market by the company, which are concentrated in the first and third quarters of the year. The sales of fund quotas part of the resilience plan and the receipt of the last installment of the sale of Cetrel reduced this consumption by BRL 211 million. Finally, considering the disbursements in Alagoas, the company had a cash consumption of approximately BRL 2.2 billion. Now let's move on to the next slide. Braskem ended the third quarter of the year with an elongated debt profile with 69% of its debt concentrated after 2030. In order to strengthen its liquidity position in the face of the industry prolonged downturn, the company drew down its standby line in the amount of $1 billion at the beginning of October. The current line matures in December 2026. The available cash of $1.3 billion is enough to cover the debt principal repayments over the next 27 months. Finally, corporate leverage stood at approximately 14.7x at the end of the third quarter of 2025, mainly due to the lower EBITDA over the last 12 months. Moving on with our agenda on Slide 11. This concludes the overview of the results for the third quarter of 2025. And next, I will comment on the company's resilience and transformation program. Braskem continues to focus on implementing the initiatives set out in its global resilience and transformation program, considering the significant impact resulting from the prolonged downturn of the entire industry and the Brazilian chemical sector. To this end, the company has adopted measures aimed at generating sustainable value with an emphasis on maximizing EBITDA and mitigating cash consumption. Braskem's resilience program is aimed at implementing tactical initiatives in the company's operations and processes and is structured around two pillars. initiatives with an impact on EBITDA and short-term cash generation and actions to defend the competitiveness of the Brazilian chemical industry with a focus on building a more competitive Braskem, resilient and sustainable. The transformation program brings together initiatives that support the perpetuity of the business and is structured around three pillars: optimization of naphtha base, increasing and flexibility of the gas base, and finally, migrating to products with renewable sources. Now let's move on to the next slide. Following on from what was presented on the previous slide, the implementation of the global resilience program fronts have been intensified considering the prolonged downturn in the industry. So far, we have established 79 action plans globally, which have been broken down into more than 700 initiatives. These actions are distributed on fronts presented above, institutional agenda, commercial agenda, monetization of assets, negotiation with suppliers, optimization of capital employed and operational optimization. In 2025, the potential for capturing these actions is around $400 million in EBITDA and about $500 million in cash generation in relation to the business plan budget for the year 2025. Regarding the progress of the implementation of the actions, around 1/3 of the initiatives have already been implemented and other are in execution or partially implemented, demonstrating the progress of the program. This program is an essential pillar to get through the challenging scenario of the global industry. Moving on to the next slide. Continuing what we saw in the previous slide, resilience initiatives have made progress that is fundamental to mitigating the impact of the prolonged downturn in the industry. On the regulatory side, we have made significant progress in strengthening the Brazilian chemical industry, ensuring fair competitiveness. Among them, the approval of the provisional application of the antidumping duty for the imported from the U.S. and Canada, mitigating the existing damage in the Brazilian market and the maintenance of the 20% import rate in Brazil for PE, PP and PVC resins. In addition, the approval of Bill 892 of 2025 by the Chamber of Deputies represents a significant step forward for the Brazilian chemical industry, which has been operating at the highest rate in the last 30 years. This bill has the purpose of extending the break, the special regime for chemical industry in November and December 2025, in addition to instituting the PRESIQ, which is the special program for the sustainability of the chemical industry from 2027 to 2031. The text of the bill is currently being processed in the Senate for approval and subsequent presidential sanction. Braskem, together with ABIQUIM and other companies in the sector, reinforces the importance of proving the Bill 892. ABIQUIM's technical studies indicate that this bill could generate an estimated positive impact of BRL 112 billion on the Brazilian GDP by 2029, create up to 1.7 million direct and indirect jobs recover up to BRL 65 billion in tax revenues as well as increasing the use of the sector's installed capacity, which currently operates at the lowest level in the industry. In addition, a series of initiatives with an impact on EBITDA were implemented, such as commercial optimizations, reductions of logistics costs, energy, supplies, input, raw materials, optimization of inventory levels as we commented on throughout the performance of the segment, monetization of tax credits, among others. These combined initiatives generated positive impact of around $240 million in EBITDA and approximately $330 million in cash in the year-to-date compared to the budget of the company's business plan for 2025. These results reinforce the importance of the resilience program in the current industry scenario. Now let's move on to the next slide. With regard to the transformation program, the company also made progress on initiatives to increase the competitiveness of its operations in the medium and long term with the aim of ensuring the perpetuity of our business. Starting with Transforma Alagoas, we highlight the beginning of actions to increase the competitiveness of the company's PVC operations and make them more sustainable. The chlorine-soda plant in Alagoas will be transformed into a unit dedicated to handling volumes of EDC, the raw material for the production of PVC. In this context, the chlorine-soda plant was hibernated in September 2025. the company started a new PVC operating model and will now import all its EDC needs through a long-term contract signed with an international supplier. Braskem, which has been present in Alagoas for 48 years, reaffirms its commitment to the socioeconomic development of the state, boosting the strengthening of the chemical and plastic chain. With regard to Transforma Sul initiative, the study into importing LPG for use as feedstock has been completed. It's worth noting that the Rio Grande do Sul petrochemical plant is the most competitive naphtha-based plant in South America and the best positioned on the global ethylene cash cost curve. This study was carried out with the aim of taking advantage of the plant's existing gas processing flexibility, combined with greater logistical efficiency by importing LPG from Argentina, taking advantage of Vaca Muerta production. This initiative brings potential incremental profitability of about $110 per tonne compared to the using naphtha as a feedstock. These actions demonstrate how the company has sought to modify its operations to ensure efficiency, flexibility and long-term sustainability. Now let's move on to the next slide. Concluding this chapter, we come to the biggest transformation initiative underway, Transform Rio. The expansion of the Rio de Janeiro plant's capacity was approved by the Board of Directors in October 2025. This project will add 220,000 tonnes per year of ethylene capacity with an equivalent expansion of PE, increasing the share of gas in Braskem's feedstock profile. The estimated investment of BRL 4.2 billion with completion estimated for the end of 2028. The implementation of the project is conditional on obtaining funding in addition to the resources already approved under the REIQ investments benefit for 2025 and 2026 and a long-term supply contract with Petrobras. In addition to increasing the competitiveness of Brazil's most efficient petrochemical plant, this expansion will bring greater competitiveness to the Brazilian polyethylene market, which is in deficit and positive socioeconomic impacts such as revenue generation for the states and the creation of more than 7,500 jobs during the project execution. With this, we conclude the chapter by reinforcing that the resilience and transformation program is essential for getting through the industry's challenging cycle, guaranteeing competitiveness and sustainability. On to the next slide. I will now comment on the company's strategic direction for the next five-year cycle and the outlook for the petrochemical scenario. Now let's move on to the next slide. Every year, the company draws up its business plan with a five-year horizon through a regular process with a structured timetable and the involvement of various areas of the company. Discussions related to the strategic direction typically take place during the second half of the year, where we revisit our vision for the next five years. taking into account changes in the global scenario, trends and fundamentals in the energy and petrochemical industry. For this cycle between May and July, we kick off by drawing up future scenarios for the petrochemical industry. In August and September, after a detailed discussion, the macroeconomic and petrochemical scenarios were validated with the leadership. In October, we refined the market, operational, financial projections based on these validations. And in December, we will consolidate the strategic direction for approval by the Board of Directors. Now let's move on to the next slide. When we look at the global scenario in 2025, what stands out most is the high level of uncertainty and volatility. This movement has been driven by trade tensions between the United States and China, which have escalated throughout the year. These tensions are accompanied by a series of factors that are likely to continue over the next years, such as more fragmented global chains, increasingly protectionist industrial policies and changes in investment flows, which directly affect international competitiveness. Even with interest rate cuts, the risk of global economic slowdown is still present. When we look at the GDP projections, the consensus is for growth similar to the start of the decade, but limited by the uncertainties of the trade war. This means that we are facing a scenario in which globalization is weakening and protection is advancing. The main impacts of this scenario are uncertainty about the stability of the global economic growth and the profound transformations in the dynamics of international trade with additional risks of disruption in global supply chains. This is the macroeconomic backdrop that we are taking into consideration in our strategic discussions for the 2026 to 2030 cycle. Moving on to the next slide. The current scenario combines two factors that put pressure on the petrochemical industry, which are lower oil prices and subdued global demand. This configuration tends to reduce resin prices on the international market as the marginal producers' cost falls, and there is not enough demand to sustain the price of resin on the international market, even with relatively stable spreads for the marginal producer based naphtha. Lower oil prices and consequently, naphtha and resins on the international market could be unfavorable for base gas producers as in the case of Mexico, depending on the magnitude of the drop in the naphtha prices if gas prices remain stable. In 2025, the price of oil on the international market was intensified by the trade war between the United States and China, which brought uncertainties and reduced expectations of growth and global energy consumption. In addition, there was a significant increase in oil production, especially by OPEC, OPEC+, which gradually resumed its supply, contributing to adjustments in global supply and putting pressure on resin prices benchmarks. In this scenario, realized oil prices this year were lower than expected when compared to the assumption made in the company's 2025-2029 business plan as well as most of the market. This difference has resulted in a challenging environment for the petrochemical industry, with direct impact on competitiveness and profitability. Now let's move on to the next slide. In the company's internal discussions supported by external consultants, it was concluded that dynamics of the petrochemical industry will remain structurally challenging until at least 2030, with China leading investments to achieve self-sufficiency. These investments, combined with the growth in demand impacted by the macroeconomic uncertainties, as mentioned above, contributed to the continued imbalance between supply and demand, putting pressure on overall operating rates, which should remain at historically low levels, even with moderate growth in demand. Given the current expectations about the rationalization scenario, it's expected that the sector will begin to recover towards the end of the decade. Now let's move on to the next slide. Finally, when we look at the outlook for the petrochemical spreads until 2030, the scenario is structurally challenging, considering global trends and industry dynamics. The prolonged downward cycle is expected to last until the end of the decade with a modest recovery after 2029. This behavior reflects the structural excess of supply combined with moderate growth in demand, which has kept international spreads below the historical average for a prolonged period. This reality reinforces the importance of the initiatives we presented in previous chapters aimed at resilience and transformation as well as the need for increasingly assertive commercial and operational strategies. With this, we end this chapter by emphasizing that in the face of a challenging global environment and pressured margins, Braskem's strategic advances will be essential to ensure competitiveness, sustainability and value generation. I would now like to close the presentation by reinforcing the company's priorities for 2025 on the next slide. We will continue to make progress with the initiatives to transform our assets. This front of the resilience and transformation plan is strategic if we are to continuously increase the competitiveness, efficiency and sustainability of our business, making Braskem better prepared to face the adversities of the global petrochemical scenario and guaranteeing its perpetuity. In order to guarantee the continued progress of the transformation, it's essential that the company continues to identify and implement resilience measures. These actions are fundamental to mitigating the impact of the cycle on the company's results and cash flow. strengthening the competitiveness of our business throughout this prolonged downturn. Braskem reaffirms its commitment to the competitiveness of the Brazilian chemical industry together with associations, clients, suppliers and society. It will continue to promote initiatives that guarantee a level playing field and a fair competitiveness for the Brazilian industry, making a consistent contribution to the sector's development. In addition, the company maintains its commitment to the agreement signed in Maceió, conducting each stage with transparency, responsibility and respect for all parties involved. Finally, it's essential to emphasize that all our priorities will be carried out while maintaining our commitment to safety in our operations. safety is and will continue to be a perpetual and nonnegotiable value in Braskem's strategy, guiding every action and decision the company makes. This concludes the presentation of Braskem for the third quarter of 2025. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Please, you may proceed. Roberto Ramos: Good afternoon, everyone. This is Roberto Ramos, President of Braskem. Before we begin the Q&A session, I'd like to highlight some aspects from the presentation in addition to some updates about the financial and economic alternatives for our capital structure, which are currently in effect in assistance from our external consultants as we announced in September '25. That work in developing our strategy for the 2026-2030 cycle began in August and have now been finished by the Administrative Board. We've made some significant conclusions about the company's mid- and long-term outlooks. We have ascertained that the perspectives for the local and international petrochemical industry have suffered a significant negative impact for a number of reasons because China will continue to make significant expansions in its ethylene, propylene, propylene and polypropylene chains using different feedstocks and solutions, also because in the Middle East, there are similar movements. This movement by the Chinese government will have a significant impact on the global scenario with over 40 new crackers increasing production by 70 million or 100 million tonnes, respectively. This will have a significant effect as well on the different petrochemical plants idle capacities. This, combined with the very timid rationalization in the petrochemical industry updates our idle projections. We project a significant gap between supply and demand up until at least the turning of the decade. As such, the companies and the petrochemical industry's mid- and long-term outlooks must be updated. And so this leads to our strategic planning project. So, in September, the company announced the contracting of external consultants to investigate a healthier capital structure. And this is given the projection that the downward cycle is going to be longer than we expected. Since then, we have been updating our mid- and long-term strategies and outlooks. This is made even more challenging by the 2025, '26 cycle. Any potential change about the path to -- path forward must consider these projections. As always, the company will keep its investors and the market as a whole duly informed about all material developments and conclusions about the topic. Lastly, please note that any -- in spite of any negative outlooks or projections, Braskem continues to move forward with its resiliency project, which was approved by its shareholders in '25 and focuses on increasing global competitivity around the world. As such, I'd like to highlight some initiatives linked to value generation for various stakeholders, emphasizing on maximizing EBITDA and cash generation, which were announced recently by Rosana. First, defense of competitivity for the Brazilian industry. by maintaining the 20% import rate for various feedstocks; two, approving various antidumping laws and rights with regard to the U.S. and Canada and also with regard to PVC in the U.S.; three, approval in the Chamber of Deputies of a bill here PL 892/2025, which sets forth rules about the REIQ and PRESIQ, which is now going to the Brazilian Senate for approval. Next, the hibernation of the chlorine-soda plant in September '25 with the goal of making PVC production in Alagoas more competitive and sustainable by importing EDC, this feedstock makes our PVC plant more competitive and also approving the transformer Rio project, which will make Braskem more competitive by using gas in its feedstock matrix to produce polyethylene. And next, operating improvements, which have been generated by over 700 initiatives in 79 different action plans, which include the use of inventories linked to CapEx, producing resin with lower -- or higher added value, reducing downtime in plants due to upgrades, which is something that used to hurt us, improving our use of feedstocks and inputs and also the use of fiscal incentives and credits. So, that being said, I will now begin to answer our listeners' questions. Rosana Avolio: Thank you, Robert. I'll start with the questions that we received on the chat. And there is some convergence in some points. So I'm going to answer some individual questions, and then I'm going to answer the questions that are grouped in terms of content, starting with Vicente with Bradesco. Vicente asked two questions. The first one, he made some comments as follows Lots have happened since the last fall and Braskem hire financial processors to help them in this restructuring. When are we going to have a decision on this? And does the company consider injecting equity now that Alagoas case seems to be completed? And Vicente also ask us resin volumes were very weak in this quarter. What was the main economic driver? What can we expect for the quarters to come? Felipe Montoro Jens: Thank you, Rosana, and thank you, Vicente, for the question. I'll field the first one, and Rosana will handle your second question. With regard to hiring the advisers, as you can imagine, this is something that comes up rather often. It's an important decision of the company, which was actually a relevant fact that was announced to the market in September. And what we can state right now is what Roberto has just read when he opened the Q&A session vis-a-vis any decision pertaining to whatever route we will move forward is still subject to the completion of this diagnostic and especially with the necessary adaptations by the company's Board. At this moment, these discussions are already being elaborated on the results as well so that we can, as we mentioned previously, develop in conjunction with the company's main stakeholders, something that will effectively reorganize Braskem's capital structure. At the present moment, no options are discarded or confirmed. Everything is open. Rosana? Rosana Avolio: Yes, of course. Thank you for the question. You know the company quite well. On a quarterly basis, we see some dynamics of seasonability. And in the historic seasonability, the third quarter tends to be the best period because it anticipates the we -- end of year celebrations and the formation of inventory levels. It was different this year, however. If we consider 2025 compared to 2024, if we consider the demand growth of resins, we do not see a growth posted in this line. We see that demand of resins, the demand of plastic is strongly associated with the Brazilian GDP. When we talk about PE and PP, we can see that there is a drop of about 4% for the next months. For the year to come, we see a recovery of about 3%, but without any doubt, there was a drop when compared to last year. If you see because of the sanitation law, we have seen a very important demand from the sectors of [indiscernible] and civil construction that is a result from the sanitation law. So we expect a 3% growth for this year, just what -- just as we saw in the third quarter when we compare to the previous quarter, we saw a 3% growth. And for the next year, we expect a growth of 3% based on the sanitation law. And a general comment I would like to make. We have seen from the global viewpoint, a very weakened demand or I would even say an uncertain demand due to tariff war that we have seen along the year of 2025. Answer the next question by Gabriel with Citi. This is his question. It's about -- in relation to transform Rio project, could you provide us the time line of the investments and the impact expected on the EBITDA of the company? In addition, could you talk about the funding of the project? Could Petrobras take part in the funding of the project? And the second question is as follows. Could you provide an update on the PRESIQ? And what are the discussions like in Brazil? Is there a time line to provide? What would be the potential impact for the company? Felipe Montoro Jens: All right. I'll begin with transformer Rio and Roberto can talk about PRESIQ afterwards. So, with regard to Transformer Rio, as we -- as Rosana presented now, we have a schedule. The project will begin its engineering phase right now. And this persists until the end of '28 or the beginning of 2029, at which point the project will be completed. If we do some math to calculate the added value that this could bring to the company's EBITDA and using a 220,000 tonnes installed capacity as announced and using an average from the spreads of the previous years, which is $860 per tonne, this brings us to just under $200 million per year of additional EBITDA that we will bring to the company. With regard to financing this project, which is extremely important, as was also announced in our relevant fact, there is a condition for this project to persist so that it can have the needed resources and funds so that it can proceed with the company's cash flow. So, at this first stage, we use the funds that are already available for the company from the REIQ and investments. This allows us to neutralize those impacts to our cash by the first part of 2026. And after that, the need to raise additional funds is already included in the context. So, actually, the first question that was asked with regard to restructuring the company, this has -- this already includes this project. Due to the nature of the project, very likely we were going to find funding sources, but this is not yet defined. It is still being discussed. It will be defined as soon as possible so that this project will not be delayed. Roberto, could you talk about PRESIQ and our forecasts for next steps? Roberto Ramos: Yes, of course. The project, as you know, was approved by the chamber here in Brazil and was sent to the Senate, EBDQUIM and ourselves as members of EBDQUIM, the Brazilian chemical industry is pushing for this to be voted on with urgency so that it can be duly studied by the industry and Trade Commission and then follow on to the plenary session to actually be voted on. We believe that if we manage to get it evaluated with urgency, it can still be signed this year, maybe in November, or if not November, then at least in December, so that it will have an impact on the 2026 results. It's very difficult to make projections about how quickly these bills go through, whether it's in the chamber or in the Senate because political scenarios change every day. New scenarios produce the need for other discussions and other topics to be pushed forward. So it's very difficult for us to give any kind of forecast as to when we think this will happen. But it's our wish and our firm belief that this will be approved in 2025. Rosana Avolio: Thank you, Roberto, Felipe. Now a question about Alagoas about recent announcement. We disclosed a material fact yesterday. Since there are many questions, I'm going to try to focus on the main points. So, there's a request for more details about the agreement in Alagoas, especially in relation to the schedule of payment expected. And there's a question if there is flexibility of the amount considering each payment individually. Felipe Montoro Jens: Thanks for the question. The state of Alagoas, as we mentioned in the material fact, signed with Braskem this agreement. It now needs to once again go through the legal approval by the public sector. This is a BRL 1.2 billion, of which BRL 139 million have already been paid by Braskem. So the remaining balance, and this is a very important topic in the negotiations by both parties or all parties with regard to Braskem's present financial condition was established so that this agreement would be paid over a 10-year period. And so that's our material fact. And the initial installments up until 2030 do respect the company's projected financial condition, which is a result of the entire tightening of the whole global petrochemical cycle and Braskem is tied to it. And after that period, these factors become even more material and move to make Braskem's financial condition recover, as Rosana mentioned in the beginning of the call, and that includes the transformation, switch to gas, fly up to green and all of our green projects in a context with more rational balance between supply and demand for the global petrochemical sector. Rosana Avolio: Thank you, Felipe. Moving on along the same lines, there's a question by Gustavo with BTG, which is consistent with what you just mentioned. In a scenario of a possible change of control in the pillar of transformation, what do you believe to be nonnegotiable to sustain the long-term cases. So there is the green agenda. The second question, what is material in terms of hibernation of capacity in Europe and Asia? And how does it compare to the scenarios announced in the past? As the company sees it, the rationalization tends to be relevant within two years. And lastly, in relation to Braskem Idesa, with ethane terminal in operation, what is the EBITDA capacity that you would consider to be normalized for Braskem Idesa? And how long this asset is likely to start contributing again for reducing the consolidated leverage level? Felipe Montoro Jens: Of course. Thank you, Rosana, and thank you Gustavo. The answer to the first question is contained right in the question. It's, in fact, what the company believes it has as far as ability to add value to all its stakeholders. That is continuing with the transformation plan, our migration to gas, our focus on competitive assets and the green agenda or what we call here in-house as fly up to green. A new, if a new potential shareholder has a different view, it's difficult to answer that because if we already had that view, we would certainly be implementing it right now. So it really will depend on what such a question would be, if and when such a new shareholder would be. With regard to our strategic plan, this is what we've been working on throughout 2025. With regard to the perspectives of closing or hibernating Europe, that depends on rationalization and our rationalization strategy. What we've been seeing is that rationalization has been lower than what we initially projected. We know this from our own experience. We announced recently the hibernation of chlorine-soda. This is a decision that was made in the beginning of the year and was only implemented in September. So these decisions all take significant time to implement with all the due care and precautions that are needed so that they can actually happen in the most sustainable and rational and also productive possible ways for the company. Roberto? Roberto Ramos: I have two points. First, our strategic plan was approved by our Board of Administrators which is composed of -- there's a significant stake by Petrobras there. So, Petrobras is certainly aligned with our vision, and I'm sure that Petrobras will continue to have that same vision regardless of whatever new shareholder comes in, if that happens. And again, this needs to be approved by all shareholders. We never do anything different from what is approved by the shareholders. So this new shareholder, if and when someone arrives, they will need to get involved in discussions with all shareholders as always. With regard to Europe, what we are seeing in Europe is announced shutting down of units and refineries, one of the biggest petrochemical companies in the world, which has units in England and the Netherlands has closed dozens of refineries in the previous years. The President of a large European petrochemical company announced the closure of 12 million tonnes of capacity of ethylene production in Europe if they do not obtain the necessary protection measures that includes either antidumping or tariffs to prevent the arrival of products, especially from China that come into Europe. That also includes U.S. products that arrive in Europe without any import tariffs. Now that being said, Europe is strategically long in propane. Now our polypropylene plants use propane as a feedstock. So it's really about finding the needed logistics. So if we need to replace any current suppliers, we'll do that. But the propane molecule, which is important for us, will continue to exist. So it will just be a matter of plugging the right numbers into the equation. Rosana Avolio: Thank you, Roberto. In relation to ethane terminal, to only to provide the context. Today, we have Braskem Idesa solution for the import of 80,000 barrels per day. Braskem Idesa to run the total capacity would require 660 barrels per day. And therefore, the total focus of Braskem team is to run full capacity. So an operation rate above 90% that in our industry, extremely high. That will be the focus. From the startup of the terminal, we have had operating results very positive, all in line with what we expected. And when you made a comment about the consistent way of reducing the consolidated leverage. It's good to remember that Braskem Idesa since when we developed this project, it was devised by means lim recourse at the time, all the bonds, all the debt have no collateral by Braskem. Braskem as a controller of the asset. So every time we are announcing our cash position, our debt coverage and the consolidated leverage. We do not consider the cash position or EBITDA or the debt of Braskem Idesa. The way it's going to contribute to the future is when there will be dividend payments impact since the startup of the plan in 2016, considering everything that we went through, the reduction of ethane supply, the renegotiation of ethane contract -- so there is a limitation of the availability of ethane in Mexico. And this is why we made this investment. So we received dividends only once in the past 10 years. So the total focus of the team is to increase the operating rate, increase the sales volume, focus on the Mexican market. This was the first purpose when the product was devised, which is to meet the demands of the Mexican market. And as there is a more balanced capital structure, we will consider the contribution for Braskem. Roberto Ramos: Rosana, Gustavo also asked about China and whether the movements in China tend to have an impact on the market. I believe Rosana already mentioned this in her presentation. We are looking at an increase in 20 million to 30 million tonnes of additional capacity in China over the next five years, essentially resulting from crackers, whether they are gas-based or naphtha based and also whether they are carbon based, believe it or not. And even gas for olefins and methanol for olefins plants. So these are four different types of feedstocks that China is coordinating in its search for self-sufficiency with regard to PE consumption. And it's always very difficult to understand the scale of this shift. But this means that China's trend is just as it is in polypropylene to be a net importer of polyethylene. Today, it is currently an importer of polypropylene, but it will become self-sufficient after some time, and it will become a net exporter of polyethylene as well. This is the baseline scenario for us. And it's a scenario that leads us to conclude that this downward cycle will extend for many years. Rosana Avolio: Thank you, Roberto. Another question by Joaquin with Moneda. He asks about the context of transformer contract that has been recently announced by the company. The question is, have we signed a long-term contract with Petrobras to supply ethane or would that depend on the construction of the project? Unknown Executive: Thanks for the question. Yes, as we mentioned in the material fact, Braskem's Board approved the terms of the negotiation between Petrobras and Braskem for ethane supply. But this contract has not yet been signed. It is still subject to being concluded. This has not yet occurred. It is still currently in negotiations. And so within the schedule that we announced recently, that Rosana announced recently. But we do not foresee any kind of change. The commercial conditions have already been agreed to officially. The only conditions that are still being discussed are secondary conditions that are not material to the contract. Rosana Avolio: Thank you. Moving on. Conrado from J. Safra, asked the following to whom you attribute the sequential improvement of the margin in Brazil, the focus that had a better margin and better cost efficiency? Or is there any special reason or a combination of all? Is there -- is it likely for the margin to continue improving? Felipe Montoro Jens: Thank you, Conrado. I'm going to answer your question. Let's consider the historical viewpoint. Brazilian business is very important for the company. Without, we saw some improvement with an EBITDA margin from 5% to 9%, but below what would be a historical margin for this business as a result of everything that we mentioned in this call, capacity, the demand is weakened when compared to the historical levels, especially 2010, 2019, putting pressure on the petrochemical spread at the international level. And this is where our resiliency program stands. So when you ask what were the factors? Without a doubt, this is a combination of different factors. Without a doubt, we are always going to prioritize the supply of the Brazilian market, the South American market, but we have been going for grades whose value added is higher for the company. In terms of cost reduction, we have made different renegotiations with our suppliers, and we've been seizing to reduce logistics costs. And in addition, when considering the EBITDA and the cash flow, we captured along the year nearly $100 million as the numbers presented in the presentation, and that was driven by the optimization of inventory levels. And when the spread, which is the main contributor to the result of any petrochemical industry, when it stands at a level which is historically low, the company has to operate in such a way to mitigate this impact partially of this downward turn. And this is something we are going to continue doing. We are going to continue communicating. Roberto Ramos: I just wanted to add one thing. With regard to when Braskem was created 20 years ago, the major difference with regard to supply and demand is that at the time, the European petrochemical industry was very important. It was actually the largest in the world, and it gradually lost competitivity and has been replaced by the petrochemical industry that is being created in China and that already existed in the Middle East and was expanded. The consequences are that the new petrochemical industries that were created and also with -- in Japan and Korea, but to a lesser extent. But China and Middle East react much more quickly to requests for higher demand than the European industry did. As a result, the high and low cycles are going to be less steep and longer. And as a result of that, the petrochemical industry must adjust its processes, reduce its costs so that it can coexist with the new reality for the future, where the EBITDA margins are not going to be exuberant as they were before, 20% or more. These margins are going to be more contained, closer to the refinery margins. And so we need to reinvent the way we operate petrochemical plants, for example, by reducing the impact of labor, increasing automation, using artificial intelligence tools to make the plant respond automatically to certain requests. All of this will reduce direct cost and fixed cost. This movement is an intrinsic part of our resiliency plan. We've had results in 2025. We're going to capture even more of them in '26. This is inexorable. It's a new reality in the petrochemical industry, and everyone is going to need to adapt to this new way of doing business. Rosana Avolio: Thank you, Roberto. I'm going to read a question that we received from different people participating in this call in relation to the possible sale of Novonor and change of control, bringing the name of IG4 as a result of what we've seen in the media. So there is a question asking if we have any type of time line to complete the discussion, especially in the case of IG4. Roberto Ramos: I would really love to be able to give you that answer. Unfortunately, I can't. As we've been saying repeatedly, we are not party to that negotiation. The information we received from Novonor, everything we received, we immediately convey to the market through material facts. And we are not aware of any topics or any progress that leads to an imminent decision with regard to the sale of Novonor shares. So we remain waiting just as the market as a whole is waiting, of course, it's a topic that is of interest to us. It's of interest to everyone. But we are not even side players. We are merely spectators. Sure, we may be in the first row, but we are spectators nonetheless. Rosana Avolio: Thank you, Roberto. There's a question of Anne with Bank of America in relation to our transformation in Alagoas. Can you provide more information about Braskem chlor-alkali for transformation plant? And we would like to understand a little bit more about Ode and if we saw the press release that was published by Ode, as you would like to understand how this relationship is going to play out. So at the end of the day is how to Transforma Alagoas will perform in general. Roberto Ramos: Well, what does this transformation bring us? Our chlor ethane process is based on electrolysis used with salt. This is something that's been in effect since we opened in 2021. It was a brine transformation. And this actually was -- it didn't generate value. It produced EDC at a cost that was harmful to the PVC plant. The PVC plant carried the cost of the lack of competitivity from the chlor soda plant. This is a plant that dated from the 1970s and whose technology had already lost its competitivity and especially guided by the fact that we needed to bring salt, gem rock salt halite, which is different from sea salt from Chile. So this halite came all the way down -- down south through the coast of Chile through the Magellan Strait and then north all the way up through the Brazilian coast. So the logistics cost was actually just as high as, if not even higher than the halite itself. So this was something that could only work if the product, the polyethylene prices were high -- sorry, not polyethylene, he corrects himself, PVC. But if the costs were sufficient, so replacing EDC manufactured in Alagoas with a noncompetitive plant, such as EDC imported from the U.S. made using ethane resulting from shale gas. therefore, an appreciable comparative advantage. And it was transported using efficient cabotage to our Alagoas plant. This makes the work of the PVC plant more competitive than it was before. And we were actually often forced to reduce the output of the PVC plant to stop losing money. Now with this change, we can run our PVC plant at its maximum capacity. We can even apply some improvements that will improve it by 25, maybe 30 per year -- tonnes per year. And it will also lead us to produce more material in a shorter amount of time. This is all based on the fact that it is going to be produced. The PVC is going to be produced from more efficient feedstocks. In addition, in a partnership that we have signed, we are burning [ Kwako ], which is a renewable feedstock. This makes our PVC increasingly more and more green. This is going to improve the results for our sales as well. With regard to the press release from Ode, I apologize, I haven't read it. Rosana Avolio: As we mentioned previously, when we were mentioning Transform Rio, any change, any project is necessary, requires raw material contract in order to maintain operational stability. With the change explained by Roberto, the answer is yes, we have an agreement for the supply of feedstock and it's a long-term contract. Moving on, we have some questions by [indiscernible] about PRESIQ. And the question is repeated sometimes. So it's in relation to PRESIQ seems to be an important and necessary program in order to control the cash burn of the company. What are the expected impacts of PRESIQ? Felipe Montoro Jens: Thanks for the question. This is a relevant fact, a material fact for the company. It deals with our resiliency and transformation plan. So I'll answer in two sections. With regard to the year 2026, during which rate will still be in effect and two rigs, the investment and feedstock rigs. Now the investment rate has no change from what is currently in effect. This is a fiscal benefit, a 1.5% benefit we have based on PIS and COFINS that Braskem pays. As we mentioned previously, this is something we use as our funding for the Transformer Rio project and other projects of the company. And the second is the feedstocks rate, which today is 0.7. As of 2026, as Roberto mentioned, once this is approved by the President, this will move to 6.25% from the current 0.7. So this will mean something in the order of $280 million to $300 million of EBITDA in the year 2026, starting as of 2027, up until 2031, which is currently in PRESIQ. It has a yearly budget for the petrochemical industry. And of course, Braskem is part of that of BRL 3 billion per year, out of which BRL 2.5 billion will be the so-called PRESIQ feedstocks and another BRL 500 million for PRESIQ investments. So this is what we are currently working on with our projections, and we currently await that signature as quickly as possible. We hope that it will be approved by the Senate firstly and then by the President. Roberto Ramos: Just a reminder, the sum is for the whole industry, the BRL 3 billion that Felipe mentioned, BRL 3 billion per year. sum is the grant that is being given to the industry as a whole. We imagine that Braskem will receive something in the order of 50% of that sum. Rosana Avolio: Thank you, Roberto. And to wrap up, due to time limits, we have last questions. And the remaining questions will be answered lately, later. And the question is about our projections. So there's a comment about our spreads projections, chemicals and petrochemical spreads. Why would make us so confident to believe that the cycle would continue below the historical levels in the next five years. And they believe that external consulting services has a weak track record to estimate what would be the spreads for the future. And why -- what they usually do is to extrapolate what's happening at the moment. So I'm going to talk about our planning process at the conceptual level and how we carry out the mitigation. But before that, I would like to say that the downward cycle has been different from the other ones. So when we discuss the track record and the weakness and the weaknesses of the external consulting services, but this is the environment we have been experiencing since 2019. So we have seen a weakened demand when compared to the global GDP of 2010 to 2019, which was different to what we saw since 2019. As a reminder, the demand for plastic is very connected to the global GDP. The higher the global GDP, the higher the consumption of plastic. So whenever there is a drop in plastic, even though it's been growing, but we see a drop of the global average GDP when compared to the previous decade. In addition to that, there's a very important difference to consider. China with the driver with -- for new capacities, they are very based on sufficiency and to meet their own demand. And this is what we have seen, and this is aligned with the external consultancy. And this has created a very major oversupply. And this is something we showed in the results definition. And there is a backlog, there's a backlog before offering demand. And the backlog is really huge. And when I look into the future, we still see capacity coming in, especially in China in its search for self-sufficiency. When we defined our projections, this is what we considered. By the way, this is an approval process, which is still going on. And this is a process which will end at the end of the year with the approval by the Board. as we have mentioned in this results presentation. So for us to define the scenarios, we can consider different probabilities in different scenarios. We do not work with one case only. We incorporate different probabilities when we define the assumptions. And without any doubt, in our base case, we have been more conservative or even more realistic would be a better word when we do the rationalization because that could accelerate or could provide a better support to the better spread for the future. But as we mentioned in this call, it's very difficult to estimate other people's decision. So there are external consultancies that provide the cash cost of all producers in the world. But we do not have the disclosure of any agreement between suppliers and clients. So the decision of investment to close a plant is a decision based only on cash cost. It starts from cash cost, but there is a definition at play, agreements, what's the best moment to make the decision for the rationalization. So, again, in the past five or six years, there was a different downturn from the previous years. And there are players, there's this player that is going to include capacity up to 2030. So we consider the probability plus the definition of the assumption. And again, we were very realistic more than what we have been -- on what we have been observing. Roberto Ramos: Just to mention something else about the topic of rationalization. We have some perspectives for reductions. Some have been announced, others not yet, but there's a significant reduction in South Korea, which should reach maybe even 4 billion tonnes in China. The Chinese capitalist process encourages creation of various industries and allows those industries to fight for space. And then once some time has elapsed, the winners remain and the Chinese government rationalizes the winners and losers. So, of course, they have a lot of capacity spinning up. And of course, there's going to be rationalization. And the biggest losers are Europe. Europe has 12 million tons of ethylene production that is currently at risk. Structurally, Europe's problem is much more serious because not only do they not have the feedstocks, they don't have the ethane. They don't have the oil. So they import oil. Yes, they refine it, but they import oil and they import ethane -- and their energy cost is also very high as a result of the war between Russia and Ukraine, which has shut down the supply of cheap Russian gas to Europe and especially to Germany. So with the energy cost in Europe, which is currently almost 3x as high as it was before Ukraine was invaded and also considering that the petrochemical industry is highly energy intensive, combined with the fact that Europe doesn't produce any of these feedstocks, not even naphtha because they don't have oil or gas because they don't have oil reserves. And of course, I'm not considering Russia. This means that Europe's petrochemical industry is moving forward toward a state of the industrialization of total inexistence. And we have a significant amount of production capacity that is at risk during this sunset perspective. Rosana Avolio: Thank you, Roberto. Due to some limitations, the other questions we will answer later. So we would like to thank everyone for attending this call to discuss the results of the third quarter of 2025. And I'll see you next time when we -- for our next call. Thank you. Unknown Executive: Thank you. Operator: This concludes Braskem's conference call. Thank you all for joining us, and have a great afternoon.
Operator: Welcome to the Grown Rogue Third Quarter 2025 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]. As a reminder, during the course of this conference call, Grown Rogue's management may make forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. The risks are outlined in the Risk Factors section of the company's filings and disclosure materials. Any forward-looking statements should be considered in light of these factors. Please note that the safe harbor and the outlook presented speaks as of today, and Grown Rogue's management does not undertake any obligation to revise any forward-looking statements in the future. This call will also reference non-IFRS financial measures, including adjusted EBITDA. These measures do not have any standardized definition under IFRS and may have -- may not be comparable to those used by other companies. They are provided as supplemental information to evaluate the company's core operating performance and should be viewed alongside IFRS results. I'll now turn the call over to Obie Strickler, Chief Executive Officer of Grown Rogue. Thank you. Please go ahead. J. Strickler: Thank you very much. And thanks, everyone, for joining today. I appreciate all of you taking time out of your busy day to learn more about our business as we talk about Q3. It would be [indiscernible] of me not to start today, I think, with the recent regulatory change on hemp. I think there's a lot of polarization when it comes to the -- that topic, I think, regardless of your position whether it was a loophole or not, whether you think it should have passed or not, this, what I consider unexpected change in the regulatory structure there certainly reflects the volatility and uncertainty that we face every day in this industry. But I think it's important to remember, it's this volatility that creates so much turmoil and risk that if navigated properly is going to result in significant reward for the winners. And I couldn't be more excited, more confident in the ability of Grown Rogue to win and to win big because we continue to navigate and kind of expand our platform inside of this industry. So I think that's how I wanted to start today's call with really talking about how we think about winning in this industry and what that looks like. At the core for us, it always starts with our people. We had recently -- I think, it's our fourth Annual Leadership Summit in Oregon. It's where we bring like the entire team together, kind of like the senior management from each of our states. We've got kind of a diverse group that lives in different parts of the country. That is the one time a year where we get everyone in the same room. And what was so kind of important and kind of awesome for me to experience during this time was kind of watching the integration of what I like to call the OGs, like the original kind of group that's been with us for 4, 5, 6 years. One of the personal people on our team has been with us since we started coupled with the new folks that we've been bringing in as we've embarked on this kind of growth platform, kind of bolster our abilities and help us execute on this next phase of growth. I can't stress enough the importance of team and how critical that is to good operations, good culture, lack of drama, lack of bureaucracy. And the focus Grown Rogue, myself and the rest of the team put on that from leadership all the way down to the people working inside [indiscernible]. We'll continue to invest and focus on our team as a critical path what we think will be 1 of the core principles of companies that are going to win and win long term in the space. The next thing we think about a lot is the controllables. There's a lot of things in life, in this industry that we don't control. And then there's the things that we have a significant amount of control over. In our business, that really comes down to kind of the two most important things, and it relates to production, which is yield on cost. I think you'll see from the press release we put out that has some of the KPIs, both Michigan and Oregon had incredible production cost this quarter. And I think, what, $368 and $348, respectively. And I want to remind everyone, this is an all-in 4-wall cost, right? This is not just COGS, like typical companies will report. Our business is really focused on cash generation. And so we look at true cash cost. What does it take for us to grow it, sell it, get it out the door, get it into customers' hands. I mentioned this, I think, on the last conference call, I think we've even beat what we were doing previously this quarter in terms of cost control. But if you look at a true definition of COGS, for indoor production as the quality that we put out, we're probably sitting somewhere less than $200, which is pretty fantastic for cost of production. Yields are also up. We're pushing 75 grams a square foot of full flower, which is almost a 20% improvement year-over-year. We believe effectively, we're one of the leading indoor producers in the U.S. that combines this amazing quality, coupled with the yield and industry-leading cost of production. It's this fact, coupled with others, but this is probably one of the most important components that positions us as well as any company, we think, in the space to continue to expand our portfolio into new states in a very kind of cost efficient and profitable manner. The next big thing for us, and you've heard Grown Rogue talk about this consistently year after year after year is focus. Staying core to our flower forward approach, not losing our low cost and quality focus. It gets increasingly difficult, especially as the industry continues to evolve because there's lots of things to chase. And our focus is going to be one of the big differentiators. And while people may say, you're not going fast enough, you're not doing enough things. We're very committed to doing a smaller number of things very good. We want to be excellent at what we want to do and not get kind of overextended or too spread out what we do. We take the mantra that simplicity is the true form of mastery, and we're going to continue to execute against that plan as we continue to go forward. Next big thing on our list is balance sheet. Obviously, we've seen a lot of distress and a healthy balance sheet to not getting overextended as critical. We have done and we'll continue to do a great job at managing the balance sheet. Important to remind everyone that we upsized our credit facility in September, adding another $5 million. We're now sitting at a $12 million credit facility at a sub 8% interest rate. I think our newest tranche was somewhere in the range of 7.5%. Again, positions us very well for our immediate development goals, and we have a very healthy cash balance coming out of Q3 with a little over $13 million in the bank. All of those pieces is what drives us into the exciting part of our industry, which is growth. And once you have those core components I just mentioned, it's all about how you maintain them and use them to continue to grow the platform. Our expansion into New Jersey has gone extremely well. It's been a little bit slower than we all hoped, but it's definitely solidified in my mind, our ability to transfer our expertise into new markets in a successful way, not only with our systems, but ability to produce quality products that customers love and they keep coming back, the customer. That's where the focus is at our ability to give them products that they're happy about at the right price. And we happen to earn it in Jersey. We expect that market to be a little bit more seamless but the benefit of like that brand loyalty, earning customers and their loyalty in order -- turned into a fairly competitive market is amazing. And I don't know if people saw -- I think it was in the press release, but big kudos to our team. We won two awards recently at the Best-in-Grass competition, 1 for flower and 1 for pre-rolls. So again, solidifying ourselves as a big player in that market, continuing to expand and build out Phase 2. I'm very excited about kind of the position where we sit inside of New Jersey. And this is ultimately why we're so excited about Minnesota right now. Josh will speak a little bit later more directly to some of these things, but we definitely believe Minnesota offers 1 of the most compelling opportunities in front of us. And it's -- honestly, where we're going to put most of our immediate focus and the balance sheet kind of component that we have over the coming year. We're not going to get crazy. We're going to continue to build projects the Grown Rogue way, starting with about 10,000 square feet of canopy in this Phase I kind of production. I think it is important to remind people that in Minnesota because of our license type and then the building that we have under contract, it would allow us to double our canopy size from our typical kind of 15,000 square feet that we have in Oregon, Michigan, and where New Jersey will sit when it's fully built out, up to 30,000 square feet. It just gives us a lot more flexibility and kind of opportunity to lean into that market if we feel that the demand and the opportunity sits there. We definitely believe being an early mover in Minnesota is going to be critical. We talked a lot about surplus profits and those versus what we consider kind of a more sustainable profit stream, and we think Minnesota has the potential to generate considerable surface profits in the early years. And so we're excited about taking advantage of that. The other thing we're continuing to get closer and closer and this kind of gets away from less part of the controllable piece, as I talked about earlier but the distress that we've been talking about for the last 3, 4 months. We keep getting closer to some of these moving down the path. There's a lot of different parties involved, and so it makes it a little bit harder for us to kind of wrap our arms around the specifics, but definitely seeing some of these, I think, get much closer to the finish line. And I think, taking advantage of some of these distressed opportunities to kind of augment our new project and new market build is just only going to increase our scale and our reach and our financial returns as we look again to expand the portfolio from 3 current states into 5, into 7. And so Josh will talk more about some of the distress he's been leading along that for us as I think most of you are aware, but very excited about that portion of the business opportunity in front of us as well. Switching gears a little bit, I think it's time to -- and I want to touch a little bit on our renewed focus on the brand. Our history in Oregon, when Sarah and I first started the company, God, going all the way back to like the medical days in 2005, 2006. But even when we first started Grown Rogue, in 2016, it was always about consistent quality of product, like first for ourselves then our medical patients and then consumers, but it was always just about good weed. Like that was what the core focus, it was to be reliable, it would be consistent. That was really what got us into this industry in the first place. It was never about building this company. It was never about building a brand. We just wanted great reliable flower. This ethos was how we started it was the initial building block of how we started Grown Rogue where we really focused on product quality, we focused on cost control, and that resulted in a very kind of sales-first sales-driven culture. This was coupled with the fact, as many of you know, Oregon is essentially a 100% deli-style market, not as great for brand development, fantastic for the consumer, they get to see it, they get to smell it if they want. There's a lot more interaction, and so you make sure what you're buying, you're very comfortable with. And there's a similar market in Michigan. Michigan has a little bit more packaging component, but still the bulk of flower sold in Michigan is deli style. And so branding is important, but it's not been as critical in some of these markets. But obviously, with kind of the focus and the -- where the organization is heading, realizing with the foundation we have, how important brand has become to the story and winning the hearts and minds of consumers long term. And this is very interesting because in New Jersey, it's essentially the opposite. I think right now, I mean, Michigan is probably 80% bulk, 20% package. Oregon is probably somewhere in that range. Jersey is the opposite? I mean our goal in Jersey is to be 100% package. Right now, we're probably 80% package, 20% kind of bulk flower sales. And what we've realized over the years, especially if you move into some of these markets is best flower competes with anyone, even the more recognized routes that you'll hear in the markets or in the news. And as we think about how we compete and the long-term value of what we're trying to establish in the industry with our foundation set, low cost, great yield, great culture, our company is definitely going to be investing more heavily, focusing more on building the brand and our brand equity. This doesn't mean we're turning into a marketing engine, right? Like we're going to do this the Grown Rogue way. We're not going to be spending tons of money on marketing and fancy agencies and all these types of things. Like again, we'll do it Grown Rogue way with an emphasis on the consumer, more exciting packaging offerings, better customer engagement with our retail partners. We're building a brand new and revised website that is much more consumer-focused. I invite people on this call. It should be launched in the next week or two. Much more focused on our packaging, some of the strain specific stuff we're doing that is getting very, very good reviews in both Michigan and about to roll out some of that stuff in Jersey, the different products that we offer in our portfolio now. So pretty excited about that piece of it. The other area we're spending some time on in our core markets is product extension. And this isn't to get away from our focus. This is just effectively the ability to broaden our product offering inside of the markets that we operate. And some of this is being driven by the pressure, we see in like Oregon. I mean pricing is difficult. We see pressure across the space, but we've also navigated several of these over the last 15 years, as you see these pricing cycles kind of come and go. And they put a ton of pressure on every business, Grown Rogue included. But I can't just stress that during this distress, during these periods of pain where you really have to lean in. I mean this is where we make our most significant strides in terms of improvements, not only inside the business, but it also gives us opportunity outside of the business as we work with our partners and our customers to grab more share. I coined the term a few years ago with our internal team, we're going to meet pressure with force. And we see pricing pressure, we meet it with force, we meet it with better cost control, better yields, maybe more products. And it's something that we're doing across all aspects of the business. Again, you'll see that in lower costs, better yields, new products come into the market. Most of our R&D work happens in Oregon. It's one of the reasons we like the state. It's got a really kind of advanced experienced consumer. It's also the state where we have probably the strongest talent in terms of just operational efficiencies and the resources and the infrastructure to support kind of new product ideation. We relaunched pre-rolls in Oregon about 18 months ago. I think we're already a top 5 brand in the state between the 2 brands that we have, which is pretty spectacular and a very strong and mature market to come in with a brand-new product. And I think it goes to the team, the efficiency, but also the loyalty that we have across this state in terms of the brand presence. We launched our first infused pre-roll. I think I mentioned that on the conference call a few months ago, and that's gone really, really well. We're slowly starting to build kind of the scale and the size of that thinking about some different offerings we can bring in terms of how we build out our infused pre-roll business. And then the team has been working on our first vape cartridge that should come out later this year. And so just looking at ways that we can expand the business through non-expensive capital allocation to take advantage of kind of the platform we have. These are not huge endeavors by our team, but really just incremental improvements in our production capabilities, capitalizing on the brand reputation we have with our retailers and customers and then really taking advantage of our already established sales and distribution channels. And we have sales networks in all these states. We have teams that cover the entire market. We have customers that are looking for more reliable and better products. And so these are things that are kind of right in our knitting. Once we kind of fine-tune these in Oregon, we then look to roll them out across our markets, probably starting with Michigan, soon to come to New Jersey and then other states as we turn them on. I then wanted to shift to a couple of the kind of the KPIs in our press release. I've kind of talked about and sprinkle those in throughout this kind of monologue here. Production-wise, very strong yield improvements, most notably in Oregon, which we had a 23% yield improvement year-over-year. Most importantly, the 21% A flower kind of improvement year-over-year we definitely have some room to improve in New Jersey. I think New Jersey is down, i.e., 50s, low 60s in terms of yields, which really shows you like, a, what we do is hard, even with our expertise, like you don't just start a new state and instantly up to the level of quality that we have in the markets we go operate in for years. I think that helps us with our moats and understanding that something we're really good at, it's still hard to like just get right, right out of the gate. But excited about the opportunity that sits there as we kind of get the team trained up, get the systems fully entrenched, get our strain selection right but it bodes well for continued improved financial performance. Not only as we build out Phase II when we just bring more square footage online, but there's considerable room for additional yield based upon maximizing the current square footage that we're operating in. Pro forma revenue was up 26% year-over-year, mostly through to the contribution from New Jersey. We continue to see pricing pressure in Oregon and Michigan, which is no surprise. We're not predicting any kind of changes, but I want to remind people, we've been through these cycles before, there is changes, and we expect it to recover and shift back upwards in a positive direction. But again, that's why we're so focused on price control, cost control. We're prepared to combat these markets for as long as it takes before you see some of that supply-demand imbalance kind of correct itself. Particularly excited about Michigan. We had a couple of rough quarters there. Some of that was price compression. Some of that was self-inflicted as we've talked about over the last few months around just -- we're not perfect. We make mistakes. We get caught up in other things that take our attention. And when you see those things, it's always good, just brings us back to the core, like where do we want to focus, how do we get in, how do we correct things? And seeing Michigan get back up above $1 million of EBITDA was really kind of encouraging. Same price, still down a little bit, but starting to stabilize is exciting. We've been making some capital improvements in there. But I think we'll continue to help with yield. We also expect them to be producing more product coming out of that market as this year ends and gets into 2026. On the flip side, Oregon was a tough quarter. [indiscernible] to laugh at it, but it just never surprises me just how hard these markets are. I mean there's a d**** knife fight every day. So a little disappointed in Oregon this quarter. Very happy with the controllables, but again, disappointed with kind of the pricing environment. Some of this was kind of exacerbated by like getting rid of some old inventory, things like that. Typical companies would do like a deduction or an add-back, like that's not the game we play. Like we had old inventory, we sold it affected price a little bit. But we've seen a nice recovery in October. And so we're optimistic for a strong Q4 as we look at Oregon kind of individually. Long term, the goal, I think, for the organization. I've been talking to our GMs about this is we need these kind of mature states to be in the $12 million run rate, $1 million a month, hopefully pushing up a little bit more than pricings better and having kind of long-term sustainable EBITDA in that $4 million range. I mean that's kind of the objective. That's the goal. Those are averages, things are going to get up and down from that a little bit. But we think these are markets that should have long-term kind of sustainability in those range. And we're going to keep pushing the team finding areas to be more efficient, seeing opportunities to expand our kind of product offering and then obviously, on the noncontrolled side, there will be a recovery in price at some point as we go through these kind of pendulum swings in the cycle. And so that's it for me. I'm going to hand it over to Josh, who is going to talk a bit about kind of capital allocation, what we're prioritizing right now. And then obviously, he's been the primary lead in our distress and all the different opportunities that we're kind of evaluating that would be kind of -- additional opportunities for the company as we continue our growth. So Josh, the floor is yours. Joshua Rosen: All right. Thanks, Obie. As Obie referenced, I'm going to talk about capital allocation and then weave that into how we're thinking about distress as part of our overall growth plans. We believe we have a multifaceted growth platform with our flower production capabilities. I often refer to this as the engine of the industry. In addition to the product expansion opportunities that will be referenced, which does represent our most capital-efficient growth driver. The more significant growth drivers continue to tie to new market expansion, which can take the form of the organic new builds like New Jersey or acquiring fixer uppers for us, the fixer-upper theme currently maps to our focus on distress. So building new cultivation facilities is 1 of the most capital-intensive parts of the industry. It's also where many of our peers have gotten sideways with the lack of discipline on cost containment and overbuilding and most often not being prepared for eventual price normalization. We're going to keep looking for opportunities for us to build new facilities in markets we believe are undersupplied when it comes to affordable quality flower. New Jersey being the prime example of this. And we previously highlighted that Illinois was going to be our next new build. Based upon our internal analysis and experience, we've pivoted to prioritizing Minnesota over Illinois when it comes to deploying capital into a new build. I wanted to provide the context on this decision. To start, we have great familiarity with the Minnesota market, including our experience, helping turn around Vireo and Grown Rogue's advisory work, which was specifically focused on Minnesota and Maryland. Our core price area for supporting new builds relates to being confident the market is undersupplied affordable quality flower. Although we don't underwrite our projects based upon a permanent undersupply, we do factor the anticipated supply/demand imbalances into our risk assessment and overall expected cash returns. In Minnesota's case, we're excited enough about the opportunity, as Obie referenced, to focus our real estate strategy of having the flexibility to scale in some more capacity than the typical Grown Rogue build out, in this case, the degree of about 2x. As Obie referenced, maximum allowable canopy for a cultivation license in Minnesota is 30,000 square feet. To be clear, we're not planning to build this immediately nor are we necessarily going to build it, but we search for a property that would allow for it. Our planned starting point for Phase 1 is approximately 10,000 square feet of bench canopy space, and we currently anticipate having product available early in 2027, and are doing everything in our power to try to accelerate that time line. Importantly, our preferred property received its conditional use permit yesterday. So we had some good news. This prioritization in Minnesota doesn't imply that we're not going to build out Illinois. We have the flexibility with a favorable lease to [indiscernible] our capital expenditures at Illinois. Sometimes we need to make tough decisions about optimizing our capital allocation based upon available capital, maintaining a prudent balance sheet and managing our internal bandwidth. It's also worth noting that we're currently evaluating a couple of compelling fixer-upper or distressed opportunities in Illinois that could support a slower approach to deploying more meaningful capital in this market. These fixer-uppers might provide us an opportunity to materially increase our speed to market while also materially decreasing our near-term capital needs. Should this materialize at a minimum, we think it helps derisk our planned CapEx in Illinois. Turning to distress more formally. On our last earnings call, I highlighted a confluence of factors creating a window of opportunity to evaluate distressed assets, and we remain highly active. Our work includes recently submitted multiple nonbinding LOIs and ongoing follow-ups with bankers, receivers, landlords and restructuring officers as they work through their processes. It has become abundantly clear that there are not many companies positioned like ours. Most other potential buyers and distressed assets are heavily focused on retail, and are on a much narrower set of states. I also want to repeat that while we are unable to commit to specific time lines or size, we would be disappointed that these opportunities are not a meaningful contributor to our growth within the next several quarters. These processes take time and the 1 anecdote that I'll share is that of the opportunities we're most excited about, none of them is traded away from us yet. They are a slog from the process and patience standpoint and will stay disciplined. One last mention for me, and it's likely less relevant after the recent news out of the federal government, and Obie referenced this at the outset, but it's still useful for folks to understand how we evaluate risks and opportunities. We believe the ambiguity around hemp laws, plus maybe a little bit less ambiguity now. And particularly for us, the THEA flower world, it can help us to better understand that emerging market, both as a competitive threat and as a potential opportunity. We believe our core competency, the low-cost production of craft quality flower, transcends regulatory regimes, and we want to ensure we are positioned long term to capitalize on our capabilities. So we recently started a very deliberate collaborative exploration to learn more about this market. Importantly, anything we do in this arena would be very capital light with commensurate low expectations on being a material contributor anytime soon. And obviously, with the more recent news, we will pay very close attention. Before turning it over to Andrew, I simply wanted to remind investors that we remain anchored on very high return hurdles when it comes to deploying capital. We've articulated this as targeting $0.75 of sustainable annualized EBITDA for every dollar deployed. This distressed opportunities we're evaluating very much fit this profile based on conversations, we believe we have a supportive investor base that's excited about our focus on distress and should something on the larger side materialize, I'm confident that the compelling return profile will speak for itself in terms of allowing us to access any needed incremental funds. Hopefully, we can start talking more tangibly about these things shortly. Now over to Andrew. Andrew Marchington: Thanks, Josh. First off, I'd like to remind everybody, as we have before, that our investment in ABCO Garden State is currently accounted for under as an equity method investment, which is why we report ABCO's revenue and EBITDA and our pro forma metrics as though it were consolidated. Under IFRS, the majority of cash flows from ABCO are reported in investing activities on the cash flow statement as the investments sit on those receivable on the Grown Rogue balance sheet. While we don't report a pro forma cash flow, we are pleased to report that ABCO generated $1.2 million in cash flow from operations for the third quarter of 2025. Moving to year-end 2025, we are in the midst of converting from IFRS to U.S. GAAP. And this will result in consolidation of ABCO Garden State, which we believe results in a simpler and easier to understand barometer of the economic benefit ABCO provides to Grown Rogue as its full revenue, EBITDA and cash flow will be consolidated into our results. To be clear, this means that when we report our fourth quarter and full year 2025 results, ABCO's results will be consolidated in those results for the full fourth quarter and full year of 2025. With that, I'll turn it back over to Obie to conclude. J. Strickler: Yes. Thanks, guys. I think we're -- think of anything else, maybe some closing remarks after questions, but I think we're ready to open it up to questions. So again, thanks for listening and yes -- any questions? Operator: [Operator Instructions] And your first question comes from the line of [Aaron Edelheit] from Mindset Capital. Unknown Analyst: I have a couple of questions. The first was, do you plan to consolidate your results, will it be for Q4 or sometime in 2026? In other words, you won't see this funky kind of reporting tables. Can you tell us when we might be able to see just 1 reporting table in the press release? Andrew Marchington: Yes. Aaron, technically, the consolidation is going to be effective back in 2024 when we first acquired the equity. So we'll actually be consolidating approximately 7 months of 2024 and then the full year 2025. There will be none we pro forma reporting. Unknown Analyst: Got you. So when you report in March, it will just be one, there won't be two different. Is that accurate? Andrew Marchington: Well, there will just be -- yes, we won't need pro forma results. Everything will be consolidated under Grown Rogue filing [indiscernible]. Unknown Analyst: Great. And I wanted to just -- Obie, I wanted to ask you about the $348 cost number. It is a pretty remarkable figure. And I'm just curious -- do you think that this is the kind of -- are you scraping the bottom of where costs you can get costs to be? Or do you think there's more room for improvement? And how would you do that exactly? J. Strickler: [indiscernible] I think -- I mean here's where the focus is. I'm always -- we're always going to drive for just better metrics. I think where we're really seeing the opportunity is the efficiencies we're bringing forward with some of the new like lighting technologies that are helping yield, but also a little bit less costly in terms of electrical and power. The scale of our footprint is allowing us to maximize kind of consumable economies of scale. So we're driving down like fertilizer costs and things like that. Our team is super dialed right? We've been -- I mean these costs even include like a bonus that we put in place for our team that's based upon yield that gives them a little bit of participation in hitting some of these numbers and targets. So I think there's still room. I think sub-$300 would be a great goal, probably something we should put up on the board as a target. A lot of it is going to come into continue to drive yield. When you -- our costs are changing a little bit to go down, you have some inflationary pressure, things like that. But really, I think yield is the big driver. And some of the stuff we've been doing with genetic selection again referencing some of the technology that we've been deploying, we're seeing a pretty compelling increase in yield, which you can have a direct impact because it's fixed cost against bigger denominator is just going to lower that cost. And so challenge accepted trying to go below $300. I think is a really reasonable goal because we know like it's cost control and those efficiencies you put in place, you keep forever. Pricing comes and goes in terms of ups and downs, but it's these learnings that we get that we're so excited about as we continue to navigate some of the other pain that comes from these competitive markets. But things like that transfer to our new states as well, just those learnings and that efficiency. And so yes, pretty excited. Really happy with the numbers this quarter. And as always, you're pushing us to be better, and I agree with that. So let's make $300 -- $600. Unknown Analyst: When I first invested, you were at $600 and now $348. So kudos to your team. I wanted to ask, when I think about New Jersey, Minnesota, Illinois, any distressed opportunities. And I look at that 4-wall cost of $348 for Oregon. Now I know New Jersey had some extra costs in there. But is there any reason, let's just take Minnesota, for example, that you couldn't get Minnesota to where Oregon and Michigan are now at? J. Strickler: I think there will be some -- there's going to be some site-specific kind of contributors to that. I think the impact of packaging is like -- like Oregon is a bulk market, putting a pound into one bag is infinitely -- not infinitely less expensive than putting it into 8 where you have 128 bags or something like that. So I don't -- Oregon is probably always going to be on the leading edge of cost control and kind of cost efficiency. But so much of it is fixed, right? It's really about do we get the team trained up. And New Jersey right now will have a lot more noise, like costs were up this quarter. mostly because it's just not harvest yield, like we harvested less room, and there's only 4 rooms. And so that is like a 20 -- 15%, 16% kind of impact to what our cost structure would be because the costs are kind of fixed in how we calculate it. But I don't know if we'll get to 350, but I don't think it's unreasonable to be looking at sub $600 pounds in these markets, sub-$500 pounds. And so we'll be pushing every lever we can to get there. I can tell you, and this is probably something for me to talk to the team about, like I don't think there's anything in Jersey outside of packaging that is really like, oh my gosh, this is just so much more expensive in that market. Lease is a little bit more expensive, like we have great lease rates in Oregon that helps with it. We have a great lease rate in Michigan. And so probably never reaching kind of those numbers, but pushing towards them and still being on a normal basis, a really, really efficient indoor producer in every market that we go into, obviously, is the [indiscernible]. Unknown Analyst: Got you. And a question about Minnesota, just so I understand correctly, when you say you have the potential to double the capacity, does that mean when I look at your current markets, you can produce between 1,000, 1,200 pounds a month? Does that basically mean that you could do like 25,000 -- if you decided to build out all of Minnesota that you could produce 25,000 pounds of flower, basically double what you do in your other states? Is that correct? J. Strickler: Yes. That's -- I mean, it's double the potential canopy. Like we kind of set our core markets at around 15,000. Oregon is like 1,900. Michigan is like 14,800. Jersey, I think at full production will be 16,000. That's kind of been our sweet spot. And the license in Jersey allows for 30,000 square feet. So if you do the math on the same yield ratios, that would double the production amount. We thought about this. We want to get outside of kind of the core kind of knitting of what Grown Rogue is. And luckily enough, we're able to find a building that was priced really well. And so we have that flexibility based upon the markets based upon how we're seeing pricing based upon balance sheet, like all these things to give us that flexibility without being stuck in a crazy expensive building that you're not using half of it becomes a drag? Like the overall cost of that building is going to be really good for us, like we're very happy with that. It's got a ton of power. But yes, in a perfect world, based on the license type and the size of our building, we could double production capacity in Minnesota versus other states. Unknown Analyst: Got you. Last question, and then I'll let someone else ask a question. But I think I'm starting to understand exactly how to look at the KPIs. And I just wanted to ask if this is the right way is that when I look at your yields let's say, in like an Oregon or a Michigan. I'm seeing in like Q2, you had a yield of 63 grams a square foot. But in Q3, 76. Now that didn't necessarily flow all the way through in Q3, you harvested, but there's a delay between the amount of flower you're harvesting versus actually selling. So is the right way to think about it that there might be a quarter or so delay when you see because there was quite an improvement in yields, both in the A and B and the as and feels like because last quarter, you had this issue where Michigan looked really rough, but it's because of a production issue from Q1. Is that the right way to look at this? J. Strickler: Yes. It gets -- so let me just explain a little bit because it's a good question around how -- and there's 1,000 KPIs and every single 1 creates -- you kind of got to have a view on all of them. And so we measure our harvested flower pounds quarter-to-quarter, which is just raw A and B flower. That number can fluctuate a little bit based upon which rooms you harvested during that quarter, Michigan is a prime example. Every room is a little bit different. A lot of people when we're trying to do this now, you build the grow rooms exactly the same. That way every single room has got, say, 2,000 square feet. But Michigan is kind of a franking sign. Like we built it. We were very scrappy. We built it very cheap. Some rooms have 800 square feet, some have 600 square feet. And so total pounds produced could fluctuate even though you get to grams per square foot, it's fantastic just because you harvested a bigger room in the quarter twice and you harvested a smaller 1 once or vice versa? So total pounds is a good kind of just production, but it's not necessarily representative of the quality of our grow, which is why we use grams per square foot. So gram per square foot eliminates the noise between which rooms got harvested or how many got harvested in the quarter and really looks at for the area you were able to produce in, what was your efficiency? And so we look at grams per square foot as kind of a north star for how we're evaluating our production business on a yield standpoint, which is why we report both of those. And then obviously, A flower production is super critical. That's the best value. That's really what we're growing for. And so watching that improve is really important as well. So that's kind of way the metrics work. And so you could see a great -- my point being is, as people learn how these KPIs work, you could see a grade grams per square foot, like even next quarter, you could see grams per square foot up a little bit, but total yields down. And that's just a factor of the rooms that were harvested, but you can still see the efficiency of what we're able to do inside the kind of the plant -- portion of the plant that we were able to harvest and operate in. As it relates to timing, there's definitely overlap. And it happens in a number of ways, like it takes us about 30 to 45 days from harvest to get product ready for sale. Jersey might even be a little bit longer, maybe Oregon is a little bit shorter. But you harvest, you've got to dry it for 10 days. Sometimes you go a little bit more. You've then got a bucket time, past it, package it, get it into inventory there's kind of this lag. And so it's not like perfect science. Sometimes, we'll like in Michigan we'll harvest 2 rooms in a week, sometimes because we have 14 rooms there. Sometimes based on demand, we're like, hey, we're not going to process this strain from this room, right? Let's prioritize this one. So sometimes maybe a strain might take a little bit longer. Something you harvest might take 2 months before it gets to the market. And so there's always going to be a little bit of that timing lag -- but effectively, I think you could argue that it's, call it, 45 to 60 days. So while not quite what you harvest in Q2 is sold in Q3, a bunch of what you're harvesting in Q2 was sold in Q3 because there's about a 45- to 60-day lag there. And so like I think in Q2, we had kind of a down quarter but we had a big harvest and we said, okay, great, we're going to be selling that into Q3, which manifested itself out, like sales in Q3 were better. We're working through a little kind of production inventory thing in Michigan around how the product is moving through the system. When some of these KPIs identify things for us to kind of really evaluate which is good. But there's definitely a tiny gap there. Like you don't harvest a room on September 30 and sell it all that month, right? You're going to sell most of that in like October and November, end of October, like middle of November, that kind of time frame. Operator: [Operator Instructions] And your next question comes from the line of [Jerry Daryani from Banco Capital]. Unknown Analyst: Can hear me? J. Strickler: Yes. Got you. Unknown Analyst: I think you covered it, but just the -- what is kind of the -- if you balance out the production kind of timing stuff, what is kind of the run rate production out of Phase 1 in New Jersey kind of averaged out or in terms of flower and A flower going forward? Because I know there was a little bit of a timing bump. So you had like 1,450 pounds last quarter, had 1,300 pounds this quarter. What kind of -- what should we expect kind of going forward? J. Strickler: Yes. I mean right now, yields are in the 60-gram a foot, call it, they should be in the 70s. So we're going to see some bump there. But it should be a 500 to 600 pounds a month Phase 1 production in terms of total harvested pounds. So we harvested 1,300 pounds this quarter which was 1 less room than last quarter. Yields were up just a tad, but we're getting about 250, 300 pounds a harvest is where we should be at. We got 4 rooms. So 600 at the peak of kind of production efficiency, 500 is kind of, I think, the bottom of that. And my expectation is by early '26 we'll be at a kind of the 600-pound, 65 grams a square foot kind of category. Unknown Analyst: And when you get there, are the costs going to be closer to like roughly, if you assume just flat costs? Where does that get you at like roughly per pound? J. Strickler: I probably want to come back to you on that and think about. My suspicion is we should be in the $700 range. I mean that's where we were kind of in Q2, I think, jumped up a little bit because less pounds harvested this more towards up to the upper 8s. But probably in the 7s, maybe pushing down into the 6s. We've got a couple of things working against us in terms of optimizing cost in Jersey right now. Number one is we have fully loaded kind of personnel costs against half the production, like we have a Director of Cultivation, full salary after production when we turn on the rest of it, it doesn't hit a second Director of Cultivation. We have [irrigation] managers, ADLCs. We have a GM, we have a sales director being loaded against it. So we're kind of fully loaded for like the organizational structure. And then we'll allocate that labor against kind of our management [indiscernible] against just more production. We're also still like -- we've realized this, I mentioned this in my notes was getting the team up to the speed we have established in Oregon and Michigan has proven -- it's not a trivial exercise. And so we're still getting the team like to speed pushing on them. We've seen the most improvements over the last 6 months, but there's still room for improvement there. So we expect kind of labor cost to be allocated against a broader footprint, lease costs, things like that. Consumables kind of scale with production, right? We turn on another room, we got to buy more pots, we've got to put more fertilizer in, we got to have more dirt that kind of thing. But I think pushing into the 6, 7 kind of in Phase I, I think, is reasonable and then a Phase 2 comes on. I think that's where we started getting sub-6, hopefully down into the 5s as kind of like a steady state in Jersey. Unknown Analyst: What's the time line for Phase 2? J. Strickler: Probably turn -- so we're going to do Phase 2 room-by-room, right? We think that's really important, like we built Phase 1 with like 4 rooms turned on overnight. We've said this publicly, and it's continued to be the strategy is to turn them on 1 room at a time. Our next room should turn on in kind of early '26, where we'll convert the flow room that we're currently using as a bedroom. We originally planned to turn it on more towards the end of this year and then realize like wholesale sales typically slow down during kind of the winter months. I mean, we're pretty confident we'll maintain it. And we didn't necessarily want to bring a bunch more supply into the market. It's not a bunch more, but another 20% of our own supply into the market during kind of the slower months. So right now, targeting like February, March to have the next room turned on, and then based on demand and how the sales process is going, we'll continue to turn on the next room and the room after that with anticipation middle of '26 hopefully having the full facility up in operation. Unknown Analyst: Understood. In terms of corporate costs, is it right to kind of look at and goes about $1.2 million, I think, this quarter roughly. And do you have any -- not to say guidance, but do you have any input on how we should think about those costs? Are you guys kind of ready -- those costs are going to stay more or less fixed as they have reasonably for like a while? Should we anticipate some more costs there? How should we think about that? J. Strickler: I think [indiscernible] go ahead, Josh. Joshua Rosen: If I could, and then you can offer more color. But I mean, I think the core on this it somewhat will be dictated by, call it, the timing and pace and success of what we're looking at on the distress side. I think if you look at the core business and the New Jersey. The New Jersey side of the equation going a room at a time, mixed with Minnesota, which is -- it's heavy engagement, but heavy on the construction side right now. We don't have -- we're in very good shape. So maybe a little bit of an inflationary creep, but we're in a pretty good place from a corporate standpoint. If we do some things that ramp our market presence up and bring just a healthy amount of our back-office work into the fold quickly, then you'll probably see a commensurate increase in corporate costs, but it will be with a catalyst attached to it or with something very tangible attach that we're not talking about tangibly today. J. Strickler: I agree with that. I don't have any other additions other additions. Joshua Rosen: Without distress, even I mean, going into Illinois is the next one, we're really well staffed right now. Unknown Analyst: Okay. Understood. I think last question. Can you give some idea of what B pricing is versus A pricing? And what trim pricing is? Because A pricing, I know it drives a lot of the business, but B I've always kind of mentally thought that there's about a 20% discount for B pricing, but if that's changed, that kind of changes the some of the math materially. So any input on how we should think about that? J. Strickler: I don't have the exact numbers. 20% sounds right in Jersey and Michigan. In Oregon, it is a bigger delta. We've seen it creep up to the 20%, 30% range. But in periods of distress, usually, it's like 30% to 40%, sometimes 50% difference, which is unique to Oregon. It's the only market like that. Like I think A pricing in Michigan was $850, B pricing was $675 in that range. Oregon, call it, $600 A pricing, B pricing was in the high $20s, $300 range, so more like that 50%. And then Jersey, it's 20% sounds about right. Most of our quarters are in -- with B buds, our A flower in the 8s, B flower goes in the quarters, and there's about a 20% gap there. So Oregon is kind of an outlier in that regard, but I think your math is pretty accurate in the other states that we operate in. Joshua Rosen: And for [trim], Oregon is also probably an outlier in terms of what trim is worth. J. Strickler: [Trim] I mean perhaps like -- I mean I don't even like trims all over the board. I mean this -- it's actually 1 of the things we're really focused on in Oregon is -- and we've done this in several states. So the Yeti brand is an indoor product that actually incorporates some trim. And so we've been putting trim into this pre roll with a little bit of flower. It actually smokes really, really good. Like regionally, we built Yeti because we were worried that it would degrade the reputation of Grown Rogue or kind of more of a high-quality product. The reality is that Yeti a fantastic product. But we're using like really low input trim costs that like a typical, call it, indoor trim pad likely $50, we can put it into Yeti, and all of a sudden, that same products like $200. So it's just margin improvement. In Michigan, same thing with Yeti. It's kind of all over the board for indoor. In indoor in Jersey, we actually take a fair amount of our trim and we turn it into a product called ready-to-roll, which is -- it's a Yeti product, it's like ground up, we grind it again, but it's effectively tram with maybe a tiny bit of flower in there that's ground up that we actually saw for a pretty good price point, like tested training Jersey might be $300 a pound. And we sell the ready-to-roll in [indiscernible] for, I think, $1,000 a pound. So again, trying to utilize these products in the best way we can. And then I talked about some of the other products in our outdoor category with the infused pre-roll as well as our vape cart. We're starting to use all of our outdoor trim, which is really inexpensive like $10 or $15 a pound to turn into higher value kind of retail-ready products. So the infused pre-roll, we use like fees for the flower material in the pre-roll but we extract our own [indiscernible] from the trim, thereby increasing the value of that. And then with the vape cart, we're doing the same thing. We're [indiscernible] outdoor trim. It's being extracted into a cured resin vape which will come back to us again, taking $15 product that people are buying and doing the same thing with paying for it ourselves, putting their own brand and selling them to the marketplace. But trim is -- I hope that answered the question on trim, but we don't spend a lot of time thinking about trim as a contributor. Mostly it's -- is there any additional value we can squeeze out of that and because it varies on the prices all over the place. And like key markets, it might be over $100, we've seen over $100 in Oregon when things get tight, $30, $40, $50, it varies quite a bit. Unknown Analyst: Okay. How is AI changing your business? I'm just kidding -- that's not a real question. I'm just kidding. J. Strickler: I was going to give you a real answer, too. about -- I mean we got a big AI play for you. We just -- we can't talk about it quite yet. It's synchronous I've got a whole server farm going. I was going to say, we -- this Minnesota property does have a lot of power. Operator: There are no further questions at this time. I will now hand the call back to Obie Strickler for any closing remarks. J. Strickler: Yes. Again, thanks, everyone, for joining. For those that couldn't, hope you get a chance to listen to or read the transcript. Excited about the future, excited about how we're going to win, things are choppy, growth and success does not come in nice straight lines, we understand that, focus on what we control cost yields team culture, super excited about what the growth that sits in front of us. I mean, Minnesota, I think, is going to be a monster especially being early and then waiting for one of these distressed things to kind of pop. So liking where we're heading, coming out of '25, moving into '26 and very excited about the future and hope you guys continue to be a part of that going forward. It's going to be a fun ride. So thanks, everyone, for joining. And if you got any questions, feel free to reach out. Happy to have calls with investor shareholders or people just more interested in learning about our business. Thank you. Operator: And this concludes today's call. Thank you for participating. You may all disconnect.
Julia Weinhart: Good morning, everyone, and thank you for joining us today. We value your continued support and are pleased to present to you today our latest development. After the presentation, we'll be happy to address your questions. With that, I'll hand it over to Alessandro to begin. Alessandro Petazzi: Thank you, Julia, and thank you, and good morning, everyone. Thanks for joining us. Well, we just closed what is traditionally the most important period of the year for us and for leisure travel in general. And our results this quarter confirmed the strength of demand. And I would say the strength of our execution, which is clearly more important. Over the past few months, we've been very focused on 3 things, right, on delivering disciplined growth, which means gaining customers and share in markets and channels where the unit economics are attractive. We've also been enhancing profitability, which we have achieved through pricing, automation and improved booking quality, and I will elaborate on that in the next few slides. And lastly, we've been building a more scalable organization, one that is leaner, faster and structurally more efficient. This quarter, you see the first results of those decisions translating into performance, high-teens revenue growth, strong EBITDA expansion, and we continue to improve our cash generation, supported by a lower fixed cost base, also following the reorganization of the company we had in the second quarter. Just as importantly, we have continued to simplify the business and allocate focus on the areas where we can win at scale, and the decision to discontinue the cruise units reflects that decision. Looking ahead, we're building a travel player with stronger customer engagement, increased automation and enhanced operating leverage. We will also present today our 3-year outlook, which reflects exactly this. We're sharing a road map grounded in execution with clear initiatives around product, loyalty, technology, brand, and we have aspirations and a clear plan to get there, which we'll be sharing with you today. But before we do a deeper dive into the outlook, let's start by reviewing our third quarter and 9-month performance. I will then move to our future and the strategic drivers supporting that trajectory. So also with the support of Diego on certain pages, we're going to take a look at the numbers. Starting with, I would say, a snapshot of everything that happened in the quarter and in the 9 months. So starting with the quarter, happy to say this summer was clearly very positive. I think the numbers really speak about themselves. We saw strong growth across GTV, revenues, gross profit and adjusted EBITDA and also adjusted EBITDA minus CapEx. We're starting to talk about this because I think it's a metric that is important for us within the business, and I think it's important for the financial community to prove that our focus on improved cash generation. Adjusted EBITDA minus CapEx grew 68% in the quarter, reflecting this meaningful step-up in operational efficiency. We're also seeing structural benefits of our organization with fixed cost decreasing 6% year-over-year in absolute terms and even more significantly as a percentage of revenue. So the efficiency is now translating already in the P&L. It's also worth noting that the year-on-year comparison is clean. In Q3 last year, Ryanair had already been reintegrated into our offerings. So we had a lot of comments about that and questions and rightfully so understandably in the first half. But now we can be very clear that the results we're showing show a genuine like-for-like comparison. So I would say the first 9 months, the key thing has been consistency. I mean, we explained already in Q2 results call that we had a strong Q1, softer Q2 due to Easter timing and especially positive Q3, but I'd like to see the 9 months performance, which obviously is not impacted by these changes between March, April or June, July. If we look at the 9 months, the picture is also very clear and consistent. So before we move and take a look at each component of the P&L separately, as anticipated in this morning's press release, we have an announcement about our Cruise business, right? So for those who maybe didn't have the time to read it, the announcement comes as a part of our commitment and long-term focus on consolidating and strengthening the segments of our group, which are really the core where we can grow profitably and at scale. The Cruise division had primarily operated in the Italian market under the Crocierissime brand, and as we announced in the PR, we'll seize its operations, complying of course, with all applicable law provisions. This division was reported under the others segment in the forthcoming revenue slide, and has been underperforming over the past few years, generating ongoing constant losses despite the effort of the team. So this is the right decision to really make sure that we can focus our attention and resources where it matters and where we can move the needle for the group as a whole. In the context of that, Crocierissime trademarks and domain have been sold to Cruise Line, which is one of the European specialist leaders in that segment. Now as we have a lot to go through this morning, let's take a look at the revenues in the third quarter and in the 9 months. So clearly, revenues reached EUR 101 million in Q3, up 17% year-on-year from approximately EUR 87 million in the same year ago period. Packages remain the pillar of our growth, contributing almost EUR 66 million with an 11% increase. Now, I think it's important to give you a bit of details about how this performance came about because clearly, it's not that we're just riding away of the market. This is due to a lot of things that we are doing internally. For example, in dynamic packaging, we released a new pricing algorithms, which progressively is substituting all the manual efforts on pricing. So there is that element. We expanded the unitary revenues, particularly from ancillaries, thanks to a higher show rates. So we were able to show especially flight ancillaries for more of our products, thanks to the fact that we've been adding suppliers, which cover situations which were not covered by the previous suppliers. And all of that basically means reflects into an improvement of unit economics. And if you have higher margin and revenues for a single transaction, then clearly, you can also afford to profitably spend more in marketing for the higher customer acquisition cost and then you start having a flywheel effect on volumes and profitability. The other element was also revised the strategy on how we consider our ad spending, which basically is focused not only on expanding traffic in the Tier 2 markets, but also considering revenues from all channels in our ROI calculations. It might sound a bit like a technical element, but definitely helped deliver successfully both traffic and top line growth across all markets. From a flight point of view, you can see that there was a pretty even more significant growth, I would say, up 39% year-on-year to almost EUR 26 million. And again, as I said, apples with apples, Ryanair was already there last year. And so this actually reflects stronger unit economics. Similar to DP also here, new pricing model. I would say the one thing, which also happened on flights is not only pretty similar to the one we mentioned on DP with pricing and ancillary revenues, but also with an improvement in conversion rates, which stemmed mostly from a change in our checkout in which basically we reduced the steps to get to a final transaction, okay? So we were able to reduce the steps, improve the conversion for that and also improve the quality of the bookings we delivered by increased automation. So there was a number of bookings made on price, especially, which had to be completed manually by our customer operations specialist. And now that percentage has dramatically reduced. And as -- basically because of that we are able to confirm the booking right away. And again, this has a positive flywheel effect on the whole system. Also, the hotel category has been growing very significantly, 24% year-on-year to over EUR 7 million in the third quarter. And here, I would say the elements from an industrial point of view were for sure, the revised approach to outspending, which I was also already mentioning for DP, but also the launch of a partnership with a new meta search channel, Trivago, which even if it happened towards the end of September, started to contribute significantly already and the partnership channel. So basically, the revenues that we get by the agreements we have for the so-called welfare channels for employees in a range of countries, especially in Southern Europe. So these were the other big contributors to the revenue growth on the hotels. So in summary, I would say top line has been pretty -- very strong. We improved also the profitability per booking, and we executed on our technology and partnership roadmap and altogether, that support these results. And with these things that we're doing in pricing and automation, it's not just the third quarter, but clearly, it's a strong foundation for the growth into 2026 and beyond. And if we look at it from a 9-month point of view, revenues at over EUR 284 million, up 13% year-on-year with all the core segments delivering double-digit growth. And packaging is remaining the core, of course, but flights and hotels also delivering growth of 26% and 20%, respectively. The only element of the business, which didn't perform is the other segments, which declined by 13%. As I was mentioning, in this area, also the Cruise unit is included. And clearly, we will not see it going forward. So luckily, the limit -- the overall -- the impact of this on the overall results is limited, but I think the picture is very clear. Strong growth in the core, decline in the noncore and which we are focusing or divesting or discontinued. Now as we move on to profitability. The strong top line growth also translated into gross profit growth, very clearly with a growth of 9% year-over-year to almost EUR 38 million in the quarter with packages having a 10% increase by 14% and hotels 10%. Now one thing that would be directly addressing is the fact that you might see a slight dilution in our percentage gross margin. So I would like to clarify that this movement is planned and is consistent with our strategy. It's not a blip, it's not a glitch. It's something that is coherent with what is going on from an industrial point of view for 2 reasons. One is that we increased our marketing investment to capture demand as we were seeing in a profitable way, and this is clearly paid off with the 70% revenue growth in the quarter. The second, obviously, is the business mix. Flights have been growing proportionately more than packages, and we know that flights have lower percentage marginality. And so obviously slightly different mix with a bit of a lower margin percentage, but higher -- the key thing for me here is to emphasize that we were talking about higher, absolute gross profit and contribution. This is what we care about, right? Basically, our unit profitability, which remains strong and the absolute growth, and this is something that we continue to prioritize profitable volumes and cash conversion over the pure, let's say, optics of doing the percentage calculation. Looking at the first 9 months, also gross profit has been growing in the same pace, 9% overall with flights up 21% and hotels up 16%. And so I would say that the fact that the performance was consistent over the 9 months demonstrates the health here of what we're doing and the execution of the strategy on which we will also give you more details going forward. But with that, I hand over to Diego for some more detailed look at our cost, P&L and cash flow. Diego Fiorentini: Thank you, Alessandro, and good morning, everyone. We are now on Slide 8, where we show our total cost structure, split between variable and fixed cost. The quarter brought some good news on the cost front. Fixed costs were down 6% as we are already seeing the first tangible benefits of the organization announced in Q2, flowing through the profit and loss. At the same time, notable costs were up 22% in the quarter, mainly reflecting reinvestments in marketing and sales that began in Q2 and continued over the summer, supporting the strong gross cover value growth momentum. This increase was partially offset by other variable costs, which rose only 7%, reducing their weight on revenues by about 2 percentage points. Taken together, the combination of higher revenues and lower fixed costs, both the fixed cost ratio down 5 percentage points over the quarter, which is a very positive development. If we look at the first 9 months, the picture is quite similar with fixed costs down about 2% year-on-year compared to 2024. If we now switch to Slide #9, we can have a look at the full profit and loss, giving you a bit more detail of what we just went through. In the third quarter, adjusted EBITDA reached EUR 17.2 million, up 35% year-on-year. This strong increase reflects our operational leverage, which amplified profitability even if we continue to invest in marketing and sales. Reported EBITDA came in at EUR 13.5 million, which is broadly in line with last year, despite the provision related to the closure of the Cruise division. EBIT totaled EUR 4 million versus EUR 8.8 million last year, mainly impacted by the impairment of the Cruise related intangibles. Importantly, despite all of this effects, the net results remained positive for the quarter at EUR 1.9 million with earnings per share of EUR 0.18. If we move to the 9 months results, so the picture remains very consistent. Adjusted EBITDA continued to show a strong year-on-year improvement, which clearly supports our upgraded full year guidance. EBITDA was in line with last year at EUR 13.7 million, while EBIT decreased to EUR 17.3 million, down 29%. Both metrics were impacted by one-off items mentioned earlier. Alessandro Petazzi: Yes. And if I can chip in for a second, Diego, sorry till you [indiscernible] here, but I think it's also important to note the adjusted EBITDA minus CapEx metric. Because basically, if you look at the 9 months, you see that we've grown the adjusted EBITDA by approximately EUR 10 million. And then we've also reduced our CapEx in the period. So the adjusted EBITDA minus CapEx grew even more than proportionally EUR 14 million or 80%. And I think this is a very important metric that we work on internally, and I think it's important to start talking about that with the financial community. Diego Fiorentini: Yes. Thank you, Alessandro. I have a point on that on Slide 11. So if we can move to Slide 10 now, we take a closer look at the net results for the quarter to help put the numbers into context. As you can see, reported net income is lower than last year. However, this difference reflects one-off items related to the closure of the Cruise division. In the third quarter, we booked a provision for restructuring expected to be settled over the next few months while the impairment of intangible represents a noncash charge. Together, these items had a negative impact of EUR 6.2 million net of tax. On a comparable basis, this picture looks quite different. Underlying net income would have been EUR 8.1 million, 42% higher quarter-on-quarter without these one-off effects. We now move to Slide 11, where you can see the net financial position movements over the last 12 months. This view has to smooth out the seasonality of our business, which is strongly influenced by the typical OTA working capital dynamics. The net financial position stood at EUR 63.5 million, broadly in line with the EUR 67.1 million recorded in September 2024. The main driver of the cash flow was EBITDA, which reached EUR 43.5 million over the last 12 months after absorbing the organizational related cost. CapEx totaling EUR 19.1 million continued its downward trend following the peak spending we saw in 2024. The change in net working capital was essentially flat, reflecting the reversal of the seasonal movement we saw in Q2, and it is expected to continue a positive trajectory toward year-end, supporting the higher gross order value compared to last year. Overall, free cash flow came at EUR 16.4 million over the last 12 months, a significant improvement compared to the EUR 0.4 million in the same period of last year. And with that, I hand over to Alessandro for the key takeaways. Alessandro Petazzi: Thank you. Thank you, Diego. Well, I think it's pretty straightforward. We had a very solid performance throughout the first 9 months of the year, and we are expecting to continue doing that over the next few quarters. Packages have been growing, flights and hotels maintained good momentum. And because of that, we are raising our EBITDA guidance to around 20% of year-on-year growth, that showed improved unit economics and continued fixed cost discipline driving stronger cash conversion. And as part of that, I would also, I would say, talk about delivering on commitments in general, right? So not only cost discipline and growth. I think we said in January, when I joined and the first call I had with all of you, I was very clear on the fact that this company cannot be just a company with stagnating revenues and bottom line growing by cost cutting, we need actually to grow the top line, and grow the bottom line by having operational leverage. This is it. I'm having strategic focus. And clearly, the decision to discontinue the Cruise business also goes in that direction and will start showing its own positive effects in the next few quarters. So growth is the name of the game here. And it will continue to be so in our 3-year outlook, which we are going to now see in greater details. So what we're sharing today is a reaffirmation of the strategy we set earlier this year, right? So I would say no revolution, but an evolution and more clarity on the execution plan, right? I like to -- always like to say that vision without execution is just hallucination. And clearly, that's not where we are here. So the 4 strategic drivers you see have guided our decisions already throughout 2025, and they will continue to guide how we operate, scale and grow the business over the next 3 years. So it's about execution, focus, consistency and building momentum quarter after quarter. Now before we dive into each of the 4 core pillars that you might already be familiar with, let me briefly touch on the 2 key enablers that support this road map, right? I mean when we talk about scalability, what means is that we're building a business that scales efficiently with faster decisions, faster execution and lower cost to serve our customers. So how do we make it happen? Because otherwise, it just remains a declaration of principle, but the fact is that we are already streamlining and consolidating systems to reduce complexity. Automating core workflows, we already have identified more than 40 on which we are working to provide automation, things such as refunds, cancellations, service reporting, things which some of them are in the back office and some of them are also impacting our customer satisfaction. So again, not just a matter of efficiency, but a matter of overall being better able to serve our customers. And in the same -- with the same philosophy, we're also applying a buy overbuild approach to technology, ensuring that we have speed and capital discipline as you see reflected -- you saw reflected, for example, in the decline in CapEx this year. So the goal is pretty simple, and it's a leaner organization with higher productivity and better customer experience. I don't think the 2 things are in a trade-off, but the 2 things must go hand in hand as we continue scaling the business with the strong operating leverage that we talked about. AI. Now everyone is talking about AI. Obviously, I do not think personally that AI is a value proposition. AI is a crucial tool and AI must be embedded in everything you do. It's something that really must be the fabric of the organization, I would say. And it touches our business in at least 3 different ways. One is that from a customer acquisition point of view, AI is already influencing how travelers search and plan, right? And we see a shift of behavior from search engines to LLMs or within Google, for example, from traditional search to Gemini, AI mode and AI powered reply. So we are preparing for all scenarios to ensure we remain relevant and competitive whatever happens in the upper funnel by remaining the trusted fulfillment partner of whoever is going to provide that type of recommendations to customers. And that also includes from a more tactical point of view evolving from an SEO approach into a so-called GEO approach to make sure that we're also present organically in the results in the various LLMs. That's the first way that AI impacts us, but actually and which is a bit more, I would say, external from our own company. But in terms of the things we can do internally, customer experience then comes first, followed by efficiency and automation. So basically, AI is already helping us personalize, inspiration and recommendation. And we've been working on it for few years already in terms of our ranking and pricing personalization systems, which are the ones, by the way, the evolution of which contributed to the significant growth we were seeing for the quarter. But by continuing to work on that, we can also support the way our agents deliver faster and more consistent service in areas, especially where ever the human intervention matter. So from an efficient point of view, as I was saying, it's across pricing, booking quality, customer operations, a lot of back-office systems, AI is already improving the speed and accuracy of what we do. A significant portion of the code that we submit for deployment every month is already generated with the support of AI. So we haven't been talking a lot about that, but there's a lot of things already happening in the organization, I would say, across the board to allow us to scale without adding proportional cost. So, in short AI is not a stand-alone initiative, but it's really a core feature of our operating model. And that being said, let's now walk through each of the 4 strategic drivers and how they evolve over the next 3 years and how together, they underpin the financial ambition we're sharing with you today. First one is our core engine, dynamic packages, right? So travelers expect relevance, simplicity, value and seamless fulfillment. I think this is something that has been very clear with us, for us and remains true even in a AI-first world, obviously, with potentially more and more of the operations powered by AI. But for fulfillment, you need a lot more elements, right? So the goal here is to move from choice, which obviously is important, and we want to continue to give our customers choice, but we want to start introducing intelligent curation in that, bringing travelers to the right holiday faster, right, with a product that feels designed around them rather than assembled by them. So this is exactly the evolution that we are talking about. In practical terms, it means curated inventory focused on quality and relevance with also personalized bundles, not only with flights and hotels, but further extras and further additions to the trip, which makes the trip more memorable. And that is already happening in the short term. Going forward, we will have more and more audience-driven bespoke offers. And we will also be offering theme signature collections such as a romantic week in Paris or a week on the slopes for ski lovers. It might sound pretty normal, I would say, but I think that if you think about it, having a system that gives you exactly the type of holiday you need in a specific moment of the year is, I would say, an ambition that every travel company has been having and very few already delivered on. So we definitely plan to be there. And we intend to help travelers also in the discovery phase while remaining the trusted fulfillment partner that makes the holiday happen. From a -- I would say, from the point of view of the industrial effect and the economics, what do we expect by this evolution of the business? We expect, as you can see on the top right corner of the page, higher conversion rates, the higher attach rate and average -- and higher average booking values. This is basically the effect we expect on our own economics by this evolution. The second pillar, as you know, is about building deeper, repeatable customer relationships, moving beyond the transactional model that has been a staple of the company for a number of years. And this is where loyalty, personalization and proactive service comes together. And again, you might say that this is what every company wants and it doesn't exactly sounds like the discovery of fire. But I think it's important to take a closer look at the key initiatives which are already in motion underpinning this. So the launch of our multi-tier loyalty program offering rewards and designed to drive lifetime value. So lifetime value for sure, is the element of focus as we go forward, providing more relevant content and offers so that every interaction can feel tailored. AI comes back into the picture to provide support in service and automation so that the attention of our human agents can be focused on where it has most impact. And support and inspiration are also coming to be embedded in our app, which must be the primary engagement hub for inspiration, booking service, rewards, but I would say the way for us to be relevant in every single moment and every single touch point of the customer journey, not just when they book, but when they are waiting between the booking and the holiday itself, when they approach the holiday, that moment of expectation when they actually start enjoying their holiday and even when they are back home and thinking maybe about having those post-holiday blues and thinking about what they should be doing next. The expectation is that thanks to all these actions, we can increase the repeat rate, which is already pretty high. I would say our repeat rate in the 12 and 18 months is already pretty high, but we can do better, for sure. We expect this to increase the app adoption, also as a way to remain relevant in the minds of customers to increase our NPS and to reduce the cost to serve. Now on to the next page with brand. In 2025, our focus under the strategic driver has been on highlighting the strength of each brand in the group. You might remember, we've already talked about that, that rather than trying to be everything to everyone, we concentrate our investments where each brand creates most value. And obviously, we have local brands like Bolgratis, Rumbo, Weg and mother ship lastminute.com. And each deserves a differentiated approach and efficient marketing to make the most of local strength with the combination of the marketing approach, the brand and the product that we sell via each brand. And so this already translated into something really concrete from aligning the visual identity of all the local brands with the core lastminute.com brand, you might have noticed that already. If you are a customer or if you are curious anyway. And we've also launched brand awareness campaigns for the first time outside our core markets. Now, if we look further ahead, this driver evolves towards ensuring that our brand purpose mirrors what we're becoming as a company. So it must be consistently aligned with our vision of a curated travel experience, especially for packages, right, what we have been discussing and reflected across each touch point product, pricing, conditions and service. A brand is not just about the nice ad campaign, is if we say that we are a customer-first, if we say that we are customer-centric, and this can really be a corporate cliche, we really want to live that mission, then clearly terms and conditions and the way we treat our customers, the way we serve them is part of that, and there must be consistency across all of that. So the brand platform that supports our strategy is about curation, ease, trust and emotional relevance. The -- I would say, more practical economic consequence of that is in, say, in our aspiration to have a higher recall of brand association, which then should also, over time, become a source of lower customer acquisition cost and higher conversion, especially as we shift more traffic into our own loyalty program and the app environment. And finally, market presence and distribution, which is about balanced and profitable scale, not footprint for its own stake. This is very important. Every time we've been expanding to new markets, we've been doing that with a data-driven approach and making sure that we were profitable very early on. So from a geographic perspective, we are maintaining a strong focus on our core European markets, depending on our leadership positions in the core 5 while also expanding selectively into high potential markets where unit economics are favorable as we've been doing already since the beginning of the year. The new thing here is that from a market perspective, this also means widening our reach with the launch of a new B2B, B2B hotel distribution channel and product. So basically is what in the sector is called a bed bank, bed as in bed, not in bad. Apologies for my pronunciation here. So that's what we're launching, opening an extra revenue stream for the group. And this is something that is already happening in these very months. From -- if we're talking about the B2C customer acquisition source point of view, the focus is on evolving how we reach customers. So shifting gradually from the history of the company, which has been a pure performance marketing to more of the brand-led growth, building awareness and preference to more diversified mix, including paid social, where we've also already started investing this year and B2B2C partnerships, and we were talking about generative engine optimization earlier on. So the outcome of this from a business point of view is more resilient demand generation, which is consistent whatever the possible shift in traffic in the upper funnel might be. So higher-quality traffic, more diversified revenue streams and overall a more resilient business. So I'm sure that all of you are now curious to see the financial impact of all the qualitative elements we talked about. And so here we are anchored in the strategy and supported by the initiatives we talked about. We're confident in our ability to continue delivering the profitable growth and reaching by 2028 approximately EUR 450 million of revenues and an adjusted EBITDA above EUR 70 million. Now, it reflects the compounding effect of scale, automation, stronger customer and higher customer lifetime value for the reasons we discussed across all the core segments and the disciplined approach to cost and capital allocation. Now let me also add, I would say a brief personal reflection on this guidance, right? When I joined in January, you might remember, one of the priorities I outlined was to make sure we established credibility with you guys. The very simple principle to say what we do and to deliver on it, right? And I think that the past 3 quarters, frankly, show pretty clear progress in that direction because we've been meeting our guidance. And actually, we're even upgrading our guidance, and we've been growing top line, growing bottom line exactly with doing -- by doing not because the market grew, but because of we executed on all the plans that we outlined at the beginning of the year. So we're executing with focus, with discipline, with transparency. That approach will continue. I also know it's just the beginning of a journey, right? So the outlook we're sharing today is intentionally grounded and realistic. It is not the ceiling of our ambition. I would say it's more the base camp, if you want. And as we keep building operational momentum, I'm confident you'll see the same clarity and consistency reflected in the actual results, which at the end is what really matters, right? I mean again, having the vision, a clear story and a clear plan to get there and deliver on the results. And with that, I conclude the strategy overview, and I hand it over to Julia again for the financial calendar. I'll be back shortly to take your questions. Julia Weinhart: Thank you, Alessandro. Now let me briefly share with you which conferences we will be attending in the coming months and our financial calendar for 2026. So on November 25, we will be at the Deutsche Eigenkapitalforum in Frankfurt. On the 15th of January will be at the Baader Swiss Equities Conference in Bad Ragaz in Switzerland. And now I'm moving into our financial releases. We will release our preliminary unaudited full year figures results on the 12th of February. Our annual report publication will be on the 2nd of April. On the 6th of May, we will publish our Q1 2026 trading update. On the 24th of June, we will have our Annual General Meeting. And on the 30th of July, we will be sharing with the market our half year results, followed then on the 29th of October, our publication of the Q3 2026 trading update. With this now, we will begin our Q&A session, starting with the live questions first, followed by those submitted via the webcast. Please note, again, as always, we might group similar questions together and slightly rephrase them. In line with our privacy and data protection policies, we remind participants that stating your name is optional when asking live questions today. With this, I'll hand over now to Sherry, our Chorus Call operator to begin with the first live question. Thank you, Sherry. Operator: [Operator Instructions] I am now pleased to hand over to Julia Weinhart, Investor Relations, who will be moderating the session. Julia Weinhart: Thank you, Sherry. So do we have any live questions in the queue already? Operator: We have no questions in the queue. Julia Weinhart: Okay. So no live questions, so with that, we'll move directly to the webcast questions we have received. And I will start with the first question, which we have received this morning. How do you intend to use the cash available since you are now even generating significant amount per quarter? Any M&A ahead of us? Alessandro Petazzi: Yes. Thank you, Julia. I'll take this one. Where our cash position will be primarily used to sustain the growth of the business. Now we've always been active and we see ourselves continuing to be active in the M&A market if any opportunity arises. For example, there might be start-ups, which come up with very interesting products, but are not able to scale due to the known difficulty of scaling B2C businesses in the travel market, which is a market with very low frequency of usage, which creates more challenges than if you try to build a B2C brand in markets in which people potentially use your service every day or every week. So there might be opportunities there and to get maybe some support for our innovation efforts. But again, I see that rather than for sure, not a transformational M&A more, something that complements and contributes to the operational execution we talked about, right? The very tactical, I would say, decisions on make or buy on certain things. So I would say the strategic focus is on investing in the initiatives that we have to strengthen our position and continue driving this profitable organic growth. Julia Weinhart: Thank you, Alessandro. Now we will move to the next question we have received. What can you say about the current market cap and rerating expectations? Are you planning to move the stock exchange to London or Amsterdam to improve liquidity? Alessandro Petazzi: Look, I think this question reflects frustration. And to be honest, it's a frustration I share. It's a frustration we all share. You might know, I think we had -- we also -- we already had comments on that, that the entire executive team is very much incentivized in line with shareholder value creation. Plus we have an institutional duty, right? So it's not only, I would say, it's a selfish element, if you want, but also an institutional element in terms of our role to provide value for shareholders. I would say that right now, considering where we're coming from, the key focus is to improve the industrial results of the company to make sure that we deliver quarter-after-quarter as we've been doing over the past 9 months. And also to continue to have more discipline and transparency and that approach to investors as well. As Julia was saying, I mean, we've already been meeting a lot of investors over the past few months. And as you've seen in our financial calendar, we are -- we will be attending a number of conferences. We will be meeting a number of you one-to-one. So I think that we are doing everything in our power to make sure that progressively, the market realizes that we deserve a different multiples because we -- the growth rates and the absolute value of our numbers, I also clearly think that we are not currently priced in the right way. Now at the same time, when we are in this journey of transformation of the company, when so many things happening with the potential to disrupt our sector and us trying to disrupt ourselves, right? We definitely want to be innovating in a way that we go ahead of market disruption, then I think that's where the focus must be. Changing, listing and stuff like that is potentially a huge distraction for the team. And so even if it might sound like a shortcut to potentially improve our liquidity, I think it will be the cost to pay in terms of defocusing the company at the moment in which the company actually is proving that focus is a good thing, is probably not the right approach. That being said, this is the evaluation now. Going forward, we will continue to monitor the things. Again, deliver on the promise, show credibility, show transparency, have a bit of patience because, of course, I think this journey is not one of a day. It's one of a few years. The plan is not a coincidence, right? That it goes until the end of 2028. I think that's a reasonable time horizon. And then we might reassess obviously a year from now, this hasn't changed, but we will see. But now focus is on industrial aspects for sure. Julia Weinhart: Thank you, Alessandro. Now moving to the next question. Could you provide a breakdown of your net cash position? How much is real cash and how much is advanced cash payments from clients? Diego Fiorentini: Thank you, Julia. Well, as you can see from our third quarter report, cash and cash equivalents stood at EUR 103.8 million at the end of the quarter. It is important to note that part of the short-term financial liabilities reflect the negative balance on our notional cash pooling structure. Adjusting for this, our effective cash position would be around EUR 55 million. This strong cash position is, of course, supported by the negative working capital dynamics that are typical of our industry. Julia Weinhart: Thank you, Diego. Now moving to the next question. What is the composition of the Dynamic Packages growth? How much of growth comes from B2B, how much from B2C? And can you give us an overview of the growth in the various regions? Alessandro Petazzi: Yes. Okay. So 2 different questions in one. So let me try and address them both. So the first one is that I guess you know that in our reporting structure, when we talk about packages, actually, it includes dynamic packages, which are the core of our business, mostly sold via the lastminute.com brand in its various incarnations in the various countries, but also the so-called tour operator business, which basically is a business in which we allow people to book the products of companies such as TUI or their tour. This is especially strong in the German market, and it's mostly sold by the Weg.de brand. Even there is also a portion in France, but lion's share of this tour operator business is in Germany with Weg.de. Now that part hasn't been growing, to be honest, the tour operator bit. But again, it's where we do not have control of the product. And so we're now working on some actions to make sure that we can also make sure that they gets back to the growth that it deserves as a historic brand in the German market. If we focus on the core of our dynamic packages, which are clearly the vast majority of the total line that we report as package, we've seen growth across both, B2C and B2B2C, as I prefer to call it rather than B2B, right? The white label solutions that we have with booking.com, with Holiday Pirates and in others, they were both growing, but the B2C channel, which clearly represents the strategic focus on which we have more control, has been growing more than the other. So I would say B2B2C has been relatively with a pretty limited growth in terms of revenues and a good growth in terms of profitability, whereas the B2C channel delivered higher growth in the quarter and in the 9 months and also remains the predominant contributor in absolute terms within the Dynamic Packaging segment. Now in terms of the growth in the various regions, we've been growing both in the core markets and in the other European markets, which we started to invest in this year. So the growth doesn't come just from the new markets. I would say within the core markets, the most positive performance has been coming from Italy and Germany, but we're also satisfied about the situation in France, Spain and the U.K. But Italy and Germany has been, for sure, the ones -- the outstanding ones in the quarter and in the 9 months. Julia Weinhart: Thank you, Alessandro. I now move to the next question. Currently, around 30% of revenue is generated through partnerships. How much of the EUR 450 million in revenue by 2028 is expected to come from partners? Will the share remain at 30%? Or will it be higher? Alessandro Petazzi: No. I mean, basically, as I said, our B2C core channels are growing more. And I think that we will continue focusing on this. And this is what we expect. So the revenues coming from partnerships will be growing if we are able to add more channels, more partners. So I would say that for sure, we do not expect the contribution of partnerships to increase as a percentage of revenues. We expect it to remain stable or potentially even slightly decline as we focus on higher growth on our B2C core properties. Julia Weinhart: Okay. Perfect. Thank you, Alessandro. With this, we have -- we move to the next question. I missed the beginning of the presentation. Unfortunately, can you explain the [indiscernible] sale? When will it be closed, which legal entities are changing their ownership? And when will it be closed? Alessandro Petazzi: Okay. So let me first clarify that no legal entities will change ownership. This is very important. It's something else we're talking about. We're not talking about sale of entities. So the context -- the strategic context of this is that we are delivering on the promise to be focused on what moves the needle and in the areas of the business where we can grow profitably at scale. So -- and that's why we have decided to seize operations of the Cruise division. This is what we're doing. We are seizing operations. The Cruise division was primarily operating in Italian market with the brand Crocierissime. Now the other thing we said is that, that brand, Crocierissime and the related domains have been sold Cruise Line, which is one of the European specialty leaders in the segment. So this is what is happening. Seizing operations, and then as a separate element, selling just the trademarks and domain. But for sure, not the operations as such, which are seizing and not the legal entities. Julia Weinhart: Thank you, Alessandro. With this, we have answered now all of the questions we have received via the webcast. Sherry, maybe in the meantime, did we receive any request to ask a live question? Otherwise, we would... Operator: There are no more questions from the phone. Julia Weinhart: Okay. Then we will be closing the call. Alessandro, would you like to say a few words at the end? Alessandro Petazzi: Yes. I mean I just want to thank everyone for the questions and for the conversation, which we obviously value and we intend to remain focused. We intend to remain focused on building on the industrial performance on the plan we disclosed. We are really confident in the path ahead. We have an ambition, which even goes beyond what we've been talking about and the plan to deliver on the targets we talked about. And we look forward to continue having this constant communication with you at the next quarter or ideally at one of the conferences that we will be attending. Thank you from that, and I see you very soon.
Operator: Good afternoon, and thank you for waiting. Welcome to Braskem's Third Quarter of 2025 Results Conference Call. With us here today, we have Mr. Roberto Ramos, Braskem's CEO; Felipe Jens, Braskem's CFO; and Rosana Avolio, Investor Relations, Strategic Planning and Corporate Market Intelligence Director. Please note that this event is being recorded. The presentation will be held in Portuguese with simultaneous translation into English. [Operator Instructions] Now I will repeat the same instructions in Portuguese translated into English. The presentation is being held in Portuguese and simultaneous interpreting into English. [Operator Instructions] The audio for this event will be available on the Investor Relations website after it ends. We remind you that participants will be able to submit questions for Braskem, which will be answered after the end of the conference by the IR department. Before we proceed, please note that any statements that may be made during this conference call regarding Braskem's business prospects, projections, operational and financial goals constitute beliefs and assumptions of the company's management as well as information currently available to Braskem. Future considerations are not a guarantee of performance and involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions, industry conditions and other operational factors may affect Braskem's future results and may lead to results that differ materially from those expressed in such future conditions. Now I'll turn the conference over to Ms. Rosana Avolio, Investor Relations, Strategic Planning and Corporate Market Intelligence Director. Ms. Avolio, you may begin your presentation. Rosana Avolio: Good morning, everyone. Thank you for participating in Braskem's earnings conference call for the third quarter of 2025. As indicated in the agenda described on Slide 3, I will begin the presentation with the company's main highlights in the period, starting on Slide 4. In the third quarter of 2025, the industry's performance continued to be impacted by the prolonged downward cycle. Utilization rate at petrochemical plants in Brazil were lower than in the second quarter due to the scheduled maintenance stoppage at the Rio de Janeiro plant and the continued implementation of the strategy to optimize production at naphtha-based plants, which takes into account demand levels and spreads on the international market. In the United States and Europe, the increase is mainly due to the normalization of operations and the rebuilding of stocks in the United States, while production levels in Mexico remained lower given the first general maintenance stoppage since the start of production, which was completed at the end of July 2025. With regard to safety and nonnegotiable value, Braskem recorded an average accident frequency rate of 0.75 events per million hours worked, down on the previous quarter and well below the global industry average. In the quarter, the company recorded consolidated recurring EBITDA of $150 million, 104% higher than that in the first -- second quarter of '25, with Brazil, South America segment standing out. With regard to operating cash flow, despite the better EBITDA recorded in the quarter, the company had operating cash consumption of approximately $62 million. Braskem's cash position at the end of the quarter was approximately $1.3 billion, sufficient to cover debt maturities over the next 27 months without taking into account the international standby revolving credit line in the full amount of $1 billion and maturing in December 2026. The company's total liquidity, including this credit line was approximately $2.3 billion at the end of the quarter. Let's move on to the next slide. In the third quarter of 2025, the global macroeconomic scenario was marked by moderate growth, the accelerated inflation, high interest rates and strong geopolitical and trade tensions. And considering the still volatile scenario, we have seen a significant impact in the regions where we operate, resulting in lower industrial activity in resin processing and a typical downturn in demand for the period, reflecting the challenges faced by the industry on a global scale, especially in Brazil and Europe. In addition, most international petrochemical spreads fell in the period, remaining at historically low levels due to excess installed capacity, which together with weakened demand continue to put negative pressure on the sector's profitability at the global level. Moving on to the next slide. The performance of each of the company's segments will presented below, starting with Brazil on Slide #7. In Brazil, the utilization rate at the petrochemical plants was lower due to the scheduled shutdown of the Rio de Janeiro petrochemical plant and the strategy of optimizing production at naphtha-based plants in face of demand levels. Resin sales in the Brazilian market were lower, mainly due to the higher volume of polyethylene imports and lower demand for polypropylene. This reduction was offset by higher sales of key chemicals. In the quarter, recurring EBITDA was $205 million, higher than in the previous quarter. This increase is explained by the prioritization of sales with higher added value, the implementation of the commercial strategy to supply the Brazilian market and the initiatives of the resilience program. Let's move on to the next slide, please. In the third quarter of 2025, the utilization rate of green ethylene plant was 40%, 31 percentage points lower than the previous quarter, impacted by the continued implementation of measures to optimize stock levels, which is part of the resilience program. Sales were lower compared to the second quarter due to lower demand from Asian markets. In relation to the strategy of accelerating the production of new bioproducts and with the aim of seeking opportunities to create value, Braskem GreenCo was created at the end of 2023, a company that already owns the green ethylene assets in Rio Grande do Sul and which will concentrate the growth of Braskem's green portfolio. Next slide, please. The utilization rate in the United States and Europe segment was higher due to the normalization of operations and the rebuilding of inventories in the United States. The lower sales volume compared to the previous quarter is mainly explained by the lower industrial activity in Europe and the weakened demand in the United States. The segment's results continued at negative levels, impacted by weakened demand in the regions pressured spreads and higher ship expenses. These effects were partially offset by the lower inventory effect of feedstock acquired in previous periods in the United States. Moving on to the next slide, we will talk about the Mexico segment's performance in the quarter. The utilization rate for the quarter was 47%, still impacted by the first general maintenance stoppage since the plant start-up, which was concluded on July 31. With regard to ethane supply, the lower volume of ethane supplied by PEMEX compared to the previous quarter was offset by the increase in the volume imported through Fast Track and the start of supply from the ethane import terminal. In this scenario, the volume of polyethylene sales was lower than in the second quarter. Recurring EBITDA of the segment for the period was negative by $37 million, also impacted by the higher idle expenses in the quarter due to scheduled stoppages and lower provisions for fine receivable for delays in the construction of the terminal of ethane imports compared to the second quarter of 2025. Now let's move on to the next slide. The general maintenance stoppage at Braskem Idesa petrochemical plant was completed at the end of July with the participation of more than 30,000 people. This was the first scheduled maintenance stoppage at the petrochemical complex in Mexico since its inauguration in 2016. In addition, the start of ethane supplies from Terminal Química Puerto México in September 2025 marks the beginning of a new chapter in the history of Braskem Idesa with the reduction of the need to use Fast Track solution and guaranteeing the possibility of access to 100% of Braskem Idesa's feedstock at lower logistics costs. This ethane will be transported using two ethane transport vessels leased by Braskem Trading and Shipping, which are dedicated to this operation. TQPM is connected to the petrochemical complex in Mexico via pipelines, guaranteeing greater reliability to the operation when compared to the Fast Track solution. It's worth noting that in September, TQPM supply of ethane to Braskem Idesa amounted to approximately 11,000 barrels per day. Next slide, please. In the next chapter, we will discuss the company's consolidated results. Consolidated recurring EBITDA in the third quarter was $150 million. The increase in relation to the previous quarter is mainly explained by the prioritization of higher value-added sales, prioritization of supply to the Brazilian market, positively impacting the contribution margin, lower inventory effect in the United States and the implementation of the resilience plan initiatives with emphasis on reducing fixed costs in general. These effects were partially offset by higher idle expenses due to scheduled stoppages in Brazil and Mexico and by the appreciation of the real against the dollar. Moving on to the next slide. By the end of September 2025, all work fronts in Maceió were progressing according to plan. The relocation and compensation front continue to show progress in its indicator and ended the quarter with 99.9% execution of the residents relocation program. The same percentage applies to the number of proposals submitted for the financial compensation and relocation support program of which around 99.6% were accepted and 99.5% were paid out. At the same time, the closure and monitoring of the salt cavities is being implemented after all the actions have been taken, if necessary, to ensure that the 35 cavities reach a maintenance-free state in the long term. This quarter, we highlight the achievement of the technical filling limit of cavity 16. As a result, six cavities have now been naturally filled, six cavities have been completed, three have reached the technical filling limit and seven cavities are being filled. Additionally, as announced by the company through a material fact, Braskem and the state of Alagoas signed an agreement related to the Alagoas geological event, providing for a total payment of BRL 1.2 billion, of which around BRL 139 million had already been paid. The outstanding balance is to be paid in 10 variable and adjusted annual installments, mainly after 2030, taking into account the company's payment capacity. The state agreement establishes compensation, indemnification and/or reimbursement to the state of Alagoas for full operation of any and all state property and of patrimonial damages and granted the company full discharge for any damages arising from and/or related to the geological event in Alagoas, including the extinction of the Alagoas state suit in action. The signing of this agreement represents a significant and important step forward for the company in relation to the impact resulting from the geological event in Alagoas. Therefore, in relation to the final provision, the total provision related to Alagoas event was around BRL 18.1 billion, of which around BRL 13.6 billion have already been disbursed and approximately BRL 1.5 billion have been reclassified to other obligations payable, including those related to the agreement signed with the state of Alagoas as mentioned above. As a result, the total provisioned balance at the end of the third quarter of 2025 was BRL 3.8 billion. Now let's move on to the next slide. In the third quarter of 2025, the implementation of resilience measures, especially the optimization of inventory levels was important in partially mitigating the consumption of working capital. The company had an operating cash consumption of BRL 334 million, impacted mainly by the higher seasonal disbursement of operating investments, including the scheduled stoppage at the Rio de Janeiro petrochemical plant and in Mexico. Recurring cash consumption was mainly impacted by higher half yearly interest payments on debt securities issued on the international market by the company, which are concentrated in the first and third quarters of the year. The sales of fund quotas part of the resilience plan and the receipt of the last installment of the sale of Cetrel reduced this consumption by BRL 211 million. Finally, considering the disbursements in Alagoas, the company had a cash consumption of approximately BRL 2.2 billion. Now let's move on to the next slide. Braskem ended the third quarter of the year with an elongated debt profile with 69% of its debt concentrated after 2030. In order to strengthen its liquidity position in the face of the industry prolonged downturn, the company drew down its standby line in the amount of $1 billion at the beginning of October. The current line matures in December 2026. The available cash of $1.3 billion is enough to cover the debt principal repayments over the next 27 months. Finally, corporate leverage stood at approximately 14.7x at the end of the third quarter of 2025, mainly due to the lower EBITDA over the last 12 months. Moving on with our agenda on Slide 11. This concludes the overview of the results for the third quarter of 2025. And next, I will comment on the company's resilience and transformation program. Braskem continues to focus on implementing the initiatives set out in its global resilience and transformation program, considering the significant impact resulting from the prolonged downturn of the entire industry and the Brazilian chemical sector. To this end, the company has adopted measures aimed at generating sustainable value with an emphasis on maximizing EBITDA and mitigating cash consumption. Braskem's resilience program is aimed at implementing tactical initiatives in the company's operations and processes and is structured around two pillars. initiatives with an impact on EBITDA and short-term cash generation and actions to defend the competitiveness of the Brazilian chemical industry with a focus on building a more competitive Braskem, resilient and sustainable. The transformation program brings together initiatives that support the perpetuity of the business and is structured around three pillars: optimization of naphtha base, increasing and flexibility of the gas base, and finally, migrating to products with renewable sources. Now let's move on to the next slide. Following on from what was presented on the previous slide, the implementation of the global resilience program fronts have been intensified considering the prolonged downturn in the industry. So far, we have established 79 action plans globally, which have been broken down into more than 700 initiatives. These actions are distributed on fronts presented above, institutional agenda, commercial agenda, monetization of assets, negotiation with suppliers, optimization of capital employed and operational optimization. In 2025, the potential for capturing these actions is around $400 million in EBITDA and about $500 million in cash generation in relation to the business plan budget for the year 2025. Regarding the progress of the implementation of the actions, around 1/3 of the initiatives have already been implemented and other are in execution or partially implemented, demonstrating the progress of the program. This program is an essential pillar to get through the challenging scenario of the global industry. Moving on to the next slide. Continuing what we saw in the previous slide, resilience initiatives have made progress that is fundamental to mitigating the impact of the prolonged downturn in the industry. On the regulatory side, we have made significant progress in strengthening the Brazilian chemical industry, ensuring fair competitiveness. Among them, the approval of the provisional application of the antidumping duty for the imported from the U.S. and Canada, mitigating the existing damage in the Brazilian market and the maintenance of the 20% import rate in Brazil for PE, PP and PVC resins. In addition, the approval of Bill 892 of 2025 by the Chamber of Deputies represents a significant step forward for the Brazilian chemical industry, which has been operating at the highest rate in the last 30 years. This bill has the purpose of extending the break, the special regime for chemical industry in November and December 2025, in addition to instituting the PRESIQ, which is the special program for the sustainability of the chemical industry from 2027 to 2031. The text of the bill is currently being processed in the Senate for approval and subsequent presidential sanction. Braskem, together with ABIQUIM and other companies in the sector, reinforces the importance of proving the Bill 892. ABIQUIM's technical studies indicate that this bill could generate an estimated positive impact of BRL 112 billion on the Brazilian GDP by 2029, create up to 1.7 million direct and indirect jobs recover up to BRL 65 billion in tax revenues as well as increasing the use of the sector's installed capacity, which currently operates at the lowest level in the industry. In addition, a series of initiatives with an impact on EBITDA were implemented, such as commercial optimizations, reductions of logistics costs, energy, supplies, input, raw materials, optimization of inventory levels as we commented on throughout the performance of the segment, monetization of tax credits, among others. These combined initiatives generated positive impact of around $240 million in EBITDA and approximately $330 million in cash in the year-to-date compared to the budget of the company's business plan for 2025. These results reinforce the importance of the resilience program in the current industry scenario. Now let's move on to the next slide. With regard to the transformation program, the company also made progress on initiatives to increase the competitiveness of its operations in the medium and long term with the aim of ensuring the perpetuity of our business. Starting with Transforma Alagoas, we highlight the beginning of actions to increase the competitiveness of the company's PVC operations and make them more sustainable. The chlorine-soda plant in Alagoas will be transformed into a unit dedicated to handling volumes of EDC, the raw material for the production of PVC. In this context, the chlorine-soda plant was hibernated in September 2025. the company started a new PVC operating model and will now import all its EDC needs through a long-term contract signed with an international supplier. Braskem, which has been present in Alagoas for 48 years, reaffirms its commitment to the socioeconomic development of the state, boosting the strengthening of the chemical and plastic chain. With regard to Transforma Sul initiative, the study into importing LPG for use as feedstock has been completed. It's worth noting that the Rio Grande do Sul petrochemical plant is the most competitive naphtha-based plant in South America and the best positioned on the global ethylene cash cost curve. This study was carried out with the aim of taking advantage of the plant's existing gas processing flexibility, combined with greater logistical efficiency by importing LPG from Argentina, taking advantage of Vaca Muerta production. This initiative brings potential incremental profitability of about $110 per tonne compared to the using naphtha as a feedstock. These actions demonstrate how the company has sought to modify its operations to ensure efficiency, flexibility and long-term sustainability. Now let's move on to the next slide. Concluding this chapter, we come to the biggest transformation initiative underway, Transform Rio. The expansion of the Rio de Janeiro plant's capacity was approved by the Board of Directors in October 2025. This project will add 220,000 tonnes per year of ethylene capacity with an equivalent expansion of PE, increasing the share of gas in Braskem's feedstock profile. The estimated investment of BRL 4.2 billion with completion estimated for the end of 2028. The implementation of the project is conditional on obtaining funding in addition to the resources already approved under the REIQ investments benefit for 2025 and 2026 and a long-term supply contract with Petrobras. In addition to increasing the competitiveness of Brazil's most efficient petrochemical plant, this expansion will bring greater competitiveness to the Brazilian polyethylene market, which is in deficit and positive socioeconomic impacts such as revenue generation for the states and the creation of more than 7,500 jobs during the project execution. With this, we conclude the chapter by reinforcing that the resilience and transformation program is essential for getting through the industry's challenging cycle, guaranteeing competitiveness and sustainability. On to the next slide. I will now comment on the company's strategic direction for the next five-year cycle and the outlook for the petrochemical scenario. Now let's move on to the next slide. Every year, the company draws up its business plan with a five-year horizon through a regular process with a structured timetable and the involvement of various areas of the company. Discussions related to the strategic direction typically take place during the second half of the year, where we revisit our vision for the next five years. taking into account changes in the global scenario, trends and fundamentals in the energy and petrochemical industry. For this cycle between May and July, we kick off by drawing up future scenarios for the petrochemical industry. In August and September, after a detailed discussion, the macroeconomic and petrochemical scenarios were validated with the leadership. In October, we refined the market, operational, financial projections based on these validations. And in December, we will consolidate the strategic direction for approval by the Board of Directors. Now let's move on to the next slide. When we look at the global scenario in 2025, what stands out most is the high level of uncertainty and volatility. This movement has been driven by trade tensions between the United States and China, which have escalated throughout the year. These tensions are accompanied by a series of factors that are likely to continue over the next years, such as more fragmented global chains, increasingly protectionist industrial policies and changes in investment flows, which directly affect international competitiveness. Even with interest rate cuts, the risk of global economic slowdown is still present. When we look at the GDP projections, the consensus is for growth similar to the start of the decade, but limited by the uncertainties of the trade war. This means that we are facing a scenario in which globalization is weakening and protection is advancing. The main impacts of this scenario are uncertainty about the stability of the global economic growth and the profound transformations in the dynamics of international trade with additional risks of disruption in global supply chains. This is the macroeconomic backdrop that we are taking into consideration in our strategic discussions for the 2026 to 2030 cycle. Moving on to the next slide. The current scenario combines two factors that put pressure on the petrochemical industry, which are lower oil prices and subdued global demand. This configuration tends to reduce resin prices on the international market as the marginal producers' cost falls, and there is not enough demand to sustain the price of resin on the international market, even with relatively stable spreads for the marginal producer based naphtha. Lower oil prices and consequently, naphtha and resins on the international market could be unfavorable for base gas producers as in the case of Mexico, depending on the magnitude of the drop in the naphtha prices if gas prices remain stable. In 2025, the price of oil on the international market was intensified by the trade war between the United States and China, which brought uncertainties and reduced expectations of growth and global energy consumption. In addition, there was a significant increase in oil production, especially by OPEC, OPEC+, which gradually resumed its supply, contributing to adjustments in global supply and putting pressure on resin prices benchmarks. In this scenario, realized oil prices this year were lower than expected when compared to the assumption made in the company's 2025-2029 business plan as well as most of the market. This difference has resulted in a challenging environment for the petrochemical industry, with direct impact on competitiveness and profitability. Now let's move on to the next slide. In the company's internal discussions supported by external consultants, it was concluded that dynamics of the petrochemical industry will remain structurally challenging until at least 2030, with China leading investments to achieve self-sufficiency. These investments, combined with the growth in demand impacted by the macroeconomic uncertainties, as mentioned above, contributed to the continued imbalance between supply and demand, putting pressure on overall operating rates, which should remain at historically low levels, even with moderate growth in demand. Given the current expectations about the rationalization scenario, it's expected that the sector will begin to recover towards the end of the decade. Now let's move on to the next slide. Finally, when we look at the outlook for the petrochemical spreads until 2030, the scenario is structurally challenging, considering global trends and industry dynamics. The prolonged downward cycle is expected to last until the end of the decade with a modest recovery after 2029. This behavior reflects the structural excess of supply combined with moderate growth in demand, which has kept international spreads below the historical average for a prolonged period. This reality reinforces the importance of the initiatives we presented in previous chapters aimed at resilience and transformation as well as the need for increasingly assertive commercial and operational strategies. With this, we end this chapter by emphasizing that in the face of a challenging global environment and pressured margins, Braskem's strategic advances will be essential to ensure competitiveness, sustainability and value generation. I would now like to close the presentation by reinforcing the company's priorities for 2025 on the next slide. We will continue to make progress with the initiatives to transform our assets. This front of the resilience and transformation plan is strategic if we are to continuously increase the competitiveness, efficiency and sustainability of our business, making Braskem better prepared to face the adversities of the global petrochemical scenario and guaranteeing its perpetuity. In order to guarantee the continued progress of the transformation, it's essential that the company continues to identify and implement resilience measures. These actions are fundamental to mitigating the impact of the cycle on the company's results and cash flow. strengthening the competitiveness of our business throughout this prolonged downturn. Braskem reaffirms its commitment to the competitiveness of the Brazilian chemical industry together with associations, clients, suppliers and society. It will continue to promote initiatives that guarantee a level playing field and a fair competitiveness for the Brazilian industry, making a consistent contribution to the sector's development. In addition, the company maintains its commitment to the agreement signed in Maceió, conducting each stage with transparency, responsibility and respect for all parties involved. Finally, it's essential to emphasize that all our priorities will be carried out while maintaining our commitment to safety in our operations. safety is and will continue to be a perpetual and nonnegotiable value in Braskem's strategy, guiding every action and decision the company makes. This concludes the presentation of Braskem for the third quarter of 2025. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Please, you may proceed. Roberto Ramos: Good afternoon, everyone. This is Roberto Ramos, President of Braskem. Before we begin the Q&A session, I'd like to highlight some aspects from the presentation in addition to some updates about the financial and economic alternatives for our capital structure, which are currently in effect in assistance from our external consultants as we announced in September '25. That work in developing our strategy for the 2026-2030 cycle began in August and have now been finished by the Administrative Board. We've made some significant conclusions about the company's mid- and long-term outlooks. We have ascertained that the perspectives for the local and international petrochemical industry have suffered a significant negative impact for a number of reasons because China will continue to make significant expansions in its ethylene, propylene, propylene and polypropylene chains using different feedstocks and solutions, also because in the Middle East, there are similar movements. This movement by the Chinese government will have a significant impact on the global scenario with over 40 new crackers increasing production by 70 million or 100 million tonnes, respectively. This will have a significant effect as well on the different petrochemical plants idle capacities. This, combined with the very timid rationalization in the petrochemical industry updates our idle projections. We project a significant gap between supply and demand up until at least the turning of the decade. As such, the companies and the petrochemical industry's mid- and long-term outlooks must be updated. And so this leads to our strategic planning project. So, in September, the company announced the contracting of external consultants to investigate a healthier capital structure. And this is given the projection that the downward cycle is going to be longer than we expected. Since then, we have been updating our mid- and long-term strategies and outlooks. This is made even more challenging by the 2025, '26 cycle. Any potential change about the path to -- path forward must consider these projections. As always, the company will keep its investors and the market as a whole duly informed about all material developments and conclusions about the topic. Lastly, please note that any -- in spite of any negative outlooks or projections, Braskem continues to move forward with its resiliency project, which was approved by its shareholders in '25 and focuses on increasing global competitivity around the world. As such, I'd like to highlight some initiatives linked to value generation for various stakeholders, emphasizing on maximizing EBITDA and cash generation, which were announced recently by Rosana. First, defense of competitivity for the Brazilian industry. by maintaining the 20% import rate for various feedstocks; two, approving various antidumping laws and rights with regard to the U.S. and Canada and also with regard to PVC in the U.S.; three, approval in the Chamber of Deputies of a bill here PL 892/2025, which sets forth rules about the REIQ and PRESIQ, which is now going to the Brazilian Senate for approval. Next, the hibernation of the chlorine-soda plant in September '25 with the goal of making PVC production in Alagoas more competitive and sustainable by importing EDC, this feedstock makes our PVC plant more competitive and also approving the transformer Rio project, which will make Braskem more competitive by using gas in its feedstock matrix to produce polyethylene. And next, operating improvements, which have been generated by over 700 initiatives in 79 different action plans, which include the use of inventories linked to CapEx, producing resin with lower -- or higher added value, reducing downtime in plants due to upgrades, which is something that used to hurt us, improving our use of feedstocks and inputs and also the use of fiscal incentives and credits. So, that being said, I will now begin to answer our listeners' questions. Rosana Avolio: Thank you, Robert. I'll start with the questions that we received on the chat. And there is some convergence in some points. So I'm going to answer some individual questions, and then I'm going to answer the questions that are grouped in terms of content, starting with Vicente with Bradesco. Vicente asked two questions. The first one, he made some comments as follows Lots have happened since the last fall and Braskem hire financial processors to help them in this restructuring. When are we going to have a decision on this? And does the company consider injecting equity now that Alagoas case seems to be completed? And Vicente also ask us resin volumes were very weak in this quarter. What was the main economic driver? What can we expect for the quarters to come? Felipe Montoro Jens: Thank you, Rosana, and thank you, Vicente, for the question. I'll field the first one, and Rosana will handle your second question. With regard to hiring the advisers, as you can imagine, this is something that comes up rather often. It's an important decision of the company, which was actually a relevant fact that was announced to the market in September. And what we can state right now is what Roberto has just read when he opened the Q&A session vis-a-vis any decision pertaining to whatever route we will move forward is still subject to the completion of this diagnostic and especially with the necessary adaptations by the company's Board. At this moment, these discussions are already being elaborated on the results as well so that we can, as we mentioned previously, develop in conjunction with the company's main stakeholders, something that will effectively reorganize Braskem's capital structure. At the present moment, no options are discarded or confirmed. Everything is open. Rosana? Rosana Avolio: Yes, of course. Thank you for the question. You know the company quite well. On a quarterly basis, we see some dynamics of seasonability. And in the historic seasonability, the third quarter tends to be the best period because it anticipates the we -- end of year celebrations and the formation of inventory levels. It was different this year, however. If we consider 2025 compared to 2024, if we consider the demand growth of resins, we do not see a growth posted in this line. We see that demand of resins, the demand of plastic is strongly associated with the Brazilian GDP. When we talk about PE and PP, we can see that there is a drop of about 4% for the next months. For the year to come, we see a recovery of about 3%, but without any doubt, there was a drop when compared to last year. If you see because of the sanitation law, we have seen a very important demand from the sectors of [indiscernible] and civil construction that is a result from the sanitation law. So we expect a 3% growth for this year, just what -- just as we saw in the third quarter when we compare to the previous quarter, we saw a 3% growth. And for the next year, we expect a growth of 3% based on the sanitation law. And a general comment I would like to make. We have seen from the global viewpoint, a very weakened demand or I would even say an uncertain demand due to tariff war that we have seen along the year of 2025. Answer the next question by Gabriel with Citi. This is his question. It's about -- in relation to transform Rio project, could you provide us the time line of the investments and the impact expected on the EBITDA of the company? In addition, could you talk about the funding of the project? Could Petrobras take part in the funding of the project? And the second question is as follows. Could you provide an update on the PRESIQ? And what are the discussions like in Brazil? Is there a time line to provide? What would be the potential impact for the company? Felipe Montoro Jens: All right. I'll begin with transformer Rio and Roberto can talk about PRESIQ afterwards. So, with regard to Transformer Rio, as we -- as Rosana presented now, we have a schedule. The project will begin its engineering phase right now. And this persists until the end of '28 or the beginning of 2029, at which point the project will be completed. If we do some math to calculate the added value that this could bring to the company's EBITDA and using a 220,000 tonnes installed capacity as announced and using an average from the spreads of the previous years, which is $860 per tonne, this brings us to just under $200 million per year of additional EBITDA that we will bring to the company. With regard to financing this project, which is extremely important, as was also announced in our relevant fact, there is a condition for this project to persist so that it can have the needed resources and funds so that it can proceed with the company's cash flow. So, at this first stage, we use the funds that are already available for the company from the REIQ and investments. This allows us to neutralize those impacts to our cash by the first part of 2026. And after that, the need to raise additional funds is already included in the context. So, actually, the first question that was asked with regard to restructuring the company, this has -- this already includes this project. Due to the nature of the project, very likely we were going to find funding sources, but this is not yet defined. It is still being discussed. It will be defined as soon as possible so that this project will not be delayed. Roberto, could you talk about PRESIQ and our forecasts for next steps? Roberto Ramos: Yes, of course. The project, as you know, was approved by the chamber here in Brazil and was sent to the Senate, EBDQUIM and ourselves as members of EBDQUIM, the Brazilian chemical industry is pushing for this to be voted on with urgency so that it can be duly studied by the industry and Trade Commission and then follow on to the plenary session to actually be voted on. We believe that if we manage to get it evaluated with urgency, it can still be signed this year, maybe in November, or if not November, then at least in December, so that it will have an impact on the 2026 results. It's very difficult to make projections about how quickly these bills go through, whether it's in the chamber or in the Senate because political scenarios change every day. New scenarios produce the need for other discussions and other topics to be pushed forward. So it's very difficult for us to give any kind of forecast as to when we think this will happen. But it's our wish and our firm belief that this will be approved in 2025. Rosana Avolio: Thank you, Roberto, Felipe. Now a question about Alagoas about recent announcement. We disclosed a material fact yesterday. Since there are many questions, I'm going to try to focus on the main points. So, there's a request for more details about the agreement in Alagoas, especially in relation to the schedule of payment expected. And there's a question if there is flexibility of the amount considering each payment individually. Felipe Montoro Jens: Thanks for the question. The state of Alagoas, as we mentioned in the material fact, signed with Braskem this agreement. It now needs to once again go through the legal approval by the public sector. This is a BRL 1.2 billion, of which BRL 139 million have already been paid by Braskem. So the remaining balance, and this is a very important topic in the negotiations by both parties or all parties with regard to Braskem's present financial condition was established so that this agreement would be paid over a 10-year period. And so that's our material fact. And the initial installments up until 2030 do respect the company's projected financial condition, which is a result of the entire tightening of the whole global petrochemical cycle and Braskem is tied to it. And after that period, these factors become even more material and move to make Braskem's financial condition recover, as Rosana mentioned in the beginning of the call, and that includes the transformation, switch to gas, fly up to green and all of our green projects in a context with more rational balance between supply and demand for the global petrochemical sector. Rosana Avolio: Thank you, Felipe. Moving on along the same lines, there's a question by Gustavo with BTG, which is consistent with what you just mentioned. In a scenario of a possible change of control in the pillar of transformation, what do you believe to be nonnegotiable to sustain the long-term cases. So there is the green agenda. The second question, what is material in terms of hibernation of capacity in Europe and Asia? And how does it compare to the scenarios announced in the past? As the company sees it, the rationalization tends to be relevant within two years. And lastly, in relation to Braskem Idesa, with ethane terminal in operation, what is the EBITDA capacity that you would consider to be normalized for Braskem Idesa? And how long this asset is likely to start contributing again for reducing the consolidated leverage level? Felipe Montoro Jens: Of course. Thank you, Rosana, and thank you Gustavo. The answer to the first question is contained right in the question. It's, in fact, what the company believes it has as far as ability to add value to all its stakeholders. That is continuing with the transformation plan, our migration to gas, our focus on competitive assets and the green agenda or what we call here in-house as fly up to green. A new, if a new potential shareholder has a different view, it's difficult to answer that because if we already had that view, we would certainly be implementing it right now. So it really will depend on what such a question would be, if and when such a new shareholder would be. With regard to our strategic plan, this is what we've been working on throughout 2025. With regard to the perspectives of closing or hibernating Europe, that depends on rationalization and our rationalization strategy. What we've been seeing is that rationalization has been lower than what we initially projected. We know this from our own experience. We announced recently the hibernation of chlorine-soda. This is a decision that was made in the beginning of the year and was only implemented in September. So these decisions all take significant time to implement with all the due care and precautions that are needed so that they can actually happen in the most sustainable and rational and also productive possible ways for the company. Roberto? Roberto Ramos: I have two points. First, our strategic plan was approved by our Board of Administrators which is composed of -- there's a significant stake by Petrobras there. So, Petrobras is certainly aligned with our vision, and I'm sure that Petrobras will continue to have that same vision regardless of whatever new shareholder comes in, if that happens. And again, this needs to be approved by all shareholders. We never do anything different from what is approved by the shareholders. So this new shareholder, if and when someone arrives, they will need to get involved in discussions with all shareholders as always. With regard to Europe, what we are seeing in Europe is announced shutting down of units and refineries, one of the biggest petrochemical companies in the world, which has units in England and the Netherlands has closed dozens of refineries in the previous years. The President of a large European petrochemical company announced the closure of 12 million tonnes of capacity of ethylene production in Europe if they do not obtain the necessary protection measures that includes either antidumping or tariffs to prevent the arrival of products, especially from China that come into Europe. That also includes U.S. products that arrive in Europe without any import tariffs. Now that being said, Europe is strategically long in propane. Now our polypropylene plants use propane as a feedstock. So it's really about finding the needed logistics. So if we need to replace any current suppliers, we'll do that. But the propane molecule, which is important for us, will continue to exist. So it will just be a matter of plugging the right numbers into the equation. Rosana Avolio: Thank you, Roberto. In relation to ethane terminal, to only to provide the context. Today, we have Braskem Idesa solution for the import of 80,000 barrels per day. Braskem Idesa to run the total capacity would require 660 barrels per day. And therefore, the total focus of Braskem team is to run full capacity. So an operation rate above 90% that in our industry, extremely high. That will be the focus. From the startup of the terminal, we have had operating results very positive, all in line with what we expected. And when you made a comment about the consistent way of reducing the consolidated leverage. It's good to remember that Braskem Idesa since when we developed this project, it was devised by means lim recourse at the time, all the bonds, all the debt have no collateral by Braskem. Braskem as a controller of the asset. So every time we are announcing our cash position, our debt coverage and the consolidated leverage. We do not consider the cash position or EBITDA or the debt of Braskem Idesa. The way it's going to contribute to the future is when there will be dividend payments impact since the startup of the plan in 2016, considering everything that we went through, the reduction of ethane supply, the renegotiation of ethane contract -- so there is a limitation of the availability of ethane in Mexico. And this is why we made this investment. So we received dividends only once in the past 10 years. So the total focus of the team is to increase the operating rate, increase the sales volume, focus on the Mexican market. This was the first purpose when the product was devised, which is to meet the demands of the Mexican market. And as there is a more balanced capital structure, we will consider the contribution for Braskem. Roberto Ramos: Rosana, Gustavo also asked about China and whether the movements in China tend to have an impact on the market. I believe Rosana already mentioned this in her presentation. We are looking at an increase in 20 million to 30 million tonnes of additional capacity in China over the next five years, essentially resulting from crackers, whether they are gas-based or naphtha based and also whether they are carbon based, believe it or not. And even gas for olefins and methanol for olefins plants. So these are four different types of feedstocks that China is coordinating in its search for self-sufficiency with regard to PE consumption. And it's always very difficult to understand the scale of this shift. But this means that China's trend is just as it is in polypropylene to be a net importer of polyethylene. Today, it is currently an importer of polypropylene, but it will become self-sufficient after some time, and it will become a net exporter of polyethylene as well. This is the baseline scenario for us. And it's a scenario that leads us to conclude that this downward cycle will extend for many years. Rosana Avolio: Thank you, Roberto. Another question by Joaquin with Moneda. He asks about the context of transformer contract that has been recently announced by the company. The question is, have we signed a long-term contract with Petrobras to supply ethane or would that depend on the construction of the project? Unknown Executive: Thanks for the question. Yes, as we mentioned in the material fact, Braskem's Board approved the terms of the negotiation between Petrobras and Braskem for ethane supply. But this contract has not yet been signed. It is still subject to being concluded. This has not yet occurred. It is still currently in negotiations. And so within the schedule that we announced recently, that Rosana announced recently. But we do not foresee any kind of change. The commercial conditions have already been agreed to officially. The only conditions that are still being discussed are secondary conditions that are not material to the contract. Rosana Avolio: Thank you. Moving on. Conrado from J. Safra, asked the following to whom you attribute the sequential improvement of the margin in Brazil, the focus that had a better margin and better cost efficiency? Or is there any special reason or a combination of all? Is there -- is it likely for the margin to continue improving? Felipe Montoro Jens: Thank you, Conrado. I'm going to answer your question. Let's consider the historical viewpoint. Brazilian business is very important for the company. Without, we saw some improvement with an EBITDA margin from 5% to 9%, but below what would be a historical margin for this business as a result of everything that we mentioned in this call, capacity, the demand is weakened when compared to the historical levels, especially 2010, 2019, putting pressure on the petrochemical spread at the international level. And this is where our resiliency program stands. So when you ask what were the factors? Without a doubt, this is a combination of different factors. Without a doubt, we are always going to prioritize the supply of the Brazilian market, the South American market, but we have been going for grades whose value added is higher for the company. In terms of cost reduction, we have made different renegotiations with our suppliers, and we've been seizing to reduce logistics costs. And in addition, when considering the EBITDA and the cash flow, we captured along the year nearly $100 million as the numbers presented in the presentation, and that was driven by the optimization of inventory levels. And when the spread, which is the main contributor to the result of any petrochemical industry, when it stands at a level which is historically low, the company has to operate in such a way to mitigate this impact partially of this downward turn. And this is something we are going to continue doing. We are going to continue communicating. Roberto Ramos: I just wanted to add one thing. With regard to when Braskem was created 20 years ago, the major difference with regard to supply and demand is that at the time, the European petrochemical industry was very important. It was actually the largest in the world, and it gradually lost competitivity and has been replaced by the petrochemical industry that is being created in China and that already existed in the Middle East and was expanded. The consequences are that the new petrochemical industries that were created and also with -- in Japan and Korea, but to a lesser extent. But China and Middle East react much more quickly to requests for higher demand than the European industry did. As a result, the high and low cycles are going to be less steep and longer. And as a result of that, the petrochemical industry must adjust its processes, reduce its costs so that it can coexist with the new reality for the future, where the EBITDA margins are not going to be exuberant as they were before, 20% or more. These margins are going to be more contained, closer to the refinery margins. And so we need to reinvent the way we operate petrochemical plants, for example, by reducing the impact of labor, increasing automation, using artificial intelligence tools to make the plant respond automatically to certain requests. All of this will reduce direct cost and fixed cost. This movement is an intrinsic part of our resiliency plan. We've had results in 2025. We're going to capture even more of them in '26. This is inexorable. It's a new reality in the petrochemical industry, and everyone is going to need to adapt to this new way of doing business. Rosana Avolio: Thank you, Roberto. I'm going to read a question that we received from different people participating in this call in relation to the possible sale of Novonor and change of control, bringing the name of IG4 as a result of what we've seen in the media. So there is a question asking if we have any type of time line to complete the discussion, especially in the case of IG4. Roberto Ramos: I would really love to be able to give you that answer. Unfortunately, I can't. As we've been saying repeatedly, we are not party to that negotiation. The information we received from Novonor, everything we received, we immediately convey to the market through material facts. And we are not aware of any topics or any progress that leads to an imminent decision with regard to the sale of Novonor shares. So we remain waiting just as the market as a whole is waiting, of course, it's a topic that is of interest to us. It's of interest to everyone. But we are not even side players. We are merely spectators. Sure, we may be in the first row, but we are spectators nonetheless. Rosana Avolio: Thank you, Roberto. There's a question of Anne with Bank of America in relation to our transformation in Alagoas. Can you provide more information about Braskem chlor-alkali for transformation plant? And we would like to understand a little bit more about Ode and if we saw the press release that was published by Ode, as you would like to understand how this relationship is going to play out. So at the end of the day is how to Transforma Alagoas will perform in general. Roberto Ramos: Well, what does this transformation bring us? Our chlor ethane process is based on electrolysis used with salt. This is something that's been in effect since we opened in 2021. It was a brine transformation. And this actually was -- it didn't generate value. It produced EDC at a cost that was harmful to the PVC plant. The PVC plant carried the cost of the lack of competitivity from the chlor soda plant. This is a plant that dated from the 1970s and whose technology had already lost its competitivity and especially guided by the fact that we needed to bring salt, gem rock salt halite, which is different from sea salt from Chile. So this halite came all the way down -- down south through the coast of Chile through the Magellan Strait and then north all the way up through the Brazilian coast. So the logistics cost was actually just as high as, if not even higher than the halite itself. So this was something that could only work if the product, the polyethylene prices were high -- sorry, not polyethylene, he corrects himself, PVC. But if the costs were sufficient, so replacing EDC manufactured in Alagoas with a noncompetitive plant, such as EDC imported from the U.S. made using ethane resulting from shale gas. therefore, an appreciable comparative advantage. And it was transported using efficient cabotage to our Alagoas plant. This makes the work of the PVC plant more competitive than it was before. And we were actually often forced to reduce the output of the PVC plant to stop losing money. Now with this change, we can run our PVC plant at its maximum capacity. We can even apply some improvements that will improve it by 25, maybe 30 per year -- tonnes per year. And it will also lead us to produce more material in a shorter amount of time. This is all based on the fact that it is going to be produced. The PVC is going to be produced from more efficient feedstocks. In addition, in a partnership that we have signed, we are burning [ Kwako ], which is a renewable feedstock. This makes our PVC increasingly more and more green. This is going to improve the results for our sales as well. With regard to the press release from Ode, I apologize, I haven't read it. Rosana Avolio: As we mentioned previously, when we were mentioning Transform Rio, any change, any project is necessary, requires raw material contract in order to maintain operational stability. With the change explained by Roberto, the answer is yes, we have an agreement for the supply of feedstock and it's a long-term contract. Moving on, we have some questions by [indiscernible] about PRESIQ. And the question is repeated sometimes. So it's in relation to PRESIQ seems to be an important and necessary program in order to control the cash burn of the company. What are the expected impacts of PRESIQ? Felipe Montoro Jens: Thanks for the question. This is a relevant fact, a material fact for the company. It deals with our resiliency and transformation plan. So I'll answer in two sections. With regard to the year 2026, during which rate will still be in effect and two rigs, the investment and feedstock rigs. Now the investment rate has no change from what is currently in effect. This is a fiscal benefit, a 1.5% benefit we have based on PIS and COFINS that Braskem pays. As we mentioned previously, this is something we use as our funding for the Transformer Rio project and other projects of the company. And the second is the feedstocks rate, which today is 0.7. As of 2026, as Roberto mentioned, once this is approved by the President, this will move to 6.25% from the current 0.7. So this will mean something in the order of $280 million to $300 million of EBITDA in the year 2026, starting as of 2027, up until 2031, which is currently in PRESIQ. It has a yearly budget for the petrochemical industry. And of course, Braskem is part of that of BRL 3 billion per year, out of which BRL 2.5 billion will be the so-called PRESIQ feedstocks and another BRL 500 million for PRESIQ investments. So this is what we are currently working on with our projections, and we currently await that signature as quickly as possible. We hope that it will be approved by the Senate firstly and then by the President. Roberto Ramos: Just a reminder, the sum is for the whole industry, the BRL 3 billion that Felipe mentioned, BRL 3 billion per year. sum is the grant that is being given to the industry as a whole. We imagine that Braskem will receive something in the order of 50% of that sum. Rosana Avolio: Thank you, Roberto. And to wrap up, due to time limits, we have last questions. And the remaining questions will be answered lately, later. And the question is about our projections. So there's a comment about our spreads projections, chemicals and petrochemical spreads. Why would make us so confident to believe that the cycle would continue below the historical levels in the next five years. And they believe that external consulting services has a weak track record to estimate what would be the spreads for the future. And why -- what they usually do is to extrapolate what's happening at the moment. So I'm going to talk about our planning process at the conceptual level and how we carry out the mitigation. But before that, I would like to say that the downward cycle has been different from the other ones. So when we discuss the track record and the weakness and the weaknesses of the external consulting services, but this is the environment we have been experiencing since 2019. So we have seen a weakened demand when compared to the global GDP of 2010 to 2019, which was different to what we saw since 2019. As a reminder, the demand for plastic is very connected to the global GDP. The higher the global GDP, the higher the consumption of plastic. So whenever there is a drop in plastic, even though it's been growing, but we see a drop of the global average GDP when compared to the previous decade. In addition to that, there's a very important difference to consider. China with the driver with -- for new capacities, they are very based on sufficiency and to meet their own demand. And this is what we have seen, and this is aligned with the external consultancy. And this has created a very major oversupply. And this is something we showed in the results definition. And there is a backlog, there's a backlog before offering demand. And the backlog is really huge. And when I look into the future, we still see capacity coming in, especially in China in its search for self-sufficiency. When we defined our projections, this is what we considered. By the way, this is an approval process, which is still going on. And this is a process which will end at the end of the year with the approval by the Board. as we have mentioned in this results presentation. So for us to define the scenarios, we can consider different probabilities in different scenarios. We do not work with one case only. We incorporate different probabilities when we define the assumptions. And without any doubt, in our base case, we have been more conservative or even more realistic would be a better word when we do the rationalization because that could accelerate or could provide a better support to the better spread for the future. But as we mentioned in this call, it's very difficult to estimate other people's decision. So there are external consultancies that provide the cash cost of all producers in the world. But we do not have the disclosure of any agreement between suppliers and clients. So the decision of investment to close a plant is a decision based only on cash cost. It starts from cash cost, but there is a definition at play, agreements, what's the best moment to make the decision for the rationalization. So, again, in the past five or six years, there was a different downturn from the previous years. And there are players, there's this player that is going to include capacity up to 2030. So we consider the probability plus the definition of the assumption. And again, we were very realistic more than what we have been -- on what we have been observing. Roberto Ramos: Just to mention something else about the topic of rationalization. We have some perspectives for reductions. Some have been announced, others not yet, but there's a significant reduction in South Korea, which should reach maybe even 4 billion tonnes in China. The Chinese capitalist process encourages creation of various industries and allows those industries to fight for space. And then once some time has elapsed, the winners remain and the Chinese government rationalizes the winners and losers. So, of course, they have a lot of capacity spinning up. And of course, there's going to be rationalization. And the biggest losers are Europe. Europe has 12 million tons of ethylene production that is currently at risk. Structurally, Europe's problem is much more serious because not only do they not have the feedstocks, they don't have the ethane. They don't have the oil. So they import oil. Yes, they refine it, but they import oil and they import ethane -- and their energy cost is also very high as a result of the war between Russia and Ukraine, which has shut down the supply of cheap Russian gas to Europe and especially to Germany. So with the energy cost in Europe, which is currently almost 3x as high as it was before Ukraine was invaded and also considering that the petrochemical industry is highly energy intensive, combined with the fact that Europe doesn't produce any of these feedstocks, not even naphtha because they don't have oil or gas because they don't have oil reserves. And of course, I'm not considering Russia. This means that Europe's petrochemical industry is moving forward toward a state of the industrialization of total inexistence. And we have a significant amount of production capacity that is at risk during this sunset perspective. Rosana Avolio: Thank you, Roberto. Due to some limitations, the other questions we will answer later. So we would like to thank everyone for attending this call to discuss the results of the third quarter of 2025. And I'll see you next time when we -- for our next call. Thank you. Unknown Executive: Thank you. Operator: This concludes Braskem's conference call. Thank you all for joining us, and have a great afternoon.
Operator: Good afternoon, and welcome to Fathom Holdings Third Quarter 2025 Conference Call. Joining us today is the company's President and CEO, Marco Fregenal; and Senior Vice President of Finance, Daniel Weinmann. [Operator Instructions] Please note, this conference is being recorded. Before I turn things over to management, I want to remind listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company's control, including those outlined in the Risk Factors section of the company's Form 10-K for the year end ended December 31, 2024, and other company filings made with the SEC, copies of which are available on the SEC's website at www.sec.gov. As a result of those forward-looking statements, actual results could differ materially. Fathom undertakes no obligation to update any forward-looking statements after today's call, except as required by law. Please also note that during this call, management will be discussing adjusted EBITDA, which is a non-GAAP financial measure as defined by SEC Regulation G. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure is included in today's press release, which is now posted on Fathom's website. With that, I'll turn the call over to Fathom's President and CEO, Marco Fregenal. Please go ahead, sir. Marco Fregenal: Thank you, operator, and good afternoon, everyone, and welcome to Fathom Holdings Third Quarter 2025 Conference Call. Before we begin, today is a very special day as it is Veterans Day. It is the day that we have an opportunity to thank and show gratitude to those who have served and continue to serve our great country. Let us also thank their families. As we all know that when someone serves the entire family serves. So thank you all for all you do. We are sincerely grateful. Let us begin by highlighting some of our accomplishments this quarter, then move to the broader market outlook and our plans for 2026. The third quarter marked another significant step forward for Fathom. We delivered 37.7% year-over-year revenue growth, nearly doubling the analyst expectations of an increase of 20% and achieved another quarter of adjusted EBITDA profitability. These results highlight our financial continued ability to execute our strategy, maintain operational discipline and capture growth across both our core brokerage and fast-growing ancillary businesses. Our agent base continues to expand at a healthy pace, growing 24% year-over-year to more than 15,300 licensed agents, supported by our lowest turnover in recent years, averaging just 1% of agents per month in Q3, far below the industry average. As we move forward, we remain focused on attracting and empowering high-performing agents who leverage our programs and technology to maximize productivity and earnings. Our ongoing investments in tools, technology and culture are helping agents convert more leads, close more transactions and build stronger, more sustainable businesses. Every initiative is designed to elevate agent success, deepen engagement and improve retention. These investments not only reinforce our reputation as one of the most agent-centric brokerages in the industry, but also drive our long-term revenue growth and profitability. Gross profit for the quarter increased by more than $2.7 million to over $9.6 million, representing a 38.5% year-over-year increase. What's most significant is that over 50% of that increase in gross profit flowed directly to EBITDA. This demonstrates the power of our operating model and disciplined expense management. We're not just growing revenue, we're converting that into real earnings. We have reached an inflection point where each additional dollar of gross profit now contributes more to our bottom line. This is the result of years of investment in technology, efficiency and scale, and it is to prove that our model is working exactly as designed. As we continue to grow, we expect this leverage to expand further, driving sustained profitability growth and creating meaningful long-term value for our shareholders. Turning to our ancillary businesses. We continue to see strong momentum across mortgage, title and technology. Our mortgage company Encompass Lending increased revenues by 20.7% and achieved adjusted EBITDA of about $160,000 for the quarter, which is a clear sign that our strategic investments in process automation and loan office productivity are paying off. Verus Title, our title business delivered 28.6% revenue growth, while our Technology segment posted an 18% increase. It is important to highlight that our ancillary business transactions generate gross profits that are 7 to 10x higher than those of our real estate transactions. The margin advantage makes them powerful growth catalysts for future profitability. Expanding these segments enable us to capture greater share of the real estate transaction value chain and strengthening our overall earnings. As these businesses continue to scale, they're become increasingly meaningful drivers for both margin expansion and long-term shareholder value. As we enter the fourth quarter, growth is accelerating with file starts for both our mortgage and title businesses up more than 60% compared to the same period last year. We anticipate these growth rates to continue. This search reflects the strong alignment between our real estate network and our ancillary services as agents increasingly refer clients to our mortgage and title companies for more seamless transaction experience. Growth in these areas reflect our ability to deliver complementary services that simplify the real estate transaction process. As transactions become increasingly complex, both agents and clients are seeking solutions that streamline closings, improve efficiency and enhance the overall experience. We're also beginning to see tangible returns from our technology investments. For example, Verus Title's successful expansion into Arizona and Alabama demonstrates our ability to replicate success in new markets. These expansions are a key part of our strategy to increase growth. At the same time, our local efforts to build strong relationships to improve attach rates, further accelerating revenue per transaction and strengthening our overall value proposition for both agents and their clients. We are leveraging our proprietary technology to unlock new high-margin revenue streams. The recent intelliAgent licensing agreement with Sovereign Partners underscores the scalability of our platform and the strong demand for our technology beyond our own agent network. By combining intelliAgent platform with our technology-enabled services, real estate companies can significantly boost profitability, a result we have already seen at My Home Group and Sovereign Partners. Looking ahead, we estimate that there are more than 18,000 small to midsized brokerages that could substantially improve their financial performance by adopting intelliAgent platform, highlighting a significant growth opportunity for Fathom. These kinds of opportunities validate our innovative and reinforce Fathom's position as a forward-thinking leader in the real estate industry. Now let's talk about Elevate, which we believe will be a meaningful growth driver for both -- for Fathom in 2026 and beyond. For those less familiar, Elevate is our concierge level growth program designed to help agents dramatically increase productivity and earnings through done-for-you branding and marketing, lead generation and conversion, transaction support and coaching, all offered at a competitive 20% commission split. It's a complete business building platform that allows agents to focus on clients while Fathom handles the back-office complexity. Think about it in this way. For the same 20% commission that an agent might pay to another broker simply to hang their license, that same agent at Fathom gains a full-service concierge team that is dedicated to help them grow their business. Elevate delivers tremendous value to agents while simultaneously improving Fathom's retention, productivity and profitability as the gross profit for Elevate transaction is on average 5x higher. As more agents join the program, we expect to see measurable increases in closed transactions, overall revenue per agent. This program not only strengthens our competitive advantage, but also creates a scalable pathway to higher margin growth well into the future. We have already onboarded over 165 agents to Elevate with another 45 agents in the pipeline and adoption is accelerating. Elevate is a powerful example of how our programs help agents maximize profitability while reclaiming their time. By combining best-in-class tools, coaching and technology, Elevate enhances performance, deepens engagement across our network, which in turn drives higher attach rates and greater adoption of our broader platform. Beyond Elevate, we also launched several new growth initiatives in recent months. First, we recently announced the acquisition of START Real Estate, a firm dedicated to serving first-time homebuyers. START headquartered in Colorado with approximately 70 agents is on track to close roughly 400 transactions this year, delivering a 50% gross margin and a mortgage attach rate of 70%. With our size and their strategy, we have already begun expanding START into other markets, including Utah, Arizona and Nevada and with a broader plan to enter more than 15 states over next year. This expansion is expected to generate over 1,500 additional transactions next year while sustaining both strong margins and high mortgage attachment rates. Ultimately, our goal is to launch START in every state, positioning Fathom to capture an important share of the first-time homebuyer market and drive meaningful revenue and EBITDA growth. Second, we're expanding the Real Results team, our lead generation and qualification program. After providing -- after proving highly effective within the Elevate program, Real Results is now being rolled out company-wide to help agents access vetted high-quality leads. This program shorten sales cycles, boost conversion rates and drives higher productivity, all while creating a more scalable growth engine for the company. Third, we established strategic partnership with ByOwner, providing Fathom with access for the for-sale ByOwner market, which currently represents approximately 6% of all U.S. homes listings. ByOwner tracks over 500,000 visitors per month across its 2 websites, including buyers, sellers and renters. Analysts estimate that approximately 20% of first-time ByOwner listings eventually convert to full service representation, which creates a significant opportunity for our agents. Through this partnership, ByOwner will refer motivated sellers and buyers to the Fathom network of agents and lenders, expanding our reach and create additional valuable growth channel. Collectively, these initiatives demonstrate our commitment to delivering measurable results for our agents and customers. By continually enhancing our technology platform and forming strategic partnerships, we are improving efficiency, simplifying transactions and creating sustainable diversified growth opportunities. As you can see, our investment of human resources and capital into strategy is translating to consistent operational execution, stronger engagement across our agent base and accelerating contribution from our ancillary businesses. With that momentum, let me turn it over to Daniel Weinmann, our Senior Vice President of Finance, who will walk through the financial results and provide additional insight into segment performance and the profitability trends. Daniel? Daniel Weinmann: Thank you, Marco. I'll begin with our financial results for the third quarter of 2025 and then provide a breakdown of performance by business segment. For the third quarter of 2025, total revenue was $115.3 million, a 37.7% increase year-over-year compared to $83.7 million for the third quarter of 2024. The increase was driven by a 39% increase in brokerage revenue, reflecting higher agent production and continued expansion of our Brokerage network. In addition, our Mortgage and Technology segments contributed modest year-over-year growth, including the initial contribution from new third-party licensing fees within our technology platform. Gross profit increased 39.1% in the third quarter of 2025 compared to the same period in 2024, primarily driven by higher transaction volume and revenue growth. Gross profit margin remained consistent at 8.3% for both periods, reflecting pricing stability and cost discipline as increases in agent-related commissions and cost of revenue scale proportionately with revenue growth. Technology and development expenses were $1.8 million for the third quarter of 2025 compared to $1.7 million for the same period in 2024. The $100,000 increase reflects continued investment in our technology platforms, including new capabilities within intelliAgent and enhancements to our Elevate program. General and administrative expenses totaled $8.3 million for the third quarter of 2025 compared to $8.1 million for the same period in 2024. The $200,000 increase reflects modest increases in personnel and administrative support costs, while the company continued to discipline spending across the organization. Marketing expenses were $1 million for the third quarter of 2025 compared to $1.4 million for the same period in 2024, primarily due to a shift towards more efficient conversion-focused marketing channels and reduced broad-based advertising spend. Our GAAP net loss for the third quarter of 2025 was $4.4 million or $0.15 per share compared to a net loss of $8.1 million or $0.40 per share for the third quarter of 2024. The improvement in net loss was primarily driven by higher revenue and operating leverage in the current period as well as the absence of approximately $3.1 million in litigation contingency expense recognized in the prior year quarter, partially offset by $2 million in litigation contingency expense recognized in third quarter of 2025. Adjusted EBITDA, a non-GAAP measure, was $6,000 for the third quarter of 2025 compared to a negative $1.4 million for the same period in 2024. The improvement was primarily driven by higher revenue and improved operating leverage as the increase in transaction volume resulted in a proportionate increase in gross profit. In addition, lower marketing spend and continued cost discipline contributed to the improvement in adjusted EBITDA year-over-year. I will now walk through the results of our individual business segments in more detail. We will start with brokerage. Revenue for the Brokerage segment was $109.2 million for the third quarter of 2025, an increase of 39% compared to the prior period, primarily driven by the addition of My Home Group, which was acquired in November 2024 and contributed significantly to transaction volume and commission income. The increase also reflects modest organic growth from our existing agent base supported by expanded market coverage. We ended the quarter with 15,371 agent licenses, an increase of 24.1% compared to 12,383 in the same period of 2024, driven primarily by the addition of agents from My Home Group as well as continued success in attracting and retaining agents through competitive commission structures, enhanced support services and targeted recruitment efforts. Gross profit margin for the Brokerage segment was 6% for the third quarter of 2025, consistent with the prior year period as higher transaction volumes from the addition of My Home Group and modest organic growth were offset by a proportional increase in commission expense and other agent-related costs, resulting in stable margins year-over-year. Adjusted EBITDA for the Brokerage segment increased by 100% to $1.6 million for the third quarter of 2025, an increase of approximately $800,000 compared to the same period in 2024, primarily driven by higher revenue and ongoing cost management initiatives. Our mortgage business, the revenue for the mortgage segment was $3.5 million for the third quarter of 2025 compared to $2.9 million in the prior year period. The increase was primarily due to higher funded loan volume supported by a more favorable interest rate environment and increased buyer activity. Adjusted EBITDA for the mortgage segment was $161,000 for the third quarter of 2025 compared to a loss of $319,000 in the same period of 2024. The improvement was primarily driven by higher funded loan volume and improved operating leverage as increased revenue flowed through while fixed operating costs remained relatively consistent year-over-year. Next, our Title business. Verus Title revenue was $1.8 million for the third quarter of 2025, an increase of 28.6% compared to $1.4 million in the same period of 2024, driven by strong organic growth from increased order volumes, the expansion of relationships with existing agents and agent workovers. Additionally, contributions came from targeted marketing initiatives and process enhancement that improved closing efficiency and capacity. Adjusted EBITDA for Verus Title was a loss of $191,000 for the third quarter of 2025 compared to a loss of $92,000 in the same period of 2024. Despite a 28.6% increase in revenue year-over-year, profitability declined due to higher operating expenses associated with supporting transaction growth, including increased personnel, onboarding costs and other investments to expand capacity. Our technology business, third-party revenue was $829,000 for the third quarter of 2025 compared to $785,000 for the same period in 2024. The increase primarily reflects the initial recognition of licensing fees from external users of our data and technology platform, representing the first quarter in which these third-party arrangements contributed to revenue. Adjusted EBITDA was $488,000 for the third quarter of 2025 compared to $152,000 in the same period of 2024. The improvement was primarily driven by the addition of a new third-party licensing revenue stream as well as improved operating leverage relative to total revenue. Focusing on our balance sheet and capital allocation, we continue to actively manage our balance sheet in light of current real estate market conditions. We ended the quarter with $9.8 million in cash, which includes $6.5 million in proceeds received in September 2025 from our public stock offering. No share repurchases were made during the first 9 months of 2025 under the company's authorized stock repurchase program. That concludes my remarks on the financial results. I will now hand it back to Marco to share more on our strategic initiatives and outlook. Marco Fregenal: Thank you, Daniel. As Daniel highlighted, our financial performance this quarter reflects both the strength of our core business and the early benefits of our strategic initiatives. I would like to take a few minutes to discuss the broader housing market and our outlook for 2026. The residential real estate market is beginning to show early signs of recovery. One encouraging indicator is the narrowing spread between the 10-year treasury yield and the 30-year mortgage rate, which is currently around 205 basis points. Combined with the growing expectations of lower Federal Reserve rates and modest declines in home prices in some states, these factors point towards an improved affordability and a gradual reopening of the housing market. We're also encouraged by the potential agreement and reopening of the government. Although thus far, we have not seen a significant negative effect on the real estate industry, we believe that a prolonged government shown would have a negative effect in Q4. As affordability improves, we expect programs like START and Real Estate and Elevate to gain significant momentum. Elevate in particular, is a differentiator, helping agents boost productivity through integrated marketing, lead generation and support services that tie directly into our mortgage title and technology ecosystems. This program is already driving higher attach rates and incremental revenue across multiple lines of businesses. Recent larger acquisitions in the market have created some uncertainty within the brokerage landscape and highlight the ongoing trend towards consolidation. The environment reinforces the need for brokerages to deliver exceptional value and elite service, areas where Fathom continues to lead through our agent-centric model and integrated platform. We anticipate that small brokerages will explore opportunities to merge with or partner with larger firms. Now looking ahead in 2026, Fathom is well positioned to capitalize on these trends. Our priorities remain clear. First, to continue diversifying revenue streams with higher-margin products and services, to expand flagship programs like Elevate and START to strengthen attach rates across mortgage and title and finally, to license our technology platform to small brokerages and teams to scale efficiently and profitably. These initiatives, combined with our commitment to disciplined execution are expected to drive further margin expansion and position us to achieve operational cash flow breakeven by second quarter of 2026. In short, momentum is building across our platform, and we are entering 2026 with confidence and focus. We see tremendous opportunity to build on our foundation, deepen agent engagement and create long-term value for our shareholders. Before we open the line for questions, I want to express my sincere gratitude to our team and partners for their relentless focus, to our agents for their trust and commitment and to our shareholders for their continued support and their continued confidence in our vision. With that, operator, we're ready to take questions. Operator: [Operator Instructions] And our first question will come from Dillon Heslin with ROTH Capital Partners. Dillon Heslin: To start on intelliAgent licensing, you talked about 18,000 brokerages you identified, I think. Could you sort of go into a bit more detail on your go-to-market strategy on that? How many are you potentially in talks with or have approached you? Marco Fregenal: Yes, sure. Thank you, Dale, for your question. Yes, there are approximately about 18,000 brokers between 25 and 500 agents. And we already -- our go-to-market strategy really to start -- we already built several different relationships across the industry over the last 4 or 5 years. We probably have relationship with a few hundred small brokers already. Also through our partnership with LiveBy. LiveBy has approximately another 200 brokerages as customers. So when you combine all of this, you're looking at 300 or 400 small brokers that we have a relationship with. So we'll begin with those, and then we'll continue marketing to all 18,000 and demonstrating our value proposition to them as we have done for My Home Group and Sovereign Partners as well. So -- and we'll begin that -- we already have begun that in terms of discussions, but that will accelerate in Q1 of next year. Dillon Heslin: And just as a follow-up, could you comment on attach rates this quarter? And then with START Real Estate, they seem to have quite high attach rates. What do you think is the possibility of -- obviously, you're trying to expand that, but keep the attach rates where they're at on that business as you take it into more states and just scale? Marco Fregenal: Yes. So START is really a very interesting business. Randy, the owner, really created a process in which really holds the hand of a first-time buyer. For people who never bought a home, buying your first home is a rather complex process. My son just bought his -- my younger son just bought his first home and he even told me that I can measure how complex this is. So it is a complex process. And Randy has created a really hands-on operational process that does that. His attach rate is over 70%. He currently is in Colorado. We already are expanding into 3 other states. And we believe that we'll be able to expand to every state in the country. We do anticipate attach rates to continue to be that high. And we've seen that because he already started in Utah, and he's already seeing that attach rate because really is a byproduct of the process that he created. And so he's -- we're going to basically going to replicate that across the country, and that's really his special sauce to run this program. So to answer your question, we do anticipate significantly growing the program, and we do anticipate to have attach rates over 70%. Having said that, we continue to improve the attach rate -- attachment rate for ELG across the country as well. And about 50% of the ELG business coming from Fathom. And as ELG continues to grow, we continue to see that. And same thing with Verus Title. So I think the combination of what we have done with ELG and Verus, combined with START Realty, I think overall, we'll see attachment rates continue to grow next year and beyond. Operator: And at this time, this concludes the question-and-answer session. Thank you for joining Fathom's third quarter earnings call. You may now disconnect.
Operator: Welcome to Intrusion Inc.'s Third Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this conference call is being recorded. An audio replay of the conference call will be available on the company's website within a few hours after this call. I would now like to turn the call over to Josh Carroll with Investor Relations. Joshua Carroll: Thank you, and welcome. Joining me today are Tony Scott, President and Chief Executive Officer; and Kimberly Pinson, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to Tony, I would like to remind everyone that statements made during this conference call relate to the company's expected future performance, future business prospects, future events or may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Please refer to our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today's conference call. Any forward-looking statements that we make on this call are based upon information that we believe as of today and we undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. During the call, we may use non-GAAP measures if we believe it is useful to investors or if we believe it will help investors better understand our performance or business trends. With that, let me now turn the call over to Tony for a few opening remarks. Anthony Scott: Thank you, Josh, and good afternoon, and thank you all for joining us today. I'm pleased to report that during the third quarter of 2025 we continue our path towards achieving our goal of creating sustainable growth and long-term profitability. And a few of our highlights of our progress in Q3 include our sixth consecutive quarter of sequential topline growth, demonstrating consistent execution and increasing demand for our products, continued near 0 customer churn, which we view as a testament to the value of our offerings, and the expansion of our Shield technology offering through the launch of Shield Cloud on the AWS marketplace. I'd also highlight the ongoing rollout of our critical infrastructure solutions, reinforcing the demand that we see to help protect these essential assets from cyber threats. And finally, the strong momentum we are seeing from our solution partner, PortNexus, as they continue to deploy the MyFlare Alert platform. Now none of what we achieved this quarter would be possible without our incredible team, and I'm deeply grateful for the passion and the commitment our employees show every day in serving our customers and advancing our mission. I'd like to provide some additional context on a few of these highlights, all of which are aimed at positioning Intrusion for sustained growth. First, we're really excited about the launch of our Shield Cloud offering on the AWS marketplace, which we believe will help drive long-term growth for our business. By making Shield Cloud available on the AWS marketplace, we're not only expanding the opportunity for customers to access our Shield technology, but we're also positioning our cybersecurity engine directly where innovation is taking place. Although still in the early stages, we're already seeing encouraging traction with new potential customers, which we believe will begin contributing positively to our financial results in the fourth quarter and throughout fiscal year 2026. In addition to AWS, we're also preparing for the launch of our Shield Cloud offering on Microsoft's Azure Cloud platform later this quarter or early in the first quarter of 2026. This launch will further expand our ability to reach new potential customers. Next, I wanted to mention that we're continuing to make progress with the rollout and adoption of our Shield critical infrastructure offering. And at the end of the third quarter, we shipped over 230 units of this critical infrastructure device as a part of our previously announced contract with the Department of Defense. And as we've previously noted, this represents a promising opportunity for Intrusion, driven by the growing need to protect critical infrastructure from evolving cyber threats. We're actively pursuing additional contracts in the private sector as well at both the federal, state and local government levels, and we remain optimistic about pursuing new agreements in the near future. As for our partnership with PortNexus, we're continuing to see strong demand for Shield endpoint that's embedded within their MyFlare solution. And that solution provides enhanced security for education and law enforcement customer end points. As some of you may have heard me say during recent discussions, the sales cycle for this solution has been one of the shortest I've ever seen. The demand for this solution, especially among school districts, is strong, and we anticipate that we will see further adoption of this offering in coming quarters. Now briefly on to our financials for the quarter. Total revenues for the third quarter were $2.0 million, representing a 5% increase compared to the previous quarter and a 31% increase on a year-over-year basis. This was largely driven by the contract expansion with the Department of Defense that we previously discussed. And our operating expenses increased modestly this quarter, primarily reflecting the continued strategic investments that we're making in the business to drive growth. As we've noted in the past, we remain committed to disciplined spending, as we invest to support our growth over the coming quarters. Now before I turn the call over to Kim, I'd like to address the current government shutdown. As you all know, the current government shutdown has impacted businesses across the board. For Intrusion, we've not yet seen any meaningful effect on our business. And it looks like the situation is on a path to resolution, thankfully. But most of the government contract conversations are still occurring. And we expect that we will be able to see additional government contracts once this situation has been resolved in Washington. In the meantime, we're continuing to see our pipeline of nongovernment opportunities expand, and we remain excited about the future here at Intrusion, as the demand for our products continues to grow. And with that, I'd now like to turn the call over to Kim for a more detailed review of our third quarter financials. Kim? Kimberly Pinson: Thanks, Tony, and good afternoon, everyone. Third quarter 2025 revenue was $2 million, up 5% sequentially and 31% year-over-year. Growth was driven by expansion of work performed under the contract with the U.S. Department of Defense, which utilizes both Shield technology and consulting services. Consulting revenue of $1.5 million is up $0.1 million sequentially and $0.4 million year-over-year. Shield revenues in the third quarter totaled $0.5 million, which was relatively flat sequentially but up approximately $0.1 million year-over-year. The increase in Shield revenue primarily reflects the work performed under the previously noted DoD contract work. As Tony mentioned, we are continuing to see strong demand for our services with both governmental and commercial customers and anticipated deeper penetration in both sectors, which will result in further changes to our customer mix. Third quarter gross profit margin was 77%, down 58 basis points year-over-year, which is consistent with expected variability based on product and service mix. Operating expenses in the third quarter of 2025 totaled $3.6 million, an increase of $0.1 million sequentially and $0.4 million year-over-year. The increase sequentially was largely driven by an increase in sales and marketing expense related to increased participation in trade shows and programs to generate brand awareness and concise product marketing messaging. We may continue to further increase our investment in both product development and sales and marketing to accelerate the growth of our customer base, which will result in higher operating expenses. The increase over the prior year period of $0.4 million is primarily due to higher share-based compensation from equity grants made in the first quarter, timing of merit increases and minor changes to staffing. Net loss for the third quarter of 2025 was $2.1 million or $0.10 per share compared to a net loss of $2.1 million for the third quarter of 2024. Turning to the balance sheet. From a liquidity perspective, on September 30, 2025, we had cash and cash equivalents of $2.5 million and short-term investments in U.S. treasuries of $2 million. Subsequent to quarter end, we received $3 million in cash related to the DoD contract extension, which increased our cash position, inclusive of short-term investments to $7.5 million, which we believe is sufficient to fund operations through the remainder of 2025 and into early 2026. With that, I'd now like to turn the call back over to Tony for a few closing comments. Tony? Anthony Scott: Thank you, Kim. And I think the third quarter was another step in the right direction for Intrusion as we are continuing to make great progress towards achieving our goal of generating sustainable growth and long-term profitability. And while we're proud of the progress we've made, we're not satisfied with our overall financial results. We know there's still more work to do, and we're confident that we can and will deliver stronger performance over time. Achieving this will require continued discipline and time, but we believe our ongoing investments in the business, the strength of our expanding pipeline and the improved engagement we're seeing with both customers and partners, has positioned us well to drive enhanced financial results. Now this concludes our prepared remarks. And I'll now turn the call over to the operator for Q&A. Operator: [Operator Instructions] The first question comes from Scott Buck with H.C. Wainright. Scott Buck: Tony, I think you touched on it a little bit in the prepared remarks, but I wanted to kind of dig in a little bit deeper on the infrastructure work with the DoD. When do you get far enough along the process or prove yourself enough that maybe you open the door to some additional work of a similar nature with them? Anthony Scott: Already in progress. So with this first project, it's opened the doors for us to have conversations about deployment in other locations. Right now, we're in a one island location in the Pac Rim, but there's lots of islands there. There's also domestic opportunities for this from a government perspective and then there's, we think, even more opportunities from a private sector or a commercial perspective. So I'm particularly excited about this product. These are -- like we've seen in this particular case, it's a big dollar sale when it happens and we think we have an opportunity for many more of these during not only the next quarter, but next year. So it's a big area, a big opportunity for us. Now we've got to close them. We got to get government funding squared away, which as we've all experienced, is a daily up and down sort of situation. But I think the potential is big for this product. It is our most successful product at this particular point. So we're going to bet on it and get all we can. Scott Buck: No, that's great to hear. Now Kim, do you need to add heads or any kind of other supports to kind of press on those opportunities? Kimberly Pinson: No. There's a fairly small capital investment because there is a device that goes with this infrastructure monitoring. But otherwise, we don't expect or anticipate having to add heads or increase our operating expenses to any large degree. Scott Buck: All right. Perfect. And then, Tony, I want to ask -- I know it hasn't been very long, right? But I'm curious what the experience has been like so far on AWS where you may be seeing some interest and any kind of initial feedback you guys are getting, I think, would be helpful. Anthony Scott: Yes. It's -- we've gone through -- we've actually been in AWS for the bulk of the third quarter and now into the fourth quarter. And we've already done a couple of updates to make it easier to configure and install. And we have one more big update coming shortly that I think will make it even easier. And this is all based on feedback we've gotten from our initial beta customers and so on. And I think with these changes, it will significantly make it easier for people to adopt. So a lot of excitement around it. The numbers aren't huge at the moment, but we're on our plan. We're starting to do the marketing and advertising work that I think we've talked about on prior calls. And our expectation is that, that's going to pay off. And the lessons we've learned from this will also apply as we get into the Azure marketplace on the Microsoft platform. And so I'm expecting that the acceleration there can go even quicker than what we've experienced in the AWS environment. But I'm very positive about it. Scott Buck: Good. No, that makes sense. And on Azure, it sounds like it could be end of this quarter it could beginning of '26. What steps do you have left there to get up and active? Anthony Scott: Well, we created a new kind of gold from scratch variant of Shield for the cloud that makes it much easier to deploy in these virtual environments. And that's the one that we're going to target for Azure as well. So easier for -- a better build for us, easier for the customer to adopt. The current AWS 1 has -- is coupled with pfSense, the open source firewall and the new versions that will go into AWS shortly and also Azure are just Shield and not coupled to pfSense, and we think that's going to attract a broader set of customers. We'll still offer the pfSense version in AWS. So we'll actually have two properties in AWS, one with pfSense and one stand-alone. And probably in Azure... Scott Buck: Does that change the way you price it, Tony? Anthony Scott: Pardon me? Does it change the pricing? Scott Buck: Does that change the way you price it? Yes. Anthony Scott: Not a whole lot because the pfSense is open source. So there's no royalties or anything like that associated with it. But what we heard from customers is, some of them want choice around which firewall they use. And while we like our technology, they had a different choice for firewall than what we chose, which was pfSense. So this will give customers broader choice. If they don't have a firewall and want one and like open source, they can use that. If they want to choose something else but still want our technology, they can have that choice as well. Scott Buck: Congrats on the progress this quarter. Operator: The next question comes from Ed Woo with Ascendiant Capital. Edward Woo: Congratulations on the progress. My question is on your channel partner, PortNexus. What are you able to do there that is able to give you the successes? And is this able to be translated to other channel partners? Anthony Scott: Yes. So what we're providing to PortNexus is endpoint security for their solution that's deployed in classrooms and other public sort of places. And that endpoint security is important so that the devices are effectively tamper-proof and safe from hacking and so on. I'm excited about it because as we've done trade shows with PortNexus and school administrators come by and see the demo and understand the capability, they get pretty excited. And as I kind of hinted the sales cycle, it looks like it's pretty short. The feedback is I want this now kind of thing, which with other solutions, there's a much longer conversation that ordinarily takes place. So we're in a couple of school districts already, and I think as experience with this product grows, the excitement is going to only accelerate. We're attending all the right trade shows with PortNexus, but also word of mouth is beginning to get out that this is a pretty cool solution. So at the end of the day, we've got great expectations for this. Edward Woo: Can you translate these opportunities to other channel partners? Or is this very specific just to PortNexus? Anthony Scott: Well, we can certainly port it to or extend it to other endpoint kinds of solutions where network security is of paramount importance, and we are looking for those opportunities. I'd say, the success with PortNexus will certainly be a good indicator for other potential partners as well. And so yes, I think it can extend and we are looking for those kinds of opportunities. Edward Woo: Great. And my last question is, as you rolled out in AWS and then also on the Azure platform soon, do you care where your customer buys it? Is there any difference in profitability and R&D costs? Anthony Scott: No impact on R&D costs. We're only at this point, extending it to U.S. customers. We're not in the global marketplaces. So that kind of, by definition, restricts where it's for sale, but it doesn't really impact our costs one way or the other. Edward Woo: And you don't really care where your customer gets it because the profitability margins are about the same? Anthony Scott: Yes. Correct. Operator: [Operator Instructions] The next question comes from Howard Brous with Wellington Shields. Howard Brous: Tony, congratulations on the increase quarter-over-quarter-over-quarter. I have a couple of questions. Can you discuss the revenue opportunity with OT Defender as an example? Anthony Scott: I can talk about it generally. I mean, I think the nice thing about these is as compared to our Shield or PortNexus deals that tend to be smaller, these tend to be bigger sales. $100,000, $200,000 above kind of opportunities. And so as you get one of these, there's a more meaningful impact in terms of revenue and overall sales. So obviously, that's important in terms of the revenue opportunity. The second thing is it's pretty widely recognized at this point that the OT environment is probably the biggest area of underinvestment from cybersecurity perspective. And it also happens to be one of the biggest targets for nation state actors who in anticipation of some sort of aggressive activity would love to take out water systems and the electrical grid and communication systems and the things that are necessary to sustain life in most places around the world. A lot of the environment in these OT spaces is old gear that over time got hooked up to networks, but we're never ever designed to fend off the kinds of attacks and threats that are just a part of our modern day world. And the reality is we've -- as a nation and even internationally, we've been a little slow to wake up to this aspect of cybersecurity, it's particular kind of threat. So we think the market opportunities are really big. And we think we have a very cost-effective and now proven solution to this particular problem, and we're going to do everything we can to let everybody know what we've got and what its capabilities are. So I think I'm pretty bullish on this. It's going to take work. But I'm excited not just from a revenue perspective for intrusion, but I'm excited for the protection, I think this can bring to some very vulnerable environments in our cities and states and critical infrastructure generally. And then as I mentioned on the call, it also applies to commercial environment, shop floors and other manufacturing environments and so on. And all of those are pretty vulnerable at this particular point. If you can disrupt manufacturing or disrupt the production of goods, that's got a pretty serious economic impact. And I think our technology is good to help protect those environments as well. So a pretty broad-based market or surface for us to go after. Howard Brous: So the second question, the same question with revenue opportunity on PortNexus school safety offering, which I -- from my understanding, should be critical with every school in the country. Anthony Scott: Yes. That one is probably not as big as the critical infrastructure stuff. But this is one of those things where once you see it, you can't unsee it. And as we've experienced the trade shows, the school administrators love the simplicity of it and also the sort of capability that the PortNexus solution provides. And the critical thing there is visibility in that first 1 to 5 minutes of an incident where you have really good and better situational awareness than you do with any other solution that's out there. And the first responders call that the critical first few minutes. If you can understand what's going on and have situational awareness, you can have a much better response, and that's what the PortNexus solution provides. So we're happy to be a part of that clearly. And I think just like you've seen police departments all over have body-worn cameras. I think ultimately, this is going to be a required thing in every school classroom or at least public school classroom in the country because it's just such a good solution. So we're happy to partner with PortNexus on that journey. Howard Brous: So my last question -- well, let me come back to the PortNexus. Any sense for 2026 of a revenue opportunity? Anthony Scott: I'd be wildly guessing at this point, Howard, but our eyes are towards up and onward from a revenue perspective. So we're, I think, genuinely excited about the opportunity. Clearly, we've got to execute. Clearly, we've got to get in front of customers, make the case and go forward. But I think we have all the right things in our briefcase to go sell, and we're as excited as I've ever been about it. Howard Brous: My last question, then one comment afterwards Shield Cloud revenue opportunity? Anthony Scott: Again, as I said on the call, that's the place where innovation is happening. And so the growth in small, medium business, they've moved to the cloud and are moving to the cloud, and that's where the economy is growing the fastest. It's probably the biggest opportunity from a tech standpoint for that part of the market. And we'll see. Again, we've got to execute. We've got to continue to work our marketing plan and demand gen plan, but we've seen a lot of other companies do it. And we're going to be a fast follower in terms of all of the things that we've seen work in that journey. So hard to exactly predict, but we have, I would say, great expectations. Howard Brous: At what level -- last question, what level of revenue per contract, would you make a public announcement $100,000, $1 million? Anthony Scott: It's not so much like -- well, it's not so much -- in some cases, Howard, it's not the level of the dollar amount that would determine whether we can make an announcement. We actually signed some deals in Q3 that didn't produce revenue in Q3, but it will produce revenue in Q4, that by contract, we were prohibited from announcing. So the only way you'll see them is when revenue shows up after the end of a quarter. And that's not uncommon in the cybersecurity space. We'll announce whatever we can when we can, if it's significant. I'm not going to announce a $5,000 deal or a $10,000 deal or something like that. But if it's $100,000 or $400,000 or $1 million, I'll certainly announce it if I'm allowed to. Operator: The next question comes from Jerry Yanowitz with -- he is a private investor. Unknown Attendee: Tony, do you believe your intellectual property alone could be worth multiples of your current stock price and I'm just looking for a simple yes or no answer. Anthony Scott: Yes. Unknown Attendee: And based on your knowledge in the cybersecurity market, do you believe your products could integrate well with a larger cybersecurities company suite of products. Yes or no? Anthony Scott: Yes. Yes, yes, I do. It may not always be the obvious first names that come to mind. But the answer is yes. It's I think obvious that, that could be very interesting and exciting for us. Operator: At this time, there are no other questions in the queue. I'll turn the call back over to our host, Mr. Tony Scott, for any closing remarks. Anthony Scott: Well, thankfully, the -- it looks like the government shutdown is close to coming to an end. And I think we all breathe a sigh of relief in that regard. We're looking forward to working with our government partners as we've talked about at some length already today. This is the opportunity that's in front of us right now is doing better protection for critical infrastructure, whether it's public sector or private sector, it's the biggest cybersecurity opportunity, I think there is out there. And so with the shutdown behind us, I think it opens the door for us to move ahead. We'll let you know is when we can and as soon as we can when anything has developed. But as I said earlier, I'm pretty excited about the opportunity and look forward to having this call with you for the next quarter in our annual results. So thanks, everybody, for your patience. We're working hard. We've got a great team on this, and I think we're making great progress. So talk to you all soon. Thanks. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and welcome to the Upexi Fiscal First Quarter 2026 Financial Results Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Valter Pinto, Managing Director at KCSA Strategic Communications. Please go ahead. Valter Pinto: Thank you, operator. Good evening, and welcome, everyone, to the Upexi Fiscal First Quarter 2026 Financial Results Conference Call. I'm joined today by Allan Marshall, Chief Executive Officer; Andrew Norstrud, Chief Financial Officer; and Brian Rudick, Chief Strategy Officer. Before we begin, I'm going to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of risks, uncertainties and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to the press release issued this evening and filed with the SEC on Form 8-K, as well as the company's reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless otherwise required by law. In addition, during the course of the call, we may refer to non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States, and they may be different from non-GAAP financial measures used by other companies. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in our earnings release issued this evening, unless otherwise noted. I'd now like to turn the call over to Upexi's CEO, Allan Marshall. Allan Marshall: Thank you, Valter, and welcome, everyone, to our first quarter 2026 earnings conference call. I couldn't be more excited to hold our first earnings call since adopting the Solana Treasury strategy. It has been truly transformational for the company, and as such, I wanted to comment on our past since inception. As you know, we primarily were a consumer Amazon brand owner. As the Amazon business became increasingly more difficult we started to think about the best ways to create shareholder value going forward. After a thorough analysis of many options, we made a strategic decision to invest our time and resources into digital assets. This was due to 2 reasons. The first was a new found openness towards crypto in the U.S., mainly due to the change in administration and its various regulatory bodies. Put simply, the U.S. administration went from a headwind to a tailwind for digital assets and which we believe will accelerate innovation, adoption and ultimately affect prices moving upwards. Second was a greater appreciation for the value MicroStrategies has created for shareholders. Indeed, it has been the best performing stock in the U.S. since adopting a Bitcoin treasury strategy in 2020. And more importantly, it has more than doubled the return of Bitcoin with only minimal leverage, meaning its capital markets activities are creating tremendous value for shareholders. We first publicly announced a pivot towards digital assets in February. And as we honed our strategy, we settled in on one built around Solana. We'll cover the rationale in more detail later in the call, but the decision on -- to focus on Solana was simple. From an asset perspective, we believe strongly that Solana has the best chance to be the end game winning high-performance blockchain and particularly so as the new rails for global finance. Second, from a treasury perspective, Solana offers additional ways to create value for shareholders via activities like staking and purchasing of discounted locked SOL. Our plan was simple: close on a large scale capital raise, employ and improved the proven capital markets playbook from MicroStrategies where issuing equity above book value is by definition accretive. Then innovate on MicroStrategy's model by staking our Solana to generate yield to turn the treasury into a cash flowing asset and also buy on locked discounted SOL for built-in shareholder gains. We did just that in April, successfully completing a $100 million equity private placement in what we believe was the first large-scale equity pipe for an Altcoin strategy. We followed it up with a $200 million raise in July, which included an innovative in-kind convertible note issuance, offering with significant benefits for both investors and the company. And again, we believe that to be an industry first. Each time we deploy the funds into spot and locked SOL at attractive entry prices, sticking nearly all of it to generate cash flow. The company currently owns $2.1 million SOL valued in excess of $327 million. While raising capital and deploying the capital in a systematic way, we remain hyper focused on both external visibility and intelligent capital issuance. Success in raising capital and deploying it are only part of a successful public strategy. We have put forth an enormous effort to build our online and traditional finance following and to educate the market on our vision and the investment opportunity. We are proud to have been quoted in over 50 news articles since launching the strategy, participating in multiple leading podcasts each month, establishing an advisory committee with Arthur Hayes, Jon Najarian and SOL Big Brain, and attended or are scheduled to attend over 20 mostly traditional finance-oriented conferences and have conducted hundreds of individual investor meetings. As previously stated, we have remained steadfast on utilizing the capital markets to create value for shareholders. Notably, our July raise not only materially increased our Solana per share, but also led to multiple expansion as we demonstrated our ability to raise funds in an accretive fashion. On the financial side, our Consumer Brand business continues to perform as expected. Most importantly, our stacking revenue is uniquely providing a huge boost to company revenue. Our fiscal Q1, we generated over $6 million in digital asset revenue, and we are currently adding over $75,000 a day. As we look ahead, Q2 will benefit from having all of 2.1 million SOL stake for the future quarter. I'll now turn the call over to Brian Rudick, Chief Strategy Officer. Brian Rudick: Thanks, Allan, and hello, everyone. The biggest determinant of any treasury company's performance will be that of its underlying token. Here, we are supremely confident in and feel very fortunate to be underpinned by Solana. We chose Solana for 3 reasons. First, it's the first second-generation smart contract blockchain. This means that it benefits from having best-in-class technology like parallel transaction processing like modern computers do, but also from strong network effects having launched in 2020. Second, Solana has a vibrant and growing ecosystem of users, developers and decentralized applications. You can really build anything on Solana from decentralized finance to deep into stable coins tokenization, gaming, art, social AI agents, meme coins and more. And third, Solana is already putting up the best metrics of any blockchain, often beating out all of them combined. These metrics include daily active users, decentralized application revenues and decentralized exchange volumes. But what gets me so excited is the potential for Solana to revolutionize the world's antiquated financial infrastructure. Indeed, current financial rails, for example, ACH and the credit card issuer networks were created 50-plus years ago, and even fintech is a front-end wrapper that uses these antiquated rails on the back end. However, blockchain technology allows us to entirely reimagine these antiquated rails and to utilize things like stable coins and tokenization to remove rent extracting intermediaries and democratize value exchange. Tangibly, this means huge cost savings and speed benefits, not to mention improvements in settlement times, transparency, composability, investor access and much more. And Solana is purpose built for exactly this in what it calls Internet capital markets. Its goal is to have all of the world's assets trading on the same liquidity venue, accessible 24/7 to anyone with the Internet connection. And institutions are taking note from PayPal to Societe Generale, Fiserv, Western Union and others. Leading financial companies are building stable coins on Solana due to its industry-leading speed, cost and reliability. Tokenization infrastructure firms like Securitize, Superstate and R3 are bringing real-world assets on chain from leading asset managers like BlackRock, VanEck, Apollo, Franklin Templeton, Hamilton Lane and others. And Visa is using Solana for its USBC stable coin merchant settlement program for cross-border payments. Finance is moving on to the blockchain, and it's happening on Solana. We are in the very early innings, but this transformation is absolutely happening and with Solana front and center. Lastly, I'd point out that we have what I consider to be the mother of all catalysts that can drastically accelerate this transformation in the U.S. passing comprehensive digital asset legislation. Indeed, a lack of clear rules in the U.S. has, in my opinion, always been the biggest item holding crypto back. Institutions have thus far only dabbled in digital assets and blockchain technology and have been loath to materially adopt the technology when it comes with heightened legal and regulatory risks. However, if and when the U.S. passes this market structure bill called the Clarity Act, which is currently being worked on in the Senate with high bipartisan support, institutions will be forced to jump in, in a big way. Otherwise, they will be disintermediated by those who do. And it's big pack and big finance that have billions of customers built in trust, billions of dollars for investment in the top developers. Imagine Google adding a built-in crypto wallet to its Chrome browser or Amazon integrating stable coin payments. We just may be on the precipice of onboarding the masses, leading to a step change in digital asset innovation, adoption and usage. Solana and Upexi are well positioned to benefit. And with that, I'll turn it over to our Chief Financial Officer, Andrew Norstrud. Andrew Norstrud: Thank you, Brian. Total revenue increased by $4.9 million to $9.2 million for the quarter. Net income was $66.7 million for the quarter, and earnings per share was $1.21 for the quarter. All of these increases were related to the Solana treasury performance. Solana tokens increased during the quarter by approximately 1,322,000 tokens. This increase was from both liquid and locked Solana purchases and swaps with approximately $181 million in noncash Solana purchases. The company has purchased approximately 2,029,100 tokens through direct purchases and swap transactions. The average price of Solana tokens purchased is $155.57, 31,347 of the quarter's increased tokens were from the $6.1 million in staking revenue generated from the treasury. In total, the treasury has generated approximately $7.1 million and 37,742 Solana tokens since inception. Unrealized gains of approximately $78 million was recognized during the quarter and had significant impact to the reported financials. Management understands the volatility of the digital assets and we'll continue to focus on growing the number of Solana tokens held in the treasury in a way that will maximize the return for our shareholders. And now I'll turn it the call back over to Allan for concluding remarks. Allan Marshall: Thanks, Andrew. Upexi is a truly differentiated treasury company with many advantages. We have a differentiated management team that is more traditional finance rather than crypto oriented. I founded what is now New York Stock Exchange listed XPO Logistics, and Andrew was our CFO at XPO and has been a public CFO for decades. Brian spent years at the most prestigious hedge funds managing hundreds of millions of dollars. This is relevant because at the end of the day, this is a capital market exercise, and we believe our experience will be paramount to our future success. We led the innovation to create what is now the DAT industry and look to innovate in the future to stay ahead of peers. With the first large-scale equity raise for altcoin treasury and the first in-kind convertible note, we have set Upexi on trajectory for a very bright future. We do several things to be more in line with traditional finance to differentiate our strategy. First, we only take on prudent amount of credit risk leverage and limit it to 20%. We do not partake an aggressive on chain trading that increased our contract, liquidation and legal regulatory risk. Lastly, we only use qualified custodians and top validators and diversify amongst them for operational risk management and best practices. We believe this strategy will not only position us well for any market environment, but also will appeal to crypto and traditional investors alike. Finally, and again, quite uniquely, we have a proven ability to create value. We have increased adjusted SOL per share in SOL terms by 47% and in U.S. dollar terms by 82%. As a reminder, the former measures our ability to capture our 3 value accrual mechanisms and accretive issuances, staking income and purchases of discount on locked SOL tokens, while the latter also incorporates the price of Solana. We are in an advantaged position to win. We are underpinned by an end game winning asset with nearly unlimited upside and offering additional value accrual mechanisms in staking and discount on locked purchases. We have a differentiated management team with best-in-class capital markets expertise. We have a risk prudent strategy, positioning us for any market environment and resonating with investors of all kinds. Lastly, we have a proven track record of innovation and shareholder value creation. With that, I'll turn it over to the operator for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Brian Kinstlinger with Alliance Global Partners. Brian Kinstlinger: Great. The company has added a few high-profile crypto investors to the advisory committee, like you mentioned. So can you talk about the impact we're having on the company? And any recommendations the committee is making as we think about differentiation of DAT, for example, outside of SOL accumulation and yield. Is the committee recommending or is management thinking about ancillary revenue generating businesses? And if so, can you share any details. Allan Marshall: Thanks, Brian. So two parts. One is, so far, it's been a short amount of time we've been working with them, but we've gotten a lot of good feedback both on how we're presenting ourselves to the market, their opinions on SOL, the overall opinion on how we're positioning the company to communicate to both TEFI, I mean, traditional finance and also the crypto community. No one right now is talking about anything outside of Solana and revenue-generating outside of that, like we still believe as we get some clarity here going forward on regulatory changes that Solana is in line for in all of crypto or all of the top cryptos in line for a pretty big move. So we're going to continue with the strategy we have, like we've said to our investors and stay focused. We will try to maximize yield. And we have had internal discussions, but none of that's public yet. We're going to do the right thing to increase our yield for our investors as quickly as possible, and we always open to input from the people we bring on board and also the outside community we talk to. Brian Kinstlinger: Great. I have 2 more questions. The first 1 is, given you didn't have a full quarter of SOL holdings, can you tell us what your effective yield has been? And is there any way to enhance that? Or are you maximizing that already? Maybe any information on the yield would help? Allan Marshall: I can let Andrew answer that question. I will say, as we've been -- because we've been building it step by step, not everything is staked as quickly -- well, it's staked quickly, but as quickly as possible. And just moving things around and getting things set in like the risk-prudent factor, the way we manage it, Also, we're always working with different -- we've been working with different validators. We've been increasing the yield as it goes. So I think this is probably the baseline for us and it's going to go higher from here and especially since it's mostly all staked now that we have on board. So I can turn it over to Andrew, if he has a rate, but I'm not sure we've been able to blend it exactly just because of all the steps along the way, but Andrew? Andrew Norstrud: Yes, you're not going to be able to blend it yet. Next quarter will be a lot better. But just to add to Allan's note, we've got a program that we put in place to look at the various different validators to have them compete against each other on any fees or anything else that's being done. We've got some great partners with us on that side and continue to look at how to increase that yield, plus we've had some other opportunities to try and increase the yield higher than just the standard staking yield. So more and more of that will come out this next quarter as we kind of have everything under control and have some of these programs in place. So -- unfortunately, I can't give you an exact yield, but going forward, you'll be able to calculate a lot better next quarter. Allan Marshall: But to close that off, Brian, we definitely think this is kind of like the baseline for us, like this is the low end and it will continue to rise from here. Brian Kinstlinger: Okay. The last one, several of the DATs are trading below 1x, steep discounts, in fact. Thankfully Upexi is not. But I think investors are interested in management, in general, of DAT companies plans with capital markets, should Upexi face a deep discount. What -- how would you address that? Allan Marshall: We have plenty. I think Brian and I and Andrew have always said when -- if for some reason, we do trade at a discount, it's -- the model is just on top. Like we still believe that inevitably crypto yield, the crypto increases and the yield and us maximizing that and also keeping company expenses as low as possible and continuing to get better at that. We'll warrant a premium. So at those moments in time, I mean, the company does have plenty of options, right? It can turn its staking revenue into a buyback. It could actually buy back shares. There's plenty of ways to offset that. But what I want to stress like this is a longer game, right? Like we don't want to think about it as 1 quarter at a time. We really do believe even if there is some sort of crypto pullback, it's just a pause. And I'll let Brian chime in here a little bit because him and I have talked about this over -- with multiple investors and I'm sure he would like to add in something on this one. Brian Rudick: Yes. Thank you, Allan, and thank you, Brian. Yes, plus 1 on the capital market side of the equation, just being a bit on pause. I think that there's no better example than MicroStrategy. So 2024, it increased Bitcoin per share by 74%. In 2021, it was something like 47%. And then when it got into a bear market, and it did trade at a discount to NAV it still was able to increase Bitcoin per share, but it was something like mid-single digits. So it was just a bit on pause. Like Allan mentioned, there are things that we can do to compress any discount should 1 come to fruition. And importantly, we actually don't have to sell our SOL to do that. You could actually borrow some funds to repurchase your shares to compress any sort of discount. And then the last thing I'd say is like we make an 8% staking yield on almost our full treasury. And then on top of that, a lot of the SOL that we've bought is locked form, which when you put that discount into any sort of yield equivalent. It's nearly doubling that 8% staking yield. So all in, we're making this really nice return on our treasury and so while we are waiting to issue capital in this accretive fashion, we were able to increase our SOL per share at a very nice pace. Operator: [Operator Instructions] There are no further questions at this time. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, ladies and gentlemen, and welcome to Pixelworks, Inc's. Third Quarter 2025 Earnings Conference Call. I will be your operator for today's call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Brett Perry with Shelton Group Investor Relations. Please go ahead. Brett Perry: Thank you, Latif. Good afternoon, and thank you for joining today's conference call. With me today on the call are Pixelworks' President and CEO, Todd DeBonis; and Chief Financial Officer, Haley Aman. The purpose of today's conference call is to supplement the information provided in Pixelworks' press release issued earlier today announcing the company's financial results for the third quarter of 2025. Before we begin, I'd like to remind you that various remarks we make on this call, including those about projected future financial results, economic and market trends and competitive position constitute forward-looking statements. These forward-looking statements and all other statements made on this call that are not historical facts are subject to a number of risks and uncertainties that may cause actual results to differ materially. All forward-looking statements are based on the company's beliefs as of today, Tuesday, November 11, 2025. The company undertakes no obligation to update any such statements to reflect events or circumstances occurring after today. Please refer to today's press release, the company's annual report on Form 10-K for the year ended December 31, 2024, and subsequent SEC filings for a description of factors that could cause forward-looking statements to differ materially from actual results. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms, including gross margin, operating expenses, net loss and net loss per share. Non-GAAP measures exclude restructuring costs and stock-based compensation expense as well as the tax effect of the non-GAAP adjustments. The company uses these non-GAAP measures internally to assess its internal operating performance. We believe these measures -- we believe these non-GAAP measures provide a meaningful perspective on core operating results and underlying cash flow dynamics. We caution investors to consider these measures in addition to and not as a substitute for nor superior to, the company's consolidated financial results as presented in accordance with U.S. GAAP. Please note throughout the company's press release and management statements during this conference call, we refer to net loss attributable to Pixelworks, Inc. as simply net loss. Also note, on January 6, 2025, the company effected a 1-for-12 reverse stock split of the company's common stock and all shares of the company's common stock per share data and related information included in today's published condensed consolidated financial statements have been retroactively adjusted as though the reverse stock split had been affected prior to all periods presented. For additional details and reconciliations of GAAP to non-GAAP net loss and GAAP net loss to adjusted EBITDA, please refer to the company's press release issued earlier today. With that, it's now my pleasure to turn the call over to Pixelworks' CEO, Todd DeBonis, please go ahead. Todd DeBonis: Thank you, Brett. Good afternoon, and welcome to everyone on the phone and on the webcast. We appreciate you joining us for today's conference call. I'll start with a brief overview of the results for the quarter, and then I'll follow with the 2 primary objectives for today's call. The first is to review the background and rationale for the proposed transaction involving our Shanghai-based subsidiary. And second is to provide a preview of what the future Pixelworks will look like after the proposed transaction closes. With respect to results for the third quarter, both top and bottom line results were within our guidance. Revenue grew by 6% sequentially, and gross margin improved to approximately 50%, a little better than expected. We also realized continued benefits from our previous cost reduction actions with third quarter operating expenses decreasing sequentially and down $3.1 million year-over-year. Through a combination of our prior restructuring and ongoing cost reductions, we reduced cash burn from operations by more than 60% year-over-year to under $3 million in the third quarter. Turning to our Pixelworks Shanghai subsidiary and the proposed transaction. As background, our Shanghai-based subsidiary was formed in 2021, as part of a comprehensive realignment of the larger Pixelworks organization. This included restructuring our Shanghai-based subsidiary to serve as the center of operations for all of Pixelworks semiconductor business and then securing investment from China-centric investors as well as our Pixelworks Shanghai employees. More specifically, this business comprises all generations of our open market and codeveloped visual display processing ships, for both digital projector and the mobile markets. Today, the subsidiary represents a substantial amount of our operating revenue and expenses and also accounts for the majority of our employees. After several prior investment rounds in the subsidiary, Pixelworks ownership ended up at approximately 78%, which is where it is today. On October 15, 2025, we signed a definitive purchase agreement to sell all of Pixelworks, Inc's. ownership in the Pixelworks Shanghai subsidiary to a special purpose entity led by VeriSilicon. For those not familiar with this name, VeriSilicon is a well-established Chinese company that provides platform-based custom silicon services and semiconductor IP licensing services. Most participating on today's call are aware, however, I would like to emphasize that this proposed transaction did not come about suddenly nor without extensive deliberation and due diligence. The recently entered definitive agreement is the result of a thorough strategic review process launched in the latter part of 2024. And that started with the engagement of Morgan Stanley as an adviser to evaluate potential alternative ownership structures for the Shanghai subsidiary, in a large part due to inpatients, from the subsidiaries China-based investors, escalating geopolitical tensions and capital market constraints within China and after evaluating all serious interest in the subsidiary. The Board and I unanimously concluded that the currently proposed transaction was in the best interest of our shareholders. Although still subject to the approval by Pixelworks, Inc. shareholders as well as other customary closing conditions and after satisfying agreed upon and contractually reduced obligations to minority equity holders of the subsidiary, transaction costs and withholding taxes. The proposed transaction is expected to result in net cash proceeds to Pixelworks of between $50 million and $60 million upon closing. As outlined in my recent published letter to shareholders on November 4, the rationale for the proposed transaction is threefold. First, it unlocks significant value for shareholders while eliminating minority investor obligations, acknowledging the strategic and potential long-term value in our Pixelworks Shanghai subsidiary, this transaction captures the optimal realizable value in the current environment and allows the company to monetize a significant asset in the form of cash proceeds repatriated to the U.S. Second, it enables a renewed focus and expansion of core strengths, following a successful exit of the semiconductor hardware business, Pixelworks will be positioned as a global technology licensing business, specializing in cinematic visualization solutions. As an asset-light, IP-rich company in this space, the company will have competitive differentiation and compelling long-term growth potential. And third, it will achieve financial flexibility. The net cash proceeds from the transaction will significantly enhance the balance sheet. Pixelworks will have the flexibility to invest in growth opportunities support new and existing licensing initiatives and enable the allocation of capital to the highest return projects. As a reminder, shareholders as of October 17, record date have the right to vote. And I strongly encourage those investors to consider the published proxy materials and vote their shares for in support of the proposed transaction. Importantly, I want to emphasize that all current shareholders will have equal per share participation in the future growth opportunity and success of our transformed business going forward. Having said that, I want to frame what this future transformed business looks like. Post-transaction, Pixelworks become a low head count pure-play technology licensing company. Specializing in cinematic visualization solutions. Our existing TrueCut Motion platform used by leading filmmakers to enhance the cinematic experience across premium theatrical and home screens will anchor a portfolio of proprietary imaging technologies extending beyond film and into high-growth enterprise, consumer visualization and entertainment markets. Specific to TrueCut Motion. I want to reiterate that Pixelworks continues to own and control 100% of TrueCut Motion including all related assets and intellectual property. Irrespective of the proposed transaction with our Shanghai subsidiary. Even though a majority of our recent TrueCut engagement activity with new prospective ecosystem partners has remained behind the scenes. We are continuing to make tangible progress in support of expanded market awareness and adoption of our TrueCut Motion platform. As previously highlighted on our August conference call, during the third quarter, we were credited in 3 new theatrical releases. Universal Pictures, Jurassic World Rebirth, DreamWorks Animation, The Bad Guys 2; and Universal Pictures, Nobody 2. Today, I can confirm the next theatrical release to feature our award-winning TrueCut Motion grading technology will be Universal Pictures, Wicked: For Good, which is slated to hit theaters on November 21. Earlier today, we confirmed that the TrueCut -- the TrueCut Motion version of Wicked: For Good was selected for last night's U.K. premier of the film. Separately, we believe we are getting close to completing an agreement with a strategic ecosystem partner to license the broader distribution of TrueCut Motion content to consumer devices in their home. This prospective partner is currently in the process of late-stage certification and if successful, we believe it can open and accelerate the path to device licensees. While we continue to be encouraged by this and other ongoing engagement activity, we see our TrueCut Motion platform as a foundation to build upon. Exiting the obligations associated with Pixelworks Shanghai's manufacturing and design business will free up the company's management and capital resources to grow an attractive high-margin licensing business. As we grow the post-transaction Pixelworks into a global technology licensing company, TrueCut Motion will not remain the company's exclusive offering. Coupled with significantly lower head count and cost structure, we envision a post-transaction business model that will be inherently more scalable, less capital intensive, and has the potential to deliver high return on invested capital. With more than 2 decades of image processing innovation and our industry-leading TrueCut Motion platform serving as the flagship offering. We believe Pixelworks is poised to enable the most authentic high-fidelity viewing experiences across all screens, both today's and the advanced screens of the future. With that, I'll turn the call over to Haley to review the financials for the third quarter. As well as a couple of positive new balance sheet developments that took place subsequent to quarter end. Haley Green: Thank you, Todd. Revenue for the third quarter of 2025 was $8.8 million compared to $8.3 million in the second quarter and $9.5 million in the third quarter of 2024. The sequential increase in third quarter revenue reflected growth across both of our end markets, led by increased sales in the home and enterprise market. The breakdown of revenue in the third quarter was as follows: Home and Enterprise revenue was approximately $7.4 million. Revenue from mobile was approximately $1.4 million. Third quarter non-GAAP gross profit margin was 49.9%, compared to 46% in the second quarter of 2025 and 51.3% in the third quarter of 2024. The sequential increase in gross profit margin primarily reflected a more favorable product mix on shipments into the home and enterprise market. Non-GAAP operating expenses were $9.2 million in the third quarter compared to $9.7 million in the prior quarter and $12.4 million in the third quarter of 2024. The sequential and year-over-year decrease in operating expenses reflects the ongoing realized benefits of our previously taken actions to reduce expenses. On a non-GAAP basis, third quarter 2025 net loss was $3.8 million or a loss of $0.69 per share compared to a net loss of $5.3 million or a loss of $1 per share in the prior quarter and a net loss of $7.1 million or a loss of $1.45 per share in the third quarter of 2024. Adjusted EBITDA for the third quarter of 2025 was a negative $3.6 million compared to a negative $4.3 million in the prior quarter and a negative $6.3 million in the third quarter of 2024. With respect to our outlook, the company is electing not to provide financial guidance for the fourth quarter due to the previously announced definitive agreement to sell substantially all of the assets to Pixelworks Shanghai. However, we want to highlight that in October 2025, we closed a registered direct offering and the sale of patents pertaining to technologies we no longer pursue collectively contributing approximately $10 million to our cash position. As of October 31, 2025, our cash and cash equivalents balance was approximately $22 million, of which roughly half is associated with Pixelworks Shanghai, and the other half is associated with it Pixelworks, Inc. That completes our prepared remarks, and we look forward to taking your questions. Operator, please proceed with the Q&A session. Thank you. Operator: [Operator Instructions] Our first question comes from the line of Suji Desilva of ROTH Capital. Sujeeva De Silva: Congratulations on the transformative transaction. So maybe you can start with the transaction itself. And maybe, Todd, you can help us bridge or Haley, the $133 million of consideration to the $50 million to $60 million you're going to get, just understanding what the amounts were and the circumstance of the, I guess, the minority shareholders receiving a portion of this? Todd DeBonis: I'll take it. I'll give you a rough guideline on how to. So first of all, we do only own 78% of the entity. So the value of the entire entity was valued at RMB 950 million or USD 133 million. Then we had obligations, either redemption obligations to like our employees, and we had actually preferred return obligations to all of the outstanding investors. As part of this transaction, they've all agreed to release the preferred return benefit in return for just redemption. So we're using some of our ownership to effectively redeem them at this lower valuation. I'll remind you that when we raised capital for the subsidiary, it was at significantly higher valuations than what we are selling the entity for. In fact, the later stage investors, it was valued over USD 500 million. So that's the main reason why we're not getting 78% of returns because we're redeeming the shareholders. But in return, they're foregoing their preferred return, which would have been significantly higher. And then there's just your normal transaction costs and legal costs. The final step is that there is a -- withholding tax as we're selling a Chinese asset to a Chinese buyer in China to repatriate our cash, we have to pay withholding tax in China of approximately 10%. So once you go through all of that, you get to this net proceeds delivered in the U.S. between $50 million and $60 million. Sujeeva De Silva: Okay. Todd, I appreciate the detail there. Second question is really on the Shanghai subsidiary. Have you seen actual impact to the business in the last few weeks or months? Due to geopolitical just to understand that asset and this deal closing? Just to understand if there has been any impact there or whether it's more normal course? Todd DeBonis: It's hard to be definitive on this, but there is a delete a -- you could call it a policy, it's an undercurrent Delete A being Delete America. There is a big effort. And you can see this in the AR world right now where the government steps in and pushes the large buyers of semiconductors, so large equipment manufacturers to the smartphone manufacturers, et cetera, to -- they want a preferred preference on local semiconductor companies. We were a hybrid, Pixelworks Shanghai was effectively a little giant, it got subsidies, et cetera, but they knew it was 80% owned by a U.S. public entity. We felt it. We felt it for the last 18 months. We tried to sell through it. In some cases, we were successful in some cases, we weren't. I can tell you since the deal was announced in public. I've seen several opportunities show up to the subsidiary that I do not think would have showed up to the subsidiary if we would have kept the existing ownership intact. Now whether the VeriSilicon will convert those opportunities or not remains to be seen, but you can feel it, Suji. Sujeeva De Silva: Right. No, that really helps. And then lastly, turning to the forward look, the TrueCut business you have here. Just maybe give me the before and after this transaction, how you are running that business? And what -- if this question makes sense, what this transaction unlocks and how you will run the TrueCut opportunity here differently going forward, whether it's capital employees, customer discussions, anything of color there would help to kind of look forward to the pro forma business? Todd DeBonis: That's a good question. I never really thought about it in running it differently, okay? I thought we were running it appropriately up to this point. And now we are going to focus on it and try to accelerate it. I do believe the nature of the business and the way we went to market, which is a very difficult way to go to market, where you have to bring the whole ecosystem together. So from content generation to theatrical distribution, then to home entertainment distribution and then device manufacturers. And you have to bring this whole ecosystem sort of forward together. It takes a lot of evangelism. And so during that evangelism period, not always throwing money and resources accelerates it. And so -- since we sort of first won awards for this technology from HPA and other Hollywood technical bodies. We've been evangelizing -- could we have done more of it maybe with more capital and more focus. But for the most part, it took its own time. We see now that, that evangelism is starting to pay dividends. And so now might be the time to accelerate the investment and energy into the business. So I would say that's probably the only difference between then and now. I will say, as a public company, you're very focused on trying to be cash flow positive and earnings growth. And so when we ran into headwinds in China, we definitely slowed down our investment in TrueCut. So maybe for the last year or so, it was artificially constrained. Operator: Thank you. I would now like to turn the conference back to management for closing remarks. Todd DeBonis: Yes. So thanks, everybody. I once again would like to repeat, I encourage all shareholders of record to vote your proxy shares as an Oregon corporation we require 67% of all outstanding shareholders to vote for in order for this to pass. So I encourage you all to vote your shares. And thanks for your time. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Julia Weinhart: Good morning, everyone, and thank you for joining us today. We value your continued support and are pleased to present to you today our latest development. After the presentation, we'll be happy to address your questions. With that, I'll hand it over to Alessandro to begin. Alessandro Petazzi: Thank you, Julia, and thank you, and good morning, everyone. Thanks for joining us. Well, we just closed what is traditionally the most important period of the year for us and for leisure travel in general. And our results this quarter confirmed the strength of demand. And I would say the strength of our execution, which is clearly more important. Over the past few months, we've been very focused on 3 things, right, on delivering disciplined growth, which means gaining customers and share in markets and channels where the unit economics are attractive. We've also been enhancing profitability, which we have achieved through pricing, automation and improved booking quality, and I will elaborate on that in the next few slides. And lastly, we've been building a more scalable organization, one that is leaner, faster and structurally more efficient. This quarter, you see the first results of those decisions translating into performance, high-teens revenue growth, strong EBITDA expansion, and we continue to improve our cash generation, supported by a lower fixed cost base, also following the reorganization of the company we had in the second quarter. Just as importantly, we have continued to simplify the business and allocate focus on the areas where we can win at scale, and the decision to discontinue the cruise units reflects that decision. Looking ahead, we're building a travel player with stronger customer engagement, increased automation and enhanced operating leverage. We will also present today our 3-year outlook, which reflects exactly this. We're sharing a road map grounded in execution with clear initiatives around product, loyalty, technology, brand, and we have aspirations and a clear plan to get there, which we'll be sharing with you today. But before we do a deeper dive into the outlook, let's start by reviewing our third quarter and 9-month performance. I will then move to our future and the strategic drivers supporting that trajectory. So also with the support of Diego on certain pages, we're going to take a look at the numbers. Starting with, I would say, a snapshot of everything that happened in the quarter and in the 9 months. So starting with the quarter, happy to say this summer was clearly very positive. I think the numbers really speak about themselves. We saw strong growth across GTV, revenues, gross profit and adjusted EBITDA and also adjusted EBITDA minus CapEx. We're starting to talk about this because I think it's a metric that is important for us within the business, and I think it's important for the financial community to prove that our focus on improved cash generation. Adjusted EBITDA minus CapEx grew 68% in the quarter, reflecting this meaningful step-up in operational efficiency. We're also seeing structural benefits of our organization with fixed cost decreasing 6% year-over-year in absolute terms and even more significantly as a percentage of revenue. So the efficiency is now translating already in the P&L. It's also worth noting that the year-on-year comparison is clean. In Q3 last year, Ryanair had already been reintegrated into our offerings. So we had a lot of comments about that and questions and rightfully so understandably in the first half. But now we can be very clear that the results we're showing show a genuine like-for-like comparison. So I would say the first 9 months, the key thing has been consistency. I mean, we explained already in Q2 results call that we had a strong Q1, softer Q2 due to Easter timing and especially positive Q3, but I'd like to see the 9 months performance, which obviously is not impacted by these changes between March, April or June, July. If we look at the 9 months, the picture is also very clear and consistent. So before we move and take a look at each component of the P&L separately, as anticipated in this morning's press release, we have an announcement about our Cruise business, right? So for those who maybe didn't have the time to read it, the announcement comes as a part of our commitment and long-term focus on consolidating and strengthening the segments of our group, which are really the core where we can grow profitably and at scale. The Cruise division had primarily operated in the Italian market under the Crocierissime brand, and as we announced in the PR, we'll seize its operations, complying of course, with all applicable law provisions. This division was reported under the others segment in the forthcoming revenue slide, and has been underperforming over the past few years, generating ongoing constant losses despite the effort of the team. So this is the right decision to really make sure that we can focus our attention and resources where it matters and where we can move the needle for the group as a whole. In the context of that, Crocierissime trademarks and domain have been sold to Cruise Line, which is one of the European specialist leaders in that segment. Now as we have a lot to go through this morning, let's take a look at the revenues in the third quarter and in the 9 months. So clearly, revenues reached EUR 101 million in Q3, up 17% year-on-year from approximately EUR 87 million in the same year ago period. Packages remain the pillar of our growth, contributing almost EUR 66 million with an 11% increase. Now, I think it's important to give you a bit of details about how this performance came about because clearly, it's not that we're just riding away of the market. This is due to a lot of things that we are doing internally. For example, in dynamic packaging, we released a new pricing algorithms, which progressively is substituting all the manual efforts on pricing. So there is that element. We expanded the unitary revenues, particularly from ancillaries, thanks to a higher show rates. So we were able to show especially flight ancillaries for more of our products, thanks to the fact that we've been adding suppliers, which cover situations which were not covered by the previous suppliers. And all of that basically means reflects into an improvement of unit economics. And if you have higher margin and revenues for a single transaction, then clearly, you can also afford to profitably spend more in marketing for the higher customer acquisition cost and then you start having a flywheel effect on volumes and profitability. The other element was also revised the strategy on how we consider our ad spending, which basically is focused not only on expanding traffic in the Tier 2 markets, but also considering revenues from all channels in our ROI calculations. It might sound a bit like a technical element, but definitely helped deliver successfully both traffic and top line growth across all markets. From a flight point of view, you can see that there was a pretty even more significant growth, I would say, up 39% year-on-year to almost EUR 26 million. And again, as I said, apples with apples, Ryanair was already there last year. And so this actually reflects stronger unit economics. Similar to DP also here, new pricing model. I would say the one thing, which also happened on flights is not only pretty similar to the one we mentioned on DP with pricing and ancillary revenues, but also with an improvement in conversion rates, which stemmed mostly from a change in our checkout in which basically we reduced the steps to get to a final transaction, okay? So we were able to reduce the steps, improve the conversion for that and also improve the quality of the bookings we delivered by increased automation. So there was a number of bookings made on price, especially, which had to be completed manually by our customer operations specialist. And now that percentage has dramatically reduced. And as -- basically because of that we are able to confirm the booking right away. And again, this has a positive flywheel effect on the whole system. Also, the hotel category has been growing very significantly, 24% year-on-year to over EUR 7 million in the third quarter. And here, I would say the elements from an industrial point of view were for sure, the revised approach to outspending, which I was also already mentioning for DP, but also the launch of a partnership with a new meta search channel, Trivago, which even if it happened towards the end of September, started to contribute significantly already and the partnership channel. So basically, the revenues that we get by the agreements we have for the so-called welfare channels for employees in a range of countries, especially in Southern Europe. So these were the other big contributors to the revenue growth on the hotels. So in summary, I would say top line has been pretty -- very strong. We improved also the profitability per booking, and we executed on our technology and partnership roadmap and altogether, that support these results. And with these things that we're doing in pricing and automation, it's not just the third quarter, but clearly, it's a strong foundation for the growth into 2026 and beyond. And if we look at it from a 9-month point of view, revenues at over EUR 284 million, up 13% year-on-year with all the core segments delivering double-digit growth. And packaging is remaining the core, of course, but flights and hotels also delivering growth of 26% and 20%, respectively. The only element of the business, which didn't perform is the other segments, which declined by 13%. As I was mentioning, in this area, also the Cruise unit is included. And clearly, we will not see it going forward. So luckily, the limit -- the overall -- the impact of this on the overall results is limited, but I think the picture is very clear. Strong growth in the core, decline in the noncore and which we are focusing or divesting or discontinued. Now as we move on to profitability. The strong top line growth also translated into gross profit growth, very clearly with a growth of 9% year-over-year to almost EUR 38 million in the quarter with packages having a 10% increase by 14% and hotels 10%. Now one thing that would be directly addressing is the fact that you might see a slight dilution in our percentage gross margin. So I would like to clarify that this movement is planned and is consistent with our strategy. It's not a blip, it's not a glitch. It's something that is coherent with what is going on from an industrial point of view for 2 reasons. One is that we increased our marketing investment to capture demand as we were seeing in a profitable way, and this is clearly paid off with the 70% revenue growth in the quarter. The second, obviously, is the business mix. Flights have been growing proportionately more than packages, and we know that flights have lower percentage marginality. And so obviously slightly different mix with a bit of a lower margin percentage, but higher -- the key thing for me here is to emphasize that we were talking about higher, absolute gross profit and contribution. This is what we care about, right? Basically, our unit profitability, which remains strong and the absolute growth, and this is something that we continue to prioritize profitable volumes and cash conversion over the pure, let's say, optics of doing the percentage calculation. Looking at the first 9 months, also gross profit has been growing in the same pace, 9% overall with flights up 21% and hotels up 16%. And so I would say that the fact that the performance was consistent over the 9 months demonstrates the health here of what we're doing and the execution of the strategy on which we will also give you more details going forward. But with that, I hand over to Diego for some more detailed look at our cost, P&L and cash flow. Diego Fiorentini: Thank you, Alessandro, and good morning, everyone. We are now on Slide 8, where we show our total cost structure, split between variable and fixed cost. The quarter brought some good news on the cost front. Fixed costs were down 6% as we are already seeing the first tangible benefits of the organization announced in Q2, flowing through the profit and loss. At the same time, notable costs were up 22% in the quarter, mainly reflecting reinvestments in marketing and sales that began in Q2 and continued over the summer, supporting the strong gross cover value growth momentum. This increase was partially offset by other variable costs, which rose only 7%, reducing their weight on revenues by about 2 percentage points. Taken together, the combination of higher revenues and lower fixed costs, both the fixed cost ratio down 5 percentage points over the quarter, which is a very positive development. If we look at the first 9 months, the picture is quite similar with fixed costs down about 2% year-on-year compared to 2024. If we now switch to Slide #9, we can have a look at the full profit and loss, giving you a bit more detail of what we just went through. In the third quarter, adjusted EBITDA reached EUR 17.2 million, up 35% year-on-year. This strong increase reflects our operational leverage, which amplified profitability even if we continue to invest in marketing and sales. Reported EBITDA came in at EUR 13.5 million, which is broadly in line with last year, despite the provision related to the closure of the Cruise division. EBIT totaled EUR 4 million versus EUR 8.8 million last year, mainly impacted by the impairment of the Cruise related intangibles. Importantly, despite all of this effects, the net results remained positive for the quarter at EUR 1.9 million with earnings per share of EUR 0.18. If we move to the 9 months results, so the picture remains very consistent. Adjusted EBITDA continued to show a strong year-on-year improvement, which clearly supports our upgraded full year guidance. EBITDA was in line with last year at EUR 13.7 million, while EBIT decreased to EUR 17.3 million, down 29%. Both metrics were impacted by one-off items mentioned earlier. Alessandro Petazzi: Yes. And if I can chip in for a second, Diego, sorry till you [indiscernible] here, but I think it's also important to note the adjusted EBITDA minus CapEx metric. Because basically, if you look at the 9 months, you see that we've grown the adjusted EBITDA by approximately EUR 10 million. And then we've also reduced our CapEx in the period. So the adjusted EBITDA minus CapEx grew even more than proportionally EUR 14 million or 80%. And I think this is a very important metric that we work on internally, and I think it's important to start talking about that with the financial community. Diego Fiorentini: Yes. Thank you, Alessandro. I have a point on that on Slide 11. So if we can move to Slide 10 now, we take a closer look at the net results for the quarter to help put the numbers into context. As you can see, reported net income is lower than last year. However, this difference reflects one-off items related to the closure of the Cruise division. In the third quarter, we booked a provision for restructuring expected to be settled over the next few months while the impairment of intangible represents a noncash charge. Together, these items had a negative impact of EUR 6.2 million net of tax. On a comparable basis, this picture looks quite different. Underlying net income would have been EUR 8.1 million, 42% higher quarter-on-quarter without these one-off effects. We now move to Slide 11, where you can see the net financial position movements over the last 12 months. This view has to smooth out the seasonality of our business, which is strongly influenced by the typical OTA working capital dynamics. The net financial position stood at EUR 63.5 million, broadly in line with the EUR 67.1 million recorded in September 2024. The main driver of the cash flow was EBITDA, which reached EUR 43.5 million over the last 12 months after absorbing the organizational related cost. CapEx totaling EUR 19.1 million continued its downward trend following the peak spending we saw in 2024. The change in net working capital was essentially flat, reflecting the reversal of the seasonal movement we saw in Q2, and it is expected to continue a positive trajectory toward year-end, supporting the higher gross order value compared to last year. Overall, free cash flow came at EUR 16.4 million over the last 12 months, a significant improvement compared to the EUR 0.4 million in the same period of last year. And with that, I hand over to Alessandro for the key takeaways. Alessandro Petazzi: Thank you. Thank you, Diego. Well, I think it's pretty straightforward. We had a very solid performance throughout the first 9 months of the year, and we are expecting to continue doing that over the next few quarters. Packages have been growing, flights and hotels maintained good momentum. And because of that, we are raising our EBITDA guidance to around 20% of year-on-year growth, that showed improved unit economics and continued fixed cost discipline driving stronger cash conversion. And as part of that, I would also, I would say, talk about delivering on commitments in general, right? So not only cost discipline and growth. I think we said in January, when I joined and the first call I had with all of you, I was very clear on the fact that this company cannot be just a company with stagnating revenues and bottom line growing by cost cutting, we need actually to grow the top line, and grow the bottom line by having operational leverage. This is it. I'm having strategic focus. And clearly, the decision to discontinue the Cruise business also goes in that direction and will start showing its own positive effects in the next few quarters. So growth is the name of the game here. And it will continue to be so in our 3-year outlook, which we are going to now see in greater details. So what we're sharing today is a reaffirmation of the strategy we set earlier this year, right? So I would say no revolution, but an evolution and more clarity on the execution plan, right? I like to -- always like to say that vision without execution is just hallucination. And clearly, that's not where we are here. So the 4 strategic drivers you see have guided our decisions already throughout 2025, and they will continue to guide how we operate, scale and grow the business over the next 3 years. So it's about execution, focus, consistency and building momentum quarter after quarter. Now before we dive into each of the 4 core pillars that you might already be familiar with, let me briefly touch on the 2 key enablers that support this road map, right? I mean when we talk about scalability, what means is that we're building a business that scales efficiently with faster decisions, faster execution and lower cost to serve our customers. So how do we make it happen? Because otherwise, it just remains a declaration of principle, but the fact is that we are already streamlining and consolidating systems to reduce complexity. Automating core workflows, we already have identified more than 40 on which we are working to provide automation, things such as refunds, cancellations, service reporting, things which some of them are in the back office and some of them are also impacting our customer satisfaction. So again, not just a matter of efficiency, but a matter of overall being better able to serve our customers. And in the same -- with the same philosophy, we're also applying a buy overbuild approach to technology, ensuring that we have speed and capital discipline as you see reflected -- you saw reflected, for example, in the decline in CapEx this year. So the goal is pretty simple, and it's a leaner organization with higher productivity and better customer experience. I don't think the 2 things are in a trade-off, but the 2 things must go hand in hand as we continue scaling the business with the strong operating leverage that we talked about. AI. Now everyone is talking about AI. Obviously, I do not think personally that AI is a value proposition. AI is a crucial tool and AI must be embedded in everything you do. It's something that really must be the fabric of the organization, I would say. And it touches our business in at least 3 different ways. One is that from a customer acquisition point of view, AI is already influencing how travelers search and plan, right? And we see a shift of behavior from search engines to LLMs or within Google, for example, from traditional search to Gemini, AI mode and AI powered reply. So we are preparing for all scenarios to ensure we remain relevant and competitive whatever happens in the upper funnel by remaining the trusted fulfillment partner of whoever is going to provide that type of recommendations to customers. And that also includes from a more tactical point of view evolving from an SEO approach into a so-called GEO approach to make sure that we're also present organically in the results in the various LLMs. That's the first way that AI impacts us, but actually and which is a bit more, I would say, external from our own company. But in terms of the things we can do internally, customer experience then comes first, followed by efficiency and automation. So basically, AI is already helping us personalize, inspiration and recommendation. And we've been working on it for few years already in terms of our ranking and pricing personalization systems, which are the ones, by the way, the evolution of which contributed to the significant growth we were seeing for the quarter. But by continuing to work on that, we can also support the way our agents deliver faster and more consistent service in areas, especially where ever the human intervention matter. So from an efficient point of view, as I was saying, it's across pricing, booking quality, customer operations, a lot of back-office systems, AI is already improving the speed and accuracy of what we do. A significant portion of the code that we submit for deployment every month is already generated with the support of AI. So we haven't been talking a lot about that, but there's a lot of things already happening in the organization, I would say, across the board to allow us to scale without adding proportional cost. So, in short AI is not a stand-alone initiative, but it's really a core feature of our operating model. And that being said, let's now walk through each of the 4 strategic drivers and how they evolve over the next 3 years and how together, they underpin the financial ambition we're sharing with you today. First one is our core engine, dynamic packages, right? So travelers expect relevance, simplicity, value and seamless fulfillment. I think this is something that has been very clear with us, for us and remains true even in a AI-first world, obviously, with potentially more and more of the operations powered by AI. But for fulfillment, you need a lot more elements, right? So the goal here is to move from choice, which obviously is important, and we want to continue to give our customers choice, but we want to start introducing intelligent curation in that, bringing travelers to the right holiday faster, right, with a product that feels designed around them rather than assembled by them. So this is exactly the evolution that we are talking about. In practical terms, it means curated inventory focused on quality and relevance with also personalized bundles, not only with flights and hotels, but further extras and further additions to the trip, which makes the trip more memorable. And that is already happening in the short term. Going forward, we will have more and more audience-driven bespoke offers. And we will also be offering theme signature collections such as a romantic week in Paris or a week on the slopes for ski lovers. It might sound pretty normal, I would say, but I think that if you think about it, having a system that gives you exactly the type of holiday you need in a specific moment of the year is, I would say, an ambition that every travel company has been having and very few already delivered on. So we definitely plan to be there. And we intend to help travelers also in the discovery phase while remaining the trusted fulfillment partner that makes the holiday happen. From a -- I would say, from the point of view of the industrial effect and the economics, what do we expect by this evolution of the business? We expect, as you can see on the top right corner of the page, higher conversion rates, the higher attach rate and average -- and higher average booking values. This is basically the effect we expect on our own economics by this evolution. The second pillar, as you know, is about building deeper, repeatable customer relationships, moving beyond the transactional model that has been a staple of the company for a number of years. And this is where loyalty, personalization and proactive service comes together. And again, you might say that this is what every company wants and it doesn't exactly sounds like the discovery of fire. But I think it's important to take a closer look at the key initiatives which are already in motion underpinning this. So the launch of our multi-tier loyalty program offering rewards and designed to drive lifetime value. So lifetime value for sure, is the element of focus as we go forward, providing more relevant content and offers so that every interaction can feel tailored. AI comes back into the picture to provide support in service and automation so that the attention of our human agents can be focused on where it has most impact. And support and inspiration are also coming to be embedded in our app, which must be the primary engagement hub for inspiration, booking service, rewards, but I would say the way for us to be relevant in every single moment and every single touch point of the customer journey, not just when they book, but when they are waiting between the booking and the holiday itself, when they approach the holiday, that moment of expectation when they actually start enjoying their holiday and even when they are back home and thinking maybe about having those post-holiday blues and thinking about what they should be doing next. The expectation is that thanks to all these actions, we can increase the repeat rate, which is already pretty high. I would say our repeat rate in the 12 and 18 months is already pretty high, but we can do better, for sure. We expect this to increase the app adoption, also as a way to remain relevant in the minds of customers to increase our NPS and to reduce the cost to serve. Now on to the next page with brand. In 2025, our focus under the strategic driver has been on highlighting the strength of each brand in the group. You might remember, we've already talked about that, that rather than trying to be everything to everyone, we concentrate our investments where each brand creates most value. And obviously, we have local brands like Bolgratis, Rumbo, Weg and mother ship lastminute.com. And each deserves a differentiated approach and efficient marketing to make the most of local strength with the combination of the marketing approach, the brand and the product that we sell via each brand. And so this already translated into something really concrete from aligning the visual identity of all the local brands with the core lastminute.com brand, you might have noticed that already. If you are a customer or if you are curious anyway. And we've also launched brand awareness campaigns for the first time outside our core markets. Now, if we look further ahead, this driver evolves towards ensuring that our brand purpose mirrors what we're becoming as a company. So it must be consistently aligned with our vision of a curated travel experience, especially for packages, right, what we have been discussing and reflected across each touch point product, pricing, conditions and service. A brand is not just about the nice ad campaign, is if we say that we are a customer-first, if we say that we are customer-centric, and this can really be a corporate cliche, we really want to live that mission, then clearly terms and conditions and the way we treat our customers, the way we serve them is part of that, and there must be consistency across all of that. So the brand platform that supports our strategy is about curation, ease, trust and emotional relevance. The -- I would say, more practical economic consequence of that is in, say, in our aspiration to have a higher recall of brand association, which then should also, over time, become a source of lower customer acquisition cost and higher conversion, especially as we shift more traffic into our own loyalty program and the app environment. And finally, market presence and distribution, which is about balanced and profitable scale, not footprint for its own stake. This is very important. Every time we've been expanding to new markets, we've been doing that with a data-driven approach and making sure that we were profitable very early on. So from a geographic perspective, we are maintaining a strong focus on our core European markets, depending on our leadership positions in the core 5 while also expanding selectively into high potential markets where unit economics are favorable as we've been doing already since the beginning of the year. The new thing here is that from a market perspective, this also means widening our reach with the launch of a new B2B, B2B hotel distribution channel and product. So basically is what in the sector is called a bed bank, bed as in bed, not in bad. Apologies for my pronunciation here. So that's what we're launching, opening an extra revenue stream for the group. And this is something that is already happening in these very months. From -- if we're talking about the B2C customer acquisition source point of view, the focus is on evolving how we reach customers. So shifting gradually from the history of the company, which has been a pure performance marketing to more of the brand-led growth, building awareness and preference to more diversified mix, including paid social, where we've also already started investing this year and B2B2C partnerships, and we were talking about generative engine optimization earlier on. So the outcome of this from a business point of view is more resilient demand generation, which is consistent whatever the possible shift in traffic in the upper funnel might be. So higher-quality traffic, more diversified revenue streams and overall a more resilient business. So I'm sure that all of you are now curious to see the financial impact of all the qualitative elements we talked about. And so here we are anchored in the strategy and supported by the initiatives we talked about. We're confident in our ability to continue delivering the profitable growth and reaching by 2028 approximately EUR 450 million of revenues and an adjusted EBITDA above EUR 70 million. Now, it reflects the compounding effect of scale, automation, stronger customer and higher customer lifetime value for the reasons we discussed across all the core segments and the disciplined approach to cost and capital allocation. Now let me also add, I would say a brief personal reflection on this guidance, right? When I joined in January, you might remember, one of the priorities I outlined was to make sure we established credibility with you guys. The very simple principle to say what we do and to deliver on it, right? And I think that the past 3 quarters, frankly, show pretty clear progress in that direction because we've been meeting our guidance. And actually, we're even upgrading our guidance, and we've been growing top line, growing bottom line exactly with doing -- by doing not because the market grew, but because of we executed on all the plans that we outlined at the beginning of the year. So we're executing with focus, with discipline, with transparency. That approach will continue. I also know it's just the beginning of a journey, right? So the outlook we're sharing today is intentionally grounded and realistic. It is not the ceiling of our ambition. I would say it's more the base camp, if you want. And as we keep building operational momentum, I'm confident you'll see the same clarity and consistency reflected in the actual results, which at the end is what really matters, right? I mean again, having the vision, a clear story and a clear plan to get there and deliver on the results. And with that, I conclude the strategy overview, and I hand it over to Julia again for the financial calendar. I'll be back shortly to take your questions. Julia Weinhart: Thank you, Alessandro. Now let me briefly share with you which conferences we will be attending in the coming months and our financial calendar for 2026. So on November 25, we will be at the Deutsche Eigenkapitalforum in Frankfurt. On the 15th of January will be at the Baader Swiss Equities Conference in Bad Ragaz in Switzerland. And now I'm moving into our financial releases. We will release our preliminary unaudited full year figures results on the 12th of February. Our annual report publication will be on the 2nd of April. On the 6th of May, we will publish our Q1 2026 trading update. On the 24th of June, we will have our Annual General Meeting. And on the 30th of July, we will be sharing with the market our half year results, followed then on the 29th of October, our publication of the Q3 2026 trading update. With this now, we will begin our Q&A session, starting with the live questions first, followed by those submitted via the webcast. Please note, again, as always, we might group similar questions together and slightly rephrase them. In line with our privacy and data protection policies, we remind participants that stating your name is optional when asking live questions today. With this, I'll hand over now to Sherry, our Chorus Call operator to begin with the first live question. Thank you, Sherry. Operator: [Operator Instructions] I am now pleased to hand over to Julia Weinhart, Investor Relations, who will be moderating the session. Julia Weinhart: Thank you, Sherry. So do we have any live questions in the queue already? Operator: We have no questions in the queue. Julia Weinhart: Okay. So no live questions, so with that, we'll move directly to the webcast questions we have received. And I will start with the first question, which we have received this morning. How do you intend to use the cash available since you are now even generating significant amount per quarter? Any M&A ahead of us? Alessandro Petazzi: Yes. Thank you, Julia. I'll take this one. Where our cash position will be primarily used to sustain the growth of the business. Now we've always been active and we see ourselves continuing to be active in the M&A market if any opportunity arises. For example, there might be start-ups, which come up with very interesting products, but are not able to scale due to the known difficulty of scaling B2C businesses in the travel market, which is a market with very low frequency of usage, which creates more challenges than if you try to build a B2C brand in markets in which people potentially use your service every day or every week. So there might be opportunities there and to get maybe some support for our innovation efforts. But again, I see that rather than for sure, not a transformational M&A more, something that complements and contributes to the operational execution we talked about, right? The very tactical, I would say, decisions on make or buy on certain things. So I would say the strategic focus is on investing in the initiatives that we have to strengthen our position and continue driving this profitable organic growth. Julia Weinhart: Thank you, Alessandro. Now we will move to the next question we have received. What can you say about the current market cap and rerating expectations? Are you planning to move the stock exchange to London or Amsterdam to improve liquidity? Alessandro Petazzi: Look, I think this question reflects frustration. And to be honest, it's a frustration I share. It's a frustration we all share. You might know, I think we had -- we also -- we already had comments on that, that the entire executive team is very much incentivized in line with shareholder value creation. Plus we have an institutional duty, right? So it's not only, I would say, it's a selfish element, if you want, but also an institutional element in terms of our role to provide value for shareholders. I would say that right now, considering where we're coming from, the key focus is to improve the industrial results of the company to make sure that we deliver quarter-after-quarter as we've been doing over the past 9 months. And also to continue to have more discipline and transparency and that approach to investors as well. As Julia was saying, I mean, we've already been meeting a lot of investors over the past few months. And as you've seen in our financial calendar, we are -- we will be attending a number of conferences. We will be meeting a number of you one-to-one. So I think that we are doing everything in our power to make sure that progressively, the market realizes that we deserve a different multiples because we -- the growth rates and the absolute value of our numbers, I also clearly think that we are not currently priced in the right way. Now at the same time, when we are in this journey of transformation of the company, when so many things happening with the potential to disrupt our sector and us trying to disrupt ourselves, right? We definitely want to be innovating in a way that we go ahead of market disruption, then I think that's where the focus must be. Changing, listing and stuff like that is potentially a huge distraction for the team. And so even if it might sound like a shortcut to potentially improve our liquidity, I think it will be the cost to pay in terms of defocusing the company at the moment in which the company actually is proving that focus is a good thing, is probably not the right approach. That being said, this is the evaluation now. Going forward, we will continue to monitor the things. Again, deliver on the promise, show credibility, show transparency, have a bit of patience because, of course, I think this journey is not one of a day. It's one of a few years. The plan is not a coincidence, right? That it goes until the end of 2028. I think that's a reasonable time horizon. And then we might reassess obviously a year from now, this hasn't changed, but we will see. But now focus is on industrial aspects for sure. Julia Weinhart: Thank you, Alessandro. Now moving to the next question. Could you provide a breakdown of your net cash position? How much is real cash and how much is advanced cash payments from clients? Diego Fiorentini: Thank you, Julia. Well, as you can see from our third quarter report, cash and cash equivalents stood at EUR 103.8 million at the end of the quarter. It is important to note that part of the short-term financial liabilities reflect the negative balance on our notional cash pooling structure. Adjusting for this, our effective cash position would be around EUR 55 million. This strong cash position is, of course, supported by the negative working capital dynamics that are typical of our industry. Julia Weinhart: Thank you, Diego. Now moving to the next question. What is the composition of the Dynamic Packages growth? How much of growth comes from B2B, how much from B2C? And can you give us an overview of the growth in the various regions? Alessandro Petazzi: Yes. Okay. So 2 different questions in one. So let me try and address them both. So the first one is that I guess you know that in our reporting structure, when we talk about packages, actually, it includes dynamic packages, which are the core of our business, mostly sold via the lastminute.com brand in its various incarnations in the various countries, but also the so-called tour operator business, which basically is a business in which we allow people to book the products of companies such as TUI or their tour. This is especially strong in the German market, and it's mostly sold by the Weg.de brand. Even there is also a portion in France, but lion's share of this tour operator business is in Germany with Weg.de. Now that part hasn't been growing, to be honest, the tour operator bit. But again, it's where we do not have control of the product. And so we're now working on some actions to make sure that we can also make sure that they gets back to the growth that it deserves as a historic brand in the German market. If we focus on the core of our dynamic packages, which are clearly the vast majority of the total line that we report as package, we've seen growth across both, B2C and B2B2C, as I prefer to call it rather than B2B, right? The white label solutions that we have with booking.com, with Holiday Pirates and in others, they were both growing, but the B2C channel, which clearly represents the strategic focus on which we have more control, has been growing more than the other. So I would say B2B2C has been relatively with a pretty limited growth in terms of revenues and a good growth in terms of profitability, whereas the B2C channel delivered higher growth in the quarter and in the 9 months and also remains the predominant contributor in absolute terms within the Dynamic Packaging segment. Now in terms of the growth in the various regions, we've been growing both in the core markets and in the other European markets, which we started to invest in this year. So the growth doesn't come just from the new markets. I would say within the core markets, the most positive performance has been coming from Italy and Germany, but we're also satisfied about the situation in France, Spain and the U.K. But Italy and Germany has been, for sure, the ones -- the outstanding ones in the quarter and in the 9 months. Julia Weinhart: Thank you, Alessandro. I now move to the next question. Currently, around 30% of revenue is generated through partnerships. How much of the EUR 450 million in revenue by 2028 is expected to come from partners? Will the share remain at 30%? Or will it be higher? Alessandro Petazzi: No. I mean, basically, as I said, our B2C core channels are growing more. And I think that we will continue focusing on this. And this is what we expect. So the revenues coming from partnerships will be growing if we are able to add more channels, more partners. So I would say that for sure, we do not expect the contribution of partnerships to increase as a percentage of revenues. We expect it to remain stable or potentially even slightly decline as we focus on higher growth on our B2C core properties. Julia Weinhart: Okay. Perfect. Thank you, Alessandro. With this, we have -- we move to the next question. I missed the beginning of the presentation. Unfortunately, can you explain the [indiscernible] sale? When will it be closed, which legal entities are changing their ownership? And when will it be closed? Alessandro Petazzi: Okay. So let me first clarify that no legal entities will change ownership. This is very important. It's something else we're talking about. We're not talking about sale of entities. So the context -- the strategic context of this is that we are delivering on the promise to be focused on what moves the needle and in the areas of the business where we can grow profitably at scale. So -- and that's why we have decided to seize operations of the Cruise division. This is what we're doing. We are seizing operations. The Cruise division was primarily operating in Italian market with the brand Crocierissime. Now the other thing we said is that, that brand, Crocierissime and the related domains have been sold Cruise Line, which is one of the European specialty leaders in the segment. So this is what is happening. Seizing operations, and then as a separate element, selling just the trademarks and domain. But for sure, not the operations as such, which are seizing and not the legal entities. Julia Weinhart: Thank you, Alessandro. With this, we have answered now all of the questions we have received via the webcast. Sherry, maybe in the meantime, did we receive any request to ask a live question? Otherwise, we would... Operator: There are no more questions from the phone. Julia Weinhart: Okay. Then we will be closing the call. Alessandro, would you like to say a few words at the end? Alessandro Petazzi: Yes. I mean I just want to thank everyone for the questions and for the conversation, which we obviously value and we intend to remain focused. We intend to remain focused on building on the industrial performance on the plan we disclosed. We are really confident in the path ahead. We have an ambition, which even goes beyond what we've been talking about and the plan to deliver on the targets we talked about. And we look forward to continue having this constant communication with you at the next quarter or ideally at one of the conferences that we will be attending. Thank you from that, and I see you very soon.
Operator: Thank you for standing by, and welcome to the Amdocs Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Matt Smith, Head of Investor Relations. Please go ahead, sir. Matthew Smith: Thanks, operator. Before we begin, I need to call your attention to our disclaimer statement on Slide 2 of the presentation. It notes that some of our comments today may be forward-looking statements and are subject to risks and uncertainties, including as described in Amdocs' SEC filings and that we will discuss certain financial information that's not prepared in accordance with GAAP. For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures, we refer you to today's earnings release, which will also be furnished with the SEC on Form 6-K. Participating on the call with me today are Shuky Sheffer, President and Chief Executive Officer of Amdocs Management Limited; and Tamar Rapaport-Dagim, Chief Financial and Operating Officer. To support today's earnings call, we are providing a presentation, which you can find on the Investor Relations section of our website. And as always, a copy of today's prepared remarks will be posted immediately following the conclusion of this call. On today's agenda, Shuky will recap our business and financial achievements for the fourth quarter and full fiscal year 2025, and we'll update you on our strategic progress, including our continued sales momentum in cloud and recent commercial developments in generative AI and data services. Shuky will finish by previewing our financial outlook for the full fiscal year 2026, after which Tamar will provide additional details on our Q4 financial performance and our forward guidance. As we communicated previously, Shuky and Tamar will compare certain financial metrics on a pro forma basis, which adjusts prior fiscal year 2024 revenue by about $600 million to reflect the phaseout of certain low-margin noncore business activities, which was substantially already ceased in the first quarter of fiscal 2025. And with that, I'll turn it over to Shuky. Joshua Sheffer: Thank you, Matt, and everyone joining us on the call today. Starting on Slide 6. I want to express my sincere appreciation to our global team as we close out another year of important progress. Your dedication and commitment have driven solid financial results, consistent with our guidance, and you did it while executing our strategy to support our telco customers with cutting-edge cloud, digital and AI-based solutions. To briefly recap fiscal 2025, revenue grew up by 3.1% in a pro forma constant currency, which adjusts for our decision a year ago to phase out certain low-margin noncore business activities to sharpen Amdocs' strategic focus while also resulting in a stronger business visibility. Among the many highlights, we delivered double-digit growth in cloud, which contributes over 30% of total revenue this year. Share of revenue for long-term managed services reached a record 66%, further supporting Amdocs's already strong business resilience. Profitability improved by 300 basis points, including 60 basis points from ongoing business transformation and efficiency gains. And we maintain our commitment to technology, innovation and product leadership, tailoring our investments to serve our customer key business imperative. These include B2B modernization, next-gen monetization, fiber networks and of course, generative AI, where this year, I'm proud to say we made a successful transition from proof-of-concept trials to winning actual generative AI-related deals. Overall, we delivered non-GAAP diluted earnings per share growth of 8.5% in fiscal 2025 and achieved our target to deliver double-digit expected total shareholder return, including our dividend yield. Now let's take a close look at our fourth quarter performance, beginning with the financial on Slide 7. Revenue of $1.15 billion was above the midpoint of guidance and up 2.8% from a year ago in pro forma constant currency. Profitability improved by 20 basis points sequentially. Non-GAAP diluted earnings per share was $1.83, slightly above the guidance midpoint, and we finished the quarter with 12-month backlog of $4.19 billion, up $40 million sequentially and 3.2% from a year ago. Growth in 12 months backlog was driven by strong sales momentum this quarter, contribute to our overall long-term book of business. As Slide 8 shows, pipeline to deal conversion was well balanced across our key operating regions and strategic domains, showcasing Amdocs' proven ability to scale our customer activities by continuously delivering fresh innovation over time. In cloud, we signed a multiyear managed services SaaS agreement with AT&T to deliver entitlement server capabilities via our eSIM cloud platform, and we won new cloud modernization and migration awards at Lumen Technologies in the U.S. and TELUS in Canada. We expected our recent momentum in generative AI domain with -- we extended our recent momentum in generative AI domain with an exciting new award at Telefonica Germany, and we expanded our international footprint with new monetization and digital modernization awards at BT-EE in the U.K., Altice SFR in France, Telia in Finland, KT in South Korea and Claro Brazil. Several deals this quarter were struck among under long-term managed services agreements, further deepening our customer relationship. This includes an exciting landmark multiyear strategic agreement with PLDT in the Philippines, which expands our long-term-standing managed service engagement to accelerate its IT modernization and streamline business processes through AI and generative AI capabilities. Rounding on operational highlights, Amdocs is engaged in the execution of complex mission-critical transformation projects, closely working with our customers as key partners. Q4 was another quarter of consistent execution in which we achieved important project milestone at AT&T, Comcast, Bell Canada, BT Everything Everywhere, Vodafone and Vodafone 3, PLDT and e& UAE. I'm also proud to say that Amdocs ensured smooth customer operation during the high-volume launch on Apple's iPhone 17 in September. Now turning to Slide 9. I would like to provide some additional color with respect to our growth strategy, which is designed to deliver the [indiscernible] product and services our customer needs to, accelerate the journey to the cloud, maximize the value of generative AI and data across our customer footprint, digitalize customer experiences for consumer and B2B, monetize next-generation network investments and streamline and automate complex network ecosystems. Beginning with cloud on Slide 10. Demand for our cloud-native solution and proven ability to accelerate public, private and hybrid cloud migration remains strong as we continue our strategy of moving mission-critical system, workloads and applications that enable innovation, agility and cost savings for all our customers. In the U.S., Lumen Technologies selected Amdocs to support its cloud transformation, moving mission-critical BSS application to Google Cloud to strengthen its digital foundation. TELUS in Canada expanded its multiyear managed service agreement with Amdocs to migrate on-premise wireless monetization operation to Google Cloud, enabling the faster launch of new consumer and enterprise offerings, improve customer experience and reliability and reduce operational costs. And Bell Canada, in collaboration with Amdocs is migrating existing system to the cloud to enhance scalability, resiliency and achieve operational efficiencies. Our SaaS-based platforms, including Amdocs eSIM, Amdocs Market One and Amdocs ConnectX are also contributing to growth with rising customer adoption. To provide a few examples, we signed a multiyear managed services SaaS agreement with AT&T to deliver entitlement server capabilities via our eSIM cloud platform. This continued to expand our eSIM SaaS platform momentum, adding over 100 million devices to it. Additionally, Amdocs ConnectX has already more than 15 customers, including consumer cellular and PLDT, who are deploying the generative AI native platform to quickly launch existing new digital brands. Adding to the list, I'm pleased to announce that Orange Belgium has selected Amdocs to lead key modernization initiative on their prepaid stack, leveraging our ConnectX platform. This project includes real-time charging and next-generation scalable architecture designed to support their needs. It will drive efficiency while transforming the user experiences with modern digital-first journeys that will redefine engagement for Orange Belgium prepaid subscribers. Looking forward, cloud will remain a primary focus for Amdocs, as we continue to support our global telco customer base, many of which are only just getting started on their multiyear cloud journeys. Now let's talk about generative AI and data on Slide 11. Following the generative AI-related deals we recently announced with e& UAE, Altice Optimum and Consumer Cellular, I'm excited to report that Telefonica Germany, one of the country's largest quad-play service providers, has selected Amdocs to extend its billing platform for both consumer and enterprise services. As part of this expanded multiyear collaboration agreement, Telefonica Germany will deploy new generative AI use cases, leveraging Amdocs' amAIz Sales Agent to enable the efficient promotion of new products and to automate the upsell of personalized offers to drive higher ARPU. This award with Telefonica Germany is another proof point that shows that we are starting to see trial POC conversion to actual generative AI projects, and we are excited about the initial results we are seeing. For example, one of the first service provider to integrate generative AI was e& UAE, a customer which is already achieving double-digit improvement in Net Promoter Scores after deploying amAIz agents. Such progress reflect Amdocs' core telco platform and data services expertise built on our vectorized amAIz platform, which we have deployed in collaboration with NVIDIA and other generative AI leaders. Moreover, I believe our recent success demonstrating the pivotal role Amdocs is playing as an IT player in helping accelerate generative AI adoption in telecom industry. In addition to cloud and generative AI, we secured important wins in the strategic domain this quarter as highlighted on Slide 12. As previously announced, we finalized a significant 10-year digital modernization and managed service agreement with BT-EE in the U.K. to deliver a modern B2C mobile platform for its prepaid and postpaid segments. We signed a multiyear strategic agreement with Telia Finland to build its next-generation digital BSS enhanced and with advanced AI capabilities. And AT&T Mexico closed a new digital program with Amdocs to enhance self-service experiences, expanding its digital selling capabilities. Here in the U.S., we signed a multiyear software and IT service agreement with Fidium, a next-generation American fiber Internet and network service provider and a new logo for which Amdocs will modernize and manage its IT operation while supporting its broader digital transformation strategy. Elsewhere in the U.S., a leading Tier 2 operator selected Amdocs for additional 5-year renewal of their BSS ecosystem. Service providers are also adopting next-generation monetization solution to support their wireless and fiber infrastructure elements. Amdocs recently signed an expanded multiyear billing transformation agreement with Altice, France's SFR to consolidate multiple billing operation to a unified cloud-ready platform. And we signed a new agreement with South Korea's telecom operator, KT, to upgrade and modernize its charging system to accelerate time to market and to boost operational efficiency. This quarter was also -- we also expanded our activities with the 2 largest operators in Brazil. First, Amdocs entered an agreement with Claro Brazil to implement a real-time billing platform designed to enable full-scale converge across its multiple line of business. Claro also extended its multiyear service contract with Amdocs. Second, in the network domain, we signed a modernization agreement with Telefonica Vivo to provide a future-ready foundation for ongoing operation by deploying our latest OSS products. Further underlying Amdocs expertise and growth potential in the network domain, we have expanded our managed services agreement with Globe in the Philippines to include network strategy and planning, mobile access engineering and optimization to enhance service quality and operational agility. Additionally, we delivered a successful go-live of Amdocs advanced network inventory platform for Vodafone Ireland and continue to expand our network activities with Vodafone Greece. Before discussing our fiscal 2026 outlook, I wanted to circle back on generative AI to share our thoughts with respect to our strategy and investment plans as presented on Slide 14. Over the past couple of years, we've shared our belief that generative AI holds immense potential to transform the telecom industry. We've been working closely with our customers to deliver tangible improvement in critical areas such as customer care and network operation while building out generative AI capabilities in our amAIz platform. As the technology matures, the industry advance and we see the progression from POCs to production, we believe there is now the potential to unlock even greater opportunities to enhance experiences, agility and efficiency. To fully capture this potential for Amdocs and for our customers, we are accelerating our generative AI investment, which we expect will open new pathway for future growth across our entire customer base, irrespective of their BSS or SS version. This included fast tracking the development of what we call a Cognitive Core, a next-generation platform built on the solid foundation of Amdocs amAIz. It integrates advanced generative AI capabilities such as agent-to-agent MCP technologies, our vectorized telecom expertise and the enablement of agentic services. In the coming quarters, we'll share more about our vision for AI-powered telecom operating system. For our customers, this investment in generative AI may represent a substantial shift in how they will adopt future software and services. Notably, we believe it promises to simplify and accelerate their digital transformation and journey to the cloud delivered under our outcome-based model. Overall, with focused and intentional investment, we expect Cognitive Core to emerge as a long-term growth engine for Amdocs by enabling us to better serve our full spectrum of customers from those running current platform seeking cost-effective line of business modernization to top-tier innovators already modernizing on Amdocs' next-gen platform to lead with future-ready digital experiences. Now let me comment on the current operating environment and our outlook for fiscal year 2026. We are entering fiscal 2026 with a healthy 12-month backlog visibility and a strong overall book of long-term business supported by a recent win momentum. With our unique tech-led and outcome-based accountability model, Amdocs is strongly positioned within our serviceable addressable market of nearly $60 billion to monetize a rich pipeline of opportunities across cloud, digital network and generative AI and data. That said, we are closely watching for any impact of the uncertain global macroeconomic environment on us and our customers' demand and spending behavior. Tying everything together with our outlook on fiscal -- on Slide 16. We expect revenue growth in the range of 1.7% to 5.7% as reported and 1.0% to 5.0% in constant currency for the full year fiscal 2026. As to our profitability, we expect a non-GAAP operating margin to increase by roughly 20 basis points year-over-year at the midpoint on our target range as we balance our strategic long-term growth investment with the benefits of ongoing cost and efficiency gains across the business. All up, we expect to deliver a non-GAAP diluted earnings per share growth of between 4% to 8% in fiscal 2026, the midpoint of which equates to an expected total shareholder return in the high single digits, including our dividend. With that, let me turn the call over to Tamar for remarks. Tamar Dagim: Thank you, Shuky, and hello, everyone. Thank you for joining us. Before I begin in today's comments, I will compare certain financial metrics on a pro forma basis, which adjusts prior year fiscal year '24 revenue by approximately $600 million to reflect the phaseout of certain low-margin noncore business activities, which were substantially already ceased in the first quarter of fiscal 2025. To further assist your modeling, the regional mix of this revenue was similar to the overall company, and it contributed roughly $150 million per quarter. To begin, I'm pleased with our solid financial performance for the fourth fiscal quarter as detailed on Slide 18. Q4 revenue of approximately $1.15 billion was up 2.8% year-over-year in pro forma constant currency. Revenue exceeded the midpoint of our guidance with no impact from foreign currency movements as compared to our guidance assumptions. Reflecting the phaseout of certain business activities, reported revenue declined by 9% from a year ago. On a regional basis, North America improved more than 2% sequentially, posting its strongest quarter of the fiscal year. Europe declined, reflecting normal business fluctuations following a record quarter in the previous quarter. Rest of the world was slightly lower on a sequential basis, reflecting mixed trends. With our strong sales momentum, we have clear visibility to continued growth in Rest of the World, but quarterly trends may fluctuate given the project orientation of our customer activities in this region. Shifting down the income statement. Non-GAAP operating margin of 21.6% improved by 290 basis points from a year ago, driven by the announced phaseout of low-margin noncore business activities and the benefit of ongoing efficiency gains within our operations. Non-GAAP operating margin improved by 20 basis points sequentially. Interest and other expenses amounted to roughly $10.3 million in Q4. On the bottom line, non-GAAP diluted EPS of $1.83 was slightly above the midpoint of guidance. Diluted GAAP EPS of $0.88 included a restructuring charge of $0.60 per share, resulting from certain transformational actions we have taken to optimize our workforce allocation, technology mix, infrastructure, workspace and other resources as we prepare to accelerate the internal adoption of generative AI in fiscal 2026. Excluding this restructuring charge, diluted GAAP was at the high end of the $1.41 to $1.49 guidance range. To quickly summarize our full year 2025 financial performance, results were consistent with the original guidance we provided a year ago, as shown on Slide 19. Revenue was up 3.1% in pro forma constant currency, above the midpoint of guidance. On the bottom line, we delivered non-GAAP diluted earnings per share growth of 8.5% in fiscal year 2025, consistent with the midpoint of guidance and driven by sustained revenue growth, a 300 basis points improvement in non-GAAP operating profitability and the benefits of our share repurchase activity. Turning to Slide 20. This year, we delivered double-digit growth in cloud, which exceeded 30% of overall revenue as compared with roughly 25% in the prior year. Further highlighting the ongoing diversification of our business and growing traction in international markets, half of our top 12 customers are international customers, 2 of which are new logos added in the last 10 years, as Slide 20 shows. Additionally, we continue to expand our footprint with long-standing customers and new logos in North America. A great example is Charter, with which we had limited business a decade ago, but is now one of our top 10 customers. Over the years, we have also added new logos in North America, such as Consumer Cellular and Fidium in fiscal 2025. Turning to Slide 21. Managed Services revenue was a record $3 billion in fiscal 2025, up 3.1% from a year ago. Managed Services as a share of overall revenue also reached a new high of 66% in fiscal 2025, further strengthening our business resilience as we maintained high renewal rates and expanded our customer activities under long-term agreements. As Shuky alluded to earlier, several of our key deals signed in the fourth quarter were struck under multiyear managed services engagements, the most significant being our landmark agreement with PLDT from the Philippines, for which Amdocs will manage its complete IT services requirements, covering architecture, implementation, operations and performance outcomes with end-to-end accountability. Additionally, we expanded our managed services agreements with Globe in the Philippines to include network operations and TELUS in Canada to cover the migration of its wireless monetization operations to Google Cloud. Managed Services can also be a spearhead to winning new customer logos, such was the case with Fidium in the U.S. for which Amdocs will serve as the primary and exclusive partner to maintain and operate its ID fiber operation across multiple applications while supporting its IT transformation as a preferred development partner. Moving to the balance sheet and cash flow highlights on Slide 22. DSO of 74 days was down by 2 days sequentially and unchanged year-over-year, reflecting normal fluctuations in the business activity. Unbilled receivables net of deferred revenue rose by $62 million sequentially in Q4 and was relatively flat compared to a year ago, aggregating both the short-term and long-term balances. As a reminder, the net difference between unbilled receivables and deferred revenue fluctuates from quarter-to-quarter, in line with normal business activities as well as our progress on multiyear transformation programs. Driven by a strong fourth quarter, free cash flow before restructuring payments was $735 million in fiscal 2025 and above our guidance range of $710 million to $730 million. Including restructuring payments of $90 million, reported free cash flow was $645 million for the year. Overall, we finished fiscal 2025 with a healthy cash balance of approximately $325 million and an available $500 million revolving credit facility, providing ample liquidity to support our ongoing business needs while retaining the capacity to fund our future strategic growth. Switching to capital allocation on Slide 23. This quarter, we repurchased $136 million of our shares. We had up to $1 billion of remaining repurchase authority as of September 30, 2025. We paid cash dividends of $58 million in the fourth fiscal quarter. Looking to fiscal 2026, we expect free cash flow of between $710 million to $730 million, not including additional payments we expect to make under our current restructuring program. Our free cash flow outlook equates to a conversion rate of roughly 90% relative to expected non-GAAP net income and translates to a healthy free cash flow yield of roughly 8% relative to Amdocs' current market capitalization. Regarding our capital allocations for the coming year, we expect to return the majority of our free cash flow to shareholders. This includes dividends for which we are pleased to announce a proposed 8% increase in our quarterly cash payment to a new rate of $0.569 per share, subject to shareholders' approval at the Annual Meeting in January 2026. Moving to Slide 24. 12-month backlog was $4.19 billion at the end of Q4, up 3.2% from a year ago. We expect 12-month backlog to represent roughly 90% of our forward-looking revenue, further underscoring the importance of this metric as a leading indicator of our business. Now turning to our revenue outlook on Slide 25. We are continuing to closely monitor the prevailing level of macroeconomic, geopolitical, business and operational uncertainty in the current business environment. The first quarter and the full year fiscal 2026 financial guidance reflects what we consider to be the most likely outcomes based on the information we have today, but we cannot predict all possible scenarios. For the full fiscal year 2026, we expect revenue growth of between 1.7% and 5.7% as reported and between 1% to 5% in constant currency. We expect our strong sales momentum in fiscal 2025 to contribute to fiscal year 2026 revenue growth, and we assume a stronger second half to the fiscal year as we ramp up activities on recently secured deals. On the other hand, our fiscal year 2026 revenue guidance assume a revenue decline at T-Mobile due to reduced discretionary spending. Our annual guidance also incorporates some contribution from inorganic deal activity. As for the first fiscal quarter, we expect revenue between $1.135 billion to $1.175 billion. Moving down the income statement, we expect non-GAAP operating margins within a new and improved target range of 21.3% to 21.9% in fiscal 2026, the midpoint of which is roughly 20 basis points higher than the prior year. Our profitability outlook reflects an intentional decision to accelerate our R&D, sales and marketing investments with respect to generative AI and next-generation Cognitive Core platform while balancing this with ongoing cost and efficiency gains resulting from our continued focus on operational excellence, automation and the internal deployment of generative AI-based tools across our business. Our margin outlook excludes additional restructuring charges we may take. Wrapping everything together on Slide 27, we expect to deliver non-GAAP diluted earnings per share growth of 4% to 8% in fiscal 2026. This outlook assumes pressure from below-the-line items in the year ahead. We anticipate a moderate increase in our non-GAAP effective tax rate to a rate for fiscal year 2026 of between 16% to 19%, primarily driven by a combination of regulatory changes, including the implementation of the Pillar 2 global minimum tax and other evolving international tax requirements. In the first fiscal quarter of 2026, our non-GAAP effective tax rate is expected to be above the annual range. Additionally, we anticipate higher finance costs this year, resulting from a reduced cash balance and funding of our strategic long-term growth plans. Overall, we expect to deliver high single-digit expected total shareholders' return in fiscal 2026, assuming the 6% midpoint of our non-GAAP diluted EPS growth outlook plus our dividend yield of roughly 2.7% based on the new dividend payment we announced today. With that, back to you, Shuky. Joshua Sheffer: Thank you, Tamar. I'm pleased with our solid financial performance and continued strategic progress in fiscal 2025, and I'm excited by our technological leadership and potential to open new growth opportunities by accelerating our generative AI investment in the year ahead. With that, we are happy to take your questions. Operator: And our first question for today comes from the line of Timothy Horan from Oppenheimer. Timothy Horan: You've had a lot more experience with AI at this point. Can you just talk about maybe qualitatively how impactful you think it will be to the telecom industry? And how much can you think improve productivity over time and generate kind of new services? And related to that, I guess the same thing internally, how much can it improve your own productivity internally? I realize you are reinvesting a lot of that productivity in R&D and in investing for longer-term growth? Joshua Sheffer: Thank you, Tim. We are evolving our offering in the in the GenAI domain. Internally, as you mentioned, we are using more and more generative AI capabilities in the software development life cycle and operation. And this is improving gradually, and we see more and more, I would say, benefits. It's not just to cost, to quality, to speed, many items that we see using this technology. From the offering perspective to customers, the initial offering that we have and which we are deploying and now successfully converting POCs to actual deals was more, I would say, add-ons on top system, some agents in the call center for care and for commerce and things like these type of capabilities, which now we are doing with many customers we mentioned and are pretty successful. The next, I would say, GenAI capabilities is what we discussed today, what we call Cognitive Core. The idea is to add a layer on the top of our BSS systems or the different one that we are supporting today and actually create a new model that can support agentic activity, agent to agent and actually completely disrupt and change the way we are running this operation today. Part of the investment that we discussed that we are going to accelerate this year is to build this layer. I think it's going to be -- it will take some time to deploy it. We believe it's going to be extremely exciting and give completely new capabilities to our customers in the agentic area. And we definitely believe that this will be another very important growth engine for Amdocs for the years to come. Timothy Horan: And do you have a rough idea when that will hit the market? Joshua Sheffer: Mid-'26. Operator: And our next question comes from the line of George Notter from Wolfe Research. George Notter: I guess I wanted to just probe the decision to kind of reallocate more capital into the business from an R&D perspective. I heard certainly what you said about building more agentic capability. I guess I'm just looking for sort of the puts and takes, right? You're implementing AI internally. You've been on a path of generating 60 or 70 basis points of efficiency each year. The coming year, it's going to be more like 20 basis points. Is that the amount of the investment, that incremental 50 or so basis points. Is that the right way to look at it? And -- or are there some other kind of growth factors we should look at? Tamar Dagim: Yes. Most of the margin story here is this intentional decision to invest more into this opportunity that we see as an exciting one. So at the same time, as you said, that we are continuing to enjoy the productivity gains. We do want to reinvest in making sure we are capturing this growth opportunity. It's not just R&D. It's also in the sales and marketing aspects, the go-to-market, how we are going to support and accelerate our coverage of the different opportunities in the pipeline. So I would say it's both. And definitely, we would like to see that keeping and accelerating the momentum we think we can bring on that aspect. We talked in the last 2 quarters about the fact that we are moving from proof of concept and feasibility to actual commercial deals. We continue to see that with the examples of Telefonica Germany we mentioned now and etisalat is much more mature and adding more and more use cases. PLDT as part of a large mega deal that we just signed is going to include adoption of our amAIz platform. So we are continuing to see more and more commercial pickup on that aspect and think that there's a great opportunity there. George Notter: Got it. Okay. And then also, I just wanted to ask about your conversations with customers. Obviously, the company prices its contracts, its businesses on outcomes, not billable hours times rate model. I get that. But I assume your customers do expect that you're using AI internally to improve efficiency. And I'm wondering if there's some expectation from customers to get better pricing or contract prices from you guys as part of that realization. I'd like to hear more about how those conversations are going. And at the moment of contracting with customers, are you seeing that pricing impact or pressure roll down on to Amdocs or not? Joshua Sheffer: So this is not new. I mean, yes, now I think the most discussed item is generative AI, but this -- we have the situation pretty much in every renewal situation. Over then, we changed technology, we moved to the cloud. So technology is evolving. Definitely, there is discussion like this with GenAI. What we are trying to do, obviously, is, a, our business model is, for the most part, as you mentioned, is outcome-based. So this is helping a bit. And I think what is more important that whenever we renew or sign a new agreement, we are doing a lot of effort very successfully to completely change the scope of the agreement by adding transformation to the cloud, generative AI capabilities and other automation and other products that we have. So yes, there is pressure. Customers expect to see savings. But as you mentioned, because we are not in a rate cut type of relationship as part of this discussion, on one hand, we show the customer efficiencies; on the other hand, we're expanding the scope of our activities. We're adding new products and new services and GenAI capabilities. So between the 2, I think we are doing a pretty good job in minimizing the impact. Tamar Dagim: And just to add on that, George, our offering is very rich. And typically, what happens is as we get into these dialogues with customers looking on their own on total cost of ownership, how they want to achieve this kind of savings or what benefits they're looking for in terms of improving customer experience and other pain points they have. So engaging in this dialogue, we have a lot of tools to go into this -- to go back to Shuky's point of mentioning additional scope. So we can take a bigger wallet share of what they need to invest in and give them the benefits that they're looking for. So it's not just a dialogue on, "Okay, what do we do for you right now and how are we pricing it moving forward?" It's a whole different dialogue that is emerging. And we've seen this quarter a lot of Managed Services expansion and extensions, and that has been part of this discussions. And as you can see, we're expanding the 12 months backlog beyond that. I feel very good about the fact that it's expanding our book of business beyond the 12 months that we are including in the backlog. So I think the method works. We can bring them that value while giving them the TCR reduction they're looking for and looking how to bring more and more of our offering to support their needs. Operator: [Operator Instructions] Our next question comes from the line of Tal Liani from Bank of America. Tal Liani: I have like 5 questions. So stop me when I'm going through too much. Cash flow is down next year. Why is it? And then I have -- I'm not asking the question in any order. Maybe I'll ask 2 at a time. But also the growth, if I take your midpoint on a constant currency basis, the growth is not showing much acceleration from this year. It's actually below -- slightly below Street expectations. What are the puts and takes in the growth because you also made the disclosure that T-Mobile is going to be down in 2026. So can you kind of elaborate on the good parts and the parts that are maybe more flattish and declining? I thought after some discontinuation of businesses, growth should somewhat accelerate from where we are or where we were? Tamar Dagim: Thanks, Tal. So I'll address the cash flow first. We ended the adjusted cash flow for 2025 of $735 million, but we started the year with exactly the same guidance range that we are starting now, $710 million to $730 million. We want to be appropriately conservative. So I don't see that as a cash flow decline. We are more or less at the same level. When we are looking into the question into the revenue growth, as you rightfully articulated, we are seeing, on the one hand, an amazing sales quarter, finishing 2025. Very happy about the deals we've signed. A lot of that momentum on the sales will contribute more into the second half of the year as it's naturally taking us more time to ramp up deals that we are capturing. So that's why we said that within the fiscal year '26, we will see a stronger second half growth. At the same time we see this positive aspect, we do see the pressure of lower discretionary spending in T-Mobile, and this is why we feel we want to be absolutely transparent about the decline we expect there. It is a major customer. I just want to give some context. T-Mobile has been a long-term relationship for us. We are supporting their billing activities across all their key brands, Magenta, MetroPCS, now UScellular. And this is obviously a core activity of what we do for them, and we are very focused on continuing to bring value. But at the same time, we need to acknowledge the fact that they are reducing some discretionary spend. So yes, there are positives, there are some negatives. But I believe that overall, looking on the sales activity and how strong we finished 2025, we feel good about our future. Tal Liani: Tamar, can you elaborate on your top 10 customers? That's number one. This is kind of -- you normally give this time of the year, you give the disclosure in the K, if you have the data. And then just on T-Mobile, they announced they made a disclosure that they are starting to transfer customers to a new billing system, and they made a few days ago. And the question is, is this kind of an end of a project? That's why revenues are going to be down? And is this normal for big transformational projects that at the end, you start to see a decline? When you say discretionary spending, it looks like things are being pushed out. And I'm wondering if it's really things that are being pushed out or being deprioritized versus the big contract that is basically done? Tamar Dagim: So Tal, to the point on the top customers, we are typically giving this information in our annual report that is coming out in December, and we'll do the same this year. I will just say that, as I mentioned on the prepared remarks, we are happy to see the customer diversification evolving in a positive way with more customers entering, I would say, the high thresholds of our business, including many international names that we've added, including relationship that a long time ago, were relatively small like Charter and are now a top customer. And we -- when we look into our relationship with T-Mobile, we cannot comment on the specific project or specific program plans, et cetera, on a single customer basis. But I can definitely tell you that we've taken all the reasonable assumptions in terms of the outcomes that we are seeing with relations to us into the guidance that we've given. So more to come, of course, in terms of what we can release moving forward. But I feel that we have taken everything we know as of today into the guidance. Tal Liani: Got it. Last question. I promised you 5 questions. So last question. You -- in the last year, you implemented AI in order to save -- to improve margins in order to reduce costs, and you've done it very successfully. And now you are talking about increased costs. Tell us about the margin trajectory, meaning on one hand, you are reducing expenses. On the other hand, you are spending more. What drives the increase in spend? And how soon could it translate into accelerated growth? Joshua Sheffer: Tal -- by the way, congratulations on the award, if we speak. The best way to tell it, if we did not have all the tools of capabilities we developed with generative AI in our software development life cycle, all the engineering activities in the company, including operation, in a year like this that we accelerate investment in developing our next generation, I would say, GenAI capabilities around the core system, you could see even a situation there is some pressure on the margin. The reason that we are able, on one hand to accelerate the investment in GenAI and still to generate maybe a moderate but still 20 basis points of increasing the margin is because we have all these capabilities that we develop and continue to see progress of actually doing everything much faster and better and with higher quality. Tal Liani: Got it. So if I take a step back for investors that are long term and looking at Amdocs as a kind of safe, relatively low-risk investment for the long term. The question that I'm asking is you've had tremendous success in the last 1 or 2 years with big projects with big customers, you are doing great in cloud. You're doing good. We start to see signs of GenAI. But the growth is still the same in a sense that even before you decided to discontinue some operations, you were growing between 3% to 4%. Now the guidance is for the same growth, maybe it accelerates second half, but we're still in the same neighborhood of growth. The question is, if you look out, without giving us guidance for growth, like specific guidance, but when you look out and you say where you want to position the company as a CEO a few years down the road, do you think that what you're doing today and your activity in cloud and your activity in GenAI, could it change the growth profile of the company? Meaning can you grow sustainably above the current 3% to 4% going into new markets and new TAMs? So sorry, it's a long-winded question, but I'm just trying to understand kind of the longer term, what you have in mind, the longer-term goals for the company in terms of growth. Joshua Sheffer: I think the answer will be shorter than the question. But I think in the last couple of years, the main growth engine for Amdocs was the cloud. In order for us to break this 3% and to go to a mid-single digit that we would like to be, we need more than one growth engine as big as it is, it's become already 30%. So we really believe that with the investments we do and with unique offering, we are going to have more than one significant growth engine like cloud, and we believe that what we develop right now in GenAI will be another one. And the answer to your question, I think in the mid, we established 2, 3 growth engines, then we can be there, and this is our intention. Operator: And our next question comes from the line of Shlomo Rosenbaum from Stifel. Adam Parrington: This is Adam, on for Shlomo. What is the organic constant currency growth implied in the guidance for fiscal 1Q '26 and full year '26? There's some commentary around some contribution from inorganic deal activity. If you could talk about that, please. Tamar Dagim: We expect to have roughly half coming from inorganic. When we started 2025 as well, we talked about some inorganic contribution and eventually, it was less than half of the growth. So we leave some flexibility for that, of course. And if you look back on the -- just on the type of deals we signed even this quarter in Q4, we already see direct relation to past acquisitions and the benefit it's bringing. So we feel this is a very important way for us to capture strategic growth opportunities, whether it's fiber -- some of those small deals that we've done in 2025 was around the fiber growth opportunity as an example. So we want that lever to stay open and contribute to the company. Adam Parrington: Okay. And the change in AI spend, where are you seeing customers put their budgets and capital? And how does that match up to the areas where you're stepping up investments in GenAI? Joshua Sheffer: So far, most of the investment we're building agents and use cases to support, as I said, to improve activities in the call center, both for our digital application, both for commerce and care. What we've built right now -- and by the way, the other thing we talked about is actually GenAI is all about data, so how to prepare the data to be available in real time to support the agents. What we are talking right now, it's a completely different scale. It's meaning that we are going to augment our core billing systems or core monetization system with the cognitive core layer that will, as I said, will allow agent to agent and all the capabilities of agentic options. This is a different scale of capabilities, which is relevant for every Amdocs customer everywhere. So we believe that from a scale perspective, it's much bigger from what we've done so far. Adam Parrington: Okay. And there was some commentary about some pressure from below-the-line items just on the modeling side. What areas specifically you're referring to and what's driving that? Tamar Dagim: Referring specifically to tax rates as we see more regulatory changes around the world, like the Pillar 2 minimum tax as well as other countries that are putting some new regulations. We elevated the effective tax rate range from 15% to 17%, to 16% to 19%. So that would be one point. And the other one is financing costs. As we are starting the year in the lower cash balance and continue to have plans to invest in some strategic growth areas, we will see some higher finance expense costs. So that's what we refer to as items below the operating income line. Operator: This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Matt Smith for any further remarks. Matthew Smith: Okay. Thanks, operator. Thanks, everyone, for joining the call tonight. If you've got any additional questions, please give us a call in the IR group here. And with that, have a great evening. Thanks a lot. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good day, everyone, and welcome to Proficient Auto Logistics Third Quarter Financial information. [Operator Instructions] Please note that this conference is being recorded. Now it's my pleasure to turn the call over to the Chief Financial Officer, Brad Wright. Please proceed. Bradley Wright: Good afternoon, everyone. I'm Brad Wright, Chief Financial Officer of Proficient Auto Logistics. Thanks for joining us on Proficient's Third Quarter 2025 Earnings Call. Under SEC rules, our Form 10-Q covering the 3- and 9-month periods ending September 30, 2025 and 2024, will include financial statements for both the predecessor accounting entity, Proficient Auto Transport and the successor entity Proficient Auto Logistics, Inc. We are not required to provide and the Form 10-Q will not contain pro forma financial data for the combined companies. Our earnings release provides comparative summary financial information for the third quarter of 2025 to the third quarter of 2024 for the company. It can be found under the Investor Relations section of our website at proficientautogistics.com. Our 10-Q when filed can also be found under the Investor Relations section of our website. During this call, we will be discussing certain forward-looking information. This information is based on our current expectations and is not a guarantee of future performance. I encourage you to review the cautionary statement in our earnings release describing factors that could cause actual results to differ from those expressed by our forward-looking statements. Further information can be found in our SEC filings. During this call, we may also refer to non-GAAP measures that include adjusted operating income, adjusted operating ratio, EBITDA and adjusted EBITDA. Please refer to the portions of our earnings release that provide reconciliations of those profitability measures to GAAP measures, such as operating earnings and earnings before income taxes. Joining me on today's call are Rick O'Dell, Proficient's Chairman and Chief Executive Officer; and Amy Rice, our President and Chief Operating Officer. We will provide a company update as well as an overview of the company's combined results for the third quarter. After our prepared remarks, we will open the call to questions. During the Q&A, please limit yourself to one question plus one follow-up. You may then get back into the queue if you have additional questions. Now I would like to introduce Rick O'Dell, who will provide the company update. Richard O'Dell: Well, thank you, Brad, and good afternoon, everyone. I'll start with an overview of our operations during the third quarter and some trends that provide insight into our expectations for the remainder of this year. First, as it relates to the third quarter, as we discussed in our last earnings call, July auto sales and deliveries were stronger than had been expected with SAAR finishing at 16.4 million units and while sequentially lower, consistent with seasonality. August and September SAAR were stronger year-over-year at an average of 16.3 million units driven in part by a surge in EV purchases ahead of the expiration of federal tax credits. Company revenue and unit volumes in the quarter largely followed these trends and were further bolstered by market share gains and the Brothers acquisition, finished up 21% and 25%, respectively, year-over-year for the quarter. The combined results nearly matched the revenue produced in the second quarter of this year and again, improved profitability sequentially and improved 250 basis points year-over-year, demonstrating continued momentum and operational improvements and strategic execution. From a market perspective, volatility in automotive manufacturing and purchase levels continues reflecting production disruption due to supply chain issues and economic impacts of the expiring EV tax credit, interest rate adjustments and tariffs. While automotive OEMs continue to face cost pressure from tariffs as widely reported in their Q3 earnings releases, PAL continues to provide critical infrastructure in the transportation supply chain and we have the ability to be nimble to serve customer needs as they make necessary shifts. The pricing environment is not as strong as we'd like to see, however, we continue to show discipline in our pursuit of new business and retention of incumbent business to ensure that our portfolio allows for sustainable profitability and reinvestment. We're confident that we can be successful in achieving growth and margin expansion despite complexities in the market. Looking to the fourth quarter, October SAAR slowed to 15.3 million, and we are feeling this softness on volumes. SAAR forecasts are for high 15 million to low 16 million range for the balance of this year and into next year with dealer inventory levels healthy, along with a favorable tax policy for qualifying car loan interest deductions, a high likelihood of continued interest rate reductions and average vehicle age above historical norms for replacement and a typical seasonal increase in buying at the end of the year, we're hopeful that volumes strengthened through the balance of the fourth quarter, but we expect a modestly lower revenue outcome than the third quarter, and we expect to achieve similar adjusted operating ratio and cash flow. With regard to profitability, as I referenced in the second quarter earnings call, we remain focused on controlling costs and advancing targeted cost savings initiatives and operating efficiencies that produce sustainable benefits. In the third quarter, we recognized a $1.9 million restructuring charge, representing approximately $0.06 per share which is primarily composed of onetime headcount and facility consolidation resulting from organizational realignment as well as fees associated with the consolidation of causality insurance coverage for all operating companies. In total, we expect to realize over $3 million in annual savings from the combined restructuring actions going forward though much of this begins in 2026. Note that under our new insurance program, we have a larger retention consistent with the company of our size, and there may be greater quarter-to-quarter volatility in the insurance and claims expense line going forward reflecting frequency and severity of any accidents and injuries that do occur. That being said, we do anticipate annual savings in our annual insurance expense. In addition to these items, we continue to leverage our national scale to drive cost synergies through our procurement efforts. While our now unified accounting and transportation management systems are increasingly providing visibility and actionable insights into our customer base, operational efficiency opportunities and profitability. As evidence of this continued progress sister hauls or load sharing between the merged companies grew to 11% of revenue in the quarter from 9% in the prior quarter, reducing empty miles and contributing to improved asset utilization. As we look ahead, we're well positioned to operate profitably with strong cash flow in the current environment and to respond quickly and efficiently when the market improves. The company will continue to protect its strong balance sheet position and advance our strategic objectives for continued margin expansion, market share gains and acquisitions. I'll now turn it back over to Brad to cover key financial highlights. Bradley Wright: Thank you, Rick. First, a few summary statistics and note that the contributions from ATG and Brothers are only reflected in periods since their acquisition by Proficient. Operating revenue of $114.3 million in the third quarter was 24.9% higher than in the third quarter of 2024. The adjusted operating ratio for the third quarter was 96.3%, an improvement of 250 basis points from the comparable quarter in 2024, which was 98.8%. Units delivered during the third quarter totaled 605,341, which is an increase of 21% compared to third quarter 2024. Revenue per unit excluding fuel surcharge, was approximately $173, up approximately 3% from the third quarter of 2024. Company deliveries were 36% of revenue this quarter, down slightly from 37% in the same quarter last year when revenue was much lower, which diminished the volume available for allocation to sub haulers. Our OEM contract business generated approximately 93% of total transportation revenue in the quarter, which is essentially unchanged from last quarter and reflects a continued lack of spot volume opportunities. Likewise, our dedicated fleet business generated $4.2 million of third quarter revenue, consistent with our expected run rate for the full year 2025. Building on Rick's comments about our expectations for fourth quarter revenue, we now foresee full year top line growth in a range of 10% to 12% compared to the combined company's 2024 total. The company has approximately $14.5 million in cash and equivalents on September 30, 2025, up from $13.6 million at the end of last quarter. Aggregate debt balances at the quarter end were approximately $79.2 million down $11 million from $90.2 million at the end of the second quarter. The resulting net debt of $64.7 million on September 30 of this year equates to 1.7x trailing 12 months adjusted EBITDA versus 2.2x at the end of last quarter. Free cash flow from operations represented by adjusted EBITDA less CapEx was approximately $11.5 million during the quarter, which allows for this meaningful reduction in our debt balances. While CapEx was light during the past quarter, we can reiterate our expectations stated in last quarter's earnings call that full year equipment CapEx will be approximately $10 million for 2025. Maintenance CapEx will likely grow from this level as our fleet expands. However, even with expected CapEx increases, we expect free cash flow yields of mid-teens to 20% return against our current market capitalization. Total common shares outstanding ended the quarter at 27.8 million, up slightly from 27.7 million last quarter as a result of vesting share grants. Operator, we will now take questions. Operator: [Operator Instructions] Our first question is from Tyler Brown with Raymond James. Patrick Brown: Brad, just some clarification just real quick. So you said revenues up 10% to 12% for the full year. Brad, is that on a $389 million pro forma base? Basically, is it about a little over $430 million for -- using the midpoint for 2025? Bradley Wright: Yes. It's off of the $388.8 million. Patrick Brown: $388.8 million. Okay. Perfect. And then flattish OR, is that what you said, Rick, sequentially. Richard O'Dell: Yes. Patrick Brown: Into Q4. Okay. Okay. Perfect. And then I was hoping, could we get a quick update on where we are on systems. I think that you guys had made the full conversion on the accounting system, but are we fully transitioned on the TMS across all the 7 opcos? Amy Rice: Yes, we are. Patrick Brown: You are. And then how is that unified operating platform? Can you talk about how that visibility is helping with those sister hauls? I think you said it was 11% of revenue, up from 9%. But just big picture, Amy, I mean, where can that number go longer term? Amy Rice: We see that number continuing to rise. In the early stages, we're using that largely as a proxy for filling empty miles. But as our assets become more fluid and flexible across the network, I would expect that sister haul volume to rise, whether it's representing filling empty miles or not. So that the additional visibility in the system is very helpful to being able to act more quickly and there's opportunity for additional technology overlay for dispatch optimization and some of those capabilities as we look forward. Patrick Brown: Okay. And then just real quick here. Just -- sorry, just a couple of other ones. But just, Rick, you mentioned last quarter that there were a number of OEM contracts that have been -- that were coming up this quarter. I'm just curious how you fared in those RFPs. Richard O'Dell: Yes, go ahead, Amy. Amy Rice: Yes. We still have a number of OEM contracts that are awaiting awards and sort of in the process of being resolved. We've not made any results that are material to overall revenues, and we commit to share anything that is of a materiality threshold. There is, as we've shared with pricing, we will work to retain profitable volume only to the point that it makes sense for our portfolio. So we have had some experience of letting some volume go to price points that are not attractive to us. We are, however, continuing to pick up some new lanes and new opportunities in some of these contracts, but they've been smaller more recently. Patrick Brown: Okay. And just my last one, I promise. But -- and I know '26 is a ways away. But -- there are a few moving pieces that roll into '26. I mean I think you've got some old Jack Cooper business that kind of is still incremental. Brothers, I believe, is incremental. But Brad, is there a reason that assuming that SAAR is flat into '26 that revenue couldn't be up maybe high single digits. Is that a crazy assumption? Bradley Wright: I don't think that's a crazy assumption, Tyler. We will pick up, as you point out, some incremental revenue for a full year of Brothers. And so that helps. It's -- we're still in the process of doing our 2026 plan, and we'll give you some more specifics on our next call. But I think that's not a crazy assumption. Richard O'Dell: Tyler, I would just add to that while, again, we're still in our '26 planning progress, we do -- we have kind of established a target to improve our operating ratio by at least 150 basis points in 2026 over the 2025 results. Operator: Our next question comes from Ryan Merkel with William Blair. Ryan Merkel: I wanted to ask on October just to get a little more specific what was the year-over-year increase in revenue for October? And then just clarify, it sounded like you thought November and December, the growth could pick up a bit from October. Did I hear that right? Amy Rice: Yes. So for October, I'll give you the pieces in there. We had Brothers this year, we had the incremental market share gains this year, neither of which were in the comps from last year. And then on just the base market, I would say it was slightly improved from where October was last year. In terms of November and December, typically, seasonally, there is an end of year purchase pattern and pushing up inventory to clear out the 2025 model and bring in 2026 inventory. We're seeing a bit of sluggishness in the current market as it stands in early November. So we are still, as we said, hopeful that we see that uptick seasonally, but we are not experiencing it in the current market. Ryan Merkel: Got it. Okay. And then the ARPU was still down year-over-year for the company deliveries, so -- and then in the press release, you mentioned there's still excess supply. I realize that's a near-term problem. But how should we think about pricing in the next couple of quarters? Do you think we've bottomed here? Or might there still be a little more pressure? Amy Rice: So I'll take that in 2 ways, Ryan. One is how we are experiencing pricing on bids that are coming up for renewal. The other is really the RPU trends quarter-to-quarter and how that may change. As we shared pricing dynamics on new contracts are pretty weak right now. We would like to see a more constructive market for pricing with supply and demand a bit more imbalanced. From an RPU perspective, though, we would expect largely stable RPU. The big changes that we saw in some of the quarters previously, we're cycling the declines in the dedicated product cycling the declines in the spot market. So those 2 things had a really material impact on RPU year-over-year. We are stabilizing now, and you should expect to see more consistent RPU year-over-year just with any impact from mix change within the portfolio. Ryan Merkel: Got it. Okay. That's helpful. And I'll slip in one more. Rick, you said that the dealer inventory was healthy so should I take that to mean that they're fairly lean levels, you feel comfortable? And I realize it's a moving target, but is that something you feel good about as you enter 4Q? Richard O'Dell: Yes. Yes, we don't perceive the inventories to be in excess. SAAR has been strong. Operator: Our next question comes from Alex Paris with Barrington Research. Alexander Paris: Congrats on a strong quarter. Just to be clear on the Q4 guide, so to speak. You said 10% to 12% Brad, I think, for the full year, that would suggest Q4 revenues of somewhere between $103 million and $110 million or so. Still strong growth year-over-year, like the -- maybe not quite as high as Q3 year-over-year. But I'm wondering where is the strength coming from? I think last quarter, you talked about several buckets. The acquisitions of Brothers, Jack Cooper market share gains, organic growth, how would you allocate the importance of those buckets to the revenue growth of 25% in the quarter just ended and the unit growth of 21%? Bradley Wright: Well, I think it's not unlike the second quarter. We still are having the same benefit, roughly the same amount of revenue from both of those 2 components, the Brothers and the new GM revenue. And with revenue essentially flat quarter-over-quarter, I think you could apply the same metrics. Alexander Paris: Got you. And then just a follow-up question on free cash flow. You said it was adjusted EBITDA minus CapEx, $11.5 million in the quarter. And I think you said on the last call, $30 million to $40 million of free cash flow for the full year. Is that still a reasonable target? Or it seems like it's running a little hotter than that right now. Bradley Wright: It is. If you -- I was using kind of a run rate last quarter, certainly annualizing this one gets you a little -- get you a higher, probably closer to $35 million. Alexander Paris: Okay. And then on that basis, by far, you generate on a free cash flow yield basis more than any other company in the group, whether truckload or LTL. And a free cash flow yield approaching 20% when the next closest is 5% or 6%, which would support a significantly higher stock price. And that's enabling you to reduce debt at a pretty aggressive rate. Is it just a matter of you're a new company, you're a small company? What's it going to take to get the market to recognize this free cash flow characteristic. Bradley Wright: Well, listen, when we talk to a lot of investors, and I think most of them appreciate the fact that the business is kind of an outsized cash flow return. When we start working off some of these other depreciation levels, amortization and that starts coming through as GAAP operating earnings, maybe that wakes other people up. But I don't know, Alex, it's -- we're as flummoxed by it as you are. Alexander Paris: And then I guess last one, m&A pipeline. It seems that you have the 7 companies fully integrated. Is there more cost takeout potential there? And then what does the new M&A pipeline look like? Are you still pretty active there, particularly with this free cash flow generation. Richard O'Dell: Yes. I mean we're always pursuing incremental efficiencies. And I think we've demonstrated or we're in the process of demonstrating kind of a cadence of regular improvements, validating our execution and our strategy and that strategy does include a combination of organic growth opportunities, supplemented by selective tuck-in acquisitions. And we have a pretty robust pipeline of opportunities. And obviously, with our strong cash flow, we've got the capability to fund that. And we would expect to continue on our target of 1 to 2 tuck-in type acquisitions a year as we proceed in 2026. Operator: Our last question comes from the line of Bruce Chan with Stifel. Andrew Baxter Cox: This is Andrew Cox on for Bruce. Building upon the cash generation discussion prior. Just kind of wanted to talk a little bit about CapEx and cash flow expectations moving through the end of the year and into 2025. You guys said in the prepared remarks that you do expect CapEx to move higher after this year and really appreciate the full year reiteration of the CapEx guide. But kind of wanted to get an expectation of your CapEx into 2026 and beyond. Is -- are there any additional CapEx needs to meet higher volumes if they should come sometime next year. And how do you plan to deploy free cash flow beyond CapEx next year? Bradley Wright: Thanks, Andrew. I think, look, CapEx at $10 million is probably kind of at the bottom of the range. But having said that, we've got fleet capacity that could support this kind of a market absent big gains in contract share. And so we'll have to kind of adjust as we go through the year. But the comment in the prepared remarks was just that we do expect that as our fleet grows, we intend to keep the average age at around 5 years. And that's just going to mean that CapEx by definition, has to go up a little bit. And so maybe $15 million a year might be more normal or even as high as $20 million as we continue to grow. But with the cash flow generation that we've been talking about, that still yields a mid- to high teens return on market cap, at least at today's market cap. So I wouldn't expect -- we're still working on the CapEx plan along with our full budget for 2026, but I wouldn't expect a much higher commitment to CapEx during '26 unless as again, the market changes, and we see big needs for addressing some contract gains. Andrew Baxter Cox: Okay. That's really helpful. Every trucking executive team this earnings season has been asked a question about the changes to whether it be non-domiciled CDLs or the enforcement of the English language proficiency. Just kind of wanted to see if you guys have any sense on the impact of maybe these supply changes could have on the auto hauler capacity. Anything on the regulatory side? We would expect that it would have much less impact than dry van, but just any insight you guys have to help us try to model that in would be really helpful. Amy Rice: Sure. So I mean, of course, we saw today that the interim rule was stayed for now on the non-domiciled CDL front. So we will continue to watch and see how that plays out through the appellate process. But assuming that interim rule does go forward in something substantially similar to what has been proposed, we do think there's a pretty material impact on trucking overall. It is not a material impact that we would expect to Proficient per se as our company's driver population is not impacted in a large way. But we would think for the auto hauler segment, that would hit more closely for smaller carriers potentially sub haulers and there are some niche players in the industry that have a driver composition that it's more likely heavily and/or majority impacted by the non-domiciled CDL interim rule proposed. It is certainly more of an impact on that front than the English language proficiency front. Andrew Baxter Cox: Okay. Amy, that's really helpful as well. If I can sneak one more in here. Just kind of double-clicking on the mix benefit or just benefit at all that you had from the potential pull forward of EV demand prior to the expiration of the tax credits this quarter. Maybe it might be best if you guys have this offhand or if you guys can help us understand like what percentage of the units in 3Q were electric vehicles, maybe compare that to the year prior or the quarter prior. Just trying to understand what sort of impact this pull forward may have had on the quarterly results. Amy Rice: Yes. So I'll come at that in a slightly different way. We don't actually track our volume on the basis of internal combustion engine versus EV vehicles. But the impact to us is that the EV vehicles are a heavier weight so you can get fewer of them on a given truck. So where you'd expect to see some impact is potentially a lower load factor per truck, but that's often and we seek to ensure compensation around EVs so that the lower load factor is offset in higher revenue on those units. Andrew Baxter Cox: Right. Okay. I just -- I mean should we believe that the revenue per unit impact this quarter, was it at all impacted by mix changes to the EV side? Amy Rice: I don't think so. Richard O'Dell: Minimally. Bradley Wright: Yes. Minimally. Operator: We have a follow-up from the line of Tyler Brown with Raymond James. Patrick Brown: I appreciate you guys actually answered my follow-up on non-domiciled. That was very helpful, Amy. But since I've got you, real quick, I think, Brad, you mentioned last quarter that 3 of the 7 opcos were running 90 or better. Can you chalk up 1 or 2 more this quarter? And then on the opcos, the other ones that are not running at 90 or better, they've got to be running just mathematically, call it, 100 or more. And if you were to build the bridge between where they're operating and some of the 90 or better opcos, what are the kind of 2 or 3 key things that really differentiate there on the P&L? Bradley Wright: So several things there, Tyler. One, the count on those at 90 or better hasn't really changed this quarter versus last quarter. But I would say more generally that there has been a pretty broad improvement across almost all of the opcos, and that has come on constant revenue. So we are seeing incremental gains even if small, but on flat revenue. In terms of your observation that others would have to be over 100, we don't have that in a pervasive way, but we've got a couple of opcos with -- that are experiencing lower volumes that are at or a little above 100, and that is mostly a revenue issue. We have dealt with a lot of the cost issues through this consolidation effort and the reorganization that we talked about. And so I think that will help in the go forward even for those entities and then pushing some extra revenue through whether that's wins on contracts or whatever it may be, we will take care of the difference. That's the path really. Patrick Brown: Okay. So it's not a fundamental cost structure issue. It sounds like it's a little bit of price, a little bit of volume would go a long way. Bradley Wright: Yes. Amy Rice: Yes. Patrick Brown: Okay. And then did you give the spot mix? That's my last question. Bradley Wright: We -- I don't know that we did, but similar to last quarter, it was at or a little below 3%. Operator: And with that, ladies and gentlemen, we conclude our Q&A session. I will turn it back to Rick O'Dell for final comments. Richard O'Dell: Well, thank you for your interest in Proficient Auto Logistics. We're pleased with the progress that we've made in the first 18 months of our endeavor as a public entity. And most importantly, never satisfied with the absolute results and clearly optimistic about our ability to continue to execute and progress our operating margins. Thank you again for your interest. Operator: And ladies and gentlemen, this concludes our conference. Thank you for your participation. You may now disconnect.