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Ana Bartesaghi: Good morning, and welcome to Grupo Supervielle's Third Quarter 2025 Earnings Call. I'm Ana Bartesaghi, Treasurer and IRO. Today's conference call is being recorded. [Operator Instructions] Speaking today are Patricio Supervielle, our chairman and CEO; and Mariano Biglia, our CFO. We're also pleased to welcome Alejandro Catterberg, President of Poliarquía Consultores, one of Argentina's leading political analysts, who will briefly share his perspectives on the post-election political and reform outlook. Gustavo Paco Manriquez, Banco Supervielle's CEO; and Diego Pizzulli, CEO of InvertirOnline, will also be available during the Q&A session. Before we begin, please note this call may include forward looking statements. Please refer to our earnings release and SEC filings for further details. Julio Patricio Supervielle: Ana. Good morning, everyone, and thank you for joining us today. Let me begin with a broader macro perspective, which is quite encouraging. Following the recent midterm elections, Argentina is entering a new era. The path towards normalization and reform is gradually taking shape, and the financial system is poised to play a critical role in enabling this transition. We see the expansion of credit and a more dynamic banking sector as essential drivers of sustained economic recovery and inclusive growth. In this new environment, we are committed to returning to deliver profitability and sustain long-term value. And we are doing so supported by strategic initiatives that continue to unlock the full value of our franchise. While we are optimistic about the future, the most recent quarter presented some challenges. Systemic pressures and a very tight monetary policy characterized by unsustainably high real interest rates and historic reserve requirements ahead of the elections had a severe impact on economic activity and particularly the entire banking sector. This dynamic significantly compressed financial margins and constrained lending capacity. As a result, we recorded a net loss of ARS 50.3 billion, in third quarter 2025. Encouragingly, we are now beginning to see early signs of stabilization. Post-election confidence is improving, interest rates have declined sharply with room for additional reduction and monetary conditions are slowly easing. As we consider what these early improvements may signal for the broader environment, Alejandro Catterberg will briefly discuss the political landscape and what's ahead for the government reform agenda. But first, let me quickly walk you through a few highlights from the quarter on the following slide. Starting with loan growth, which remains solid, up 8% in real terms, slightly ahead of the system. Growth was led by the corporate segment, while retail declined slightly as we further tightened origination standards. Asset quality weakened as expected with the NPL ratio rising to 3.9%, mainly driven by the retail side. However, our NPL ratio -- share of individuals remains below our retail loan share, highlighting our focus on payroll and pension customers. On the funding side, deposit growth was strong, up 15% quarter-on-quarter in real terms and over 40% year-on-year. Dollar deposits climbed to another record high, up 31% sequentially. Our remunerated account strategy continues to gain traction and helping deepen client relationships. Profitability was most impacted, mainly due to margin compression and a higher cost of risk. Partially mitigating this, we maintain a tight control on cost, which declined 2% quarter-on-quarter and 12% year-to-date in real terms. We maintain a sound capital base to support growth as monetary policy continues to ease and loan demand resumes. Our CET1 ratio reached 13.2% at quarter end and rose to 14.5% in October, supported by lower deferred asset tax deductions. We are on track with executing our strategy, scaling our SuperApp, enhancing customer engagement and expanding cross-sell opportunities, particularly at [ Yole ], where we saw another strong quarter of volume and fee growth. While the quarter had its challenges, we are focused on controlling what we can control and continue to invest in our business to further advance our competitive position and ensuring long-term success. With that, I'll hand it over to Mariano to go deeper into our financial performance and perspectives. Mariano Biglia: Thank you, Patricio, and good day to all. Our third quarter results were heavily impacted by temporary macro and regulatory headwinds, which drove a 43% sequential decline in net financial income. With 1-day interest rates increasing to a peak of over 90% and 150% when adjusted by reserve requirements, funding costs increased by ARS 56 billion. Deposit rates adjusted almost immediately, while loan repricing lags due to longer duration, creating a temporary squeeze on spreads. Additionally, local market volatility ahead of the midterm elections impacted bond prices, resulting in weaker investment portfolio yields. In parallel, the Central Bank raised minimum reserve requirements by over 23 percentage points and moved compliance from a monthly average to a daily basis, further tightening liquidity, which had a negative impact of nearly ARS 21 billion. Lastly, the sharp rise in real interest rates generated a negative spread on our UVA mortgage portfolio, which impacted financial margin by close to ARS 18 billion. As a result, our peso NIM declined to 11.7% and total NIM fell to 10.8%, down 1,100 basis points and 1,000 basis points, respectively, quarter-over-quarter. Let's now turn to the next slide to review our 2025 -- turning to Slide 5. We are resetting our expectations for full year 2025. We now anticipate real loan growth of between 35% to 40%, led by corporate lending with retail gradually resuming growth as disposable income improves. Deposits are forecast to grow 30% to 35% with further share gains in U.S. dollar-denominated deposit balances. Regarding asset quality, we now expect an NPL ratio between 4.7% to 5.1%, reflecting asset quality trends among consumers and the result of the more challenging environment in recent months. Consequently, net cost of risk is now projected at 5.8% to 6.3%. NIM is now anticipated between 15% to 18% as high interest rates and reserve requirements through late October weighed on 4Q results. Turning to Slide 6. We now forecast net fee income growth of 5% in real terms. We are reinforcing our focus on operational efficiencies, including reductions in headcount and non-staff expenses. We now expect operating expenses in real terms to decline 8% to 10%. We now expect full-year ROE to range between negative 5% and 0%. Lastly, we anticipate ending the year with a CET1 ratio between 12.5% and 13.5%. Looking ahead, we intend to provide the 2026 preliminary outlook of key variables early next year, once there is greater clarity around reserve requirements, liquidity conditions, economic activity and the broader macroeconomic framework. Additional details on our quarterly performance and outlook are available in the appendix of our earnings presentation. This concludes our prepared remarks. We are pleased to welcome Alejandro Catterberg for a brief overview of Argentina's political outlook before we move to Q&A. Alejandro Catterberg: Thank you. Thank you for the invitation, Patricio, Ana. Thank you for having me here. Thank you, people for joining. My idea is just to give a brief analysis of what happened or what the election give us and what are the scenarios that we should start thinking from now on for Argentina. I would like to make basically 4 points. And then I don't know if we have time for Q&A. Happy to answer. Number one is that after a year of huge volatility, uncertainty, a big number of self-inflicted mistakes and damage by the government, it ended up quite positive for the government. Of course, as we all know, the election end up being better than expected a few weeks or months before the election, probably worse than what the government could have got if they decided to follow a different strategy and path by the beginning of the year. But that is in the past. But basically, with the result of the election, the government had a huge opportunity to begin the second stage of their administration with a lot of -- in control, in political control and with huge opportunities in front of them. A few numbers of trends had been confirmed by what happened this year and especially in the elections. Number one, it's something that some of you heard me before saying is that we have a confirmation that we have a huge change in the political cycle. The political cycle that lasts for 20 years and that was basically dominated by the Kirchner and the other hand of the same coin Macri was over in 2023. This election cycle basically confirmed that. We no longer had Juntos por el Cambio. All of the parties that were part from Juntos por el Cambio suffered huge defeats or very bad electoral results. The radical party performed or got less than 1% at the national state. They lost a huge number of seats in the Congress. Coalición Cívica led by Elisa Carrió, they had extremely bad results. They lost 4 of the seats they control in the House. The PRO party in the provinces that they run outside La Libertad Avanza, they performed very badly. Clearly, that idea that we have, and I've been saying that there was before and after 2023 has been consolidated with this electoral cycle. We are seeing the implosion of the political parties at the national level or the traditional political parties. We are seeing the implosion and the disappearance and the loss of influence of the leaders that dominate Argentina over the last 20 years. I'm talking about Mauricio Macri and Cristina Kirchner. We are seeing a huge fragmentation and atomization of politics in Argentina. As a consequences of all of that, we are seeing a greater role from the governors and the provinces. The governors and the provinces are becoming the main players besides, of course, La Libertad Avanza and Javier Milei. And that is changing the Argentina economy and politics, and we should -- and I believe this trend will continue, and we are moving forward to a different organization of politics with a much more fragmented distribution of power with the governors and the provinces becoming more -- having a higher degree of autonomy, less constrained by the national political leaders. And of course, that has correlated with some economic trends that we are having here in Argentina with this or many of these provinces starting to receive investments in the extractive industries for the first time in their history. And finally, as a consequence of all of this, we are seeing a consolidation of Javier Milei and La Libertad Avanza and especially the decisions that the President took after the victory. The changes within the government that the President made after the victory clearly sends the signal that he is concentrating most of the power that somehow he had delegated in other advisers like Guillermo Francos, Santiago Caputo. And the key post in the government is being fulfilled by Karina Milei people and Javier Milei himself. Also that is the broader picture of the things and the trends we have seen after the election. Number three, going to the Congress that we're going to see from December 10 in a few days from now and the agenda that is coming, you have probably read this, but there was a huge change and some positive surprises, especially in the Senate because all of the tight race of -- most of the tight race end up being on the favor of La Libertad Avanza. So La Libertad Avanza end up getting 3 extra Senators that better than what we thought and the Peronism end up losing 3 extra Senators out of the expectation. So the Peronists went from 34 Senators to 28. That is a key piece of information, guys, because the Senate has always been the most difficult part of the political system in Argentina to go through reforms. The Peronist has always been traditionally dominated by the Peronist because the Peronist traditionally dominate the provinces and the small provinces. Since the Peronist are losing the provinces, as I said before, are fading away, that translates into the Senate and the number of seats that the Peronist is now controlling the Senate is no longer the majority. And at some point, they may even lose the first minority. So it opened the door for the Senate to approve reforms. La Libertad Avanza until today has 6 Senators plus 9 from the PRO, 15 in total. They go from 6 to 21. The PRO go from 9 to 5. So they go from 15 to 26. They need to get 11 Senators to get the majority. And basically, those 11 Senators are very easy to reach. They need to make agreements with number of Governors that are willing to collaborate with the government and with -- and are willing to vote for many of the reforms. There is a, how do you call, the chair game, in which now the government has more chairs than -- there are more governors than chairs. So the governor will have the incentives to collaborate. And I don't find any difficulty. So I don't expect any difficulty for the government to be able to gather a majority in the Senate during the summer in which they're going to be discussing the reforms. In the House, the picture is quite similar. La Libertad Avanza has moved from 44 to 91 plus 18 from the PRO. So there are only 20 seats away from having the majority in the House, and there is 46 seats in the hands of the governors who they could easily reach agreements to get to that number. So the reform seasons will start in a few weeks from now. The government will be able to approve for the first time in the administration, their budget. So like Milei and La Libertad Avanza run the country the last 2 years without a budget. Next year, we will have a budget being approved by the Congress. And a big number of reforms will be discussed. Basically some labor reforms, some tax reforms, some other reforms regarding, for example, criminal policies or judicial things or many other aspects, many of the things that were left behind in the [ buses law ] last year are going to be put it back on the table. Other issues like the Glacier Law will probably be discussed and there is a high probability that will be approved that is critical for the mining industry because basically, they will send the decisions regarding Glacier's policy to the provinces of each province decided what to do with that. And on top of that, we have other reforms coming, institutional reforms that will be very important. The most important of all, the government will have a new chance to complete the Supreme Court and to nominate some new judges into the Supreme Court. So I do expect that this or most of this reform will be approved during the summer. I don't know if one of them or the other will be a fully game changer. At some point, I think they are relevant and they change and increased productivity in the long term in Argentina. But also what happens with the economic policies and the normalization of the economy, interest rates and all of the stuff are as relevant as the reforms coming from the Congress. Finally, my last comment is that I have received many questions from clients or from investors like you guys saying, well, listen, Ale, I have saw this picture before, I have saw this movie before. In 2017, Macri won the midterm selection with almost the same amount of support and votes that Milei got and almost exactly in the same provinces that Milei won last month. So we all know what happened with Macri a few months after he won the midterm election. And I have to say that I find some differences this time with the previous time. And most of the differences, I think, plays on the favor of Javier Milei or that the chance that these times work it out better. On the economic side, clearly, by this time, Milei has done the dirty work and the fiscal adjustment is already done. Mauricio Macri got to the midterm elections without having done the fiscal adjustment, and he was forced to do it after the 2018 crisis. The adjustment in relative prices clearly has been probably better under -- or has moved faster under Milei than what Macri was able to do by 2017. We have a good emerging markets environment right now. Macri, 2 months after winning the midterm election faced one of the toughest drought in the agricultural sector, while Milei is going to face one of the greatest harvest in 2 or 3 months from now. Macri by this time has used all of the markets or has, how you say, consume all of the access to the market. Milei has not been able to go back to the markets. They will go back to the market probably starting next year. By this time, Macri had an energy deficit of more than $5 billion. Argentina now because of how Vaca Muerta is producing has a surplus of energy account by more than $7 billion. That is on the economic side. On the political side, clearly, Milei is facing a weaker Peronism and a much weaker Cristina Kirchnerism that Macri was facing. Milei has a very favorable Senate, much more favorable than what Macri had, even though the House was more easy for Macri than for Milei. But on the whole, I think the chances to move forward with the reforms should be easier now for Milei than what it was for Macri after the 2017 election. We have governors who are -- who have a more important role and have the incentive to collaborate with the government because basically, they don't have another place to go right now. We have an administration and probably a President that is much more committed into pushing the reforms and going deeper with surplus than what Macri was. Macri and Milei still had very similar public opinion support by the time. We finished our November survey and the trust and confidence index that I do for Universidad Di Tella increased 16% this month. Milei approval rating went up 6 points this month. So basically, we are going back to the numbers that we have seen around June, July this year before the whole deterioration process started. We have not reached the highest point that Milei was able to achieve by the beginning of 2025. But clearly, after the election, Milei recovered almost all of the deterioration that he suffered during the last 3 or 4 months of huge uncertainty. And on top of all of that, besides the economy and the political considerations, we have something that could be a game changer or it is a game changer, and that is the full support in economical terms and in political terms of the U.S. Government and President Trump. So all of that context, in my opinion, creates the conditions to make the story or the probabilities of Milei to move forward and have a third year of administration clearly better than what Mauricio Macri had as a third year. So for me, Argentina and the government has a huge opportunity in front of us. I hope that the government and the President had learned from the mistakes he made in the last few months and some of the mistakes he made in the first year of his administration. I hope that this time, he pushed for good judges to go to the Supreme Court. I hope that this time, he's able to -- or he delivered on the promises and the agreement that he made with the governors. I hope that this time, he's able to change part of his narrative style and the way he communicate and his constant aggression against some of the independent media. But to put it in a simple ways, I think it's up to the government and up to Milei not to lose this opportunity. So with that said, Ana, thank you very much. Ana Bartesaghi: Thank you, Alejandro. At this time, we are conducting the Q&A session. [Operator Instructions] The first question comes from Ernesto Gabilondo with Bank of America. Ernesto María Gabilondo Márquez: My first question will be on your loan growth expectations. You have guided between 35%, 40% this year. I know that you don't have a guidance for next year yet, but can you give us some color on what are your growth expectations per segment? And maybe Alejandro can also add to this question. Can you share the names and amounts of private investments announcements so far, so we can detect the potential lending activity in the different regions and sectors? And then my second question is on your ROE expectations. You have mentioned to expect an ROE between minus 5% to 0% this year. And then again, you will provide guidance next year. But any color on how should we think about the ROE next year? Just the general trends, high single digit or low double digit, I think, will be very helpful. Julio Patricio Supervielle: Ernesto, thank you for your questions. I'll take it first and then be complemented probably by Mariano. In terms of loans, loan growth this year was constrained by tight monetary conditions. But since the midterm elections, we see the first signs of a turn. Real rates are falling, reserve requirements easing and credit demand improving. In 4Q 2025 and early 2026, we see growth coming mainly from corporates and SMEs, particularly in the oil and gas chain with retail coming maybe probably later picking up in the second quarter of 2026 as rates and employment conditions improve. In terms of -- if, let's say -- all what we heard from Alejandro in terms of macro reforms and the deflation continues, we see real loan growth in 2026 reaching in the area of 30% to 40%. And that's, I think, for -- in terms of loan growth. To fund this growth, by the way, let me add that our strategy of remunerated accounts for corporates and payroll clients have been also now extended to the entire ecosystem that will -- this will strengthen our funding base. And I think it anticipates what fintechs will do when they start to play like Mercado Pago. So I think it's the right move. So in short, corporate and SME lending will lead the recovery and retail resume as of second Q '26. And we think that 2026 will be a strong year. [indiscernible] do you want to complement something on loans? Unknown Executive: No. I think that's... Julio Patricio Supervielle: Okay. And then in terms of ROE for 2026, we have a long-term view, which is constructive and particularly so after the outcome of the midterm elections. So -- but there are several drivers that support a positive trajectory for us in terms of ROE starting in 2026 and extending beyond. The first one is the releveraging -- the gradual releveraging of banks. And this is, of course, connected to the reforms that are implemented by the government to expected improving consumer confidence, disposable income and also an increase in money demand by Argentines. And I think that we can expect also that with money demand, there will be lower liquidity requirements as of 2026, creating more room to leverage and to expand. Also, we plan -- we will be looking to international markets if conditions are there to tap debt. We are doubling down on cost controls to lift operating leverage. And we are also, as I mentioned before, advancing our key strategic initiatives such as the remunerated account now extended to the entire old ecosystems. So basically, all of this with, let's say, focus on fee growth, better asset liability management and prudent underwriting, I think will give us the way to improve ROE. Importantly, we are investing for the long term, and we are conscious that certain initiatives have longer paybacks, but they are designed to build durable earnings power for our franchise. So while the path to 15% and 20% ROE may be extended, we are building all the necessary blocks basically to -- and put it in place. And we believe that as leverage normalizes and reform takes traction, Supervielle can converge towards ROE levels in line with peers in the region. Unknown Executive: I think I might also ask about some big initiatives that Argentina has for the next year. Unknown Executive: The investments that -- the private investments that have been announced so far in the different regions and sectors, I think, will be very helpful. Alejandro Catterberg: Ernesto, I don't have the exact list of especially the mining big projects that have been going on. But clearly, when you look at the geography and the political geography of Argentina, what we are seeing is a rapid change in the economic dynamics that, that is creating. I mean provinces that has basically traditionally lived from public funds that we were receiving from federal coparticipation now has starting to receive direct investment and direct projects that are becoming a reality. So for example, provinces in the whole north, you go to Jujuy, you go to Salta, Rioja, San Juan, Catamarca with all big mining projects from silver to gold to lithium. Mendoza , who has been a province that traditionally has rejected mining because they are more concerned about the impact of mining in tourism and in the wine industry, whatever. Finally, last year, Governor Cornejo has jumped into mining and basically are starting copper projects. As you all know, we have the same -- and as Chile, and I don't know and nobody has found the reason why the Chilean side of the Los Andes could have huge reserves of copper and not the Argentinian side. So Mendoza has started. Neuquén and the south provinces of Patagonia with, of course, Vaca Muerta and the oil and gas industry. So -- and on top of that, you have the traditional all of the La Pampa region with Córdoba, Mendoza and all of the agricultural production that so far it's about to have a good impact next year. So in general terms, the extractive industries are booming, are accelerating. Many rigid projects have been approved. And I think that will have an impact that -- the way I like to analyze Argentina, especially on the political and social side is, is having an impact on the distribution of political power. And I think that trend will continue, even though we don't have Milei or we have someone is coming back, et cetera, et cetera, et cetera. And also on the long-term view, we are seeing a shift in Argentina that is starting to distribute the power that -- economic and political power that has been so concentrated in Buenos Aires and in La Pampas more to the provinces. Julio Patricio Supervielle: Sorry, let me add to Alejandro. With all these investments that are being announced by the -- all the debt emissions by the oil and gas industry, they will have -- as soon as they start being invested, all the value chains of these industries will start to move. So this will ignite growth and loan demand precisely in the value chains that we are focusing because we -- by the way, we just -- we opened recently a branch in Añelo and another branch in the -- where the ecosystem of mining in San Juan is. So even though we were present before, now we have a more direct presence and because we want to focus on that. Alejandro Catterberg: But let me add something on the political side. Probably one of the things that will start showing up as a concern, and I tend to believe that will start to happen next year as long as inflation demands or people worry about inflation end up vanishing away, it has gone from by far being the #1 problem to now being shared with another problem. What I tend to believe in the long term in Argentina will happen and as in many other countries, it's a labor problem. So probably what we will start seeing is demands from some sector of the society that will suffer from losing job in the unproductive industries in the suburbs of Buenos Aires City and jobs being created on the new provinces, and I don't know how labor demanded are in these industries. So if you want to -- if you ask me what consequence or what negative implications these changes could have for this government on the next government and also if you add artificial intelligence and the impact that, that will have on labor as a general and globally. Probably what we will start seeing next year or in the next -- or in the future years is that the problems and the tensions and the social tensions changes from related to inflation towards relating to employment generation. Ernesto María Gabilondo Márquez: And just a follow-up with Patricio on the ROE expectation. So you were mentioning that Supervielle is positioned for the long term, but the ROE of 15% to 20% may be extended. So considering what you posted in or what you're guiding for this year, would it be reasonable to see around a single-digit ROE next year and then moving to your medium-term target by 2027, 2028? Julio Patricio Supervielle: Mariano, do you want to answer? Mariano Biglia: Ernesto, yes, let me complement on this. I think for next year, although we haven't given guidance because we still want to see how the monetary policy, the regulation evolves after the elections. But it's reasonable to think that we will reach our medium-term target ROE for the end of next year. So for the full year, we will be on high single digits or low double digits depending on the pace on how fast the things that we need to happen, evolve. That is lower interest rates. We are already seeing that in November, which is an inflection point for interest rates. Also minimum cash requirements. We are already seeing some flexibilizations with the last regulations decreasing non-remunerated cash requirements. There's still some way to go looking forward. Cash requirements are still on 50% level for site deposits, which still extremely high. So we need that to continue easing. And then also improvement in NPLs, we think will happen next year that will allow us not only to reduce cost of risk, but to resume real growth on the retail side. And that is something that we think can happen when economic activity improves with more loose monetary policy, with economic conditions improving, not only on an average for the country, but also across industry. We know there are some industries that are still lagging in the recovery of activity and some of those industries have a lot of employment. So those dynamics should allow us to lower cost of risk, increase in retail. And again, with a lower of cash requirements, increase the weight of the loan portfolio in our balance sheet. That is what will lead us to our target for medium-term ROE. And depending on how fast that happens, we will be on lower single -- double digits or if it take more time on single -- higher single digits. Ana Bartesaghi: Our next question comes from Brian Flores with Citi. Brian Flores: I have 2 questions here. I think the first one is a bit on growth. You mentioned in the presentation that you want to achieve a more balanced loan mix between corporate and retail. You're probably prioritizing corporate, as you were mentioning the strong demand and the unlocking of a lot of pent-up demand perhaps. Just wanted to clarify if this means that corporate loans could reach around 50% of the loan mix in 2026? And also, naturally, this brings lower yields. So just wondering if we should see a recovery in risk-adjusted NIMs by the second half of 2026, perhaps? And then I'll ask my second question. Julio Patricio Supervielle: We believe that the right approach, considering also the competitive landscape of new banks coming into the country, I mean starting to work in the country, we believe that the right approach is to have a balanced approach in terms of serving enterprises, SMEs and families or individuals. Having said that, loan demand will resume as of second Q 2026 for -- we believe it will resume if -- with consumer confidence improving and better maybe disposable income for individuals. And -- but to answer your question, today, I think the balance between enterprises and Mariano will confirm that, enterprises and individuals is tilted towards enterprises, corporations. So it means more than 50%. I believe that this will continue to be the case, in my opinion, maybe the first half of 2026. And then when we see the conditions for individuals and loan demand arise -- raising again, then it will probably go back to 50%, 50-50 or maybe higher, being optimistic at the end of the fourth quarter 2026, being optimistic, maybe more retail demand, so in order to have higher NIMs. I don't know if you want to complement the question. Mariano Biglia: I think regarding the weight of corporate and retail, that is very complete. What I can add maybe is that on the corporate side, although maybe it will -- we expect it to be more balanced with retail for the end of next year. But also we can start to see maybe in the second half of the year, a change in tenors. Because remember that right now, and this is true also across the industry, almost all lending is for working capital. It's very short term. So what we could see happening next year is that we can see more loan demand for longer-term investments and not only working capital. So that will also help to these yields. Brian Flores: No, super clear. And then on risk-adjusted NIMs, should we think about, let's say, a U-shaped recovery by late 2026, as you mentioned, cost of risk coming down perhaps. Is this maybe a correct observation, Mariano? Mariano Biglia: Yes, I think it could be earlier than that. As you know, with the expected loss model that is pro cycle, we are already provisioning all the deterioration that -- even the early deterioration that we see in the -- particularly in the retail portfolio. So when we see conditions improving, cost of risk should decrease very fast and not only having to see an important recovery in real terms in the growth of the retail portfolio. So in that case, we should be able to see a recovery in risk-adjusted NIMs for the retail portfolio, and that will also translate into the whole portfolio maybe earlier in the year and not having to wait for the second [indiscernible]. Brian Flores: No, super clear. And my second question is on risk management because obviously, we're all excited about the Argentina story. And I think Alejandro started saying that one of the key concerns that we receive, I think, is we have been here before. And Patricio, you mentioned a lot of optimism, right, in not only the political, but also, I would say, the economic landscape. But I just wanted to hear your thoughts on what if, right, what could happen if things do not go well, if the reserve requirements remain high? Are there any considerations by you or the Board regarding any alternatives, could be partnerships, asset sales, M&A, if the base case scenario does not pan out and we have, let's say, a less bullish scenario? Julio Patricio Supervielle: Well, yes, I mean the -- I think that the risk scenario that a lot of people are talking about is the policy that the government is having about reserves, foreign reserves. And they are -- I think there is a certain risk that, for instance, you have people -- a lot of people traveling abroad, spending money abroad because you have this sensation that is relatively cheap. And at the same time, the Central Bank is not building reserves. So well, we -- I can understand the way the reason because they have the support of the U.S.A. and so on. But eventually, things are volatile in the world, and that could potentially be a problem. I think, of course, they want to focus on inflation and make sure that rapidly inflation comes down. And this is why I think they are keeping a tight control on FX. Regarding our franchise, I think what we're doing, we are working always to improve our resiliency in terms of the way we originate the way our origination standards for individuals. We anticipated earlier than other banks that the deterioration that took place this year. So we are -- I think we are good in this. And at the same time, since Paco came -- arrived to the company, to the bank, he's implemented a complete reshuffle of the culture of the bank in order basically -- in order to become much more customer-centric and have people more accountable. So we have people now that are completely engaged, aligned and committed to going the extra mile. We are working with -- in the ecosystem -- in our ecosystem, we have a very strong company in our own ecosystem, which is InvertirOnline, which is in the verge of the next stage of InvertirOnline because they already achieved something which is quite remarkable is they are the most and by far, the biggest digital broker in the country for retail investors. This is fantastic what they did in the last 4 years. But now they are -- they will maintain this. They are very efficient, and they have the scale and the technology, but now they will go to the second stage, which is to concentrate on wealthy people, wealthier and affluent people in enterprises, in IFAs. And they have the teams to do that, the engineers, and they will invest more on that to make sure that we get fast to this stage. And this engine gives us the opportunity to do a fantastic cross-sell with -- in order to acquire bank clients. So I think we are prepared to competition. We are prepared for what is coming. And we've lived for different previous crisis and so on. Unknown Executive: No. Also, Patricio, we are always open to make some strategic alliances. So we are open in order to define the new future for Argentina in our industry. So yes, we are open. We are analyzing a lot of them. But basically, also, we have a conversation with a huge retailers in order to make some strategic alliances. So yes, we are open. We understand the change in the transformation in the world about this industry. So yes, we are open, and we want to make a new bank, a very attractive bank. So yes, we are open for new businesses. Ana Bartesaghi: Maybe our next question comes from Camila Azevedo from UBS. [Operator Instructions] Camila Villaça Azevedo: I'll keep it brief. I want to comment -- I want you to address more on asset quality topics. So could you please give more color about the NPL dynamics during the quarter? Do you think that the numbers seen in the quarter was the peak? Or are you seeing any signs of peak? When should we expect it to happen in both segments? And which would be the comfortable coverage ratio level that you imagine given this context? Julio Patricio Supervielle: Well, first of all, asset quality deterioration this quarter mirrors system-wide trends as the credit cycle adjust to the macroeconomic environment. After a very unusually benign period of NPLs, low NPLs, they rose across existing and new customers, driven by pressure on disposable income and tariff adjustments and also the shift to a disinflationary environment where debt no longer erodes in real terms. This was most visible in retail. We had anticipated this deterioration because -- and a tightening origination criteria in personal auto and car loans since the beginning of the year and reinforcing collection and also client support. Unfortunately, the sharp pre-election rate hikes added further stress to -- through our individual NPL shares, but our individual NPL share in the market remains below our retail loan share. So this is showing relative resilience. We believe that these NPLs are -- going forward, I think we believe that this trend is manageable, and we expect gradual improvement as macro conditions and consumer confidence normalizes. I don't know if you want to add or, Mariano, complement. Mariano Biglia: Yes, I can just complement on the NPL expectations. Maybe we can see a peak in the fourth quarter as a rollover of early deterioration comes NPL maybe at the end or during the fourth quarter. And also when conditions improve, not only we will see NPLs decreasing, but also loan growth increasing. So that will also dilute NPLs, and we will see that number improving. But for the impact of high interest rates on economic activity in the third quarter, we still can see [indiscernible] the NPL ratio increasing in the fourth quarter. And I think that will be the peak. Camila Villaça Azevedo: Super clear. Yes, the coverage ratio, please. Mariano Biglia: And regarding the coverage ratio, as I mentioned before, we follow the expected loss models. So when NPLs are very low, coverage tends to go very high. In fact, in the past, we were above 200%. So now that those provisions are being used. So that's why we see the coverage decreasing, but it should always remain above 100% compared to NPL. So we should see it in the range of 110%, 120%. Ana Bartesaghi: The next questions come from Ricardo Cavanagh with Itau. Ricardo Cavanagh: As I look into 2026, for me, it's not just another year. It has a big déjà vu of Argentina of the '90s with positive expectations for credit and credit to GDP was double where it stands. So my question would be, which are the new actions that you believe you still need to take? And which are the new risks that you think you still need to face in order to generate new results in a new and different environment? Perhaps the first question is if you agree with this possibility or with this positive outlook as well. Julio Patricio Supervielle: I think that we need to make sure that there is -- we need to make sure that we increase the leverage of the bank. This is a challenge of all banks, but in our case, it's our challenge. And I think that we will -- it's clear that savings in Argentina is still a pending issue for Argentina. The share of savings of GDP is still very low. So in order -- we need to build a bridge in order to make sure that the bank gets leveraged. And this bridge, I believe, will come in international markets. So we will be looking in order -- we will tap international debt markets if conditions arise. And flavor of this is what we already did with multilaterals where we -- 45 days ago, we got up to $270 million in terms of facilities 3 years from multilaterals because we have a focus in SMEs. So -- and another thing that I think for me, it's very interesting. I don't know whether it will happen or not. It's first in -- to try to repeat what we did in 2017, where we also tapped in peso-linked debt. This is not yet the case because there is not yet a market for peso-linked debt. But we did this in 2017. And also something that maybe for this stage is maybe a dream, but this is my dream at least. I think that if confidence is built in Argentina, then there will be a possibility of rotating assets. I mean let's say, doing originating loans and maybe sell those loans to the local capital market or maybe international markets if there is a -- this is something that could happen. And so we are always looking to this opportunity because this will be a fantastic way of growing without consuming capital. Ana Bartesaghi: I think we have the last questions come from Pedro Offenhenden from Latin Securities. Pedro Offenhenden: I had one question on how do you assess liquidity conditions in the system going forward -- in the system and in the bank going forward? And if you see liquidity as a potential constraint for great growth in 2026? Julio Patricio Supervielle: As the monetary base remains very small even in historical terms, we're already seeing a rebound in money demand after the elections. This is key, the increasing money demand. This should support system-wide deposit growth. And as confidence consolidates, we could expect that a gradual lengthening of deposit duration, that is people investing in -- more people investing in time deposits. Another thing, another issue, which is central also is the Central Bank favoring financial intermediation because as of today, around 30% to 35% of deposits of the system come from money markets. And this is not normal. And if you want -- if the Central Bank wants to, let's say, to favor credit to the private sector, then they need to go to eventually regulate differentiated reserve requirements for -- to make deposits more attractive than money market funds. And for us to also to tackle the liquidity constraints, I think we have the right strategy because the rollout of the [Foreign Language] and cash management solutions for corporates, payroll accounts and all the entire ecosystem, I think, positions us well to capture more stable and high-quality deposits. And as I said before, finally, we will try to tap the international markets if conditions arise. Ana Bartesaghi: Thank you, Pedro. So I think we had some in the Q&A, but I think all of them were addressed. [ Ignacio ] [indiscernible], I think all of them mainly were addressed. The rest of the KPIs in terms of guidance, we are going to provide them maybe at the beginning of the year formally. So we will have more, as Mariano mentioned, clarity in terms of what happens with requirements and rate as well. Then from Cap Securities, [indiscernible], we already discussed about NPLs. And then in terms of shares canceled, they are automatically being canceled after 3 years of being in the treasury held by the treasury. So I think by the end of the year, be this next year, 3% of the capital has been canceled and -- but not more than that. So I think with no more questions, I think we arrived to the end of the Q&A session. Thank you all for joining us. A lot of people today. We're sorry, we delayed a bit, and we know there is another call from another bank at the same time. So thank you all for joining. Julio Patricio Supervielle: I do appreciate your question. It was a difficult quarter, but it was -- I'm optimistic for 2026. And we do have the 2 -- I think the 2 best CEOs of Argentina for -- to tackle for the bank. And with Paco and Diego for InvertirOnline. So I think we -- I'm very optimistic about the future. Thank you very much.
Alexander Saverys: Good afternoon and welcome to the Cmb.Tech's Earnings Conference Call for the Third Quarter of 2025. My name is Alexander Saverys, and I'm joined by my colleagues, Ludovic Saverys, Enya Derkinderen and Joris Daman. We have the usual topics we want to discuss with you today, starting with our financials and the highlights of the quarter. We will then move to the Marine division market update, and we will close with the conclusion and Q&A. I would like to start with the financial highlights and will therefore hand over to our CFO, Ludovic. Ludovic Saverys: Thanks, Alex. If you move to the next slide, this is the typical overview of our company now post Golden Zhoushan merger. We have roughly $11 billion worth of assets on the water and being constructed over 250 ships. And we'll go further towards the metrics at a later time in the slide deck. But if you move to the next slide, Alex, you'll see that we finished the quarter with a result of roughly $17 million of net profit. Our EBITDA stood at $238 million, where we end the quarter with ample liquidity. We have more than $555 million worth of liquidity in the company. The contract backlog stayed the same, which means that we added a little bit compared to the natural attrition we have quarter-on-quarter. The CapEx right now sits at $1.6 billion and our equity on total assets, book equity for the bond covenants still sits below -- above the 30.4%. We had a pretty active quarter, obviously, apart from finishing the merger with Golden Zhoushan, but the Board has decided to declare an interim dividend of $0.05 per share, which is going to be payable early January. Our CapEx program is now fully funded. Happy to say that we have signed all new loan agreements on the remaining CapEx and the equity component has been covered by own liquidity and sale of assets. Contract backlog mentioned still hovering around $3 billion, but we definitely took a big step forward again in our rejuvenation of the fleet where we took delivery of 7 newbuild vessels, which have been announced in our trading update. We delivered 2 ships in Q3. But more importantly, we will generate another capital gain of roughly $50 million on the delivery of the VLCC Dalma, the Capesize Battersea and Zhoushan and the Suezmax Sofia in Q4. And on top of that, we just announced the order of a multipurpose accommodation service vessel, which is similar to our CSOV, but in a bigger format, but Alex will discuss that at a later stage. Moving towards the coming quarters. We're quite excited with the timing acquisition of Golden Zhoushan, a big increase in spot exposure on dry bulk, which is happening at the right moment. It's playing out well. We have 55,000 shipping days in '26 from which roughly 47,000 is spot. With a big focus on large tankers and large dry bulk, we're perfectly positioned to enjoy the good markets that we have today. Moving to the next slide. Here, we've made a simple assumption. If the market today would continue going forward, we would show what the free cash flow capacity is at current rates. This is a pure assumption, but you could see that at today's rates, we would add another $600 million of liquidity over a year, on top of the $420 million that we anticipate to pay back on the bonds and on the bridge financing. Happy to say, by the way, that we'll reduce the bridge by another $300 million by end of this quarter. But this slide shows that with the spot exposure and the good market we have, we can generate meaningful free cash flow growing the operational leverage of the company. And if people sometimes don't like to spread out over a year, you can easily filter this into quarter-by-quarter. And this would mean at today's market that we would add $250 million free cash flow per quarter, which is, I think, is a pretty strong sign of our operational leverage. I'll move the floor back to Alex on the various marine divisions we have. Alexander Saverys: Yes. Thank you, Ludovic. I want to take you through our 5 divisions and the markets in which they operate and what has happened in Q3 and is happening right now in Q4. You can see our usual slide with the 5 main markets we operate in, the tankers, dry bulk, containers, chemicals and the offshore markets. You see that we are still positive on tankers, positive on dry bulk, positive on the offshore market. We are cautious since a couple of quarters already on containers and on chemicals. And that has to do with the fundamental supply-demand numbers. If I start with the divisions where we're a little bit more cautious, containers and chemicals, you can see the demand numbers for 2025 in containers were positive, but are expected to be quite flat or even down a little bit in 2026, combined by a huge order book in containers, 32% and the fact that we are expecting gradual unwinding of the rerouting away from the Red Sea, so that ships would go through the Red Sea again, which represents today between 10% and 12% in ton miles. We think container markets will have a difficult time next year and probably also the year thereafter. Same can be said for chemical tankers, be it to a lesser extent. Supply-demand is a little bit overweight in terms of the number of ships coming on stream. So we're also a little bit cautious on the chemical tankers. As you know, our 2 divisions Delphis and Bochem are mainly covered by time charters and have very little spot exposure. If we turn to the other segments, starting with dry bulk, which is by far our biggest exposure today. We see that there was an increase in tonne-mile demand growth for Capesizes this year of 0.8%. So not very meaningful, but still positive, expected to ramp up next year to close to 3%, combined with a supply figure where only 9% of the fleet is on order, where the fleet is also aging, 32% of the Capes is 15 years and plus, we believe that supply demand fundamentals on dry bulk are actually very strong. On tankers, we are seeing demand growth this year, next year in tonne-mile. We see that the fleet is growing, but because of all the inefficiencies that we are seeing in the market, and I'll talk about that in a minute, we still believe that definitely, in the short term, the supply-demand figures look very good for tankers. Last but not least, on the offshore, offshore wind, but also offshore oil and gas. We have seen the offshore wind markets grow even though some projects have been postponed. But therefore offshore supply vessels, there has been a lot of extra demand for the oil and gas from the oil and gas market. So we are seeing offshore wind vessels going into the oil and gas market and supply-demand fundamentals definitely in that market are also positive. I'd like to zoom in to Bocimar and maybe go back one slide. You see here one of the vessels from Golden Zhoushan that has been renamed to the Mineral Sakura. So our renaming program is in full swing. We are keeping the Golden Zhoushan or the Golden prefix for our Panamaxes, but are renaming all our Capesizes and Newcastlemaxes to Mineral prefixes. We have 3 large divisions in dry bulk, our Newcastlemaxes, our Capesizes and our Kamsarmaxes, Panamaxes. And we focus on the Newcastlemaxes first, what have they done in Q3. We achieved a TCE of $29,500. And in Q4 to date, we are at close to $34,000. On our Capes, the number for Q3 is $20,500 going up in this quarter at $26,200. You can see that we've already fixed quite a substantial amount of ships for Q4, but that number could still go up a little bit if the current markets stay strong. On the Kamsarmaxes and Panamaxes, definitely a positive surprise for this year. We have seen rates better than anticipated. We achieved rates around $13,500 in Q3, but that's already up in Q4 to $17,000. Main drivers for dry bulk when we look at all the indicators, a lot of them are green. It's positive on the China steel mill utilization. It's positive on soybean imports to China. Brazil iron ore exports there are also very good. And of course, the dry bulk fleet supply is growing, but we are seeing definitely in the larger segments, more demand growth than supply growth of vessels. Sorry for that, just was a bit too quick. Zooming in on the demand of iron ore, coal, grain and bauxite. You can see that all numbers are positive, expected positive for '26 and '27, except for coal, but we believe definitely for the larger sizes that iron ore and bauxite are compensating or overcompensating the less demand for coal. Watch the space on grain as well. Not really a big driver for Capesizes, but important for our Panamaxes. The numbers there are very positive. And with the recent lease agreement on tariffs between China and the U.S., we're expecting that demand hopefully to continue on the tonne-mile side. If we look at the number of ships on order compared to the existing fleet, you can see that in 2026 and 2027, we are going to add some Capesizes to the market. But all in all, including '28, the order book to fleet is only 9%. The number for Panamaxes is 14% order book to fleet, but also there, with the demand figure, I think supply-demand should be balanced and definitely looking positive for that market. An important number to highlight is the average vessel age. As you can see, both Panamaxes and Capesizes are at historical highs in terms of average age, which always bodes well for potential scrapping. The next 3 slides are providing you more information on the Brazil iron ore trade, the Australia iron ore trade and the Guinea iron ore and bauxite trade. On all 3, I can say that we are at 5-year highs in terms of output. You can see the numbers there on the slide. And we've basically tried as well to highlight the seasonality. Seasonality in the Atlantic Basin in Australia and for Guinea is dependent on rain. The rainy season usually in Brazil and Australia is in the first quarter. However, in Guinea, that's usually in the third and fourth quarters. So we see that the guinea season can actually help our markets because when Australia and Brazil are down, they are up. And actually, in the rainy season of Guinea this year, it was less than expected. So we saw some good outputs regardless of the rainy season. The key takeaway here from this slide and from the Australia slide and from the Guinea slide is that we are seeing volumes up, volumes at 5-year highs and seasonality in Q4 and Q1 actually supportive. I'd like to talk about our tankers, Euronav, our Tanker division and crude oil transportation. We have a trading fleet of 10 VLCCs with another 4 ECO VLCCS on order. Some of the pictures that you have seen during this presentation highlight the new VLCC that we took delivery of a couple of weeks ago, the Atrebates. We have another 4 coming in the following weeks and months. We achieved $30,500 in Q3. So far in Q4, we are at $68,000 with 78% fixed. We believe that number can still go up, the fixings and the bookings that we have done in recent days and in the coming weeks are looking very promising. We sold 1 older ship, the Dalma, which generated a capital gain of $26 million. We've extended 1 ship by year, the Donoussa, and then we delivered 2 vessels to the new owners in Q3, the Hakata and Hakone. On the Suezmaxes, we have 17 vessels on the water. We have another 2 ships coming in the fleet next year at the end of Q1. We sold 1 Suezmax, the Sofia, which was delivered in Q4. And the rates we achieved in Q3 was strong, was $48,000. And Q4 quarter-to-date, we are close to $60,000. But again, there, we still have some days to fix. So there is upside to that number. When we look at the main drivers and the main indicators, we see that a lot of indicators are positive. And also on the tanker fleet supply year-on-year, it's still a moderate fleet growth. But let's look at what's coming. Zooming in on the demand, you can see that the forecasts are that there will still be an oversupply of oil in the coming months and quarters. That leads to more storage, that leads to more oil on the water, that leads to definitely, in the short term, better rates. Because if we look at the supply of vessels, you see that this year, there's been very little new ships coming on the water, but it's starting to creep up. So next year, '26 and in '27, we will see more Suezmaxes and VLCCs come to the market. If you look at the average age of the fleet, this new supply should definitely be manageable. So in the very short term, maybe even medium term, we are still bullish on rates for tankers. What happens thereafter, a lot will depend on how many more tankers will be ordered and added to the order book. We are not at the single-digit numbers anymore. For the VLCCs, we're at 15% order book to fleet and Suezmax is 20%. So it's not what it used to be, but I would say that the short to medium term, things are still looking very good. And also the age of the fleet is supportive. On containers, we can be quite brief. As you know, the exposure we have on containers is limited. Actually, it's 0. We have fixed all our ships to 4 vessels on the water to CMA CGM and then we have 1 ship coming next year on a 15-year charter. The market on containers has weakened. You can see the SCFI, which reflects the freight rates for containers paid. It has slipped down and is now at a level which is the lowest of the past 2 years. The high order book, more than 30% of ships on order, plus the Red Sea situation, which will unwind, lead us to being quite cautious on the supply side. Demand should also be lower next year. So container markets could be up for a bit of a rough patch. Chemical tankers. There, our spot exposure is also very limited. We have a couple of ships operating in a spool. So that's basically our spot exposure. All the rest is time chartered. We still have quite an interesting order book coming with all ships having been fixed. We have one more chemical tanker that has already been christened, but that will deliver soon coming to our fleet. Next year, we'll have 2 product tankers coming to the fleet, which are fully fixed. And then we have our ships in '28 and '29 that were fixed to MOL that will come later. But -- so our spot exposure on chemicals is relatively limited. It's a less volatile market, but it has come off its very high levels of last year and the year before, but we are still at very healthy levels. And then I'll finish with WindCat, the offshore wind division. Some of you might have seen in our press release but also in a separate WindCat press release that we ordered a new CSOV, an enlarged version of the CSOV, which we call an MP-ASV, and I'll say something about that in a second. But maybe first zooming in on our going concern business. We have our CTVs, we have our CSOVs. We took delivery already of 1 CSOV. That ship has been fixed on a very short-term period for business in oil and gas in Australia. It already gave us earnings in the third quarter of $27,000. The fourth quarter rates are going up to $118,000 with most of the days already fixed. We have ordered this new multipurpose accommodation service vessel, which I will discuss in a second. And then looking at our CTVs. You can see that the seasonally strong Q3, we achieved good rates of close to $3,500 a day on average. The slower period in Q4, our TCE sits at $2,800. Here, you have a render of the newest newbuilding order for Cmb.Tech. So we ordered 1 ship with another options for 5 vessels. It is based on our existing CSOV design for the 120 passengers on board, but we've upsized it to 150 to even 190 passengers on board. It will have a permanent gangway connection, which is better for oil and gas projects. It will be larger, so positive for our charters. When we look at the market, it will be the only vessel type that can truly operate between oil and gas on the one hand and the offshore wind on the other. Our existing ships are already suited to do that, but this one will be even better suited. We have 100-tonne subsea crane, which is installed. And when we look at where that ship will compete, we see that the flotel markets for oil and gas is one market that we will target. And when we look at designated ships for that market that also have the crane capability, we see that there's actually not that many vessels on the water and that are being built for this. Our markets are everywhere. But clearly, one of the markets that will be interesting and something to follow is the Brazilian oil and gas market where we see more than 30 FPSOs entering service in the next 2 to 3 years, which will need a lot of support vessels coming there. The reasoning behind this is that we want to trade in the 2 markets. Eventually, the ship will end up in offshore wind. But as long as the offshore wind is a little bit quieter, we can also go to oil and gas. And with this newbuilding or with this newest addition to our fleet, we can end the part of the presentation and go to the Q&A. Enya Derkinderen: [Operator Instructions] The first one is Frode Morkedal. Frode Morkedal: This is Frode from Clarksons. First, I wanted to ask you about IMO. They delayed the carbon pricing by a year at least. So what's your verdict on this? And have you seen any change, I guess, in terms of let's say, interest or demand for dual fuel technology after that? Alexander Saverys: Yes. Thanks, Frode. I think it's a question many people have. Well, first on the delay, whether it's going to be a 1-year delay, 2 years delay or 3 years delay, we don't know. We have, of course, not based our strategy on the IMO coming to fruition in 2028. It definitely helps our business case. But our strategy on dual-fuel engines is based on finding like-minded partners to charter these vessels and use the technology to decarbonize. We have the EU legislation, which is in place, which is definitely supportive. IMO would have been a very nice to have. It's not a must-have for strategy and for our plans. Our opinion on whether eventually, they will find an agreement on the IMO level is that we don't know. But we do see that after the failure of IMO, there's a lot more discussion between countries on a bilateral basis to see what can be done on certain trade lanes, say, Australia to China, for instance, or trades that are linked to Europe. So the last word has definitely not been said, but it will not change anything to our strategy. Frode Morkedal: Okay. Fair enough. One question on your, let's say, investment philosophy. So you ordered a few large CSOVs, I guess, you can call it. But how do you think about opportunities in other segments like dry bulk and tankers? Are you looking to invest more there or maybe trim or sell in those segments? Alexander Saverys: Well, I think we've invested already a lot over the last 2, 3 years at the right time, I would say. We will always look opportunistically at newbuildings. But today, clearly, we think newbuildings are quite pricey. That doesn't mean we would not order if it's the right value and if we believe that it will create value for us and our balance sheet can take it. You just saw that we ordered this extra wind vessel, which is really an offshore vessel. We think there's very good value there. We think this is also something Cmb.Tech can perfectly do even if we have more options that we can declare going forward. So -- but that's on the newbuilding side. On the secondhand, you have seen, and we will continue to do that, that we're clearing out our older vessels, because we just think rates are very good and the prices for secondhand tonnage are at a level where we're rather sellers than buyers. We still have a couple of older vessels. Don't be surprised if we clear them out. But then there will come a point where we're very satisfied with the age profile of our ship, and we're very satisfied of basically staying on the market and enjoying the good markets. Frode Morkedal: Okay. Last question on the dividend. So this is the $0.05 second quarter in a row. So that makes it tempting to think this is some type of minimum level going forward? Or should investors expect dividends are flexible going forward? Ludovic Saverys: I think, Alex, I'll take it. We have a fully discretionary dividend policy. I think we've been pretty clear that every quarter, the Board will decide what we'll do with the cash that we have. And it's fair to say that with the meaningful cash flow generation that we are seeing in Q4, that we're expecting in Q1, that there will definitely be a further look at how to reward the shareholders, whether that's share buyback, whether that's dividends, whether that's an accelerated clearing out of some of the bonds. Some people have mentioned the bridge financing or just reducing leverage. I think it's -- these markets, the way we positioned ourselves in there so that it goes very fast. And that I don't think we're there to say minimum dividends. We don't say maximum dividends. We're there to balance between rewarding shareholders and strengthening our balance sheet to be positioned for opportunities when they present themselves, whether it's organically or through M&A. Enya Derkinderen: And moving on, Eirik Haavaldsen. You can now unmute and ask your question, please. Eirik Haavaldsen: This is Eirik from Pareto. Just following up a little bit on the S&P because you have -- you haven't -- I mean, do you have a sort of target list of the vessels you could dispose of? I'm thinking especially on the tanker side now where S&P markets are interesting, but the cash flows are also fantastic, right? So how do you balance that short-term cash flow versus potentially realizing some of these elevated asset values? Alexander Saverys: It all depends on the price. But I think, Eirik, you will agree with me if you're getting north of $50 million for 18-, 19-year-old VLCCs, there's a good case to say that you should sell. Other people might say, no, keep it on the spot market and trade it out for another year. We are more in the first camp. I think tonnage, which is older than 15 years old at current valuations, and again, it will depend on the bid, and it will depend on the price. We are more sellers than keeping it in our fleet. That doesn't mean we will do it at any cost. Eirik Haavaldsen: And what about on the -- I mean on the modern vessels though, to lock some of them up to sort of derisk a little bit your cash flows. Is that something you're looking at? Alexander Saverys: Yes. So a very good question, Eirik. I think we've mentioned this in previous calls as well, and we've been very open about that. If we see good levels to take some cover, we will definitely do it. We like to have 40,000 spot days. But at one point, we also want to use the market to take some cover. Keep the young vessels in our fleet, but take some TC cover. Now as we've not announced a lot of time charters, it also means that right now, both on tankers and on dry bulk, we've not been tempted by numbers that are good enough for us to take action. Eirik Haavaldsen: Very good. And finally, should we read anything into the fact that you're not changing the prefix on the Panamax Kamsar fleets of Golden? Alexander Saverys: No. No, it's a good question. Looking back in the CMB days, we had a CMB prefix. Look, we're very happy and proud that Golden Zhoushan is now part of our company, even though we're not using the brand name any longer, we like to respect the Golden Zhoushan history and then keep them as part of our name and our brands by keeping the Golden prefix on Panamaxes. Enya Derkinderen: Then, Kristof Samoy, you can now unmute and ask your questions. Kristof Samoy: Kristof Samoy from KBC Securities. A few have been addressed already. So -- but maybe first on -- to go a little bit deeper into IMO that was already touched upon. If the conditions would be right to consider newbuild ordering, would you, for sure, order ammonia or H2-ready or fitted vessels or could you nowadays also consider LNG-ready or fitted vessels? And then secondly, just with regards to the decision of the IMO, what impact does it have on your business plan for H2 industry and Infra? Alexander Saverys: Yes. And thank you, Kristof. So we are more convinced than ever that ammonia is a very good choice to decarbonize. And the reason is not only because we are now getting very close to showing to the world that the technology actually works, but also because we have seen over the last 12 months in China and in India, tremendous evolution on increasing the availability of the green ammonia molecules and reduction in the cost of the green ammonia molecules. So on IMO, even though, as I just said, I don't think there will be a lot of movement in the next couple of years, and I hope we will be surprised, we still think that technology and cost and availability of molecules will be the main driver to convince people like ourselves, but also partners that want to decarbonize their fleet to go for ammonia. So in short, right now, we're not looking at any LNG projects. Never say never, but our choice of fuel is still ammonia. On your second question on H2 Infra and H2 Industry, these are very small divisions. They are supporting the business we do on the development of hydrogen and ammonia engines on the Industry side, and they are trying to develop molecules, producing molecules but also sourcing molecules on the H2 Infra side. There, we have a lot of ongoing discussions with suppliers in China and India to buy molecules for our fleet of next year. Nothing we can announce yet, but as soon as we have news on that, we will definitely let you know. Kristof Samoy: And maybe just as a follow-up, I mean any change in the attitudes or the appetite of miners to conclude long-term charters since the decision of the IMO has been made public? Alexander Saverys: That's again a very good question, Kristof. I think there's 3 categories of people, people like us that were convinced before the IMO discussion that we should decarbonize our fleet. And we have a couple of customers, as you saw in April with the deals that we announced that will continue down that path. So people that were convinced are continuing to engage with us and continue their investments. There's another category of people, and that's still the vast majority in shipping that take a very much wait-and-see attitude and that don't do anything and basically wait to see how this will evolve. And then the category in between people that were hesitating a little bit, I think we definitely lost part of them that they are not looking at it anymore and more than the camp of wait and see. But some others still continue to engage and ask questions. So it's a little bit of everything. The conclusion for us is simple. Had the IMO decision been taken a couple of weeks ago, it would definitely have propelled our business plan to a much higher speed, but it doesn't slow down our business plan, and it doesn't change our business plan, but it would definitely have helped. Enya Derkinderen: Then the next one is Climent Molins. You may now unmute please. Climent Molins: This is Climent, known from Value Inestor's Edge. I wanted to start by asking about your interest expenses for the quarter. Did those include any one-offs? Or is it, let's say, a clean quarter? Ludovic Saverys: Good question, Climent. There's 2 things. Obviously, when you do leverage buyouts, those bridges are somewhat more expensive. We had $1.3 billion. We've reduced that to close to $220 million end of quarter, but that definitely has explained our Q2 and Q3 figures of elevated interest expense. Second point there is, obviously, when we did those acquisitions, both from a Euronav point of view, but also Golden Zhoushan, we had a back financing of releveraging the fleet to be able to pay back. And those refinancings, you always incur arrangement fees with the banks. And these, you have to write off over the length of the financing. So if you refinance $2 billion over 5 years, and you pay a percent arrangement fee, you're going to add $4 million of interest expense every year. And as we've been doing a lot of these, these obviously are increasing the total interest expenses. That said, I think only in the last 3 weeks, we've been able to look at our total financing package where we had an average of SOFR plus 275 throughout all our financings. And we are actively working billion per billion to reduce that by 100 to 125 basis points. So this is more going to be a topic of 2026 of optimizing our financing portfolio and costs as part of, I would say, integrating the businesses and optimizing our balance sheet. Climent Molins: That's helpful. My second question is also on the modeling side. First, should we expect G&A to come in at around $34 million as well in Q4. And secondly, where do you see the run rate on the G&A front once you've realized any potential synergies from the merger with Golden Zhoushan? Ludovic Saverys: Yes, I think it's a valid question. When you do large-scale transactions, you always incur a lot of lawyer fees, auditor fees, financial advisory fees and others. And we've been doing that 2 years in a row, doing multiple billion-dollar transactions. That has not helped our SG&A, full stop. It is a review that we're making while we are integrating the teams, optimizing the insurance packages, the IT systems and everything like in normal M&A processes, this will be optimized. To put the actual figure, Climent, I think it's hard to say. I think 2026, give us a couple of quarters, and you'll see those SG&A naturally normalize, I would say. Climent Molins: Makes sense. And final question for me. Does the $1.57 billion in remaining commitments include the CapEx on the recent CSOV newbuild addition? Ludovic Saverys: No, that's a good point. So in the Q4, we'll add that. Currently, as Alex mentioned, it's 1 ship. We can't disclose the newbuild price, but somewhat higher, I would say, than your smaller CSOV. But that is going to be added to the total CapEx. Operator: Next up is Kristoffer. You can now unmute and ask your question, please. Kristoffer Skeie: Can you comment a bit on when the options on the CSOVs are lapsing and when is the delivery of the optional vessels? In order to declare them, would you need to see any long-term contracts in the division? Or to put it differently, what do you need to see to declare these options? Alexander Saverys: Yes. We have a lot of time, so close to a year to declare the option. And then, of course, the options thereafter. Of course, the earlier we declare, the earlier the vessels could deliver. We're looking at deliveries in 2028 and 2029. Answer in terms of contracts, it's not a must have to have a contract to lift the option. Of course, if we get a contract straight away, we could lift the option earlier, but we can also lift without a contract. Kristoffer Skeie: Perfect. And moving over to the Tanker division. What type of time charter levels would you need to see in order to derisk estimates here? It's sort of -- it seems like rates are starting to move up quite fast. So -- and... Alexander Saverys: Where do you pick the 5-year -- would you pick a 5-year for modern VLCC... Kristoffer Skeie: Probably just below 50 or something or? Alexander Saverys: So clearly, that's not something we would do right now. I mean we can still change our mind, of course. But I think the market would need to be higher on long term, and I'm talking 5 years plus then in order to consider. So current rates are -- for us for our modern tonnage, and I stress on modern tonnage, we would need to see more. Kristoffer Skeie: And final one for me. In terms of the bond process you had ongoing, can you just comment a bit on how you're sort of looking to refinance the bond maturing next year? And is it still only debt instrument with an equity covenant and not value just equity? Ludovic Saverys: Yes. Great question. I think we stopped the bond process because we had much cheaper alternatives, Kristoffer. So -- in that same flow, we are anticipating paying back the bonds with our own free cash flow, sale of assets and own liquidity. We don't anticipate the bond process to be reinitiated anytime soon. It's a cheap bonds, 6.25. So we'll probably leave it run until September '26. And the way it's continuing, not just the bond but also on the bridge, we feel that we can pay this with our own means. So we don't foresee any equity issuances or debt capital markets in the coming quarters. Operator: Then next up is Axel. You may now unmute and ask your question, please. Axel Styrman: Three questions from me. One, how do you see potential removal of U.S. sanctions on Russian oil to influence the tanker market and the tanker rates? Second question, if the Guinea volumes on the iron ore just started replaces the Australian exports to China. How do you see this outlook, or this influencing the -- your bullish outlook on the dry bulk market on the -- for the large dry bulk carriers? And thirdly, what kind of optimal financing structure, kind of leverage are you looking for after you've taken delivery of your newbuilding program? Alexander Saverys: Okay. I'll take the 2 first questions, and then maybe, Ludovic, you can comment on our finance structure. So on Ukraine, I think the easy thing to say is that before the fully fledged war started in 2022 or when you look at the effect of the war, it was definitely positive for crude oil tankers. So if we would unwind it, one might say, logically, it will be negative. In our opinion, it's way too early to say. And actually, we don't know. Maybe in theory, relief of sanctions on Russia could be negative for our market because then you unwind everything that has been put in place over the last 2 or 3 years. But in practical terms, I think there will be a lot of different levers that will play an impact on that. So the short answer to your question is we don't know what the impact will be. On Guinea cannibalizing Australian volumes because I think that's what you mean. I think 2 things need to be said there. On iron ore specifically, you have to know that the very beginning, all the volumes are going to China and are actually being transported by Chinese ships, which is taking away capacity. So it's supporting the market in general. Going forward, of course, as we see a ramp-up and there would be any cannibalization, the logical immediate effect is that you're replacing short tonne mile with long tonne mile, so the effect is relatively positive. If on top of that, you would see that the price of iron ore starts falling, you might push out some producers that have a higher breakeven level. And again, there, we think that we'll rather stimulate the high or the long tonne mile and the short tonne mile. But all in all, cannibalization of volumes of Australian volumes and replacing them by Guinea volumes, we think it will definitely have an impact on the market. But on a net-net basis, it could actually be positive. It's on the... Ludovic Saverys: And then Axel, on the optimal loan-to-value, I mean, we are indicating a 50% loan-to-value throughout the cycle. We're somewhat north of that. So after the full delivery newbuilding program assimilated, and most of it is going to be end '26. I think out of the $1.5 billion, we're taking a delivery of $1 billion worth of ships in '26. So thereafter, it's only a few ships that are on long-term charters. We're definitely targeting the 50%. But in your 50%, I think it's important to look at what is the cost of those financings where we still have some expensive leases on board. We still have bonds. We still have bridges. I think it's also the work in the next 2 quarters to take out, I would say, the more expensive debt, replace it by inexpensive financing, which is readily available for companies like us at this stage. Axel Styrman: Just a short follow-up. Maybe you partly answered that earlier, but could we then expect a fixed payout ratio, also an explicit dividend policy different from what you have or don't have today thereafter? Ludovic Saverys: No. I think -- no, we don't have. It's a fully discretionary dividend policy. I think while our balance sheet and our company is still in transition, I think that's an important one to say, we need to keep the flexibility to decide on every dollar that goes down on debt, M&A, newbuilds, rewarding shareholders to share buyback or dividends. So we're not going to go for a fixed payout anytime in the short future. Enya Derkinderen: Then we have a few questions in the Q&A. So I will ask them. The first one, is it correct that the 2026 FCF sensitivities assume $180,000 a day in VLCC rate for the whole of 2026. If so, can you provide more color on the factors behind such an assumption? Ludovic Saverys: Sure. It's 118, so 1-1-8 and not 180. I think this is not a projection. We are not believing that this could hold on for a year because we don't know. We are in a kind of market where it could go anyway right now. Supply-demand looks positive, like Alex mentioned, we just want to show the free cash flow capacity. If at $118,000 a day for a full year, for VLCCs, which is relatively small in our spot exposure compared to our dry bulk, where we anticipate $34,000 on Newcastlemaxes, where actually we're at $44,000 right now. If you look at the market. So it's just an assumption to show the operational leverage and the free cash flow generation capacity of our company. Hence, it is strengthened by the belief that we'll be able to pay back the bridges and the bonds and our newbuild CapEx just by on cash flow. We're fixing Q4 already, deep down Q4, and we're starting to fix Q1. So Q4 and Q1, there is a good likelihood that we are hovering around elevated levels. Is it going to be 118, we don't know. But is it going to be 34 for Newcastlemaxes, we don't even know as well. This could go up. Enya Derkinderen: Right. Then the second question, what are your expectations for the Simandou mine opening? How important is the service to the offshore oil market OSV to you going forward? There are some very old vessels in operation by competitors. What are our depreciation rates? Alexander Saverys: Okay. So on Simandou, I think we've highlighted this already many times. That is, of course, going to be a meaningful impact as it ramps up to its full capacity of 120 million tonnes of extra iron ore. I think on the offshore market, we can be very clear. We have our CTVs for the offshore wind specifically. We have 6 CSOVs, which are a very meaningful investment of close to $0.5 billion, where we definitely want to continue to fix them well, short term and long term. We have now one extra CSOV XL. If it is successful, if we see traction with our customers, we will definitely order more. And the last question? Ludovic Saverys: On depreciation rates, we depreciate, I think, 20 years of scrap. Now on OSVs, the scrap is relatively light. So you can assume close to 0, but these are depreciation that we use on the offshore oil vessels. Enya Derkinderen: And we have one more question live. So Quirijn, you can now unmute and ask your question. Quirijn Mulder: Quirijn Mulder from ING. I have a couple of questions. My first question is with regard to the tariffs. Have you calculated what the impact was of tariffs on your company, let me say, between 1st of April and the end of September? That's my first question. And the second question is about, let me say, if you look at your fixed contracts, 295, I think 294 in that range. What do you think it will be at the end of 2025? That are my 2 questions. Alexander Saverys: Yes. Thank you, Quirijn. I'll answer your second question first. We have the intention, of course, to increase it. I think we've been very vocal about that. We want to take more cover when markets are high. We don't have a fixed target because a lot will depend on the market and what people are willing to offer us. But we definitely want to grow our fixed contract cover. The first question on the tariffs. Apart from the effect on the market in general, with rerouting of ships and what this has had on some of our vessel fixtures, we have actually none or very little impact on tariffs. Our container ships -- container ships are the ones that are more affected are chartered out. So there it is, of course, an issue for our customer, but not directly for us. And on the 2 other segments that would call the United States or would carry goods to and from the United States, it's dry bulk and its oil. And on dry bulk, we do very little to the United States. On oil, as you know, this has been exempted. So in short, the impact of tariffs on us, on Cmb.Tech specifically, has been close to 0. Of course, the side effects on the broader market of rerouting of ships and people wanting to have Japanese or Korean built ships to go to China and vice versa for China that we have felt a little bit. But I must say that right now, the effects are very limited. Quirijn Mulder: Does that also mean that the end of tariffs is -- does not have any impact in, let me say, 2026? Alexander Saverys: Well, Quirijn, I think now I'm talking as a shipping player in general, tariffs are always bad. We prefer not to have any tariffs because then trade can flow freely, and that means more opportunities for our ships to trade. So again, I don't want to create the wrong impression. We are very much in favor of tariffs going away because that creates more trading opportunities for our ships. But if you go on a macro level, what has happened in the United States compared to our fleet, there the impact has been limited. Quirijn Mulder: My final question is about the, let me say, the order ratio for the VLCC, Suezmax that is now above 12%, as I understand from your graphs. What is the delivery time of these vessels? That's mostly '26, '27. Is there anything to add to that in terms of when it is coming and what the impact might be? Alexander Saverys: Yes. So it's 15% for VLCCs and 20% for Suezmaxes, so it's actually higher than the 12% you mentioned. '26 and '27, we don't see any meaningful capacity that can still be added to the order book. But '28, we are seeing new yards or existing yards with extra capacity still coming on stream. So that number by 2028 could still go up. That's my belief. Ludovic Saverys: And today, Quirijn, if you would want to jump on these slots, I mean, we had 1 shipyard in China offering early slots for end '27 and begin '28. But any conventional yard, as you see in the news flow on the specific shipping news, you are starting to talk end '28 if you deliver -- if you order today, beginning '29, even 2030. So shipyards are getting filled up with the current slots. As Alex mentioned, you can have new yards, you can have new capacity coming online as well. But definitely, the traditional delivery time for VLCC and Suezmaxes are quite long now. Enya Derkinderen: We have 2 additional questions written. So the Q4 2025 bookings for VLCCs look low versus the market rates. Can you comment on why? Alexander Saverys: It has to do with the trips that our vessels have been doing. And I'm supposing people are referring as well to some of our peers. There's some creative bookkeeping, sometimes load to discharge or discharge to discharge. But there is also a fact that some of our vessels are slightly older and of course, are earning less than more modern vessels that are operated by our peers. We just took delivery of one very modern ship, but we still have some tonnage, which is 13 years old and which is logically then earning a little bit less because the vessels burn more fuel. Enya Derkinderen: And then the last one, can you discuss the relationship between News and Capes historically? And going forward, will this change go forward? Alexander Saverys: Well, the relationship is they move the same cargo. One ship is just 5 meters wider and carries 25,000 to 30,000 tonnes more. Capesizes traditionally have been the workhorse of the fleet, but Newcastlemaxes are taking this over now because it is relatively cheaper just to build a slightly bigger ship than a Capesize of 180,000. So same cargo, same trades. Enya Derkinderen: Perfect. I think that concludes the questions. Alexander Saverys: All right. Well, then we will close this earnings call by thanking all of you for having dialed in and looking forward to speaking to you in the following weeks, months or maybe on the next earnings call. Thank you very much. Ludovic Saverys: Thank you. Bye-bye.
Operator: Thank you for standing by, and welcome to the Ryman Healthcare Half Year Results Briefing. [Operator Instructions] I would now like to hand the conference over to Ms. Naomi James, Chief Executive Officer. Please go ahead. Naomi James: Good morning, everyone. I'm Naomi James, Chief Executive Officer of Ryman Healthcare. Thank you for joining us for our half year results for the 6 months to 30 September 2025. With me today is Matt Prior, who commenced as Chief Financial Officer on the 31st of July; and Hayden Strickett, our Head of Investor Relations. We're going to be working to get through the presentation in around 30 minutes to allow time for Q&A before we wrap up at midday. Looking at the agenda, I'll provide an overview of sales, stock, operations and development before handing to Matt, who will speak to the financials and capital management. And I'll then provide an update on outlook and strategic priorities before opening up for Q&A. Hayden Strickett: Starting on Slide 4. As you'll see from today's results, we are well on our way to delivering better returns and are doing the things we said we would do when we raised capital at the start of the year. This is the first positive free cash flow result that Ryman has announced in more than a decade. We have made substantial progress towards achieving our cost reduction target in the first half and increased our target for the full year. Our refreshed sales strategy is rebuilding momentum with 2 quarters of sequential growth at our new 30% deferred management fee. Our balance sheet reset is now complete with the full bank refinancing we announced at the start of the week. And we have today announced that we will hold an Investor Day in February, which will cover our strategy refresh and new capital management framework. Let me start with the first half highlights on Slide 5. And starting with our sales performance. We've seen a rebuild in sales volume for the first half with total sales of 704. While down on the second half of last year, which was a record, this was up on the fourth quarter of last year and is at a significantly higher value with the new level of DMF. On the operating side, we've stepped up the level of cost out. To 30 September, this is now at $40 million annualized, and we've uplifted the full year target to $50 million to $60 million. This is reflected in our financial performance with a significant improvement in operating EBITDAF and positive free cash flow for the half of $56.2 million on total revenue up 13% on both pricing and occupancy growth, while total costs fell 2%. We've completed the refinancing of all banking facilities, significantly extending the average facility tenor to 5 years. As part of this refinancing, we also improved our pricing and have more resilient financial covenants. Through the half, we completed an ASX foreign exempt listing, which we committed to do at the time of the capital raise. This is a pivotal step in broadening Ryman's investor base while reinforcing our commitment to the Australian market. Finally, we've made good progress with the strategy and portfolio review with additional land divestments bringing total contracted sales to $110 million. We will be coming back to the market at an Investor Day in February with an update on our refresh strategy and capital management framework going forward, including our dividend policy. Now jumping into the detail, starting with sales on Slide 8. We've seen continued improvement in sales effectiveness and contract conversion driven by strong lead generation from village open days and targeted sales and marketing initiatives. Looking at the first quarter, we saw a 12% step-up and another 9% step-up in the second quarter in our occupied sales. As a reminder, these are RV unit sales only, and we do not include care RADs in our sales numbers. This year, we introduced quarterly reporting. So you already have the sales figures you see on this slide. The new news is the update to our full year guidance to 1,300 to 1,400 units, which I'll speak to at the end in the outlook section. Moving now into pricing and the breakdown in sales mix. On Slide 9, you can see the changes we made to the pricing model are now fully in place. As a reminder for those new to the Ryman story, our sales, which are recognized at the point of occupancy typically lag contracting by 6 months on average. We made the shift to a standard 30% DMF on the 1st of October 2024. So contracts signed prior to that date have now been settled and the first half of this year reflects the pricing changes. You can see that 3/4 of new residents are moving in on our standard 30% DMF with the remaining quarter being a mix of DMF options, demonstrating the flexibility in our pricing framework across DMF and unit pricing to meet individual needs. Our contracts are long dated and the benefit of these changes will build over time with annual portfolio turnover currently at 12%. As well as the uplift in DMF, we're also seeing a significant step-up in weekly fees with an average 60% uplift in the level of weekly fees on rollover of units. Moving now to sales contracts on Slide 10. You can see again the significant improvement half-on-half coming through in our forward contract book with both increased contracting levels and a reduction in cancellations. Market conditions are still mixed across the regions. We are seeing early signs of recovery in Victoria, while Auckland is yet to show meaningful improvement, which is significant for Ryman with around 30% of the portfolio in Auckland. Our contracted level of stock is lower, reflecting the recent completion and settlement of presold units at Kevin Hickman and Nellie Melba. Stepping now into the breakdown between resales and new sales on Slide 11. Our average resales pricing has been broadly stable on first half 2025, while slightly down half-on-half due to mix impact. Independent units are down 2% year-on-year, while serviced units are up 1%. We've seen our gross resales margin, which reflects the cumulative capital gains on each unit continue to moderate from historical highs. This reflects the flat housing market we've experienced in recent years. We've seen resales volumes increase across both independent and service departments compared to the prior half. But you will see there is still a gap between sales and turnover, 81 units for the half, which means as we signaled at our full year results, there is a working capital drag through the half with an increase in resale stock and the payout balance. Turnover is an important driver of cash generation in our model through both DMF and capital gains. With improving resales, we have a significant opportunity both to increase cash generation and to release cash from the $330 million of bought back resale stock we have today. Turning to new sales on Slide 12. New sales have reduced, reflecting the planned ramp down in development in response to elevated industry stock in some locations. As a result, our level of new sales stock has remained broadly flat over the past 6 months. We do have elevated levels of serviced apartments following the opening of 5 main buildings over the last 18 months. This is a key area of focus for us, and we are considering a number of options to improve utilization of this product. Average pricing remains strong, supported by a favorable mix with 45% of new sales coming from Australia. And importantly, our total new sales stock value of around $470 million at the end of the half represents a significant cash release opportunity going forward. As we open the operations section on Slide 14, I'm pleased to share that Ryman has once again received significant external recognition. I know these award slides sound a bit repetitive given how many we've won over the years. But this is ongoing recognition across both the aged care and retirement living parts of our business, which truly reinforces the strength of Ryman's reputation. Importantly, our internal customer survey results have also continued to improve year-on-year across all parts of the village. It's been especially pleasing to see this progress in a year where we've undertaken a significant reset across many parts of the business. And I want to acknowledge the dedication and commitment of our Ryman team members who work every day to deliver great service for our residents and are working to make our business performance even more sustainable. Moving now to aged care performance on Slide 15. Starting with pricing, we have seen significant period-on-period improvement in both room premiums in New Zealand, up 10% on PCP and an average refundable accommodation deposits, or RAD balances in Australia, up 5%. These gains are in addition to the base care funding uplifts implemented in both New Zealand and Australia. In New Zealand, a base care funding uplift of 4% took effect from 1 July. We have also successfully trialed a new product for residents transferring to care from within the village, which we're now rolling out across all of our New Zealand villages. This allows us to grow the level of resident capital in care in New Zealand and gives our residents more choice in how they fund the cost of their care. In August, we communicated the closure of our 2 oldest rest home level care centers in Christchurch. Time to align with the opening of the 80-bed new Kevin Hickman facility, every resident has been supported to find a new home that meets their needs. Moving on to Slide 16 and the significant progress with aged care reforms across both Australia and New Zealand. In Australia, reforms have been enacted and are now moving into the implementation phase. Changes to allow a 2% annual retention of new RADs came into effect on 1 November. With our average incoming new RAD in Australia currently exceeding $800,000, this is expected to deliver a meaningful increase in revenue from new RADs moving forward. Ryman is already well progressed in meeting the new clinical care minute requirements, which become mandatory with the new funding changes. We've also seen significant progress made in New Zealand with the government announcing the establishment of a ministerial advisory group. While it is lagging Australia in undertaking the necessary reforms, we expect New Zealand will benefit from being able to draw on lessons from the Australian reforms, taking the elements that have worked well and delivered meaningful benefits while supporting the delivery of high-quality care without creating undue compliance burden. And the New Zealand government has been specific on the timing it wants to achieve, advised by the middle of next year to enable it to enact changes to the funding model in 2027. This will provide time for all political parties to commit to funding reform ahead of the New Zealand election next year. And there's a big focus on the reforms gaining bipartisan support has occurred in Australia. Moving now on to development. I'm pleased to announce today the appointment of Richard Stephenson as Chief Development and Property Officer. Richard brings deep sector experience with more than 20 years working across the retirement living and aged care sectors in New Zealand and Australia. The addition of Richard to our senior executive team positions Ryman for a return to disciplined growth and supports the continued delivery of high-quality communities for residents. Moving now to Slide 18, which sets out the status of our program of works across our in-flight projects. We've made good progress in the last half with the completion of the final stage at Nellie Melba completing the village, the completion and opening of the Kevin Hickman main buildings, the commencement of the main building at Patrick Hogan and progress of Keith Park Stages 8 and 9 with these independent apartments forming the bulk of our second half build guidance. We expect updated plans for our Hubert Opperman village to be finalized and approved next calendar year, allowing for the commencement of construction, which will be the first project we deliver under the outsourced model. And we continue to have more than 300 RV units sitting in our land bank for future stages on these projects, which have planning approvals and are ready for development as and when market conditions support it. Jumping forward to our land bank on Slide 20. In February, we announced that we were undertaking a comprehensive review of our land bank, which was independently valued at $376 million at 30 September. We have been exploring the best opportunities for growth in terms of both our existing villages and our greenfield sites and are also determining which sites would deliver better value for shareholders through divestment. A number of sites were identified for potential divestment during the early stages of this review, and we're pleased to report the successful sale of Park Terrace in Christchurch for $42 million and Mount Eliza in Victoria for $35 million. This is in addition to the existing contracted sales at Karori and surplus land at Nellie Melba totaling $33 million. We will provide a further update on our land bank review at our Investor Day in February and expect to have identified sites to be retained for future development as well as additional sites for divestment. Now I'll hand over to Matt to run through the financials. Matthew Prior: Thanks, Naomi. As my first half at Ryman, it has been fantastic getting to see the opportunity to unlock value in the business on a number of fronts, which I will touch on today. For the result, I'll talk to the financial highlights in our P&L, cash flow and valuations as well as speak to the refinancing update, which we announced earlier in the week. Starting with Slide 22. As Naomi has spoken to, we have made meaningful progress in the first half, which is reflected in these financial results. I'll call out 4 highlights on this slide. Firstly, we have seen a significant improvement in financial performance with losses before tax and fair value movements reducing $57.6 million year-on-year, underpinned by revenue growth of 13% and disciplined cost control. Next, free cash flow of $56.2 million was positive, underpinned by strong net development cash flows and lower finance costs. And thirdly, acknowledging the quality of our $1 billion of unrealized development assets, which represents a material cash opportunity. Lastly, the full refinancing of our bank debt, which has extended average tenor to 5 years, improved pricing and introduced a fit-for-purpose covenant structure. The refinancing completes our balance sheet reset and provides a robust foundation to grow earnings. Moving to Slide 24. Strong revenue growth is a notable highlight for the half, driven by the benefit of both our growing resident base, up 4% year-on-year in volume terms and stronger pricing in both aged care fees and retirement village fees. Year-on-year growth in DMF revenue includes a one-off adjustment for the prior year period relating to a historical GST issue, which was disclosed at the full year result. Removing this impact, DMF was broadly flat year-on-year. There are a number of factors at play here, including the changes to our pricing model as well as the accounting changes made in the prior year. If we look at independent units, we have moved from a 20% to a 30% DMF, but with revenue recognition period changing from 7 years to 9 years. Similarly, service apartments have moved from the 20% to 30% DMF with recognition changing from 3 years to 4.5 years. This means that whilst the change in DMF contract terms is building a higher-value contract book, it will take time to flow through to the P&L, and this is shown in revenue in advance. In simple terms, revenue in advance represents DMF, which has been contractually accrued but not yet recognized in the P&L. The balance will underpin future DMF revenue. I would stress that our front book revenue profile across both DMF and weekly fees is significantly greater than the revenue in place from our back book, which supports our growth in years to come. Slide 25 shows the significant progress we have made in our cost-out programs over the past year. Non-village expenses reduced half-on-half by 27% to $54 million, with the majority of this improvement coming from last year's restructure to support services. Adding to this is also some reallocation of costs to villages following these operational changes. Village expenses increased 7%, reflecting additional capacity, which has come online, noting that we have opened 5 main buildings in the past 18 months. While cost savings remains a key focus for the business, this is being approached in a considered way given the importance of the Ryman brand and our strong resident proposition. Moving to Slide 26. Combining the revenue and cost improvements I've talked to, we have seen a $26.4 million year-on-year lift in operating EBITDAF to $40.1 million, a key measure we focus on internally to track the core operating performance of our business. I would note that this does not include any realized capital gains on retirement village ORAs, which are reflected in other metrics such as cash flow from existing operations. The chart shown on this slide shows the improvement with non-Village cost reduction and positive leverage in developing village growth providing the most benefit. Moving to Slide 27. A key strategic priority for FY '26 has been segmenting our financials between aged care and the retirement village parts of the business, which we will report on going forward. I'd like to highlight that this is a non-GAAP disclosure, which currently sits outside of our financial statements. Segmentation is based on property type with the aged care segment comprising our care centers and the Retirement Village segment comprising our independent living units, service apartments as well as common areas and amenities. I should also make clear that home care services provided to a resident in RV are included in the Retirement Village segment. Central to this analysis is the allocation of support services to each of the segments. A substantial amount of the support is provided through our office functions such as operations, clinical, procurement and contracting. Allocating these costs to the segments provides a complete picture of our cost structure and business performance. The output of this work provides metrics such as EBITDAF per aged care bed of approximately $15,000 on an annualized basis. For a scale operator such as Ryman, this is significantly below the full potential of our portfolio, and there are transformation projects underway to improve performance. It is also important to note that the figures shown on a per bed or unit metric are averages with variations seen throughout the portfolio. Our transformation progress will be reflected in these segment measures going forward. Slide 28 details our cash flow from existing operations, or CFEO, for short, which is down year-on-year when excluding interest. Robust cash flow from village operations aligned with the improvement in operating EBITDAF has been offset by lower net cash flow from resales. Resales cash flow continued to be impacted by growth in our bought back stock, which grew $53 million in the half. Excluding this, our cash performance would have been meaningfully higher. I'd also highlight that we have made some refinements to our cash flow methodology. The most significant change is the allocation of interest on unsold new stock and land bank to development activities. Whilst much of this interest does not meet the criteria for capitalization, functionally, it still relates to our development business. Other changes include the allocation of sales and marketing costs between CFEO and CFDA and similarly, reallocating costs on land bank sites such as rates or site security to CFDA. The composition of CFEO shows the improvement in village operations, but this is held back by gross receipts from resales compared with the previous half, which had the benefit of stronger sales. Totaled against lower non-village expenses and attributed interest costs, there was a slight improvement in overall CFEO. Turning to Slide 29. We have seen strong net cash release from the development side of the business with our project spend reducing significantly as we sell down existing stock. The opportunity to release cash from inventory is substantial with approximately $470 million of new sales stock at 30 September. Consistent with my previous comments, the figures on this slide reflect our updated methodology with cost allocation to CFDA, including marketing and selling costs as well as allocating notional interest on unsold new stock and our land bank. Slide 30 shows the positive free cash flow for the half, which was the first time in many years for Ryman. Free cash flow of $56 million was partly offset by a headwind of $42 million in other movements, primarily FX with the 3% decline in the New Zealand dollar for the period. While this has had a negative impact on the Australian dollar debt, I'd note that our Australian dollar assets have also seen an FX uplift, which is an offsetting benefit to our balance sheet and our NTA. And as Naomi has already highlighted, there have been subsequent land bank sales that will benefit our second half cash position. Turning to asset valuations on Slide 31. Independent valuations across our sites consider unit and pricing information, capital spend and site-specific factors with further details in our presentation appendices. The half saw a positive fair value movement of $3.2 million, reflecting a number of changes, including price, but the outcome was broadly flat, taking into account FX and the previous result adjustment. There has also been a small impairment for 3 care centers as detailed in the financial statements, noting that the broader care portfolio is valued annually. The overall investment property carrying value and net tangible asset value remained broadly flat against the previous result. My final slide on financial performance provides a summary of our profit and loss with per share measures, which I won't speak to in detail given most line items have already been covered. Earnings per share of negative $0.044 was down for the half with the improvement in operating earnings offset by lower fair value movements as well as the higher number of shares on issue following the February equity raise. Now on Slide 34. As announced earlier in the week, we have successfully completed a full refinancing of our syndicated loan facilities. This extends our weighted average maturity to nearly 5 years with no maturities until FY '31. To achieve this, we have received strong support from our lending group who has recognized the turnaround that is underway at Ryman by providing funding out to 7 years. Our new ICR covenant is 1.50x adjusted EBITDA to interest, excluding interest on development debt. This designated development debt includes our committed developments that are in flight as well as recently completed care centers in New Zealand. Importantly, our existing covenant waiver remains in place with first testing of the new covenant to apply from September 2026. Overall, this refinancing retains significant funding headroom of over $500 million and provides a strong foundation to support our strategy and long-term value creation. Finishing my sections, I'll talk to treasury management on Slide 35. Since the equity raise earlier this year, we have delivered annualized interest savings of around $67 million, driven by lower debt following the February equity raise, positive free cash flow and a reduced cost of funds. With nearly 70% of drawn debt now on fixed rates and an average hedge tenor of 3 years, we have strong interest cost certainty. Combined with a lower debt profile post equity raise, this positions us for substantially reduced interest going forward. Before I hand back to Naomi, I'd like to thank all the operational teams across Ryman's Villages as well as the development and support teams in Christchurch, Auckland and Melbourne that helped deliver these results. I'll now hand back to Naomi to talk to our outlook. Naomi James: Thanks, Matt. On Slide 37, we have our updated full year sales guidance to 1,300 to 1,400 RV units. This reflects expected broadly flat total sales half-on-half in a mixed market with new stock delivery weighted to the first half and a lower level of new sales. In these numbers, we haven't assumed a recovery in the Auckland market, which makes up approximately 30% of our portfolio by number. We have increased our cost saving target for the year to $50 million to $60 million annualized. We have also confirmed the top end of our build rate guidance for the year at 330 units and beds. And we have moderated our CapEx guidance, reflecting the release of contingency on a number of in-flight projects, which have completed as well as some timing -- cash timing impacts. And we take a more disciplined approach to sustaining CapEx in the existing villages. Slide 38 gives you an update on the strategic priorities we announced at the time of the equity raise and what we said would be our focus in FY '26. I won't step through the slide as we've already covered each of these points through the presentation. But I would say we have made meaningful progress in releasing cash from the business, improving our performance and resetting the business for a return to disciplined growth. Let me wrap up on Slide 39. Our near-term focus continues to be on building our sales momentum, releasing cash from the balance sheet and driving operational efficiency across the business. Ryman is positioned for significant cash flow growth as the housing market recovers, aged care funding reforms are enacted, our aging population grows strongly on both sides of the Tasman and aged care scarcity increases. And I'm looking forward to sharing more with you at our Investor Day in February on our refreshed strategy, focused approach to growth and new capital management framework, including our new dividend policy. I will now open up for Q&A. Operator: Your first question comes from Bianca Murphy with UBS. Bianca Fledderus: First question is just on future development -- no, sorry. My first question was on your commentary that you are signaling that you will be returning to disciplined growth again. But at the same time, we continue to see vacant stock increase as well as bought back stock. And I know it, of course, takes a few years to develop a village. But can you just touch on the confidence, I guess, that Ryman is ready to return to growth again given where your stock levels are? Naomi James: I think I caught all of that. But I guess just talking to, first of all, the stock levels, what we've seen half-on-half is obviously build rate and new [ stock ] sales rate much more closely match each other. And that's what we're wanting to achieve in terms of moderating the rate of growth in our in-flight projects, which has seen us defer some of those later stages. We are intending to bring those stages forward as and when the market conditions support those developments, and that will be done on a progressive basis. And in terms of our greenfield land bank and sort of future expansion around the existing villages, that's something that we're intending to come back and talk about further at the Investor Day in February. Bianca Fledderus: Okay. That's helpful. And then I believe you previously mentioned that you expect stock levels to peak in FY '26. Do you still expect that to be the case? And if so, is your expectation that will be first half or second half? Naomi James: So in terms of the stock levels, we've obviously seen those increase through the first half with resales being at a slightly lower level compared to turnover. We are very actively working to get those to match each other with the range of sales effectiveness initiatives that we've got underway. We are also a little bit dependent on market conditions, particularly when it comes to the portfolio in Auckland. And ultimately, that's going to determine the exact point in time that we reach that point and start to see that cash come back down and the buyback level come back down. So probably can't predict more precisely than that, Bianca, but we're certainly working very hard to get to that as soon as we can. Bianca Fledderus: Okay. And then yes, following up on that, could you just talk about what you're seeing in terms of market conditions in the first weeks of the second half? Naomi James: Sure. Do you want to talk to that, Matt? Matthew Prior: Sure. Thanks, Naomi. So Bianca, in terms of what we're seeing so far in the second half, but before I do that, just rewinding slightly to the first half, in the first half, we did see higher volume of new sales and good movement on new stock deliveries with the rate of move-in probably a little bit faster than expected. In H2, I would say that we're optimistic given the recent cuts to the OCR, but it's really too early to say how those cuts will translate in terms of an uplift in current conditions. For October and November specifically, we've seen consistency with our first half sales performance, although we're entering this kind of quietly -- sorry, quiet seasonal period of December and January with this mixed market conditions as a backdrop. And as I said, optimism around the OCR cut, but it's too early to say how that will play through in the second half. Operator: Your next question comes from Arie Dekker with Jarden. Arie Dekker: First question, just on new sales stock and the ILUs in particular. Just given the influence of Australia in the first half. Just keen to get a bit of an indication of how much of that nearly 300 ILUs in new stock sits in Australia versus New Zealand? And then just related to that also, what your expectations are for pricing in Australia given the mix of stock that you have remaining there? Matthew Prior: That's a very detailed question. We might have to come back to you offline as to the composition. Naomi James: In the first half, Arie, one thing we'd point to is with the Nellie Melba final stage completing, we have had a number of sales come through from that. We had 76 units added in Nellie Melba. We are seeing good trading and market conditions over there, and that's a relatively recent thing. But we haven't, I don't think, provided quite the level of split that you've just asked us for in terms of the split between New Zealand and Australia. So that's probably the further detail we can provide around that. Arie Dekker: Okay. No, sure. Just in terms of cost-out expectations, which have increased through the first half, which is clearly pleasing as you're spending more time in the business. I mean, could you just sort of characterize how far you've gone, I guess, in sort of peeling back the layers of the onion and whether your expectations would be that based on what's still to go that we could see further upsizing of that envelope through the balance of this year and into next year? Matthew Prior: Thanks, Arie. So in terms of what we've seen so far is, obviously, we had $23 million last year. We initially expected $23 million this year. At the half, we've achieved $40 million. The current year savings are really across both non-village and village. I would say in emphasis areas, it's around the support services, as you would know, procurement as well, refurbishment CapEx and really village efficiency initiatives. It's really giving us the early gains that we're being able to talk to and now update and increase our guidance to the $50 million to $60 million. As we do more work, we'll be able to give you more confidence around the timing of that. But at this stage, not looking to change the original numbers in terms of total target. Arie Dekker: I know I wasn't expecting you to. But what you're suggesting there is there is more work to do in terms of looking across the business and certainly potential for that to be increased further? Naomi James: Yes. You'll remember, if you go back to the cap raise, Arie, we talked about a cash improvement target of $100 million to $150 million made up of a mix of cost and revenue. So that is still our overall target that we're working to. We've given you the cost indications to date. And one of the things we're mindful of is being able to give a clearer view around timing of when the revenue improvements will flow through as well. So that's probably something we're going to come back on in the new year with some further detail around it. Arie Dekker: Great. Yes, that makes sense. And then just on the RAD retention benefit that's coming in, in Australia. I mean, what's your -- obviously, too early to see on the evidence, but I guess, just some comments on your expectations with regards how it might change the mix and the SKU of residents you see coming in on a DAP versus a RAD. Do you have any comments there? Naomi James: I don't think we'd expect to see it change the mix, Arie. We've certainly seen a little bit of benefit ahead of the 1 November commencement for residents looking to avoid that new regime. It applies to new RADs from the 1st of November. But typically, it's driven based on the capital that individuals have access to. And it's also strongly linked with the tax and means testing settings in Australia. So it's fairly resident circumstance specific as to how those choices work rather than tied with that DMF retention. Arie Dekker: Okay. No, that's good. And then just, I guess, returning and just asking a specific question back to the answer you've already given with regards to that the resales and improving volumes there to bring it more in line with turnover and then clearly, clear inventory as well. I guess just on the tools you're using, I guess we can't sort of see it come through at an aggregate level. And then also, there's obviously the phasing of it all and that in terms of settlements. But can you just talk to the extent to which you are using price as a tool in resales to increase volumes, whether you are doing that or not? And what sort of levels where it is being applied? Naomi James: Sure. So we're using a range of initiatives, Arie, and price is really only one of those. I think we signaled at the full year that we would use pricing in a targeted way where we have building resale stock or where we have older new sales stock. I won't talk to sort of anything specific around discounting. It's obviously a competitive market. But price is certainly not the only thing we are doing. We have a range of other incentives and measures in place targeted at a village level and also have invested quite a bit in the training of our sales staff to really make sure that they've got sort of the right toolkit, the right range of incentives and are able to do a really great job at selling the new DMF offering, which they are really hitting their strides with. So it's a range of things with targeted pricing really just being one part of it. Arie Dekker: Okay. And then just the last question for me, it's a quick one. Congratulations on the divestments of Mount Eliza and Park Terrace. Could you -- I may have missed it, but could you just comment on where those -- the values achieved for those versus the FY '25 book value? Naomi James: Yes, they're broadly in line with book. Operator: The next question comes from Will Twiss with Forsyth Barr. Will Twiss: Thanks for the extra disclosure on the Village and the care earnings. If we think about that $15,000 per bed EBITDAF in aggregate, can you give us an idea of what that looks like if we think about mature versus non-mature care centers? And then a follow-up to that, what is the split between what that looks like in Australia versus New Zealand? Matthew Prior: Hi, Will. It's Matt. I'll talk to the Australia and New Zealand piece. So care in Australia is more profitable. It reflects the funding reforms that have occurred in that market. And whilst we're not providing the $15,000 EBITDAF per bed split between the 2 markets, you can see from the country segment reporting in Note 2 that Australia has a higher margin at a country level and the bulk of the P&L is care. So hopefully, that's helpful in terms of giving you an indication. And look, with the lower margin in New Zealand, it really is particularly as a result of the funding environment. So a scale operator like Ryman, we should be looking to get efficiencies from that scale, and we will from our transformation programs to improve performance. But that said, lower earnings in New Zealand aged care is reflected in our valuations also, and we do need to see meaningful improvement in funding to support investment in new capacity. And just on that, the same applies to obviously mature versing immature care centers. This is a high fixed cost business. They benefit from occupancy. So you should expect obviously a lower margin in a more immature care center. Will Twiss: Okay. Great. But maybe if you could just give us a ballpark of where you think that EBITDAF per bed would be in a mature center today? Naomi James: Yes. I think, the complex thing there is, obviously, the premiums we're realizing do vary quite a bit across the portfolio. So it's not a consistent position. It is region-specific. And I think in terms of perhaps that portfolio target in Australia and New Zealand, that's something we might come back in the new year and give you a further view on what we think a fully optimized position might get to, including the benefit of the sorts of aged care reforms that are being looked at in New Zealand. Will Twiss: Okay. No, that all makes sense. And then just moving to the village side. There's quite a big delta, sort of $50 million, $60 million between the village fees and the village OpEx. When can we sort of expect that delta to start closing materially? And then I guess, following up from that, is it still your expectation that over time, you can get these 2 lines to closer to breakeven? Matthew Prior: Yes. Good question, Will. So focusing on RV, not care. Looking at the costs I should point out the cost is a blend of independent and serviced and the cost of delivering service is higher within that blend. You can see in the appendices that we've given the [ IA ] kind of unit fees of approximately $156 based on the current back book, if you can think about it this way, with the costs being at a current point in time. My observation coming in as a CFO is this is an industry issue. It's affecting a number of operators in this kind of high inflationary environment. A large part of the reason that Ryman has lifted its fees after many years of keeping them flat is to partly address this issue. So the front book will address this in combination with some of the cost-out programs that we have underway, and that will close that gap on the RV side progressively over time, but it will take time. Will Twiss: Great. And then just last one from me. If we think about the kind of step down in maintenance CapEx in the first half, how should we be thinking about this as a base going forward? Naomi James: I think the step down, and it's not a significant step down, Will, in terms of FY '25, it really just reflects a different level of cost discipline across the business and financial discipline across the business. We want to invest in the existing villages, but do that in a way that really is value-oriented. And so there will be some movement period-to-period based on opportunities, particularly where we can create value through investing in the villages. But in every dollar we're allocating, we are really making sure it is well spent, and that's reflected in the numbers. Operator: [Operator Instructions] The next question comes from Stephen Ridgewell with Craigs Investment Partners. Stephen Ridgewell: Congratulations on the improved free cash flow results and progress on improved operating results. Look, I just wanted to touch on the operating EBITDAF result, which you called out earlier, Naomi was up sort of 200% or so off a low base. And then maybe also look at the resale gains because if we include that to the operating EBITDAF, that number is down 3%. So given the cash resale gains, look to be down about 34%. I just want to follow up on Arie's question on the decline in resale margins. Directionally, it's as expected but the magnitude does perhaps look a little bit steeper. And I just wanted to see if there were any call outs with regards to mix or other considerations? Or does that kind of fairly reflect the level of discounting that Ryman has connected over the half to clear the resale stock? Naomi James: I think in terms of just what's driving that reduction, which is obviously not new to this half, Stephen. We see the HPI inflation in recent years as a significant factor. And remembering that in resales, about half is service departments, which are turning over on average in 4.5 years and half is independent at about 9 on average. And so particularly with service departments, you see that more recent lower level of house price inflation having an impact. And so that's sort of as significant a factor in terms of the resale margins. The pricing, I think, is more of a factor in terms of mix as well. And so as we see newer villages making up a larger proportion in the volumes and not necessarily having the same level of resale gains just purely as a percentage terms in terms of house price inflation, that's also flowing through to sort of what you print in terms of that overall percentage margin change. Stephen Ridgewell: Okay. So you're calling out maybe a slightly younger average tenure potentially for those resales because just to -- I guess we did see a 540 bps sequential decline in independent gross resale margins on Slide 11 and 350 bps sequential on service. So that would seem a bit steeper than what we're seeing across the rest of the sector and the housing market generally. So it reads more -- without that color, did more discounting, but you're suggesting it's more of a mix shift. Is that right? Naomi James: Look, I think it's a combination of those things, Stephen. So rather than one of them. And just to call out the -- we've obviously got the city villages as well as the regional ones. We've got the newer villages as well as the older ones. And then we've got the service department and independents in the mix and all of that overlaid with broadly flat HPI over the last 5 years or so. So those factors are all playing into that resales trend. But obviously, pricing is a factor as well. Stephen Ridgewell: Okay. And I guess if we look into the second half, I mean, are we going to see -- should we be seeing a stabilization in those, if you like, like-for-like resale margin trends? Or is this a fair read is this the new normal just given where the housing market is in this part of the cycle and what you need to do to get clear stock? Naomi James: Look, it's obviously fairly mix dependent, Stephen, but I'd expect there's potential to further downward, but with perhaps a slower moderation in that in terms of where it trends, but very mix dependent in terms of where the sales are coming from. Stephen Ridgewell: Okay. And then just maybe one on the CapEx. I think it's been mentioned earlier that the CapEx guide was lowered a bit. Naomi, you sort of called out cost discipline. I was just wondering as well, though, does that pull down and what we're seeing is that the build rate is at the top end of the range, prior range and the CapEx guidance is lowered. Does that reflect perhaps lower CapEx going into next year or lower build rate going into next year? I'm just trying to interpret the moving parts there because typically, if your build rate was at the top end, you'd expect CapEx to be a little bit higher from where I sit. Just trying to understand that. Naomi James: So the way I'd think about the build rate, Stephen, is really just that we're expecting to deliver in full to schedule rather than any change in development activity. In terms of the CapEx, there's a couple of things in that. One is that we have released meaningful contingency from some of the projects that we've completed, which is really pleasing. And then there's some timing in that. There's always a -- we're obviously completing Keith Park final, the current stages 8 and 9 near the year-end. We're getting towards the end of Northwood around the year-end. That just means you do sometimes have some timing impacts as to when that can flow through those projects. No change to schedule or delivery in any of that -- impacting any of that. Stephen Ridgewell: Okay. And maybe just one last one for me. Just on the volume guidance upgrade, it's obviously good to see. Just maybe a question on the mix. And Matt, you sort of called out kind of earlier that perhaps you'd see some improvement in continued improvement in resales in the second half, but new sales perhaps sort of dipping a little bit just given obviously the front books coming back. I mean I was just wondering if you could give us some indication of maybe how sharp that mix shift you might expect to see in the second half on the settlements. And I appreciate it's early days, but is it likely to be quite a different mix in the second half or incrementally different, if you like? Matthew Prior: Yes, you had 2 kind of large tranches of stock come through in the first half in terms of Nellie Melba and Kevin Hickman. So those 2 definitely play a role in first half new sale performance, and you can see the mix from what we have disclosed in our trading updates and the result. So it probably is more of an even spread in H2 than what it was in H1, which had the benefit of those 2 large tranches. So I'm not going to give you specifics, Stephen, in terms of the combination of those factors into H2, but hopefully, that's directionally helpful. Operator: The next question comes from Nick Mar with Macquarie. Nick Mar: Just following on from that. Just within the contracting rates, can you give us any idea of how that's looking on retail, just how close you're getting to the sort of termination run rate on a go-forward basis? Naomi James: So Nick, I think you were asking how close is the resale contracting rate to matching the turnover rate? Did I hear that correctly? Nick Mar: Yes. So within that sort of $674 million of new sales contracts in the first half, how close that is to the $619 million of termination? Naomi James: So we haven't given a specific split in terms of the guidance, but we are certainly seeing that gap narrow. And while resales is sort of below where we want it to be, we're chasing that hard to get back up to that turnover level, and that's a near-term focus for us. So that's a near-term goal we are working to chase down. We have indicated, I think, in the guidance that new sales are probably a bit lighter in the second half. And so you'll factor that into sort of the resales rate through that period in how you read that. Matthew Prior: And Nick, just to add to that, not just for the target of achieving turnover, but also to the extent there's $330 million of stock value attributed to that, which is something -- which is a large prize for us to get after in terms of cash release. Nick Mar: Yes, absolutely. And do you think that the current set of incentives, tools, pricing, everything like that is enough to get you to that, notwithstanding sort of a material change in market conditions? Or are you sort of needing to wait for the market to pick up in Auckland to be able to actually execute on that piece? Naomi James: I don't think we're waiting for the market to pick up, Nick. I think property is cyclical. We all know that, and we're chasing that down in the current market. It's just a little harder, particularly probably at the Auckland end. But certainly, in lots of markets, we're well exceeding that. And so our focus is on closing the gap. Nick Mar: Yes. So my question was in order to do that sort of nearer term, do you need to run more discounting or bigger incentives to get the cadence up? Naomi James: Not necessarily. I think it's a matter of continuing what's occurring, which is really using the full range of sales initiatives and options we've got to drive near-term sales performance. Matthew Prior: And I think you've seen, Nick, in the half that there's been a trend in sales effectiveness towards better conversion and that conversion rate of leads through to contracts, through to settlements has been one of the highlights of the half. So to the extent we can continue to build and develop those tools, it goes beyond price in terms of sales performance. Nick Mar: That's helpful. And then could you just talk through that resident funding trial that you've done kind of transfers to care and any intentions of sort of going back and allowing ORAs across other care beds in your portfolio and trying to sell down that way? Naomi James: Yes. So I guess just starting with the resident. When it comes to care, our residents are coming either from within the village or often coming from outside the village. And so that resident fund product that we have trialed and are now rolling out is really about helping our residents transfer within the village and use the capital they have, whatever level of capital that might be to fund their care. We do also provide care in certain cases into service departments, and that's an ORA structure in terms of where that's used. But we also see daily accommodation premiums as a really important option because -- very often, care residents are coming to us at a difficult time in life. There's a lot of uncertainty around how long they might require care for and what level of care they might need. And so we want to have the terms and offerings right to sort of match the residents' needs. High occupancy in care is key to profitability. And so having a range of pricing options is what's going to support that. And we think this new resident fund adds to the range of options that our residents have in coming into care. Nick Mar: Sorry, what specifically is the resident fund and what's the mechanism? Naomi James: So it's effectively a capital amount that applies as a deposit to fund through both effectively the value on the capital as well as through drawdown of that amount to fund the care. So whatever level of capital an individual might have, they can use both the capital base and the drawdown from that to fund their care without needing to have separate funding or capital available to pay their room premiums. It effectively allows us to discount the room premium in using that capital in that way. Nick Mar: And then the last part of the question, are you considering sort of having ORAs available over the [ balanced ] care portfolio in New Zealand? Naomi James: We see that as one option, and it's an option that's used today in service departments and care suites. As to the extent of broader use of it, that's something we'll keep considering in really matching the range of pricing options to what residents are looking for. Occupancy is critical in care. So we want to be able to maximize occupancy and realize the premium for the accommodation in a way that's aligned with how the resident is best able to fund that. And not everyone has a capital sum and not everyone is wanting to sign an IRA at a point where they are moving them or a family member into care. Operator: There are no further questions from the phone lines at this time. I will now hand it to Hayden for rest of Q&A. Hayden Strickett: Your first online question is from David Kingston. Well done on an overall -- on the overall progress and positive free cash flow. When are you expecting positive EPS? Matthew Prior: Yes. Thanks for the question, David. So EPS, as you'll see it in the face of the accounts, is driven pretty heavily by the fair value movements period-to-period. These are independent, hard to pick. You'll see from our fair value change from last year to this year, it was a substantial difference. But going forward, to the extent of build rate moderating and as well as valuation being stable, we wouldn't expect that to have the same degree of change. But that's the main factor affecting EPS beneath our operating performance. Hayden Strickett: Your second online question comes from [ Francois ]. Sales application trends beyond the reporting period of September 2025 with a split of ILUs and care suites, please? Matthew Prior: Thanks, [ Francois ]. We're not going to give the complete split, but I would say that it's continuing at a very similar level of contracting post 30 September. Again, we're coming into this quiet kind of December, January period. But what we're seeing to date across October and November is at a very similar level of contracting. Hayden Strickett: There are no further online questions. I'll hand back to Naomi. Naomi James: Thanks, Hayden. Thanks, everyone, for joining us today. Appreciate your time and look forward to giving you an update next year at Investor Day. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Hello, ladies and gentlemen. Thank you for standing by for Li Auto's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Ms. Janet Chang, Investor Relations Director of Li Auto. Please go ahead, Janet. Janet Chang: Thank you, operator. Good evening, and good morning, everyone. Welcome to Li Auto's Third Quarter 2025 Earnings Conference Call. The company's financial and operating results were published in a press release earlier today and were posted on the company's IR website. On today's call, we will have our Chairman and CEO, Mr. Xiang Li; and our CFO, Mr. Johnny Tie Li, to begin with prepared remarks. Our President, Mr. Donghui Ma; and CTO, Mr. Yan Xie, will join for the Q&A discussion. Before we continue, please be reminded that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain company filings with the U.S. Securities and Exchange Commission and the Stock Exchange of Hong Kong Limited. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that Li Auto's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to Li Auto's disclosure documents on the IR section of our website, which contain a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Our CEO will start his remarks in Chinese. There will be English translation after he finishes all his remarks. With that, I will now turn the call over to our CEO, Mr. Xiang Li. Please go ahead. Xiang Li: [Interpreted] Now it's translation for Mr. Li. The third quarter of 2025 was also the first quarter in the second decade of Li Auto. We went through many challenges, including supply chain, product life cycle, PR challenges as well as changing policies. All these factors have had a negative impact on our operations and deliveries. However, today, I want to take this opportunity to talk about our long-term thinking in the next decade and three most important choices that we need to make, organization, products and technology. The first choice we need to make is organization. The challenge we're facing is whether to choose an entrepreneurial model or a professional management model. In the last 10 years of Li Auto, the first 7 of those years, we operated as an entrepreneurial model company. But as we scaled over time to a scale that we've never seen before, especially in terms of revenue, around the time of 2022, many people suggested to us to shift to a professional management model. Because historically, whether it's Mercedes or BMW or any of these 100-year-old car enterprises as well as Microsoft and Apple, which is the tech giants have all operated under this model and have great success. In the last 3 years, we tried very hard to make ourselves used to this professional management model. We -- but after implementation, we realized -- we came to the realization that the entrepreneurial model and the professional management model are fundamentally different, and it is irrelevant to processes and organization structures. The difference really lies in management principles and key operating principles. And also, they are tailored to different stages of growth and industry environment. The professional management model can be very successful, but it relies on three factors. The first one is that the industry and technology cycle has to be relatively stable. And the second is that the enterprise is already in a leading position and the position is relatively stable. And the third one is that the founding -- the founder and the founding team are either lost their motivation or are not actively involved in the company. If all these three criteria are satisfied, a professional management model could be a very ideal choice, whether it's Apple or Microsoft have both flourished after professional management took over and grew from $100 billion in revenue to $1 trillion companies. However, the entrepreneurial model is catered to an entirely different environment. First of all, the industry and technology cycles are going through fundamental changes. And second, the industry is very unstable and the entrepreneur -- and the company enterprise itself is not yet a leader. And thirdly, the founder and the founding team are still devoted to everyday work with their full passion and fully motivated. As AI is shaping many industries today, the environment that we live in and considering the traits of this company, we think that we fit into the entrepreneurial model way better. The entrepreneurial model really is about four things. First of all, there needs to be more conversations as opposed to reports. In a rapidly changing environment, deep conversations is really key to increasing our knowledge and judgment of the world as well as to making bold decisions. And secondly, is focusing on user value as opposed to just short-term deliveries. Only those things that create value for the users are worthy to be delivered as opposed to only focusing on how many tasks that we delivered on. And third one is keep increasing efficiency as opposed to occupying more resources. For example, if we spend $10 on doing something last year and this year we need to do it with $8. That's how we have, have resources to really spend on projects and investments that do not generate short-term revenue, but really benefit us in the long term. And fourth, the key is to recognizing the key issues as opposed to just creating information asymmetry. And only as we create more value and increase efficiency and solve the key issues, can we really thrive in a highly competitive and rapidly changing environment and consistently meet customer demand? In the last 3 years, me and my team have tried very hard to adapt to the professional managed model, and we have forced ourselves to embrace all kinds of changes. However, we all realize that we became a diminished version of ourselves. NVIDIA and Tesla are still operating as an entrepreneurial company. And if the largest and strongest companies are all operating in the entrepreneurial model, there is no reason for us not to utilize our strength and what we're most used to. Since 1998, I have 27 years of running entrepreneurial companies, and I have never worked in any large corporation as a professional manager. Now we're facing a highly competitive and rapidly change -- an environment with rapidly changing technologies. I personally am passionate about products, about automobiles and about AI. And work is my largest passion. So, why don't I focus on what I'm most used to and what I'm best at to manage Li Auto. And that's how -- that's the most important first choice as we look into our second decade. As a result, starting from Q4 this year, I and my founding team will firmly revert back to the entrepreneurial model and to embrace the new era and new technological challenges. The choice of organizational model is the foundation of everything. Looking into the next decade, the next key question is how we really solve issues for our customers. First of all, what products do we build? And where is technology headed? That's always the essence of everything. First of all, on products. We also need to make an important choice. What kind of products should we really build for our users? Is it electric vehicles? Is it smart devices? Or is it embodied robots? If we only focus on electric vehicles, competition is really all about an arms race in spec sheet. Do you have more -- 20 kilometers of range more? Do you have a car that's 2 centimeters longer in dimensions? And if it's only focused on electric vehicles, it's all about larger space, more range and cheaper prices and maybe copy some proven designs, just like how Li L9 has been copied. Other than that, all R&D investments are waste, stronger sensors, bigger models, more computing power, better active suspension are always waste of cost. And even stronger and stronger computation power and active ride suspension may even have negative impact on range. And secondly, if we choose to focus on smart devices, then we'd automatically be focused more on what happens in the screen. Features that used to belong to smartphones and smart tablets will be migrated to the car environment. In fact, most of the innovations in smart devices is really about moving what's already available in smartphones into vehicles and moving mobile apps into head units, deploying larger language models in head units and even do coding in cars and conduct deep research. But then, we ask ourselves the question, when our users buy our cars, do we really buy it for their work or deliver better life? If certain experience are better -- already better in mobile phones and tablets or computers and more natural, why should we even bother putting them in cars? All these investments create very little incremental value for users. And thirdly, the third route is for us to make our cars into an embodied AI in the physical world or in layman terms, robots. The movie transformer told us that there are broadly two types of robots. The first type looks like human beings and the second type looks like cars. Knight Rider and Cars, these TV shows or movies have clearly showed us car-shaped robots is going to be a mainstream type of -- form factor of robots going forward. So, how do we transform our cars into robots? We need to give it ears and eyes for perception. We need to give it brains and nerves, which is modeling capability. We need to give it heart, which is computing power, and we need to reshape the hardware to make it a stronger physical presence. So, our robots need to have -- need to parallel the top drivers and can not only drive but also pick you up, park for you, have to charge the car up, have to close the door, open the door and meticulously make your life more convenient and safer. It can also play the role of parents, assistants or even flight attendants and to provide you the convenience and take care of you within the sphere of the car, just like first-class cabin and the services on planes. And it's also like when we're a little that our mother takes care of us and make us happy. So, how do we define a good embodied robots? How do they make them to change from passive machines into an automated machine and then further into proactive machines? In the next decade, the most valuable embodied AI products is going to be vehicles that are automated as well as proactive. And competition is really to how automated and proactive can we make these products and how can we fuse them into high-frequency life experiences something that once we get used to, we can never go back. So, whether it's electric vehicles or smart devices, these are not necessarily bad choices, but we think they're not sufficient. And only if we choose the embodied AI, which is the hardest about these three problems, can we really change the life of our users and really provide automated and proactive services that only embodied AI products can provide. And it's really like what you see in Transformers movies, they're car-shaped robots or what we see in Cars or Knight Riders, they are robots that are shaped in cars. And I believe that this is the biggest challenge and opportunity that we entrepreneurs see in this new era. And the next choice is about technology or more specifically, our full stack AI system. What do we choose? What kind of technology do we choose to power this full stack AI system? Is this something that's language-based that's faced towards the digital world? Or is this something faced towards the physical world? These two options require completely different system capabilities. If we want to build a good embodied AI, we need to build an AI system that's completely different from language-based AI models, including perception like eyes and ears, including the model itself like brain, including the operating system like nerves and including the computation power, which is like hearts and also the physical body itself, just like human body. At this moment, there's no third-party supplier that can provide the full-stack system. And in fact, not any company can provide even part of this system. And the focus of large language models is really focusing on the model itself and computation. Larger models and more computation power is always going to generate stronger capabilities. However, for embodied AI, we need to better understand the physical world. And the model is also built on our understanding of the physical world. Accuracy is the first priority and generalization only comes next. Operating system needs to make sure the optimal integration is made between the hardware and the software and also provide higher frequency and also the system needs to be fast and precise. And also this computation power that powers the perception, the model and the operating system needs to reside on the device side as opposed to the cloud side. And lastly, we also need to modify the hardware itself to become a really embodied hardware. And for example, our active suspension, it's just like a 3D nerve system -- nerve control, and it can increase the efficiency and precision of execution in the physical world. So, if we look at this entire AI system through the lens of embodied AI, you will see that there are so many changes that needs to happen and desperately need to happen. The first change comes in perception. Based on the current model and the computation power that can be deployed on the device, the current 3D BEV or occupancy network or 2D Vision Transformer, the effective range of perception, I'm talking about the effective as opposed to theoretical maximum is only just about over 100 meters, which is way less than human eyes. However, if we upgrade it to 3D Vision Transformer, which is just similar to how human eyes works, this range can be increased by 2x, 3x, and it can solve more than 50% of the common issues we see in autonomous driving. 3D Vision Transformer is not only limited to autonomous driving, but it can also benefit interactions with the car inside and outside of the car. These can also all become possible. So that requires fundamental breakthroughs in perception models, both in research and also development. And also requires tailored chips for embodied AI, just like M100, which we have developed and also requires a very strong compiler team and high-efficiency cooperation. The next area of improvement is in models. It's only with 3D Vision Transformer can we really understand the world. The VL in the BLA is really -- can really understand and perceive the world better and human data can be more effectively used for training and world model can also be used more effectively for training. For example, in the status quo computation platform, a 4-billion parameter MOE model can only run at 10 hertz. But the execution frequency is 60 hertz. So, we can increase the frequency of the model by 2x to 3x. It can also automatically solve many issues, including comfort and speed of reaction in autonomous driving. And it also requires us to fundamentally modify and customize the traditional GPU architecture and to have a dedicated operating system. And M100 again, is really designed for solving these embodied AI problems. And lastly is the embodied hardware itself. A human being can typically react to braking and steering in about 450 milliseconds. And for a typical autonomous driving system from perception to execution, the entire closed loop takes about 550 milliseconds. So, for a typical driver today, they can easily -- it's very obvious to them that autonomous driving is much slower. It's like an elderly driving car. The drive-by-wire system can reduce the response time to about 350 milliseconds. And the difference of 200 milliseconds is not to be underestimated. It can roughly reduce the accident rate by over 50% and it also feels better even than driving by themselves, and it's also safer. It's safer both in the subjective as well as the objective sense. So based on these needs, all the entire control mechanism will be different. And if we only focus on increasing the scale of model just like we did in language models, for example, if we increase the size of model 2x and with a corresponding increase in computation power, the really performance increase is only going to be 5% to 10%. But if we look at this from an embodied AI perspective and to solve the key issues in every stack -- on every level of stack, the next-generation autonomous driving can really increase the performance by 5- to 10-fold. And that is what can power embodied AI to perform fast and accurate and valuable services. And that's the difference between 0 to 1. In the past 3 years, we have made a lot of progress in technology and systems for embodied AI. And that makes us very confident about the next-generation products. The start of embodied AI robots starts with car robots and starting this year, I believe, and hundreds of billions of revenue is only a starting point. So, the above three key strategic choices really laid the foundation for the next decade of our development. It's more challenging than the last decade. And we're deeply aware that real competition isn't really about short-term wins. It's about staying on the right path over the long term and having the dedication to keep investing in it. Backed by a strong financial foundation, we will stay focused, embrace our beloved entrepreneurial management style and build leading body intelligence products. So Li Auto can navigate market cycles, lead technological transformation and become a company that creates unique lasting value for users and society in the long run. Finally, I will also look forward to engaging with you guys in this manner moving forward rather than presenting a quarterly report in a fixed format. And I want to express my gratitude to all of you for your support and trust, especially during our most challenging times. We're fully committed to making Li Auto the best performing company in embodied intelligence and the greatest creator of user value within the next 3 to 5 years. Thank you. Tie Li: Thank you, Xiang. Hello, everyone. I will now walk you through some of our third quarter financials. Given time constraints, my remarks today will be limited to the financial highlights. All figures will be called in RMB, unless otherwise stated. For further details, we encourage you to refer to our earnings press release. Total revenues in the third quarter were RMB 27.4 billion, decreased 36.2% year-over-year and 9.5% quarter-over-quarter. This included RMB 25.9 billion from vehicle sales, decreased 37.4% year-over-year and 10.4% quarter-over-quarter, mainly due to lower vehicle deliveries. The sequential decline was partially offset by a higher average selling price due to the different product mix. Cost of sales in the third quarter was RMB 22.9 billion, down 22% (sic) [ 32% ] year-over-year and 5.3% quarter-over-quarter. Gross profit in the third quarter was RMB 4.5 billion, down 51.6% year-over-year and 26.3% quarter-over-quarter. Vehicle margin in the third quarter was 15.5% versus 20.9% in the same period last year and 19.4% in the prior quarter. The year-over-year decrease was mainly due to estimated Li MEGA recall cost and the higher per unit manufacturing cost from lower production volume. The sequential decline was mainly due to the same recall-related costs. Excluding such recall costs, vehicle margin would have been 19.8% in the third quarter. Gross margin in the third quarter was 16.3% versus 21.5% in the same period last year and 20.1% in the prior quarter. Excluding the above-mentioned Li MEGA recall cost, gross margin would have been 20.4% in the third quarter. Operating expenses in the third quarter were RMB 5.6 billion, down 2.5% year-over-year and up 7.8% quarter-over-quarter. R&D expenses in the third quarter were RMB 3 billion, up 15% year-over-year and 5.8% quarter-over-quarter. The year-over-year increase was mainly due to the impact of the pace of new vehicle programs and increased investments in expanding our product portfolio and technology, along with expenses from the product configuration adjustment. The sequential increase was mainly due to those same product configuration adjustment expenses. SG&A expenses in the third quarter were RMB 2.8 billion, down 17.6% year-over-year and up 1.9% quarter-over-quarter. The year-over-year decrease was mainly due to the recognition of share-based compensation expenses regarding the CEO's performance-based awards in the third quarter of last year. Loss from operations in the third quarter was RMB 1.2 billion versus RMB 3.4 billion income from operations in the same period last year and RMB 827 million income from operations in the prior quarter. Operating margin in the third quarter was negative 4.3% versus 8% in the same period last year and 2.7% in the prior quarter. Net loss in the third quarter was RMB 624.4 million versus RMB 2.8 billion net income in the same period last year and RMB 1.1 billion net income in the prior quarter. Diluted net loss per ADS attributable to our ordinary shareholders was RMB 0.62 in the third quarter versus diluted net earnings of RMB 2.66 in the same period last year and RMB 1.03 in the prior quarter. Turning to our balance sheet and cash flow. Our cash position remains strong with a quarter ended balance of RMB 98.9 billion. Net cash used in operating activities in the third quarter was RMB 7.4 billion versus RMB 11 billion provided in the same period last year and RMB 3 billion used in the prior quarter. Free cash flow was negative RMB 8.9 billion in the third quarter versus RMB 9.1 billion in the same period last year and negative RMB 3.8 billion in the prior quarter. And now for our business outlook. For the fourth quarter of 2025, the company expects the deliveries to be between 100,000 and 110,000 vehicles and quarterly total revenues to be between RMB 36.5 billion (sic) [ RMB 26.5 billion ] and RMB 29.2 billion. This business outlook reflects the company's current and preliminary view on its business situation and market conditions, which is subject to change. That concludes our prepared remarks. I will now turn the call over to the operator and start our Q&A session. Thank you. Operator: [Operator Instructions] Your first question comes from Yingbo Xu at CITIC. Yingbo Xu: [Foreign Language] So, I have two questions. The first question is about -- we are very glad to hear the company's return to entrepreneurship and next decade plan. But any R&D and development needs time. So my first question is that if we just say next year 2026, what kind of technology or product progress can we expect? And also from the investors' perspective, how long can we really see a technology or product jump in future? How long? And the second question related to BEV. The company's transition from EREV to BEV, it's challenges. So can we please give us more information or confidence in the BEV part, how we prepare for the effective technology reserve and supply chain preparation? Xiang Li: [Interpreted] On your first question about 2026, next year, we'll be launching our AI system based on our internally developed M100 chips. And once this system gets in the car, that's where we will start to see real value and change of user experience. As I mentioned earlier, our products would go from a passive -- a machine that passively takes orders to a more automated machine and even a proactive machine that can provide services for the users. So, unlike large language models, which can conduct deep research or video generation, this embodies AI products and really benefit our users in their everyday use at a very high frequency. And on the second part about the next 10 years, unlike programming or traditional rule-based programming, we do not have a feature list or a list of functions. Instead, AI really -- for a complex AI system, if we can solve key issues in some important areas and improve performances in some bottleneck points, then we will start to see a series of changes that are unimagined before. And that's our late understanding of embodied AI and AI system. And this is really the room for imagination for the next 10 years. On the key in-house BEV-related technologies, we focus on three areas: electric drive, battery systems, and electronic control. First of all, on the electric drive system, our focus is on efficiency and user experience. We have an in-house developed and outsourced our manufacturing of silicon carbide power chips and in-house developed and in-house manufacturing of power modules and motor controllers, but also establish our own dedicated drive motor factory. We have built a full chain in-house development capability stemming from silicon carbide power chips, power modules to electric motor assemblies. Our electric drive technology covers all BEV and EREV models, ensuring quiet and smooth driving experience while also optimizing for energy consumption and vehicle driving range. And secondly, on the battery system, our focus is on ultrafast charging and safety. We have built a full stack in-house capability around 5C ultrafast charging batteries with full control over self-chemistry, BMS control modules and algorithms as well as battery pack layouts and structural design and achieving three core advantages across ultrafast charging, long driving range, and long service life. On the supply front, we also have a combined strategy of external procurement and in-house development. Li Auto's own 5C batteries will enter mass production next year. This industrialization of in-house developed technology will further strengthen our battery safety and also improve user experience. And thirdly, on the electronic control system, our goal is to provide the best driving experience also through in-house developed hardware and software. On the software side, we have full stack in-house development capability of powertrain control, power management and engine calibration. On the hardware side, our core domain controller PCB layout are all developed in now as well as the underlying software. Together with our in-house chassis technology, and we were able to enhance driving smoothness and comfort and make the drive experience easy and intuitive to our users. So, through a combination of three electrical technology, including battery electric control and electric drive, we provide our users with a special fast charging long-range and smooth and safe driving experience. Operator: Your next question comes from Tim Hsiao from Morgan Stanley. Tim Hsiao: [Foreign Language] So, I have two quick questions focusing on the near-term operation. So, the first one about the product, Li i Series. Could the management team share the latest update on orders and deliveries of Li i8 and i6? And in the meantime, how and when could you start the current supply bottleneck of the Li i6 and i8? And how should we think about the normalized sales volume of the two i Series models in the following months? Second question is about cash flow. Li Auto actually registered increasing operating cash outflow of about RMB 7.4 billion or free cash outflow of RMB 8.9 billion during this quarter. So, this caused quite a significant drop in company's cash reserve drained away. Why is that? And how should we think about the cash flow in the following quarters? That's my second question. Xiang Li: [Interpreted] This year, we established our BEV portfolio with i8 and i6 models. And respectively, they cover the mainstream and premium segments for the family BEV market. These new cars create a solid foundation for the long-term stable growth of our BEV business. We also deployed our products to support the dual energy strategy, namely EREV and BEV, which effectively complement each other and to meet the diverse needs of our users. A key highlight that's worth mentioning is that we have made breakthroughs in key regional markets. The i-Series has successfully entered core BEV markets such as Beijing, Shanghai, Jiangsu and Zhejiang, with orders in these areas starting to increase significantly from September. Li i8 and i6 are steadily going through the path of production ramp-up, delivery acceleration and market penetration. And starting in November to address production ramp-up challenges, we will officially start to begin a dual supplier strategy for our batteries on Li i6. We will ensure consistent performance and quality standards between these two suppliers. We will expect monthly Li i6 production capacity to steadily increase to about 20,000 units starting from early next year. We sincerely apologize to customers who placed orders on i6 and still waiting for the cars to be delivered. Due to constraints in the supply chain planning of key components and the pace of production ramp-up, your vehicle is still -- the delivery schedule has been affected. We deeply appreciate your trust and choice in Li Auto, and we kindly ask for your continued understanding and patience. Our team is working around the clock to accelerate production and expedite the delivery process. Tie Li: And for the second question, Tim, this is Johnny. I think for the operating cash flow, it's about two reasons. First, as we guided in the last earnings release, the third quarter, we faced great pressure on the deliveries and the delivery decrease will make the revenue decrease, which will finally impact the operating cash flow and also the impact of shortening of the payment cycle to suppliers. And this is, as you may know, it's due to the government's authority starting from good in the national wide. Actually, we value our partnership with our supply chain partners and actively respond to their requirements. Currently, the settlement period for all our accounts payable is 60 days and the payment is either through bank transfer or bank notes without any business notes or some kind of certificates from the OEM, just the normal bank notes. Operator: Your next question comes from Ming-Hsun Lee from BofA. Ming-Hsun Lee: [Foreign Language] So, my first question is that because next year, the trade-in subsidy policy will change and also the EV purchase tax will increase from 0% to 5%. If the subsidy decline next year, what will be your sales strategy for 2026? [Foreign Language] So, my next -- second question is that in 2026, your Li i and Li L series will have a new generation. So what can we expect the most -- the new features, specs and what will be the new advantages for your new models? Xiang Li: [Interpreted] We believe this change marks the auto industry's transformation from policy-driven adoption to organic market-driven adoption. And it is precisely during this phase that the value of stronger players can really stand out. As the purchase tax policy phases out, there will be fluctuations in the first short term, we believe. We expect to see a pull-forward effect, namely as customers rush to lock in their incentives at the end of 2025, that will naturally lead to a substantial dip in deliveries in Q1 2026. Looking into the longer term, we are optimistic about the penetration rate of NEVs. In 2026, the NEV penetration rate in the domestic Chinese market will probably reach between 55% to 60% with the rate in the premium segment exceeding 60%. At the Auto, our response strategy is to guarantee user benefits and adapt to new standards with our new vehicles rolling out during the transition period. And for the transition period, we have a peace of mind purchase program covering the purchase tax difference for i6 customers who locked in their orders in 2025, but take deliveries in 2026. All of our 2026 models meet the new standards for gas and energy consumption, so they will qualify for 2026 incentives. In the longer term, we will continue to be dedicated to user value and offset policy impacts through technology advancements. For example, we will be fully adopting 800-volt high-voltage platform and 5C ultrafast batteries to enhance efficiency and reduce energy consumption in 2026. We aim to operate about 4,800 supercharging stations by 2026, with 35% of which will be on highway service stations. We'll continue to deepen our supply chain localization and leverage economies of scale to stabilize pricing, while accelerate product iteration to keep all 2026 models at the forefront of product competitiveness. As the product strength, we must accelerate model innovation and accelerate further. In summary, this policy phase out marks a watershed moment for the industry's shift from -- towards high-quality development. Li Auto is poised to achieve a historic breakthrough in deliveries in 2026, and we will navigate this cycle through superior product strength and user value, thereby consolidating our leadership in the premium market. Usually, on product release dates and more details, we need to choose an appropriate time to release publicly. But today, I still want to take the opportunity to give a glimpse on our product rollout for next year. The next year for L Series is going to be a major generational upgrade. And the changes are based on deep research of users and their feedback as well as our accumulation of technology over the years, and we want to build a very strong product that's also fundamentally different from the current generation. And all this is to support our goal of reclaiming leadership in the EREV market in 2026. In terms of model configuration, we'll be going back to the simplified SKU approach, which balances market coverage as well as supply chain efficiency. So, even the base model will not compromise in terms of user experience and will have all features as standards. And in terms of design upgrades, while retaining our iconic design DNA, we will be upgrading the premium deal and craftsmanship. We'll strike a balance between strong brand identity and fresh user appeal and to refine our products to better serve the needs of family users. On the core technology front, 5C standard supercharging will be standard on all models and seamlessly integrating with our existing charging network to efficiently address range anxiety. And at the same time, we will reinforce our position as the EREV leader, building on our first-mover advantage and deep expertise in EREVs. The 2026 L Series refresh is about responding to market uncertainty with certainties on technological upgrades, delivery cadence and user value. We will announce the specific launch timing and further details at the appropriate time. Please stay tuned. Operator: Your next question comes from Paul Gong at UBS. Paul Gong: [Foreign Language] So let me translate. I have two questions. The first one is regarding the recall of the MEGA. I noticed this was announced in Q4. Why are you booking it in Q3? And how did you determine the amount and the sharing between yourself and the supply chain? What's the impact for the Q4 GP margin? And if possible, please also update us about the latest situation of the callback of the recall as well as the latest order of MEGA. My second question is regarding the AI. Can you please update us the latest development of VLA, large model and the user feedback. If possible, please also give more color for the future targets and upgrades process. Tie Li: Paul, this is Johnny. I think, I will shortly and we will respond to your question very shortly. First, we recognized this in Q3 is just we regard this event as a subsequent event. So it will be accrued in the most recent quarter, we can recall. So, it's a bit accounting standard. And for the recall, I think we have announcement. I don't want to repeat most of the details covered. And currently, we just make all the battery pack to fulfill the recall requirement, the demand and which means we lower the delivery of our 2025 MEGA delivery. So, which means all the battery pack, we shipped most of them to replace the 2024 recall. I think that best serve the customers' benefit. And that's the company's value proposition. Xiang Li: [Interpreted] We rolled out our VLA Driver to all of our AD Max vehicles in September. And with the strong migration capability of our model across all releases, all of our AD Max users have access to this new model, including the new i Series users as well as the Li L9 users who bought the car back in 2012, and they're able to experience its core capabilities across the board. User feedback and data analysis have very clearly showed the effectiveness and the level of experience improvement. We can see that Li L Series and i Series owners have a strong -- Vi i Series owners have a stronger willingness to use VLA Driver with both DAU and MPI showing improvements. In the meantime, users generally report the VLA to be smoother, especially in longitudinal control and more proactive and decisive in detours and more accurate in route selection at complex intersections. And with ongoing iterations, the functions of VLA will continue to achieve further breakthroughs. For OTA 8.0, which is our first full-scale rollout, the priority is mostly focused on safety. And in early December, we will release the OTA 8.1, which further enhances VLA perception capabilities for more precise and responsive behavior. And by year-end, we will deploy an architecture upgrade to strengthen language behavior interaction and streamline the decision-making process, which will be compatible with our upcoming in-house developed M100 chip. Beyond core system improvements, we're rolling out a series of innovations, including the industry's first defensive driving AES feature to enhance safety capability and any point to any point full scenario automated parking and a smart finder to find charging stations and park automatically. And all this completes the smart mobility ecosystem. Operator: Your next question comes from Tina Hou from GS. Tina Hou: [Foreign Language] Thanks management for taking my questions. So, I just have one question. What is the progress in terms of our in-house developed SoC as well as the operating system and then the progress in terms of open source and future development? Tie Li: Let me answer your question. We believe that AI inference system is a core foundation for intelligent vehicles. To achieve this efficiency, the system must be designed as integrated architecture, not as separate parts. Our in-house design controller hardware and operating system have enabled us to reduce development time from industry average of 15 months to 9 months, while lowering cost by 20%. Many modules in the inference stack still come from suppliers. To innovate faster together, we open source to Halo OS, enabling collaborative development with our partners and ecosystem. In September, we established the Halo OS Technical Steering Committee, and assisting companies across intelligent vehicle value chain signed the community charter, including OEMs, chip makers, software and hardware service providers and component suppliers. At the same time, we are undergoing our own vehicle foundation model for physical AI. Our focus is to improve perception, understanding and response, so the model can see further, understand better and react faster. The AI inference chip is the computing engine of this system. Our controller built with our in-house design chip M100 is now undergoing large-scale system testing. We expected commercial development to take place in the next year. Co-designed with our foundation model, compiler and software system, we expect that the M100 within our next-generation VLA-based autonomous driving system to achieve at least 3x the performance to cost ratio of today's high-end chips. On the basis of highly efficient AI inference and execution systems, our next priority will be faster iteration, continuous performance improvement and lower cost. Development of our next-generation platform and chip has already begun. Thank you. Operator: Thank you. As we are now reaching the end of our conference call today, I would like to turn the call back over to the company for closing remarks. Ms. Janet Chang, please go ahead. Janet Chang: Thank you once again for joining us today. If you have further questions, please feel free to contact Li Auto's Investor Relations team. That's all for today. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good day, and thank you for standing by. Welcome to Calian Group Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host Jennifer McCaughey, Director of Investor Relations. Please go ahead. Jennifer McCaughey: Thank you, Olivia, and good morning, everyone. Thank you for joining us for Calian's Q4 and Year-end 2025 Conference Call. Presenting this morning are Kevin Ford, Chief Executive Officer; and Patrick Houston, Chief Financial Officer. They will present our Q4 and year-end results as well as provide an update on defense and our future outlook. As noted on Slide 2, please be advised that certain information discussed today is forward-looking and subject to important risks and uncertainties. The results predicted in these statements may be materially different from actual results. As a reminder, all amounts are expressed in Canadian dollars, except as otherwise specified. With that, let me turn the call over to Kevin. Kevin Ford: Thank you, Jennifer, and good morning, everyone. I'm pleased to report that we closed the year on a high note. We delivered record results, the highest revenue quarter in our 43-year history and the second highest adjusted EBITDA and a return to positive organic growth. Following a period of slower momentum, we've turned the corner with renewed momentum. Our team's dedication and resilience have fueled a solid recovery with both revenues and adjusted EBITDA showing year-over-year growth. Our Defense Solutions continues to lead the way with double-digit growth, reflecting riser sector investments and our ability to convert demand into results. We finished this year with $122 million in signings, and this translated to over $1 billion in net signings this year, an increase of 48% over the previous year. Shortly after year-end, we supported our signed with a large ground system project with a leading global space company. This project will deliver 4 Q/V-band antennas and is a sign of our leadership in the space ground segment. Now I'd like to take a moment to highlight the significant progress we have made in advancing our defense focused strategy over the past year. This area has been a key driver of our growth in innovation, and I'm excited to share the milestones and achievements that are shaping our future in this sector. Our Defense Solutions now represents 50% of consolidated revenues. These revenues grew 17% year-over-year as demand accelerates across Canada, the U.K. and Europe. Growth is broad based, spanning mission-critical health care, manufacturing and engineering, cyber and military training. Over the past year, our team has demonstrated agility in a rapidly shifting defense environment. In Q3 fiscal '24 and into fiscal '25, we successfully navigated $1 billion in Canadian defense cuts, while expanding our European footprint from less than $10 million in revenues in fiscal '23 to over $65 million in fiscal '25. This adaptability not only offset domestic budget pressures, it strengthened our global presence and set the stage for sustained growth in key markets. In fiscal '25, we laid a strong foundation for long-term growth in defense through strategic acquisitions, operational realignment, new contracts, partnerships and key hires. To expand our Northern capabilities, we acquired AMS, strengthening our health care portfolio and positioning us for future federal investment in the Canadian North. This, along with our relationships with provincial and territorial governments, sets us up to pursue new contracts as Northern programs developed. Shortly after the end, we acquired InField Scientific, enhancing our defense offerings and opening new market opportunities. We also refocused our operations to align with growth opportunities, including launching U.S.-focused subsidiary to target federal defense contracts. In parallel, we integrated our defense and space capabilities, forming a unified segment that combines advanced technologies with immersive training, allowing us to deliver comprehensive solutions that stand out in the market. Our defense strategy has already yielded significant contract wins, including agreements with NATO and Allied countries and a $250 million expansion to our health services contract with Canadian Armed Forces. At year-end, our backlog reached $1.4 billion, with $1 billion in the defense sector. To support growth and innovation, we forged new partnerships. We've launched Calian VENTURES to help Canadian SMEs scale defense solutions and signed our first partnership with TACTIQL to co-develop ISR software for the Canadian Armed Forces. We also signed a memorandum of understanding with Ericsson and Saab to explore collaboration in areas that as secure communications, supporting Canada's defense modernization. Finally, we strengthened our leadership team with key hires, including Major-General Roch Pelletier, as Regional VP, Global Defense and Security; and Chris Bode, President, Defense and Space. Their expertise will help us build our momentum and pursue new opportunities. Northern modernization and sovereign space capability have the potential to reshape Calian's trajectory, positioning us to participate meaningful in the opportunities ahead. Few companies contribute across connectivity, cyber and digital, training and health care, and we can. Our diversity isn't just a feature of the business. It's a competitive advantage. On that note, let me say a few words on the federal defense budget that was announced on November 4. Overall, we view the federal 2025 budget as positive for Calian. On the defense training side, increased CAF funding and readiness initiatives, including new commitments under operations reassurance [indiscernible], will benefit Calian's training and simulation business. These initiatives expand Canada's operational readiness commitments abroad, driving demand for enhanced training, readiness exercises, and mission-specific preparation, areas where Calian's expertise and existing CAF contracts position us to deliver. In health care, the commitment to address workforce shortages across the Canadian Armed Forces, RCMP and CBSA will increase demand for health care and occupational health services. Calian is well positioned to meet this need, supporting the physical and mental readiness of Canada's public safety and defense communities. In terms of manufacturing, we are among the few companies with proven defense and space manufacturing capability, and we continue to engage with OEMs and the federal government on how best to utilize this capacity. In summary, as a trusted Canadian operational readiness partner, delivering mission-critical solutions for national security, we are well positioned to benefit from this budget. The creation of the defense investment agency signals further opportunities, though timing of contract awards remains uncertain. While implementation details are still emerging, we remain cautiously optimistic about the longer-term impact for Calian and will monitor developments closely. Before I pass it on to Patrick, I just want to provide a brief update on our ITCS segment. After several quarters of reduced profitability, we took material action in Q4 to restore performance. With the departure of previous management team, we streamlined operations to improve efficiency, reducing resources, refocusing on core markets and products, and renewing our partner ecosystem. Most changes were implemented in Q4, so their impact was limited this period, but we expect meaningful benefits in fiscal '26. We also realigned the IT business to better reflect our major markets. Tighter integration with our defense solutions and essential industry customers will enable us to bring more differentiated offerings to market and improve execution across the portfolio. We're already seeing traction in mission-critical applications, including our recent contract win with the Ottawa Airport Authority. I will now turn it over to Patrick to discuss Q4 and year-end consolidated results. Patrick? Patrick Houston: Thank you, Kevin. Q4 revenues increased 12% to $203 million as the combined growth of 18% from Advanced Tech Learning and Health was partially offset by ITCS, which saw revenues down 4%. Acquisitive growth was 6% and was generated by the contributions of AMS completed this past May. More importantly, we returned to consolidated organic growth. Organic growth was 6%, driven by Advanced Tech Learning and Health and partially offset by ITCS. Excluding ITCS, organic growth would have been 9%, highlighting the strength of our core operations, particularly our defense training momentum in Canada, the U.K. and Europe. We continue to scale our international presence with 48% of Q4 revenues generated outside Canada, our highest quarter ever, both in terms of absolute dollars and as share of total revenue. Q4 gross margin was 34% compared to 35% in the same period last year, reflecting revenue mix. This marks our 14th consecutive quarter above 30% and the fourth highest quarterly margin in the company's history. Q4 adjusted EBITDA increased to $24 million, driven by strong performance in our core markets of space, defense and health care. These businesses continue to demonstrate resilience and momentum with adjusted EBITDA up 32% when excluding the lower performance in our ITCS segment. Importantly, adjusted EBITDA grew 32% versus 18% revenue growth, reflecting improved operational efficiency and expanding margins. Given the ITCS underperformance, adjusted EBITDA margin stood at 11.9%, down from 13.1% for the same period last year. Now turning to full year results. Revenues in FY '25 were up 4% to $774 million, a new record for Calian. It included 6% growth from acquisitions and negative 2% from organic growth. The decrease in organic growth were primarily due to defense cuts in the first half, delays in major space programs and uncertainty surrounding tariffs at the beginning of the year. However, as these challenges began to subside, we posted positive organic growth in the second half. Adjusted EBITDA declined 15%, primarily reflecting the underperformance in ITCS, as Kevin mentioned earlier, we have addressed this in Q4. Excluding these impacts, adjusted EBITDA increased 9%, underscoring the resilience of our core business. Despite these headwinds, we maintained double-digit adjusted EBITDA margin and extended our track record of profitable growth to 24 consecutive years. Turning to cash flow and capital deployment. In FY '25, we generated $45 million in cash flow from operations compared to $87 million last year, primarily due to lower EBITDA, higher interest expense and working capital returning to normalized levels. Importantly, we maintained working capital efficiency below 10%, consistent with last year, reflecting disciplined execution. Operating free cash flow was $52 million, reflecting a strong conversion of 67% from adjusted EBITDA. Turning to capital deployment. We use our cash and a portion of our credit facility to make CapEx investments of $11 million and $39 million in acquisitions, including earn-outs. We paid the earn-out related to our May 2024 acquisition of Mabway, reflecting the strong performance and successful integration of that business. We also provided a return to shareholders with $13 million in dividends and $26 million in share buybacks, this represents the purchase of 563,000 shares or approximately 5% of shares outstanding. In August, we renewed our NCIB reflecting our view that Calian shares remain undervalued, we intend to continue repurchasing shares on an opportunistic basis in FY '26. At the same time, we are actively evaluating opportunities across defense, space, health care and energy, and we'll continue to prioritize capital towards strategic acquisitions alongside the NCIB. In early October, we acquired InField Scientific, a small but strategic addition that strengthens our relationship with the Royal Canadian Navy and Lockheed Martin. This expands our presence in the international defense market and positions us for future naval opportunities. Looking ahead on M&A, our pipeline remains strong. We are engaged in multiple discussions and remain optimistic about completing several strategic transactions in FY '26. Let's take a look at the balance sheet and cash availability. As of September 30, we had drawn $131 million on our debt facility. During Q4, we repaid $10 million on our facility as we didn't close any acquisitions and only repurchased a small amount of shares. We ended the quarter with net debt of $85 million, representing a net debt to adjusted EBITDA ratio of 1.1. This is well below our threshold of 2.5x. At the end of September, we renewed and expanded our debt facility. The new 3-year revolving credit facility totaled $350 million, comprising a committed $200 million and an accordion feature of $150 million. This provides us with ample financial flexibility to support our growth strategy. As I transition into the CEO role on January 1, I want to share a few thoughts on our future direction. My focus will be on leading the next phase of growth through a refreshed strategic plan to accelerate Calian's evolution as the leading Canadian industry champion, one designed to drive long-term shareholder value. My vision centers around 3 objectives: targeting high-growth vertical markets, driving lean and efficient operations and investing with discipline and purpose. We'll begin by focusing on vertical markets with strong growth momentum, specifically defense, space and essential industries, strengthening and expanding our existing portfolio of products and services, which has already generated a backlog of $1.4 billion. To create a leaner, more competitive organization and unlock greater convergence across our markets, starting in FY '26, we will reorganize into 2 core segments, defense and space led by Chris Pogue and essential industries led by Derek Clark. This streamlined structure will enable us to move faster, seize emerging opportunities and continue delivering solutions our customers truly value. Our next phase of investment will prioritize divesting noncore assets outside our primary vertical markets while leveraging our track record of strong M&A to acquire businesses that strengthen our position in these core markets. Calian enters this next phase from a position of strength. We're well positioned to benefit from a significant period of growth and investment by our largest customers, supported by favorable domestic environment for Canadian companies. To highlight our refreshed strategic direction and introduce our new leadership team, we plan to host an Investor Day in the spring. This event will give investors the opportunity to engage directly with our executives and gain insight into our long-term growth plans and priorities. On that note, I want to provide some thoughts on our FY '26 outlook. Looking ahead to FY '26, we're optimistic about recent government commitments to defense spending. In the interest of visibility and transparency, we will not be issuing guidance as we have in the past years. Instead, we will provide long-term view of the business and short-term directional growth indicators. Over the next several years, we are targeting annual revenue growth of 10% to 15%, driven by both a combination of organic growth and strategic acquisitions. This aligns with our historical 12% revenue CAGR over the past decade. As we pursue this growth, our focus will be on enhancing EBITDA, free cash flow and return on invested capital by prioritizing high-growth verticals, streamlining operations and investing with discipline. Accordingly, we aim for adjusted EBITDA expansion as we deliver top line growth. For FY '26 specifically, based on our existing business and recent developments, we expect double-digit growth in both revenue and adjusted EBITDA relative to FY '25. This positions us at the low end of our long-term growth target range. This outlook is supported by momentum we've displayed in Q4 in our Defense & Space and Essential Industry segments and the full year contributions from recent AMS and InField Scientific acquisitions. Future M&A we complete would be incremental. In terms of capital deployment, we expect working capital usage to remain aligned with revenue growth. We plan on maintaining CapEx in the $10 million to $11 million range supporting both core operations and targeting growth initiatives. Our dividend policy remains unchanged with a payout target of 25% to 30% of operating free cash flow, underscoring our commitment to shareholder value while preserving flexibility for strategic investments. M&A will continue to be our primary use of cash as we expand our capabilities and market reach. We'll also evaluate share repurchase on an opportunistic basis, taking market conditions and capital priorities into account. Before we begin the question period, I want to let everyone know that Kevin will share some parting words afterwards, so please remain online until the end. And with that, Olivia, I'd like to open the call to questions. Operator: [Operator Instructions] Now first question coming from the line of Doug Taylor with Canaccord. Doug Taylor: I appreciate the comments you just made as it relates to double-digit expected revenue growth and adjusted EBITDA in 2026. I want to just unpack a little bit or talk about some of the factors that build up to that. Maybe I'll start by asking if you could speak a little bit more, give us some more color about the recent antenna contract. Any more specifics you can provide size, timing and contribution to this upcoming year? Patrick Houston: Yes. I think it's a strong win for the team showing kind of continued growth in that segment. It exceeds $30 million, Doug, and it's going to be delivered over the next 24 to 28 months sort of. So I think we'll start to see some contributions this year and then a good portion of that into the next year. Doug Taylor: Okay. Also, I mean, as it relates to the outlook you've provided, you referenced the dramatic budget passage by the Canadian government recently. I mean understanding that you've said that you don't expect the -- there's still uncertain timing as it relates to the new contract awards. Can you talk about what you factored in to that assumption in terms of wins or expansions of your programs of record with the Canadian government and the military? Patrick Houston: Yes. I mean, we're very optimistic about just the investment that Canada is making right now. I think the level of discussions and opportunities is probably the highest it's ever been. I think we've been cautious about building a lot of that into next year. I think we -- what we've tried to do is forecast the things we know that are happening, but we're certainly pursuing a lot of opportunities, which I think would be incremental. I think a lot of these are longer-term ones and much significant opportunities. So certainly update the market as those come to fruition, but certainly optimistic about the change in Canada and the investment profile. Kevin Ford: And Doug, it's Kevin. I think this is going to be an ongoing dialogue. We're waiting the defense industrial strategy is now being formulated with regards to how in the market verticals that will be a focus for the federal government this increased defense spend. So we're looking forward to seeing that. We've had a lot of discussion with governments. From my opening comments, though, I think from a Canadian perspective, we are very well positioned to support many different aspects of this new agenda. And now it's a question of timing and pace of that investment to get to the street. Doug Taylor: Understood. Perhaps one more for me. In the comments you made as it relates to the ITCS unit, which is going to form part of the Essential Industries business, I believe, the realignments that you've executed on in the quarter, how should we think about what the benefits are from those changes, what those should look like, how and when you think they manifest? And then just more broadly, your expectations for the ITCS business within that new unit going into this year as it relates to organic performance. Patrick Houston: Yes, it was a combination of a lot of things we did in Q4. One of them was looking at the cost base and making sure it's aligned. So those measures were taken, and I expect that to be a positive contributor to EBITDA going into next year. We also realigned some of the assets into our defense portfolio, which I think we'll see renewed momentum. I think that's going to be a strength for us going into the year, and the remaining of the assets is essential industries, as you said. . And I think it's just been renewing the leadership team. We had some departures there, but we're confident about the team we have and the outlook, and then we're expecting a better year out of our IT product portfolio going to '26. Doug Taylor: Okay. I'll pass the line. But before I do, Kevin, I'll wait for your comments at the end, but did want to take the opportunity to congratulate you on what you've built here so far and wish you well on your future endeavors. Kevin Ford: Yes. Thanks, Doug. Appreciate that. I appreciate all your support over the years. It's been great to get to know you and also appreciate all the dynamic performance comments you've had on Calian over the years. I think you're one of our few analysts that actually some of what do like. So I appreciate those comments. Operator: Our next question coming from the line of Stephanie Price with CIBC. Stephanie Price: Kevin, I'll echo the congrats on the retirement. Maybe we could just focus back in on the ITCS business for just a second. I know that in the U.S., we're seeing some weaker demand. How should we kind of think about the U.S. ITCS business at this point? Patrick Houston: Stephanie, we had -- yes, the first half was soft for sure in our U.S. business. I think we start to see some good signs towards the end of the year. We're entering the back -- with a backlog that's significantly higher than it was last year. So I think some of that momentum we saw towards the end of the year, I think it's setting us up for a better year this year. So I think early signs are better than this time last year, but we're going to be conservative here and just kind of build back the profitability in ITCS here over several quarters. Stephanie Price: Okay. And then you mentioned targeting high-growth vertical markets, and I think there was also a comment around a U.S.-focused subsidiary to target federal defense. Just curious how much U.S. defense work you do right now and how you think about the U.S. opportunity here around the defense business? Patrick Houston: It's limited right now. I think the convergence, I think we're seeing in the U.S. is the combination of our space and defense pedigree. I think that's probably the place where we can make progress the fastest. I think we do have some unique propositions and solutions in space, specifically to the defense customer. So that's where we're focusing right now, and we're optimistic that we can make some progress here in the next couple of years. Stephanie Price: Great. And then just maybe one final one for me. Just in terms of the announcement you put out a few weeks ago about a special committee looking at potential divestitures in the portfolio review. Just curious about if you have an update on time line for that and how should -- we should be thinking about what that committee is looking at here? Patrick Houston: Yes, lots of activity going on there. I think that will continue here in the balance of this year and into early '26. Obviously, I think, certainly, motivation to just do the work and come to a conclusion on those things. So I would say probably early '26 would be the best timing, but we'll probably update that on Q1 in mid-February. Operator: Our next question coming from the line of Paul Treiber with RBC Capital Markets. Paul Treiber: Just a quick follow-up. Just on the strategic review. You called out a couple of times in noncore areas. What specifically do you see as noncore going forward? Patrick Houston: I think what knit together for Calian is kind of mission-critical solutions for customers that value that. I think that's been the one if you think defense, space, health care, energy, these are markets that really value what we bring. We've been doing it for 25 years. I think it's probably one of our biggest differentiating points that Calian has. We've earned that for decades. So I think that's what's core to kind of everything we do at Calian, I think you'll see us knitting that together going forward and really focusing there, putting a lot of investment towards there. And I think you've seen the momentum in that business here in the last -- in the second half of this year. So I think when we talk about core, that's what we're talking about, lots of solutions within that to those customer sets, but those are our core markets. Paul Treiber: Okay. And then your outlook for '26, it's helpful that the high-level outlook. What you see is the largest potential drivers of upside to your outlook? And then conversely, what are potential risks to your outlook at this point? Patrick Houston: I think it's probably the same answer to both. Like, I think the defense spending is always -- I think the trajectory and the momentum is very encouraging. I think that's positive both in Europe and Canada for us. I think trying to nail the timing on some of these things is always difficult. They're big opportunities, and they can move and that can have a significant impact. So I think that's where we're trying to be cautious, but at the same time, the team is motivated to go and make some of these opportunities happen. Paul Treiber: And then with the Canadian federal budget, there have been earlier this year, procurement delays. Now with the budget out, the -- how quickly do you see procurement normalizing? Should it be quite rapid in terms of maybe 1 to 2 quarters? Or could it take longer than that? Kevin Ford: Yes, it's a good question, Paul. From my viewpoint, and I've done this 42 years around defense, this alignment that we're seeing from a budget perspective in the context of investing in defense, obviously, very positive. The creation of the Defense Investment Agency, very positive. So what we're looking at, as I mentioned, is the industrial base and then the timing of the procurement. There's significant expenditure in the short term that's been projected. And now it's just a matter of pushing that through the procurement system. So from my viewpoint, I think in the next quarter, 2 quarters max, we'll have a real good understanding of the pace and focus areas for that investment, and we'll be better positioned to answer that question. And we're very excited by the way, about this. We think this is a transformational opportunity for the Department of National Defense, but also for Canadian industry, and we're a leader in that industry. So we're very excited about where this is. And we just want to -- a bit more time will give us some of the specifics around the timing around how fast this, again, is going to be hitting the industry with regard to their focus on vertical markets that they want to see us grow in Canada. Paul Treiber: Congrats on the retirement, Kevin. Operator: Our next question coming from the line of Benoit Poirier with Desjardins. Benoit Poirier: Yes. If we can come back on the key highlights from the federal budget, obviously, pretty positive. We've seen $20 billion that's going to be spent over the next 5 years. So with hiring with -- so quite positive. But there was also an interesting comment about hiring on RCMP and CBSA officers. So could you -- given your strong relationship with RCMP, do you see also foresee some opportunity outside the CAF? Patrick Houston: Yes. I think RCMP has been a customer of ours for a long time between health care and IT and other of our solutions. So I think for sure, I think they're going to have a big growth momentum here in the next couple of years. I think it's a key part of Canada, the RCMP. So we're optimistic to kind of work with them in a greater extent in the next couple of years. Kevin Ford: And Benoit, I think to Patrick's point, just the increase in size and the scope that we play in supporting RCMP and borders and defense, this will require personnel. And personnel for us is about training. It's about health care. So again, I think it's -- I think we're uniquely positioned to help them in that capacity building that's going to be required to meet the new mandates. Benoit Poirier: Okay. And just in terms of organic growth for fiscal year '26, it was very nice to see the recovery in Q4. So given fiscal year '25 has been more challenging, how should we be thinking about organic growth going overall in fiscal year '26. Could we see something stronger than typical mid-single digit given you might be facing kind of an easy comparison? Patrick Houston: I think the guidance or the growth outlook we gave kind of assumes kind of mid-single-digit organic growth with some acquisition contribution from AMS and InField, so that's what our base outlook is right now. Benoit Poirier: Okay. Perfect. And M&A, Pat, you mentioned that you have a busy pipeline, obviously, well positioned for fiscal year '26. Any more color about the verticals or regions that are most interesting these days on your side? Patrick Houston: We're spending a lot of time in defense and space, trying to find some complementary assets there to kind of the capability we have. I think we've got a lot of momentum there. So we're trying to say, let's make acquisitions and try to drive the synergy out of them. So I think that's where we're spending most of our time, and we've got some good candidates in the pipeline. So I'm optimistic about completing some deals here. Kevin Ford: And Benoit, as a complement to that, the VENTURES program led by Chris is exciting for us. It's new. It's about us now taking a position as a leader in the defense community here in Canada to engage small medium enterprises and the defense agenda with increased spending and giving access to not only capital, but market reach both in Canada and globally. So I think as we go forward between organic growth, M&A growth and our VENTURES program, again, I think we're uniquely positioned to support what Canada wants to do in the context of increasing our sovereign capability. Operator: And there are no further questions in the queue at this time. I will now turn the call back over to Mr. Kevin Ford for any closing remarks. Kevin Ford: Thank you, Olivia. I appreciate your efforts today. Considering this is my last quarter as CEO, as I reflect on 15 years here with this remarkable company, including the past 10 as CEO, I'm filled with gratitude and pride. When I first joined, Calian was a promising Canadian business with ambitious goals. I vividly remember the opening to TSX in April 2016, and being asked during a live BNN interview, why haven't I heard of you and why aren't you bigger? Those questions fueled my determination to grow and transform Calian. One of my primary objectives as CEO was to drive growth. Since 2015, we have tripled our revenues from $242 million to $774 million in '25. I also said it's a diversified our company by geography, customer base and offerings. We've evolved from a Canadian-focused business to a global enterprise with close to half of our operations now outside of Canada. Our revenue shift mix -- our revenue mix shifted from predominantly government clients to a balanced split between the government and commercial customers. Additionally, we transitioned from a services-based company to a solutions provider with 25% of our revenues now coming from products. This transformation is a testament to the dedication, talent and resilience of our entire team, not the work of one individual. Today, Calian stands as a market leader in mission-critical solutions with a stronger brand and a diversified presence across geographies, customers and offerings. I'm deeply grateful to our employees whose commitment and creativity have driven our success. To our customers and partners, I want to thank you for your trust and collaboration. To our shareholders, our analysts, your support has enabled us to pursue bold strategies and deliver sustained growth. And finally, to our Board of Directors, my thanks for continued support during this transformation. I specifically want to thank our previous Chair, Ken Loeb and our current Chair, George Weber, for tirelessly working with me and the Board through all the opportunities and challenges we have faced. I'm forever grateful for your guidance and support. Building this company to what it is today has been the honor of my career. I am confident that the foundation we have laid, our values, our culture of innovation and our global reach, our footprint in exciting tailwind markets such as defense and our amazing dedicated team will continue to propel us forward. I know that the company is in strong hands with Patrick at the helm and the leadership team ready to write the next chapter of our story. I look forward to watching the company's continued success from a new vantage points and always be cheering you folks on. So wishing you all the best. And with that, I'll pass it back to Jennifer. Jennifer McCaughey: Thank you so much, Kevin. Thank you for everybody for attending our conference call, and Patrick and the team look forward to providing you an update on the next quarterly call. You may now disconnect. Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. I am Geli, your Chorus Call operator. Welcome, and thank you for joining the OPAP S.A. conference call and live webcast question-and-answer session to discuss the third quarter 2025 financial results. Please note, a video presentation has been distributed and is also available on the OPAP Investor Relations website. [Operator Instructions] And the conference is being recorded. At this time, I would like to turn the conference over to Mr. Jan Karas, Chairman and CEO of OPAP S.A.. Mr. Karas, you may now proceed. Jan Karas: Good evening or good morning to everyone. We are glad to welcome you here and present to you a strong set of Q3 2025 results, which reinforces our confidence in achieving full year 2025 outlook. I hope you have enjoyed the presentation distributed earlier today, and we would be glad to answer any questions related to our financial performance. With regards to the hot topic of the proposed business combination with Allwyn, we would like to invite you all to participate to a combined Capital Markets Update this Friday, November 28, at 1:00 p.m. Athens time, where together, OPAP and Allwyn management teams will provide you with additional information regarding the proposed transaction and will answer all your questions. Now let's proceed directly to the Q&A to make the discussion more engaging. Geli, over to you. Operator: [Operator Instructions] The first question is from the line of Kourtesis, Iakovos with Piraeus Securities. Iakovos Kourtesis: Congrats on the good set of results. What I would like to ask, as far as I understand, I cannot ask -- this call refers to your results, so I can ask only for OPAP, this I understand. If you have any update on the -- remember that you've said that on 7th of November, you submitted your proposal, your bid for the Hellenic Lotteries concession. If you have any update for us on this front, where is the whole procedure starting at the moment? Second thing is that in the -- during the fourth quarter, do you plan to proceed with any actions that will enhance growth on GGR and will allow us -- allow you to stay above the 5% threshold for GGR growth for the full year, although your guidance calls for low single digit. That will be from my side. Jan Karas: Thank you for your questions. So on the Hellenic Lotteries licenses tender, first, and for anybody who may not be familiar, we are participating in the second phase of the tender process for the Greek state lotteries license, which we refer to here. And at this stage, we have submitted our binding financial offer. And we are currently awaiting the outcome of the evaluation, which is being conducted by the growth fund. So as soon as we have any news, we will certainly share with you through a public press release. But the first one actually announcing that the ball is now on the side of growth fund. And so the first announcement we should see is from growth fund that we will then follow ourselves. When it comes to your second question, the Q4 obviously is, as always, full of various commercial actions that are supporting the maximum push for the best possible results on the annual basis. Fourth quarter, as always, is a very important period for us, and we believe that we have a solid set of commercial initiatives that should bring us to the year-end with the expectations that we referred to when it comes to our full year outlook. So we are certainly confident to deliver what we have promised to you. Operator: [Operator Instructions] The next question is from the line of Nekrasov, Maksim with Citi. Maksim Nekrasov: Thank you for the presentation earlier. I have a couple of questions on your businesses. First is on the betting side. We saw a little bit of decline in the online betting. And I understand the base of last year, right, and some results we saw from the peers. But at the same time, as I understand, offline betting was slightly positive. So I was wondering what drives that difference, right, between online and offline betting performance. And also, I think for at least a couple of quarters, we saw some improvements in the instant and passives and VLT GGR acceleration. So I wonder if there are any specific factors for those 2 businesses, basically acceleration in the last couple of quarters compared to the previous few quarters? Jan Karas: Let me elaborate on the first question. We will kindly ask you to rephrase your second one because we are not sure we understand. On your first question with the sports betting, we certainly have -- we like to believe that we a have very solid underlying trends, at least from what we see from the data as well as consumer feedback. So everything that needs to be in place is good, healthy, solid and strong and foreseeing further growth of this important gaming vertical, especially when it comes to online. The Q3 was special indeed, and strongly influenced by customer favoring results, and that's probably what you have also commented observed across the industry in general. The difference between online and retail performance is driven by the different structure when it comes to pregame bets versus live bets, which obviously have higher sensitivity on that front. On your second question, would you be so kind and rephrase one more time? Maksim Nekrasov: Yes. So -- yes, we saw improved performance of VLT and the Scratch in the like second and third quarter of '25, some acceleration compared to the previous a few quarters of bit softer performance. So I wonder what was driving that and whether you think this growth is sustainable for those businesses? And maybe if I may just follow up on the first question, right? And maybe if you can comment on the competition levels in online, right, that you see in sports betting and also on the casino side. Jan Karas: Okay. So one by one. VLTs and Scratch performance as a result of our focus and commercial initiatives and development of the relevant verticals. Typical example, evolution of the Scratch games portfolio where we put a lot of emphasis on the families, and we want to establish a families of products that people understand better. So the whole offer is much more clearer than before to the customers and when you launch a new product in the family, you are, at the same time, bringing new freshness to the whole family as such with the new product. At the same time, we have launched some exciting new price categories, like the EUR 20 Scratch, which seems to resonate really well with the customers. Similar on the VLT vertical side, innovation of the product offering, new machines, new screens, new experiences, new games, a lot of efforts put into events in our play stores and on the experiential side. So there is a series of initiatives. There's not one thing that made a big difference. It's really that consistency and managing properly the complexity of various initiatives that in total, bring the new energy to these 2 verticals that we are very pleased with when it comes to results. Both VLT and Scratch are businesses where we see further opportunities to be explored. And thus, these are certainly categories that we will continue to actively explore. When it comes to sports betting competition, competition in the sports betting world has always been fierce, that continues to be. We have a lot of respect for our competition. And with both OPAP's own sports betting and casino proposition, we do our best to be competitive. Nice example might be the portfolio of exclusive games we are launching now in Q4 in iCasino. That should refresh the offering because exclusive games is something that customers are very hungry for. And the same goes for our subsidiaries, Stoiximan that is continuing very strong performance and good position to fight the competition in their grounds. So overall, our dual brand strategy continues to be, we believe, a very successful formula for our presence in the competitive online world. Did we cover your questions or anything else you would like to ask? Maksim Nekrasov: No. It's been very clear. I think more questions this Friday regarding the deal. Operator: The next question is from the line of Draziotis, Stamatios with Eurobank Equities. Stamatios Draziotis: Just a couple, if I may. Just firstly, on the outlook, given you've delivered quite healthy growth -- operating profit growth in the 9-month period. I was actually surprised that you've not been more specific regarding what you target for in terms of profitability for the full year. What is it that constrains you from doing that, would you say? And the second question has to do with online, a follow-up, I guess, on the previous questions. You mentioned the tough comps and the results, which were headwinds this quarter. I'm just wondering what growth in online overall you think is sustainable now that some of the vertical are starting to mature. Thank you. Pavel Mucha: Yes. This is Pavel Mucha. So there is nothing which would constrain our outlook. And we are pleased with the performance so far. And it is true that we feel highly confident that upon a good final quarter, which typically is the case with strong Q4, we realistically expect to comfortably deliver the full year outlook. And also, we confirm our EBITDA margin of 35%. So we are quite comfortable that we will deliver the guidance as we provided it. Jan Karas: Okay. And on the second question regarding the sustainable growth, our expectations generally are mid- to high single digit to be specific. Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Karas for any closing comments. Thank you. Jan Karas: Thank you very much, and thank you all for being with us today and for your continuous interest in OPAP. Our Investor Relations team, as always, will be happy to address any additional questions you still might have after this call. And we will be very much looking forward to see you on the Friday session. You will find all the relevant invites in both OPAP and Allwyn websites. Have a great rest of the day. Thank you. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.
Rivka Neufeld: Hello, and thank you for joining us today. Welcome to Strauss Group's Third Quarter and First 9 Months of 2025 Results Earnings Call. On our call today, management will provide a review of the results, followed by a questions-and-answer session. [Operator Instructions] As a reminder, this online Zoom earnings call is being recorded Wednesday, November 26, 2025. A recording of this call will be available on the company's website a few hours after the call. I would like to remind everyone that this online webinar may contain projections or other forward-looking statements regarding future events or the future performance of the company. These statements are only predictions and may change as time passes. Strauss Group does not assume any obligation to update this information. Actual events or results may differ materially from those projected, including as a result of changing industry and market trends, reduced demand for our products, the timely development of new products and their adoption by the market, increased competition in the industry and price reductions as well as due to risks identified in the documents filed with the company with the Israeli Securities Authority. Online with me today are Mr. Shai Babad, Strauss Group's President and CEO and Mr. Tobi Fischbein, Group CFO; and myself Rivka Neufeld, Head of Investor Relations. We will begin with a review of the quarterly results by CEO, Shai Babad; and then move on to the financial highlights of the quarter presented by CFO, Tobi Fischbein. We will then move on to a Q&A session. Shai, the floor is yours. Shai Babad: Thank you very much, Rivka. Can you put the presentation on? Thank you very much, and welcome this afternoon to our quarterly financial reports. We are very happy to have you here. What we'll try to do in the next 25, 30 minutes is to give you just some kind of an overview of the results with our highlights and then open it up for some questions. I'll start and Tobi will continue. So if I look at the major highlights of this quarter, following all previous quarters, we are continuing a very, very solid and strong growth. Growth this quarter is approximately 16% if I take pro forma growth, taking out all the divestment activity that we departed from last year. And if we look from the beginning of the year, it's approximately 19% growth 9 months to 9 months into 2025. When we look at our EBIT and operational profit, we also see a substantial growth, and I'll touch it when we see the results and the same goes for the net income. So it was a very strong quarter for Strauss in the first 9 months. When we look at our productivity journey, we are up to track, and I'll say a few words about that later on. We are continuing to execute our strategy. There were various innovation initiatives that were launched in the third quarter that we will touch later on and also the inauguration of the plant-based factory facility in the South -- in the North, sorry. So here are the major results. You can see here growth to ILS 3.3 billion from approximately ILS 3 billion, 13% growth. If you take the full year to full year numbers, if you take pro forma activity with the divestments that were done last year, then it's 16% growth, 17% growth. When we look at EBIT margins, mostly, by the way, of the growth is from price -- from increasing prices and a very small amount of the growth comes from volume, but still there's volume growth in 3 months and also in the quarter and also 9 months since the beginning of the year. When we look at our EBIT, our EBIT summed up to ILS 312 million with 43% growth from last year, substantial growth, and we'll see later on, most of it has been driven from our international coffee activity. And when it comes to cash flow, our net profit also ILS 146 million compared to ILS 300 million in 9 months. We can see that in the quarter, we did very well, 40% more than last year. But when we look at net profit 9 months into the year, we are 50% less. But last year, we had tax incentives of approximately ILS 60 million. And also there is financial activity, financial expenses this year that were higher than last year. And therefore, if we take the tax incentives, actually, the gap is the other way around. And when we look at cash flow, we generated a very high cash flow this quarter of ILS 245 million compared to minus ILS 100 million last year. And also when we look here to -- since the beginning of the year, year-to-date, we are approximately ILS 150 million better than last year. And by the end of the year, we expect it to be on positive cash flow. Of course, 3 major commodities are affecting our results, the Robusta, the Arabica and the Cocoa. And although we see in the Robusta and in Cocoa in the last quarter, some kind of decreasing prices whereas Robusta is continuing with very high prices. Still, we don't see the impact on that -- or full impact on that on our results, taking Brazil outside of the equation in everywhere in all our other geographies, we have hedging activity, and we have a very high inventory as well. And taking that into consideration, there is time until we actually see in our results the impact of the reduction of the prices in the P&L. And I will touch later on how do we see our Cocoa and our confectionery activity. When we look at Israel, so Israel is with a 3% growth, quite a solid growth. Part of that growth is limited because of divestment activity that we've done last year with our -- in our Health & Wellness division with fresh vegetables that we divested last year. If we do apples-to-apples, also you can see in Health & Wellness, there's not actually a decrease. There's actually a slight increase in revenues. But when it comes to EBIT, you can see in total Israel, ILS 12 million reduction, 7.7% and all of it comes from Health & Wellness. You can see there's a ILS 90 million decline. Here, it's very, very important to note that we consider this as a onetime thing. We had some functional issues in our dairy factory in the north during August and some in September. It affected a little bit our business. And therefore, you can see that they did less than last year. But looking ahead, looking into October, which was already finished also in November, those onetime problems are behind us, and we will see going into -- going ahead, Health & Wellness getting back to track and back to -- on growth and on profitability. When we look at our Fun & Indulgence, you see an increase here, but the increase is a little bit misleading because last year, the ILS 9 million that you see in EBIT is actually ILS 27 million because there was an ILS 18 million loss in derivatives there. This year, the results of ILS 50 million in the Fun & Indulgence because in our confectionery business, the Cocoa is impacting our business, still very high cocoa prices. Now when we look into the future and asking ourselves when do we see the effect, we think that when we'll get into 2026 and during 2026, there will be a full turnaround of the business of our confectionery business and cocoa prices that we know today, which we hedged and the inventory that we have for 2026 and with the current cocoa prices that they are in the market now, we are very confident that our business will do a turnaround -- substantial turnaround next year, and we'll see much higher profits in this segment. Next. If we look at our innovation activities, so you can see there's a vast innovation there. There's a cross-branding collaboration between our brands in alternative milks and in our dairy. There's a new Arab coffee that we targeted for the segment. We also withdraw all our protein desserts. We've done a series of Zero Sugar. Our Cow Free innovation, our new disruptive innovation of bringing milk drinks and spreads -- cheese spreads with proteins that don't come from a cow, the same protein, the said BLG protein, it comes from either mushroom or yeast. And from that, we managed after 2.5 years of development to develop these products. And the advantages of these products are that they are very similar in the taste to cheese and milk. They have the same protein and the same health components, but they don't have the lactose. So anyone who is sensitive to lactose will not have a problem having those products and also they don't have cholesterol because they don't come from animals. And we think there's a place for them in the market and demand from consumers for these type of products. We also launched in the confectionery some Nostalgic snacks that we had. And we had the inauguration of our plant in the North, which I'll speak about later. And with our confectionery business, we did a lot of variety of different chocolate tablets and snacks. If we look at our coffee activity, the international coffee activity, so this is the main -- we think this is the main news of this quarter. We also have seen that last quarter, but this quarter, we see it even in a more influential way, in a more impactful way. Our coffee business is improving substantially. Growth has been 30% due to price increase and a little bit of volume increase. But mainly, mainly operating profit, you can see jumped to -- by 140% to ILS 163 million, reaching the double digit -- almost a double-digit margins. The reason is, of course, our activity in Brazil. Can we move to the next slide? You can see that in Brazil, again, profit more than doubled, almost tripled with 170% growth this quarter and overall from the beginning of the year, almost doubled with 27% increase in revenues in this quarter and 37% increase from the beginning of the year. What we believe looking forward is that Brazil -- the proforma that we have managed to generate in Brazil over the last 6 months is a new platform, which will also be carried out in the next year and the next quarters. That doesn't mean that we'll see the same level of profit and such high profits and margins, you can see the margins here in Brazil this quarter are reaching 11.3%. But it does mean that the new platform definitely will not stay at the 4% or 5% that they were in the past and will jump towards more like 8%, 9% and 10% and will be much more healthier business. The reason is, is that we are managing to maintain prices, high prices and maintaining the margin in roast and ground coffee, while we are continuing to grow all our non-R&G activity, which is generating a double-digit margin. So looking into the next quarters and looking into next year, we do see a jump in the profitability of our international coffee businesses with an emphasis on Brazil. And we do think this will be a new normal, maybe not as high as this quarter, maybe a little bit lower, but still a new normal to this business, unlike what we used to see in the past. In our water business, you can see there was growth in our revenues here in Israel, mainly due to 4% growth, mainly due to quantities of installed base, which grew. We launched this quarter the Shabat machine. It's basically for juice to keep the seventh day, the Shabat. Until today, our machines were not closure for the seventh day for the Shabat. And now those machines are applicable for people who keep the Shabat for ready-to-use-juice, and it's a new solution for approximately 30%, 40% of the people of Israel who keep the Shabat in some sort of way. We do think that will be a future growth engines for us. Nevertheless, we see a decrease in operating income of ILS 3 million, up 11%. It mainly comes from our operations in China. In China, there is intensive competition by Xiaomi who entered the market. And since they entered the market, we've seen -- we continue to grow double digit on growth on revenues. But on the other hand, we had to give discounts and to have -- to reduce prices in order to maintain our position in the market in order to continue to grow. And we also had to invest in new products. Unlike the onetime events that we had in the dairies in Israel, this will follow us into the next quarter or 2 and into next year. And we predict that maybe by the end of 2026, the platform will get back to what we used to see in the past. Still, it's very important to mention that we still have high -- because in China, the results are net margins and net profit and net margins, we still have high net margins in China, but much less than we had in the past. When we look at our productivity, so productivity is in line with our plan. We said that by the end of 2026, we will reach between ILS 300 million and ILS 400 million in productivity, and we do see ourselves reaching the target. We are on track with the strategic procurement with all of the streams that we opened in this productivity program with working capital, with RGM, with logistics, with manufacturing and of course, with capability building, upskilling and reskilling our people to being able to use the new tools that we are bringing into the company. A little bit about talking -- moving forward, what are the engines of growth that we developed specifically this quarter, which we think will follow us next year and will help us a lot to continue our growth. So one is, of course, our factory in the north. We build our own factory for alternative milks. Till today, everything that we've done was outsourcing from third quarter onwards, the end of third quarter onwards, everything that we're doing, we're doing in our factory. That will enable us to give much better products, much more variety, much higher variety of our products. And also not just to play until today, everybody in Israel plays in the segment of alternative milk drinks. We will bring it also into yogurts and desserts, which is -- this is our claim to fame. This is where we are #1 in the market. This is our strength here in Israel. And we'll take the very, very strong brands that we have in desserts and we have in yogurts, and we'll be able to implement them in our factory. Our factory will allow us to give much more capacity into the market in a much higher quality and tastier products than we used to have in the past. On the one hand, get into new categories like the desserts, like the yogurts with our beloved brands, local brands here of our desserts and yogurts. And also our manufacturing costs are much lower than what we used to have when we outsourced Alpro since the beginning of the year before we had the factory. Putting all those components together, we see this as a major engine of growth in the next quarters and also in the next years. Cow Free, which I've mentioned before, we -- when we look at dairy and milk industry in Israel and all over the world, we divide it into 3 segments. One segment is the traditional milk, everybody knows. The other one is the alternative milk such as soy, almond or oat. And the third one is the new segment that we brought to life. And I think we are one of the first companies, innovative companies to bring these segments into the world, which is basically like milk, but not milk because it doesn't come from a cow, but it has the same protein, it has the same components and nutritional advantages, but -- and the identical taste, the sensoric taste, but it doesn't come from a car. It doesn't have lactose, it's -- people who can't take lactose can actually consume it. For Jewish people who are religious, you can eat it after meat, people who differentiate between meat and milk and people who like the taste of milk, but don't do it for various reasons, will be able to get those products. And we believe that those 3 segments, there's a place for those 3 segments. This segment is going to start very small and it's going to grow. It's not something that we're going to see that next quarter or quarter after that is becoming substantial. It will take time to build the category as it took time to build the milk alternatives categories or plant-based category in Israel for many, many years. But we do think that this is a very profound and very unique category that there's place and that there's a consumer need and requirement from consumers for this category. And we're very, very happy that we were the first one to innovate and to launch these products. In Yotvata, where we do all our milk drinks, traditional milk drinks and protein drinks based on milk, we had capacity constraints over the past year, 1.5 years. And basically, 20%, 25% of the demand, we were not being able to meet. And we deployed the new line about 2 months ago. And by December, after all the testings are done, the new line will start being productive. So by 2026, our capacity will grow by 40% to 50% and the demand of 20%, 25%, which we don't meet today and we don't give an answer today, we'll be able to give an answer. So in our milk drink, which is part of our, of course, Health and Wellness segment, we'll see substantial growth next year with opening up capacity bottlenecks. And Shabat, which I mentioned before, which is a huge launch and the growth engines for our water business. As you remember in the strategy, we talked about taking our water company and making it a multiproduct company from a single product company. So this year, we launched under the sink, we launched the soda machine, and we also launched the Shabat. We launched an affordable machine in the U.K., and we'll continue to launch new devices from a different price tag and a different price range and also different functionality to answer consumer needs. And we do see the ongoing growth of the water business. And with those new products, especially with the Shabat, which is very, very high demand for this product, we sold thousands of those machines, and we stopped sales because we are waiting for new machines to come to us, so we can continue to sell them. We see potential for substantial growth in the next year. And just summing up, if you remember, our strategy talked about 4 pillars, Israel focusing on the core and growth and Brazil transforming the R&G and growing the non-R&G and our water business, growing our water business and growing internationally as well with productivity, CapEx and investment into the business. So looking at the parameters that we set to the strategy that we want to achieve, I think that we are in line and even way over in line, growing 5% over the years, '24, '26. We think we -- as you can see in our results in '24 and also now in '25, we are growing much more than 5%. When we talk about expanding the margin, you can see that there's a substantial improvement, and we believe that a lot of that improvement is a pro forma improvement into our margin in our coffee business which will be a new level. We do think the productivity of ILS 300 million to ILS 400 million will reach that target and even exceed it. We are investing a lot in CapEx, whether it's on productivity, whether it's on engines of growth, such as the new plant in the north that you've seen such as Cow Free that we launched Shabat that we launched and also in digitalization, in automation that we put in the company to be more productive and to assist us to grow in a more healthier way. And when we focus on our portfolio, when we started, we were around 60%, 65% core. Our portfolio was core. Core was being #1 in the market, growing more than 5% and having a double-digit margin. Today, we believe that by 2026, after we turned around Brazil, after we divested Sabra and divested other parts of our businesses, we believe that we'll be able to reach this target. The last big business that we need to do the turnaround in profitability is our confectionery business. And as I said before, looking into 2026, knowing already what we have as cost of goods when it comes to hedging cocoa and also the inventory of cocoa, we believe that we'll be able to do a substantial turnaround to the confectionery business and to bring it back to levels that we saw in the past. And by that, we'll complete fixing the -- or transforming all the big businesses and all the core businesses of Strauss having more than 85% of the business as a core business. So just to sum up before I give it to Tobi, we believe it was a very strong quarter with substantial results for the coffee business, which we believe a lot of them will come to be pro forma. We had some onetime problems in Israel, which are already fixed, and we don't see them following us in the next few quarters. And we are looking to turning around our confectionery business once we will -- our P&L will absorb the new cocoa prices, which are much lower than what we had in the past. And from here, Tobi it's yours. Tobi Fischbein: Thank you, Shai. On Slide 19, looking at the quarter's sales more closely, we see continued growth in all segments, while the most significant contribution came from Coffee International, especially from Brazil. Excluding the appreciation of the Israeli shekel, group sales grew by 13.2%. We also see the impact of divestments in the quarter with Sabra and Obela being the most noteworthy. These businesses were consolidated in the group's 2024 non-GAAP results. Moreover, we also see the impact of the divestment of the Ultra Fresh business in Q4 of 2024 and the coffee retailer Coffee-to-Go in Israel at the end of Q2 of 2025. Without these businesses, our pro forma growth in Q3 of 2025 would have been 16.3%. On Slide 20, where we look at the sales for the first 9 months of the year, and we see similar trends as in Q3. Moving now to operating profit on the next slide. What we see here is that the group delivered significant improvement in both Q3 and the 9 months of 2025. Higher EBIT and EBIT margin can be attributed to the higher sales achieved and ongoing productivity measures and despite the impact of raw material cost inflation. In Coffee International, we see the impact of pricing, whereas in Strauss Israel, pricing did not compensate for higher raw material costs. As Shai mentioned, Strauss Water's EBIT was impacted by intense competition in China. Looking at the next slide, we can see operating profit and margins by business segments. On Slide 23, we see that net income in the third quarter increased by 42.7% following significantly higher EBIT. In the 9-month period, higher financing and tax expenses impacted net income. Higher financing expenses in Q3 and the 9-month period were attributed to the impact of the stronger shekel, which led to foreign exchange hedging expenses as well as FX differences as well as higher interest paid mainly related to financing working capital and higher interest rates in Brazil. Tax expenses were also higher, reflecting tax income received in 2024 following the release of provisions due to previous tax assessments and the profit mix in 2025. Moving to cash flow performance. On Slide 24, we see that in Q3, our operating and free cash flow improved significantly. Free cash flow amounted to ILS 245 million, an increase of ILS 343 million over the comparative period last year. This was supported by higher EBITDA, lower inventory levels in Coffee International as well as lower CapEx. On Slide 25, we look at the net debt -- net financial debt, and we see that the higher free cash flow led to a decrease in net debt as well as an improvement in the net debt-to-EBITDA ratio. Let's now take a closer look at our business segments, starting with Israel. On Slide 27, Strauss Israel, we see that sales in the third quarter of 2025 mainly reflected pricing in a number of categories, while divestments of the Ultra Fresh business in Q4 of last year and of the retail chain Coffee-to-Go at the end of Q2 of this year impacted growth. Without these divestments, sales growth would have been approximately 5.2%. On Slide 28, we see Strauss Israel sales for the first 9 months. And we see here that growth across the board stemmed both from pricing as well as higher volumes. Moving to EBIT for Strauss Israel, both in Q3 and the 9 months, we see that both the impact of higher raw materials as well as pricing were reflected on the operating profit performance. In Coffee Israel, pricing offset higher green coffee prices, whereas in Fun & Indulgence, snacks and confectionery, pricing actually did not compensate for higher cocoa costs. In Health & Wellness, we saw a one-off cost related to food safety and quality control activities as well as higher raw material costs and increased marketing expenses supporting the plant-based milk category. Moving to Coffee International on Slide 31. For the key highlight here, of course, of the quarterly results, Coffee International, we saw strong growth in sales that was driven primarily by pricing. And the sales growth offset green coffee input cost inflation, while operational efficiencies supported margins. On Slide 32, we can see that geographical breakdown of sales for Coffee International in Eastern Europe, Central and Eastern Europe. We see that sales growth was achieved across the board following pricing as well as higher total volumes. Our Brazilian JV, as explained before, grew nicely, and we also saw strong growth in Poland, both from pricing and volumes. Moving to the sales for the first 9 months of the year. On the next slide, we see a similar picture, showing the same overall market dynamics. On Slide 34, we see the Três Corações, our Brazilian JV performance on a 100% basis and on Brazilian real. And we see the increase in sales supported mainly by pricing in the roast and ground categories, but also the continued growth in non-grow R&G categories. Moving now to Slide 36 for the Strauss Water performance. During the quarter and first 9 months of the year, we saw higher installed base, higher sales, both in Israel and the U.K. as well as better sales mix. The gross profit was positively impacted by exchange rates and productivity measures, while higher Strauss Water, our JV in China with higher contributed lower equity gains. Moving to the next slide. We see higher Strauss Water yuan-based 100% results. We see there that with double-digit top line growth with lower net income due to intense competition and efforts to preserve and expand market share through promotions, marketing and R&D by diversifying the portfolio offering. It should be mentioned also that the R&G versus shekel exchange rate led to lower sales and profit when translated into shekels in the period. With that, we conclude management's presentation, and we will open the call for Q&A. Rivka Neufeld: Thank you very much, Tobi. I'll now fetch your questions. So the first question I have is regarding Cow Free, could you please give us more color on the Cow Free dairy drink and spreadable products released this year? What are some of the early indications from retailers and consumers in Israel? And what demand and sales volumes are you experiencing? Shai Babad: So as I mentioned before, the new category is basically a category that is there to imitate the nutritious values of milk. It has the same milk protein, the BLG protein that we have with milk that comes from a cow, and it has very similar elements. It also has almost the same test as the milk drink and also the same thing in the cheese spread. The advantages of that is that it doesn't come from a cow. It's more sustainable. It doesn't have lactose. So everybody senses that lose can actually have those products. It has very, very similar to milk and cheese whoever likes the taste of milk will find it identical -- almost identical. And it doesn't have cholesterol because it doesn't come from animals. And for Jewish people, it's also -- who differentiate between meat and milk, it also we call it power, which means you can eat it after you eat meat. So we think there's a lot of place for this because in all the milk alternatives, they don't actually have the taste of milk. And someone who actually wants the taste of milk and also wants the protein. Most -- and by the way, people don't know this, but in most milk alternatives, there's not really many nutritious values, not in oat and not in almond. There's a little bit of protein in soya, but not as much as we have in milk. And here, we actually have the advantages of milk. We have the same taste of milk for people who like getting the taste of milk, but people who doesn't want it to come from a cow, people are sensitive to lactose or any other reason, we'll be able to have this category. So for these reasons, we believe there's place for this category. Yet this category is very, very small. Right now, there's not even time to talk about revenues or demand. It's just starting. It will take time. We'll need a couple of more quarters before we can actually have some data and really understand. Right now, we know that everything we put in the market was sold, but it's very, very, very small quantities, still under test. We are -- there's also educating consumers what is this new category? What do you mean it's milk, but it's not milk? What do you mean it doesn't come from a cow? Whatever I told you now is something that really needs to be explained and really needs to be experienced by the consumers. So we really think it will take time to this category will go -- grow. Nevertheless, it took more than 10 years to grow the alternative milk category here in Israel. And today, it's more than ILS 1 billion category. It's still continuing to grow. We do believe the country can grow to being a very big category in Israel to give solution in Israel, not just in milk, drinks and spreads. You can look about it in yogurts and in desserts and in any dairy products that we have today. There's questions of the availability of those proteins that come from yeast and mushrooms and don't come from a cow how available they are going to be. Once this will come more scalable, then there'll probably be more factories that will produce this or it will be easier to make this on scale. Right now, the availability of -- or the ability actually to keep these products into the market is very, very limited because the product -- the input product of the protein is very limited in the amounts that is being produced today. So I hope I gave some kind of an answer. We can speak about this for the next 20 minutes, but I think this wasn't the session -- this wasn't the reason of the session. Rivka Neufeld: So I actually have another follow-up question regarding Cow Free from Chris Reimer from Barclays. Shai Babad: Yes. Rivka Neufeld: So are these products -- are the results of these products in line with your expectations so far? Shai Babad: Yes, very much and even more. When it comes to the sensory test, when it comes to the consumers' reaction to what we've done, very much in line, but I want to be very careful. There are still very limited amount of products that we put on sale and it's still very, very early. I think that a year from now, by the end of next year, after we have a year of launching, after we have a year of deploying them in the market after that we will be able maybe to scale a little bit up our production abilities and getting more protein and putting more products into the market, we'll be smarter to say what do we think. But we do think this is a very, very exciting category. We do believe very much in this category. And we believe there's a path to grow this category so that the milk industry will be broken down into 3 major categories: the traditional milk, the alternative milks that are not milk such as soy, almond and oat and also Cow Free, which is basically imitating milk, but it's not milk, has all the advantages of milk and the taste that just doesn't have the disadvantages of lactose, cholesterol, sustainability and others. And we do think that over the years, the space for these 3 categories and the Cow Free category can grow substantially. Rivka Neufeld: So staying in this same sector, what do you see in terms of the plant-based milk line? How is that performing so far, especially given...? Shai Babad: It's performing really well. We also managed to grow our market share very rapidly over the last few weeks when we launched. Our products are much higher quality, much tastier. We brought in a variety of new products into the market. And once we'll -- and so far, we've only been in the milk drinks or milk alternative drinks category. Once we'll go into desserts and to the yogurts, this is where we own the market. We have the highest market share. We are the #1 player. Once we'll take our loved brands and we put our loved brands on plant-based products in the desserts, in the dairy, we believe we can grow this category very much. And the new plant that we have designed, which is the highest technology and with our partners with Danone bringing in their highest IP into the factory, we will really be able to grow this category and also grow this category with new products. Rivka Neufeld: So given your explanation, when looking at the global market, demand does seem to have some challenges in terms of the alternative milk market. So how does that correspond with how you see the growth opportunities here in Israel? Shai Babad: So far, we don't see any demand. There was a hiccup in the last few years, but we do see alternative milks continue to grow in Israel, the demand is quite constant. The category has been growing. In the previous year, it has been growing double digit. Now it's growing high single digit. We don't see a problem. And this is only on the side of the milk -- alternative milk drinks or plant-based drinks category. Once -- as I mentioned before, once we'll get into the desserts and once we'll get into the yogurts, which is a very big category for us and give that in alternative milk solutions, we do believe we'll be able to grow this category much more and to gain market share in the category and also develop new products because today, there's not real products when it comes to desserts and yogurts in this category. And I think we'll be able to bring in products, which will be very, very unique, very, very tasty, very, very good and with our love brands, which are the #1 brands in the desserts and the yogurt categories. Rivka Neufeld: Moving to the Water segment. Regarding expansion in the Water segment, how long do you think it will take to come to fruition considering the market in China and depending on the launch of the new facility? Or is that more of a 2027 story? Shai Babad: So it's really very, very hard to know. We are -- we do want to see a -- the new facility will start -- will come in place and start in the beginning of 2026. It has nothing to do with the new facility. We don't have -- it's not a capacity constraint that is today affecting us. It's more the competition of Xiaomi and the fact that they have reduced prices and we're facing kind of a price war right now and the discounts at the beginning of machines. Still there's good margins, I must say, having a 5%, 6% net margin is not a bad margin in our business. And the growth is very solid. We've seen -- although this war with Xiaomi is putting very high pressure, we still grew 13% year-over-year, which is very high growth in the category. We're still gaining market share and still growing. Yes, this will follow us probably in the next couple of quarters. If it's 2 quarters, 1 quarter, 3 quarters, 4 quarters, yet to be seen. We'll keep you updated. We do think that -- we hope that by 2026 or maybe end of 2026, we'll be able to overcome this is [indiscernible], this [indiscernible] on the right order, but this downhill going back backfill, but it's too early to say. Rivka Neufeld: Final question so far is, are there any more segments of the business being considered for divestiture? Shai Babad: We always look at portfolio optimization. We always look what is the right way for us. We look at the trends, we look at consumer needs. We look at where we have our competitive advantage. We look at do we have a sustainable way to grow to meet consumer needs in the next 5 to 10 years. And we look, can we -- are we #1 player? Are we #2 player? Are we a substantial player in those categories. And then we look, is this business profitable or can we make it profitable? And if the answer to all this is yes, then it's fine. If not, then we ask ourselves can we fix one of the no answers to these questions. And if we can't fix it, then we ask, does it support the core activity, does it support our portfolio? And sometimes when the answer to that, yes, is keep it. And only when the answer is no to all the questions about then we divested. So I won't give you a specific business that we're looking at. And of course, it's an internal information once we do something, we will just announce it. But we are always looking at portfolio optimization, making our portfolio is right for us, as right for consumers as well so that we will serve our consumers in the best way where we have a competitive advantage by keeping -- or by maintaining growth and by maintaining high margins. Rivka Neufeld: Okay. We don't seem to have any more questions. So I will now turn the call back to you, Shai, for closing remarks. Shai Babad: Well, thank you very much, Rivka. So as I said before, this has been a very good quarter for us and also 9 months into the year. I think that one of the major things that we've managed to do over the past few quarters and also looking into the fourth quarter and hopefully into next year as well is to transform the pro forma -- the platform of our coffee business in Brazil and a little bit in the CE as well. We do believe that we can get higher margins there, be more sustainable. As I said before, I'm not sure they'll be as high as we've seen in the third quarter, but I do think that we'll be a higher performer. We do think Israel had a onetime leap, and they'll go back into growth and to higher margins and profitability as was before, especially health and wellness, as I mentioned before, those onetime problems we don't believe will continue into the future. We don't see them repeating themselves. And we do think that we are on track to growth. Today, the business is healthier than it was in the past. Most of our categories, almost all of them besides the confectionery are already there with high margins, high growth and with high adjustment to consumer needs. The only last business that we believe that in 2026, we'll see the full turnaround is our confectionery business. So overall, when we look ahead, we see continuous growth through all the growth engines and others that I didn't mention in this presentation, but all the growth engines that we set ourselves this quarter that I've shown in this presentation. And also with continuing to work on our core categories of growth and by fixing also our confectionery business, we'll continue to see in the pro forma of the new coffee business, we'll continue to see overall profitability and overall growth improving. Rivka Neufeld: Thank you, and thank you for joining us for Strauss Group's Third Quarter and First 9 months of 2025 Results Earnings Call. And this concludes our call for today. So thank you.
Operator: Good morning, everyone, and welcome to BBVA Argentina's Third Quarter 2025 Results Conference Call. Today with us are Mr. Diego Cesarini, Head of Asset and Liability Management and Investor Relations; Mrs. Belen Fourcade, Investor Relations Manager; and Mrs. Carmen Arroyo, CFO, who will be available for the Q&A session. This presentation and the third Q '25 earnings release are available on BBVA's Investor Relations website, ir.bbva.com.ar, and will also be available for download in the chat. First of all, let me point out that some of the statements made during this conference call may be forward-looking statements within the meaning of the safe harbor provisions found in Section 27A of the Securities Act of 1933 under U.S. federal securities law. These forward-looking statements are subject to risks and uncertainties that could cause results to differ materially from those expressed in the forward-looking statements. Additional information concerning these factors is contained in BBVA Argentina's annual report on Form 20-F for the fiscal year 2024 filed with the U.S. Securities and Exchange Commission. [Operator Instructions] I will now turn the call over to Mrs. Belen Fourcade. Please go ahead. María Belén Fourcade: Good morning, and thank you all for joining us today. In the third quarter of 2025, BBVA Argentina has managed to sustain its growth strategy, demonstrating the strength of its fundamentals and the effectiveness of its management. We maintained a focus on operational efficiency through careful administration of our fees and strict control of expenses, which allowed us to navigate the volatile context in which interest rate levels have doubled. The period was marked by high political uncertainty, which resulted in strong movements in financial variables. The Central Bank implemented a more restrictive monetary policy with increases in reserve requirements, a new daily compliance scheme for them and changes in the instruments used to regulate the money supply, which led to a sharp rise in the level and volatility of interest rates. The electoral results in the province of Buenos Aires at the beginning of September added further doubts about the continuity of the government's economic policy. Deposit rates increased from levels of 30% at the beginning of July, reaching peaks of 70% during September. Furthermore, demand for exchange rate hedging increased, resulting in some dollarization of deposits while loan growth slowed down. Nevertheless, credit to the private sector of the system achieved a real-term increase of 7% during the quarter. Although this scenario was quickly reversed after the outcome of the national elections in October heavily supported the ruling party, the results of the financial system were not exempt from the impact of what happened during the quarter. On the one hand, the high level of rates affected the continued deterioration of the system's delinquency. And in addition, it had a negative impact on intermediation margins given the faster speed at which liabilities are renegotiated compared to assets despite the short duration of the latter. In this scenario, we are leveraged on active pricing, careful portfolio management and strict control of expenses, which has allowed us to navigate a context of higher provisions and delinquency while still driving growth in activity. The aforementioned negative impact on margins was mitigated by the high percentage of floating rate sovereign debt in the securities portfolio. In this context, the bank's total loans to the private sector grew by 6.7%, and the consolidated market share was 11.39%. Regarding deposits, a real-term increase of 10.2% was also achieved so that the market share rose 44 basis points and reached the double-digit figure for the first time, up to 10.09%. As for asset quality, the NPL ratio of BBVA Argentina on private loans reached 3.28% as of September of 2025, a figure that remains below the system average. BBVA is renowned for presenting delinquency ratios consistently below the sector average, which reflects the quality of its credit risk management and its prudent approach to portfolio origination. Regarding the liquidity ratio, the bank remains at a comfortable level, which at the end of the quarter reached 44.3% of deposits. The capital ratio stood at 16.7%, decreasing 170 basis points compared to the previous quarter, mainly explained by the temporary impact of the sovereign debt valuation, yet it continues at ample levels that allow us to sustain our growth strategy. Moving to Slide 2, 3 and 4. I will now comment on the bank's third quarter 2025 financial results. BBVA Argentina's inflation adjusted net income in the third quarter of 2025 was ARS 38.1 billion, decreasing 39.7% quarter-over-quarter. This implied a quarterly ROE of 4.7% and a quarterly ROA of 0.7%. The decrease in quarterly operating results was mainly explained by lower operating income, mainly due to: one, a deterioration in loan loss allowances; two, lower net interest income; and three, a drop in the line of net income from measurement of financial instruments at fair value through P&L. These were positively offset by substantially better net fee income, operating expenses and other operating income, including nonrecurring concepts. As previously mentioned, it should be noted that the quarter was marked by an increase in average interest rates in a context of volatility, regulatory changes of minimum reserve requirements and uncertainty raised by the electoral period, which cleared up after the results, reversing several of the negative impacts. Net income from the net monetary position was 5.7% lower quarter-over-quarter, explained by a stable quarterly inflation. Turning into the P&L lines in Slide 3. Net interest income was ARS 585.5 billion, decreasing 6.6% quarter-over-quarter. In the third quarter of 2025, interest income increased less than interest expenses in monetary terms, driven by the sudden increase in interest rates. While income from loans increased 19%, income from the government securities increased 66.6% given the high percentage of TAMAR floating rate bonds in the portfolio, which rapidly captured changes in market rates. Expenses increased mainly due to higher deposit costs, in particular, due to time deposits. Loan loss allowances increased 37.1%, explained by the deterioration of nonperforming loans, in particular, on the retail book, which implied higher provisioning as well as the publicly known deterioration of NPLs, both for BBVA and for the system. The effect of loan loss allowances can be observed in the evolution of the cost of risk, which reached 6.63% in the third quarter of 2025. Net fee income as of the third quarter of 2025 totaled ARS 137.1 billion, increasing 37.5% quarter-over-quarter, thanks to continued alignment in pricing strategies, both in fee income and expenses. During the third quarter of 2025, total operating expenses were ARS 494.6 billion, decreasing 3.4% quarter-over-quarter. Several improvements are observed in administrative expenses, mainly due to proactive efficiency measures in: one, software; two, outsourced administrative expenses; three, advertising; and four, armored transportation. In the case of software, the decrease is due to a reestimation of expense provisions. For advertising and armored transportation, diverse actions have been taken in the aim of improving efficiency. Both the efficiency ratio as well as the fee to expenses ratio evidence the stability and improvements that are taking place on these lines of the income statement, and we expect them to improve even further for 2026. Private sector loans as of the third quarter of 2025 totaled ARS 12.8 trillion, increasing 6.7% in real terms quarter-over-quarter. Growth was mainly driven by an increase in loans in foreign currency, boosted by commercial lending, mainly prefinancing and financing of exports and other loans, which include investment project loans and a position in correspondent banks. On the peso portfolio, credit cards and pledge loans stood out. The latter was partially affected by an accounting reclassification done by the subsidiary companies from the other loans lines to the pledge loan line. In the case of consumer loans, prudency policies taken in a context of higher deterioration of nonperforming loans were noticeable in this line with 0% growth. Overdrafts fell 12.1%, driven by the rapid increase in interest rates mentioned previously. After years of commercial segment growth over retail, the sudden increase in interest rates took a toll on commercial loan demand, which tends to be more sensitive to changes in interest rate movements, making the commercial loan book slightly fall versus retail in the portfolio mix. BBVA Argentina's consolidated market share of private sector loans reached 11.39% as of the third quarter of 2025, improving from 10.58% a year ago. Regarding asset quality, BBVA Argentina's nonperforming loan ratio on private loans reached 3.28% in September 2025, a figure that remains below the system average. This was due to an increase in the nonperforming retail portfolio, reflecting a deterioration in nonperforming credit card and consumer loans, which aligns with the overall systemic trend. Commercial nonperforming loans, however, showed very good performance, remaining in 0.10%. As we can see on Slide 6, as of the third quarter of 2025, total gross loans and other financing over deposits ratio was 85%, below the 88% recorded in the second quarter of 2025 and above the 65% in the third quarter of 2024. Participation of total loans over assets is 57% versus 58% in the second quarter of 2025 and 43% in the third quarter of 2024, evidencing a slightly higher exposure to the public sector, driven by the changes in reserve requirement regulation concerning reserves in kind and also in line with the lower origination of loans as a consequence of prudential actions in a high NPL environment. On the funding side, as of the third quarter of 2025, total deposits reached ARS 15.4 trillion, increasing 11.2% quarter-over-quarter. The bank's consolidated market share of private deposits as of the third quarter of 2025 reached 10.09%. Private nonfinancial sector deposits in pesos totaled ARS 9.8 trillion, an increase of 7% quarter-over-quarter. This was explained by an increase in time deposits and in interest-bearing checking accounts. This effect was partially offset by a drop in investment accounts. Private nonfinancial sector deposits in foreign currency expressed in pesos increased by 16.6% quarter-over-quarter. This is mainly due to an increase in time deposits, mainly investments from mutual funds, followed by an 8.3% increase in savings accounts. As of the third quarter of 2025, capital ratio reached 16.7%. The drop was due to an increase by 7.4% in risk-weighted assets, which was higher than the 2.9% decrease in common equity Tier 1 capital, the latter affected by the fall in the valuation of public securities mentioned previously. This explains 2/3 of the quarterly decrease in the capital ratio. Public sector exposure, excluding Central Bank totaled ARS 3.6 trillion, implying a 16.4% exposure above the 15.88% recorded on the second quarter of 2025. The quarter-over-quarter increase is mainly due to a higher position in securities at amortized cost related to the higher requirements [indiscernible] correspond to TAMAR bonds. For the quarter, liquidity ratio reached 44.3%, lower than the 48.7% in the prior quarter. In local currency, the ratio decreased 779 basis points to [ 37.6%, ] explained by the lower valuation of public securities, affecting the overall drop in the total currency liquidity. Liquidity in foreign currency increased 152 basis points to 57%. In line with our commitment to generating value for our shareholders, the bank continued with the payment of dividends corresponding to a 2024 financial year -- having successfully completed the installments 3 to 6 as of the date of this report. In summary, despite the challenges of the environment, BBVA Argentina has demonstrated notable resilience and effective management during the third quarter of 2025. The positive growth in credit, delinquency levels below the system average and the strength in liquidity and capital ratios are a testament to the quality of our risk management and prudent approach. We reiterate our firm commitment to continue driving activity, maintaining operational efficiency and generating sustained value for our shareholders. This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Brian Flores with Citi. Brian Flores: Apologies. I was having technical issues. I have 2 questions. The first one, kind of a mandatory one on the guidance. Just wanted to check if you are reiterating the real loan growth at 45% to 50% year-over-year with deposits at 25% in real terms. I think the last time we discussed the ROE range you provided was real ROE of 10% to 15% and expectations of the Tier 1 ratio between 16% and 16.5%. Just wanted to check if all of these items are maintained given obviously a hectic third quarter. My second question is on basically loan growth. You showed market share gains, very strong loan growth. But just given the economic stagnation of the third quarter, how much of this growth would you consider genuine versus merely refinancing from existing clients that were struggling with liquidity. Just wanted to understand how we should think about loan growth going forward. Carmen Arroyo: Everyone. Okay. Brian, regarding your questions, regarding guidance, we are okay with this 45% to 50% in real terms loan growth. In terms of deposit, we see something more than what you said. So something similar to 30%, 35% could be okay for us. ROE, we are thinking of high single digits. And in terms of capital ratio, finishing the year near the 17%, around 17%. So that would be the changes -- in fact, there's no change in our guidance. We are maintaining a similar view for the whole year. So that's one issue. Then regarding loans and what you asked about refinancing and if the growth is genuine or not. So we believe the growth is fully genuine. You have to consider that part of the loan growth is related to U.S. dollar loans. And then if you take a look to personal loans, you will see that we are very flat. So we didn't grow in that line. So of course, the situation in the retail side regarding personal loans and credit cards is delicate due to NPL growth, and that's why we've been more prudent on the growth there. And our growth comes from, as I said, U.S. dollar and very linked to companies, of course. Brian Flores: Thank you, Carmen. I think the last time we spoke was maybe 3 weeks ago in one event we hosted. You mentioned the sustainable ROE of the bank is around mid-double digits at least. So just wanted to think if maybe 2026 is a transition year towards this level. Carmen Arroyo: Okay. So I was talking about the end of 2025. Maybe I misunderstood your question. Related to 2026, yes, we maintain the mid to -- yes, mid- to low teens, I could say. So 2026 will be better than this year, maybe not at a sustainable pace. But yes, so the trend should go upwards. So yes, we can maintain this mid to -- yes, low to mid-teens here. Operator: Our next question comes from Tito Labarta with Goldman Sachs. Daer Labarta: Two questions also. Just any update on just the daily reserve requirements and what the government is thinking on maybe reducing that and just to allow for better liquidity and your ability to grow? And how do you see that continuing to impact NIM maybe in 4Q and then maybe for 2026, just high-level thoughts on how the NIM can evolve? And then second question, as you mentioned, the retail NPLs, right, have been rising, just given some of the short-term uncertainty. How are you thinking about asset quality from here? Do you think that reverses quickly? Do you think -- how long of a prolonged credit cycle would it be? Just to think about asset quality and then your ability to grow the retail loan book? Diego Cesarini: This is Diego. Thanks for the question. I will take the first one. Regarding reserve requirements, Central Bank has already made some changes. The third quarter was very difficult because they -- not only they raised reserve requirements 2 or 3 times, but they also had us to comply it on a daily basis. So that made us a little inefficient. They have already changed this from the 1st of December, we -- even if we have to comply with those requirements on a daily basis, we need to comply just 75% of the total requirement that the Central Bank makes us to comply. So this is a huge change for us. This will reduce this inefficiency to 0. And besides, they also reduce the percentage of requirement on our site deposits. So that has a direct impact on profitability because this is money that was allocated at 0 rate at Central Bank. And now well, we can have -- we can comply that with bonds. So this makes an important change for us and for banks in general. We expect Central Bank in the coming months, of course, to reduce the level of requirements. This monetary policy that has been very restrictive in the -- since May or June, we think that with time, they will relax this. And of course, that will provide us with more liquidity to fund growth we are expecting for next year. Carmen Arroyo: Okay. And I'll take the question related to NPLs and what we see. So NPLs, as you know, so we have ended September with 3.28%. The system was above that, near 4%. So we are doing better than the system. Of course, the environment has been very complex in this quarter with inflation going down in a very quick way and interest rates still very high in real terms. So this is affected, of course. What we see is that we will see a fourth quarter, which will be also complicated in that sense. So maybe we see something higher. So NPL is higher than this quarter, not pretty much. And then 2026 needs to be a much better year. So in terms of NPL and in cost of risk, something similar. We see cost of risk that has been 6.63% by the -- so this 9 months. We see something higher, but not really dramatic, so by the end of the 2025 and then a decrease in 2026. Daer Labarta: Great. That's helpful. Just one follow-up on as the reserve requirements get relaxed, I mean, rates, I think, have come down from the peak as well. How do you see the evolution of NIM, right? Because we saw some NIM pressure in the quarter. Do you think that already begins to reverse in 4Q? Just to think about the net interest margin evolution from here? Diego Cesarini: Okay. NIMs, when you take out the third quarter, which is very special, of course, NIMs have been really stable through the year. And I think that, that will be the main conclusion. Third quarter, of course, was special because rates went from 30% to almost 70% on a given day. So having liabilities from 1 day to 40, 50 days, that really impacts much quicker than our asset repricing. Which, by the way, our assets are also short term in general terms. We -- just as an example, 60% of our bond portfolio was adjusted by interest rates. So it reflected this rise almost immediately and in a way that help us with the NIM through this quarter. We didn't fall as much as many competitors. So for fourth quarter, of course, the opposite trend, we should expect that. We should see higher NIMs. And for next year, we are not really thinking that NIMs should go down that quickly. With this demand of loan that is, of course, will remain high, we hope it will remain high and liquidity, which is not as much. It's not scarce, but it's not that high. We think that banks and us especially have a pricing power with our customers. So we are not expecting NIMs next year to fall that much. Operator: Our next question comes from Carlos Gomez-Lopez with HSBC. Carlos Gomez-Lopez: Two questions. One, as you mentioned, the asset quality is still going to deteriorate into the fourth quarter. So essentially, my question is the damage from the high interest rates, when do you think that will be gone? We will see it through? And have you seen already demand started to come or it's still too early? And second, what is the optimal level of capital that you want to achieve now that you have come down all the way from 33% to, I believe, 16.7% now. Where would you like to stabilize the capital level? Carmen Arroyo: Thank you, Carlos. So related to the demand on credits, what we see is that the retail side is going to come back slowly maybe. We need to see how long does it take to go through this NPL high ratios. So maybe in the retail side, we will see, yes, a slow move. But in commercial, what we see is that U.S. dollar needs to -- we are already having high demand on U.S. dollar credits for companies and also pesos. So what we see is a different -- so we have a different view between retail and commercial. So we believe this 45% to 50% loans growth will come through companies and mostly dollar-based. So that's the first question. Diego Cesarini: Carlos, this is Diego. Regarding capital level and where we feel comfortable. As Carmen said before, we are thinking that 2025 will finish with a ratio of around 17%, probably a little higher. And for the coming years, when -- first of all, we have a management level, which is the minimum level that we feel comfortable that is around -- it's a little below 13%. Having said that, when we forecast for the 4, 5 next years and every year, we are forecasting that Argentina financial system will grow in real terms and that BBVA will keep growing in market share. And considering all that, we are not forecasting that we will reach that level of 13% or 12.75%. So we have some possibilities, of course, of issuing at any given moment, subordinated debt. We do not have at this moment a Tier 2 instrument in our book. So we really are not seeing concerns regarding capital for the coming years. Carlos Gomez-Lopez: And this is a bit technical, but actually, when I was looking at risk-weighted assets, there seems to have been something changing in the formula from second quarter to third quarter. Your capital consumption seems to be much higher than what the loan growth seems to justify. Was there a regulatory change that we overlooked? Diego Cesarini: No. What -- if you are mentioning our decrease in the third quarter, it's mainly because the valuation of our public sector debt [indiscernible] a lot because at the end of the third quarter was the worst moment for Argentinian assets. Bonds were at the worst moment. Next month, in October, our capital ratio will be much higher than in the third quarter. Carlos Gomez-Lopez: Okay. So this was temporary and in October it should go back up. And going back to the loan demand that we mentioned before. So we have this high NPLs that have to be absorbed digested. So the problem right now is lack of demand in terms of customers or lack of willingness on the part of banks to lend until that NPL situation is solved. Carmen Arroyo: I would say it's both. Yes. So in retail, of course, yes, commercial -- so as I mentioned, commercial is another story, and we are okay with that. So -- but in retail, I guess it's both. So these high interest rates are doing part of the situation. But yes, it's lack of demand and also more restrictive lending policies. So yes, both. Operator: Our next question comes from Pedro Ofenhagenen with Latin Securities. Pedro Ofenhagenen: I wanted to ask what risk or pressure points do you identify in this new credit expansion after the electoral result and for 2026? And if there are any specific segments you are -- where you anticipate greater sensitivity maybe? Carmen Arroyo: Sorry, Pedro, I'm not sure if I got your question right. Can you please repeat? Pedro Ofenhagenen: Yes. No, looking at credit growth for 2026, if the -- what risk or pressures do you see if NPLs liquidity or what are you looking at for credit growth? Carmen Arroyo: No, we don't see an issue related to capital or liquidity. So that's for sure. Then of course, as I mentioned before, we need to be cautious on the retail side in NPLs looking at the -- so we need to see where it ends, this high NPLs, what we think is that we will see the worst part by the end of this year, maybe beginning of the next year. And from then on, it should go back to more normal levels. So that's in the retail side. In the commercial side, we don't see anything. So there is demand. So we believe with the reforms and if everything goes in the direction that the government is announcing, what we believe is that there will be more willingness from the companies to go long to make investments, and we will have the opportunity to fund those in pesos and in dollars. So no restrictions in terms of capital and liquidity, I would say it's the most important message to give. Operator: Next question from Mateus Raffaelli with Itau BBA. Mateus Raffaelli: So I'd like to ask about coverage ratios and cost of risk because we've been seeing coverage trending downward covering 99% as NPLs continue to rise in the short-term outlook, at least for continued increase in NPLs, but the bank is still growing significantly portfolios. So how should we think about coverage ratio levels in this particular scenario of high growth and high NPLs? And I know coverage is an output of the models, but it would be nice to hear if maybe this is the core level for coverage ratios and should improve or maybe still comfortable with these levels considering the portfolio growth mix, more commercial retail. And also if you could give us an outlook for retail NPLs, maybe it stabilizes going into the second half of next year or maybe early in that... Carmen Arroyo: Okay, Mateus, thank you for your question. So first of all, maybe it's good to notice that coverage ratio were really, really high because of the lack of NPLs in the past years. So we were at a very good level of this ratio. And now, of course, in a more complex environment, it's normal that you see a reduced coverage ratio. Then these levels, we are comfortable in this 98% to 100% levels for 2025. We believe we are not going to decrease much more for this year. And then 2026, we are already projecting higher levels. So it should be the minimum levels we are forecasting to see. Operator: The Q&A session is now concluded. I would like to turn the floor back to BBVA's team for closing remarks. María Belén Fourcade: Okay. Thank you all for joining the call. And if you have any further questions, please do not hesitate to contact us. Have a good day, and goodbye. Operator: This concludes today's presentation. You may disconnect, and have a nice day.
Barati Mahloele: Good morning, ladies and gentlemen, those of you here with us at the JSE in person as well as those joining us online. My name is Barati Mahloele, Investor Relations at Tiger Brands, and I have the pleasure of welcoming you to the Tiger Brands FY '25 Results Presentation. I'd like to acknowledge the presence of the Chairman of our Board, Mrs. Geraldine Fraser-Moleketi, members of our Board as well as our Executive Committee members who are with us today. Later on, joining me on stage will be the CEO of Tiger Brands, Mr. Tjaart Kruger; as well as the CFO, Mr. Thushen Govender, and they will be taking us through the presentation this morning. Before I hand over to Tjaart, I'd like to bring your attention to our forward-looking statement. And with that, I hand over to the CEO of Tiger Brands, Mr. Tjaart Kruger. Tjaart Kruger: Good morning, everyone. And Barati, that was very formal. Anyway, I'll leave the chirping on the new dress code to Thushen. He'll talk about it later. We really believe in Tiger that we've turned the corner and we -- on a new planet almost. We really do think we've reset the organization, and we believe that our visuals, our logos and stuff must present that. And therefore, you've probably seen in the press announcement this morning, there is a few changes, but we officially want to do it now to expose you to the new Tiger. [Presentation] Tjaart Kruger: So we're very excited about this. If I can make a few comments on this new logo that we presented here. I think my first comment, which is not on the list there, is that it's only 2 colors. And what does that mean? All your printing is much cheaper. And that's real. It's a joke now, but that's real. The fewer colors you have and everything, the less your costs. And that's very important for us because to live to those promises that you've just seen in that video, we must get our costs right down to get our products at an affordable price and make the margins we're looking for. And we think we've achieved that in the last while, but we'll talk about that in the next hour or so. But a few comments around this brand. It's bold. It's our Tiger. The previous picture was probably [ 8 Tiger ]. This is our Tiger. Nobody can copy this. It brings focus out. It draws on the legacy of the past. I mean we've had 100 years of greatness in this organization. It brings that out, but it also takes us into the future. The geometric shapes inspires our value chain. And that's very, very important and a very nice way of designing this is -- if you look at those bottom pictures, you'll see all the ear of the Tiger comes off the Black Cat Peanut Butter bottle. The chin of the Tiger comes off the Chutney, Mrs Balls' bottle. One of the side things here comes off a plow that's a farmer busy working in the land. So this brand logo represents our whole value chain. And that's very important to us because we know to deliver on our promise to our consumer, we have to manage that whole value chain, whether we own it or whether we partner with it, we have to manage that whole value chain to the end degree to make sure we get our proposition and we get our values right. So very excited about this new brand. And we obviously, lots of internal stuff that we're going to do with the brand with our people in Tiger, but also external with our stakeholders driving this forward. So I hope you like it. This is what you're going to see going forward. I can now for the real job this morning, the results presentation. Thanks, Barati. So as normal, I'm going to do the highlights, the strategic execution. Thushen will take us through the operational performance, and then I'll conclude with the outlook going forward. We certainly have had a good year. If you look at our cash conversion, 90%, and you'll see we've reduced our dividend cover and paid special dividends. The work we've done on portfolio optimization is going very well. The Carozzi disposal is done, Baby Wellbeing is done. The LAF disposal is done. The SKU rationalization is far ahead of the target that we've set 2 years ago. And the Randfontein site is at the competition tribunal, I think, today. And if you look at those volume growth of 3.5%, if you take out these SKUs that we've discontinued that volume growth, it's actually 5.8%. So very chuffed to say. The guys have really done a great job of driving value in the business. And if you look at the volume growth and the revenue growth, you can see we've got deflation in our turnover, which is great because we brought value to our consumers, and we brought value to our customers. With that, we delivered the right margins as well. So we're very, very comfortable with that. And capital allocation, returning ZAR 10 billion to shareholders over this period. Special dividend, share buybacks and ordinary dividends, and Thushen will get into the detail of that. So we're very pleased with the results that we've seen over the last year compared to last year. And you can see we're clearly into the double-digit margins here. The year number is 11.1%, I think. And it's really a great performance by the organization. And that's why you would also see that I've asked the whole executive to attend. Normally, I say to them, if you've got important factory visits to do, go and do that rather. But today, I said, make an exception. Please attend this presentation because I do think we've got to showcase stuff here that we're really proud of. So good performance for the year. But also on the sustainability commitments that we've made, and I want to make the point upfront. If you look at these achievements, they all merge with the business on a commercial proposition. They're not separate stuff that we do to get points for CSI or BEE scorecards. We get that anyway. We know that. But they're done in a commercial basis integrated with the organization. And those top 3, the Langeberg & Ashton deal we've done, we were very conscious not to lose those jobs in the community that we can save the jobs, and that was a great deal that was done. The small white bean farmers and the tomato farmers is our whole promise that we started 18 months ago to really get back into agriculture and make sure we secure our supply chains, in a sustainable way and in a commercial viable way. And we're very proud of all those farmers. And I visited all of them myself. It's really going quite well. On the electricity side and emissions and waste to landfill, making good progress on the glide path where we want to get to our targets. And all those activities will save us money. It will save us money to have panels on the roof rather than pay Eskom for power. It will save us money to have less landfill stuff because it costs you money to take that to landfill. So great progress in that area. Our general trade progression, as you know, we've got 2 big drives in the general trade. The one is in bakeries. And lots of technology that's going in there to drive our volumes in the general trade. And then the other project we started about 3 years ago is to get into this par of general trade directly through also putting some technology in there, and that's going well. We're over 100,000 stores where we started with, I think, 60,000 stores 2 years ago. On our people side, fill 60% of leadership vacancies internally. That's a big number. And we've got some great people at Tiger, and we are able to promote them into these leadership positions, having had the right programs to develop them over the last number of years. And then we've had a few winners of some competitions. Please don't give those names to headhunters. That's a flippant remark. But we -- people at Tiger, work at Tiger, not because we pay them a lot, it's because it's a great place to work. That's why people are here. We also pay them a lot because that goes with a great place to work. But you can't just work for money. You work because it's a great place to work. And that's the culture we're building in the organization, and we're making very good progress on that. We shared these guidance numbers with you over the last 2 years and just a measurement on how we fared against those. And you can see that these medium-term guidance targets, we've actually exceeded them. We exceeded some of them last year already. And the great performance, volume growth, revenue growth, operating margin. Revenue growth is probably slightly short of inflation, but we're very comfortable with that because we've restated our price points, and we took a lot of cost out of the value chain in many of the businesses. Operating margin over 10% ROIC, well on its way to 20%. Working capital, that 52 is probably not a sustainable number, but we're very comfortable with a target of 67 and that we will beat that going forward, but we'll talk to you about new targets later on. And then on the simplification of the organization, real great progress. We've only really got the King Foods site, Randfontein site is busy happening and then the chocolate stuff we spoke about last time as well that needs to be resolved. So great progress in all of those areas. And I do think the short- to medium-term guidance is irrelevant. Now we'll have to restate those numbers, and I will do that at the closure of the session. If you look at our strategy execution, and we shared this with you before. If you look at our strategic thrusts, I really think the organization has done extremely well and the cost leadership, a bit of that, the way we took costs out over the last 2, 3 years of the business, make it more efficient, and it's everywhere. It's overhead, it's recipes, it's factory efficiencies, it is distribution efficiency. It's everywhere in the business where the business has really performed extremely well in that. Our portfolio, we just spoke about that, great progress in that. Rejuvenating a brand. I think if you look at the numbers this year, you'll see the spend coming back into marketing. And remember, last year, I think I stood here and I said, if you haven't fixed the business, you haven't got your price points right, you're probably wasting every cent you spend on marketing. That's not the case anymore. You'll see our spend and our investment behind our brands is on its way coming back, and you'll see big spending in that going forward. Growth platforms, we spoke about those growth platforms, health, nutrition, affordability. Affordability, I think we've done well. Health, nutrition, we've probably got a lot of work that we're going to do. I'll talk about that just now. And superior challenges is the GT trade we're talking about and looking at all our channels, the wholesalers, the retailers, great relationships with all of them, great work we're doing with all of them. So great work doing in that. On our enablers, I just want to make a comment on 2 of those. The one is competitive manufacturing. We haven't got a business if we haven't got efficient factories. We are driving scale. We big in all the categories we play. We need to have highly efficient factories to deliver safe products that's of the right quality and that's in time. And that doesn't happen by itself. That happens with a huge effort and huge investment. And the progress in that area has been phenomenal over the last year, and that will continue. And the second one I want to talk about is sustainable agricultural sourcing. We cannot, as Tiger, sit here and say there's been a bad crop of small white beans, we haven't got baked beans. That's not an option for us. We must make sure we understand the value chain and the supply chain, and we must be able to predict the crop, which we can. And then we must have alternative plans, whether it is different areas of growing small white beans, maybe importing it, which is plan 5 because the quality is not right. But the thing we're doing is to get small white beans to be grown Malelane area in the north, in the south, in the east so that you get the climatic conditions that impacts on this, you get that a little bit more balanced or better balanced. As an example, we cannot sit here and say we haven't got caps for closures for our mayonnaise because the supplier dropped us. It's not an option for us. This has happened in the past. So we must manage our supply chain. Agriculture, in particular, and the caps is a supply chain issue. Eggs is another issue in mayonnaise 2 years ago. So that's a lot of work we're doing. And if we talk about sustainable agricultural sourcing, that's the type of stuff we're talking about. Our consumers need the products on the shelf all the time, not when the weather is good. If you look at our strategic ambitions, maybe same to the guidance we've given you, these are probably not ambitions anymore because we've reached most of those or achieved most of those, and we will probably restate them as we go forward. But certainly, very proud of the organization. And these ambitions were probably stated for 2028 and it's 2025, and we've probably reached most of them. So well done to the organization, and we will work on that. Because as an organization, we want to be ambitious. And if we do state targets for ourselves, we want to be ambitious on that and we want to really reach for the staff. So we will restate those. Just Tiger at a glance. And if you look at this slide, you can actually see why Tiger is such a great organization. In these businesses or categories that we play, we're really the #1. And in most of them by far. In bread, we're probably not by far. Our competitors is probably a close #2 from a brand equity point of view. Their volumes is higher than ours. We know that. You know that, too. In grains, we are on those 3 brands, by far the biggest and by far the best and by far, the most preferred. Now yes, our challenge, we must keep it like that. And you can only keep it like that if you stay relevant. And that's the whole strategy that we've spoken about so often. If you look at our culinary business, look at those brands. 6 brands, Crosse & Blackwell is #2 from an equity point of view, but we took back our market leadership in the last 6 months. So we'll be #1 soon again. And in Snacks and Treats, those brands are to die for. Home Care, #1 in Doom, big brand; Ingram's, we've spoken about, we're #6 or 7, but it's got a niche position, and it's got good margins. So if you look at this slide, it really -- it's not difficult to sell Tiger. It's really -- it's got brands that you cannot -- you can only buy these brands. You can't develop them. It takes 100 years to develop brands like this. And we've got them, and we're making them better, and we're making them more relevant to our consumers. The new strategy that we started communicating with you about 2 years ago was to be Southern African focused, South Africa bricks and mortar and a very focused distributor model going into Southern Africa. And that's the countries where we play. We haven't got distributors in all of them. Some distributors look after 2 or 3 countries. So I've also said to you before, Southern Africa, don't try and draw a line just above Angola. We're happy to go into those countries into Africa. We're also exporting into other countries, but that's more in an opportunistic way. This is a strategy that's focused. We've got focused distributors in these countries, and it's really going well. On the left side of the slide, you can see where our factories are more or less all over the country, very focused in Gauteng or in the center, but we're in Cape Town and we pick in Durban as well. That's where all the confectionery businesses are. So great business, good footprint, good factories all over the country and well positioned. So going forward, we always talk about the affordability and the focus on value for the consumer. We've got a consumer under stress. And I think I've said before that all these presentations normally started in a very stressed economy or with the consumer under huge pressure, and that's normally making excuses. I don't think I've started like that this morning. I think my message here is that we are much better positioned to serve the consumer under these conditions at the moment. So the consumer is under pressure. 4.5% inflation, if you look at labor and wage negotiation and rates where they've settled this year, the consumer is under pressure. There's no doubt about that. We can see it in promotion activity. Lots of our products sold only on promotion, about half of it. So what does that mean for us, that first block? It means we must be relevant. We must be affordable, and we must know how to operate on promotions. We must know how to operate with combos. And that is the one thing we've got right, particularly in a business like Grains. We've got that right. We know how to do promotions, and we know how to play the combo game because we've got the brands to put in the combos to make the combo attractive to the consumer. And some of our retailers and wholesalers know that. We're not arrogant about it. We're strategic about it, and we work with our customers to make that work. And that is one thing we got right this past year. The retail landscape, we know it's blurring. We know all the retailers are opening in townships. We know all the wholesalers have got retail outlets. We know the whole thing is blurring. We understand that. We've got lots of activity into the general trade. We know the e-commerce thing is developing. You know the home deliveries, we're in that. We're growing big in that. So we understand that whole landscape around what our customers do and how they want to do things, and we support them. And we work with all of them strategically to make things work better. And then the supply chain risk, I've spoken about quite a bit already. We don't have enough water in South Africa. We also don't have services in -- our service is not always as good as it should be to get water to our factories. We understand that. We understand that from a climate position, from agriculture, from water in agriculture, we must go to areas where there's enough water, maybe irrigation water and not rainwater, and we drive that in our agricultural activities. Global and local suppliers. I think we're all aware that, that block, the Baltic block with Russia and Ukraine probably exports most of the world's sunflower and most of the world's wheat. And when that war started, there was a big problem with that. That again, for us, we can't go and say the person, the shopper at the shop, we haven't got flower for you because the Russians invaded Ukraine. That's not an option for us. We must find flower. We must find wheat. So to understand that whole global value chain and where we procure from, how do we mitigate, and I think we're getting much better at that. And then leveraging digital tools. And the best example we probably have in our logistics setup. We've got digital tools in our logistics setup where we've probably taken out quite a couple of hundred million rand of costs to improve that. And our service levels has probably improved a good 5 to 10 percentage points over the last year. So reacting to all these things is what we do. We don't stand and complain about them. Key milestones that we've achieved. We've started February last year. It feels like 20 years ago, but it's not even 2 years ago that we've restructured the organization into the federated model. We took a couple of months to find our feet. September, we spoke about the continuous improvement and the SKU rationalization. We improved on that. We changed structures again in the December, but Culinary and Davita under Culinary. In March, Baby Wellbeing was sold. Carozzi was sold. Randfontein was agreement signed. Randfontein now is hopefully sold in the next day or so. In May, we made considerable progress with the Listeriosis case, and we can talk about that later. We've made some more progress. And then in September, the LAF agreement, which took 5 years to conclude was concluded, and we actually went down on the 1st or 2nd of October to have dinner with the Premier and the new team in LA and they're very excited about their future. Let me conclude this first bit with just reminding you of our capital allocation model and what we've done with it and how we've applied it and how we stuck to the discipline of our capital allocation model. So the first thing is probably looking at our capital allocation model and our business and how we generate returns and what returns we need and how we can get businesses to those returns. And if they can't get there, then we must dispose of them, which we've done. So I think we made great progress on that, get the portfolio right. And then we've -- as we say through the capital allocation model, we first look at internal requirements. We must obviously pay tax. We must put money in working capital when required. We've got maintenance CapEx. We've got growth CapEx. And then with the cash after that, we decide what we do. And you've seen we've bought back a lot of shares. We've reduced our dividend cover, and we've paid 2 special dividends interim and we paid a big special dividend, paying a big special dividend now. So we are driving through this capital allocation model to get our balance sheet to be optimal and to really be the foundation of future growth in the organization. So I think the one thing we've done is we stuck to the discipline of this over the last 2 years and really applied our mind what to do with the cash. And you'll see that -- I mean we're returning about ZAR 10 billion of cash to our shareholders. So that was my introduction. Let Thushen take you through the operational performance, and then I will conclude a bit later. Thushen Govender: Good morning, everyone. It's nice to welcome you today on which is a very momentous day for us with the launch of our new purpose as well as our refreshed logo. I'm sure as you've seen, our rebranded CEO with his new suit. Sorry, Tjaart, you left the door open there. So I'm going to touch on a few key initiatives first that we've managed to make great progress on and then move into the segmental analysis. I'm sure those of you who have read the earnings announcements have seen we're certainly ahead of targets when it comes to continuous improvement. We committed that amount to you over a 2-year period, and we've delivered it in a year. And it's a testament to the great work done by the team, and you've seen it come through in the operating margin improvement that we've delivered in the current year as well. We're confident that there's more fuel in the tank. There's more opportunity in Tiger Brands, as Tjaart referred to earlier, and we're committing to another ZAR 500 million over the next 2-year period, and that will also drive further margin accretion. I'll touch on working capital a little later on, but ultimately, you'll see it's a job well done with some focus from management as well as some tailwinds from soft commodities. Capital investments. When I stood in front of you in H1, we spoke about the Mega DC. I'm proud to say that we've now appointed a developer. We signed off on the designs, and we've identified a plot. This will probably be commissioned in October 2027 or just before then. And the reason why we're delaying this slightly is, as I mentioned to you, we're consolidating about 4 warehouses and we want to align the commissioning of the DC with the expiry of the leases. So there isn't any duplication in costs. The super bakery, well on track to be delivered late next year. No pressure, Quinton. And I'm going to talk to you more about the mega site philosophy that we're bringing to the 4 across our business units and how that drives manufacturing footprint optimization. Digitalization is a key theme, not only for us and for the rest of the world, as you all know, with AI being the new buzzword or the buzzword for some time. We spoke to you about the logistics control tower, the software we put in place and how that's managed to improve our efficiencies, turnaround times of our trucks, monitoring how long they wait at customers or outside our facilities. And it certainly delivered a big part of those savings that you see in continuous improvement. So that's been well managed, and there's still room to go improve. The bakeries team have implemented software that we've spoken about previously. It's now implemented across all our bakeries that optimizes our route to market in the general trade that drives efficiencies, and that's well on track as well. The AI journey within Tiger, I'm proud to say, has commenced. We've started our first AI committee. We've identified some use cases, which are currently in progress, and we're starting to see the results. A big part of AI and the technology journey for Tiger is the culture. So I'm partnering with our Chief HR Officer, S'ne on this as well, driving training programs to create a more digital savvy, digitally savvy Tiger Brands and also create that culture that embraces technology. In the past, we invested quite a bit in software solutions, but we didn't manage the change management aspect of it well and monitor the adoption, and that points to a culture. So that's what we're trying to change within Tiger, have a culture that embraces new technology. On international markets, the key distributor model is well embedded. We're moving away from that trading mindset, in particular, in our neighboring markets, where we're looking at category management principles. We're working on brand development and establishing our brands in these neighboring markets as really household names as well. Moving on to the numbers. I think that was exceptional revenue growth, considering the soft commodity deflation and obviously underpinned by good volume performance and some deflation in other categories as well as we managed our price index to improve our competitiveness. Operating income and operating margin, you're seeing the benefit of CI come through, the continuous improvement I referred to and at the same time, the volume leverage driving that margin improvement. It's also nice to see that across all of our business units, conversion cost per unit has reduced. And to Tjaart's point earlier, marketing investment is up double digits with -- now that we understand where we want to invest and we've got our price points right, we're speeding up that investment. The evolution between EPS and HEPS is really the profit on sale of Wellbeing and the Carozzi business, and that's the movement that you see there. And I'll touch on working capital in the coming slides. I think this is quite an important slide, and we're wondering whether we should put it up. But given the questions we've had in the past 2 years around we're going on this portfolio optimization drive. Is it going to create a HEPS gap? Carozzi was a big contributor in the past. Chococam was a big contributor. And what is Tiger going to do to fill the gap? I'm proud to say we've actually done exceptionally well to fill the gap in the current year. And obviously, in the coming year, with the organic growth, we plan to exceed off this base. So what you see on the left was our reported earnings of ZAR 18.10, and that includes Chococam and Carozzi, as you see to the left of that graph. And what we did for the F '25 graph, we've taken out the impact of Carozzi that's in continuing operations. Remember, for the first half of the year, we consolidated those -- I mean we accounted for those equity earnings. And then there's also some benefit there from interest rates on the proceeds and ForEx. So we've been very transparent about that. And we said, if we take out that full benefit, what does the adjusted continued HEPS look like? And then we've then taken into account the shares that we've purchased to date. There was about 5.5 million shares in 2025 on an unweighted basis. And as of last Friday, about 4.4 million shares on an unweighted basis. And when you apply that to the headline earnings and consider the HEPS versus FY '24, that gap has largely been filled or reduced to 1.8%. So to those questions around whether we're going to leave a gap with the portfolio honing, I think the discipline that Tjaart talks to with regards to our capital allocation and the focus on the core results has certainly lifted our headline earnings from continuing operations. And here is testimony to the fact that the Tiger can change its stripes. Let's hope a few other stripe animals follow suit soon. So moving on to the next slide. This is the volume on an adjusted basis where we take out discontinued SKUs, discontinued operations, and we show you what that normalized base growth looks like. And as you can see, it was an exceptional performance from the business, volume growth across the board. On STB, we did see some challenges come through with the competitive pricing in the CSD market and consumers shifted to that category. But we've rectified that. We're already seeing some green shoots. But all in all, as I mentioned, managing the price point, the volumes have come through quite nicely. And on Grains, you've seen that commodity deflation in rice, sorghum and oats in particular. On bread as well, the drag there on pricing is due to the wheat milling operations. On the cash movement for the period, as you can see, exceptional performance from cash operating profit. And on working capital, it was well managed. And there's probably 2 or 3 reasons supporting this working capital benefit. One, that federated model and the decentralization of procurement brings a lot more focus to procurement. We can manage our procured positions better. Decisions are made closer to the close -- I mean the cold front of business, and it's more effective with regards to stockholding management. The other point is, I mentioned to you in H1, we've implemented SAP IBP. Just to reiterate, that's not a ERP implementation. I had a few panicky messages on that. That's just a business supply and demand business planning tool. And it's quite a sophisticated tool looks at regression analysis, it looks at historic trends and helps us predict the stock levels that we should have. And it certainly helped us in managing the complexity that we have much better. And the third probably benefit to acknowledge is the tailwinds we had in our commodity business. And as Tjaart mentioned, it's been a record year for Tiger, ZAR 8.3 billion worth of dividends, a reduction in our dividend cover from 1.75 to 1.25 shows our confidence in the fact that this cash generation is repeatable, and we've optimized the business platform. The ZAR 1.8 billion in the end there relates to the Carozzi proceeds. You won't see that in your cash flow analysis. We've had to re-categorize that in the balance sheet due to IFRS purposes, and it sits under an investment account. The reason why it's there is to optimize our return on those proceeds as we anticipate the dividend payout. On CapEx, as you can see, we're making great progress. And besides the super bakery and the Culinary mega site investment, there's efficiency CapEx and capacity CapEx across all business units. And as I said to you, the Mega DC is on track. We're now applying that philosophy that we've applied in Gauteng to consolidate and streamline our warehousing facilities. We're applying that philosophy to KZN and Cape Town, where we have multiple facilities and there's opportunities to consolidate that warehouse facility and generate the similar synergies that we anticipate from the Gauteng Mega DC. An exceptional performance from the bakeries team on track with their turnaround strategy. You can see the margin expansion coming through, the operating income growth and there were a few things driving this. Besides the supply chain optimization, the reduction of waste, the improvement on conversion cost per loaf as a consequence of labor optimization, there's also diligent price point management. The team look at price discounting per route all the way down to that level to ensure we're not putting too much on the table, discounting too deep, and it's quite critical to manage those price points in what remains a competitive category. The other thing to point out on this slide is you will see that, that operating margin was delivered off the existing platform. The super bakery has not been commissioned yet. We have optimized our existing operating platform, and we will see that operating margin move closer to double digits even before the commissioning of the super bakery. So we're well on track here. Maybe just 2 call-outs here. The route-to-market software is now implemented in -- across all the bakeries. It's driving not just efficiency, but it's aiding the team in penetrating the general trade channel using geolocators to lay down what is the route to market, identify those in-store locations and make sure they service it effectively. So that software solution is certainly a step change in our demand management. Price volume, as I mentioned, that mix remains quite crucial as well as making sure it's relevant for each of the channels we participate in. Operational excellence goes without saying, and I think the other call out here is the great work done on our recipes over this past year to retain that #1 spot in bread. We worked with partners, technology partners, reformulated our recipes, and you're starting to see that come through in the reduced consumer complaints. It's quite a sophisticated process. The recipe can vary from region to region as well given climatic conditions. So that was well executed and consumers are embracing the new recipes and the quality that comes with it. On Grains, you see that deflation coming through in the revenue, but there was a spectacular turnaround from Liezel and the team with regards to that performance. And there's 2 or 3 things driving it. The first one is important to acknowledge is that base isn't really where this business should be. With the brands that Tjaart referred to earlier, we've had some challenges as well in the past with this business. So there is an element of this that's really the rectification of the historic margin. The other element is the better management of business across the supply chain, whether it's conversion cost per unit, whether it's waste management, whether it's extraction from our mills, and that's driving that margin improvement. And the third one is what Tjaart referred to earlier around better trading, better understanding our procured position relative to global commodity pricing, making sure when we foresee a drop in this commodity pricing, we trade out very quickly in order to remain competitive throughout the year in the various channels that we participate in. So that price point management in store relative to the commodity position is a critical aspect to manage. And I think it's also worth mentioning in this business, a little bit of luck also helps when it comes to commodities. With the commodity deflation, we saw quite a few consumers come back into the category. The Indian borders had opened once more and rice prices had normalized. And it also helps when your competitor is out of stock for a little bit and you take full opportunity of that. And moving on to some of the key factors that looking -- when we look ahead at the Grains category. Cost leadership, absolutely crucial. The value engineering opportunity and the automation opportunity in these facilities are phenomenal. There's still some fuel in the tank here. Yet again, as I mentioned earlier. In fact, just recently, we've approved end-of-line automation in one of the facilities that will deal with the pelletization. And even lightweighting of packaging, processing, as I mentioned, there's a huge opportunity to drop the costs even further. The other important aspect is portfolio optimization. We -- as you know, we've exited the maize category. That category had changed structurally with regional millers dropping prices and impacting our margin, and that was part of our noncore businesses that we exited. And here's another business that holds potential from a mega site development perspective. Our pasta site in Isando, we're revisiting the opportunities to expand that facility and look at increasing our breakfast offerings to the market. As you know, we're big in the oats category. That's predominantly a winter product. There's opportunity to expand our breakfast repertoire, and these are various things we're considering. On Culinary, it's nice to do to see your business firmly in the double-digit territory now. At 9.7%, the market said to us, well, you're not quite there, but we're firmly over the 10% hump, and we're in that double-digit territory. So that's nice to see that those value engineering initiatives that we've been talking about around packaging lightweighting, around recipe formulations is coming through quite nicely and assisting that turnaround. And as you know, in this business, the affordable -- the affordability of our products is quite critical. We've managed the price points quite well. We're launching the tiered products and brands that we referred to. Black Cat, creamier, in PET, which is a reduced peanut content -- peanut butter should be in your grocery stores pretty soon. It's an amazing product. Please go out and try it. Some of the key highlights on Culinary as you look ahead. Cost leadership, absolutely crucial to remain relevant to our consumers, as Tjaart mentioned upfront. And here again, across the value chain, there's significant opportunity for further value engineering. And the other concept that we -- as I mentioned, we spoke about the mega site upfront. And in this business, that will also aid us in step changing our cost profile. In Paarl, we're establishing a vinegar site. We've had some challenges with supply there, and we've also established -- we're establishing a vinegar line in Boksburg that allows us to reduce our dependency on suppliers for critical products such as All Gold, Mrs Balls and mayonnaise. And by in-sourcing that vinegar production, it helps us reduce our cost per liter on that particular raw material. And at the same time, we're in-sourcing the Mrs Balls product. That will be manufactured in Paarl as well, and that's going to become a mega site for the Western Cape region to service our markets nationally. And that mega site concept and manufacturing footprint optimization is key to unlocking further margin expansion. The investment behind our brands has just started. There's significant opportunity with our value tiering to drive further penetration in the market, go after those Tier 2 brands and establish ourselves as a relevant offering across the LSM profile consumers. On Snacks, Treats and Beverages, as you can see, it's been an exceptional year. Margin improvement, operating income improvement. We spoke to you about the degrammage in our candies and sweets portfolio. It's particularly important to be at the right price point in a discretionary category. And with that degrammage and maintaining competitive price points, we're seeing nice volume growth and nice upliftment in our margins. So it's really been a great year for the Snacks and Treats portfolio. On Beverages, we did see some headwinds. As I said, the carbonated software category, there was some huge price war, shall I say, highly -- became highly competitive in that category. And as a consequence, you've seen consumers shift their preference or their choices from squashes, which is the Oros stronghold into carbonated soft drinks. So we did lose some traction there. However, as I said, there's big investment going behind this and the reduction in the input costs with the orange squash prices coming off globally is also aiding us into recovering those price points on shelf. So we've seen some nice turnaround now in the Beverage category. This business has also focused a lot on the time and motion study within the various facilities, and that's delivered labor cost optimization, which has improved our conversion cost per unit. Looking ahead, there's 2 or 3 important factors that will help us remain -- continue to remain competitive on shelf and drive further margin expansion. One is the consolidation of our various snacks and treats facilities. There's 3 in Durban. We're busy exploring the consolidation thereof. And I think we did mention that to you in H1. And the other big margin unlock is the investment into a primary DC at our Roodekop beverage facility. Right now, the product gets on to a truck because there's no space -- storage space on site, goes to Yaldwyn, which is in Boksburg, gets double handled there. We get a customer order, gets back onto a truck and goes to our customer. So there's huge inefficiencies. So we're now investing in a primary DC, which will allow us to unlock further savings. On Home and Personal Care, I think it's important to point out that in the prior year number of ZAR 559 million, we do have ZAR 45 million from the Wellbeing business, and that's still in prior year continuing operations. So Thabani will give you a pass there. There has been growth on prior year. If you back out that ZAR 45 million. And on a like-for-like basis, you are seeing growth. Having said that, you would recall from H1, we did experience some challenges with can supplies for the pesticide business. And it happened during the worst time ever. It was during the pest season. We have managed to mitigate that by finding an offshore supplier at a much better price point. However, with that comes the working capital implications. But all in all, we believe we're in a better position, sustainability of supply at a lower price point. The other challenge that we faced in the current year was in our Personal Care business. Good volume growth, yet highly competitive prices in the skin category. And it's something that we really need to turn around and focus on with regards to the Ingram's brand in particular. So the turnaround focus in this business is the relaunch of Ingram's. We've got some value engineering around the packaging. But most importantly, we're trying to reduce that dependency on the Camphor range, which is a winter-specific product. And with the relaunch, we will position ourselves as a skin solution for all seasons. So that should deal with some of the seasonality challenges in this business. The other good opportunity that we're busy leveraging is the penetration into neighboring markets, our pesticide business, the Ingram's Camphor cream product itself is doing exceptionally well in those markets, and the team is really driving market penetration and consumer acceptance of these products. And I think the other thing to focus on here is rightsizing the cost base. We've rightsized the portfolio. We've taken out the tail brands and SKUs, and now we're going to rightsize the cost base to further enhance those margin and make sure we're competitive on shelf. I'll close on that note, and I'll hand back to Tjaart. Thank you. Tjaart Kruger: Thank you, Thushen. If I can -- 2 or 3 slides to conclude with. This slide is just talking about our priorities for the year ahead. And if you look at the stuff I'll just talk about in this slide, as you can see how much runway we still have for the next 2 or 3 years to deliver value improvement in Tiger. We've started the journey. We've done quite well, but we're by far not finished with it. So if you look at a couple of points in Milling and Baking, embedding the basics, getting those 700 trucks every morning out of every bakery before 6, managing that supply chain, optimizing product quality. That's stuff that they're busy with every single day, and we've got lots of opportunities still in that area. General trade recovery, doing great work. We dropped below 50% 2 years ago. We're above 50% now. We must get that above 60%. That is hard work. It's very competitive. And it's difficult. That's why the technology that the guys have put in there is so important and driving it day after day after day, and that's in progress. The super bakery will reposition this business from a cost base point of view. That's not in this current financial year, that will be in the following financial year, the benefit of that. That bakery is on track, very exciting. It's something that hasn't been built in this country yet. And we would like to show it to you when it's commissioned, which will be towards the end of next calendar year. In Grains, huge opportunities in expanding the Jungle repertoire. The Jungle brand, I think, has got so much legs to go outside of oats. And we've seen it before. We must just sort our supply chains out. So lots of opportunity and lots of work being done in that area. Defending and growing our main meal carbohydrate. So great work done this past year with Tastic and with Fatti's & Moni's. I mean Fatti's & Moni's came from a loss 2 years ago to being a good operating business now. And that is main meal stuff. It's the biggest brand. It's the only brand to find in those categories. And we must make sure that we stay as tough as we can, no space for competitors to come in and no space for competitors to get any space anywhere. Pasta is out of capacity. We need to look at that. We're busy looking at that. We must put in -- probably put in a new plant. And then snacking, this is one area, and it's probably the Jungle brand, but we're open-minded to use any of our mega brands. And it's probably savory snacking that we're talking about here, big opportunity. The one thing that we've changed a bit in Tiger is we're not -- maybe I should speak for myself. I'm not that keen on outsourcing production. You can't control your quality and you can't control the safety of your products, or you can, but it's more difficult. So whatever we do here must have proper scale. We don't necessarily -- we're not necessarily very good at niche positions. Must have proper scale, and therefore, we must have our own supply chain and our own factories, and we're busy doing that, and we can do that. In Culinary, great work over the last while. Still lots of opportunity in product tiering. Thushen spoke about the creamier Black Cat that will probably be launched in March, April somewhere. We've got opportunities in mayonnaise for product tiering, probably got opportunities in tomato sauce product tiering, just to get an alternative to the consumer at a much better price point. That work is happening in the business. And in the next year or 2, we'll see lots of these things happening. Value engineering, they've done so much work in the Culinary business to take cost out of the supply chain. And it's recipes, it's packaging, it's more efficient factories. And there's lots of opportunities still to come. We've still got quite a bit of products in glass, and we've spoken about moving to PET for a while now. And we will do that in a sensible way. It will be consumer-driven. We won't do stuff our consumers don't like, but that work and those opportunities are still there. The manufacturing footprint optimization in the Paarl site is quite big. The Paarl site was a small little factory, a big facility, but a small little factory making jams quite manually. We're commissioning 3 plants in that facility over the next couple of months. In fact, they have been commissioned. The products will probably hit the market early next year sometime. It's a new jam line, chutney line and the vinegar line. And there's space for more and there's more stuff going to happen on that side. So very exciting for that business. And the export recovery, we probably -- when we had the nice problems in this business, in particular, we short the export markets to satisfy local markets. And that recovery is in progress. That problem also helps us with very, very efficient factories now because you can imagine those factories are running flat out and the throughput and the overhead recovery is phenomenal. Snacks and Treats, discretionary category in Snacks and Treats. We must get our offerings right. We must get in the face of our consumers. We must get our marketing spend right. We must get our distribution right or we must get it better, it's not wrong. And we must get our innovation right in launching new products in that category. Yet the risk is that we don't get to where we were 3 years ago with having to take out 20% of SKUs again. So what we're developing in the business is this innovation culture of new stuff the whole time, but take the old stuff out and keep the place efficient. That's the big thing, is we must keep the place efficient. Thushen covered a little bit Oros and Energade, where we've got some nice campaigns in place now to address the loss of volumes with the CSD war going on. We've seen some nice recoveries in that business over the last couple of months. So it's going well. A big driver in this organization is the S&T site optimization in Durban. We've got 3 sites and we will end up with 1 site in 2 years' time. And that's a big project. It's on the go. It's got the right resources behind it. It's probably about ZAR 200 million, ZAR 300 million CapEx, and it's very exciting. It will reposition this organization if that's completed. And Thushen spoke about the DC at the beverage site. Home and Personal Care, we must recover the pest volumes. Last year, we were very short because we didn't have cans, and we must penetrate other markets. The further north you go from South Africa, they don't really have a winter. They only have a summer. So there's mosquitoes all the time. And I think we know that, and we drive these products into those areas. The body care volumes, I think Thushen covered that. We've got the plans in place, get our cost down, different packaging, more relevant, cheaper and going to the right channels to get the right marketing campaigns behind the products. And then continuously look at our costs in this business. The one -- we've sold quite a few brands out of the Personal Care business, and that obviously impacts on your factory, your throughput and your volumes through the factory is not as it was a couple of years ago, and we must fix that, and we're busy with that. So that's quite exciting. So I did ask all the MDs to come and listen to this because now this must be done. But they're pretty good at doing these things. My last slide, and I spoke to you earlier about restating our guidance on these numbers. And I think that is what we said previously and what we're saying now really is looking at the volumes, medium, short term, 1% to 3%, longer term, 4% to 6% inflation, just beat inflation. And I think if you've got the deflation in commodities, that number is a little bit different, but we understand that. If you look at our operating margin, probably get towards 12% in the medium term and 15% longer term. ROIC, we're close to 20%. So we probably want to get into the very shorter term over 20% and then aim towards 25%. Working capital, we stick to the 65 days. I think the guys are pretty efficient in working capital. And then the gearing, I spoke to you about that on the first slide as well that our gearing is probably around 33% or 1x EBITDA. We're very far from there. That's why we've got all these special dividends and reducing the cover. And we're trying to get to that number, and we'll probably get there in a couple of years' time, but the company is very cash generative, but that's the ambition. And then the portfolio optimization is, we're very close to actually have the portfolio optimization as a key issue because the stuff has been done. The 1 or 2 things may be left. It's not such big issues. And then obviously, the longer-term guidance is where do we look at inorganic growth in the organization. And what do we do about that? I think internally in the current businesses, we've got huge growth opportunities in all of them. And then on top of that, from a capital allocation model point of view as well as to look at what opportunities do we have outside of that. And that's probably longer-term thinking that need to start. With that, I say thank you very much for attending and listening. And I think Barati will go on to questions being dialed in and taking questions from the floor. Thushen, I think you must come and sit here. Barati Mahloele: Thank you very much, Tjaart and Thushen. Online, please do continue to submit your questions. But I think it's best to start in the room. Shaun, go ahead. Please introduce yourself, even though you need no introduction. Shaun Chauke: Okay. Shaun Chauke from JPMorgan. Two questions -- no, before I start, I think it's safe to say the Tiger is out of the cage. It's ready to go hunting. So just 2 questions on my side. So well done on that. Results on the Milling and Baking were achieved purely on the back of fixing your existing bakeries. So then my question is, how long from commission, so i.e., the start of FY '27, do you expect to realize the full benefits of the super bakeries? And what capacity utilization assumptions are you using for that scenario? And outside of -- that's the first part on that. The second part of it is outside the pure economies of scale benefits that you do get from the mega bakery, what are some of the upside opportunities that we could be missing because we're not operators. I'll ask the second one after... Barati Mahloele: Super bakery. Shaun Chauke: Yes, the super bakery. Sorry, super bakery, yes. Tjaart Kruger: Remember, the super bakery, whole investment case has been based on cost and not on volume growth. So the whole justification is based on replacing existing capacity with capacity that's much more efficient and much lower cost. So that's the premise of the new bakery. We can see we're not going to be able to close all the old bakeries because our volume growth is there, which is a lovely problem to have. It will probably put us into our second super bakery pretty -- quite a few years sooner than what we thought as well. So the benefits of the super bakery from a utilization and automation point of view is huge. We obviously don't disclose the real numbers, but it step changes the organization's cost base. It improves quality hugely because we use much better technology. And the obvious challenge we have is you've got -- you centralized manufacturing, so your distribution becomes more complicated. But we're very confident that we know how to deal with this. So this bakery will deliver nothing directly to a customer. It will go straight to depots. So with this bakery, we'll have a network of depots. We haven't done those numbers yet, and we don't know yet which exact bakeries is impacted in what way because we will make the decision when we get much closer to commissioning to look at the volume demand and the volume requirement. But it's step changes to organization. The second question, I think, was what opportunities do we miss from an efficiency point of view without having a mega bakery or super bakery? Shaun Chauke: So beyond your economies of scale efficiency benefits that you get from the super bakery, is there anything else we're not thinking about that you see that you think you will get as part of those benefits? Tjaart Kruger: Yes. The way we go to market is always a big opportunity. We talk about the general trade, but we also talk about how do we get bread to consumers in innovative ways that get them to prefer our product ahead of our competitors. And the bakeries have started a couple of months ago with a project where they get the hawkers on the street corners with trolleys that takes about 20 loads of bread. And they buy them from a local vendor in the area, which we set up and then they go and sell and they make about ZAR 200, ZAR 300. These are unemployed people. They make about ZAR 200, ZAR 30 a day on selling that 1 trolley, they sell 2 if they want to. But that's a very innovative way to look at, and we need 1,000 of those ideas daily to get our product to our consumers in a cost-efficient way where the consumer can choose it ahead of the rest. That type of stuff doesn't stop. It doesn't wait. We don't -- we're not waiting for this new bakery to save us. It won't save us if we wait for that. We have to do everything we do. And our coastal bakeries are not impacted by that. Our coastal bakeries are not that old anyway. Maybe Durban is quite old, but it's a very efficient bakery. And we've got some work to do in Pietermaritzburg. We've got one new line, one older line. But the coastal bakeries, it's a different issue that we have there. It's the biggest -- your biggest challenge in the bakeries after those -- that truck leaves the bakery is how do you get to the consumer before your competitor. And it is -- there's all sorts of challenges. People shoot at you in the trade, and I'm not joking, it's true. They shoot at you. We -- every year in the industry, it's an industry issue. We talk about it in the industry. Every year in the industry, more than a couple of people get shot. So how do you deal with that? A bakery driver, the average bakery driver starts working 3:00 in the morning. How do you deal with that? Do they sleep properly? So there's lots of challenges. That's why if you get that stuff right in the bakery business, people can't compete with you. Shaun Chauke: And then my second question is, can you please speak about the mega site in Paarl? I know you said it's chutney, vinegar and jam. Maybe speak about the -- because it's very much coastal base and you've got a very strong presence in land, can you speak about the incremental distribution costs relative to the benefits you expect from a manufacturing perspective? So i.e., is the site in Paarl beneficial because it's close to the sourcing of your raw materials? And what else can be brought into the mix of that factory, given that it feels like there's opportunity to still do beyond the 3 categories? Tjaart Kruger: I think you've answered your own question there. You must come and do the presentation next time. No, that's exactly the answer. The first philosophy of building a factory is you build it at where the raw materials are. Because if you build it anywhere else, you've got byproduct that you must truck around, which has got no value. So if you build a mill, if you build a maize mill, the best place to build a maize mill in South Africa is just north of Germiston because that's where your inbound logistics is the best, and there's feedlots very close by that can take the byproduct. And then you can have 70% of the maize pulp that becomes maize mill, you can truck that around the country, and that's pretty much in the center of the country, too. So that's the philosophy of manufacturing. All -- most of the raw materials for those products come out of the Western Cape, fruit and stuff. So that's the reason that business was started there 100 years ago by [ Acoa ]. Paarl is also a very good location because there's labor nearby, but it's not a big city with the labor cost that you've got in big cities. It's a small town, but it's not that small. So -- and people -- to get management, there's also easy. We would all love to go and live in Paarl. But if you build the factory in Upington, you start struggling a bit -- or maybe in the small town, let me say that. So Paarl is very well located. It's on the highway. It's in the area where the raw materials are. We've got management there. The facility is quite big. There's lots of space. And you're dead right, there's opportunity there for -- I think if you look at just square meter utilization, we've probably got more than 50% of it left for more opportunities. It's a great opportunity. It's a great site. Barati Mahloele: I think I'll take a question from online before coming back into the room. Tjaart and Thushen, so there's firstly, a congratulatory message. Congratulations on a great set of results and returning so much cash to shareholders. Well done. With regards to Grains, the half 2 operating margin at 14.6%, what would you say is a range for a sustainable margin for this business going forward? Thushen Govender: You want me to take it? So maybe it's worth recapping on the points I've made as well for the current year performance. One is the soft commodity cycle, and we don't expect that going away in the medium term. So the category pricing still remains relevant, and we think those margins over the short to medium term will continue. The second point I made was around the efficiency being brought to that business. The operating platform was fairly inefficient in the past, as you've seen from the past results. And we've invested in this business as well around value engineering, packaging lightweighting, automation, which is still to come. So that will help sustain those margins. And I think if you were to look at this over the medium to longer term, commodity business, just under 10% or hitting 10% is probably a good operating margin. But these tailwinds, we anticipate to continue over the short to medium term. Barati Mahloele: Thank you. Are there any questions in the room? None at the moment. No problem. I've got another one coming online. And the question is, looking at the operating margin between the different halves, can you talk a little bit about what drives future seasonality in the group? Thushen Govender: So if you consider our business, there's a few types of seasonality impacting it. One is generally the festive season. So Christmas, Black Friday, what everyone experiences as a retail surge, we obviously benefit from that. Easter, another opportunity. So as you look at those holiday seasons, there is some seasonality. And then within each category, that seasonality also differs. Bread, you'll find the bakery business seeing a bit of a volume impact during school holidays because kids aren't going to school with sandwiches. On Personal Care, we mentioned the Camphor cream, which is typically a winter product, and we're trying to deseasonalize that. Very similar with the pesticide business, that's a summer product. And as Tjaart mentioned, it's going north of our borders where the winter season isn't as prevalent or focusing on the coastal areas of SA, we can try and mitigate the impact of seasonality. So -- and then just broadly, generally speaking, during the winter months, starches are much preferred to salads, for example. Most of us stay away from salads during winter. So each category has a different type of seasonal SKU. But ultimately, if you look at the Tiger portfolio holistically, each of those seasonalities offset each other to deliver a consistent set of results. Barati Mahloele: Any questions? I'll take the last round in the room. Okay. Then I'll close with one last question that comes from online. And it's with regards to the value engineering that was mentioned earlier in terms of moving from glass to PET, reduction in peanut content in Black Cat. Can you talk a little bit more on value engineering across the business and what we can build in going forward from an uplift perspective? Tjaart Kruger: I think we've got a challenge as business people to run our business on a daily basis better than the previous day. So it's, I guess, a generic thing that your business must be run better and better and better all the time. Your utilization of your factories, improving, put technology in your factory that makes it more efficient, get your yields up. So let me give a good example. If you -- 40, 50 years ago, we could have get more than about 42% super maize meal out of a mill. Today, they run at 72%. And that's technology that's allowed there. I think that goes for most of our other categories in terms of what we -- so that's an ongoing thing, and that won't stop. And we've got lots of opportunity. We've got in the Snacks and Treats business, lots of opportunity for better technology making gums and jellies and all the stuff we do. Now obviously, not -- we can't throw ZAR 10 billion of CapEx in 1 year. We do this over time as we try and improve. I think the journey we started in Tiger, in particular, a couple of years ago on reducing our cost base, which we realized was too high. There were particular things that we needed to do is packaging has moved from glass to PET, but that's the big example. There's also [ lease ] -- a lot of stuff, fantastic in getting the packaging to be cheaper. You can do what thickness of packaging do you need and how many colors do you put on the bag? It's a lot of money. So that value engineering is also never stopping. How do you improve on that all the time. I think the tiering of products that we talk about is there's a particular thing that Tiger probably missed in the past that we've had competitors. Certainly, if you take peanut butter, for example, our peanut butter has got 91% peanuts in it and the sugar, no sugar, no salt and has got 99% peanuts in it. Some of our competitors run at 40% peanuts. Now that gives them a cost advantage that we can't really match. Now our response to that is let's get the PET sorted out, ask the consumer what they think they actually prefer PET to glass because kids walk around with peanut butter jars and its glass is dangerous. So that's the case. But then if you look at the recipe, we're very, very cautious and jealous of our brands. The one thing we're not going to do is mess up our brands. So we do proper consumer research in terms of what we can do with the recipes. And in all these categories, we can probably get a secondary product or an alternative product. And we've spoken about the Black Cat one a few times. It's -- we probably call it creamier, that's a cheaper, but we make sure the recipe that the taste profile is good and it's acceptable to the consumer. We can get that to a price point, and we'll have both on the shelf. And if it does cannibalize it, that's fine because it's at the right margin. So that's one example. We've got that example in all our products. Liezel is working in Grains. It's a bit more difficult to get a cheaper rice on the market because that's a different grain or shorter grain than its stock parboiled rice or long grain parboiled rice anymore. But there are opportunities. He's done a lot of work in pasta around what mixture of flour and stuff do we use. And that, again, is -- that's what our R&D people do on a daily basis. That's what keeps them busy to do those things. So continuously working on how do we improve these recipes to get the taste profile from a consumer point of view more acceptable at a better price. And you get substitute raw materials you can use. There's so many opportunities, but you need -- we need proper R&D people that doesn't sit at head office, sit in the factories where we can look at our technologies, look at our capabilities and actually design the future doing with what we have. Barati Mahloele: Thank you so much to all of you who have joined us online. For those of you in the room with us, that Tiger shop that you saw outside was not just for show. As you exit this room, you will find Tiger branded Tiger Brands shoppers. Please feel free to take one and fill it up with all our wonderful products across our business units. Thank you so much once again for joining us this morning.
Operator: Hello, ladies and gentlemen. Thank you for standing by for Li Auto's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Ms. Janet Chang, Investor Relations Director of Li Auto. Please go ahead, Janet. Janet Chang: Thank you, operator. Good evening, and good morning, everyone. Welcome to Li Auto's Third Quarter 2025 Earnings Conference Call. The company's financial and operating results were published in a press release earlier today and were posted on the company's IR website. On today's call, we will have our Chairman and CEO, Mr. Xiang Li; and our CFO, Mr. Johnny Tie Li, to begin with prepared remarks. Our President, Mr. Donghui Ma; and CTO, Mr. Yan Xie, will join for the Q&A discussion. Before we continue, please be reminded that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain company filings with the U.S. Securities and Exchange Commission and the Stock Exchange of Hong Kong Limited. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that Li Auto's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to Li Auto's disclosure documents on the IR section of our website, which contain a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Our CEO will start his remarks in Chinese. There will be English translation after he finishes all his remarks. With that, I will now turn the call over to our CEO, Mr. Xiang Li. Please go ahead. Xiang Li: [Interpreted] Now it's translation for Mr. Li. The third quarter of 2025 was also the first quarter in the second decade of Li Auto. We went through many challenges, including supply chain, product life cycle, PR challenges as well as changing policies. All these factors have had a negative impact on our operations and deliveries. However, today, I want to take this opportunity to talk about our long-term thinking in the next decade and three most important choices that we need to make, organization, products and technology. The first choice we need to make is organization. The challenge we're facing is whether to choose an entrepreneurial model or a professional management model. In the last 10 years of Li Auto, the first 7 of those years, we operated as an entrepreneurial model company. But as we scaled over time to a scale that we've never seen before, especially in terms of revenue, around the time of 2022, many people suggested to us to shift to a professional management model. Because historically, whether it's Mercedes or BMW or any of these 100-year-old car enterprises as well as Microsoft and Apple, which is the tech giants have all operated under this model and have great success. In the last 3 years, we tried very hard to make ourselves used to this professional management model. We -- but after implementation, we realized -- we came to the realization that the entrepreneurial model and the professional management model are fundamentally different, and it is irrelevant to processes and organization structures. The difference really lies in management principles and key operating principles. And also, they are tailored to different stages of growth and industry environment. The professional management model can be very successful, but it relies on three factors. The first one is that the industry and technology cycle has to be relatively stable. And the second is that the enterprise is already in a leading position and the position is relatively stable. And the third one is that the founding -- the founder and the founding team are either lost their motivation or are not actively involved in the company. If all these three criteria are satisfied, a professional management model could be a very ideal choice, whether it's Apple or Microsoft have both flourished after professional management took over and grew from $100 billion in revenue to $1 trillion companies. However, the entrepreneurial model is catered to an entirely different environment. First of all, the industry and technology cycles are going through fundamental changes. And second, the industry is very unstable and the entrepreneur -- and the company enterprise itself is not yet a leader. And thirdly, the founder and the founding team are still devoted to everyday work with their full passion and fully motivated. As AI is shaping many industries today, the environment that we live in and considering the traits of this company, we think that we fit into the entrepreneurial model way better. The entrepreneurial model really is about four things. First of all, there needs to be more conversations as opposed to reports. In a rapidly changing environment, deep conversations is really key to increasing our knowledge and judgment of the world as well as to making bold decisions. And secondly, is focusing on user value as opposed to just short-term deliveries. Only those things that create value for the users are worthy to be delivered as opposed to only focusing on how many tasks that we delivered on. And third one is keep increasing efficiency as opposed to occupying more resources. For example, if we spend $10 on doing something last year and this year we need to do it with $8. That's how we have, have resources to really spend on projects and investments that do not generate short-term revenue, but really benefit us in the long term. And fourth, the key is to recognizing the key issues as opposed to just creating information asymmetry. And only as we create more value and increase efficiency and solve the key issues, can we really thrive in a highly competitive and rapidly changing environment and consistently meet customer demand? In the last 3 years, me and my team have tried very hard to adapt to the professional managed model, and we have forced ourselves to embrace all kinds of changes. However, we all realize that we became a diminished version of ourselves. NVIDIA and Tesla are still operating as an entrepreneurial company. And if the largest and strongest companies are all operating in the entrepreneurial model, there is no reason for us not to utilize our strength and what we're most used to. Since 1998, I have 27 years of running entrepreneurial companies, and I have never worked in any large corporation as a professional manager. Now we're facing a highly competitive and rapidly change -- an environment with rapidly changing technologies. I personally am passionate about products, about automobiles and about AI. And work is my largest passion. So, why don't I focus on what I'm most used to and what I'm best at to manage Li Auto. And that's how -- that's the most important first choice as we look into our second decade. As a result, starting from Q4 this year, I and my founding team will firmly revert back to the entrepreneurial model and to embrace the new era and new technological challenges. The choice of organizational model is the foundation of everything. Looking into the next decade, the next key question is how we really solve issues for our customers. First of all, what products do we build? And where is technology headed? That's always the essence of everything. First of all, on products. We also need to make an important choice. What kind of products should we really build for our users? Is it electric vehicles? Is it smart devices? Or is it embodied robots? If we only focus on electric vehicles, competition is really all about an arms race in spec sheet. Do you have more -- 20 kilometers of range more? Do you have a car that's 2 centimeters longer in dimensions? And if it's only focused on electric vehicles, it's all about larger space, more range and cheaper prices and maybe copy some proven designs, just like how Li L9 has been copied. Other than that, all R&D investments are waste, stronger sensors, bigger models, more computing power, better active suspension are always waste of cost. And even stronger and stronger computation power and active ride suspension may even have negative impact on range. And secondly, if we choose to focus on smart devices, then we'd automatically be focused more on what happens in the screen. Features that used to belong to smartphones and smart tablets will be migrated to the car environment. In fact, most of the innovations in smart devices is really about moving what's already available in smartphones into vehicles and moving mobile apps into head units, deploying larger language models in head units and even do coding in cars and conduct deep research. But then, we ask ourselves the question, when our users buy our cars, do we really buy it for their work or deliver better life? If certain experience are better -- already better in mobile phones and tablets or computers and more natural, why should we even bother putting them in cars? All these investments create very little incremental value for users. And thirdly, the third route is for us to make our cars into an embodied AI in the physical world or in layman terms, robots. The movie transformer told us that there are broadly two types of robots. The first type looks like human beings and the second type looks like cars. Knight Rider and Cars, these TV shows or movies have clearly showed us car-shaped robots is going to be a mainstream type of -- form factor of robots going forward. So, how do we transform our cars into robots? We need to give it ears and eyes for perception. We need to give it brains and nerves, which is modeling capability. We need to give it heart, which is computing power, and we need to reshape the hardware to make it a stronger physical presence. So, our robots need to have -- need to parallel the top drivers and can not only drive but also pick you up, park for you, have to charge the car up, have to close the door, open the door and meticulously make your life more convenient and safer. It can also play the role of parents, assistants or even flight attendants and to provide you the convenience and take care of you within the sphere of the car, just like first-class cabin and the services on planes. And it's also like when we're a little that our mother takes care of us and make us happy. So, how do we define a good embodied robots? How do they make them to change from passive machines into an automated machine and then further into proactive machines? In the next decade, the most valuable embodied AI products is going to be vehicles that are automated as well as proactive. And competition is really to how automated and proactive can we make these products and how can we fuse them into high-frequency life experiences something that once we get used to, we can never go back. So, whether it's electric vehicles or smart devices, these are not necessarily bad choices, but we think they're not sufficient. And only if we choose the embodied AI, which is the hardest about these three problems, can we really change the life of our users and really provide automated and proactive services that only embodied AI products can provide. And it's really like what you see in Transformers movies, they're car-shaped robots or what we see in Cars or Knight Riders, they are robots that are shaped in cars. And I believe that this is the biggest challenge and opportunity that we entrepreneurs see in this new era. And the next choice is about technology or more specifically, our full stack AI system. What do we choose? What kind of technology do we choose to power this full stack AI system? Is this something that's language-based that's faced towards the digital world? Or is this something faced towards the physical world? These two options require completely different system capabilities. If we want to build a good embodied AI, we need to build an AI system that's completely different from language-based AI models, including perception like eyes and ears, including the model itself like brain, including the operating system like nerves and including the computation power, which is like hearts and also the physical body itself, just like human body. At this moment, there's no third-party supplier that can provide the full-stack system. And in fact, not any company can provide even part of this system. And the focus of large language models is really focusing on the model itself and computation. Larger models and more computation power is always going to generate stronger capabilities. However, for embodied AI, we need to better understand the physical world. And the model is also built on our understanding of the physical world. Accuracy is the first priority and generalization only comes next. Operating system needs to make sure the optimal integration is made between the hardware and the software and also provide higher frequency and also the system needs to be fast and precise. And also this computation power that powers the perception, the model and the operating system needs to reside on the device side as opposed to the cloud side. And lastly, we also need to modify the hardware itself to become a really embodied hardware. And for example, our active suspension, it's just like a 3D nerve system -- nerve control, and it can increase the efficiency and precision of execution in the physical world. So, if we look at this entire AI system through the lens of embodied AI, you will see that there are so many changes that needs to happen and desperately need to happen. The first change comes in perception. Based on the current model and the computation power that can be deployed on the device, the current 3D BEV or occupancy network or 2D Vision Transformer, the effective range of perception, I'm talking about the effective as opposed to theoretical maximum is only just about over 100 meters, which is way less than human eyes. However, if we upgrade it to 3D Vision Transformer, which is just similar to how human eyes works, this range can be increased by 2x, 3x, and it can solve more than 50% of the common issues we see in autonomous driving. 3D Vision Transformer is not only limited to autonomous driving, but it can also benefit interactions with the car inside and outside of the car. These can also all become possible. So that requires fundamental breakthroughs in perception models, both in research and also development. And also requires tailored chips for embodied AI, just like M100, which we have developed and also requires a very strong compiler team and high-efficiency cooperation. The next area of improvement is in models. It's only with 3D Vision Transformer can we really understand the world. The VL in the BLA is really -- can really understand and perceive the world better and human data can be more effectively used for training and world model can also be used more effectively for training. For example, in the status quo computation platform, a 4-billion parameter MOE model can only run at 10 hertz. But the execution frequency is 60 hertz. So, we can increase the frequency of the model by 2x to 3x. It can also automatically solve many issues, including comfort and speed of reaction in autonomous driving. And it also requires us to fundamentally modify and customize the traditional GPU architecture and to have a dedicated operating system. And M100 again, is really designed for solving these embodied AI problems. And lastly is the embodied hardware itself. A human being can typically react to braking and steering in about 450 milliseconds. And for a typical autonomous driving system from perception to execution, the entire closed loop takes about 550 milliseconds. So, for a typical driver today, they can easily -- it's very obvious to them that autonomous driving is much slower. It's like an elderly driving car. The drive-by-wire system can reduce the response time to about 350 milliseconds. And the difference of 200 milliseconds is not to be underestimated. It can roughly reduce the accident rate by over 50% and it also feels better even than driving by themselves, and it's also safer. It's safer both in the subjective as well as the objective sense. So based on these needs, all the entire control mechanism will be different. And if we only focus on increasing the scale of model just like we did in language models, for example, if we increase the size of model 2x and with a corresponding increase in computation power, the really performance increase is only going to be 5% to 10%. But if we look at this from an embodied AI perspective and to solve the key issues in every stack -- on every level of stack, the next-generation autonomous driving can really increase the performance by 5- to 10-fold. And that is what can power embodied AI to perform fast and accurate and valuable services. And that's the difference between 0 to 1. In the past 3 years, we have made a lot of progress in technology and systems for embodied AI. And that makes us very confident about the next-generation products. The start of embodied AI robots starts with car robots and starting this year, I believe, and hundreds of billions of revenue is only a starting point. So, the above three key strategic choices really laid the foundation for the next decade of our development. It's more challenging than the last decade. And we're deeply aware that real competition isn't really about short-term wins. It's about staying on the right path over the long term and having the dedication to keep investing in it. Backed by a strong financial foundation, we will stay focused, embrace our beloved entrepreneurial management style and build leading body intelligence products. So Li Auto can navigate market cycles, lead technological transformation and become a company that creates unique lasting value for users and society in the long run. Finally, I will also look forward to engaging with you guys in this manner moving forward rather than presenting a quarterly report in a fixed format. And I want to express my gratitude to all of you for your support and trust, especially during our most challenging times. We're fully committed to making Li Auto the best performing company in embodied intelligence and the greatest creator of user value within the next 3 to 5 years. Thank you. Tie Li: Thank you, Xiang. Hello, everyone. I will now walk you through some of our third quarter financials. Given time constraints, my remarks today will be limited to the financial highlights. All figures will be called in RMB, unless otherwise stated. For further details, we encourage you to refer to our earnings press release. Total revenues in the third quarter were RMB 27.4 billion, decreased 36.2% year-over-year and 9.5% quarter-over-quarter. This included RMB 25.9 billion from vehicle sales, decreased 37.4% year-over-year and 10.4% quarter-over-quarter, mainly due to lower vehicle deliveries. The sequential decline was partially offset by a higher average selling price due to the different product mix. Cost of sales in the third quarter was RMB 22.9 billion, down 22% (sic) [ 32% ] year-over-year and 5.3% quarter-over-quarter. Gross profit in the third quarter was RMB 4.5 billion, down 51.6% year-over-year and 26.3% quarter-over-quarter. Vehicle margin in the third quarter was 15.5% versus 20.9% in the same period last year and 19.4% in the prior quarter. The year-over-year decrease was mainly due to estimated Li MEGA recall cost and the higher per unit manufacturing cost from lower production volume. The sequential decline was mainly due to the same recall-related costs. Excluding such recall costs, vehicle margin would have been 19.8% in the third quarter. Gross margin in the third quarter was 16.3% versus 21.5% in the same period last year and 20.1% in the prior quarter. Excluding the above-mentioned Li MEGA recall cost, gross margin would have been 20.4% in the third quarter. Operating expenses in the third quarter were RMB 5.6 billion, down 2.5% year-over-year and up 7.8% quarter-over-quarter. R&D expenses in the third quarter were RMB 3 billion, up 15% year-over-year and 5.8% quarter-over-quarter. The year-over-year increase was mainly due to the impact of the pace of new vehicle programs and increased investments in expanding our product portfolio and technology, along with expenses from the product configuration adjustment. The sequential increase was mainly due to those same product configuration adjustment expenses. SG&A expenses in the third quarter were RMB 2.8 billion, down 17.6% year-over-year and up 1.9% quarter-over-quarter. The year-over-year decrease was mainly due to the recognition of share-based compensation expenses regarding the CEO's performance-based awards in the third quarter of last year. Loss from operations in the third quarter was RMB 1.2 billion versus RMB 3.4 billion income from operations in the same period last year and RMB 827 million income from operations in the prior quarter. Operating margin in the third quarter was negative 4.3% versus 8% in the same period last year and 2.7% in the prior quarter. Net loss in the third quarter was RMB 624.4 million versus RMB 2.8 billion net income in the same period last year and RMB 1.1 billion net income in the prior quarter. Diluted net loss per ADS attributable to our ordinary shareholders was RMB 0.62 in the third quarter versus diluted net earnings of RMB 2.66 in the same period last year and RMB 1.03 in the prior quarter. Turning to our balance sheet and cash flow. Our cash position remains strong with a quarter ended balance of RMB 98.9 billion. Net cash used in operating activities in the third quarter was RMB 7.4 billion versus RMB 11 billion provided in the same period last year and RMB 3 billion used in the prior quarter. Free cash flow was negative RMB 8.9 billion in the third quarter versus RMB 9.1 billion in the same period last year and negative RMB 3.8 billion in the prior quarter. And now for our business outlook. For the fourth quarter of 2025, the company expects the deliveries to be between 100,000 and 110,000 vehicles and quarterly total revenues to be between RMB 36.5 billion (sic) [ RMB 26.5 billion ] and RMB 29.2 billion. This business outlook reflects the company's current and preliminary view on its business situation and market conditions, which is subject to change. That concludes our prepared remarks. I will now turn the call over to the operator and start our Q&A session. Thank you. Operator: [Operator Instructions] Your first question comes from Yingbo Xu at CITIC. Yingbo Xu: [Foreign Language] So, I have two questions. The first question is about -- we are very glad to hear the company's return to entrepreneurship and next decade plan. But any R&D and development needs time. So my first question is that if we just say next year 2026, what kind of technology or product progress can we expect? And also from the investors' perspective, how long can we really see a technology or product jump in future? How long? And the second question related to BEV. The company's transition from EREV to BEV, it's challenges. So can we please give us more information or confidence in the BEV part, how we prepare for the effective technology reserve and supply chain preparation? Xiang Li: [Interpreted] On your first question about 2026, next year, we'll be launching our AI system based on our internally developed M100 chips. And once this system gets in the car, that's where we will start to see real value and change of user experience. As I mentioned earlier, our products would go from a passive -- a machine that passively takes orders to a more automated machine and even a proactive machine that can provide services for the users. So, unlike large language models, which can conduct deep research or video generation, this embodies AI products and really benefit our users in their everyday use at a very high frequency. And on the second part about the next 10 years, unlike programming or traditional rule-based programming, we do not have a feature list or a list of functions. Instead, AI really -- for a complex AI system, if we can solve key issues in some important areas and improve performances in some bottleneck points, then we will start to see a series of changes that are unimagined before. And that's our late understanding of embodied AI and AI system. And this is really the room for imagination for the next 10 years. On the key in-house BEV-related technologies, we focus on three areas: electric drive, battery systems, and electronic control. First of all, on the electric drive system, our focus is on efficiency and user experience. We have an in-house developed and outsourced our manufacturing of silicon carbide power chips and in-house developed and in-house manufacturing of power modules and motor controllers, but also establish our own dedicated drive motor factory. We have built a full chain in-house development capability stemming from silicon carbide power chips, power modules to electric motor assemblies. Our electric drive technology covers all BEV and EREV models, ensuring quiet and smooth driving experience while also optimizing for energy consumption and vehicle driving range. And secondly, on the battery system, our focus is on ultrafast charging and safety. We have built a full stack in-house capability around 5C ultrafast charging batteries with full control over self-chemistry, BMS control modules and algorithms as well as battery pack layouts and structural design and achieving three core advantages across ultrafast charging, long driving range, and long service life. On the supply front, we also have a combined strategy of external procurement and in-house development. Li Auto's own 5C batteries will enter mass production next year. This industrialization of in-house developed technology will further strengthen our battery safety and also improve user experience. And thirdly, on the electronic control system, our goal is to provide the best driving experience also through in-house developed hardware and software. On the software side, we have full stack in-house development capability of powertrain control, power management and engine calibration. On the hardware side, our core domain controller PCB layout are all developed in now as well as the underlying software. Together with our in-house chassis technology, and we were able to enhance driving smoothness and comfort and make the drive experience easy and intuitive to our users. So, through a combination of three electrical technology, including battery electric control and electric drive, we provide our users with a special fast charging long-range and smooth and safe driving experience. Operator: Your next question comes from Tim Hsiao from Morgan Stanley. Tim Hsiao: [Foreign Language] So, I have two quick questions focusing on the near-term operation. So, the first one about the product, Li i Series. Could the management team share the latest update on orders and deliveries of Li i8 and i6? And in the meantime, how and when could you start the current supply bottleneck of the Li i6 and i8? And how should we think about the normalized sales volume of the two i Series models in the following months? Second question is about cash flow. Li Auto actually registered increasing operating cash outflow of about RMB 7.4 billion or free cash outflow of RMB 8.9 billion during this quarter. So, this caused quite a significant drop in company's cash reserve drained away. Why is that? And how should we think about the cash flow in the following quarters? That's my second question. Xiang Li: [Interpreted] This year, we established our BEV portfolio with i8 and i6 models. And respectively, they cover the mainstream and premium segments for the family BEV market. These new cars create a solid foundation for the long-term stable growth of our BEV business. We also deployed our products to support the dual energy strategy, namely EREV and BEV, which effectively complement each other and to meet the diverse needs of our users. A key highlight that's worth mentioning is that we have made breakthroughs in key regional markets. The i-Series has successfully entered core BEV markets such as Beijing, Shanghai, Jiangsu and Zhejiang, with orders in these areas starting to increase significantly from September. Li i8 and i6 are steadily going through the path of production ramp-up, delivery acceleration and market penetration. And starting in November to address production ramp-up challenges, we will officially start to begin a dual supplier strategy for our batteries on Li i6. We will ensure consistent performance and quality standards between these two suppliers. We will expect monthly Li i6 production capacity to steadily increase to about 20,000 units starting from early next year. We sincerely apologize to customers who placed orders on i6 and still waiting for the cars to be delivered. Due to constraints in the supply chain planning of key components and the pace of production ramp-up, your vehicle is still -- the delivery schedule has been affected. We deeply appreciate your trust and choice in Li Auto, and we kindly ask for your continued understanding and patience. Our team is working around the clock to accelerate production and expedite the delivery process. Tie Li: And for the second question, Tim, this is Johnny. I think for the operating cash flow, it's about two reasons. First, as we guided in the last earnings release, the third quarter, we faced great pressure on the deliveries and the delivery decrease will make the revenue decrease, which will finally impact the operating cash flow and also the impact of shortening of the payment cycle to suppliers. And this is, as you may know, it's due to the government's authority starting from good in the national wide. Actually, we value our partnership with our supply chain partners and actively respond to their requirements. Currently, the settlement period for all our accounts payable is 60 days and the payment is either through bank transfer or bank notes without any business notes or some kind of certificates from the OEM, just the normal bank notes. Operator: Your next question comes from Ming-Hsun Lee from BofA. Ming-Hsun Lee: [Foreign Language] So, my first question is that because next year, the trade-in subsidy policy will change and also the EV purchase tax will increase from 0% to 5%. If the subsidy decline next year, what will be your sales strategy for 2026? [Foreign Language] So, my next -- second question is that in 2026, your Li i and Li L series will have a new generation. So what can we expect the most -- the new features, specs and what will be the new advantages for your new models? Xiang Li: [Interpreted] We believe this change marks the auto industry's transformation from policy-driven adoption to organic market-driven adoption. And it is precisely during this phase that the value of stronger players can really stand out. As the purchase tax policy phases out, there will be fluctuations in the first short term, we believe. We expect to see a pull-forward effect, namely as customers rush to lock in their incentives at the end of 2025, that will naturally lead to a substantial dip in deliveries in Q1 2026. Looking into the longer term, we are optimistic about the penetration rate of NEVs. In 2026, the NEV penetration rate in the domestic Chinese market will probably reach between 55% to 60% with the rate in the premium segment exceeding 60%. At the Auto, our response strategy is to guarantee user benefits and adapt to new standards with our new vehicles rolling out during the transition period. And for the transition period, we have a peace of mind purchase program covering the purchase tax difference for i6 customers who locked in their orders in 2025, but take deliveries in 2026. All of our 2026 models meet the new standards for gas and energy consumption, so they will qualify for 2026 incentives. In the longer term, we will continue to be dedicated to user value and offset policy impacts through technology advancements. For example, we will be fully adopting 800-volt high-voltage platform and 5C ultrafast batteries to enhance efficiency and reduce energy consumption in 2026. We aim to operate about 4,800 supercharging stations by 2026, with 35% of which will be on highway service stations. We'll continue to deepen our supply chain localization and leverage economies of scale to stabilize pricing, while accelerate product iteration to keep all 2026 models at the forefront of product competitiveness. As the product strength, we must accelerate model innovation and accelerate further. In summary, this policy phase out marks a watershed moment for the industry's shift from -- towards high-quality development. Li Auto is poised to achieve a historic breakthrough in deliveries in 2026, and we will navigate this cycle through superior product strength and user value, thereby consolidating our leadership in the premium market. Usually, on product release dates and more details, we need to choose an appropriate time to release publicly. But today, I still want to take the opportunity to give a glimpse on our product rollout for next year. The next year for L Series is going to be a major generational upgrade. And the changes are based on deep research of users and their feedback as well as our accumulation of technology over the years, and we want to build a very strong product that's also fundamentally different from the current generation. And all this is to support our goal of reclaiming leadership in the EREV market in 2026. In terms of model configuration, we'll be going back to the simplified SKU approach, which balances market coverage as well as supply chain efficiency. So, even the base model will not compromise in terms of user experience and will have all features as standards. And in terms of design upgrades, while retaining our iconic design DNA, we will be upgrading the premium deal and craftsmanship. We'll strike a balance between strong brand identity and fresh user appeal and to refine our products to better serve the needs of family users. On the core technology front, 5C standard supercharging will be standard on all models and seamlessly integrating with our existing charging network to efficiently address range anxiety. And at the same time, we will reinforce our position as the EREV leader, building on our first-mover advantage and deep expertise in EREVs. The 2026 L Series refresh is about responding to market uncertainty with certainties on technological upgrades, delivery cadence and user value. We will announce the specific launch timing and further details at the appropriate time. Please stay tuned. Operator: Your next question comes from Paul Gong at UBS. Paul Gong: [Foreign Language] So let me translate. I have two questions. The first one is regarding the recall of the MEGA. I noticed this was announced in Q4. Why are you booking it in Q3? And how did you determine the amount and the sharing between yourself and the supply chain? What's the impact for the Q4 GP margin? And if possible, please also update us about the latest situation of the callback of the recall as well as the latest order of MEGA. My second question is regarding the AI. Can you please update us the latest development of VLA, large model and the user feedback. If possible, please also give more color for the future targets and upgrades process. Tie Li: Paul, this is Johnny. I think, I will shortly and we will respond to your question very shortly. First, we recognized this in Q3 is just we regard this event as a subsequent event. So it will be accrued in the most recent quarter, we can recall. So, it's a bit accounting standard. And for the recall, I think we have announcement. I don't want to repeat most of the details covered. And currently, we just make all the battery pack to fulfill the recall requirement, the demand and which means we lower the delivery of our 2025 MEGA delivery. So, which means all the battery pack, we shipped most of them to replace the 2024 recall. I think that best serve the customers' benefit. And that's the company's value proposition. Xiang Li: [Interpreted] We rolled out our VLA Driver to all of our AD Max vehicles in September. And with the strong migration capability of our model across all releases, all of our AD Max users have access to this new model, including the new i Series users as well as the Li L9 users who bought the car back in 2012, and they're able to experience its core capabilities across the board. User feedback and data analysis have very clearly showed the effectiveness and the level of experience improvement. We can see that Li L Series and i Series owners have a strong -- Vi i Series owners have a stronger willingness to use VLA Driver with both DAU and MPI showing improvements. In the meantime, users generally report the VLA to be smoother, especially in longitudinal control and more proactive and decisive in detours and more accurate in route selection at complex intersections. And with ongoing iterations, the functions of VLA will continue to achieve further breakthroughs. For OTA 8.0, which is our first full-scale rollout, the priority is mostly focused on safety. And in early December, we will release the OTA 8.1, which further enhances VLA perception capabilities for more precise and responsive behavior. And by year-end, we will deploy an architecture upgrade to strengthen language behavior interaction and streamline the decision-making process, which will be compatible with our upcoming in-house developed M100 chip. Beyond core system improvements, we're rolling out a series of innovations, including the industry's first defensive driving AES feature to enhance safety capability and any point to any point full scenario automated parking and a smart finder to find charging stations and park automatically. And all this completes the smart mobility ecosystem. Operator: Your next question comes from Tina Hou from GS. Tina Hou: [Foreign Language] Thanks management for taking my questions. So, I just have one question. What is the progress in terms of our in-house developed SoC as well as the operating system and then the progress in terms of open source and future development? Tie Li: Let me answer your question. We believe that AI inference system is a core foundation for intelligent vehicles. To achieve this efficiency, the system must be designed as integrated architecture, not as separate parts. Our in-house design controller hardware and operating system have enabled us to reduce development time from industry average of 15 months to 9 months, while lowering cost by 20%. Many modules in the inference stack still come from suppliers. To innovate faster together, we open source to Halo OS, enabling collaborative development with our partners and ecosystem. In September, we established the Halo OS Technical Steering Committee, and assisting companies across intelligent vehicle value chain signed the community charter, including OEMs, chip makers, software and hardware service providers and component suppliers. At the same time, we are undergoing our own vehicle foundation model for physical AI. Our focus is to improve perception, understanding and response, so the model can see further, understand better and react faster. The AI inference chip is the computing engine of this system. Our controller built with our in-house design chip M100 is now undergoing large-scale system testing. We expected commercial development to take place in the next year. Co-designed with our foundation model, compiler and software system, we expect that the M100 within our next-generation VLA-based autonomous driving system to achieve at least 3x the performance to cost ratio of today's high-end chips. On the basis of highly efficient AI inference and execution systems, our next priority will be faster iteration, continuous performance improvement and lower cost. Development of our next-generation platform and chip has already begun. Thank you. Operator: Thank you. As we are now reaching the end of our conference call today, I would like to turn the call back over to the company for closing remarks. Ms. Janet Chang, please go ahead. Janet Chang: Thank you once again for joining us today. If you have further questions, please feel free to contact Li Auto's Investor Relations team. That's all for today. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: And English lines are open for questions. And today's call is being recorded. Now I will turn the call over to Angie Yiheng, senior of Investor Relations. Ms. Anne, please proceed. Thank you all for joining us on today's conference call to discuss the company's financial results for 2025. The earnings release is available on the company's IR website. Please note the conference call is being recorded, and the audio replay will be posted on the company's IR website. On the call today, we have Mr. Huazhi Hu, our Founder Chairman and Chief Executive Officer, Mr. Zhao Wang, Chief Operating Officer, and Mr. Conor Yang, Chief Financial Officer. Before we continue, please note that today's discussion will contain forward-looking statements made pursuant to the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding this and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Also, please note that all numbers presented are in RMB and are for 2025 unless stated otherwise. With that, let me now turn the call over to our CEO, Mr. Huazhi Hu. Please go ahead, Mr. Hu. Hello, everyone, and thank you for joining our call today. Huazhi Hu: In 2025, we continue to advance our business roadmap in a steady and disciplined manner. We delivered 42 units during this quarter, generating RMB 92.5 million in total revenue. Under our annual strategy of operations-driven sales, we proactively optimized our delivery pace and prioritized resources toward supporting existing customers in building regular operations, in order to establish sustainable commercial operating capabilities. As a result, delivery saw a temporary slowdown while new orders continue to grow strongly and our order backlog further increased. We believe this strategy will strengthen the foundation for commercial operations and drive EHang Holdings Limited's healthier, more sustainable long-term growth. This quarter, we achieved sustainable progress in product portfolio, product development, industrial deployment, and international expansion, laying a solid foundation for the next phase of growth. First, in terms of product portfolio, we continue to expand our product line this year to cover more diverse application scenarios in the low altitude economy. In October, we officially launched the VT35, our next-generation long-range lifting cruise pilotless human-carrying eVTOL. The VT35 has gone through a long six-year period from finalization to productization, integrating the advantages of eVTOLs while avoiding shortcomings of products with other configurations. Adopting an advanced tandem wing design, the VT35 maintains full aerodynamic efficiency and flight stability while minimizing the overall size of the aircraft. Its design range with a full load is at least 200 kilometers. This is only our conservative data under strict conditions. It can cover various medium to long-distance scenarios such as cities, islands, and mountain areas, clearly expanding the application scope of eVTOLs in intercity and regional transportation. Consistent with our safety-first principle, the VT35 adopts fully redundant systems and autonomous obstacle avoidance, ensuring further enhancements in safety. Meanwhile, the VT35 extensively uses the mature system architecture of the 216S, including its command and control system and ground infrastructure such as standardized vertiports and charging platforms. In the future, this will enable the true realization of intercity door-to-door travel while significantly reducing infrastructure costs and deployment thresholds. We announced the presale price of RMB 6.5 million for the standard version of VT35 in China. Supported by China's strong manufacturing capabilities and new quality productive forces, we believe this compelling pricing advantage will make the VT35 highly competitive in global markets. We have already received purchase orders from customers in Hefei, Zhejiang, and Hainan and have started delivery and test flights in the third quarter. On certification and industrial deployment, the Civil Aviation Administration of China formally accepted the VT35 type certificate application in March, and this certification progress is progressing steadily. We are following the proven certification path of the EH216S and are fully accelerating the testing and certification efforts of the VT35. Meanwhile, we further deepen our strategic partnership with the Hefei government to establish the VT35 product hub in Hefei. The Hefei government will provide comprehensive support totaling RMB 500 million, including purchase orders to build an integrated layout across R&D, manufacturing, airworthiness, certification, sales, and operations. This partnership meaningfully strengthens our foundation across the entire industry chain. From the product portfolio perspective, the EH216S focuses on intracity transportation while the VT35 addresses intercity and regional transportation covering major metropolitan clusters such as the Yangtze River Delta, the Pearl River Delta, and the Beijing-Tianjin-Hebei region, extending the radius of the one-hour air travel circle to hundreds of kilometers. Together, the two models Huazhi Hu: In a modular box launch design deployment. The lightweight system with high precision positioning enables long-duration, highly stable flights, significantly enhancing visual effects and operational efficiency for aerial light shows. During the fifteenth national games held in Guangzhou, we deployed more than 11,000 GT4.0 drones for a night sky performance, making our largest formation record to date. We are also advancing development on several next-generation models, including the firefighting variant of the 216 series, the VT series logistics aircraft, and a two-seater configuration to support a broader range of commercial applications. Our joint venture with the Chang'an Automobile Yeon Zhihang has been formally established, and we will co-design and develop the next-generation product line, further strengthening industrial synergies and accelerating the diversification of our overall portfolio. In terms of industrial development, we continue to strengthen our manufacturing system and long-term capacity planning. Our strategic cooperation with the Menthe group deepened further this quarter, leveraging this expertise in lightweight structural components and intelligent cabin systems to enhance the core competitiveness of EHang Holdings Limited's eVTOL products. Meanwhile, our joint venture with Empower Yunfoo Yihon has entered a trial production for its phase two project at the Yunfu production base. Construction of our facilities in Hefei, Weihai, and Beijing is also progressing as planned, forming a full value chain layout across R&D, manufacturing, airworthiness, certification, delivery, and operations. As these major industrial bases come online, we expect to further strengthen our production capacity, supply chain resilience, and delivery efficiency. Internationally, we continue to advance global deployment in a steady and phased manner, establishing scalable market entry models through demonstration flights and local partnerships. During the quarter, we achieved notable progress across Asia, the Middle East, and Africa, including ongoing trial operations under Thailand's regulatory sandbox program and completing the Mideast's first intracity pilotless human-carrying eVTOL flight in Qatar, which showcased the efficiency of point-to-point low altitude transportation. We also carried out consistent flights and regulatory engagements in Africa and Japan. These overseas initiatives the path of flight verification scenario application, commercial operation, laying a solid foundation for future large-scale business expansion. On the policy front, China's fifteenth five-year plan proposal released in October explicitly called for accelerating the deployment development of industrial class in strategic low altitude economy, providing long-term stable and high certainty policy expectations for the industry. Ongoing regulatory improvements, aerospace reform, infrastructure build-out, and application scenarios collectively create a comprehensive environment that supports the R&D, production, testing, and operations of eVTOLs. As an industry pioneer, EHang Holdings Limited will continue to participate in standards development and demonstration programs, leveraging policy momentum to accelerate technology deployment and industrial expansion. Guided by national policy support, local governments are increasingly supporting the low economy, providing more practical operational guidance for the industry. For example, in October, Guangdong province introduced several measures to promote the high-quality development of the low altitude economy, supporting Guangzhou, Shenzhen, and Zhuhai in pioneering intercity and intercity low altitude passenger routes and promoting cross-border drone logistics in the Greater Bay Area. Similarly, in September, the Hong Kong government also proposed in its latest policy address to formulate a low altitude action plan and launch and advance the sandbox pilot. The initiatives cover more complex scenarios, including cross-border flight routes and human-carrying eVTOL operations. We are currently working closely with the Hong Kong regulators to advance pilot initiatives. These policy breakthroughs not only strengthen the industry's long-term outlook but also provide clear institutional guidance for our commercial implementation. We also continue to invest in the broader industrial and research ecosystem following the establishment of the Johannen Research Institute with Tsinghua University this quarter. We recently signed a strategic cooperation framework agreement with the China Academy of Civil Aviation Science and Technology. The partnership will focus on six major areas, including flight safety, road management, operational support, regulatory standards, and validation, and jointly building a standard system for low altitude commercial operations. Looking ahead, we will continue to prioritize safety while leveraging our product strength, innovation capabilities, and operational expertise as our core drivers. We will advance commercial operations in a disciplined manner and further deepen our global footprint, benefiting from an increasingly supportive policy environment, a more complete product portfolio, and our continuously strengthened full chain capabilities across R&D, manufacturing, airworthiness certification, and we remain confident in our long-term growth outlook. Meanwhile, we are also very pleased to welcome our new board member, Ms. Haiyin Lee, to the company's board of directors. With her extensive global experience in capital markets, asset management, and corporate strategy, her addition will provide significant support for enhancing the company's international capital market engagement and strategic decision-making in the future. Her appointment will also strengthen the diversified structure and the governance capabilities of our board. We look forward to working with her to drive the company into its next phase of growth. I will now hand it over to our COO, Zhao Wang, for operational updates this year. Thank you, Mr. Hu. In Q3, we continue to execute against our core strategy focused on safety, operational excellence, and commercial deployment. We generated revenues of RMB 92.5 million and delivered 42 units of eVTOL, including 41 units of the 216 series and the first VT35. Deliveries this quarter were mainly in China, totaling 39 units with overseas customers in Thailand and Malaysia. The quarter-over-quarter and year-over-year declines in revenues and deliveries were mainly due to the delayed payment schedules from certain customers. While some sales agreements were signed during the third quarter, payments were not completed in time, resulting in a part of the originally planned deliveries being deferred and, therefore, not recognized as Q3 revenue. As of now, 30 units of those orders have been fully paid for and will be recognized in Q4. Based on our current delivery progress and order execution, we are maintaining our full-year revenue guidance of RMB 500 million. On operational readiness, we are steadily preparing for the official commercial operations of the 216S in China. Our two certified operators, EHang General Aviation and Hefei Hei Aviation, continued human-carrying trial operations throughout the third quarter. As of now, in 2025, a total of 1,147 flight missions have been safely conducted by the two certified operators, including 359 human-carrying flights, all demonstrating stable and reliable performance. Hefei Hei Aviation's operations site is now ready for operations and plans to gradually and carefully open to the public through a reservation system starting in December. This will allow more passengers to experience pilotless eVTOL mobility firsthand. Meanwhile, preparation for point A to B route trial flights at both sites is progressing well. Route planning, vertiport assessment, and surveys have been completed, and multiple rounds of test flights have already been conducted. Leveraging the capabilities of both certified operators, we will continue conducting additional human-carrying flights and operational trials to advance the rollout of point A to B route operations. As the plateaus, cold regions, and strides are also progressing steadily, further demonstrating the strong flight performance of the EH216S. For external operational support, we have begun delivering our services of OC certification assistance and outsourced operation services through EHang General Aviation and Hefei Hei General Aviation, several customer projects are already underway. To support future commercial scaling, we are accelerating the deployment and development of our key capabilities. In Q3, we completed the design of all required materials for the EH216S ground operator training program, including training plans, flight menus, course outlines, training materials, and assessment systems. The Center South Regional Administration of the CAAC has formally accepted our application, and the first training program is expected to begin shortly. The training cycle will run through the end of the year and proceed under CAAC supervision. Our goal is to verify the first batch of ground operators early next year. We plan to build a team of about 100 professional ground operators to support scaled commercial operations and service delivery, while also training additional ground operators for our customers' own operating teams. Once a certain number of certified ground operators are available in the market, regular operations can be realized in various customer operations scenarios, and the progress for other operating companies to obtain OC will be further advanced. At the same time, we are making steady progress on developing the EHang trip ticketing system. The internal testing version is now live, allowing our employees to book and experience flights through the online platform, and initial feedback has been very positive. This will prepare us for the upcoming launch of the public online ticket service. Internationally, our global visibility and flight footprint continue to expand. To date, the EH216 series has cumulatively completed over 80,000 flights globally, further strengthening its international presence and credibility. In Japan, the EH216S successfully flew near the Osaka Kansai Expo venue and at the foot of Mount Fuji, while the EH216L completed its first cargo logistic route flight in Ishikawa Prefecture. In Rwanda, in collaboration with the China Road and Bridge Corporation, we completed the first human-carrying flight of the EH216S in Africa, extending our flight footprints to 21 countries. Regarding overseas regulatory certification, we are working with local partners and civil aviation authorities in multiple countries, including Saudi Arabia, the UAE, Thailand, Brazil, and South Africa, to advance the establishment of bilateral airworthiness validation with the CAAC and to support the validation of type certificate application for the 216S. Relevant regulatory frameworks in these markets are accelerating and maturing, laying important groundwork for future commercial eVTOL operations. Meanwhile, we are also actively exploring trial-first pathways to initiate operational trials overseas. In October, together with the Civil Aviation Authority of Thailand and local partners, we officially launched the Thailand Advanced Aerial Mobility sandbox project. Through flight validation under the sandbox framework, we were able to obtain special operational approval through an expedited regulatory process. This initiative represents the world's first regulatory sandbox model for advancing commercial eVTOL operations and is expected to become a benchmark program globally. The EH216S has now undergone over a month of continuous trial operations within the Bangkok sandbox area, showing strong stability and reliability across all trial flights. We also conducted a series of on-site emergency response demonstrations for CAA covering scenarios such as a propeller failure, communication loss, and other contingency situations to validate the capabilities and safety performance of our pilotless intelligence system. These efforts not only validate the commercial operational model for eVTOLs but also establish a solid foundation for a replicable regulatory and operational framework. Looking ahead, we plan to expand the sandbox to Pattaya, Colon, Phuket, and Koh Samui, forming a demonstration network covering tourism, commuting, and interisland transport. This will also provide a scalable and replicable pathway for commercial pilot projects across other Southeast Asian markets. In the Middle East, with operational authorization from the Qatar Civil Aviation Authority and the support from the Ministry of Transport, we successfully completed a series of human-carrying flights with the 216S in downtown Doha and the region's first pilotless intracity point-to-point eVTOL flights. The flights connected Doha Port and the Katara Cultural Village, reducing a thirty-minute car ride to just eight minutes, clearly demonstrating the EH216S's application potential in urban air mobility scenarios. We will continue deepening cooperation with Qatar's Ministry of Transport and advance the pilotless air taxi project in a phased manner. In Central Asia, we signed an MOU in September with a major industrial and commercial enterprise in Kazakhstan, outlining a phased procurement plan for 50 units of the EH216 series eVTOL. Together, we will establish the first UAM operation center in Central Asia and plan to build a localized assembly base, further promoting the localized development of the low altitude economy in this region. The partnership has attracted strong attention from Kazakhstan's first deputy prime minister and the governor of the Karaganda region. We held two meetings with the first deputy prime minister in Beijing and Astana, during which EHang Holdings Limited was invited to share China's leading operational experience and regulatory best practices to support Kazakhstan in building a compliant and sustainable low altitude economy. Beyond our human-carrying business, and in line with this year's strategic priorities, we are also actively expanding our non-passenger business, including emergency firefighting, logistics, urban inspection, and drone light shows. For emergency response applications, we have developed an integrated system. It links small drones deployed from automated drone ports with our command and control system and specialized firefighting UAVs. This solution enables cities to build a comprehensive rapid response emergency framework. Several municipalities, including Fengsheng District in Beijing, have already expressed strong interest, and project planning and demonstration drills are underway. EHang Holdings Limited was among the first enterprises to conduct drone light shows. This year, our newly developed GD4.0 drone also demonstrated strong performance and high scalability. It successfully completed an 8,000-drone performance for CCTV's China Science Technology Innovation Gala and over 11,000 drones for the national games and has already achieved formations of up to 14,000 drones. Currently, test flights for a 20,000-drone show are in progress, which would surpass the current Guinness World Record. In addition, the GD4.0 is multifunctional. With minor modifications, it can be used for urban inspection and as a key component in building 3D digital twin models and smart city management systems. The strong overall performance of the GD4.0 positions our aerial media business to shift its focus from primarily providing show performance services to becoming a hardware solution supplier through direct sales of formation drones. To date, the GD4.0 has secured firm orders for 3,000 units and customer purchase intentions exceeding 10,000 units. Selling formation drones not only enables us to quickly recover R&D investments and generate product-level margins but also helps us cultivate the drone formation show market and capture greater market share. In addition, it brings recurring revenue opportunities from aircraft maintenance and consumables. This drives a more diversified and resilient revenue structure for the business. Looking ahead, we will continue to strengthen our overall competitiveness through our diversified product portfolio, modified assist, low altitude solutions, and solid safety record, improving commercial operation capabilities, and our growing global partnership network. These capabilities collectively reinforce the foundation for the company's long-term and sustainable growth. Now I'll turn it over to our Chief Financial Officer, Conor Yang, to walk us through the financial results. Hello, everyone. Before I go into the details, please note that all numbers presented are in RMB unless otherwise stated. A detailed analysis is available in our earnings press release on the IR site. Now I'll present some key financial data. Total revenues were RMB 92.5 million in Q3 2025. These year-over-year and sequential decreases are primarily driven by decreased sales volume of 216 series products. This was primarily due to the company's strategic focus being adjusted to the various operational preparations before the launch of operations as well as assisting customers in the establishment of operation certificate systems and capabilities, which thus affected short-term delivery. Gross profit was RMB 56.2 million in Q3, showing both year-over-year and sequential decline, caused by decreased revenues in the quarter. The gross margin in Q3 was 60.8%, slightly lower than 61.2% in Q3 2024 and 62.6% in Q2 2025. Despite a slight decline, our gross profit margin remains at a relatively high level, which reflects our competitive advantages in the eVTOL sector. Turning to expenses, total operating expenses in Q3 were RMB 151 million, which remained basically flat year-over-year and decreased quarter-on-quarter. The quarter-on-quarter decrease was primarily due to significant decreases in sales and marketing expenses. The adjusted operating expenses for the third quarter, which excluded share-based compensation expenses, were RMB 147 million, representing a slight year-on-year increase of 2.6% and a quarter-on-quarter decrease of 8%. This quarter-on-quarter decrease was mainly due to the company's continuous efforts to enhance operational efficiency, which has led to a reduction in various operating expenses. Adjusted net loss was RMB 20.3 million compared with adjusted net income of RMB 15.7 million in 2024 and RMB 9.4 million in 2025. The adjusted net loss was mainly caused by decreased revenue generated in the quarter. In Q3, the company raised USD 10 million through its at-the-market offering program. The proceeds will mainly be used for the company's research and development of next-generation technologies and products, team and production expansion, establishment of new headquarters, commercial operations, working capital, and general corporate purposes. The company continues to have strong capital reserves. As of September 30, 2025, our cash and cash equivalents, restricted short-term deposits, and short-term investments totaled RMB 1.13 billion. This solid foundation gives us the flexibility to support future R&D investments, expand our production capacities, and grow our commercial operations. With steady delivery progress for orders in hand in the fourth quarter, we currently remain confident in our full-year 2025 revenue guidance of approximately RMB 500 million. Looking ahead, as commercial operations begin to scale and international sandbox projects advance, with the establishment of scalable operating systems and the continued expansion of our global footprint, EHang Holdings Limited is rapidly building a robust foundation for sustained long-term growth. We'll continue to pursue healthy, sustained growth. Thank you. Operator: If you wish to ask a question, please press 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press 2. If you are on a speakerphone, please pick up the handset to ask your question. The first question comes from Tim Hazia with Morgan Stanley. Please go ahead. Hey. Hi. Joey: I am Joey from Morgan Stanley. I would like the management to share more color on the sandbox initiative. Could you share more from the capital markets perspective in terms of the exact or rough timeline that we are currently looking at, particularly on specific or crucial stages like OC application, transition from trial operations to official commercial operations? And I've heard that you are currently expanding this sandbox initiative to four regions. So, collectively, what kind of scale are we looking at from this perspective? An additional separate question is that you are planning to replicate the sandbox initiative to other Southeast Asian countries. I was wondering, could management share any progress on that front? Are there any engagements that we are having with various countries in that region? Because we know that eVTOL is a good fit for many of these island countries. So could management share more color on that? Thank you. Thank you for your question. So, let me answer this question. Actually, in October, the regulators from Thailand, the civil aviation regulators from Thailand, have actually approved that we conducted AUM, a sandbox initiative in Bangkok. This is a point A to point B sandbox initiative. So the goal for us is to officially commence eVTOL commercial operations in the next three months. Currently, we are still conducting daily tests and we are submitting these test data to the civil aviation regulator in Thailand. Actually, just on Monday, the director general of Thailand's Civil Aviation Authority took a ride on our eVTOL, flying across the city center of Bangkok. This marks the very first of its kind for a director general of a civil aviation regulator to ride on an eVTOL. There is an important industry conference called IETL that's going to be held in Q4 in 2026. Given this important meeting, the goal for the director general of the Thailand civil aviation regulator is to officially launch commercial operation of eVTOLs before the conference takes place. We just released an interview, which is posted on YouTube and other social media platforms. It's available out there. It's an interview between the founder of our Thailand operator, the founder of AERIAL, which is our Thailand operator. In the interview, they officially mentioned they proposed that they are going to have 20 sandbox initiatives in 2026. By then, it's going to be commercial operations where we are going to generate revenue. Judging by this goal, we are looking at a delivery of 100 EH216 units in 2026. Looking at the overall market, given the islands and the transportation requirements or needs out there, we are looking at the potential of over a thousand units of EH216 to be delivered to this market. Of course, we understand that there has been some misunderstanding from some industry analysts recently on our commercialization path. However, I want to assure you that with the preparations we have put in place over the years, we are preparing and we are going to see a breakthrough in EHang Holdings Limited's commercial operations, both domestic and overseas. With the engagement with other regulators in Southeast Asian countries, I can tell you that they are progressing well. We are maintaining close communication with them. We are currently engaging the authorities in Cambodia, Malaysia, and Singapore. Just to give you some information, the director general of the Singapore Civil Aviation also visited and saw the 216S demo flight, and I personally offered the explanation. It's a new industry, and with the new demo projects that we are going to enter into commercial operation in Thailand, it's going to set up a good role model for the rest of the surrounding countries in Southeast Asia. Hopefully, that answers your question. Thank you very much. Operator: Thank you. Your next question comes from James Zu from UBS. Please go ahead. Pardon me? What is the name of the line needed? James Zu: Pardon me? Hi, management. Thank you for taking my question. I was wondering why we are expanding into unmanned product portfolios, for instance, firefighting drones or eVTOLs as well as deformation performance drones. What's their contribution to our revenue and also profit? So could management share more on that? This is Huazhi Hu. Let me take your question. Actually, the low altitude economy encompasses or consists of both manned business and unmanned business. They are both critical components of this economy. With EHang Holdings Limited's decade-long R&D investments, we first set up manned operation as our goal because this is the most challenging sector as it involves flying men from the ground up to the sky, posing significant challenges. Over the years, we have accumulated a lot of technologies and patents. With our capabilities covering various travel distances and sizes of eVTOLs, we are able to tackle all of these problems. Actually, for our 216, it's a serious product. We have the 216S, which is for manned transportation, and we have 216L, which is dedicated for logistics, 216F, dedicated for firefighting, and 216LF dedicated for forest fire extinguishing. Additionally, we just launched the VT35 in October, which also has a model dedicated for logistics services and other application scenarios available. What we are trying to do is to maximize the technology that we have. We are going to introduce more models and expand our product portfolio to increase revenue. That's our strategy and how we are going about it in the low altitude economy. Maybe in the past, analysts were not following our unmanned products very closely. To achieve sustainable, healthy development, we need to extend our product portfolio to gain more market share. The reason why we focused on the demand of eVTOL is because it's the most challenging part, and that's the one we chose to focus on first. Hopefully, that's the first bit. As our manned eVTOL gradually enters commercial operation, we have been expanding the teams, recruiting more personnel, and trying to extend our unmanned business. We are trying to build a comprehensive product portfolio that can generate positive cash flow for the company. As we mentioned at the end of last year and earlier this year, we are trying to adjust the product mix and have a more diversified portfolio. Nevertheless, they all fall under the low altitude economy umbrella, so they are all going to be major businesses for our company. Going forward, you are going to see a much more diversified product mix, which will all contribute to the company's bottom line. Thank you. Operator: Thank you. Your next question comes from Chen Yu from Guangfa Securities. Please go ahead. Chen Yu: Hi, management. Thank you for taking my question. I have two questions. One is on our VT35. Following the October announcement, we noticed that there is a one-unit delivery of the VT35 in Q3. I was wondering what the plan is for the airworthiness application as well as the type certificate application. The second question, perhaps I joined the call a little bit late. I'm not sure whether you have touched on that or not. We noticed that the gross profit margin for Q3 declined slightly. Will the gross profit margin stabilize at around 60%, and what's the cause of the decline for Q3 in gross profit margin? Thank you. This is Huazhi Hu. I'll take your first question. Actually, you're right. We debuted the VT35 model on October 13. We submitted the TC application as early as March, and the airworthiness application or review progress is progressing steadily. You may have noticed that we released the VT35 route flight demo at the October press conference. It has successfully completed multiple key tests, including wind tunnel tests, ground load tests, multirotor test flights, and many other tests. Additionally, the design of VT35 incorporates both the multi-propeller and fixed-wing. We have accumulated rich experience in our 216S airworthiness review process, and we are going to leverage those learnings together with the R&D team as well as the airworthiness application team that we have, which will accelerate the AC process. We are pretty confident in that. Conor Yang: On the gross profit margin, yes, you're right. It declined slightly. The causes behind that are, for one, there are repeat purchases from some of our existing major customers, which is a good thing. Also, we have made sales to some of the distributors where we offered some discounts. These two are the causes of the decline in the gross profit margin. With regard to the VT35, we delivered one unit this quarter. However, you should know that this model is still in the trial production phase and not being mass-produced. That's why the unit cost of this model is relatively high. But we have secured orders for VT35, which will hopefully bring down the unit cost of the VT35. Over the long term, we expect our gross margin to remain stable at around 60%, but you are going to see the gross profit margin fluctuate slightly as we introduce more products to enrich our product mix. For instance, the unmanned business such as the drone formation performance, firefighting, and logistic aircraft, etc., as that increases, it's going to cause fluctuations in the gross profit margin. But over the long run, we expect a 60% gross profit margin. Thank you. Operator: Thank you. Your next question comes from Jason Sung with BDS Bank. Please go ahead. Pardon me. Your line may be muted. Pardon me, Jason. You may ask your question. Your line may be muted. Operator: Once again, you may press star 1 to join the question queue. We'll now pause a moment to allow for any final questions. Pardon me. That is all the time we have for questions this evening. Thank you for participating. You may now disconnect.
[speaker 0]: Hello, ladies and gentlemen. Thank you for standing by, and welcome to the Gao2Tech edu Third Quarter twenty twenty five Earnings Conference Call. I At this time, all participants are in a listen only mode. There will be a question and answer session. Today's conference call is being recorded. I would now like to turn the conference over to your first speaker today, Ms. Catherine Chen. Head of Investor Relations. Please go ahead, Catherine. Thank you, operator. Good evening, everyone. Thank you for joining Gao2 Third Quarter twenty twenty five Earnings Conference Call. My name is Catherine. And I'll help host the earnings call today. Altus earnings release for the quarter was distributed earlier and is available on the company's IR website. At ir.ga2.cn. As well as through PR Newswire services. Joining the call with me tonight from Gao2 Senior Management is Mr. Larry Chen, Gautu's Founder Chairman and Chief Executive Officer and Ms. Shannon Shen, Altu's Chief Financial Officer. Larry will first provide the business highlights for the quarter and then afterwards And they involve known or unknown risks. Uncertainties, and other factors, all of which are difficult to predict. And many of which are beyond the company's control. And may cause the company's actual results performance, or achievements to differ materially from those contained in any forward looking statements. Further information regarding this and other risks is included in the company's public filing with the U. S. SEC. The company does not undertake any obligation to update any forward looking statements except as required under applicable law. During today's call, management will also discuss certain non GAAP measures for comparison purpose only. For definition of non GAAP financial measures, and reconciliation of GAAP to non GAAP financial results please refer to our third quarter earnings release published earlier today. As a reminder, this conference is being recorded. In addition, a live and archived webcast of this conference call will be available on Gaotu's IR website website. It is now my pleasure to introduce our Founder, Chairman and Chief Executive Officer, Larry. Larry, please. [speaker 1]: Good evening and good morning everyone. Thank you for joining us on Gao2's third quarter of year twenty twenty five earnings conference call. I would like to take this opportunity express my gratitude to each of you for your interest in and support for Goutou. Before I start, I would like to remind everyone that all financial figures discussed today are in RMB. Unless stated otherwise. Our user centric approach continues to drive progress in our high quality growth strategy. As we continually enrich the product portfolio to support lenders of all ages across diverse studies scenarios we are deepening user insights strengthening the high quality teacher pipeline and comprehensively enhancing product quality delivery process and operational At the same time, the full stack integration of AI across our Q3 services and operations is driving measurable efficiency gains and smarter resource at kitchen. As our core capabilities expand, our differentiated value proposition is becoming increasingly evident and our trajectory toward the profitability is becoming more defined creating a robust foundation for scalable long term growth. In the third quarter, we delivered another solid set of financial results. Revenue grew by 30.7% year over year to nearly 1,600,000,000.0 while on a non GAAP basis both loss from operations and the net loss narrowed significantly by 64.6% and the 69.9% respectively. We're expecting sustained improvement in gross content and profitability. Excluding the impact of share repurchases, our cash position increased year over year strengthening the balance sheet and highlighting our disciplined financial management. We remain committed to creating long term shareholder value as of this quarter we have completed the full amount of the initial share repurchase program approved in November 2022. And expanded to $80,000,000 in 2023. Meanwhile, the new $100,000,000 program approved by our Board in May had already commenced We will continue to will continue to execute as a share repurchase program in a prudent and disciplined manner while ship carding operational and financial health. Further reinforcing our commitment to enhancing shareholder value. Now, I'd like to elaborate on our progress this quarter by reviewing our strategic priorities and key developments across five fronts. First, we are solidifying our strategic edge by extending the coverage across the full learner journey and diversifying our service scenarios. Through sustained investment and refinement, we have built a cohesive product and service ecosystem [speaker 0]: spending [speaker 1]: primary school through adult learning. This brings us a deep understanding of users' learning trajectories enabling us to deliver increasingly differentiated and personalized services at every stage and establish a unique user value proposition and brand equity. Building on this foundation, we continually iterate our service models in lockstep with user demand We began with online delivery. Gradually expanding our our offerings to include online emerging offline models, and offline board camps to meet the user demand for enhanced interactivity and immersive experiences. And have ultimately established offline learning centers. Our online model provides broad reach and leverages high caliber teaching resources and a flexible learning format to deliver efficient and highly accessible services. Meanwhile, our offline learning centers enhance localized support and personalized instruction naturally complementing our core online framework, notably for the first time in this quarter, the revenue contribution of offline learning services exceeded 10% of our total revenues. We believe our deeply integrated online offline model not only aligns with users' lifelong development, but also forms a resilient flexible and scalable service network. By harnessing the efficient scalability of online learning while incorporating the interactive and immersive value of offline education. Kaltu is poised to become a premium lifelong learning platform. Second, we are building a robust pipeline of high quality educators to strengthen our talent strategy. Exceptional educators are at the heart of our competitiveness. To attract the talent we have brought the long term strategic partnerships with thousands of leading domestic universities and continuously broaden our tenant pool through career mentoring program and other initiatives. Applications from our key target universities increased notably during this year's campus recruitment season. In terms of talent development, we have further enhanced our professional training team and integrated assessment competition and evaluation framework augmented by AI tools to systematically elevate employees, professional skills and foster their long term growth. We have also fine tuned our incentive system and organizational culture to enhance teachers' sense of belonging and job satisfaction. Together these efforts are cultivating a sustainable high quality tenant ecosystem and laid a solid foundation for our long term development. Third, both internally and externally, innovation and enhance efficiency. we are leveraging the power of AI to drive As a digital native education company, We are committed to integrating AI technology throughout our business operations. [speaker 0]: Internally, [speaker 1]: initiatives like AI Paxons encourage business units to identify efficiency improvement opportunities and develop AI driven solutions and agents creating a closed loop process from exploration to implementation. These efforts have improved operational efficiency and embedded AI into delay workflows. Boosting employee satisfaction and fostering creativity. Externally, we are partnering with local governments and leading universities to co establish educational AI, R and D centers and labs. The managing, the research, development and application of AI models in the education sector. These collaborations strengthen industry academic academia integration and help make learning more intelligent, personalized and effective. Fourth, we remain focused on strengthening execution. Improving organizational efficiency and the five profitable growth. This year, we continue to build our results driven culture and made profitable growth a core objective. In the budgeting process we we implemented an operational metric tracking system for each business line using measurable quality and efficiency indicators to ensure that the teams are reaching their goals. As a management level, we are execution to fuel growth. leveraging this driven decision making and the disciplined We believe that the future competition will be about more than product services organizational efficiency will also be key underpinned by an agile organizational framework and technology powered decision making systems we will boost our execution capabilities and drive high quality growth. Fifth, we remain committed to fulfilling our social responsibilities and creating long term value for all stakeholders. We firmly believe that the value of an educational company is not only in its commercial success, but also in its contributions to society. In the third quarter, Sao Tou Foundation partnered with several leading universities to launch the Rural Teacher Empowerment Program This initiative provides comprehensive training and practical courses to the teachers in Central And Western China, improving their teaching skills and promoting educational equity. In addition, we collaborated with Jingxin Medical a mental healthcare company So it's about healthcare plus education service model. Together, we launched an AI powered training lab that trains counselors in adolescent mental health through practical exercises and how the students on leave due to mental health changes reintegrate into school life. From a focus on operational efficiency to expanding our business boundaries and from a single point of breakthroughs to systematic growth [speaker 0]: whereas [speaker 1]: steadily shaping distinctive development path They go to has evolved into a technology driven and AI powered ad tech company centered on user needs providing end to end solutions across the full learning lifecycle. Thank you very much everyone. This concludes my prepared remarks. I will now pass the call over to our CFO, Chen and to walk you through the quarter's financial and operational details. [speaker 0]: Thank you, Larry. And thank you everyone for joining our call today. I will now walk you through our operating and financial performance. For the 2025 Please note that all financial data are in RMB terms unless otherwise stated. In the third quarter, net revenues continued to grow and operating efficiency maintained a healthy trajectory. Demonstrating that our investments in resource allocation optimization Current efficiency While fully addressing user demand we achieved a 1.4% year over year decrease in marketing expenses. Improving customer acquisition efficiency by 12.8% R and D and G and A expenses as a percentage of net revenues declined 9.6 percentage points year over year. Reflecting a steady improvement in operating leverage. Enhanced operational performance also led to a substantial year over year decrease in operating net cash outflow of approximately 54,200,000.0 Our deferred revenue sustained healthy growth app 23.2% year over year to nearly 1,800,000,000.0 providing strong visibility into revenue recognition in future quarters. In shaping our growth strategy, we constantly prioritize healthy unit economics setting specific operational goals for each business segment based on its stage of development. For our mature businesses with clear and well defined commercial models, We focus on sustainable steady growth while expanding margins through skilled service delivery enabling incremental growth to follow through to the bottom line. Our businesses still in the early growth stage we emphasize refining educational products strengthening our instructor and tutor development system, and cultivating brand mindshare to deliver user experiences that drive long term enhancement in retention referrals and willingness to pay Ultimately, this strategy ensures every investment yields measurable returns wider in the form of profitability business resilience or long term user value. We remain committed to building organizational capabilities through distinct line quality improvements positioning operating efficiency rather than a focus on speed alone to get the pace and scale of our growth. quarter's progress Next, an overview of this by business segment. Learning services contributed over 95% of net revenues Traditional learning services and non academic learning services as our core segments. Contributing more than 80% of our total revenues and recorded over 55 percentage year over year growth. Revenue from our new initiatives focused on non academic tutoring services in both online and offline settings. Increased by around 60% year over year. This quarter. The online segment for traditional learning services and non academic learning services. Is on track to achieve a double digit profit margin for the full year of 2025. Supported by increased user enrollment and enhanced operational capabilities. On the curriculum side, we constantly explore genuine user needs through high quality educational products One standout example is our programming courses which delivered impressive results in the National Youth Innovation Competition further solidifying our product reputation and user trust. Our traditional learning services maintained a healthy growth trajectory with revenue increasing by 15% year over year in the third quarter. On the product front, we continued to advance our localized course development and service systems to enhance teaching delivery flexibility and adaptability. Regarding user acquisition, we focused on optimizing operational processes and addressing real user needs. Achieving steady improvements in gross billings performance At the same time, a more mature and stronger team and AI powered traffic operations boosted our customer acquisition efficiency by nearly 20% year over year. Providing stronger support for healthy business growth Another key component of our learning services is educational services for college students and adults. Which contributed more than 15% of total revenue in the third quarter. This segment has returned to a positive growth trajectory following our strategic adjustments achieving double digit year over year growth in both revenues and gross billings. Alongside quarterly profitability. Within this segment, our educational services for college students leverage intelligent student learning profile management to enable clear and more precise learning path learning. We also accelerate the development of a high calibrated teaching team. These efforts further expanded our service capabilities boosted user satisfaction and promoted brand awareness In this quarter, revenues from educational services for college students increased by nearly 50% and net profit delivered high double digit growth year over year. Lastly, I will walk you through our financial data Our cost of revenue this quarter was 5 and $35,500,000 Gross profit increased 34% year over year to over 1,000,000,000 with a gross margin of 66.1% Total operating expenses during the quarter decreased 7% year over year to approximately $1,200,000,000 Breaking it down, quarter. selling expenses decreased 1.4% year over year this To 873,400,000.0 accounting for 55.3% of net revenues. Research and development expenses decreased 13.9% year over year to 152,900,000.0 accounting for 10.3% of net revenues. General and administrative expenses decreased 3% year over year to 185,200,000.0 accounting for 11.7% of net revenues. Loss from operations was 178,000,000 and operating loss margin was 11.3%. Net GAAP loss from operations was 168,600,000.0 and non GAAP operating loss margin was 10.7%. Net loss was $147,100,000 and net loss margin was 9.3%. Non GAAP net loss was 137,700,000.0 and non GAAP net loss margin was 8.7%. Our net operating cash outflow was 660,200,000.0 narrowed by 7.6%. Year over year. Now turning to our balance sheet. As of 09/30/2025, we held $444,000,000 in cash cash equivalents and restricted cash. Along with nearly $2,100,000,000 in short term investments and $500,400,000 in long term investments. This comes to a total of over $3,000,000,000 As of 09/30/2025, our deferred revenue balance was around 1,800,000,000.0 primarily consisting of tuition received in the month. As of November 25, 2025, we have repurchased an aggregate of around 27,500,000.0 ADS on the open market or nearly RMB619 million. Before I provide our business outlook for the next quarter, please allow me to remind everyone that this contains forward looking statements which include risks and uncertainties. That are beyond our control and could cause the actual results to differ materially from our predictions Based on our current estimates, total net revenue for the 2025 are expected to be between 2,628 million dollars and $1,648,000,000 representing an increase of 17.2% to 18.7% on a year over year basis. This concludes my prepared remarks Operator, we are now ready for the Q and A section. Thank you everyone for listening. Thank you. We will now begin the question and answer session. If you wish to ask your question to management in Chinese, For the sake of clarity and order, please ask one question at a time. Management will respond The first question today comes from Crystal Li with CMS. Please go ahead. Thanks, management, for taking my questions. Congratulations on strong results. And could you give us some color on your 2026 top line growth and your expectations on each and each business line? And in terms of the bottom line, how's your plan? Maybe could you share more about your plan to balance your growth and loss reduction? Thank you. Thanks, Crystal for your question. So looking back at 2024 and 2025, our revenue grew 53.8% year over year in 2024. And based on our latest guidance, we expect close to 35% year over year growth of our top line in 2025 So over the past two years, our revenue actually more than doubled We've achieved relatively strong line expansion in the past two years. So behind this growth is the steady increase in the number of students and parents we serve. The continued strengthening of our product portfolio and also the growing influence of our brand. As of today, our offerings cover the key needs of users with strong learning demand and learning motivation. And also from a product perspective, the integration of our online and offline solutions along with the use of AI to enhance the user experience in our courses. Is progressing steadily and continuously improving. As our skill expense, are seeing sustained operating leverage which adds a solid foundation for achieving full profitability at our target scale. So 2026, we expect our growth trajectory to become more balanced with profitability as the major focus. Guiding the execution of our overall strategy. So which means 2026 profitability will play the most important role So based on our expected gross billings in 2025, in Q4, together with our operating plans and upcoming initiatives we anticipate approximately 15% year over year revenue growth in 2026 We also expect to see further improvements in our operating cash flows with ongoing efforts aimed at moving the company toward sustainable net profitability in 2026. Hope that address your question. Thanks. Thanks, Shannon. This concludes our question and answer session. I would like to turn the conference back over for any closing remarks. Thank you everyone for joining us for today. If you have any further questions, please don't hesitate to contact our Investor Relations department or our management via emailir. Baotu. Cn directly. You are also welcome to subscribe to our news alert on the company's IR website website. Thank you very much again for your time. Have a great night. The conference has now concluded. Thank you for attending today's presentation.
[speaker 0]: Welcome to the Lee Enterprises twenty twenty five Fourth Quarter Webcast and Conference Call. This call is being recorded and will be available for replay at investor.lee.net. At the close of the plan remarks, there will be an opportunity for questions. Participants accessing this call by webcast may submit written questions through the website, and they will be answered during the call as permitted. Otherwise, you will receive a response later. The link to the live webcast can be found at investors.lee.net. I will now turn the call over to your host, Jared Marks, vice president finance. [speaker 1]: Good morning. Thank you for joining us. In addition to myself, speaking on this morning's call are Kevin Mowbray, president and chief executive officer Nathan Becki, chief operating officer and Tim Milledge, Vice President, Chief Financial Officer and Treasurer. Earlier today, we issued a news release with preliminary results for our 2025. It is available at lee.net as well as major financial websites. Please also refer to our earnings presentation found at investors.lee.net, which includes supplemental information. As a reminder, this morning's discussion will include forward looking statements based on our current expectations. These statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially. Such factors are described in this morning's news release and in our SEC filings. During the call, we refer to certain non GAAP financial measures. Reconciliations to the relevant GAAP measures are included in the tables accompanying the release. And now to open the discussion is our President and Chief Executive Officer, Kevin Mowbray. Thanks, Jared, and good morning, everyone. [speaker 2]: This morning, I'll provide an update on our fiscal twenty twenty five performance. We'll also hear from Nathan and Tim later in the call to discuss operations and an outlook on fiscal twenty twenty six. Our 2025 performance clearly demonstrates the strong foundation of Lee's future as a digital first company. Fiscal twenty twenty five finished with 562,000,000 in total revenue 53% which was digital, showing more reliance on our digital business. Than our legacy print business. On the digital subscription front, we finished the fiscal year with 94,000,000 in revenue, from our 633,000 digitally only subscribers, an incredibly proud of this industry leading revenue growth of 16% year over year on a same store basis. Considering the February severance hampered our ability to generate digitally we are really encouraged to see where we finished the year on the revenue side. We see an opportunity in 2026 to grow units in combination with continued rate optimization. Our digital marketing services business, known as the Ampli Digital Agency, surpassed the 100,000,000 mark in FY '25 with industry leading 5% growth on a same store basis. I'm very encouraged by Amplify's ability to consistently deliver steady top line growth even as the broader digital advertising market remains competitive Progress in these revenue categories gives us confidence in our ability to drive sustainable growth deliver long term value to our shareholders. As a reminder, our three pillar digital growth strategy is to result in 450,000,000 in digital revenue. By 2030. Our team continues to execute exceptionally well on our digital transformation strategy. In 2025, we delivered an excellent 16% growth in digital only subscription revenue, further diversifying our revenue mix expanding our digital margins, and leading the industry. At the same time, we maintained disciplined cost management across the organization, particularly in print production and corporate overhead. Which allows us to reinvest in high growth digital initiatives. These efforts are driving steady momentum in adjusted EBITDA grew for the second consecutive quarter when adjusted for the extra week. The prior year. This level of performance is truly a testament to Nathan and his operations team and the positions Lee to achieve sustained success in the years ahead. In 2025, we continue to lay the foundation for Lee's future as a digital first company. We're driving our digital transformation, and we're confident To our shareholders. on our ability to drive sustainable growth and deliver long term value. The strength of our core digital business has built a solid foundation of over $298,000,000 of digital revenue annually putting us firmly on track to achieve 450,000,000 of digital revenue by fiscal twenty thirty. We have consistently outpaced our industry peers in several key measures of digital growth, both digital, and digital agency revenue growth. Digital subscription revenue growth grew 32% annually over the last three years, more than doubling the nearest industry peer. The substantial growth is a testament to the value of our hyper local content as well as our top notch digital platforms and tools Over the course of 2025, we continue to modernize our digital platforms and expand our product ecosystem leveraging data and marketing to maximize engagement. On the advertising side, Amplify Digital agency revenue growth has significantly outpaced our nearest peer, growing 5% annually over the past three years. Again, we've demonstrated the ability to grow digital advertising revenue through innovative and scalable operations and services with our tremendously talented digitally driven teams. Overall, Lee continues to advance our strategy by driving digital transformation across every part of the business expanding reach through ongoing digital innovation, and investing in initiatives that support industry leading growth. Our focus remains on strengthening our digital products enhancing audience engagement, and building scalable capabilities that position the company for sustained performance increasingly digital media landscape. Total digital revenue was 298,000,000 in fiscal twenty five, well on our way to achieving our long term target of $450,000,000 and we're confident in our ability to get there. Next, I'll pass it over to Nathan. [speaker 1]: Thank you, Kevin. As Kevin mentioned earlier, [speaker 2]: we closed the year with solid digital momentum, delivering 2% digital revenue growth on a same store basis. A clear indication that our digital transformation strategy is taking hold across the enterprise. Within advertising, we strengthened SMB retention throughout the year, [speaker 3]: and nearly doubled the number of clients now valued at more than a million dollars annually. Demonstrating the rising impact of our innovative solutions and the deepening value we provide to local, and regional businesses. This improved customer performance, combined with accelerating adoption of our AI powered tools including AI enablement, AI boost, smart answer, and smart sites, directly fueled 5% same store revenue growth in the amplified digital agency. Contributing $103,000,000 to our $184,000,000 in digital advertising revenue and reinforcing the durability of our commercial base and our first to market leading position. On the consumer side, digital only revenue increased 16% on a same store basis. Driven by the strength of our local journalism and targeted retention strategies. These gains reflect the quality and relevance of our local content, the stickiness of our consumer products and our continued ability to grow high margin recurring digital revenue. Altogether, we delivered $298,000,000 total digital revenue, representing 53% of total company revenue. A key performance measure that underscores the shift towards sustainable, higher margin digital enterprise. Importantly, digital growth and product innovation are enabled by rigorous operational execution. Throughout the fiscal year, we continued optimizing our cost structure including consolidating print operations and reducing legacy complexity. These actions created the financial capacity to invest in cloud modernization AI driven product development, and the digital capabilities that fuel this year's digital growth. This slide highlights the fundamental shift underway in our business and the clear progress of our digital transformation. In 2020, before we launched the three pillar digital growth strategy, only 21% of our revenue came from digital. Today, digital represents 53% of total revenue, meaning we have already surpassed the critical revenue inflection point where digital leaves the enterprise. This transition is the result of industry leading digital revenue growth across advertising, subscription, and new digital products. Supported by disciplined execution and consistent investment in our digital capabilities. Are also effectively optimizing print operations to maximize profitability and free up resources for digital growth. Looking ahead, our strategy positions us to achieve our long term target of 90% digital revenue by fiscal year twenty thirty. Enabling a sustainable business model that is no longer reliant on print products as they mature. This trajectory demonstrates we are moving with purpose toward a stronger, more resilient, predominantly digital company. With that, I'll turn it over to Tim. Thanks, Nathan. [speaker 1]: Our core digital business has driven digital revenue growth more than 12% annually [speaker 2]: from fiscal twenty twenty one to fiscal twenty twenty five. And that has translated to a comparable annual growth in digital growth [speaker 3]: margins. [speaker 1]: As Nathan touched on, replacing our print revenue [speaker 2]: with growing and profitable digital revenue sets us up to achieve long term sustainability and we're nearing the sustainability point. [speaker 3]: While the February cyber incident interrupted efforts on several key projects in 2025, we believe that 2026 will see a nice lift digital revenue and margin due to realizing the impact [speaker 2]: of these transformational business projects. [speaker 1]: Moving over to the cost side, we have a successful track record of effective cost management, and thoughtfully investing in strategies that fuel long term growth. [speaker 0]: As a reminder, we executed a [speaker 2]: approximately $40,000,000 in annualized cost reductions [speaker 3]: in the second quarter aimed at lowering costs across the board [speaker 2]: with an emphasis on noncore print operations. While also preserving the integrity of our core operations. We also made an additional $10,000,000 in additional reductions entering fiscal twenty twenty six. For the year, [speaker 3]: cash costs decreased 5% compared to last year [speaker 2]: and finished at $524,000,000 [speaker 1]: We remain steadfast in our commitment [speaker 2]: to long term financial sustainability. By enhancing operational rigor [speaker 3]: this year without compromising quality, we strengthened [speaker 2]: our long term position and are poised to drive sustainable shareholder value over the long term. [speaker 1]: Next, I'll move to the balance sheet. [speaker 2]: Our credit agreement with Berkshire Hathaway includes favorable terms, including a twenty five year runway [speaker 3]: fixed interest rate, [speaker 2]: and no financial performance covenants. These better than market terms allow us to stay laser focused [speaker 1]: on executing our strategy. [speaker 3]: Also, we've recently executed a strategic termination of the company's fully funded defined benefit pension plan. [speaker 2]: This enhances balance sheet flexibility and eliminates long term volatility while preserving the participant benefits. Since the plan assets have grown sufficiently to cover all obligations, the company is free from any future cost uncertainty. [speaker 3]: We continue to identify opportunities to monetize [speaker 1]: our noncore assets [speaker 3]: which improve liquidity and facilitate accelerated debt repayment. In fiscal twenty twenty five, we closed $9,000,000 of assets [speaker 1]: sales. [speaker 2]: And we've identified an additional $25,000,000 of noncore assets to monetize in the future. [speaker 3]: The monetization of these noncore assets provide a significant source of liquidity [speaker 2]: in 2026. [speaker 1]: And looking ahead to 2026, we expect adjusted EBITDA growth [speaker 2]: in mid single digits, [speaker 3]: And with that, I'll turn it back to Kevin. [speaker 2]: Thanks, Tim. I'd like to revisit our long term outlook for digital subscription. Key driver of our digital revenue growth is our digital only subscription revenue. Not only for 2026, for the next five years. This slide provides insight into the positive long term trajectory our digital subscriptions and associated revenue. [speaker 3]: The acceleration in digital subscription revenue growth [speaker 2]: over the past few years is driven by investments we've made top talent and in the areas of content, branding, and consumer marketing. These investments are pro producing strong results through engaging local content, effective brand campaigns, and KPI driven marketing campaigns. We expect the results continue to push our revenue forward. With these investments and actions, we expect to achieve a 175,000,000 of recurring digital subscription revenue by fiscal twenty thirty fueled by 1,200,000 digital subscribers. Our focus on diversifying expanding offerings for advertisers will lead to the acceleration of digital advertising revenue over the next five years. Have strong relationships with more than 20,000 local and regional advertising advertisers across The US, we partner with them to achieve their marketing goals. We sell advertising and marketing services to our customer base through both our own and operated products and our full suite of omnichannel marketing solutions through Amplify Digital Agency. With advanced data driven ad tech, specialized category expertise, scalable custom video content, and powerful first party data access amplified is a strong partner for local and regional businesses looking to drive growth. We continue to see a significant growth runway we execute our strategy. Our 2030 goal for digital advertising revenue is over 250,000,000. While Amplified is the growth engine for top line advertising revenue, our massive owned and operated digital audience fuels high margin digital advertising revenue We've owned and operated digital products infused valuable hyper local content remain a key advertising channel for our local communities. Our owned and operated properties attract massive audiences, we're offering more video inventory and branded content opportunities to boost digital advertising revenue This category is important as there remains growth potential by expanding our audience, and this category represents our highest margin digital advertising revenue. We have a strong legacy and a bright future. We're a leader in local content with core local news and advertising assets in place. serve. We provide breaking news and stories that matter most to the local communities we Over the past five years, have grown our digital revenue mix to 53% as of 2025 more than doubling since the launch of our three pillar digital growth strategy. Looking ahead, we're working on an important development namely a 50,000,000 common stock rights offering further support our digital transformation and deleveraging over the next five years. Our sole lender, Berkshire Hathaway, is extremely supportive of our long term future. Successful completion of the rights offering will trigger an amendment to our credit agreement, reducing the interest rate on outstanding debt from 9% to 5% for five years. This will result in 18,000,000 annual interest savings. The combination of the 15,000,000 infusion into the business with another 90,000,000 in interest savings over five years is our balance sheet and capital structure a tremendous boost. Excited to provide an update on our next quarter's call on the recapitalization of S efforts that are underway. The upcoming rights offer sets us up even more favorably over the next stage of our evolution as a digital first company. Our local content and presence in our local communities are as strong as they've ever been, and we look forward to the next five years. Being our strongest yet. And lastly, we recently announced the upcoming departure of Tim the 2026. I'd like to extend my sincere and deep gratitude to Tim for his leadership, integrity, and dedication serving as Lee as CFO the better part of the last decade decade. His financial acumen and stewardship has been instrumental in advancing the company. While Omissen is a valued team member, we fully support his decision and wish every success in the next chapter. Tim will see the transaction and transition through and be with Lee until March. We'll share more on the next call regarding his successor. But in the meantime, I'd like to thank Tim and his team and wish him the very best in the future. This concludes our remarks. And we're open for questions. [speaker 0]: Thank you. At this time, we will we will be conducting a question and answer session. As a reminder, if you are accessing this call by webcast, you may submit typed questions on your screen. Those questions will be answered during the call as time permits. One moment while we poll for questions. [speaker 1]: We will now take our first question from the web. Was the total debt reduction in the fourth fiscal quarter and the full fiscal year? Yeah. So just as some context since our credit agreement, was launched in 2020, we have reduced debt $121,000,000 since that time. In 2025, we have seen, as you recall, we did have, in response to the cyber incident, waivers related to interest in rent. [speaker 3]: That did increase our debt balance. If we exclude the increase related to those items, our debt was reduced roughly 3 and a half million dollars in the fiscal year as a result of the operations and assets. Sales. [speaker 1]: With that, we have no more questions, and I'll turn it back to Kevin for closing remarks. [speaker 0]: I'd like to thank everyone for joining today's call. [speaker 2]: Our focus remains on transforming our business for the long term benefit of our shareholders, our employees, our readers and our advertisers. We appreciate your time and your interest in Lee, Thank you again. [speaker 0]: Thank you. At this time, we have reached the end of our question and answer session, and this concludes today's conference call. Thank you for participating, and you may now all disconnect. Everyone, have a great day.
Operator: Good morning, and welcome to Deere & Company Fourth Quarter Earnings Conference Call. Your lines have been placed on a listen. I would now like to turn the call over to Mr. Josh Beal, Director of Investor Relations. Thank you. You may begin. Josh Beal: Hello. Welcome and thank you for joining us on today's call. Happy Early Thanksgiving for those of you celebrating tomorrow. Joining me on the call today are John May, Chairman and Chief Executive Officer; Josh Jepsen, Chief Financial Officer; Deanna Kovar, President, Worldwide Agriculture and Turf Division Production and Precision Ag, Americas and Australia; and Christopher Seibert, Manager, Investor Communications. Today, we'll take a closer look at Deere & Company's fourth quarter earnings, then spend some time talking about our markets and our current outlook for fiscal 2026. After that, we'll respond to your questions. Please note that slides are available to complement the call this morning. They can be accessed on our website at johndeere.com/earnings. First, a reminder, this call is broadcast live on the Internet and recorded for future transmission and use by Deere & Company. Any other use, recording, or transmission of any portion of this copyrighted broadcast without the express written consent of Deere is strictly prohibited. Participants in the call, including the Q&A session, agree that their likeness and remarks in all media may be stored and used as part of the earnings call. This call includes forward-looking statements concerning the company's plans and projections for the future that are subject to uncertainties, risks, changes in circumstances, and other factors that are difficult to predict. Additional information concerning factors that could cause actual results to differ materially is contained in the company's most recent Form 8-Ks, risk factors in the annual Form 10-Ks as updated by reports filed with the Securities and Exchange Commission. This call also may include financial measures that are not in conformance with accounting principles generally accepted in the United States of America (GAAP). Additional information concerning these measures, including reconciliations to comparable GAAP measures, is included in the release and posted on our website at johndeere.com/earnings under Quarterly Earnings and Events. I will now turn the call over to Christopher Seibert. Christopher Seibert: Thank you, Josh, and good morning to everyone joining us today. Deere & Company's fiscal 2025 results for the fourth quarter and for the full year reflect the resilience of our business amidst a challenging and uncertain market backdrop. In the fourth quarter, equipment operations delivered 9.2% margins. Full-year operating margins came in at 12.6%. And we delivered over $5 billion in net income. Financial performance that represents our best results yet for this point in the cycle. Our teams continue to manage this downturn effectively by focusing on what we can control. And we believe the progress we have made throughout this past fiscal year positions us well as we enter fiscal year 2026. Looking ahead to 2026, we anticipate that large ag in North America will continue to be subdued. However, there are indications of stabilization, and we also see areas of optimism emerging in other segments and geographies. Notably, we see opportunities for growth ahead in our small ag and turf and construction forestry businesses. Slide three begins with the results for fiscal year 2025. Net sales and revenues were down 12% to $45.7 billion, while net sales for equipment operations were down 13% to $38.9 billion. Net income attributable to Deere & Company was $5 billion or $18.5 per diluted share. Next, fourth quarter results are on Slide four. Net sales and revenues were up 11% to $12.4 billion, while net sales for the equipment operations were up 14% to $10.6 billion. Net income attributable to Deere & Company decreased to $1.1 billion or $3.93 per diluted share. Diving into our fourth quarter results for our individual business segments, we'll begin on Slide five with our Production Precision Ag business. Net sales of $4.74 billion were up 10% compared to the fourth quarter last year, primarily due to higher shipment volumes and favorable price realization. Price realization in the quarter was positive by approximately three points. Currency translation was also positive by about a point. Operating profit was $604 million, resulting in a 12.7% operating margin for the segment. The year-over-year decrease in operating profit was primarily due to higher production costs, higher tariffs, and special items, which were partially offset by price realization and higher shipment volumes. Turning to Small Ag and Turf on Slide six. Net sales were up 7% year over year, totaling $2.457 billion in the fourth quarter, primarily due to higher shipment volumes. Price realization in the quarter was positive by approximately one point. Currency was also positive by more than 0.5 point. For the quarter, operating profit declined year over year to $25 million. The decrease was primarily due to higher tariffs, warranty expenses, and production costs. Slide seven details our fiscal year 2026 ag and turf industry outlook. We expect industry sales of large equipment in the U.S. and Canada to be down 15% to 20%. Row crop farmers continue to face challenging farm fundamentals, which are pressuring short-term liquidity. Used equipment, while continuing to improve over the past quarter, remains a constraint to investments in new machinery. However, strong crop yields and consumption, new trade agreements, growing demand for biofuels, and supportive government payments support potential upside. For small ag and turf in the U.S. and Canada, industry demand is estimated to be flat to up 5%. The dairy and livestock sector continues to generate profits driven by strong beef prices. Additionally, a modest recovery in turf is anticipated, following a rebound in the housing market and growth in the overall economy. In Europe, the industry is projected to be flat to up 5%. The outlook for the dairy sector continues to be robust, with stabilizing interest rates helping to support investment decisions. In addition, margins for arable farmers are strengthening as crop yields recover in major European ag markets. Within South America, we anticipate industry sales of tractors and combines will remain flat in 2026. While soybean and corn acreage is expected to grow at a trendline pace in Brazil, customer demand for equipment has been tempered due to the high-interest rate environment. Additionally, strong global crop yields are weighing on prices, and the recent trade agreement between China and the U.S. creates uncertainty around demand for Brazil exports of soybeans. In Argentina, industry growth is anticipated to moderate after robust growth in 2025. Industry sales in Asia are expected to be down 5% following slight gains in India last year. Moving to our segment forecast on Slide eight. We anticipate Production and Precision Ag net sales to be down 5-10% in fiscal year 2026. The forecast assumes roughly 1.5 points of positive price realization and about 1.5 points of positive currency translation. Segment operating margin for the full year is forecasted between 11-13%, reflecting stability in international markets amidst incremental tariff and mix headwinds with Large Ag in the U.S. declining another year. Slide nine provides our forecast for the Small Ag and Turf segment. Josh Beal: We expect fiscal year 2026 net sales to be up around 10%. This includes two points of positive price realization as well as one point of positive currency translation. The segment's operating margin is projected to be between 12.5-14%, reflecting strength in the Dairy and Livestock segment. Shifting to Construction and Forestry on slide 10. Christopher Seibert: Net sales for the quarter were up 27% year over year to $3.382 billion, due to higher shipment volumes. Price realization was negative by about one point, while currency translation was positive in the quarter by roughly 1.5 points. Operating profit increased to $348 million, resulting in a 10.3% operating margin. Higher shipment volumes and a positive sales mix were partially offset by increased production costs driven by higher tariffs and special items. Josh Beal: Slide 11 outlines our 2026 Construction and Forestry industry outlook. Christopher Seibert: Industry sales for earthmoving equipment in the U.S. and Canada are expected to be flat to up 5%. And compact construction equipment in the U.S. and Canada is also expected to be flat to up 5%. Construction markets are expected to experience modest growth, supported by employment at all-time highs and construction backlogs at robust levels. U.S. Government infrastructure spending continues to bolster the industry. Additionally, declining interest rates, increasing investments in rental fleets, and surging data center construction starts are also providing support. And while U.S. single-family housing starts are expected to show modest improvement in 2026, investment activity in the private commercial sector continues to be restrained. Global forestry markets are expected to remain flat. Global road-building markets are expected to remain flat at strong levels. Continuing with our 12. 2026 net sales are forecasted to be up around 10%. Our net sales guidance for the year includes about three points of positive price realization and one point of positive currency translation. The segment's operating margin is projected to be between 8-10% as the benefits of higher North American earthmoving volumes and price realization are tempered by incremental tariff expense. Switching to our Financial Service operations on slide 13. Worldwide Financial Services net income attributable to Deere & Company was $93 million for the fourth quarter. The year-over-year increase was mainly due to favorable financing spreads, special items, and the lower provision for credit losses. Josh Beal: For fiscal year 2026, the net income forecast is $830 million. Results are expected to be lower year over year primarily due to lower portfolio levels driven by volume, partially offset by favorable financing spreads. Christopher Seibert: Slide 14 concludes with our guidance for net income, effective tax rate, and operating cash flow. Josh Beal: For fiscal year 2026, our full-year net income forecast is expected to be in the range of $4 billion and $4.75 billion. Included in this estimate is projected pretax direct tariff expense of approximately $1.2 billion, with additional inflationary pressures also contemplated from the direct and indirect impacts of tariffs. Christopher Seibert: Next, our guidance incorporates an effective tax rate between 25-27%, which is higher year over year as a result of fewer discrete items and a less favorable geographic mix driven by projections for a higher percentage of income coming from outside the United States. Lastly, cash flow from equipment operations is projected to be in the range of $4 billion to $5 billion. We would like to highlight that our implied midpoint guidance of approximately $16 in earnings per share reflects sub-draft conditions in PPA, with projected fiscal year 2026 sales at less than 80% of mid-cycle levels. This level of performance reflects the structural improvements we have made to the business over the last several years. Our ongoing efforts to manage the cycle through proactive inventory management and cost control and the resilience that comes from a more diversified business as both Small Ag and Turf and Construction Forestry are projected to grow in 2026. This concludes our formal remarks. We'll now cover a few topics before opening the line for Q&A. But before we get into the details, John, would you like to share your thoughts on the year? John May: Thanks, Chris. 2025 marked a year of significant challenges and uncertainty, but it also reflected the resilience and strength of the Deere organization as we continue to demonstrate structurally higher performance levels while making substantial progress on our smart industrial journey. Despite the uncertainty, we delivered over $5 billion in net income. And we achieved equipment operations OROs of 12.6%, which included about a 0.5 impact from tariffs. It's notable that these income and margin levels surpassed our performance in 2020, the year we launched Smart Industrial. Despite being at a lower level point in the cycle that year. Continually demonstrating higher cycle-over-cycle performance, particularly in trough years, emboldens us to stay the course as we advance towards our ambitions. We believe this fuels future growth that positions us to unlock even more value for our customers when this cycle inflects. I also want to take a moment to thank our teams. Our organization is used to managing cyclicality. But this year, we faced an additional headwind of heightened uncertainty in a rapidly changing business environment. I am so proud of our team's grit and determination to push forward as well as the resulting accomplishments from their efforts. To name a few examples, our sales, life cycle, and John Deere financial teams worked hand in hand with our dealers to keep our customers up and running throughout the year. While at the same time, taking the actions needed to continue driving down used inventory levels. Our logistics, supply management, and finance teams partnered with the broader organization to assess and mitigate tariff exposures. Manage disruptions in global supply chains, and maintain sufficient liquidity all in an effort to ensure our factories continued producing the complete goods and parts that support our customers on a daily basis. At the same time, our design and go-to-market teams sustained their constant focus on bringing cutting-edge innovations to the multiple production systems we serve. Efforts grounded in the core principle of helping our customers do more with less. That fuels customer value unlock and enables enterprise growth. As a result of this focus, we're seeing accelerating momentum in the growth of our tech stack. Which is shown on Slide 15 of the presentation. This growth is happening both in the number of solutions that we're bringing to market and the depth and breadth of customer utilization of those solutions. And it's happening across all layers of the stack. From base precision to digital engagement to advanced automation and to full autonomy. More importantly, this growth isn't confined to large ag. In 2025, we saw an amplification of technology leverage across nearly all production systems. Let's look at two examples. One from the base of the tech stack, and one from the top. At the base, we reached new heights in 2025 in terms of connectivity, and digital engagement. Supported by game-changing connectivity solutions like JDLink Boost, retrofit options like Precision Essentials, and the expansion of the John Deere Operations Center into road building, earthmoving, golf, and turf. At the peak of the tech stack, we began the calendar year at CES in Las Vegas. Showing you where we're directly leveraging our autonomy tech stack developed in row crop farming into solutions for other industries like commercial mowing, orchards, and quarry operations. As we close out the fiscal year, we started taking orders for spring delivery of our autonomous row crop tillage solution. Which should help our customers get the job done at the right time unconstrained by the challenge of labor scarcity. In difficult markets, it's natural for people to focus only on the near-term challenges in front of them. But I am incredibly proud of how our organization has delivered exceptional performance in the current environment while also continuing to advance the development and delivery of solutions that have the potential to unlock tremendous value for our customers and serve as the foundation for Deere's growth into the future. I'm excited for all of you to hear more about this during our upcoming Investor Day on December 8. Where we're going to spend a little bit of time reflecting on the past five years of smart industrial but more importantly, about where we expect to take us in the years to come. Christopher Seibert: Thank you, John. We are really looking forward to hearing more about the future of Smart Industrial in a couple of weeks. Before we move on to questions about the 2026 guide, I'd like to focus briefly on our '25 results. This past fiscal year demanded a lot from our teams, but as John mentioned, we still delivered more than $5 billion of net income. Josh Beal, could you please unpack what happened during the quarter? As well as the entire fiscal year? Josh Beal: Yes. Sure, Chris. I'll begin with the quarter. Overall, the results were in line with our expectations, but there were a few moving pieces that I'd like to briefly go over. Net sales for all segments finished a bit higher than expected, driven by strong execution at our factories, especially in North America. Price realization for PPA in the quarter was nearly 3%, while SAT came in at 1%. Notably, large ag price realization in Brazil in the quarter was strong. Closing out 2025 with full-year mid-single-digit price growth after a challenging 2024. Quarterly pricing in Construction and Forestry was slightly negative due to additional incentives to support retail activity. Turning to cost. Direct tariff expense negatively impacted equipment operations margins in the quarter, by more than 3%. This is Josh Jepsen. Touching on the full year for a moment, John already noted how our performance is a testament to the organization's perseverance. In a year where we saw industry declines, in a majority of major markets that we serve, placing the business below trough levels the combination of our operational execution the work that we've done to improve businesses over the last several years continue to yield positive results. Our margins are a notable example of this. Even with the North American large ag industry declining this year by around 30%, We delivered margins over 450 basis points better than 2016. The last time we were at this point in the cycle. Excluding tariff headwinds, that improvement would have exceeded 600 basis points. A decade ago, the profitability of our business was heavily indexed to North American large ag, with other geographies and business segments operating at much lower margins. Since Smart Industrial, we've significantly raised the level of performance across all our business segments around the globe. While North American large ag continues to be a critical market for Deere, this diversification of profitability has bolstered the company's through-cycle resilience. We're seeing the vision we had when we launched Smart Industrial Journey come to life with better performance across the breadth of our businesses. Thanks for that additional color, Josh. Beyond profitability, this year's results also reflect focused cycle management. Most notably in managing inventory. In North America large ag, we produced roughly in line with retail demand for the full year. Keeping new field inventory at the very low levels where fiscal 2025 started. Inventory to sales ratios for combines and four-wheel drive tractors both closed the year at 8% while 220 horsepower and above tractors were at 12%. To put in perspective how low absolute inventory levels are, new field inventory for Deere 220 horsepower and above tractors ended fiscal 2025 at the lowest unit level we've seen in over seventeen years. For small ag and turf, had a pretty global retail demand in 2025 by around 10%. And as a result, saw a significant reduction in field inventory levels, particularly in North America. Notably, inventory for North American tractors below 100 horsepower was down nearly 40% year over year while 100 to 220 horsepower tractor inventory in the region was down by nearly a third. Similarly, the underproduction that we did in North American earthmoving at the end of fiscal 2024 and into the beginning of fiscal 2025 has also positioned that business well for next year. Field inventory levels of North American earthmoving equipment were down around 35% at the end of our fiscal 2024 third quarter. Positioning that business to build in line with retail sales in 2026 as that market shows signs of recovery. Cost management is the other hallmark of managing cycles. And our efforts to control production costs for the equipment operations remain successful throughout fiscal 2025. Excluding the impact from tariffs, full-year production costs were favorable driven by strong reductions in material costs. This enabled price cost ex tariffs to be positive as well. Inclusive of the price actions that we took in a competitive earthmoving market and the additional pool funds that we deployed in large ag to support used inventory management. The work on costs enabled our future growth. Evidenced by the record level of R&D investment that we made in fiscal 2025. Christopher Seibert: Thanks, Josh. You mentioned used inventory management. Would like to discuss that topic a little further. Last quarter, we talked about the additional pooled funds that we deployed to support used inventory reduction. Could you please provide an update on our current position in North America? And share any notable developments or progress observed? Josh Beal: Sure, Chris. Support to these targeted pool front programs along with the ongoing commitment and focus of our dealers on improving the health of the trade ladder is generating positive momentum. This is particularly notable amongst the late model year high horsepower tractors. Remain the area of focus in the channel. As an example, Deere 175 horsepower and greater tractors in North America have declined by around 7% since they peaked in March 2025, supported by a 4% sequential decrease in the fourth quarter. Compared to the previous cycle peak ten years ago, current unit levels for horsepower category are lower by nearly 15%. Although the value of inventory today is higher than the last cycle due to a higher population of late model equipment. However, that mix continues to improve. Notably, model year 2022 and model year 2023 used them in inventory of Deere 8R tractors reduced by a mid-teens percentage in Q4 and is now around 25% below the peak in March 2025. Our used inventory progress in other product categories is also notable. Inventory levels of Deere 100 to 174 horsepower tractors have decreased around 20% from their 2025 peak. While Deere sprayers are down mid-teens and Deere planters are down nearly 30% from their recent highs. Deere used combines declined over 10% sequentially in our fourth quarter. Resulting in a nearly 25% decrease from their spring 2024 peak. Perhaps more importantly, the model year distribution of Deere use combines in the field has returned to a nearly normal level of distribution. Deanna Kovar: Thanks for highlighting those inventory reduction progress, Josh. I'm glad to join everyone today and wanted to provide some additional thoughts. As mentioned, our team has done an excellent job managing new inventory. Bringing us to low levels in North America. As we manage inventory through the cycle, considering current industry demand, and when that might inflect we not only think about the total level of inventory in the field, but also the balance between new and used equipment. Our goal is a healthy product mix and a healthy trade ladder that supports the current level of demand in the market. With that in mind, I'm pleased by the used inventory progress we've made jointly with our dealers. Although there's still work to be done here, the combination of our aligned channel and support provided by higher pool contribution rates and targeted programs in 2026 give me confidence that we have the right tools in place to sustain this positive momentum and position the market well in 2026. Nevertheless, our customers are still facing headwinds that are driving near-term investment caution. Although there are incremental demand drivers emerging, our priorities remain clear. Manage new inventory carefully, avoid oversupply when demand is still dropping, and double down on used inventory reduction. These priorities influence our approach to production planning. It's our intent to start the new fiscal year with lean production for North American large ag to respond quickly while building flexibility in the full-year production plan when the market inflects. John May: Building on Deanna's comments, I want to take a moment to express my gratitude to our dealers for the work that they've done this past fiscal year in support of our customers, and our business. This partnership is critical, particularly when navigating the ups and downs of market cycles. I'm proud to work alongside them and consistently impressed by how they represent our brand through their dedication to customers, their drive for innovation, and delivery of world-class support. Christopher Seibert: Thank you all for your comments and insights. Now let's build on that and talk in more depth about the Ag and Turf outlook for fiscal year 2026. The guide varies by segment and geography. Can you please unpack why this is the case? Josh Beal: Yes. Happy to, Chris. Let's start with North America. Global farm fundamentals are expected to stay challenged in 2026. U.S. Crop yields have been strong and we've seen robust production this year in other major markets as well. As a result, the USDA expects stocks of global stocks of corn and wheat to rebuild soybean stocks to remain at elevated levels. Putting continued pressure on commodity prices. That dynamic, combined with the persistently high input prices we've seen over the last several years, continues to challenge farm profitability. For the positive, commodity demand continues to climb. Demand for U.S. Corn remains robust with projected U.S. Exports to reach an all-time high. Up 9% from the previous year. The amount of U.S. Corn going to ethanol is approaching record levels, with U.S. Ethanol exports approaching a new peak for the second consecutive year. Supported by recent trade deals and driven by strong shipments to Canada, The U.K, India, and The Netherlands. Meanwhile, Brazil is also allocating significantly more of its corn production for domestic ethanol use. Similar demand drivers exist for soybeans. Projected U.S. Soybean crush for the 2025-2026 marketing year expected to reach an all-time high. Marking a 5% year-over-year increase. Similarly, U.S. Soybean oil use is also projected to reach record levels primarily fueled by rising demand for biomass-based diesel. Broadly, U.S. Renewable fuel policies continue to move in a positive direction. The EPA's proposed renewable fuel standards for 2026 and 2027 include substantially higher targets for biomass-based diesel while the clean fuel production tax credit was extended via the One Big Beautiful bill, incentivizing the domestic production of biofuels. California enacted a law allowing for the sale of E15, providing additional support for long-term growth in ethanol consumption. And we are optimistic a federal solution will be finalized soon to allow the year-round sale of E15 across the country. In addition to these favorable demand dynamics, U.S. Government support for farmers is expected to exceed $40 billion in 2025. With the majority of payments going to row crop producers. While farm balance sheets remain healthy with land value supportive of good near-term good debt-to-equity ratios, additional government support provides help with near-term liquidity challenges facing growers. Moving to the Small Ag and Turf segment, dairy and livestock margins remain healthy. Supported by ongoing strength in beef prices. With favorable margins, bonus depreciation from the One Big Beautiful Bill is more attractive for customers in this segment. And is expected to support modest equipment replacement growth in 2026. And as you mentioned earlier, Chris, we expect the turf industry to recover modestly next year as the housing market improves. Christopher Seibert: Thanks, Josh. With that setup, let me jump in to cover our industry expectations. The backdrop that Josh just laid out along with our current view of order books, drove our North American industry guides of down 15 to 20% for large ag and flat to up 5% for small ag and turf. Translating that to Deere sales, the low inventory levels that we discussed previously in large ag will enable us to keep producing in line with retail demand in 2026. We mentioned in last quarter's call that based on the results of the early order program, Deere Sprayer shipments would be down around 20% this coming year. John May: Our planter early order program resulted in a similar year-over-year change. And our combined EOP, which closes in mid-December, is projected to fall within our guided range for the industry. North American large tractors operate on a rolling order book, row crop tractor availability already pushing into the third quarter. Current order velocity indicates that demand for North American row crop tractors in 2026 will also be within our forecasted range for the industry. But it's worth noting that velocity can shift as market conditions change and we're prepared to respond. Preserving this optionality was a primary reason for our lean production approach to start the fiscal year. Which will also cause our production to deviate from normal seasonality. For example, for large protractors produced in Waterloo, we typically see a seasonal build in North American inventory in the first quarter of the year. Given higher levels of uncertainty this past summer and early fall, when we were taking orders for Q1, we decided to limit production slots in the quarter for North America. As a result, we'll have a lower than normal level of seasonal production to start the year and won't see the typical early year inventory build. But we've given ourselves flexibility to adjust to demand in subsequent quarters. Since setting our Q1 production plans, we have seen positive developments in the North American market. For example, the recent U.S. Trade agreement with China has lifted soybean prices to their highest levels in over a year. Providing marketing opportunities for farmers to lock in more favorable prices. Turning to South America, Our guide is for a flat industry in 2026. In Brazil, strong commodity production supported by area growth and the potential for interest rate reductions next year, are supportive of demand. However, profitability for Brazilian corn and soy growers may be impacted by lower commodity prices and the potential return to more normal soybean trade activity between The U.S. And China. I was just in Brazil a few weeks ago. And it was clear that there is strong enthusiasm for our solutions. We have many new products and technologies coming to support increased productivity and precision for our Brazilian customer base. We have been investing in our solution development factory production and channel capabilities in the region and the extended Deere team is poised to take advantage of it. Brazil is a great market for us today and an even bigger opportunity in the future. Closing out the ag walk around the world we expect the European ag industry to be flat to up 5% in 2026. The outlook for dairy margins continues to be robust, and arable cash flows are showing improvement as harvest results exceeded expectations in key markets such as France, Germany, and Spain. With interest rates stabilizing at current levels, the environment in Europe is conducive for growers to move forward with planned investments following a period of caution. Josh Jepsen: A couple of points to add. As we translate these industry outlooks to our own sales forecast, we're expecting small ag and turf to return to growth in 2026 with sales up about 10%. And this is driven by a combination of improving end-market demand as well as the benefit of producing much closer to retail demand compared to underproduction in 2025. John May: For production precision ag, expect sales down 5% to 10%, which is comprised of the market outlooks noted. Europe up, South America flat, North America down. For large ag in North America, while we see the industry declining in 2026, we also see a number of positive factors that lead us to believe this coming year will mark the bottom of the cycle. As noted earlier, consumption of U.S. Corn and soy remains strong and is expected to grow. Paired with strong support for biofuels and recent improvement in commodity prices, demand picture on grains feels incrementally better compared to a quarter ago. Additionally, with new trade agreements driving purchase commitments, further stability has been brought to the market. Lastly, the continued reductions that we're seeing in used inventory levels are freeing up the market as the trade ladder gets healthier. Christopher Seibert: One additional comment. We are encouraged by the administration's support and focus on the ag economy. Delivering trade agreements and policies that are driving demand growth and stability for U.S. Farmers. Josh Beal: Thanks for your comments. I'd like to revisit Deanna's comments regarding our production plans and product mix. What implications does this have for seasonality as we begin the year? Deanna Kovar: Sure, Chris. For 1Q 2026 in production precision ag, we anticipate net sales will be close to 2025, but margins will be significantly lower in the low single digits. Product and regional mix will be a large driver of the reduction as our lean production plan anticipates shipping fewer large tractors in Q1 versus historical first quarters. Absorption of tariffs and lighter price realization in part due to lower shipment volumes are also a headwind to margins year over year. And since we're talking about the first quarter, it's also worth touching on Construction and Forestry. Compared to 2025, we expect the top line to be up about 20% while margins at similar levels due to the impact of tariffs. Thank you. Christopher Seibert: Thank you for the insights. Building on that last comment, let's pivot to the overall C&F segment. Josh Beal: 2025 proved to be a demanding year for C&F as we faced increased competitive price pressure and the highest level of tariff exposure amongst our business units. Despite these headwinds, we've observed some positive trends in both retail performance and order intake. Our outlook suggests that industry demand is expected to improve in the coming year, with our sales forecasted to outpace this industry growth. You provide an overview of what we anticipate for 2026? Christopher Seibert: You bet, Chris. As you mentioned, we saw a pickup in retail demand for earthmoving equipment in 2025. North American earthmoving and forestry retails were up a mid-single digit year over year in our third quarter, and we saw this momentum carry into the fourth quarter. Although our numbers require a little unpacking, As you can see in the appendix of our earnings call deck, Q4 North American earthmoving and forestry retail were down a single digit year over year. However, our construction equipment retails were actually up mid-single digits in the quarter. This was offset by a year-over-year decline in compact construction, which faced a difficult comp as we saw strong activity for this segment in October 2024. Notably, our North American earthmoving order book is up around 25% year over year with availability approximately three to four months out. As previously discussed, our underproduction earthmoving in late 2024 and early 2025 has positioned us well from a field inventory standpoint. We expect to produce North American earthmoving equipment in line with retail in 2026. Which is a significant driver of our 2026 net sales guide of up around 10%. Road building and forestry industry volumes are expected to remain flat year over year. Notably, our roadbuilding business given its market leadership position and global diversification, continues to benefit from strength in infrastructure spending around the world. John May: I think it's important to note the impressive synergies that we're seeing in road building particularly in terms of leveraging Deere technology. As the industry leader, we're now expanding the value proposition to customers with tools like the John Deere Operations Center, which we brought to road building in 2025, we believe that customers are now benefiting from an advanced digital platform to monitor fleet, logistics, and job performance. We've already seen over 3,200 customer organizations engage with this platform. This is just one of many opportunities we have for delivering more value to customers in this sector. Christopher Seibert: Thank you both for your comments. Your insights have clarified the dynamics across different segments and geographies. And explained why our overall focus suggests net sales will increase year over year. Now that Harvest is complete, I'm also interested in learning about the technology and progress we have made during the past fiscal year. What's ahead? How these advancements will further benefit our customers. Josh Beal, could you share some updated statistics? Josh Beal: Sure, Chris. Just like many of our customers' operations post-harvest, it's a good time to take stock of what we did in the past year. As John mentioned earlier, in fiscal 2025, we made significant progress across all layers of the tech stack. Both in terms of expanded offerings and utilization, but also in greater leveraging of technology across more production systems and geographies. Let's start with the foundational layer of the tech stack, base precision. We've talked in the past about how Precision Essentials, our retrofit kit, brings the core elements of precision technology guidance connectivity and onboard compute deeper in the installed base of Deere and non-Deere equipment, via a low upfront cost with an annual license. Reception of this offering continues to be strong. In the two years since it's been on the market, we've had orders for over 24,000 kits and this core technology has brought 3,300 new organizations into the John Deere Operations Center. Another key example of our growth in base precision is JDLink Boost, which brings Starlink-enabled satellite connectivity to areas of the world where terrestrial cell is insufficient for machine connectivity. We launched this solution in Brazil and The U.S. In January, and expanded the offering to additional regions over the summer. Christopher Seibert: Since launch, we've taken over 8,000 orders for this solution globally. Josh Beal: The next layer of the tech stack is digital. The John Deere Operations Center. John already mentioned how we've leveraged the operations center in the road building business. We've also brought it to earthmoving, commercial landscaping, and golf. In agriculture, we continue to see higher and higher levels of digital engagement. The John Deere Operations Center now covers over 500 million engaged acres. A 10% increase from last year. And the number of highly engaged acres rose by 17% year over year reaching 147 million. More highly engaged acres suggest more customers each day are realizing the value gain from digitally documenting multiple production steps executing value-enhancing actions using the tool. The next layer of the tech stack is automation. Deanna, last quarter, Cory Reed shared some early customer feedback related to our newest combine offerings. Harvest settings automation and predictive ground speed automation. Now that harvest is wrapping up, would you mind sharing your thoughts on how the season went? Deanna Kovar: Absolutely. Fiscal year 2025 marked the first year of availability for both solutions. Harvest settings automation had an impressive year one take rate of over 90% on North American combines. On average, operators use the technology over 60% of the time they were in the combine. Resulting in over 5 million acres covered by this solution. And the adoption of this tech isn't limited to the North American market. The 5 million acres covered and more importantly, value realized from this technology included acres in Brazil, Europe, and Australia. Predictive ground speed automation, which further enhances the harvest experience, yielded a nearly 30% increase in throughput measured by bushels per hour. Continuing with automation, I'd also like to highlight the results we saw from See and Spray, in 2025. This year See and Spray technology also covered over 5 million acres after covering over 1 million acres in 2024. The average herbicide savings from the technology in 2025 was around 50%. To give you a sense of this value that customers can realize, let me share an example from Agrotechnica this month. A customer from the state of Washington approached us at the show, and shared that in one day, he saved more than $20,000 using See and Spray. Examples like this give us confidence in the continued growth in both adoption and utilization of the technology. The tech is working. And when customers see that value in their operation, it's anticipated that they will continue to use it Passover Pass, and season over season. Christopher Seibert: Thanks, all. It's great to hear the examples of technology adding real value to our customers. Deanna, would you mind sharing some thoughts on the top layer of the tech stack? Autonomy? Deanna Kovar: Certainly, Chris. As John mentioned, we recently opened up dealer orders for our tillage autonomy kits. That are retrofittable onto AR and 9R tractors. I had the opportunity to visit an early autonomy customer two weeks ago in Illinois. He was pleased with their experience with autonomy on a 9RX and a 2680 high-speed disc this fall. Autonomy is unique because the value to the customer is really more about operational flexibility. Autonomy certainly addresses labor shortages, while also allowing existing resources to concentrate on higher-value tasks within their operations. But to this customer I visited in Illinois, it was even more than convenience. He said it was invaluable to have the ability to get a job done when there was no one around to put in a seat. To just take the tractor to the field and let it go to work. No matter where I go in the world, labor availability is a huge issue on the farm. Especially in busy seasons like spring and fall. That's why we began by concentrating on our corn and soy production system and started developing a solution that can support customers during those peak activity periods. Since the start of our autonomous tillage journey, we've covered over 200,000 acres autonomously. We're looking forward to even more next spring. And labor availability isn't unique to the corn and soy production system. It's prevalent across all the production systems that Deere supports. Which is why you saw us at CES this year highlight how we're leveraging the technology in high-value crops, turf care, and earthmoving. The value of autonomous solutions can be tremendous, and we're just getting started. Christopher Seibert: Thank you. It's encouraging to see numerous examples that show how our ongoing tech investments are fueling substantial innovation creating real value for our customers. Now before we open the line for questions, do you have any final thoughts you'd like to share, Josh Jepsen? Josh Jepsen: Yes. I'll be brief. 2025 was a challenging year for the industry and for our team at Deere as the agricultural sector continued its downturn for a second straight year. As mentioned before, I've never witnessed Deere's resilience more than I did this year, represented by how we took care of customers while achieving performance that exceeded similar points in other similar points in the cycle. From a shareholder perspective, our performance yielded $18.5 earnings per share that supported continued strong cash generation. Equipment operations cash flow was $5.1 billion, a significant improvement from past downturns and better than any year outside of the period of 2021 to 2024. Which enabled us to return over $2.8 billion to shareholders via dividends and share repurchases. We paused buybacks in the fourth quarter due to heightened market uncertainty but we expect to resume our normal capital allocation activities in 2026. As we look ahead to the next year, we believe our field inventories across all segments are in good shape. We expect to see growth in Small Ag and Turf as well as in Construction and Forestry. And in North American large ag, we will enter the year lean from a production perspective but with flexibility to allow us to respond swiftly as market demand inflects. The structural improvements we've made empower us to support robust levels of R&D and capital spending. We remain focused on the long-term customer value that we expect to unlock through technology which should enable future growth for Deere and a greater level of value for shareholders and all stakeholders. Finally, the achievements we delivered this year are a direct result of the commitment and hard work of our teams worldwide. I'm truly proud of what we've accomplished together and excited to keep advancing our mission to empower customers to do more with less. 2026 and beyond. Christopher Seibert: Thanks, Josh. Let's open the line to questions from our investors. Josh Beal: We're now ready to begin the Q&A portion of the call. The operator will then instruct you on the polling procedure. In consideration of others and our hope to allow more of you to participate in the call, please limit yourself to one question. If you have additional questions, we ask that you rejoin the queue. Operator: Thank you. We will now begin our question and answer session. Our first question will come from Stephen Volkmann from Jefferies. Your line is open. Stephen Volkmann: Great. Good morning, everybody. Thank you for taking the question. I guess I will focus on tariffs. And you talked about the $1.2 billion I think, headwind I think that was your 2026 number. But how are you thinking about offsetting that and over what period would you think that perhaps you'd be able to kind of recapture that? Trying to think a little bit about the cadence of the year I assume you'll improve as the year progresses, but curious how you're thinking about it. Thanks. Josh Jepsen: Yes. Thanks, Steve, for the question. You got the numbers right. So it's $1.2 billion is the pretax tariff hit in 2026. That's about $600 million incremental, from the $600 million that we saw in 2025. The run rate of the tariffs by quarter is pretty evenly spread, roughly $300 million per quarter. If you look at our price cost, expectation for 2026, inclusive of tariffs in that number, we expect to be price cost positive. So we'll start to capture back we'll capture the incremental exposure this year and some of the exposure that we saw in 2025. Won't get us fully there, but it gives us a good chunk along the way continue to execute activities to mitigate that. I'm going to expect to take some continued price in the future as well to cover that additional piece. Thanks for the question, Steve. Stephen Volkmann: Thank you. Operator: Thank you. Our next question comes from Jamie Cook with Truist Securities. Your line is open. Jamie Cook: Hi, good morning. Just a question on production and precision ag, just on a 7% sales decline, the implied decrementals, I think, are approaching 60%. So just trying to understand that. I mean, I'm assuming a good portion of that is tariffs. So how much is allocated to tariffs? And also, just your comments on mix, understanding North American large ag is going to be down a lot, but you've also spoken to improving profitability in other regions in particular Brazil. So if you could just unpack the decremental margin on the sales decline? Thank you. Josh Jepsen: Yes. Your numbers are right, Jamie. If looking at PPA specifically into 2026, it's around 60 would be the implied decremental margin. Tariffs for that business have approximately zero point or so margin impact for the full year of 2026. So if you back out that piece it takes decrementals to kind of the low to mid-50s. So still elevated, above normal levels for PPA. That delta between normal would be the geographic mix that you're seeing. You're right, that profitability levels around the world have improved. We've talked to that. Still, North America large ag remains our most profitable market. So there is negative mix for the year. Just given the magnitude of decline, that's what's driving the higher level of decrementals next year. Thanks, Jamie. Operator: Thank you. Our next question comes from Kristen Owen with Oppenheimer. Your line is open. Kristen Owen: Hi, good morning. Thank you for the question. I wanted to double click on the large ag price assumption that 1.5%. I think when we were talking about early order program, that number in North America was closer to 3% to 4%. So could you just help us unpack that 1%? How much of that is being driven by some of the geographic mix, Just a little bit more color on the underlying assumptions for that number. Thank you. Josh Jepsen: Yes. Thanks for the question, Kristen. You're right. Early order programs in large tractor pricing North America for 2026 those price increases are in the range of 3% to 4% and that's held. What you're seeing with the one-point price guide is a couple of things. One thing, you're spot on is geographic mix. We talked about Brazil in 2025. We did very strong price in Brazil in 2025, mid-single-digit price increase positive. It'll still be positive in 2026, but more muted. Think about closer to that guide range. So that is pulling down some of the list price. The other thing that's happening in North America is a, call it, parts mix versus complete goods. As we go down in the cycle, parts make up a bigger mix of our sales in a given year. And our parts pricing, excuse me, was a little more muted for 2026. So the combination of those two is really what's pulling down that guide versus the list price increases. Deanna Kovar: Yes. Thanks for unpacking that Josh. This is Deanna. And as we think about North American pricing overall, we go back to two of our priorities. And first is the continued focus on use reduction. So you will see us continue to provide pool fund opportunities to our dealers at a similar level in 2026 as we did in 2025. And from an overall pricing standpoint, we remain mindful of where our customers are at in the cycle. And maintaining our opportunities for the future. Josh Jepsen: Thanks, Kristin. Operator: Thank you. Our next question comes from Tim Thein with Raymond James. Your line is open. Tim Thein: Thank you. Good morning. The question is just on production costs. In '26. You highlighted tariffs, but just ex that, you saw kind of a build throughout 2025 in just in terms of production costs. How are you thinking about that as we look into '26? Obviously, a number of pieces that flow into that. So maybe just some help in terms of for the overall equipment ops, how we're thinking about production costs. Thank you. Josh Jepsen: Yes. Thanks, Tim, for the question. Yes, if you back off the incremental $600 million of tariffs in production costs, we would still expect to be slightly unfavorable for production costs in 2026. But there's a few moving pieces there. Overheads, for our business, particularly in large ag are expected to be unfavorable next year. We do have some headwinds in our North American labor from our current contract. Jeff: Thanks. Hey, Tim. This is Jeff. So I would say the other thing is, you know, we still have a bunch of opportunity to runway as it relates to taking cost out of product and process production costs. The teams have done a really good job over the couple of years and we think that will continue. So we're by no means done on that journey. That will continue to create opportunity for us to grow margins, particularly as we've seen some of these headwinds here over the back half of 2025 into 2026? Thank you. Operator: Thank you. Our next question comes from David Raso with Evercore ISI. Your line is open. David Raso: Hi, thank you. Given the full-year large ag sales guide in the first quarter implied a flat, It's implying the rest of the year down 9%. I was just curious when you think of PP and A for the rest of the year after the first quarter, are we down every quarter? And then maybe to help us with the margins for the rest of the year, any cadence you can give us on the pricing? Obviously, pricing was up. I know it was an easy comp in Brazil. But just the 1.5% for the full year, just how to think about that cadence, just so to think how we get over the hump on kind of price cost later in the year if we don't have any growth in any quarter for large ag? Thank you. Josh Jepsen: Yes. Thanks, David, for the question. As Deanna talked earlier, seasonality will be a little different for large ag next year given our leaner start in Q1. We will see that typical ramp-up in the second quarter. It actually can have a fourth quarter. That's going to be particularly strong as well. Just given some of the timing of the shipments. To your question, we would expect to be down year over year in all those quarters, just given the level of decline that we're seeing. But you see margin improved quite a bit as you get into the second quarter and we'll stay at those higher margin levels through the balance of the year. It's really an impact on Q1 given the lean production that's driving that. David, this is Justin. The other thing I'd add is, we would expect to post 1Q to kind of return to more normal seasonality. Highest net sales, highest margin in the second quarter. So a more traditional seasonality as we go from there. And then if you just step back and look at 2Q through 4Q, those margins, we would expect based on the guide to be Kits into The US, for 26. And any expectations on acres coverage and overall as we look back on fiscal 2025, any update on progress on the subscription build-out that you can share? Josh Jepsen: Yeah. Thanks, Jerry. Happy Thanksgiving to you as well. I mean, maybe a couple of points there. First, just as we look at take rates, of Sea and Spray on our 2026 early order program at a pretty similar level to what we saw in 2025 in terms of that factory-installed piece. We'll need to see what happens with the retrofit orders which tend to be placed over the course of the winter. But from a take rate standpoint, we're at a pretty similar level to what we saw in 2025. I think one point to make on acres covered is the returning customers that had machines in 2024 and moving into 2025, we saw them cover on average about 20% more acres of their operation in the 2025 year. And that's a positive sign for us for a number of reasons. It validates what Deanna said earlier that the technology is working. Delivering savings. And as a result, we see customers increasing utilization year over year. So our expectations, we continue to grow that number in 2026. Deanna Kovar: And this is Deanna. In addition to the increasing installed base with new model year 26 sprayers coming out of the factory and additional retrofit kits, increased per machine usage in their second year. We also know that See and Spray is expanding globally as we see other markets in the world beginning to take up this technology as well. So our expectation is to see growth in acres covered in 2026, and we look forward to seeing our customers have those great savings that we saw in 2025 continue. Josh Jepsen: Thank you. Operator: Thank you. Our next question comes from Chad Dillard with Bernstein. Your line is open. Chad Dillard: Hi. Good morning, everyone. So a question for you on your guidance. So as we think about 2026, to what extent does it embed any additional farmer assistance from the government? And then also just like how do you think about the operating leverage of the business coming out of this deeper than the normal cycle? Josh Jepsen: Yes. Happy to Chad. I would say our baseline expectation is not for any more assistance. I mean, we based our forecast off of what we see in the market today. Informed by order velocity and Deanna mentioned this in the comments that can see order velocity change and we've seen some positives over the last call a month or so. As an example, the trade agreement with China, we've seen a pickup in purchases of soybeans, and that's been reflected in the soy price as well. So we'll see how the rest of the year plays out. We've intentionally put some flexibility in the back half to respond to changes in velocity and we'll see how that plays out over the balance of the year. Justin: Yes, Chad. This is Justin. As it relates to leverage, your question on kind of what as things inflect. I think as we start to see those volumes pick up and even in production position ag as we discussed kind of first quarter versus rest of year, you see some of that improvement and benefit as we go through the year. Clearly, we're seeing that on Small Ag and Turf and construction even with call it 10% increased sales. Those particularly if take out the tariff impact, incrementals are really solid. So I think that's a positive reflection of that. I think across the businesses too, we're seeing more from a technology perspective whether that's in construction and forestry where we saw 20% growth in technology sales there the opportunities in small ag and turf continuing to present themselves. So I think the combination of what the work we've done on the cost structure. Obviously, we've got more work ahead of us as work to mitigate and take out some of the tariffs. But I think the leverage for us as we inflect will be positive from a margin perspective. Thanks, Chad. We'll go ahead and do one more question. Operator: Thank you. Our last question comes from Steven Fisher with UBS. Your line is open. Steven Fisher: Thanks. Good morning. Wanted to just clarify a couple of assumptions that you mentioned in the dialogue. I think there's some folks that were surprised to see the expectation of South America flat in light of some of the sort of incremental caution we've seen there, but it sounds like you cited some potential for lower interest rates. Can you just kind of give us a little more color on your confidence there? And then on the small ag side, you cited some expected improvement in or better results as a result of better housing activity. Can you just clarify if you've seen any indications of that already? Thank you. Josh Jepsen: Yes. Thanks, Steve, for the question. A couple of things on South America. We've talked about kind of a mix of caution and optimism in that region. As we've seen, I think, over the past quarter or so, it's probably a bit more caution there. And interest rates have been a big driver. The benchmark rate at 15% certainly having an impact on replacement. As we look at expectations over the last month or so, inflation expectations have eased a little bit. And as a result, you're seeing expectations for that rate to come down by a couple of points over the course of 2026. So obviously, we need to see how that plays out, and that will be impactful on the market. But that's, I think that's embedded sort of in that combination of caution optimism, which is what's reflected in the flat guide. The only thing I would say is just on our order books in the region, they look really strong. I mean, we are about five months out in Brazil. So we've got pretty good coverage through most of the first part of the year. Obviously, we need to see how that plays out in the back half. But from an order velocity standpoint, it looks good. I think one other positive there in Brazil is high-value crop. As we've seen some tariff relief on things like coffee, beef, citrus, particularly if you think about our small and mid-tractor business, think that bodes well for the industry and in turn for us and our dealers as well. On small ag, Steve, and specific to turf, our forecast is based off of housing starts coming up a little bit next year, not a massive increase, a low single-digit increase in home sales, should say, not housing starts, home sales. In 2026. That's based off of some expectations around easing in The U.S. We'll see how that plays out. But as we see home sales come back, that tends to be supportive of our turf business. And so we've got some modest growth in turf as well, which is reflected in that small ag guide. Of flat to up five. Jeff: Yes. One thing I'd add this is Jeff. And I think the prospect of a little more a few more interest rate cuts and what that could mean for housing both for our earthmoving, compact construction, and turf are all positive. Particularly given just the low levels of inventory, we're under from a single-family housing perspective. So I think that a little bit of continued rate easing there would be positive. Yes. Thanks for the question, Steve. This concludes today's call, and we really appreciate everybody's time with us today. Just as a reminder, I will be hosting our upcoming Investor Day on December 8. You can find additional details for the events in the appendix of today's slide deck. And for all those of you in The U.S. who are celebrating, we hope you have a Thanksgiving holiday. Have a great day. Operator: This concludes today's conference. Thank you for participating. You may disconnect and have a great rest of your day.
Operator: Good morning, ladies and gentlemen, and welcome to Grupo Financiero Galicia Third Quarter 2025 Earnings Call. This conference is being recorded, and the replay will be available at the company's website at gfgsa.com. [Operator Instructions] Some of the statements made during this conference call will be forward-looking statements within the meaning of the safe harbor provision of the U.S. federal securities law and are subject to risks, uncertainties that could actual results would differ materially from those expressed. Investors should be aware of events related to the macroeconomic scenario, the financial industry and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. Now I will turn the conference over to Mr. Pablo Firvida, Head of Investor Relations; and Gonzalo Fernandez Covaro, CFO. Please Mr. Firvida, you may begin your conference. Pablo Firvida: Thank you. Good morning, and welcome to this conference call. According to the monthly indicator for economic activity, MI, the Argentine economy recorded a 5% year-over-year increase during September. In year-to-date terms, the economic expansion reached 5.2%. During the third quarter of 2025, the primary surplus reached 0.5% of GDP and an overall surplus of 0.1% of GDP was reported. This result was explained by revenues increasing by 32.8% year-over-year, whereas primary spending rose 30.6%. During the first 10 months of 2025, the primary balance stood at 1.4%, while the financial balance amounted to 0.5% of GDP. The national consumer price index accumulated a 6% increase during the third quarter of 2025 and 24.8% year-to-date increase as of October. After 4 consecutive months below the 2% mark, headline inflation was 2.1% in September and 2.3% in October, accumulating 31.3% in the last 12 months, the lowest level since July 2018. The third quarter was marked by high volatility in the months leading up to the midterm elections. The exchange rate came under pressure at times nearing the upper limit of the floating band which prompted the Central Bank to step in with foreign exchange sales. Nonetheless, the exchange rate averaged ARS 1,400 per dollar in September 2025, a 15.6% devaluation compared to June 2025. Meanwhile, peso-denominated interest rates saw sharp swings, reflecting increased uncertainty and liquidity shift. In fact, the average rate on peso-denominated private sector time deposits for up to 59 days, averaged 48.7% in September 2025, up 16.5 percentage points from June 2025 levels. Private sector deposits in pesos averaged ARS 94.1 trillion in September, increasing by 5.6% during the quarter and 53% in the last 12 months. Time deposits in pesos rose 13.1% during the quarter and 76.3% in the year. Peso-denominated transactional deposits decreased 2.4% during the third quarter, but increased 31.5% in year-over-year terms. Private sector dollar-denominated deposits amounted to $32.6 billion in September 2025, increasing 7.2% during the quarter and rising 38.9% in the last 12 months. Peso-denominated loans to the private sector averaged ARS 79.3 trillion in September, showing a 9.7% quarterly increase and a 105.4% year-over-year. Private sector dollar-denominated loans amounted to $18.3 billion, recording a 15.8% quarterly growth and 153.4% annual increase. Turning now to Grupo Financiero Galicia. Net loss for the quarter amounted to ARS 87.7 billion, due to losses from Banco Galicia for ARS 104 billion, from Naranja X for ARS 6 billion and from Galicia Seguros for ARS 12 billion, partially offset by the profits from Galicia Asset Management for ARS 25 billion. This loss represented a minus 0.8% annualized return on average assets and a minus 4.7% return on average shareholders' equity, while accumulated annualized figures for the fiscal year reached 0.9% and 4.7%, respectively. The quarter includes extraordinary restructuring expenses associated with the merger with HSBC for ARS 105.3 billion net of income tax. The quarter ROE without the extraordinary expenses would have been 1%, and the 9 months ROE 6.9%. The result from Banco Galicia included ARS 101.1 billion of extraordinary expenses, and in addition, were negatively affected by the increase in the cost of risk associated with the growth of the loan book and the increase in the nonperforming loans in the retail segment, particularly in personal loans and credit card financing. Together with a decrease of financial margin associated to an environment of high interest rates and regulatory increase of reserve requirements. It is also worth noting that most of the comparisons will be made against the second quarter of this fiscal year as figures for the third quarter of 2024 do not include information about the acquired business of the former HSBC Argentina. Net operating income decreased 23% and net interest income decreased 10%. Net results from financial instruments were down 89%, and loan loss provisions increased 26%, which were partially offset by a 9% growth of net fee income and a 12% increase profit from gold and FX quotation differences. Average interest earning assets reached ARS 22.7 trillion, 8% higher than in the previous quarter, primarily due to the increase of the average portfolio of loans in, 5% in pesos and 27% in dollars. In the same period, its yield decreased 259 basis points, reaching 30.1%. Interest-bearing liabilities increased 27% from June 2025, amounting to ARS 19.9 trillion, primarily due to the increase of time deposits in pesos and of saving accounts in foreign currency. During this period, its cost increased 88 basis points to 16.5%. Net interest income decreased 10% when compared to the second quarter because of a 35% increase in interest expenses due to a 36% higher interest rate on time deposits, partially offset by a 7% increase of interest income, mainly due to a 12% higher interest on loans and other financing to the private sector. Net fee income increased 9% from the previous quarter due to a 6% higher income from credit card fees and up 19% from fees on deposits. Net income from financial instruments decreased 89% due to an 88% lower result from government securities. Gains from FX quotation differences were 12% higher from the year ago quarter, including the results from foreign currency trading following the lifting of exchange restrictions. Other operating income increased 11% in the quarter, mainly due to the 45% increase in other income, primarily corresponding to credits recovered. Provision for loan losses increased 26% due to the growth of the financing portfolio and to an increase in delinquency that is limited to personal loans and credit card financing to individuals in pesos. Personnel expenses were 83% higher than in the second quarter due to the voluntary retirement program recorded in connection with the restructuring plan following the acquisition of HSBC's business in Argentina. Administrative expenses were 11% lower than in the previous quarter due to a 32% decrease of expenses for maintenance and repairment of goods and IT, and to 14% decrease of higher administrative services. Other operating expenses increased 5% due to a 7% higher turnover tax. Results from the net monetary position decreased 9% from the second quarter following the declining evolution of inflation. The income tax charge was positive as the pretax net income was a loss. Demand financing to the private sector reached ARS 20.4 trillion at the end of the quarter, up 14% in the last 3 months, with peso financing increasing by 5% and dollar-denominated financing growing 35%. Net exposure to the public sector was 3% down in the previous -- comparing with the previous quarter, primarily due to a 38% decrease in government securities in pesos measured at fair value through OCI, offset by an increase in government securities in pesos at amortized cost. Deposits reached ARS 22.9 trillion, 8% higher than the quarter before, mainly due to a 26% increase in dollar-denominated deposits, mainly time deposits that were up 72%. The bank's estimated market share of loans to the private sector was 14.8%, 30 basis points higher than at the end of the previous quarter and the market share of deposits from the private sector was 16.4%, 40 basis points higher than in the second quarter of 2025. The bank's liquid assets represented 94.5% transactional deposits and 59.2% of total deposits compared to 94.3% and 65.2%, respectively, from a quarter before. As regards to asset quality, the ratio of nonperforming loans to total financing ended the quarter at 5.8%, recording a 140 basis points deterioration as compared to the 4.4% of the second quarter. And as I mentioned before, the deterioration is limited to the personal loans and credit card financing portfolios. At the same time, the coverage with allowances reached 105%, down 16.4 percentage points from the 117.9% recorded a quarter ago. As of September 2025, the bank's total regulatory capital ratio reached 22.1%, decreasing 160 basis points from the end of the second quarter, while the Tier 1 ratio was 21.8%, down 140 basis points during the same period. In summary, the third quarter was marked by high political effects and monetary volatility and negatively affected margins and asset quality. And in addition, the results were affected by very high onetime expense due to the restructuring of the merged banks. Despite this, Grupo Financiero Galicia was saving to keep liquidity and solvency metrics healthy levels, and we expect an improvement in profitability during the fourth quarter and next year. And now Gonzalo Fernandez Covaro will make some additional remarks. Gonzalo Covaro: Hi, everyone. Well, continue with what we see for the future. I mean regarding how we see the rest of the year, October continued with low margins due to the high interest rate that we saw in the third quarter. But we are already seeing a vast improvement in margins in November. We are already really seeing margins at the same level than second quarter and the first half of the year in August -- in November, and we expect the same for December. Portfolio performance still needs some time to get back on track, so we still see a deterioration in the fourth quarter at a lower trend than before, but still some. So overall, bank will be better, will improve returns, mainly due to the margin improvement. But Naranja X, we have some headwinds in terms of portfolio performance up. With this mix, we are seeing the ROE for the full year 2025, around 4%, the reported one. And if we exclude the nonrecurring integration costs that we mainly booked in the third quarter we should be around 6%. Talking about 2026, we're expecting an ROE in the low teens range, I would say, between 11% and 12%. Of course, a lot of moving targets for next year. We will be updating this guidance in further quarters. But this is our best case scenario to be around 11% to 12%. Margins, we'll see improving them in the first months of the year, together, what we are seeing in November, December, then some kind of light reduction as a consequence of the rate reduction, but not really high, the reduction. So we'll still see healthy margins next year, I would say, in the levels of the second quarter. NPLs, we expect a peak on NPLs in March of next year, but then improving as a good portfolio that we are originating is gaining weight in our mix and that we will end the year with NPLs better than the run rate that we are having now. And regarding costs, we are also seeing a reduction in year-over-year in cost because of all the restructuring we have done. And you saw the restructuring costs we booked in the third quarter and that generated 1,000 heads reduction in the group quarter-over-quarter. And that's -- if we add up all the year, we have a headcount reduction of 2,000 heads for the year. So that is, of course, generating reductions -- cost reduction for next year. We are seeing already fourth quarter of next year, our projection shows, our fourth quarter of next year ROE run rate already at 15% level. So that put us with a solid base to start '27 and deliver ROEs above 15% is the target ROE that we are aiming for the longer future. So with that, I mean, we are also open for any questions you may have. Operator: [Operator Instructions] Our first question comes from Daniel Vaz from Safra. Daniel Vaz: I'm looking at your capital ratio of '21 at the group level, and it was down 120 bps from the second quarter. I'm just wondering if you said that your cohorts -- new cohorts of origination are getting better, so you expect a peak in NPL in March. So -- but still your ROE is super low compared to your targets, right? So how do you expect that capital would be ranging in this scenario, what's your bottom of capital that you would like to work as a risk-taking level for the group or for the controller, which is this bottom that you would like to limit your capital? And if you need at some point to reduce your origination and how you're dealing with the new originations compared to your beginning of the year? Because at the beginning of the year, the longer duration, I think it hurt your margins, mainly your cost of risk. But when we compare to other players, other fintechs, their duration is faster to adjust. So both these 2 questions here blend into each other. So first, capital and how is your origination compared to your duration in the beginning of the year going right now? Gonzalo Covaro: Regarding capital, our capital also was impacted by the reserve in OCI, the other comprehensive income with the bonds that are valuated at hold to collect and sale that you have a reserve in equity that moves between the accrued income in the bonds and the market -- mark-to-market. But as you know, in the third quarter, there was a big reduction in bond prices. So that we had a ARS 160 billion negative reserve in equity due to those bonds that affects, of course, the equity ratio. On October, we -- our Tier 1 ratio in October is already at 24.5% in the -- talking about the bank. And that's, of course, because now this OCI reserve is slightly positive. So it has an improvement of ARS 160 billion in 1 month because as you know, after the elections, the rally that all the bonds have. So really, with these levels of capital, we are comfortable. We -- I would say that our minimum appetite to operate is 13.5%, 13%, 13.5%, but we don't expect to get close to that in the near future. We believe that with the projection we have, we have enough capital until the -- at least until the end of 2027. So -- and without any limitation for growth. So I would say that's -- of course, that's something that we monitor and we will be updating regularly. But with this -- now that the reserves of the bonds are stabilized, we don't see really the need for capital or any restriction in the growth of our loan book, at least the whole next year and 2027. Regarding the second question, I think I didn't get it very well. Pablo Firvida: Origination of loans and maturity of the loans. Gonzalo Covaro: I mean, we continue to originate, I mean, both commercial and consumer lending. We have put some slowdown in the consumer lending due to the portfolio quality, as you have seen. First mortgages will reduce significantly the origination of mortgages. In that case, not because of quality, but because of -- there is not any securitization market. And as you know, we cannot be putting 30-year lending without any securitization market where we can offload those loans. But we continue -- in the consumer sector, we continue lending personal loans that may have a duration of 2 years, 2.5 years. And now we are also increasing car loans or auto loans that same duration. Talking about commercial financing, we are still originating a very short duration. Slightly, we start to increase duration because the demand was not there. Now with after elections, with Argentina stabilizing and with a lot of growth potential in the country, we are expecting to see more projects for our clients to finance longer terms, but that's not yet happening, but we are expecting that next year, the duration in the commercial lending should be getting longer than what we have today. Operator: Our next question comes from Ernesto Gabilondo from Bank of America. Ernesto María Gabilondo Márquez: My first one is on your loan growth expectations. What should we think for next year? If you can give us some color on the expectations per segment? And also, I believe there have been some announcements on private investments in Argentina. Have you quantified an amount? Or can you give us like some direction or color in which regions and sectors are you perceiving these new private investments? And how would you be willing to participate through corporate loans, as you mentioned, SME loans? That will be very helpful. Then my second question is on asset quality. I believe -- I'm just double checking, you mentioned NPL ratio could be peaking by March next year. And if that is correct, if you can provide any potential range? And if you are seeing the same trend on the cost of risk, if you're expecting cost of risk also to peak by March next year? And how should we think overall for the cost of risk next year? Gonzalo Covaro: Thank you for the question. I mean talking about, yes, the color of next year, we see -- I mean, growing lending in 25%, more or less in real terms. I mean we want to continue gaining market share. So of course, this number will be adjusting according how the market grow. We see market growing around 20%, 22% in real terms, of course. We -- in terms of sectors, yes, we are growing -- I mean, I think that the commercial lending will be capturing a lot of attention. I mean, as you said, there are a lot of projects and investments in the country that we have a lot of customers already starting to talk about it. We also want to continue growing the consumer lending with, of course, the new origination tools and the models adjusted in order to book better credits. But we will start a bit slower in the first month, start continue a bit slower as we are having this month and then restart the full growth as we see that the quality is improving. Talking about commercial lending, yes, we are seeing a lot of the investment mainly in the oil and gas sector. As you know, Vaca Muerta continues with a lot of attention in the mining segment -- I mean, sector, sorry, copper, lithium, a lot of focus there also. We are very -- also very present in the agri business. And this year, the agri business is going to have a very good harvest. And we are anticipating good investments for next year also in this sector that we will be also joining there. And we are also starting to see M&A starting to move, local M&A, companies, some privatizations that may come close that we don't have yet the names, but we're starting to hear rumors that some may not be huge privatization, but yes, smaller companies that can come to the market. And of course, the idea for us is to be close to our customers there. Some of those projects are going to be too big for the local financial market to finance because when we talk about oil and gas, the amounts are huge. But we will always be there to participate with smaller tickets or to be there in transactions that local balance sheets can afford. So again, we are very close to our commercial customers. And really, we see a sentiment on appetite for Argentina, on appetite for investing. And that's where we are seeing that our next year, we are going to be growing faster than the market, and that will help also to improve the returns year-over-year. Talking about NPLs, yes, we are expecting our peak on NPLs around March next year. We are seeing that the peak would be around 7%, 6%, 7% -- and the cost of risk, yes, again, same thing. We are seeing also peaking next year in March for the bank, I'm talking, and we'll see more or less cost of risk between 9% and 10% the peak. Then going down those -- both ratios to end the year at lower numbers that is what we -- that we expect. I mean we are already seeing the new harvest of consumer lending at much better behavior than the old ones. We still need the time to digest the older portfolio and see the results that will come after, I would say, second, third and fourth quarter of next year. Ernesto María Gabilondo Márquez: Super helpful, Gonzalo. Just another question in terms of this potential growth that you can see for the loan book next year. Another competitor just mentioned the possibility to tap the markets next year. Is this something that you are also exploring? Pablo Firvida: Bonds or equity? Ernesto María Gabilondo Márquez: In bonds. Gonzalo Covaro: Equity. I mean, the financing or equity? Ernesto María Gabilondo Márquez: Yes, debt financing. Gonzalo Covaro: I mean, yes, of course, it's something that we have always in our alternatives need to see how -- the windows are starting to open. Really, we don't -- we are not seeing now the need. But of course, that's something that we are always evaluating. And we need to see, of course, the equation, the profitability equation of the cost that the market could offer at some point. But yes, mainly considering larger tickets or the projects that they may come, yes, definitely, it's an alternative that we consider very seriously. Operator: Our next question comes from Brian Flores from Citi. Brian Flores: I just wanted the first question to be a clarification on the ROE trend because you mentioned the peaks of NPLs and asset quality, as you mentioned, cost of risk by March, right, of 2026. So you mentioned 11% to 12% in terms of real ROE for 2026 with reaching the 15% in the fourth quarter. So would that mean we should see a mid- to high single digit in the first half? Just thinking about the speed of the recovery, right? Apparently, it seems to be a very gradual recovery. Just wanted to check on that trend, Gonzalo. And then my second question is perhaps a follow-up on Ernesto because I think we're all thinking about external funding, right? But you have perhaps one of the best franchises in Argentina. meaning that deposits are very, very relevant. So I just wanted to understand if the visible funding cost advantage that you have demonstrated in previous quarters should continue? Or do you think the -- I would say, the funding cost war should, I would say, increase or deepen in 2026? Gonzalo Covaro: No, thank you. So first question about ROE trend. I mean, yes, I mean, we see first quarter slower. I mean, I would say that the numbers you mentioned could be right. I mean, we see a recovery first quarter will still be -- I mean, margins, we are going to be already in the first quarter at good levels, but we will still have some kind of heavy burden of NPLs still the last month of that and then starting to recap in the third quarter. So I would say that, yes, lower ROE in the fourth quarter and then recapping the trend until the 15 in the fourth quarter and continue with that in 2027. But yes, your assumption is right in terms of ROE evolution. Remember that the group has also Naranja and the bank and Naranja also needs to improve that portfolio performance. That's why also we need a couple of months from next year in order to be able just to go above 2 digits in ROE. Talking about the funding, what's the other one? -- funding. I would say that, yes, that's why my question was -- I mean, our idea is -- my answer before to Ernesto was, yes, we are analyzing potential debt in the market, but we always look first at our deposit base. We see some possibilities for next year. In deposits, we see that we -- the market liquidity is coming back. With interest rate reduction, the market will be also more liquid. We see that there may be some changes in regulations for mutual funds that put some limitations for the banks to go to the market to place funds in the market. So they -- that liquidity should come back to banks. As you know, the money markets are a huge holders of funds from deposits from customers in Argentina. And they put part of their deposits in banks, but also they go to the market and place those funds in the market in Cauciones. And next -- according to next year, they should be able to put more money of those in the bank, and that should also provide more liquidity to banks to lend. That will be another source of liquidity for banks. So -- we are aiming to increase our deposits to gain market share in deposits. All our business lines have that mandate because we consider it the more stable funding and the cheaper one or the more the cost-efficient one. But of course, depending on the speed of the credit growth, we may need to go to the market. And we need to do it, we'll do it. But our first priority is deposit, and we really believe that deposit next year should start to grow better than this year. I wouldn't say same pace than lending, but better than this year. Brian Flores: Perfect, Gonzalo. I think the last guidance you mentioned in the second quarter on deposit growth was around 35% in real terms. So I just wanted to check if you are revising this number. And also, I understand, as you mentioned, the deposit growth for 2026 is going to be lower than the portfolio. Gonzalo Covaro: Yes. For this year, I mean, we are keeping, yes, those guidance for growth. For next year, we are seeing more like 20% in real terms deposits, 25% lending. But again, that's something -- I mean, a lot of moving targets for next year. So we will be updating those guidance because we'll see how -- we need to see how the country is changing. 1 month ago, we were with a lot of volatility. Now stabilizing interest rate reductions. So we need to see how everything comes together, but that's our -- so far, it's our assumption around 20% for next year. Operator: Our next question comes from Tito Labarta from Goldman Sachs. Daer Labarta: A couple of questions also. I guess, just on the Naranja, you mentioned Gonzalo that needs to recover as well. Do you think NPLs peaked there also in 1Q? Or how do you see the evolution of asset quality in Naranja and then also your ability to resume growth at Naranja? And then second question, just on margins, do you think we saw some pressure this quarter, I mean, just given all the liquidity issues in the quarter. Do you think this is the bottom? Should that already begin to recover in 4Q? Or will that take a little bit longer until you start to get the loan growth and asset quality under control, just to think about the evolution of margin in the short term and I guess, thinking about 2026 as well. Gonzalo Covaro: Yes. Talking about Naranja, I would say that we are seeing the same -- more or less same amount, same timing for the peaking. I mean, third March, April next year, same and they're also doing a lot of things. Their turnaround, I would say that the, but they have a shorter duration in lending. So they cure their portfolio faster than the bank. So yes, I would say March should be also the peak for them, and we are expecting also an improving on NPLs for Naranja for the rest of the year. Of course, as they go to lower segments, they have bigger swings on the bad, but then on the good at the same time. Talking about... Pablo Firvida: NIMs. Gonzalo Covaro: NIMs margins, yes. Margin, yes, we saw the bottom was October. I mean, I would say fourth quarter still has October, which is 1 month with a low margin. So in the quarter, you still -- in the next quarter, you still see 1/3 of the month, I would say, with a bad margin. I would say October was a bad margin because it was the worst month before the elections, the election month. But then November, really, we are seeing a quick, fast turnaround and fast improving in the margin. And December, I would say it will be 100% at the second quarter levels. So yes, to your question, the bottom was, I would say, October, third quarter and October. But November, December already recapping December already at the same or pre-volatility levels, I would say. So for next year, margins will be at good levels. Of course, then after the second half, slightly reduction because with the continued rate reduction. Today, what we are seeing is our cost of funding reducing significantly now and our lending start to reduce the interest rates at a slower pace because we have already booked longer-term lending at higher rates. So we will enjoy those higher margins first half of next year. And then we may see some slight reduction, but nothing significantly next year yet. So in a summary, yes, the bottom was third quarter and October. Daer Labarta: Okay. No, that's helpful, Gonzalo. And just on the reserve requirements, I mean, they've been reducing a little bit. Do you think it's enough now that liquidity is less of an issue? Do you think that they need to reduce the reserve requirements further from here? Or how do you think about that and the impact on your liquidity? Gonzalo Covaro: I would say so far, it's -- I mean, so far, in these months, it's okay. The Central Bank, as you know, made some changes in liquidity requirements like last week and that were better, mainly in the calculating the daily calculation, but also they reduced 3.5% the cash encashments that are 0 interest, so that will also give some improve EBITDA margins for banks going forward starting December. This is starting December 1. but they reduced -- so that's not significant for injecting liquidity to the market. But I would say that at some point next year, that may be revisited again by Central Bank because at some point next year, it could be needed. So it's something that I wouldn't say that is needed now or the next 3 months, the next quarter. But at some point, depending on how the market behaves, could be there is an opportunity for a revision on that side. Operator: Our next question comes from Camila Azevedo from UBS. Camila Villaça Azevedo: My question is a follow-up on Ernesto's question on asset quality. I would like to get a better view of the asset quality dynamics during this quarter, mainly between segments. And you said we should end the year with better NPLs than current levels. Could you please share more details on that? So it could be in general terms, what should we expect? And with this, with which coverage ratio would be comfortable going forward? Pablo Firvida: Sorry, Camila, there was a noise in the middle of the conversation. We couldn't get the first part. Yes, the part of ratio, not the other part. Camila Villaça Azevedo: Sorry. Sure. So I'll repeat the entire question. Like I would like to get a better view on the asset quality dynamics during this quarter and which levels should we expect for the end of the year? You said that we should expect better NPLs. So in general terms, at which levels? And did you get the coverage ratio part? Pablo Firvida: Yes. Camila Villaça Azevedo: Okay. So that's it. Gonzalo Covaro: I mean when we talk about NPL better than the end of next year, not this year, right? I mean this year, we still -- as we said, that the peak will be March next year. So what we are seeing, and this is for the end of 2026, NPLs, I would say, in a range of 4.3%, give or take, more or less 4%, 4.3%, 4.5%. I mean that could be the range of NPLs by the end of '26. Pablo Firvida: And the coverage? Gonzalo Covaro: I didn't get that. Pablo Firvida: And the coverage, the last number is 101.5%. Really, it comes from the model of expected losses, talking with the credit department, they say that the coverage is beginning to grow, and it's likely that at the end of next year would end up at 110%. But really it's... Gonzalo Covaro: When you create -- we grow your book, you create a lot of upfront reserves and that increase your coverage, then you start using those, and that's where we are now. And that when it comes, now we want to stabilize the portfolio and that should start growing again. But now we are in the process of using the upfront reserves that were booked when the portfolio grew a lot. And now we are also accelerated the growth, so you don't have a lot of upfront books because of new loans and you are using what you booked before. It's kind of a mathematical thing. But we are comfortable with the level we have. Operator: Our next question comes from Pedro Offenhenden from Latin Securities. Pedro Offenhenden: I wanted to ask if there are any remaining integration costs from the HSBC acquisition that could impact results in the coming quarters? Gonzalo Covaro: No. I mean, I would say the restructuring, nothing big. I mean we may have some small thing in the fourth quarter, but regarding systems that we are shutting down, but not restructuring cost, which is the big portion, we booked everything in the third quarter, not just the people that left in the quarter, but also what we plan that the ones start leaving until the end of the year. So everything is booked there. Something very small, not related to restructuring may happen in the fourth quarter related to system, but really small, nothing important. Operator: Our next question comes from Carlos Lopez from HSBC. Carlos Gomez-Lopez: First of all, congratulations on how brave you are because you are giving predictions for the ROE for the middle of the year and for the end of the year. And I hope that those forecasts are actually achieved. More concretely, I realize that we have gone through 3 conference calls, and I don't think anybody has told us what their economic assumptions are. What do you expect for inflation, interest rates and the currency for the end of next year? Maybe you have said it and I missed it, sorry for that. And second, in terms of liquidity, your LDR in pesos is around the 100% level and more partial it is because of Naranja. Is there an absolute level beyond which you would rather not go and therefore, you might be able to -- you might be willing to restrict your loan growth until deposits catch up? Pablo Firvida: In terms of macroeconomic assumptions, we have -- I will tell you the last estimates from our Chief Economist for this year and next year, GDP growth, 4% for this year, 3.7% for next year, inflation ending this year, 30% next year, inflation, 18% and FX 14.10 at the end of this year and 16.10 -- next year, end of next year. And LDR in pesos, loan-to-deposit ratio. Gonzalo Covaro: Yes. I mean we -- I mean, as you know, we're talking about first LDR, then we have our LPR, which is the liquidity coverage ratio that we have more than 180%, so very, very liquid there. In loan-to-deposit ratio, we are -- but we are at 99%, 100%, but we are comfort -- we are assuming that our deposits -- peso deposit will continue to grow. And what happened also in the third quarter and in October is a lot of high realization happening in the economy because of what was happening in the election, what was expected in the election. So we saw deposit in pesos to turn into dollars. Now we are starting to see some kind of reverse thing that some of the actors selling the dollars and going back to pesos because they need to operate and they are not expecting a devaluation in the near term at least. So we believe that we have other means to grow deposits or to go to the market. So really, we don't see that as -- even though we monitor that and we want to -- that's why we are putting a lot of focus in deposit growth, but we expect that could -- deposit growth could come with us, and that will help us to continue growing the peso lending. We don't see a constraint in the growth because of that so far. Carlos Gomez-Lopez: You don't see that as a constraint? Gonzalo Covaro: No. Carlos Gomez-Lopez: Okay. And in terms of the dollarization, you're completely right. There has been dollarization both of loans and deposits. You and the other banks are mentioning demand for dollar loans. Should we expect, therefore, further dollarization of the banks on the asset side? And have you started to see or not yet a reduction in demand for dollars? Have you seen actual dollar sales back to pesos? Gonzalo Covaro: I mean lending in dollars, yes. I mean, we see in the commercial lending high demand or higher, I would say, demand in dollar lending. So that is continuing, mainly what we are seeing these projects that we are talking about, we expect that to continue. So yes, we have grown a lot of our deposits in dollars starting the tax amnesty that [indiscernible]. And after that, we -- our share in deposits, dollar deposits is higher than our fair share. So we are taking advantage on that. And of course, with the limits, internal limits that we have to lend dollars, et cetera. And we can also go to the market and get dollar debt, which the market is there also. So yes, we expect to continue growing dollar lending, of course, at a moderate rate considering the liquidity limits that we have internally to our dollar deposits. Dollarization, of course, the demand for dollars, I mean, from our customer base talking about purchase of dollars after the election has gone down. But I mean, it was a very, very high level before the election, it has gone down to normal levels. In Argentina, you always have people buying dollars. But that -- it's something that can come back again if there is any noise or any political uncertainty. But so far, we expect this to be quiet in the next months and not really -- is now at, I would say, first month of the year levels, and we expect this to continue at this stage. Carlos Gomez-Lopez: Can you give us an idea about the levels of your dollar purchases that you are seeing from your customers? I mean other banks have told us they went from 1 million -- $5 million or $6 million to $30 million or so per week. Where are you and where are you relative to, let's say, the second quarter or the first quarter? Gonzalo Covaro: Yes. I mean we used to have like $50 million per day. We are now at, I would say, $15 million, something like that. So lower levels -- lower levels. I mean, it's daily levels, but same level at the beginning of the year, I would say. Carlos Gomez-Lopez: So that would be the level of the beginning of the year as well, the $50 million. Gonzalo Covaro: Yes, more or less, yes. Operator: Our next question comes from Yuri Fernandes from JPMorgan. Yuri Fernandes: A quick follow-up. Most of my questions have been already asked. But just on asset quality, and there were many questions about the peak and how you are seeing. But what makes you confident that first quarter will be the peak? Because we heard before, right? I think second quarter was supposed to be the peak than third quarter. Now we're talking about the first quarter 2026. And I know it's hard, but what is the leading indicators you are looking for? Like why you think it should improve? Is asset like lower yields on loans moving lower? Is the economy improving? Is, I don't know, any kind of underwriting lessons that you learned in this last year? Just trying to understand what drives the confidence for improved asset quality. And just a second one on this topic. How your expected loss model should work on this? Should we start to see lower provisions now because you are calling for improvement ahead? Like -- or no, you still need to do some kind of incurred losses provisions. Help us to understand the difference between incurred losses and expected losses here for you. Gonzalo Covaro: I mean, I would say that, of course, when you make an expectation for the future on NPLs, there are 2 things that plays. One thing is what you can control and the other thing that you cannot control, which is the market and how the economy is doing for families and for people. Of course, what that -- what we always talk is about what we are doing and what we expect that will create a change. Then in the middle, you may have elections, you may have interest rate going up that you couldn't expect before, many things living in a country, in a developing country that, I mean, 1 month ago was in the border of hyperinflation if the elections were with a different scenario. And now we are all again drafting that -- but with a lot of volatility in the middle that you have a lot of interest rate going now and families being affected. That's why it's not that easy to predict what's going to happen. It's our best estimate with considering what we can control. As you know, people do estimates. So what we are doing is, of course, we changed the score of the customers we are lending to. Our score now it's a better score. It's a higher score. We are -- we cut a lot of the lower scores that we used to have. We reduced limits in some of the lending. we, of course, monitor the roles and we see the roles by vintage and by harvest. And we are seeing that new origination is behaving before than the old one. Then of course, you have in the middle credit cards, which is just that it's not new origination, credit cards, I'm talking about personal loans, the first thing. Now we're going to go to credit cards, it's old customers that starts to behave bad that you didn't do anything, but it just started to behave different because of adjustments they had in the family economy, et cetera. So in that sense, we are also seeing some slight improving in personal loans. I mean we are talking about -- we see personal loans improving, credit cards still having a heavy lifting, and that's why we still see this going on, on the third quarter -- on March. If it's February or April or May, I mean, this is again, I think what Carlo was saying, well, you are predicting ROE, you are a magician. We are doing our estimate today, I mean, with what we have. Of course, that we cannot guarantee that the ROE will be 11% is an estimation with the forecast we have as all banks does in the world. This is the same. This is with the tools that we have, we made those changes that we expect that they are going to reduce changes, again, going to better scores, cutting limits and monitoring that roles of the new lending is coming better than the old ones. Then we -- if there is something in March or February that happens that affects families' incomes again, well, we cannot predict that. But with the assumptions and the economy as is today, we expect this to happen. Yuri Fernandes: No, no, super clear. I know it's hard. Good examples. I was just trying to understand the -- what has changed, right? Gonzalo Covaro: We are talking also about the dynamics. Sorry, I didn't answer that one. The dynamic of the models, I mean the point is that when the new lending, you are booking new losses or new reserves for the new lending considering the behavior of the past lending. So you still won't see a lot of reduction in the I would say, the cost of risk in the same in the first month because even though you're originating or we are originating better quality, you still need to book reserves considering the past performance of your portfolio. You cannot say, well, this is -- these guys are better, so I will book a lower -- a better performance because you didn't see that in your book. So that's why at the beginning, you will take some time in have a reduction in the cost of risk because the new lending is also booked considering the behavior of the past lending. Then when you start proving that those lendings are -- or those customers are behaving better than the old ones, then you start reducing your cost of risk. But that's something that is gradual. It's not that quick. That's why we will see first quarter of next year still with higher provision. Operator: Our next question comes from Santiago Petri from Franklin Templeton. Santiago Petri: I understand you mentioned you're expecting return on equity by the mid-teens by 2027. I would like to know what loans to GDP assumption you are assuming for this achievement. And if this return on equity is the sustainable steady state that you are aiming at or you are aiming at a higher return on equity? And what will be the steady state loan-to-GDP penetration in Argentina under this assumption? Gonzalo Covaro: Mean what we are seeing is, I mean, loan to GDP today is around 10%, 11%, more or less. I mean, we are expecting in our projections, if everything goes right, that this can improve 2% per year. We -- our aim is to be a sustainable ROE between 15% and 20%, I would say. That's the aim. We expect, I mean, with everything going right with our assumptions to be around 15% by the end of next year. So starting at 15%, we -- I consider that by 2027, we could be in that range. Still, we don't know what Argentina will find by that time. But if everything continues to improve, loans to GDP continue to grow at least 2% per year, we believe that, that could be the range in 2027 and onwards, maybe 2027 still at mid-teens and 2028 already at higher teens. But our aim for the longer term with a country that is already stabilized with our changes in our operating model, we are also working in changing our operating model or how to serve our customers to reduce cost and compete with the fintechs, with Mercado Pago that we know that they have a much lower cost to serve. So with that already everything implemented, we -- our aiming is to be between 15% and 20%, I would say. And that should be after 2027. Pablo Firvida: Okay. I think that was the last question right? Operator: Right, Pablo. Pablo Firvida: Okay. Well, so thank you, everybody, for attending this call. If you have any further questions, please do not hesitate to contact us. Good morning, good afternoon. Gonzalo Covaro: Bye-bye. Pablo Firvida: Bye-bye. Operator: Grupo Financiero Galicia is now closed. We thank you for your participation, and wish you a very good day.
Jeff Borcherding: Good afternoon, good morning, and welcome to the Q3 interim report for Immunovia. I'm excited to speak with you today about the milestones we've achieved and the progress that we've made in our mission to save lives through early detection of pancreatic cancer. This is a really important quarter for us as it marked the transition from being a development stage company to being a commercial stage company, where we brought our PancreaSure test to the market and saw the initial response to that. We have been very excited about the responses that we've received. Throughout this presentation, I'll try to share a little bit of perspective from some of our customers about the PancreaSure test. And here, you can see one of those comments from Dr. Raj Keswani, who works at Northwestern University, who is excited about offering this screening option to his patients. He calls out the fact that the test has a high sensitivity and a high specificity. And so it's a valuable option for their high-risk patients at Northwestern Medicine. On today's call, we'll talk about the launch of PancreaSure and share some initial results. We'll also talk about reimbursement milestones that we've achieved and what lies ahead. We'll briefly cover the Q3 financial results and our cash position. And then I'd like to share a little bit more information about the AFFIRM clinical study that we announced results for a while back. Just as a reminder, before we talk about the results of the PancreaSure launch, I thought it would be helpful to go back and make sure that we talked a little bit about the strategy that we're pursuing for the test. So one of the things we want to do is really build advocacy, build use among key opinion leaders who practice at the top high-risk surveillance centers across the United States. One of the other things we want to do is make sure that we're smart about how we spend our money. We want to execute a very targeted low-cost launch that leverages our existing resources as much as possible so that our investment doesn't get ahead of our ability to generate revenue. As we think about expanding over time, that's where we want to bring in a partner. And so a lot of what we're doing in these early stages is demonstrating the potential of the PancreaSure test so that as we think about what the potential volume is for the test and the reimbursement potential, that potential is obvious to a potential partner for us. And then finally, it's going to be critical that we continue to run lean, that we operate very efficiently and that we limit our expenses, looking for ways to automate so that we can scale without our expenses increasing at the same time. There's a quote from one of our customers, Ray Wadlow, who is a gastrointestinal oncologist at Inova Schar Cancer just outside of Washington, D.C. And it speaks to the fact that we are making a transition from the development stage to the commercial stage. And as we do that, the fact that we've engaged so many key opinion leaders in our clinical program really sets the stage for us to succeed commercially. Dr. Wadlow was involved in our CLARITI clinical study. And in addition, his patients participated. He said that they're very excited now to use the test that is available in the market. And this is something that we've seen from multiple physicians who were involved in our clinical studies. As we've shared previously, we will launch PancreaSure in 3 phases. And as I mentioned earlier, we want to increase our commercial investment as we start to approach and achieve reimbursement, so that when we start to generate significant volume, we're getting paid for that volume, and we're not investing money in generating too much volume that doesn't generate a lot of revenue. We'll go through 3 phases: Targeted advocacy, which will last until around the middle of 2026, a volume building phase that will comprise the end of 2026. And then as we move into 2027, we will really focus on revenue growth as both the volume builds and we start to get reimbursement from payers. As we think about the first stage that we're in right now, just as a reminder, our objective is to build targeted advocacy. In this phase, we are targeting those key opinion leaders who practice and who screen for pancreatic cancer at top high-risk surveillance centers across the United States. Our sales effort has been very, very limited at this point. We have not yet hired any salespeople. The sales effort has been completely done by members of the management team and I, reaching out to prospects, including both those who participated in our clinical studies, those who used our prior IMMray PanCan-d test and then others that we have met over the years. A really important thing during the 3 phases of this launch is that the metrics that we use to evaluate our progress will change over time. So when we're in this targeted advocacy phase, our primary metric is going to be the number of high-risk surveillance centers that order PancreaSure. That's our key metric of success. Are we getting more and more of those top physicians, those experts in the field to raise their hand and say, "I want to use the PancreaSure test with my patients." That's a really critical metric for us, more important than volume, more important even than revenue. Those things will come. But the first thing that we have to do is build that advocacy, because if we build that advocacy, that sets the foundation for us to grow the business going forward from here. I'm very excited to share our progress so far on that key metric. As of the end of the third quarter, we had 10 leading pancreatic cancer centers who had implemented PancreaSure, and that's just in the first month. If you remember, we launched the test on September 2. So in just those 4 weeks, we were able to get 10 centers registered and up and running ordering the test. You can see some of the names here on the right-hand side of the screen. We can't disclose all of them. Some of these centers have a prohibition against using their names and sharing them commercially, but we are very excited by the fact that we've got a range of systems represented here. Some of them like Northwestern and Penn Medicine are top academic institutions. Others like Hackensack Meridian and HonorHealth are community health systems that are not affiliated with an academic center, but do have a high-risk surveillance program. This represents the range that we want to pursue. And you can also see here a good geographic range. So we've got everything from the Northeast with Penn to the West with University of Colorado Health. HonorHealth is in Arizona and Hackensack Meridian, New Jersey. So we've got a good geographic representation across the country. Again, that's important because we want to build advocacy overall, but also in specific regions within the country. I mentioned that our metrics will evolve as we move through the 3 phases of the launch. When we get into the volume building phase later on in 2026, that's when our primary metric will really become PancreaSure volume, and we'll start looking at revenue as we get into 2027. It's not that we aren't focused on how to generate revenue. It's just that the most important thing that we can do in the near term to ultimately generate the revenue that we need is to focus on building that targeted advocacy. One of the things I think is important to understand is how does our testing process work? And what does that mean in terms of when a test order becomes a completed test and ultimately leads to a patient paying for that test. So here, we have a simple flow chart that shows the fact that once a physician orders the test in our online portal, we immediately contact the patient to schedule their blood draw. That can happen the same day in some cases. In other cases, it may take us up to a week to reach that patient. Once we reach them, we schedule that appointment to have their blood drawn so that we can collect the sample. Sometimes that happens as soon as the next day. In other cases, because of that patient schedule, it may take a few weeks to get that appointment scheduled. Once the blood is collected, it's shipped overnight to our lab in North Carolina. And from there, it takes us somewhere between 2 and 10 days to run the test. Running the test is actually quite quick, but we want to batch tests together so that we're not doing a small number because that increases our cost per test. By batching them together in larger batches, we reduce the cost per test, and we deliver the results in a reasonable time to our customers. As you see here, once we deliver the results to the provider, we send out the bill within a day to the patient. And then from there, as you can imagine, it may take some time to collect the revenue from that patient -- to collect that payment. It can be as quick as the next day if they use their credit card to pay online. For some people, we need to send them a couple of reminders before they pay. So in total, what you can see is that we can, in some cases, go from a test order to cash collection in an ideal scenario as quick as about a week, and that's about as quick as we could do it. But there may be other situations where it takes a few months or even longer. So that's just something to be aware of that we know this is a dynamic in this market, and we're planning accordingly. One of the other things that will impact how quickly an order turns into revenue is the fact that we give our physicians what we call future order functionality. What that means is that if a patient is in the physician's office, maybe they're having an MRI or they're having an endoscopic ultrasound. That physician may want to use the PancreaSure test. But in many cases, many of our physicians tell us how they want to use the test is at 6-month intervals in between that imaging that's done with an MRI or an endoscopic ultrasound. So what we do is we give the physician the opportunity to place a future order while that patient is in their office, while that patient is right in front of them. That order gets captured in our system. And then we know once it's time for that order to happen, we go through the normal process where we contact the patient and schedule the blood draw. In some cases, that might lead to waiting to reach out to that patient for 6 months, which is probably most common. But we've seen some future orders placed as far out as 9 months. So we know that this is something that ultimately will really bolster our results. It's essentially building a pipeline of future tests. While we're in the early days following launch, some of these orders are just going to take quite a while to work their way through the system. Again, as we think about this targeted advocacy idea, I just wanted to share one last quote from one of our key opinion leaders. He works at New York University. He leads the pancreatic cancer surveillance screening program there. And Dr. [ Ganda ] talked about the fact that NYU is a major network of hospitals with different levels of access to cancer screening across their system. In fact, one of their sites is actually down in Florida and treats New York residents who are in Florida at different parts of the year. Because PancreaSure is a simple blood test, NYU can use our test to expand the access within their system. Previous research within NYU shows that only 1 in 5 people who is eligible for pancreatic cancer screening is actually getting screened. A big part of the problem is access to the imaging approaches that have always been the standard of care for pancreatic cancer surveillance. By giving them a blood test, we give them a new option. And one of the things that's especially as exciting is that we've been working with Dr. Ganda on the initial setup, and that setup has been in the New York area. We actually had one of the physicians down in Florida who practices with the New York University practice in Florida, reach out to us proactively, not even realizing yet that the New York group was starting to set up this program and said, we'd really like to take advantage of the PancreaSure test. How do we get set up to use it. So I think that speaks to the fact that there is a clear demand for the PancreaSure test. Moving on then from our launch progress. Let's talk a little bit about reimbursement and the milestones that we've achieved and what lies ahead. If you think about getting reimbursed for a diagnostic test in the United States, there are really 4 elements that come into play, and we refer to them as the 4 Cs: Code, Cost, Coverage and Contracts. A Code is the billing code that's used to identify a test. This really facilitates the reimbursement and billing process when we send a claim to a reimbursement or an insurance company and ask them to reimburse us. Cost refers to the price of the test, and that's really determined by the clinical lab fee schedule, which is set by Medicare, a government agency. Coverage is the payer's determination that the test is reasonable and it's medically necessary. Essentially, what they're saying with coverage is we believe that this test adds value for the patients who are covered by our insurance plan, and therefore, we're going to pay for our patients to have this test. And then Contract is something that happens with commercial insurance companies where we enter into a contract, it really sets terms of payment and really ensures that the process runs smoothly. If you look at our progress across these 4 elements, what you see is we've made very good progress in 2025. Earlier this year, we received our code, and that code is effective as of October 1, 2025. I'm also very excited to share literally just late yesterday, we received notice from Medicare that they have set the final clinical lab fee schedule rate for the PancreaSure test. They've set the rate at $897, which means that when Medicare reimburses us in the future, that reimbursement will be $897. We're excited about that rate. We think that it really fairly reflects the value of our test and reflects the clinical and economic impact that we can have and that Medicare expects us to have on the people who use the Medicare program. The next step is coverage, and we don't have coverage in place today. And the key there is to complete and publish the clinical studies that show that medical necessity that prove to Medicare and prove to commercial insurers that this test is something that should be included in the physician's approach to early screening for pancreatic cancer. Let's talk a little bit more about coverage. So to prove medical necessity and secure coverage, we've got to generate 3 types of evidence: analytical validation, clinical validation and clinical utility. Analytical validity means does the lab measure the biomarkers accurately? It's essentially a very lab-focused measure of are we for the 5 biomarkers in the PancreaSure test accurately measuring the level of that biomarker in the patient's blood. You can see that we've completed our studies there, and we're actively pursuing publication of that study. Next is clinical validation. And clinical validation essentially means if you're given a blood sample and you run the test, can you accurately distinguish cancer from a sample that doesn't have cancer. So you're likely familiar with the results that we've announced previously from the CLARITI study and from the VERIFI study. On today's call, I'm going to share with you results from a third study called AFFIRM. We have just had the CLARITI study published. It was published in the Journal of Gastroenterology, which is really considered the premier journal in gastrointestinal disease. And one of our key opinion leaders who publishes extensively said he was incredibly surprised that they selected a diagnostic test to publish an article in gastroenterology. He said it really speaks to the quality of the CLARITI study and the promise of the PancreaSure test. So for analytical validity and clinical validity, we have excellent data, and we're largely ready to submit that to insurers. The key is just making sure that everything is published. Clinical utility is the final part of the clinical evidence package that we need to generate. We currently have 2 clinical utility studies underway. These are studies that are being funded by the National Institutes of Health of the U.S. government. So there's very minimal cost to us. But we're looking to conduct additional studies in 2026 and beyond. Why additional studies? Well, there's a couple of reasons. One, the 2 studies that are underway will take a few years to complete. So we want to have some clinical utility studies that can be done more quickly. That's why we'll be doing survey studies that we can complete in the first part of 2026, so that we can submit them as evidence of clinical utility in 2026. Another reason that we want to show or demonstrate clinical utility across multiple studies is that there are multiple ways that the study can -- or that our test can show value. Clinical utility basically means do you impact physician decisions and/or can you improve patient outcomes based on using the test? And there are, as you can imagine, multiple ways to show that because the test is used different ways. So for example, if the test is used to evaluate pancreatic cysts for patients who are going to surgery, that's a different kind of clinical utility than if that test is used in someone who has a family history of pancreatic cancer and they're being monitored over time to identify cancer as quickly as we can. So we want to do multiple clinical utility studies so that we really build out that body of evidence. As we now switch to the Q3 financial results and the cash position, we are excited to share that this was a solid quarter for us from a cash flow and financial results standpoint. We had net sales of SEK 101,000. That was almost entirely royalty revenue. As we discussed earlier, it will take quite a while for orders that were placed in September to actually generate revenue. So we don't expect to see that for a little while here. That revenue will come more in 2026 as we ramp up our volume and as we start to realize that revenue as patients work their way through the testing process. Our operating loss for the third quarter was SEK 25.5 million. Importantly, as we approach the launch, we also look for any way possible to conserve cash. So our cash burn was reduced to SEK 5.4 million per month, and that's well below the guidance that we have had in place of SEK 8 million to SEK 10 million per month. I do want to highlight, as we move forward with the launch, we certainly expect to go back more to that previous guidance level of SEK 8 million to SEK 10 million, but we wanted to do everything we could to preserve cash prior to the launch. At the end of the third quarter, our cash was SEK 26.6 million, and that was bolstered by a bridge loan that we had received during the quarter. As you recall, our cash position was bolstered by a successful rights issue. That rights issue actually completed after quarter end, but we were very excited with the way it played out. We were excited that guarantors were interested in guaranteeing the rights issue to 100%, even more grateful and excited that 87.9% of rights issues were subscribed. That really, I think, speaks to the support that we've received from shareholders, and I want to express how much I appreciate that. I know that it's been a difficult ride as a shareholder and appreciate the continued trust that you have placed in us. Because of that trust, we were able to raise just over SEK 100 million which resulted in a net cash infusion of just under SEK 70 million when you account for the repayment of the bridge loan that I mentioned. And that cash will take us into the third quarter of 2026. We'll use these funds to fund the commercial launch and also those clinical studies that I mentioned earlier in the clinical utility arena. Finally, before we wrap up and transition to questions, I want to share the results from the AFFIRM clinical validation that we recently completed. The AFFIRM study comes after 2 prior studies. You'll remember that we did the CLARITI study and the VERIFI study. Those were both intended to show that we could accurately detect Stage I and II pancreatic cancer when you were looking at that cancer compared to high-risk controls. So control samples from people who have that familial or hereditary risk for cancer, people who have pancreatic cysts that put them at risk for cancer. And so can we distinguish in between those 2 groups? The CLARITI and the VERIFI results showed we absolutely could. We had very strong sensitivity, meaning that we could detect cancer as well as specificity, meaning that we didn't have a lot of false positives where we returned to positive result when there really wasn't cancer there. One of the questions that we got from physicians after those 2 studies was, we understand the fact that you focused on Stage 1 and 2 for early detection. That's really important. But are you certain that if a patient has Stage III or IV cancer, you will detect it. So that was one of the key questions we wanted to solve or wanted to answer. Another question was, how would the test perform in a normal patient population, meaning those people who are not at high risk. That's important because many of our competitors in the early detection space have historically used normal patient populations as controls. What happens is it's easier to avoid a false positive if you use those normal patients as your controls. So we wanted to have the data that allowed an apples-to-apples comparison between our test and for example, some of the multi-cancer early detection tests that are out there. We were thrilled with the results. They turned out exactly how we would have hoped. So PancreaSure showed excellent sensitivity, 10 percentage points higher in Stage III and IV cancer compared to the sensitivity that we showed in Stage I and II. If you look at the VERIFI and the CLARITI studies, on average, we were able to detect about 78% of Stage I and II cancers. And in the AFFIRM study, where we looked at Stage III and IV pancreatic cancers, we detected 88% of those cancers. So literally 10 percentage points more. Similarly, we saw excellent specificity even higher than what we had seen with the high-risk controls. We showed 98% specificity in those healthy controls in the AFFIRM study. So this data adds to the body of evidence that says PancreaSure is a very accurate test. The fact that it becomes more accurate as a patient moves through the stages of disease shows that our 5 biomarkers really are detecting cancer and increasing or decreasing as cancer comes to be in a person's body and over time as that cancer grows and develops. So another excellent set of clinical data that really gives us confidence in the test itself. With that, I'm excited to see if there are any questions. We can certainly take questions for the call in as well as you can ask questions using the chat feature as well. Operator: [Operator Instructions] We will now begin the question-and-answer session. [Operator Instructions]. We have a question from Niklas Elmhammer from Carlsquare. Niklas Elmhammer: Thank you for excellent presentation and very clearly explaining the steps of reimbursement and commercialization. I was wondering what you know about the test sold so far? How is it used to complement to other screening methods, such as endoscopic ultrasound that's your -- the comments from the clients seem to suggest or -- is it perhaps subjects that are eligible, but not doing screening for some reason and sort of reaching a new patients. Jeff Borcherding: Yes. Thanks for the question, Niklas. What we're hearing is all of those things. So for existing patients, we have physicians who are using the test on the 6-month intervals in between their regularly scheduled imaging, whether that's MRI or ultrasound or, in some cases, even a CT scan. We have some physicians who are using the test at the same time that they do imaging. Essentially, they want to sync up the 2 so that they can understand how the results compare. But we do certainly see a number of physicians who are using the test for people who are not in surveillance today. And that can mean a lot of different things. So for example, some physicians are using the test for people who don't meet the formal criteria for pancreatic cancer but maybe they have a reason to be concerned. So for example, this might be someone who has one relative with pancreatic cancer but maybe they don't meet the formal definition for screening yet. Maybe they're too young or the relative was not a close relative but more distant relative. So we're seeing them use the test in that situation. We're also seeing them use the test for people who are younger and really don't want to sign up for 30 years or more of intense imaging surveillance. So I think we'll learn a lot more about how the test is being used. We're conducting a quality survey now. And one of the things that we're asking physicians to do is provide information about how they are using the test for each particular patient. So we look forward to sharing that data in the quarters to come. Niklas Elmhammer: Okay. Great. And a little bit going back, you have explained a lot about the reimbursement process. So how is it going sort of with Medicare -- is it reasonable to expect reimbursement from Co-Medicare in 2026. Jeff Borcherding: Yes. So Medicare is our clear focus for reimbursement initially. It is a very large payer. It's a very important payer. It's also one of the payers that is most proactive about providing coverage. So it is our clear focus. We are waiting for that last clinical utility evidence that I mentioned, those surveys, we will then be submitting to Medicare in 2026. And in terms of the timing of when that coverage actually happens, that's something that we can't really predict. The time line is not set in stone by any stretch. So we will be able to share information about when we submit. And then at that point, we won't know when we will get coverage. The one thing that I will share is that now that we have a code and we have a rate we can begin submitting claims to insurance companies. And so we do hope to see some insurance company reimbursement in 2026. It will be limited because we don't have those coverage policies in place yet, but we are hoping to see some of that in 2026. Niklas Elmhammer: Great. That's sounds promising. And a little bit regarding the organization, end of the period report 12 employees, I believe, so that's excluding any account managers, I believe they should be added going forward. Jeff Borcherding: That's correct. So our plan is to add 3 strategic account managers who will sell the test throughout the country. And I think that's going to be a really important addition to the team. Niklas Elmhammer: Okay. Great. And finally, you have provided some guide. And what about R&D costs going forward? Should we expect that to ramp up or stable? Jeff Borcherding: Yes. I guess what I would say is our intention is to keep our total expenses and cash burn within the guidance that we've shared previously of $8 million to $10 million per month. And so there may be times when our R&D expenses ramp up, but we will -- there will be other savings that we try to offset that with -- we'll be finalizing our 2026 budget here very shortly and getting that approved through the board. And part of that process is to make final decisions about a couple of the clinical studies that we're considering, but we need to think about how that fits into the budget financially. Operator: Sir, so far, there are no further questions from the phone. Jeff Borcherding: Okay. We've got some questions on the chat line. So I'll share those and then answer them. So one is you described the embrace of the PancreaSure test and the scientific community. How do you convert that embrace into orders and sales. I think this is a great question. So what we see is that there is a high level of interest in the experts who run the pancreatic cancer surveillance programs. They are eager to use the test and to start incorporating it into their practice. At the same time, that requires change. They have to change their processes, they have to change, in some cases, formal protocols. And so part of what we will do is work with them to understand how do those processes need to change? What specific patient populations do they want to use the test for, how can they identify those people within their patient base and what steps do they need to take in order to be in a position to utilize the test fully. And that's one of the Niklas asked about staffing. That's one of the key ways that the account managers will add value. We really want them to get in, get integrated with these high-risk surveillance centers get to know the staff people because ultimately, while the tests are ordered by the physician, the staff people really play a crucial role in identifying patients for testing, making sure that orders are placed and following through to make sure that the testing happens. So all of those things will be key elements of our effort to make sure that we can turn that enthusiasm into orders and sales. A question, how much are patients paying for the test. So that varies based on their ability to pay. We offer patients financial assistance if they have lower income. And so the amount that a patient pays could be $0, it could be $100. It could be $200 or it could be as much as $995. People who are not eligible for financial assistance are going to pay somewhere between $750 and $995. And as time goes on, we'll be able to provide a better estimate of what's our average selling price? And what's the average amount that a patient pays for the test. Are we still pursuing a commercial ally or partner? Can you tell us about that process. So yes, we are absolutely still very interested in partnering with a large diagnostics company that will ultimately help us expand our physician reach significantly and drive volume. So what we do currently is keep those potential partners informed about different developments that are happening. When we attend conferences, we schedule meetings with those potential partners. For example, I'll be attending the JPMorgan conference in January that brings together many of the top life sciences companies in the world and we'll be having a number of meetings with those potential partners at that time. As you can imagine, it's difficult to say when that will lead to a partnership agreement being put in place. The reality is that we want to make sure that we don't enter an agreement too soon. That may sound strange, but we want to enter into an agreement when we've demonstrated the potential of PancreaSure when we've made more progress on reimbursement so that the split of value between us and that partner is more shaded to Immunovia's benefits. So we're absolutely still pursuing it and are excited to move forward with that. Okay. I don't think we have any other questions, unless there's any that somebody had in mind that they want to ask quickly before we wrap up. Operator: So far, there are no further questions from the phone. Jeff Borcherding: Okay. Well, thank you very much for your time. I really appreciate you joining the call today to learn a little bit more about our progress in launching the PancreaSure test and in building towards reimbursement for the test in 2026 and beyond. I'm thrilled that we have crossed over and made the transition to the point where we are now commercializing the PancreaSure test. It really is a major step forward for us in achieving our mission of saving lives through early detection and it's a really important milestone for the company and for our shareholders. So thank you for your support, and we look forward to more good news in the future. Take care.
Operator: Good morning, everyone, and welcome to BBVA Argentina's Third Quarter 2025 Results Conference Call. Today with us are Mr. Diego Cesarini, Head of Asset and Liability Management and Investor Relations; Mrs. Belen Fourcade, Investor Relations Manager; and Mrs. Carmen Arroyo, CFO, who will be available for the Q&A session. This presentation and the third Q '25 earnings release are available on BBVA's Investor Relations website, ir.bbva.com.ar, and will also be available for download in the chat. First of all, let me point out that some of the statements made during this conference call may be forward-looking statements within the meaning of the safe harbor provisions found in Section 27A of the Securities Act of 1933 under U.S. federal securities law. These forward-looking statements are subject to risks and uncertainties that could cause results to differ materially from those expressed in the forward-looking statements. Additional information concerning these factors is contained in BBVA Argentina's annual report on Form 20-F for the fiscal year 2024 filed with the U.S. Securities and Exchange Commission. [Operator Instructions] I will now turn the call over to Mrs. Belen Fourcade. Please go ahead. María Belén Fourcade: Good morning, and thank you all for joining us today. In the third quarter of 2025, BBVA Argentina has managed to sustain its growth strategy, demonstrating the strength of its fundamentals and the effectiveness of its management. We maintained a focus on operational efficiency through careful administration of our fees and strict control of expenses, which allowed us to navigate the volatile context in which interest rate levels have doubled. The period was marked by high political uncertainty, which resulted in strong movements in financial variables. The Central Bank implemented a more restrictive monetary policy with increases in reserve requirements, a new daily compliance scheme for them and changes in the instruments used to regulate the money supply, which led to a sharp rise in the level and volatility of interest rates. The electoral results in the province of Buenos Aires at the beginning of September added further doubts about the continuity of the government's economic policy. Deposit rates increased from levels of 30% at the beginning of July, reaching peaks of 70% during September. Furthermore, demand for exchange rate hedging increased, resulting in some dollarization of deposits while loan growth slowed down. Nevertheless, credit to the private sector of the system achieved a real-term increase of 7% during the quarter. Although this scenario was quickly reversed after the outcome of the national elections in October heavily supported the ruling party, the results of the financial system were not exempt from the impact of what happened during the quarter. On the one hand, the high level of rates affected the continued deterioration of the system's delinquency. And in addition, it had a negative impact on intermediation margins given the faster speed at which liabilities are renegotiated compared to assets despite the short duration of the latter. In this scenario, we are leveraged on active pricing, careful portfolio management and strict control of expenses, which has allowed us to navigate a context of higher provisions and delinquency while still driving growth in activity. The aforementioned negative impact on margins was mitigated by the high percentage of floating rate sovereign debt in the securities portfolio. In this context, the bank's total loans to the private sector grew by 6.7%, and the consolidated market share was 11.39%. Regarding deposits, a real-term increase of 10.2% was also achieved so that the market share rose 44 basis points and reached the double-digit figure for the first time, up to 10.09%. As for asset quality, the NPL ratio of BBVA Argentina on private loans reached 3.28% as of September of 2025, a figure that remains below the system average. BBVA is renowned for presenting delinquency ratios consistently below the sector average, which reflects the quality of its credit risk management and its prudent approach to portfolio origination. Regarding the liquidity ratio, the bank remains at a comfortable level, which at the end of the quarter reached 44.3% of deposits. The capital ratio stood at 16.7%, decreasing 170 basis points compared to the previous quarter, mainly explained by the temporary impact of the sovereign debt valuation, yet it continues at ample levels that allow us to sustain our growth strategy. Moving to Slide 2, 3 and 4. I will now comment on the bank's third quarter 2025 financial results. BBVA Argentina's inflation adjusted net income in the third quarter of 2025 was ARS 38.1 billion, decreasing 39.7% quarter-over-quarter. This implied a quarterly ROE of 4.7% and a quarterly ROA of 0.7%. The decrease in quarterly operating results was mainly explained by lower operating income, mainly due to: one, a deterioration in loan loss allowances; two, lower net interest income; and three, a drop in the line of net income from measurement of financial instruments at fair value through P&L. These were positively offset by substantially better net fee income, operating expenses and other operating income, including nonrecurring concepts. As previously mentioned, it should be noted that the quarter was marked by an increase in average interest rates in a context of volatility, regulatory changes of minimum reserve requirements and uncertainty raised by the electoral period, which cleared up after the results, reversing several of the negative impacts. Net income from the net monetary position was 5.7% lower quarter-over-quarter, explained by a stable quarterly inflation. Turning into the P&L lines in Slide 3. Net interest income was ARS 585.5 billion, decreasing 6.6% quarter-over-quarter. In the third quarter of 2025, interest income increased less than interest expenses in monetary terms, driven by the sudden increase in interest rates. While income from loans increased 19%, income from the government securities increased 66.6% given the high percentage of TAMAR floating rate bonds in the portfolio, which rapidly captured changes in market rates. Expenses increased mainly due to higher deposit costs, in particular, due to time deposits. Loan loss allowances increased 37.1%, explained by the deterioration of nonperforming loans, in particular, on the retail book, which implied higher provisioning as well as the publicly known deterioration of NPLs, both for BBVA and for the system. The effect of loan loss allowances can be observed in the evolution of the cost of risk, which reached 6.63% in the third quarter of 2025. Net fee income as of the third quarter of 2025 totaled ARS 137.1 billion, increasing 37.5% quarter-over-quarter, thanks to continued alignment in pricing strategies, both in fee income and expenses. During the third quarter of 2025, total operating expenses were ARS 494.6 billion, decreasing 3.4% quarter-over-quarter. Several improvements are observed in administrative expenses, mainly due to proactive efficiency measures in: one, software; two, outsourced administrative expenses; three, advertising; and four, armored transportation. In the case of software, the decrease is due to a reestimation of expense provisions. For advertising and armored transportation, diverse actions have been taken in the aim of improving efficiency. Both the efficiency ratio as well as the fee to expenses ratio evidence the stability and improvements that are taking place on these lines of the income statement, and we expect them to improve even further for 2026. Private sector loans as of the third quarter of 2025 totaled ARS 12.8 trillion, increasing 6.7% in real terms quarter-over-quarter. Growth was mainly driven by an increase in loans in foreign currency, boosted by commercial lending, mainly prefinancing and financing of exports and other loans, which include investment project loans and a position in correspondent banks. On the peso portfolio, credit cards and pledge loans stood out. The latter was partially affected by an accounting reclassification done by the subsidiary companies from the other loans lines to the pledge loan line. In the case of consumer loans, prudency policies taken in a context of higher deterioration of nonperforming loans were noticeable in this line with 0% growth. Overdrafts fell 12.1%, driven by the rapid increase in interest rates mentioned previously. After years of commercial segment growth over retail, the sudden increase in interest rates took a toll on commercial loan demand, which tends to be more sensitive to changes in interest rate movements, making the commercial loan book slightly fall versus retail in the portfolio mix. BBVA Argentina's consolidated market share of private sector loans reached 11.39% as of the third quarter of 2025, improving from 10.58% a year ago. Regarding asset quality, BBVA Argentina's nonperforming loan ratio on private loans reached 3.28% in September 2025, a figure that remains below the system average. This was due to an increase in the nonperforming retail portfolio, reflecting a deterioration in nonperforming credit card and consumer loans, which aligns with the overall systemic trend. Commercial nonperforming loans, however, showed very good performance, remaining in 0.10%. As we can see on Slide 6, as of the third quarter of 2025, total gross loans and other financing over deposits ratio was 85%, below the 88% recorded in the second quarter of 2025 and above the 65% in the third quarter of 2024. Participation of total loans over assets is 57% versus 58% in the second quarter of 2025 and 43% in the third quarter of 2024, evidencing a slightly higher exposure to the public sector, driven by the changes in reserve requirement regulation concerning reserves in kind and also in line with the lower origination of loans as a consequence of prudential actions in a high NPL environment. On the funding side, as of the third quarter of 2025, total deposits reached ARS 15.4 trillion, increasing 11.2% quarter-over-quarter. The bank's consolidated market share of private deposits as of the third quarter of 2025 reached 10.09%. Private nonfinancial sector deposits in pesos totaled ARS 9.8 trillion, an increase of 7% quarter-over-quarter. This was explained by an increase in time deposits and in interest-bearing checking accounts. This effect was partially offset by a drop in investment accounts. Private nonfinancial sector deposits in foreign currency expressed in pesos increased by 16.6% quarter-over-quarter. This is mainly due to an increase in time deposits, mainly investments from mutual funds, followed by an 8.3% increase in savings accounts. As of the third quarter of 2025, capital ratio reached 16.7%. The drop was due to an increase by 7.4% in risk-weighted assets, which was higher than the 2.9% decrease in common equity Tier 1 capital, the latter affected by the fall in the valuation of public securities mentioned previously. This explains 2/3 of the quarterly decrease in the capital ratio. Public sector exposure, excluding Central Bank totaled ARS 3.6 trillion, implying a 16.4% exposure above the 15.88% recorded on the second quarter of 2025. The quarter-over-quarter increase is mainly due to a higher position in securities at amortized cost related to the higher requirements [indiscernible] correspond to TAMAR bonds. For the quarter, liquidity ratio reached 44.3%, lower than the 48.7% in the prior quarter. In local currency, the ratio decreased 779 basis points to [ 37.6%, ] explained by the lower valuation of public securities, affecting the overall drop in the total currency liquidity. Liquidity in foreign currency increased 152 basis points to 57%. In line with our commitment to generating value for our shareholders, the bank continued with the payment of dividends corresponding to a 2024 financial year -- having successfully completed the installments 3 to 6 as of the date of this report. In summary, despite the challenges of the environment, BBVA Argentina has demonstrated notable resilience and effective management during the third quarter of 2025. The positive growth in credit, delinquency levels below the system average and the strength in liquidity and capital ratios are a testament to the quality of our risk management and prudent approach. We reiterate our firm commitment to continue driving activity, maintaining operational efficiency and generating sustained value for our shareholders. This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Brian Flores with Citi. Brian Flores: Apologies. I was having technical issues. I have 2 questions. The first one, kind of a mandatory one on the guidance. Just wanted to check if you are reiterating the real loan growth at 45% to 50% year-over-year with deposits at 25% in real terms. I think the last time we discussed the ROE range you provided was real ROE of 10% to 15% and expectations of the Tier 1 ratio between 16% and 16.5%. Just wanted to check if all of these items are maintained given obviously a hectic third quarter. My second question is on basically loan growth. You showed market share gains, very strong loan growth. But just given the economic stagnation of the third quarter, how much of this growth would you consider genuine versus merely refinancing from existing clients that were struggling with liquidity. Just wanted to understand how we should think about loan growth going forward. Carmen Arroyo: Everyone. Okay. Brian, regarding your questions, regarding guidance, we are okay with this 45% to 50% in real terms loan growth. In terms of deposit, we see something more than what you said. So something similar to 30%, 35% could be okay for us. ROE, we are thinking of high single digits. And in terms of capital ratio, finishing the year near the 17%, around 17%. So that would be the changes -- in fact, there's no change in our guidance. We are maintaining a similar view for the whole year. So that's one issue. Then regarding loans and what you asked about refinancing and if the growth is genuine or not. So we believe the growth is fully genuine. You have to consider that part of the loan growth is related to U.S. dollar loans. And then if you take a look to personal loans, you will see that we are very flat. So we didn't grow in that line. So of course, the situation in the retail side regarding personal loans and credit cards is delicate due to NPL growth, and that's why we've been more prudent on the growth there. And our growth comes from, as I said, U.S. dollar and very linked to companies, of course. Brian Flores: Thank you, Carmen. I think the last time we spoke was maybe 3 weeks ago in one event we hosted. You mentioned the sustainable ROE of the bank is around mid-double digits at least. So just wanted to think if maybe 2026 is a transition year towards this level. Carmen Arroyo: Okay. So I was talking about the end of 2025. Maybe I misunderstood your question. Related to 2026, yes, we maintain the mid to -- yes, mid- to low teens, I could say. So 2026 will be better than this year, maybe not at a sustainable pace. But yes, so the trend should go upwards. So yes, we can maintain this mid to -- yes, low to mid-teens here. Operator: Our next question comes from Tito Labarta with Goldman Sachs. Daer Labarta: Two questions also. Just any update on just the daily reserve requirements and what the government is thinking on maybe reducing that and just to allow for better liquidity and your ability to grow? And how do you see that continuing to impact NIM maybe in 4Q and then maybe for 2026, just high-level thoughts on how the NIM can evolve? And then second question, as you mentioned, the retail NPLs, right, have been rising, just given some of the short-term uncertainty. How are you thinking about asset quality from here? Do you think that reverses quickly? Do you think -- how long of a prolonged credit cycle would it be? Just to think about asset quality and then your ability to grow the retail loan book? Diego Cesarini: This is Diego. Thanks for the question. I will take the first one. Regarding reserve requirements, Central Bank has already made some changes. The third quarter was very difficult because they -- not only they raised reserve requirements 2 or 3 times, but they also had us to comply it on a daily basis. So that made us a little inefficient. They have already changed this from the 1st of December, we -- even if we have to comply with those requirements on a daily basis, we need to comply just 75% of the total requirement that the Central Bank makes us to comply. So this is a huge change for us. This will reduce this inefficiency to 0. And besides, they also reduce the percentage of requirement on our site deposits. So that has a direct impact on profitability because this is money that was allocated at 0 rate at Central Bank. And now well, we can have -- we can comply that with bonds. So this makes an important change for us and for banks in general. We expect Central Bank in the coming months, of course, to reduce the level of requirements. This monetary policy that has been very restrictive in the -- since May or June, we think that with time, they will relax this. And of course, that will provide us with more liquidity to fund growth we are expecting for next year. Carmen Arroyo: Okay. And I'll take the question related to NPLs and what we see. So NPLs, as you know, so we have ended September with 3.28%. The system was above that, near 4%. So we are doing better than the system. Of course, the environment has been very complex in this quarter with inflation going down in a very quick way and interest rates still very high in real terms. So this is affected, of course. What we see is that we will see a fourth quarter, which will be also complicated in that sense. So maybe we see something higher. So NPL is higher than this quarter, not pretty much. And then 2026 needs to be a much better year. So in terms of NPL and in cost of risk, something similar. We see cost of risk that has been 6.63% by the -- so this 9 months. We see something higher, but not really dramatic, so by the end of the 2025 and then a decrease in 2026. Daer Labarta: Great. That's helpful. Just one follow-up on as the reserve requirements get relaxed, I mean, rates, I think, have come down from the peak as well. How do you see the evolution of NIM, right? Because we saw some NIM pressure in the quarter. Do you think that already begins to reverse in 4Q? Just to think about the net interest margin evolution from here? Diego Cesarini: Okay. NIMs, when you take out the third quarter, which is very special, of course, NIMs have been really stable through the year. And I think that, that will be the main conclusion. Third quarter, of course, was special because rates went from 30% to almost 70% on a given day. So having liabilities from 1 day to 40, 50 days, that really impacts much quicker than our asset repricing. Which, by the way, our assets are also short term in general terms. We -- just as an example, 60% of our bond portfolio was adjusted by interest rates. So it reflected this rise almost immediately and in a way that help us with the NIM through this quarter. We didn't fall as much as many competitors. So for fourth quarter, of course, the opposite trend, we should expect that. We should see higher NIMs. And for next year, we are not really thinking that NIMs should go down that quickly. With this demand of loan that is, of course, will remain high, we hope it will remain high and liquidity, which is not as much. It's not scarce, but it's not that high. We think that banks and us especially have a pricing power with our customers. So we are not expecting NIMs next year to fall that much. Operator: Our next question comes from Carlos Gomez-Lopez with HSBC. Carlos Gomez-Lopez: Two questions. One, as you mentioned, the asset quality is still going to deteriorate into the fourth quarter. So essentially, my question is the damage from the high interest rates, when do you think that will be gone? We will see it through? And have you seen already demand started to come or it's still too early? And second, what is the optimal level of capital that you want to achieve now that you have come down all the way from 33% to, I believe, 16.7% now. Where would you like to stabilize the capital level? Carmen Arroyo: Thank you, Carlos. So related to the demand on credits, what we see is that the retail side is going to come back slowly maybe. We need to see how long does it take to go through this NPL high ratios. So maybe in the retail side, we will see, yes, a slow move. But in commercial, what we see is that U.S. dollar needs to -- we are already having high demand on U.S. dollar credits for companies and also pesos. So what we see is a different -- so we have a different view between retail and commercial. So we believe this 45% to 50% loans growth will come through companies and mostly dollar-based. So that's the first question. Diego Cesarini: Carlos, this is Diego. Regarding capital level and where we feel comfortable. As Carmen said before, we are thinking that 2025 will finish with a ratio of around 17%, probably a little higher. And for the coming years, when -- first of all, we have a management level, which is the minimum level that we feel comfortable that is around -- it's a little below 13%. Having said that, when we forecast for the 4, 5 next years and every year, we are forecasting that Argentina financial system will grow in real terms and that BBVA will keep growing in market share. And considering all that, we are not forecasting that we will reach that level of 13% or 12.75%. So we have some possibilities, of course, of issuing at any given moment, subordinated debt. We do not have at this moment a Tier 2 instrument in our book. So we really are not seeing concerns regarding capital for the coming years. Carlos Gomez-Lopez: And this is a bit technical, but actually, when I was looking at risk-weighted assets, there seems to have been something changing in the formula from second quarter to third quarter. Your capital consumption seems to be much higher than what the loan growth seems to justify. Was there a regulatory change that we overlooked? Diego Cesarini: No. What -- if you are mentioning our decrease in the third quarter, it's mainly because the valuation of our public sector debt [indiscernible] a lot because at the end of the third quarter was the worst moment for Argentinian assets. Bonds were at the worst moment. Next month, in October, our capital ratio will be much higher than in the third quarter. Carlos Gomez-Lopez: Okay. So this was temporary and in October it should go back up. And going back to the loan demand that we mentioned before. So we have this high NPLs that have to be absorbed digested. So the problem right now is lack of demand in terms of customers or lack of willingness on the part of banks to lend until that NPL situation is solved. Carmen Arroyo: I would say it's both. Yes. So in retail, of course, yes, commercial -- so as I mentioned, commercial is another story, and we are okay with that. So -- but in retail, I guess it's both. So these high interest rates are doing part of the situation. But yes, it's lack of demand and also more restrictive lending policies. So yes, both. Operator: Our next question comes from Pedro Ofenhagenen with Latin Securities. Pedro Ofenhagenen: I wanted to ask what risk or pressure points do you identify in this new credit expansion after the electoral result and for 2026? And if there are any specific segments you are -- where you anticipate greater sensitivity maybe? Carmen Arroyo: Sorry, Pedro, I'm not sure if I got your question right. Can you please repeat? Pedro Ofenhagenen: Yes. No, looking at credit growth for 2026, if the -- what risk or pressures do you see if NPLs liquidity or what are you looking at for credit growth? Carmen Arroyo: No, we don't see an issue related to capital or liquidity. So that's for sure. Then of course, as I mentioned before, we need to be cautious on the retail side in NPLs looking at the -- so we need to see where it ends, this high NPLs, what we think is that we will see the worst part by the end of this year, maybe beginning of the next year. And from then on, it should go back to more normal levels. So that's in the retail side. In the commercial side, we don't see anything. So there is demand. So we believe with the reforms and if everything goes in the direction that the government is announcing, what we believe is that there will be more willingness from the companies to go long to make investments, and we will have the opportunity to fund those in pesos and in dollars. So no restrictions in terms of capital and liquidity, I would say it's the most important message to give. Operator: Next question from Mateus Raffaelli with Itau BBA. Mateus Raffaelli: So I'd like to ask about coverage ratios and cost of risk because we've been seeing coverage trending downward covering 99% as NPLs continue to rise in the short-term outlook, at least for continued increase in NPLs, but the bank is still growing significantly portfolios. So how should we think about coverage ratio levels in this particular scenario of high growth and high NPLs? And I know coverage is an output of the models, but it would be nice to hear if maybe this is the core level for coverage ratios and should improve or maybe still comfortable with these levels considering the portfolio growth mix, more commercial retail. And also if you could give us an outlook for retail NPLs, maybe it stabilizes going into the second half of next year or maybe early in that... Carmen Arroyo: Okay, Mateus, thank you for your question. So first of all, maybe it's good to notice that coverage ratio were really, really high because of the lack of NPLs in the past years. So we were at a very good level of this ratio. And now, of course, in a more complex environment, it's normal that you see a reduced coverage ratio. Then these levels, we are comfortable in this 98% to 100% levels for 2025. We believe we are not going to decrease much more for this year. And then 2026, we are already projecting higher levels. So it should be the minimum levels we are forecasting to see. Operator: The Q&A session is now concluded. I would like to turn the floor back to BBVA's team for closing remarks. María Belén Fourcade: Okay. Thank you all for joining the call. And if you have any further questions, please do not hesitate to contact us. Have a good day, and goodbye. Operator: This concludes today's presentation. You may disconnect, and have a nice day.
Jeff Borcherding: Good afternoon, good morning, and welcome to the Q3 interim report for Immunovia. I'm excited to speak with you today about the milestones we've achieved and the progress that we've made in our mission to save lives through early detection of pancreatic cancer. This is a really important quarter for us as it marked the transition from being a development stage company to being a commercial stage company, where we brought our PancreaSure test to the market and saw the initial response to that. We have been very excited about the responses that we've received. Throughout this presentation, I'll try to share a little bit of perspective from some of our customers about the PancreaSure test. And here, you can see one of those comments from Dr. Raj Keswani, who works at Northwestern University, who is excited about offering this screening option to his patients. He calls out the fact that the test has a high sensitivity and a high specificity. And so it's a valuable option for their high-risk patients at Northwestern Medicine. On today's call, we'll talk about the launch of PancreaSure and share some initial results. We'll also talk about reimbursement milestones that we've achieved and what lies ahead. We'll briefly cover the Q3 financial results and our cash position. And then I'd like to share a little bit more information about the AFFIRM clinical study that we announced results for a while back. Just as a reminder, before we talk about the results of the PancreaSure launch, I thought it would be helpful to go back and make sure that we talked a little bit about the strategy that we're pursuing for the test. So one of the things we want to do is really build advocacy, build use among key opinion leaders who practice at the top high-risk surveillance centers across the United States. One of the other things we want to do is make sure that we're smart about how we spend our money. We want to execute a very targeted low-cost launch that leverages our existing resources as much as possible so that our investment doesn't get ahead of our ability to generate revenue. As we think about expanding over time, that's where we want to bring in a partner. And so a lot of what we're doing in these early stages is demonstrating the potential of the PancreaSure test so that as we think about what the potential volume is for the test and the reimbursement potential, that potential is obvious to a potential partner for us. And then finally, it's going to be critical that we continue to run lean, that we operate very efficiently and that we limit our expenses, looking for ways to automate so that we can scale without our expenses increasing at the same time. There's a quote from one of our customers, Ray Wadlow, who is a gastrointestinal oncologist at Inova Schar Cancer just outside of Washington, D.C. And it speaks to the fact that we are making a transition from the development stage to the commercial stage. And as we do that, the fact that we've engaged so many key opinion leaders in our clinical program really sets the stage for us to succeed commercially. Dr. Wadlow was involved in our CLARITI clinical study. And in addition, his patients participated. He said that they're very excited now to use the test that is available in the market. And this is something that we've seen from multiple physicians who were involved in our clinical studies. As we've shared previously, we will launch PancreaSure in 3 phases. And as I mentioned earlier, we want to increase our commercial investment as we start to approach and achieve reimbursement, so that when we start to generate significant volume, we're getting paid for that volume, and we're not investing money in generating too much volume that doesn't generate a lot of revenue. We'll go through 3 phases: Targeted advocacy, which will last until around the middle of 2026, a volume building phase that will comprise the end of 2026. And then as we move into 2027, we will really focus on revenue growth as both the volume builds and we start to get reimbursement from payers. As we think about the first stage that we're in right now, just as a reminder, our objective is to build targeted advocacy. In this phase, we are targeting those key opinion leaders who practice and who screen for pancreatic cancer at top high-risk surveillance centers across the United States. Our sales effort has been very, very limited at this point. We have not yet hired any salespeople. The sales effort has been completely done by members of the management team and I, reaching out to prospects, including both those who participated in our clinical studies, those who used our prior IMMray PanCan-d test and then others that we have met over the years. A really important thing during the 3 phases of this launch is that the metrics that we use to evaluate our progress will change over time. So when we're in this targeted advocacy phase, our primary metric is going to be the number of high-risk surveillance centers that order PancreaSure. That's our key metric of success. Are we getting more and more of those top physicians, those experts in the field to raise their hand and say, "I want to use the PancreaSure test with my patients." That's a really critical metric for us, more important than volume, more important even than revenue. Those things will come. But the first thing that we have to do is build that advocacy, because if we build that advocacy, that sets the foundation for us to grow the business going forward from here. I'm very excited to share our progress so far on that key metric. As of the end of the third quarter, we had 10 leading pancreatic cancer centers who had implemented PancreaSure, and that's just in the first month. If you remember, we launched the test on September 2. So in just those 4 weeks, we were able to get 10 centers registered and up and running ordering the test. You can see some of the names here on the right-hand side of the screen. We can't disclose all of them. Some of these centers have a prohibition against using their names and sharing them commercially, but we are very excited by the fact that we've got a range of systems represented here. Some of them like Northwestern and Penn Medicine are top academic institutions. Others like Hackensack Meridian and HonorHealth are community health systems that are not affiliated with an academic center, but do have a high-risk surveillance program. This represents the range that we want to pursue. And you can also see here a good geographic range. So we've got everything from the Northeast with Penn to the West with University of Colorado Health. HonorHealth is in Arizona and Hackensack Meridian, New Jersey. So we've got a good geographic representation across the country. Again, that's important because we want to build advocacy overall, but also in specific regions within the country. I mentioned that our metrics will evolve as we move through the 3 phases of the launch. When we get into the volume building phase later on in 2026, that's when our primary metric will really become PancreaSure volume, and we'll start looking at revenue as we get into 2027. It's not that we aren't focused on how to generate revenue. It's just that the most important thing that we can do in the near term to ultimately generate the revenue that we need is to focus on building that targeted advocacy. One of the things I think is important to understand is how does our testing process work? And what does that mean in terms of when a test order becomes a completed test and ultimately leads to a patient paying for that test. So here, we have a simple flow chart that shows the fact that once a physician orders the test in our online portal, we immediately contact the patient to schedule their blood draw. That can happen the same day in some cases. In other cases, it may take us up to a week to reach that patient. Once we reach them, we schedule that appointment to have their blood drawn so that we can collect the sample. Sometimes that happens as soon as the next day. In other cases, because of that patient schedule, it may take a few weeks to get that appointment scheduled. Once the blood is collected, it's shipped overnight to our lab in North Carolina. And from there, it takes us somewhere between 2 and 10 days to run the test. Running the test is actually quite quick, but we want to batch tests together so that we're not doing a small number because that increases our cost per test. By batching them together in larger batches, we reduce the cost per test, and we deliver the results in a reasonable time to our customers. As you see here, once we deliver the results to the provider, we send out the bill within a day to the patient. And then from there, as you can imagine, it may take some time to collect the revenue from that patient -- to collect that payment. It can be as quick as the next day if they use their credit card to pay online. For some people, we need to send them a couple of reminders before they pay. So in total, what you can see is that we can, in some cases, go from a test order to cash collection in an ideal scenario as quick as about a week, and that's about as quick as we could do it. But there may be other situations where it takes a few months or even longer. So that's just something to be aware of that we know this is a dynamic in this market, and we're planning accordingly. One of the other things that will impact how quickly an order turns into revenue is the fact that we give our physicians what we call future order functionality. What that means is that if a patient is in the physician's office, maybe they're having an MRI or they're having an endoscopic ultrasound. That physician may want to use the PancreaSure test. But in many cases, many of our physicians tell us how they want to use the test is at 6-month intervals in between that imaging that's done with an MRI or an endoscopic ultrasound. So what we do is we give the physician the opportunity to place a future order while that patient is in their office, while that patient is right in front of them. That order gets captured in our system. And then we know once it's time for that order to happen, we go through the normal process where we contact the patient and schedule the blood draw. In some cases, that might lead to waiting to reach out to that patient for 6 months, which is probably most common. But we've seen some future orders placed as far out as 9 months. So we know that this is something that ultimately will really bolster our results. It's essentially building a pipeline of future tests. While we're in the early days following launch, some of these orders are just going to take quite a while to work their way through the system. Again, as we think about this targeted advocacy idea, I just wanted to share one last quote from one of our key opinion leaders. He works at New York University. He leads the pancreatic cancer surveillance screening program there. And Dr. [ Ganda ] talked about the fact that NYU is a major network of hospitals with different levels of access to cancer screening across their system. In fact, one of their sites is actually down in Florida and treats New York residents who are in Florida at different parts of the year. Because PancreaSure is a simple blood test, NYU can use our test to expand the access within their system. Previous research within NYU shows that only 1 in 5 people who is eligible for pancreatic cancer screening is actually getting screened. A big part of the problem is access to the imaging approaches that have always been the standard of care for pancreatic cancer surveillance. By giving them a blood test, we give them a new option. And one of the things that's especially as exciting is that we've been working with Dr. Ganda on the initial setup, and that setup has been in the New York area. We actually had one of the physicians down in Florida who practices with the New York University practice in Florida, reach out to us proactively, not even realizing yet that the New York group was starting to set up this program and said, we'd really like to take advantage of the PancreaSure test. How do we get set up to use it. So I think that speaks to the fact that there is a clear demand for the PancreaSure test. Moving on then from our launch progress. Let's talk a little bit about reimbursement and the milestones that we've achieved and what lies ahead. If you think about getting reimbursed for a diagnostic test in the United States, there are really 4 elements that come into play, and we refer to them as the 4 Cs: Code, Cost, Coverage and Contracts. A Code is the billing code that's used to identify a test. This really facilitates the reimbursement and billing process when we send a claim to a reimbursement or an insurance company and ask them to reimburse us. Cost refers to the price of the test, and that's really determined by the clinical lab fee schedule, which is set by Medicare, a government agency. Coverage is the payer's determination that the test is reasonable and it's medically necessary. Essentially, what they're saying with coverage is we believe that this test adds value for the patients who are covered by our insurance plan, and therefore, we're going to pay for our patients to have this test. And then Contract is something that happens with commercial insurance companies where we enter into a contract, it really sets terms of payment and really ensures that the process runs smoothly. If you look at our progress across these 4 elements, what you see is we've made very good progress in 2025. Earlier this year, we received our code, and that code is effective as of October 1, 2025. I'm also very excited to share literally just late yesterday, we received notice from Medicare that they have set the final clinical lab fee schedule rate for the PancreaSure test. They've set the rate at $897, which means that when Medicare reimburses us in the future, that reimbursement will be $897. We're excited about that rate. We think that it really fairly reflects the value of our test and reflects the clinical and economic impact that we can have and that Medicare expects us to have on the people who use the Medicare program. The next step is coverage, and we don't have coverage in place today. And the key there is to complete and publish the clinical studies that show that medical necessity that prove to Medicare and prove to commercial insurers that this test is something that should be included in the physician's approach to early screening for pancreatic cancer. Let's talk a little bit more about coverage. So to prove medical necessity and secure coverage, we've got to generate 3 types of evidence: analytical validation, clinical validation and clinical utility. Analytical validity means does the lab measure the biomarkers accurately? It's essentially a very lab-focused measure of are we for the 5 biomarkers in the PancreaSure test accurately measuring the level of that biomarker in the patient's blood. You can see that we've completed our studies there, and we're actively pursuing publication of that study. Next is clinical validation. And clinical validation essentially means if you're given a blood sample and you run the test, can you accurately distinguish cancer from a sample that doesn't have cancer. So you're likely familiar with the results that we've announced previously from the CLARITI study and from the VERIFI study. On today's call, I'm going to share with you results from a third study called AFFIRM. We have just had the CLARITI study published. It was published in the Journal of Gastroenterology, which is really considered the premier journal in gastrointestinal disease. And one of our key opinion leaders who publishes extensively said he was incredibly surprised that they selected a diagnostic test to publish an article in gastroenterology. He said it really speaks to the quality of the CLARITI study and the promise of the PancreaSure test. So for analytical validity and clinical validity, we have excellent data, and we're largely ready to submit that to insurers. The key is just making sure that everything is published. Clinical utility is the final part of the clinical evidence package that we need to generate. We currently have 2 clinical utility studies underway. These are studies that are being funded by the National Institutes of Health of the U.S. government. So there's very minimal cost to us. But we're looking to conduct additional studies in 2026 and beyond. Why additional studies? Well, there's a couple of reasons. One, the 2 studies that are underway will take a few years to complete. So we want to have some clinical utility studies that can be done more quickly. That's why we'll be doing survey studies that we can complete in the first part of 2026, so that we can submit them as evidence of clinical utility in 2026. Another reason that we want to show or demonstrate clinical utility across multiple studies is that there are multiple ways that the study can -- or that our test can show value. Clinical utility basically means do you impact physician decisions and/or can you improve patient outcomes based on using the test? And there are, as you can imagine, multiple ways to show that because the test is used different ways. So for example, if the test is used to evaluate pancreatic cysts for patients who are going to surgery, that's a different kind of clinical utility than if that test is used in someone who has a family history of pancreatic cancer and they're being monitored over time to identify cancer as quickly as we can. So we want to do multiple clinical utility studies so that we really build out that body of evidence. As we now switch to the Q3 financial results and the cash position, we are excited to share that this was a solid quarter for us from a cash flow and financial results standpoint. We had net sales of SEK 101,000. That was almost entirely royalty revenue. As we discussed earlier, it will take quite a while for orders that were placed in September to actually generate revenue. So we don't expect to see that for a little while here. That revenue will come more in 2026 as we ramp up our volume and as we start to realize that revenue as patients work their way through the testing process. Our operating loss for the third quarter was SEK 25.5 million. Importantly, as we approach the launch, we also look for any way possible to conserve cash. So our cash burn was reduced to SEK 5.4 million per month, and that's well below the guidance that we have had in place of SEK 8 million to SEK 10 million per month. I do want to highlight, as we move forward with the launch, we certainly expect to go back more to that previous guidance level of SEK 8 million to SEK 10 million, but we wanted to do everything we could to preserve cash prior to the launch. At the end of the third quarter, our cash was SEK 26.6 million, and that was bolstered by a bridge loan that we had received during the quarter. As you recall, our cash position was bolstered by a successful rights issue. That rights issue actually completed after quarter end, but we were very excited with the way it played out. We were excited that guarantors were interested in guaranteeing the rights issue to 100%, even more grateful and excited that 87.9% of rights issues were subscribed. That really, I think, speaks to the support that we've received from shareholders, and I want to express how much I appreciate that. I know that it's been a difficult ride as a shareholder and appreciate the continued trust that you have placed in us. Because of that trust, we were able to raise just over SEK 100 million which resulted in a net cash infusion of just under SEK 70 million when you account for the repayment of the bridge loan that I mentioned. And that cash will take us into the third quarter of 2026. We'll use these funds to fund the commercial launch and also those clinical studies that I mentioned earlier in the clinical utility arena. Finally, before we wrap up and transition to questions, I want to share the results from the AFFIRM clinical validation that we recently completed. The AFFIRM study comes after 2 prior studies. You'll remember that we did the CLARITI study and the VERIFI study. Those were both intended to show that we could accurately detect Stage I and II pancreatic cancer when you were looking at that cancer compared to high-risk controls. So control samples from people who have that familial or hereditary risk for cancer, people who have pancreatic cysts that put them at risk for cancer. And so can we distinguish in between those 2 groups? The CLARITI and the VERIFI results showed we absolutely could. We had very strong sensitivity, meaning that we could detect cancer as well as specificity, meaning that we didn't have a lot of false positives where we returned to positive result when there really wasn't cancer there. One of the questions that we got from physicians after those 2 studies was, we understand the fact that you focused on Stage 1 and 2 for early detection. That's really important. But are you certain that if a patient has Stage III or IV cancer, you will detect it. So that was one of the key questions we wanted to solve or wanted to answer. Another question was, how would the test perform in a normal patient population, meaning those people who are not at high risk. That's important because many of our competitors in the early detection space have historically used normal patient populations as controls. What happens is it's easier to avoid a false positive if you use those normal patients as your controls. So we wanted to have the data that allowed an apples-to-apples comparison between our test and for example, some of the multi-cancer early detection tests that are out there. We were thrilled with the results. They turned out exactly how we would have hoped. So PancreaSure showed excellent sensitivity, 10 percentage points higher in Stage III and IV cancer compared to the sensitivity that we showed in Stage I and II. If you look at the VERIFI and the CLARITI studies, on average, we were able to detect about 78% of Stage I and II cancers. And in the AFFIRM study, where we looked at Stage III and IV pancreatic cancers, we detected 88% of those cancers. So literally 10 percentage points more. Similarly, we saw excellent specificity even higher than what we had seen with the high-risk controls. We showed 98% specificity in those healthy controls in the AFFIRM study. So this data adds to the body of evidence that says PancreaSure is a very accurate test. The fact that it becomes more accurate as a patient moves through the stages of disease shows that our 5 biomarkers really are detecting cancer and increasing or decreasing as cancer comes to be in a person's body and over time as that cancer grows and develops. So another excellent set of clinical data that really gives us confidence in the test itself. With that, I'm excited to see if there are any questions. We can certainly take questions for the call in as well as you can ask questions using the chat feature as well. Operator: [Operator Instructions] We will now begin the question-and-answer session. [Operator Instructions]. We have a question from Niklas Elmhammer from Carlsquare. Niklas Elmhammer: Thank you for excellent presentation and very clearly explaining the steps of reimbursement and commercialization. I was wondering what you know about the test sold so far? How is it used to complement to other screening methods, such as endoscopic ultrasound that's your -- the comments from the clients seem to suggest or -- is it perhaps subjects that are eligible, but not doing screening for some reason and sort of reaching a new patients. Jeff Borcherding: Yes. Thanks for the question, Niklas. What we're hearing is all of those things. So for existing patients, we have physicians who are using the test on the 6-month intervals in between their regularly scheduled imaging, whether that's MRI or ultrasound or, in some cases, even a CT scan. We have some physicians who are using the test at the same time that they do imaging. Essentially, they want to sync up the 2 so that they can understand how the results compare. But we do certainly see a number of physicians who are using the test for people who are not in surveillance today. And that can mean a lot of different things. So for example, some physicians are using the test for people who don't meet the formal criteria for pancreatic cancer but maybe they have a reason to be concerned. So for example, this might be someone who has one relative with pancreatic cancer but maybe they don't meet the formal definition for screening yet. Maybe they're too young or the relative was not a close relative but more distant relative. So we're seeing them use the test in that situation. We're also seeing them use the test for people who are younger and really don't want to sign up for 30 years or more of intense imaging surveillance. So I think we'll learn a lot more about how the test is being used. We're conducting a quality survey now. And one of the things that we're asking physicians to do is provide information about how they are using the test for each particular patient. So we look forward to sharing that data in the quarters to come. Niklas Elmhammer: Okay. Great. And a little bit going back, you have explained a lot about the reimbursement process. So how is it going sort of with Medicare -- is it reasonable to expect reimbursement from Co-Medicare in 2026. Jeff Borcherding: Yes. So Medicare is our clear focus for reimbursement initially. It is a very large payer. It's a very important payer. It's also one of the payers that is most proactive about providing coverage. So it is our clear focus. We are waiting for that last clinical utility evidence that I mentioned, those surveys, we will then be submitting to Medicare in 2026. And in terms of the timing of when that coverage actually happens, that's something that we can't really predict. The time line is not set in stone by any stretch. So we will be able to share information about when we submit. And then at that point, we won't know when we will get coverage. The one thing that I will share is that now that we have a code and we have a rate we can begin submitting claims to insurance companies. And so we do hope to see some insurance company reimbursement in 2026. It will be limited because we don't have those coverage policies in place yet, but we are hoping to see some of that in 2026. Niklas Elmhammer: Great. That's sounds promising. And a little bit regarding the organization, end of the period report 12 employees, I believe, so that's excluding any account managers, I believe they should be added going forward. Jeff Borcherding: That's correct. So our plan is to add 3 strategic account managers who will sell the test throughout the country. And I think that's going to be a really important addition to the team. Niklas Elmhammer: Okay. Great. And finally, you have provided some guide. And what about R&D costs going forward? Should we expect that to ramp up or stable? Jeff Borcherding: Yes. I guess what I would say is our intention is to keep our total expenses and cash burn within the guidance that we've shared previously of $8 million to $10 million per month. And so there may be times when our R&D expenses ramp up, but we will -- there will be other savings that we try to offset that with -- we'll be finalizing our 2026 budget here very shortly and getting that approved through the board. And part of that process is to make final decisions about a couple of the clinical studies that we're considering, but we need to think about how that fits into the budget financially. Operator: Sir, so far, there are no further questions from the phone. Jeff Borcherding: Okay. We've got some questions on the chat line. So I'll share those and then answer them. So one is you described the embrace of the PancreaSure test and the scientific community. How do you convert that embrace into orders and sales. I think this is a great question. So what we see is that there is a high level of interest in the experts who run the pancreatic cancer surveillance programs. They are eager to use the test and to start incorporating it into their practice. At the same time, that requires change. They have to change their processes, they have to change, in some cases, formal protocols. And so part of what we will do is work with them to understand how do those processes need to change? What specific patient populations do they want to use the test for, how can they identify those people within their patient base and what steps do they need to take in order to be in a position to utilize the test fully. And that's one of the Niklas asked about staffing. That's one of the key ways that the account managers will add value. We really want them to get in, get integrated with these high-risk surveillance centers get to know the staff people because ultimately, while the tests are ordered by the physician, the staff people really play a crucial role in identifying patients for testing, making sure that orders are placed and following through to make sure that the testing happens. So all of those things will be key elements of our effort to make sure that we can turn that enthusiasm into orders and sales. A question, how much are patients paying for the test. So that varies based on their ability to pay. We offer patients financial assistance if they have lower income. And so the amount that a patient pays could be $0, it could be $100. It could be $200 or it could be as much as $995. People who are not eligible for financial assistance are going to pay somewhere between $750 and $995. And as time goes on, we'll be able to provide a better estimate of what's our average selling price? And what's the average amount that a patient pays for the test. Are we still pursuing a commercial ally or partner? Can you tell us about that process. So yes, we are absolutely still very interested in partnering with a large diagnostics company that will ultimately help us expand our physician reach significantly and drive volume. So what we do currently is keep those potential partners informed about different developments that are happening. When we attend conferences, we schedule meetings with those potential partners. For example, I'll be attending the JPMorgan conference in January that brings together many of the top life sciences companies in the world and we'll be having a number of meetings with those potential partners at that time. As you can imagine, it's difficult to say when that will lead to a partnership agreement being put in place. The reality is that we want to make sure that we don't enter an agreement too soon. That may sound strange, but we want to enter into an agreement when we've demonstrated the potential of PancreaSure when we've made more progress on reimbursement so that the split of value between us and that partner is more shaded to Immunovia's benefits. So we're absolutely still pursuing it and are excited to move forward with that. Okay. I don't think we have any other questions, unless there's any that somebody had in mind that they want to ask quickly before we wrap up. Operator: So far, there are no further questions from the phone. Jeff Borcherding: Okay. Well, thank you very much for your time. I really appreciate you joining the call today to learn a little bit more about our progress in launching the PancreaSure test and in building towards reimbursement for the test in 2026 and beyond. I'm thrilled that we have crossed over and made the transition to the point where we are now commercializing the PancreaSure test. It really is a major step forward for us in achieving our mission of saving lives through early detection and it's a really important milestone for the company and for our shareholders. So thank you for your support, and we look forward to more good news in the future. Take care.
Operator: Ladies and gentlemen, thank you for standing by. I am Geli, your Chorus Call operator. Welcome, and thank you for joining the OPAP S.A. conference call and live webcast question-and-answer session to discuss the third quarter 2025 financial results. Please note, a video presentation has been distributed and is also available on the OPAP Investor Relations website. [Operator Instructions] And the conference is being recorded. At this time, I would like to turn the conference over to Mr. Jan Karas, Chairman and CEO of OPAP S.A.. Mr. Karas, you may now proceed. Jan Karas: Good evening or good morning to everyone. We are glad to welcome you here and present to you a strong set of Q3 2025 results, which reinforces our confidence in achieving full year 2025 outlook. I hope you have enjoyed the presentation distributed earlier today, and we would be glad to answer any questions related to our financial performance. With regards to the hot topic of the proposed business combination with Allwyn, we would like to invite you all to participate to a combined Capital Markets Update this Friday, November 28, at 1:00 p.m. Athens time, where together, OPAP and Allwyn management teams will provide you with additional information regarding the proposed transaction and will answer all your questions. Now let's proceed directly to the Q&A to make the discussion more engaging. Geli, over to you. Operator: [Operator Instructions] The first question is from the line of Kourtesis, Iakovos with Piraeus Securities. Iakovos Kourtesis: Congrats on the good set of results. What I would like to ask, as far as I understand, I cannot ask -- this call refers to your results, so I can ask only for OPAP, this I understand. If you have any update on the -- remember that you've said that on 7th of November, you submitted your proposal, your bid for the Hellenic Lotteries concession. If you have any update for us on this front, where is the whole procedure starting at the moment? Second thing is that in the -- during the fourth quarter, do you plan to proceed with any actions that will enhance growth on GGR and will allow us -- allow you to stay above the 5% threshold for GGR growth for the full year, although your guidance calls for low single digit. That will be from my side. Jan Karas: Thank you for your questions. So on the Hellenic Lotteries licenses tender, first, and for anybody who may not be familiar, we are participating in the second phase of the tender process for the Greek state lotteries license, which we refer to here. And at this stage, we have submitted our binding financial offer. And we are currently awaiting the outcome of the evaluation, which is being conducted by the growth fund. So as soon as we have any news, we will certainly share with you through a public press release. But the first one actually announcing that the ball is now on the side of growth fund. And so the first announcement we should see is from growth fund that we will then follow ourselves. When it comes to your second question, the Q4 obviously is, as always, full of various commercial actions that are supporting the maximum push for the best possible results on the annual basis. Fourth quarter, as always, is a very important period for us, and we believe that we have a solid set of commercial initiatives that should bring us to the year-end with the expectations that we referred to when it comes to our full year outlook. So we are certainly confident to deliver what we have promised to you. Operator: [Operator Instructions] The next question is from the line of Nekrasov, Maksim with Citi. Maksim Nekrasov: Thank you for the presentation earlier. I have a couple of questions on your businesses. First is on the betting side. We saw a little bit of decline in the online betting. And I understand the base of last year, right, and some results we saw from the peers. But at the same time, as I understand, offline betting was slightly positive. So I was wondering what drives that difference, right, between online and offline betting performance. And also, I think for at least a couple of quarters, we saw some improvements in the instant and passives and VLT GGR acceleration. So I wonder if there are any specific factors for those 2 businesses, basically acceleration in the last couple of quarters compared to the previous few quarters? Jan Karas: Let me elaborate on the first question. We will kindly ask you to rephrase your second one because we are not sure we understand. On your first question with the sports betting, we certainly have -- we like to believe that we a have very solid underlying trends, at least from what we see from the data as well as consumer feedback. So everything that needs to be in place is good, healthy, solid and strong and foreseeing further growth of this important gaming vertical, especially when it comes to online. The Q3 was special indeed, and strongly influenced by customer favoring results, and that's probably what you have also commented observed across the industry in general. The difference between online and retail performance is driven by the different structure when it comes to pregame bets versus live bets, which obviously have higher sensitivity on that front. On your second question, would you be so kind and rephrase one more time? Maksim Nekrasov: Yes. So -- yes, we saw improved performance of VLT and the Scratch in the like second and third quarter of '25, some acceleration compared to the previous a few quarters of bit softer performance. So I wonder what was driving that and whether you think this growth is sustainable for those businesses? And maybe if I may just follow up on the first question, right? And maybe if you can comment on the competition levels in online, right, that you see in sports betting and also on the casino side. Jan Karas: Okay. So one by one. VLTs and Scratch performance as a result of our focus and commercial initiatives and development of the relevant verticals. Typical example, evolution of the Scratch games portfolio where we put a lot of emphasis on the families, and we want to establish a families of products that people understand better. So the whole offer is much more clearer than before to the customers and when you launch a new product in the family, you are, at the same time, bringing new freshness to the whole family as such with the new product. At the same time, we have launched some exciting new price categories, like the EUR 20 Scratch, which seems to resonate really well with the customers. Similar on the VLT vertical side, innovation of the product offering, new machines, new screens, new experiences, new games, a lot of efforts put into events in our play stores and on the experiential side. So there is a series of initiatives. There's not one thing that made a big difference. It's really that consistency and managing properly the complexity of various initiatives that in total, bring the new energy to these 2 verticals that we are very pleased with when it comes to results. Both VLT and Scratch are businesses where we see further opportunities to be explored. And thus, these are certainly categories that we will continue to actively explore. When it comes to sports betting competition, competition in the sports betting world has always been fierce, that continues to be. We have a lot of respect for our competition. And with both OPAP's own sports betting and casino proposition, we do our best to be competitive. Nice example might be the portfolio of exclusive games we are launching now in Q4 in iCasino. That should refresh the offering because exclusive games is something that customers are very hungry for. And the same goes for our subsidiaries, Stoiximan that is continuing very strong performance and good position to fight the competition in their grounds. So overall, our dual brand strategy continues to be, we believe, a very successful formula for our presence in the competitive online world. Did we cover your questions or anything else you would like to ask? Maksim Nekrasov: No. It's been very clear. I think more questions this Friday regarding the deal. Operator: The next question is from the line of Draziotis, Stamatios with Eurobank Equities. Stamatios Draziotis: Just a couple, if I may. Just firstly, on the outlook, given you've delivered quite healthy growth -- operating profit growth in the 9-month period. I was actually surprised that you've not been more specific regarding what you target for in terms of profitability for the full year. What is it that constrains you from doing that, would you say? And the second question has to do with online, a follow-up, I guess, on the previous questions. You mentioned the tough comps and the results, which were headwinds this quarter. I'm just wondering what growth in online overall you think is sustainable now that some of the vertical are starting to mature. Thank you. Pavel Mucha: Yes. This is Pavel Mucha. So there is nothing which would constrain our outlook. And we are pleased with the performance so far. And it is true that we feel highly confident that upon a good final quarter, which typically is the case with strong Q4, we realistically expect to comfortably deliver the full year outlook. And also, we confirm our EBITDA margin of 35%. So we are quite comfortable that we will deliver the guidance as we provided it. Jan Karas: Okay. And on the second question regarding the sustainable growth, our expectations generally are mid- to high single digit to be specific. Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Karas for any closing comments. Thank you. Jan Karas: Thank you very much, and thank you all for being with us today and for your continuous interest in OPAP. Our Investor Relations team, as always, will be happy to address any additional questions you still might have after this call. And we will be very much looking forward to see you on the Friday session. You will find all the relevant invites in both OPAP and Allwyn websites. Have a great rest of the day. Thank you. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.
Alexander Saverys: Good afternoon and welcome to the Cmb.Tech's Earnings Conference Call for the Third Quarter of 2025. My name is Alexander Saverys, and I'm joined by my colleagues, Ludovic Saverys, Enya Derkinderen and Joris Daman. We have the usual topics we want to discuss with you today, starting with our financials and the highlights of the quarter. We will then move to the Marine division market update, and we will close with the conclusion and Q&A. I would like to start with the financial highlights and will therefore hand over to our CFO, Ludovic. Ludovic Saverys: Thanks, Alex. If you move to the next slide, this is the typical overview of our company now post Golden Zhoushan merger. We have roughly $11 billion worth of assets on the water and being constructed over 250 ships. And we'll go further towards the metrics at a later time in the slide deck. But if you move to the next slide, Alex, you'll see that we finished the quarter with a result of roughly $17 million of net profit. Our EBITDA stood at $238 million, where we end the quarter with ample liquidity. We have more than $555 million worth of liquidity in the company. The contract backlog stayed the same, which means that we added a little bit compared to the natural attrition we have quarter-on-quarter. The CapEx right now sits at $1.6 billion and our equity on total assets, book equity for the bond covenants still sits below -- above the 30.4%. We had a pretty active quarter, obviously, apart from finishing the merger with Golden Zhoushan, but the Board has decided to declare an interim dividend of $0.05 per share, which is going to be payable early January. Our CapEx program is now fully funded. Happy to say that we have signed all new loan agreements on the remaining CapEx and the equity component has been covered by own liquidity and sale of assets. Contract backlog mentioned still hovering around $3 billion, but we definitely took a big step forward again in our rejuvenation of the fleet where we took delivery of 7 newbuild vessels, which have been announced in our trading update. We delivered 2 ships in Q3. But more importantly, we will generate another capital gain of roughly $50 million on the delivery of the VLCC Dalma, the Capesize Battersea and Zhoushan and the Suezmax Sofia in Q4. And on top of that, we just announced the order of a multipurpose accommodation service vessel, which is similar to our CSOV, but in a bigger format, but Alex will discuss that at a later stage. Moving towards the coming quarters. We're quite excited with the timing acquisition of Golden Zhoushan, a big increase in spot exposure on dry bulk, which is happening at the right moment. It's playing out well. We have 55,000 shipping days in '26 from which roughly 47,000 is spot. With a big focus on large tankers and large dry bulk, we're perfectly positioned to enjoy the good markets that we have today. Moving to the next slide. Here, we've made a simple assumption. If the market today would continue going forward, we would show what the free cash flow capacity is at current rates. This is a pure assumption, but you could see that at today's rates, we would add another $600 million of liquidity over a year, on top of the $420 million that we anticipate to pay back on the bonds and on the bridge financing. Happy to say, by the way, that we'll reduce the bridge by another $300 million by end of this quarter. But this slide shows that with the spot exposure and the good market we have, we can generate meaningful free cash flow growing the operational leverage of the company. And if people sometimes don't like to spread out over a year, you can easily filter this into quarter-by-quarter. And this would mean at today's market that we would add $250 million free cash flow per quarter, which is, I think, is a pretty strong sign of our operational leverage. I'll move the floor back to Alex on the various marine divisions we have. Alexander Saverys: Yes. Thank you, Ludovic. I want to take you through our 5 divisions and the markets in which they operate and what has happened in Q3 and is happening right now in Q4. You can see our usual slide with the 5 main markets we operate in, the tankers, dry bulk, containers, chemicals and the offshore markets. You see that we are still positive on tankers, positive on dry bulk, positive on the offshore market. We are cautious since a couple of quarters already on containers and on chemicals. And that has to do with the fundamental supply-demand numbers. If I start with the divisions where we're a little bit more cautious, containers and chemicals, you can see the demand numbers for 2025 in containers were positive, but are expected to be quite flat or even down a little bit in 2026, combined by a huge order book in containers, 32% and the fact that we are expecting gradual unwinding of the rerouting away from the Red Sea, so that ships would go through the Red Sea again, which represents today between 10% and 12% in ton miles. We think container markets will have a difficult time next year and probably also the year thereafter. Same can be said for chemical tankers, be it to a lesser extent. Supply-demand is a little bit overweight in terms of the number of ships coming on stream. So we're also a little bit cautious on the chemical tankers. As you know, our 2 divisions Delphis and Bochem are mainly covered by time charters and have very little spot exposure. If we turn to the other segments, starting with dry bulk, which is by far our biggest exposure today. We see that there was an increase in tonne-mile demand growth for Capesizes this year of 0.8%. So not very meaningful, but still positive, expected to ramp up next year to close to 3%, combined with a supply figure where only 9% of the fleet is on order, where the fleet is also aging, 32% of the Capes is 15 years and plus, we believe that supply demand fundamentals on dry bulk are actually very strong. On tankers, we are seeing demand growth this year, next year in tonne-mile. We see that the fleet is growing, but because of all the inefficiencies that we are seeing in the market, and I'll talk about that in a minute, we still believe that definitely, in the short term, the supply-demand figures look very good for tankers. Last but not least, on the offshore, offshore wind, but also offshore oil and gas. We have seen the offshore wind markets grow even though some projects have been postponed. But therefore offshore supply vessels, there has been a lot of extra demand for the oil and gas from the oil and gas market. So we are seeing offshore wind vessels going into the oil and gas market and supply-demand fundamentals definitely in that market are also positive. I'd like to zoom in to Bocimar and maybe go back one slide. You see here one of the vessels from Golden Zhoushan that has been renamed to the Mineral Sakura. So our renaming program is in full swing. We are keeping the Golden Zhoushan or the Golden prefix for our Panamaxes, but are renaming all our Capesizes and Newcastlemaxes to Mineral prefixes. We have 3 large divisions in dry bulk, our Newcastlemaxes, our Capesizes and our Kamsarmaxes, Panamaxes. And we focus on the Newcastlemaxes first, what have they done in Q3. We achieved a TCE of $29,500. And in Q4 to date, we are at close to $34,000. On our Capes, the number for Q3 is $20,500 going up in this quarter at $26,200. You can see that we've already fixed quite a substantial amount of ships for Q4, but that number could still go up a little bit if the current markets stay strong. On the Kamsarmaxes and Panamaxes, definitely a positive surprise for this year. We have seen rates better than anticipated. We achieved rates around $13,500 in Q3, but that's already up in Q4 to $17,000. Main drivers for dry bulk when we look at all the indicators, a lot of them are green. It's positive on the China steel mill utilization. It's positive on soybean imports to China. Brazil iron ore exports there are also very good. And of course, the dry bulk fleet supply is growing, but we are seeing definitely in the larger segments, more demand growth than supply growth of vessels. Sorry for that, just was a bit too quick. Zooming in on the demand of iron ore, coal, grain and bauxite. You can see that all numbers are positive, expected positive for '26 and '27, except for coal, but we believe definitely for the larger sizes that iron ore and bauxite are compensating or overcompensating the less demand for coal. Watch the space on grain as well. Not really a big driver for Capesizes, but important for our Panamaxes. The numbers there are very positive. And with the recent lease agreement on tariffs between China and the U.S., we're expecting that demand hopefully to continue on the tonne-mile side. If we look at the number of ships on order compared to the existing fleet, you can see that in 2026 and 2027, we are going to add some Capesizes to the market. But all in all, including '28, the order book to fleet is only 9%. The number for Panamaxes is 14% order book to fleet, but also there, with the demand figure, I think supply-demand should be balanced and definitely looking positive for that market. An important number to highlight is the average vessel age. As you can see, both Panamaxes and Capesizes are at historical highs in terms of average age, which always bodes well for potential scrapping. The next 3 slides are providing you more information on the Brazil iron ore trade, the Australia iron ore trade and the Guinea iron ore and bauxite trade. On all 3, I can say that we are at 5-year highs in terms of output. You can see the numbers there on the slide. And we've basically tried as well to highlight the seasonality. Seasonality in the Atlantic Basin in Australia and for Guinea is dependent on rain. The rainy season usually in Brazil and Australia is in the first quarter. However, in Guinea, that's usually in the third and fourth quarters. So we see that the guinea season can actually help our markets because when Australia and Brazil are down, they are up. And actually, in the rainy season of Guinea this year, it was less than expected. So we saw some good outputs regardless of the rainy season. The key takeaway here from this slide and from the Australia slide and from the Guinea slide is that we are seeing volumes up, volumes at 5-year highs and seasonality in Q4 and Q1 actually supportive. I'd like to talk about our tankers, Euronav, our Tanker division and crude oil transportation. We have a trading fleet of 10 VLCCs with another 4 ECO VLCCS on order. Some of the pictures that you have seen during this presentation highlight the new VLCC that we took delivery of a couple of weeks ago, the Atrebates. We have another 4 coming in the following weeks and months. We achieved $30,500 in Q3. So far in Q4, we are at $68,000 with 78% fixed. We believe that number can still go up, the fixings and the bookings that we have done in recent days and in the coming weeks are looking very promising. We sold 1 older ship, the Dalma, which generated a capital gain of $26 million. We've extended 1 ship by year, the Donoussa, and then we delivered 2 vessels to the new owners in Q3, the Hakata and Hakone. On the Suezmaxes, we have 17 vessels on the water. We have another 2 ships coming in the fleet next year at the end of Q1. We sold 1 Suezmax, the Sofia, which was delivered in Q4. And the rates we achieved in Q3 was strong, was $48,000. And Q4 quarter-to-date, we are close to $60,000. But again, there, we still have some days to fix. So there is upside to that number. When we look at the main drivers and the main indicators, we see that a lot of indicators are positive. And also on the tanker fleet supply year-on-year, it's still a moderate fleet growth. But let's look at what's coming. Zooming in on the demand, you can see that the forecasts are that there will still be an oversupply of oil in the coming months and quarters. That leads to more storage, that leads to more oil on the water, that leads to definitely, in the short term, better rates. Because if we look at the supply of vessels, you see that this year, there's been very little new ships coming on the water, but it's starting to creep up. So next year, '26 and in '27, we will see more Suezmaxes and VLCCs come to the market. If you look at the average age of the fleet, this new supply should definitely be manageable. So in the very short term, maybe even medium term, we are still bullish on rates for tankers. What happens thereafter, a lot will depend on how many more tankers will be ordered and added to the order book. We are not at the single-digit numbers anymore. For the VLCCs, we're at 15% order book to fleet and Suezmax is 20%. So it's not what it used to be, but I would say that the short to medium term, things are still looking very good. And also the age of the fleet is supportive. On containers, we can be quite brief. As you know, the exposure we have on containers is limited. Actually, it's 0. We have fixed all our ships to 4 vessels on the water to CMA CGM and then we have 1 ship coming next year on a 15-year charter. The market on containers has weakened. You can see the SCFI, which reflects the freight rates for containers paid. It has slipped down and is now at a level which is the lowest of the past 2 years. The high order book, more than 30% of ships on order, plus the Red Sea situation, which will unwind, lead us to being quite cautious on the supply side. Demand should also be lower next year. So container markets could be up for a bit of a rough patch. Chemical tankers. There, our spot exposure is also very limited. We have a couple of ships operating in a spool. So that's basically our spot exposure. All the rest is time chartered. We still have quite an interesting order book coming with all ships having been fixed. We have one more chemical tanker that has already been christened, but that will deliver soon coming to our fleet. Next year, we'll have 2 product tankers coming to the fleet, which are fully fixed. And then we have our ships in '28 and '29 that were fixed to MOL that will come later. But -- so our spot exposure on chemicals is relatively limited. It's a less volatile market, but it has come off its very high levels of last year and the year before, but we are still at very healthy levels. And then I'll finish with WindCat, the offshore wind division. Some of you might have seen in our press release but also in a separate WindCat press release that we ordered a new CSOV, an enlarged version of the CSOV, which we call an MP-ASV, and I'll say something about that in a second. But maybe first zooming in on our going concern business. We have our CTVs, we have our CSOVs. We took delivery already of 1 CSOV. That ship has been fixed on a very short-term period for business in oil and gas in Australia. It already gave us earnings in the third quarter of $27,000. The fourth quarter rates are going up to $118,000 with most of the days already fixed. We have ordered this new multipurpose accommodation service vessel, which I will discuss in a second. And then looking at our CTVs. You can see that the seasonally strong Q3, we achieved good rates of close to $3,500 a day on average. The slower period in Q4, our TCE sits at $2,800. Here, you have a render of the newest newbuilding order for Cmb.Tech. So we ordered 1 ship with another options for 5 vessels. It is based on our existing CSOV design for the 120 passengers on board, but we've upsized it to 150 to even 190 passengers on board. It will have a permanent gangway connection, which is better for oil and gas projects. It will be larger, so positive for our charters. When we look at the market, it will be the only vessel type that can truly operate between oil and gas on the one hand and the offshore wind on the other. Our existing ships are already suited to do that, but this one will be even better suited. We have 100-tonne subsea crane, which is installed. And when we look at where that ship will compete, we see that the flotel markets for oil and gas is one market that we will target. And when we look at designated ships for that market that also have the crane capability, we see that there's actually not that many vessels on the water and that are being built for this. Our markets are everywhere. But clearly, one of the markets that will be interesting and something to follow is the Brazilian oil and gas market where we see more than 30 FPSOs entering service in the next 2 to 3 years, which will need a lot of support vessels coming there. The reasoning behind this is that we want to trade in the 2 markets. Eventually, the ship will end up in offshore wind. But as long as the offshore wind is a little bit quieter, we can also go to oil and gas. And with this newbuilding or with this newest addition to our fleet, we can end the part of the presentation and go to the Q&A. Enya Derkinderen: [Operator Instructions] The first one is Frode Morkedal. Frode Morkedal: This is Frode from Clarksons. First, I wanted to ask you about IMO. They delayed the carbon pricing by a year at least. So what's your verdict on this? And have you seen any change, I guess, in terms of let's say, interest or demand for dual fuel technology after that? Alexander Saverys: Yes. Thanks, Frode. I think it's a question many people have. Well, first on the delay, whether it's going to be a 1-year delay, 2 years delay or 3 years delay, we don't know. We have, of course, not based our strategy on the IMO coming to fruition in 2028. It definitely helps our business case. But our strategy on dual-fuel engines is based on finding like-minded partners to charter these vessels and use the technology to decarbonize. We have the EU legislation, which is in place, which is definitely supportive. IMO would have been a very nice to have. It's not a must-have for strategy and for our plans. Our opinion on whether eventually, they will find an agreement on the IMO level is that we don't know. But we do see that after the failure of IMO, there's a lot more discussion between countries on a bilateral basis to see what can be done on certain trade lanes, say, Australia to China, for instance, or trades that are linked to Europe. So the last word has definitely not been said, but it will not change anything to our strategy. Frode Morkedal: Okay. Fair enough. One question on your, let's say, investment philosophy. So you ordered a few large CSOVs, I guess, you can call it. But how do you think about opportunities in other segments like dry bulk and tankers? Are you looking to invest more there or maybe trim or sell in those segments? Alexander Saverys: Well, I think we've invested already a lot over the last 2, 3 years at the right time, I would say. We will always look opportunistically at newbuildings. But today, clearly, we think newbuildings are quite pricey. That doesn't mean we would not order if it's the right value and if we believe that it will create value for us and our balance sheet can take it. You just saw that we ordered this extra wind vessel, which is really an offshore vessel. We think there's very good value there. We think this is also something Cmb.Tech can perfectly do even if we have more options that we can declare going forward. So -- but that's on the newbuilding side. On the secondhand, you have seen, and we will continue to do that, that we're clearing out our older vessels, because we just think rates are very good and the prices for secondhand tonnage are at a level where we're rather sellers than buyers. We still have a couple of older vessels. Don't be surprised if we clear them out. But then there will come a point where we're very satisfied with the age profile of our ship, and we're very satisfied of basically staying on the market and enjoying the good markets. Frode Morkedal: Okay. Last question on the dividend. So this is the $0.05 second quarter in a row. So that makes it tempting to think this is some type of minimum level going forward? Or should investors expect dividends are flexible going forward? Ludovic Saverys: I think, Alex, I'll take it. We have a fully discretionary dividend policy. I think we've been pretty clear that every quarter, the Board will decide what we'll do with the cash that we have. And it's fair to say that with the meaningful cash flow generation that we are seeing in Q4, that we're expecting in Q1, that there will definitely be a further look at how to reward the shareholders, whether that's share buyback, whether that's dividends, whether that's an accelerated clearing out of some of the bonds. Some people have mentioned the bridge financing or just reducing leverage. I think it's -- these markets, the way we positioned ourselves in there so that it goes very fast. And that I don't think we're there to say minimum dividends. We don't say maximum dividends. We're there to balance between rewarding shareholders and strengthening our balance sheet to be positioned for opportunities when they present themselves, whether it's organically or through M&A. Enya Derkinderen: And moving on, Eirik Haavaldsen. You can now unmute and ask your question, please. Eirik Haavaldsen: This is Eirik from Pareto. Just following up a little bit on the S&P because you have -- you haven't -- I mean, do you have a sort of target list of the vessels you could dispose of? I'm thinking especially on the tanker side now where S&P markets are interesting, but the cash flows are also fantastic, right? So how do you balance that short-term cash flow versus potentially realizing some of these elevated asset values? Alexander Saverys: It all depends on the price. But I think, Eirik, you will agree with me if you're getting north of $50 million for 18-, 19-year-old VLCCs, there's a good case to say that you should sell. Other people might say, no, keep it on the spot market and trade it out for another year. We are more in the first camp. I think tonnage, which is older than 15 years old at current valuations, and again, it will depend on the bid, and it will depend on the price. We are more sellers than keeping it in our fleet. That doesn't mean we will do it at any cost. Eirik Haavaldsen: And what about on the -- I mean on the modern vessels though, to lock some of them up to sort of derisk a little bit your cash flows. Is that something you're looking at? Alexander Saverys: Yes. So a very good question, Eirik. I think we've mentioned this in previous calls as well, and we've been very open about that. If we see good levels to take some cover, we will definitely do it. We like to have 40,000 spot days. But at one point, we also want to use the market to take some cover. Keep the young vessels in our fleet, but take some TC cover. Now as we've not announced a lot of time charters, it also means that right now, both on tankers and on dry bulk, we've not been tempted by numbers that are good enough for us to take action. Eirik Haavaldsen: Very good. And finally, should we read anything into the fact that you're not changing the prefix on the Panamax Kamsar fleets of Golden? Alexander Saverys: No. No, it's a good question. Looking back in the CMB days, we had a CMB prefix. Look, we're very happy and proud that Golden Zhoushan is now part of our company, even though we're not using the brand name any longer, we like to respect the Golden Zhoushan history and then keep them as part of our name and our brands by keeping the Golden prefix on Panamaxes. Enya Derkinderen: Then, Kristof Samoy, you can now unmute and ask your questions. Kristof Samoy: Kristof Samoy from KBC Securities. A few have been addressed already. So -- but maybe first on -- to go a little bit deeper into IMO that was already touched upon. If the conditions would be right to consider newbuild ordering, would you, for sure, order ammonia or H2-ready or fitted vessels or could you nowadays also consider LNG-ready or fitted vessels? And then secondly, just with regards to the decision of the IMO, what impact does it have on your business plan for H2 industry and Infra? Alexander Saverys: Yes. And thank you, Kristof. So we are more convinced than ever that ammonia is a very good choice to decarbonize. And the reason is not only because we are now getting very close to showing to the world that the technology actually works, but also because we have seen over the last 12 months in China and in India, tremendous evolution on increasing the availability of the green ammonia molecules and reduction in the cost of the green ammonia molecules. So on IMO, even though, as I just said, I don't think there will be a lot of movement in the next couple of years, and I hope we will be surprised, we still think that technology and cost and availability of molecules will be the main driver to convince people like ourselves, but also partners that want to decarbonize their fleet to go for ammonia. So in short, right now, we're not looking at any LNG projects. Never say never, but our choice of fuel is still ammonia. On your second question on H2 Infra and H2 Industry, these are very small divisions. They are supporting the business we do on the development of hydrogen and ammonia engines on the Industry side, and they are trying to develop molecules, producing molecules but also sourcing molecules on the H2 Infra side. There, we have a lot of ongoing discussions with suppliers in China and India to buy molecules for our fleet of next year. Nothing we can announce yet, but as soon as we have news on that, we will definitely let you know. Kristof Samoy: And maybe just as a follow-up, I mean any change in the attitudes or the appetite of miners to conclude long-term charters since the decision of the IMO has been made public? Alexander Saverys: That's again a very good question, Kristof. I think there's 3 categories of people, people like us that were convinced before the IMO discussion that we should decarbonize our fleet. And we have a couple of customers, as you saw in April with the deals that we announced that will continue down that path. So people that were convinced are continuing to engage with us and continue their investments. There's another category of people, and that's still the vast majority in shipping that take a very much wait-and-see attitude and that don't do anything and basically wait to see how this will evolve. And then the category in between people that were hesitating a little bit, I think we definitely lost part of them that they are not looking at it anymore and more than the camp of wait and see. But some others still continue to engage and ask questions. So it's a little bit of everything. The conclusion for us is simple. Had the IMO decision been taken a couple of weeks ago, it would definitely have propelled our business plan to a much higher speed, but it doesn't slow down our business plan, and it doesn't change our business plan, but it would definitely have helped. Enya Derkinderen: Then the next one is Climent Molins. You may now unmute please. Climent Molins: This is Climent, known from Value Inestor's Edge. I wanted to start by asking about your interest expenses for the quarter. Did those include any one-offs? Or is it, let's say, a clean quarter? Ludovic Saverys: Good question, Climent. There's 2 things. Obviously, when you do leverage buyouts, those bridges are somewhat more expensive. We had $1.3 billion. We've reduced that to close to $220 million end of quarter, but that definitely has explained our Q2 and Q3 figures of elevated interest expense. Second point there is, obviously, when we did those acquisitions, both from a Euronav point of view, but also Golden Zhoushan, we had a back financing of releveraging the fleet to be able to pay back. And those refinancings, you always incur arrangement fees with the banks. And these, you have to write off over the length of the financing. So if you refinance $2 billion over 5 years, and you pay a percent arrangement fee, you're going to add $4 million of interest expense every year. And as we've been doing a lot of these, these obviously are increasing the total interest expenses. That said, I think only in the last 3 weeks, we've been able to look at our total financing package where we had an average of SOFR plus 275 throughout all our financings. And we are actively working billion per billion to reduce that by 100 to 125 basis points. So this is more going to be a topic of 2026 of optimizing our financing portfolio and costs as part of, I would say, integrating the businesses and optimizing our balance sheet. Climent Molins: That's helpful. My second question is also on the modeling side. First, should we expect G&A to come in at around $34 million as well in Q4. And secondly, where do you see the run rate on the G&A front once you've realized any potential synergies from the merger with Golden Zhoushan? Ludovic Saverys: Yes, I think it's a valid question. When you do large-scale transactions, you always incur a lot of lawyer fees, auditor fees, financial advisory fees and others. And we've been doing that 2 years in a row, doing multiple billion-dollar transactions. That has not helped our SG&A, full stop. It is a review that we're making while we are integrating the teams, optimizing the insurance packages, the IT systems and everything like in normal M&A processes, this will be optimized. To put the actual figure, Climent, I think it's hard to say. I think 2026, give us a couple of quarters, and you'll see those SG&A naturally normalize, I would say. Climent Molins: Makes sense. And final question for me. Does the $1.57 billion in remaining commitments include the CapEx on the recent CSOV newbuild addition? Ludovic Saverys: No, that's a good point. So in the Q4, we'll add that. Currently, as Alex mentioned, it's 1 ship. We can't disclose the newbuild price, but somewhat higher, I would say, than your smaller CSOV. But that is going to be added to the total CapEx. Operator: Next up is Kristoffer. You can now unmute and ask your question, please. Kristoffer Skeie: Can you comment a bit on when the options on the CSOVs are lapsing and when is the delivery of the optional vessels? In order to declare them, would you need to see any long-term contracts in the division? Or to put it differently, what do you need to see to declare these options? Alexander Saverys: Yes. We have a lot of time, so close to a year to declare the option. And then, of course, the options thereafter. Of course, the earlier we declare, the earlier the vessels could deliver. We're looking at deliveries in 2028 and 2029. Answer in terms of contracts, it's not a must have to have a contract to lift the option. Of course, if we get a contract straight away, we could lift the option earlier, but we can also lift without a contract. Kristoffer Skeie: Perfect. And moving over to the Tanker division. What type of time charter levels would you need to see in order to derisk estimates here? It's sort of -- it seems like rates are starting to move up quite fast. So -- and... Alexander Saverys: Where do you pick the 5-year -- would you pick a 5-year for modern VLCC... Kristoffer Skeie: Probably just below 50 or something or? Alexander Saverys: So clearly, that's not something we would do right now. I mean we can still change our mind, of course. But I think the market would need to be higher on long term, and I'm talking 5 years plus then in order to consider. So current rates are -- for us for our modern tonnage, and I stress on modern tonnage, we would need to see more. Kristoffer Skeie: And final one for me. In terms of the bond process you had ongoing, can you just comment a bit on how you're sort of looking to refinance the bond maturing next year? And is it still only debt instrument with an equity covenant and not value just equity? Ludovic Saverys: Yes. Great question. I think we stopped the bond process because we had much cheaper alternatives, Kristoffer. So -- in that same flow, we are anticipating paying back the bonds with our own free cash flow, sale of assets and own liquidity. We don't anticipate the bond process to be reinitiated anytime soon. It's a cheap bonds, 6.25. So we'll probably leave it run until September '26. And the way it's continuing, not just the bond but also on the bridge, we feel that we can pay this with our own means. So we don't foresee any equity issuances or debt capital markets in the coming quarters. Operator: Then next up is Axel. You may now unmute and ask your question, please. Axel Styrman: Three questions from me. One, how do you see potential removal of U.S. sanctions on Russian oil to influence the tanker market and the tanker rates? Second question, if the Guinea volumes on the iron ore just started replaces the Australian exports to China. How do you see this outlook, or this influencing the -- your bullish outlook on the dry bulk market on the -- for the large dry bulk carriers? And thirdly, what kind of optimal financing structure, kind of leverage are you looking for after you've taken delivery of your newbuilding program? Alexander Saverys: Okay. I'll take the 2 first questions, and then maybe, Ludovic, you can comment on our finance structure. So on Ukraine, I think the easy thing to say is that before the fully fledged war started in 2022 or when you look at the effect of the war, it was definitely positive for crude oil tankers. So if we would unwind it, one might say, logically, it will be negative. In our opinion, it's way too early to say. And actually, we don't know. Maybe in theory, relief of sanctions on Russia could be negative for our market because then you unwind everything that has been put in place over the last 2 or 3 years. But in practical terms, I think there will be a lot of different levers that will play an impact on that. So the short answer to your question is we don't know what the impact will be. On Guinea cannibalizing Australian volumes because I think that's what you mean. I think 2 things need to be said there. On iron ore specifically, you have to know that the very beginning, all the volumes are going to China and are actually being transported by Chinese ships, which is taking away capacity. So it's supporting the market in general. Going forward, of course, as we see a ramp-up and there would be any cannibalization, the logical immediate effect is that you're replacing short tonne mile with long tonne mile, so the effect is relatively positive. If on top of that, you would see that the price of iron ore starts falling, you might push out some producers that have a higher breakeven level. And again, there, we think that we'll rather stimulate the high or the long tonne mile and the short tonne mile. But all in all, cannibalization of volumes of Australian volumes and replacing them by Guinea volumes, we think it will definitely have an impact on the market. But on a net-net basis, it could actually be positive. It's on the... Ludovic Saverys: And then Axel, on the optimal loan-to-value, I mean, we are indicating a 50% loan-to-value throughout the cycle. We're somewhat north of that. So after the full delivery newbuilding program assimilated, and most of it is going to be end '26. I think out of the $1.5 billion, we're taking a delivery of $1 billion worth of ships in '26. So thereafter, it's only a few ships that are on long-term charters. We're definitely targeting the 50%. But in your 50%, I think it's important to look at what is the cost of those financings where we still have some expensive leases on board. We still have bonds. We still have bridges. I think it's also the work in the next 2 quarters to take out, I would say, the more expensive debt, replace it by inexpensive financing, which is readily available for companies like us at this stage. Axel Styrman: Just a short follow-up. Maybe you partly answered that earlier, but could we then expect a fixed payout ratio, also an explicit dividend policy different from what you have or don't have today thereafter? Ludovic Saverys: No. I think -- no, we don't have. It's a fully discretionary dividend policy. I think while our balance sheet and our company is still in transition, I think that's an important one to say, we need to keep the flexibility to decide on every dollar that goes down on debt, M&A, newbuilds, rewarding shareholders to share buyback or dividends. So we're not going to go for a fixed payout anytime in the short future. Enya Derkinderen: Then we have a few questions in the Q&A. So I will ask them. The first one, is it correct that the 2026 FCF sensitivities assume $180,000 a day in VLCC rate for the whole of 2026. If so, can you provide more color on the factors behind such an assumption? Ludovic Saverys: Sure. It's 118, so 1-1-8 and not 180. I think this is not a projection. We are not believing that this could hold on for a year because we don't know. We are in a kind of market where it could go anyway right now. Supply-demand looks positive, like Alex mentioned, we just want to show the free cash flow capacity. If at $118,000 a day for a full year, for VLCCs, which is relatively small in our spot exposure compared to our dry bulk, where we anticipate $34,000 on Newcastlemaxes, where actually we're at $44,000 right now. If you look at the market. So it's just an assumption to show the operational leverage and the free cash flow generation capacity of our company. Hence, it is strengthened by the belief that we'll be able to pay back the bridges and the bonds and our newbuild CapEx just by on cash flow. We're fixing Q4 already, deep down Q4, and we're starting to fix Q1. So Q4 and Q1, there is a good likelihood that we are hovering around elevated levels. Is it going to be 118, we don't know. But is it going to be 34 for Newcastlemaxes, we don't even know as well. This could go up. Enya Derkinderen: Right. Then the second question, what are your expectations for the Simandou mine opening? How important is the service to the offshore oil market OSV to you going forward? There are some very old vessels in operation by competitors. What are our depreciation rates? Alexander Saverys: Okay. So on Simandou, I think we've highlighted this already many times. That is, of course, going to be a meaningful impact as it ramps up to its full capacity of 120 million tonnes of extra iron ore. I think on the offshore market, we can be very clear. We have our CTVs for the offshore wind specifically. We have 6 CSOVs, which are a very meaningful investment of close to $0.5 billion, where we definitely want to continue to fix them well, short term and long term. We have now one extra CSOV XL. If it is successful, if we see traction with our customers, we will definitely order more. And the last question? Ludovic Saverys: On depreciation rates, we depreciate, I think, 20 years of scrap. Now on OSVs, the scrap is relatively light. So you can assume close to 0, but these are depreciation that we use on the offshore oil vessels. Enya Derkinderen: And we have one more question live. So Quirijn, you can now unmute and ask your question. Quirijn Mulder: Quirijn Mulder from ING. I have a couple of questions. My first question is with regard to the tariffs. Have you calculated what the impact was of tariffs on your company, let me say, between 1st of April and the end of September? That's my first question. And the second question is about, let me say, if you look at your fixed contracts, 295, I think 294 in that range. What do you think it will be at the end of 2025? That are my 2 questions. Alexander Saverys: Yes. Thank you, Quirijn. I'll answer your second question first. We have the intention, of course, to increase it. I think we've been very vocal about that. We want to take more cover when markets are high. We don't have a fixed target because a lot will depend on the market and what people are willing to offer us. But we definitely want to grow our fixed contract cover. The first question on the tariffs. Apart from the effect on the market in general, with rerouting of ships and what this has had on some of our vessel fixtures, we have actually none or very little impact on tariffs. Our container ships -- container ships are the ones that are more affected are chartered out. So there it is, of course, an issue for our customer, but not directly for us. And on the 2 other segments that would call the United States or would carry goods to and from the United States, it's dry bulk and its oil. And on dry bulk, we do very little to the United States. On oil, as you know, this has been exempted. So in short, the impact of tariffs on us, on Cmb.Tech specifically, has been close to 0. Of course, the side effects on the broader market of rerouting of ships and people wanting to have Japanese or Korean built ships to go to China and vice versa for China that we have felt a little bit. But I must say that right now, the effects are very limited. Quirijn Mulder: Does that also mean that the end of tariffs is -- does not have any impact in, let me say, 2026? Alexander Saverys: Well, Quirijn, I think now I'm talking as a shipping player in general, tariffs are always bad. We prefer not to have any tariffs because then trade can flow freely, and that means more opportunities for our ships to trade. So again, I don't want to create the wrong impression. We are very much in favor of tariffs going away because that creates more trading opportunities for our ships. But if you go on a macro level, what has happened in the United States compared to our fleet, there the impact has been limited. Quirijn Mulder: My final question is about the, let me say, the order ratio for the VLCC, Suezmax that is now above 12%, as I understand from your graphs. What is the delivery time of these vessels? That's mostly '26, '27. Is there anything to add to that in terms of when it is coming and what the impact might be? Alexander Saverys: Yes. So it's 15% for VLCCs and 20% for Suezmaxes, so it's actually higher than the 12% you mentioned. '26 and '27, we don't see any meaningful capacity that can still be added to the order book. But '28, we are seeing new yards or existing yards with extra capacity still coming on stream. So that number by 2028 could still go up. That's my belief. Ludovic Saverys: And today, Quirijn, if you would want to jump on these slots, I mean, we had 1 shipyard in China offering early slots for end '27 and begin '28. But any conventional yard, as you see in the news flow on the specific shipping news, you are starting to talk end '28 if you deliver -- if you order today, beginning '29, even 2030. So shipyards are getting filled up with the current slots. As Alex mentioned, you can have new yards, you can have new capacity coming online as well. But definitely, the traditional delivery time for VLCC and Suezmaxes are quite long now. Enya Derkinderen: We have 2 additional questions written. So the Q4 2025 bookings for VLCCs look low versus the market rates. Can you comment on why? Alexander Saverys: It has to do with the trips that our vessels have been doing. And I'm supposing people are referring as well to some of our peers. There's some creative bookkeeping, sometimes load to discharge or discharge to discharge. But there is also a fact that some of our vessels are slightly older and of course, are earning less than more modern vessels that are operated by our peers. We just took delivery of one very modern ship, but we still have some tonnage, which is 13 years old and which is logically then earning a little bit less because the vessels burn more fuel. Enya Derkinderen: And then the last one, can you discuss the relationship between News and Capes historically? And going forward, will this change go forward? Alexander Saverys: Well, the relationship is they move the same cargo. One ship is just 5 meters wider and carries 25,000 to 30,000 tonnes more. Capesizes traditionally have been the workhorse of the fleet, but Newcastlemaxes are taking this over now because it is relatively cheaper just to build a slightly bigger ship than a Capesize of 180,000. So same cargo, same trades. Enya Derkinderen: Perfect. I think that concludes the questions. Alexander Saverys: All right. Well, then we will close this earnings call by thanking all of you for having dialed in and looking forward to speaking to you in the following weeks, months or maybe on the next earnings call. Thank you very much. Ludovic Saverys: Thank you. Bye-bye.