加载中...
共找到 18,327 条相关资讯
Consumer confidence plunged in November to lowest level since April as Americans cite inflation, tariffs, and uncertainty as weighing on sentiment, according to The Conference Board.
In afternoon trading, eight of the 12 best-performing industry groups were from the retail sector.
CNBC's Michael Santoli and Warren Pies, 3Fourteen Research, join 'Closing Bell' to discuss the signs of capitulation in equity markets last week.
Billionaire investor Bill Ackman is aiming to raise $5 billion through the U.S. listing of his closed-end fund, Bloomberg News reported on Tuesday, citing people with knowledge of the offering.
Ed Yardeni, Yardeni Research president, joins 'Closing Bell' to discuss why equity markets can move higher if the Fed does little.
Richard Fisher, former Dallas Fed president, joins 'Closing Bell' to discuss the latest National Economic Council report on the next Fed chair, the upcoming December meeting and much more.
Operator: Thank you for standing by, and welcome to the Web Travel Group Limited First Half FY '26 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. John Guscic, Managing Director. Please go ahead. John Guscic: Thank you, Harmony. Good morning, everyone. Welcome to the Web Travel Group results for the first half of FY '26. Joining me today is our CFO, Tony Ristevski. Grab your ticket and your suitcase, thunders rolling down the tracks. Web knows where it's going, and we know we'll never go back. Investors, if you're weary, lay your head upon my chest. We'll take what we can carry, and we'll leave the rest. Big Web rolling through fields where sunlight streams, meet me in the land of hope and dreams. Welcome, guys. We said that we would deliver world-class growth in FY '26, and we said that margins would stabilize. And we've done both things. If you go to Slide 3, you'll see that our TTV is up 22%. Our margin is at 6.5%. We'll talk about how we get there and the construct in a second. EBITDA for the group is up 17%. If we break it down to the underlying performance of WebBeds, TTV of $3.2 billion, up 22% on the first half of '25, revenue of $204.6 million, up 20%, EBITDA of $94 million, up 21% on the corresponding period. We've maintained market-leading TTV growth rates while maintaining margins. Revenue is a reflection virtually identical with TTV and EBITDA is up almost exactly the same. We'll go through the construct of how that all transpired in a second. If we get to the overall group performance, underlying EBITDA is up $81.7 million after corporate costs of $12.3 million. NPAT is $48.6 million, and we continue to skew out cash at a rate well above our contemporaries where we're up circa $120 million in the year. CapEx is in line with our expectation at $18.6 million. And our cash position is exceptionally strong, notwithstanding that we spent $150 million on buying back shares in the second half of the last financial year. What we have done is to provide greater flexibility is increased our undrawn revolver credit facility from $40 million to $200 million. Moving through to our key metrics. I've covered most of these, but bookings at 5.70 million, TTV at $3.17 million. In both cases, we're seeing strong organic growth in all regions. And our bookings and TTV combination reflects the expansion of the network in which -- or the distribution network in which we participate in both various geographies and various channels that have all expanded during the first half of '26. Record revenue at $204.6 million and record EBITDA at $94 million, obviously, reflecting our revenue growth as well as our planned increase in operating expenses as we future-proof our business to maintain the margin levels that we are currently delivering and expect to deliver for the foreseeable future. Let's go through the highlights. Bookings up 18% across all regions. TTV up 22%. Revenue, 20%, expenses up 19%. That's reflecting CPI increases, the reintroduction of the bonus scheme, which we didn't get paid in FY '25, as well as the previously flagged investment in hotel contracting. In functional currency, we expect expenses to go up in high single digits. We'll talk a little bit about the functional currency in a little while as we go through what has transpired. EBIT is up 21%. We said at the start of the year, we reaffirmed during the AGM that EBITDA margins will be between 44% and 47%, and we are at 45.9%. So let's get into a little bit more of the detail of what we've been able to deliver. As those who are familiar with the business are aware that we carve out our superior growth rate in 3 separate buckets. One is what does the market growth or system growth look like. What are we adding to the pile through new customers and through improved supply arrangements or entering into new markets. And the third is same-store sales, which we call conversion, what are we doing to increase the sales that we make from our existing customer base. So if you look at systems growth, so if you're not growing at 5%, you're going backwards against the market. We think our estimates are the overall hotel supply and distribution market grew circa 5%. We looked at our business and what's different between the first half in specific inventory that we've sold and/or specific clients that we've sold to. That accounted for about 5% of our growth. And all the rest is the singular focus of an organization of circa 1,900 employees looking to ensure that we provide the right product at the right price at the right time for our customer base and enhancing the value of our supply partners by giving them global distribution. And again, we had another standout result where we improved our conversion by another 12% in the first half of '26. All right. Let's get a little bit technical here, and we're going to have to talk about the vagaries of the FX market and how that played out for us over the year and talk specifically about the regional performance of our respective markets and how that's been translated to our functional currency. So as you can see, in aggregate, globally, our bookings are up 18%, but in the functional euro currency, we're only up 14%. This is an anomaly from this perspective. What we have seen in FY '26, as we compare the exchange rates of the euro, in particular, against FY '25 is the euro has appreciated considerably, in particular, against the U.S. dollar. The net effect of that is that at a functional currency level, we're only up 14%. At a bookings level, which is activity, we're up 18%. At Aussie dollar level, we're up 22%, and 22% is circa normal. If you had a bookings growth rate of 18%, then you would expect average booking values to go up circa 3% to 4%. So 22% is the expected outcome of bookings of 18%. How we got there is a little bit unusual. So let's go through the individual markets and call out what's actually happened. So Americans had clearly, the standout performance in the half, up 36%, a factor of, again, some great client wins and massive market share gains from existing clients driving a massive outperformance in that particular market. And yet when you translate that to euros, it's only up 27%. The vast majority of that delta is the previously mentioned exchange rate between the U.S. dollar and euro. Let's go to Europe. Europe, very strong results at a bookings level, up 14% in the most mature distribution market in the B2B landscape. That is a superior result. And perversely, TTV in euros is down 12%. And that's because there are not just the euro that we sell in Europe, we're selling GBP pounds. We're selling Scandinavian currencies, we're selling Eastern European currencies. The way we account, we've got Turkish lira in there, and all of those currencies have depreciated against the euro, which shows the 14% bookings translating to 12% at a TTV level. Okay. Let's go to APAC and strong growth, double-digit growth in APAC and TTV growing faster than bookings. That's purely a function of average booking value increasing quite significantly in APAC because there was an FX drag on many of those currencies against the euro. So we saw ABV rates of circa 5%, driving a 2% net TTV to euro improvement. And the starkest example is the Middle East, where solid bookings, 6%. They were up massively in April and May, as you will have at our full year highlights as we -- of FY '25 when we called out our respective results, they were up significantly. There's been a significant softening in the Middle East market as a consequence of the war in Israel and Gaza and the bombing in particular, of Iran and Qatar saw a significant slowdown in region of that particular, in market, and that resulted in the subdued growth. We have high conviction that our Middle East business will continue to grow at above market rates. And as we'll talk about in the forward-looking element of our presentation, as the FX exchange rate delta ameliorates over time, that will translate to double-digit TTV growth in the market. So overall, really strong performance and that's how we landed in our respective marketplaces. Moving on to Slide 9. Again, for those who have been on us for this particular journey, in particular, in the post-COVID world, you've seen a significantly streamlined business doing significantly more volume, significantly more profit with lower resources invested in that effort. So the time scale to the right shows you the history of our business. In particular, it's a proud moment for our entire organization to see that growth rate continuing at our expectation of delivering towards our $10 billion TTV target. We're on track for that particular effort. We spoke about our margin where -- we said that we would be circa a year ago, I said that we would be at least 6.5% over the next 3 half reporting periods, which is an 18-month period. We continue to be on track to deliver 6.5% not only for FY '26, but with all the things that we've done in our business for FY '27, and I'll talk about those when we get to the forward-looking statements about our business. How we get to improve margins when clearly 6.5% is less than 6.6% is during the course of the year, we sold our DMC business, which is a high-margin business, low volume. That accounts for circa 20 basis points, and we actually improved our margin across the board to deliver 6.5%. So the most simple way of looking at it is the -- we're on a run rate to circa $6 billion in TTV this year. We delivered circa $5 billion last year. And what we've done is deliver the exact same TTV plus the incremental circa $1 billion over the full year, and we've maintained margins across the entire pool of business that we've sold to, which is in line with our overarching strategy over the last 12 months of ensuring that we solidify that margin and anchor it to the 6.5% and continue to deliver superior revenue and TTV growth as we deliver across the 3 piles that I talked about, systems growth, new customer supply and markets and improved conversion. So moving on to Slide 10. We're expanding our customer base. I've had opportunities through various presentations internally over the last few weeks to reflect upon the journey that we've undertaken from a customer base. And in essence, we started as a business where we sold Dubai as a destination to the Middle East. We made a small acquisition in Sunhotels in which we sold Mediterranean beach holidays to Scandinavians, and it was predominantly through a retail channel and predominantly through a narrow focus of customers. What we've done exceptionally well over the post-pandemic recovery period is broaden out that customer mix, in particular, looking at where are the fastest-growing customers globally and how can we tap into meeting their needs as a wholesale bedbank provider. And we've done that very well, and you see the superior results, in particular, in the Americas where we're partnered with the most innovative OTAs in the region to maintain our superior growth rates. Our customer diversification extends to what I've just described in America versus the tour operator business that we provide the same offering to and the same level of success in Europe, let alone the super apps in Asia or the corporate clients that we deal with in the Middle East. So we've got a really broad portfolio of customers that we continue to expand, and we have a strong pipeline for the balance of FY '26 and into FY '27. The next element is our supply mix in which we have a renewed sense of focus over the course of the last 12 months, and it's the most important strategic focus -- sorry, most important operational focus of our business going forward. So we were unhappy with our performance in FY '25, where there was the wrong inventory being sold at the wrong prices to some of our clients. We are addressing that, in particular, with our efforts to improve directly contracting sales in Americas, in particular, where we are significantly underweight. There's an enormous opportunity for us as we play out that particular strand of our tactical initiatives, and that will continue into FY '27. The second thing that has been, again, a credit to the hybrid business model we have of directly contracted inventory and partnering with the major third-party suppliers is we've seen an increase in supply of last-minute accommodation over the course of this half. Our average booking window has compressed by circa 5%, which is material in as someone who's been in this industry for 20-odd years. So it's the most significant compression of the booking window because of the broad range of supply that we have, we're able to tap into that particular compressed booking window and our percentage of last-minute bookings is up significantly against the same period of last year. And as we continue to grow, we have increased our relevance and presence with the major hotel chains. And we've got to the -- we've got into now the consideration set of being a viable distribution partner on a semi-exclusive basis to some of the largest hotel chains in the world, and we couldn't make that claim 2 to 3 years ago. As we were a business of circa $2 billion to $3 billion, we're a long way from having the global reach and presence that we now do have. And that dialogue is changing, and there will be some considerable success stories as we roll out our chain strategy over the course of the next 2 to 3 years. Moving on to geographic mix. In a Utopian world, we think we'll have 3 equal regions of roughly 30% each between Europe, America and APAC. We're getting pretty close to that. Middle East will be circa 10% of our overall business. We will continue to grow in all regions. We are not underinvesting in any. We have high-quality individuals who are running our sourcing and sales organizations in all those regions. And that's why we continue to outperform our competitors at both the TTV and EBITDA level. One of the significant contributors, and those who have followed our story will know that Europe is our highest margin region. We have improved margins in our highest margin region. And as we've grown faster in some of those regions, it's more than compensated for that TTV margin geographic mix that would have been down with pressure on us, and it's one of the reasons why we're so confident about delivering 6.5% for the balance of this year but also into FY '27. Finally, if we talk a little bit about scalability in the biggest hat tip I can give to the operational element of our organization and the people responsible for efficiency across the entire organization. It's an incredible achievement that we're now delivering bookings at circa triple what we were doing per FTE pre-pandemic. We're up 174%, and that number will continue to expand as we deliver the multitude of initiatives that we have within our organization that enable us to leverage technology to become more relevant and embedded in our business and to drive greater efficiency. And that's, as I said, a credit to, in particular, the operations teams within our business, which are all in-house. If we move to AI, there are a number of things that we have done. In particular, we have delivered margin optimization over the last number of years through a significant investment that we have made in that particular space. We think that we have market-leading solutions there. We also have a number of other AI initiatives undertaken within the business to improve how we surface inventory, the quality of the inventory we surface and how we service that inventory once it's been sold. There's been a little bit of a conversation about most particularly in the last week or so from industry commentary about the impact of what AI tools by some of the large language models will have on our business. The short answer is that will be another growth engine for us. The most recent example is Google announced their new travel initiative. And as I've shared previously with my colleagues on this particular call, there's only one team -- one time in the history of my 14 years, I generally thought -- apart from COVID, of course, but what I generally thought we faced an existential threat was when Google Flights was launched at the top of the funnel on all Google Search to displace the existing meta providers and take and capture demand before it fell to people like Webjet back in the day. The new Google -- and if that had been -- if that had played out, you wouldn't see the success of the large OTAs globally and Webjet's continued success over that intervening 10-year period. Now there are many reasons for that because at the end of the day, in this Google AI initiative and the various others that are coming down the track that we are aware of, what they all are is fixing a specific problem. And it's a problem that we have discussed many times internally when we were Webjet is how do you improve the search experience for customers, and we now have the answer: AI makes it infinitely better than typing in a date range, number of packs and a location and hoping that the 1,000 properties in Paris come to in the sequence that you would like. So it's an incredible fill up for those businesses that have -- that will -- sorry, for consumers that will enable them to derive superior results faster and have it tracked and be able to keep a log of everything that you're looking at before you make your booking decision. But the booking decision will not be made by the AI. The booking decision, and this is straight from Google last week, the booking decision will be -- they will not be the merchant of record. They'll pass that through to their partners. They will not service the customer. They will not go through all the things that we go through to enable that to happen. And where we fit in and why this is going to be a sustainable growth channel within our organization is we feed the people who are the consumer-facing level. We feed the OTAs that are going to be partnering with them. We feed any of the other channels that they choose to partner with. So rather than being a displacement for us, we think this will continue to enable us to grow faster as we have because we have a very broad range of inventory as demonstrated by the fact that we're on track to sell $6 billion of it. And it's not going to become less attractive in an AI world. What AI will do is deliver these incredible insights to get to our inventory faster. So we're very excited about that particular initiative. Finishing off the scalability, investment in contracting staff, we think will have a meaningful impact, in particular, in Americas, where we believe our margins will go up on the back of that. And in light of the fact that 5 or 6 years ago, we were the only publicly listed company that had publicly declared data about this industry, you'll see that with new people coming into the public markets, it still remains a significantly fragmented market, which continues to create opportunities, and we will look to take advantage of those opportunities over the course of this and the next financial year. So with that, I will now hand over to Tony to go through the finances. Tony Ristevski: Thank you, John. Good morning, everyone. Can you turn to Slide 12, which is our first financial summary, the P&L. Consistent now for the better part of 7 years, we've presented the P&L in the statutory format, which is to the left and the one that's more relevant, which is the underlying format to the right. John has already gone through the key operational results as it relates to review and EBITDA for the WebBeds business. Corporate cost is the next idea there in line, and that is pretty much consistent to what I said 6 months ago, where we're on track to do circa $24 million, but I'll talk a bit a bit about that in the next slide. And our operating expenses, which we do exclude from underlying of $5.5 million for the half is really predominantly a function of a mark-to-market to the equity-linked instrument that is a function of share price. Our share price obviously at 30 September is lower than what it was at 31 March, and that resulted in a revaluation downwards, which we do exclude from the result. The other key item there to call out is our effective tax rate at an underlying level. It is on track to be around 17% for the year. But this time last year, when we were part of the enlarged Webjet Group, we had the benefit of Australian earnings to offset the corporate losses, which were incurred in root, which for this half, we don't get that benefit. So consistent with what I said 6 months ago, our effective tax rate going forward will be in the vicinity of around 17%. The other key thing to call out on the slide is, as you can see, there at an underlying NPAT level, despite the record earnings for the half. But at an NPAT level, we are down versus last year, and that is really a function of the demerger, which I'll take you through the next slide, which is quite important. So if you then turn to Slide 13. What our NPAT represents in the first half of '26 is really the stand-alone business in its post-demerger format. So if you then look to the left there of corporate expenses, being $12.3 million, if you go back 6 months ago, second half '25, the exit run rate for corporate cost was $11.1 million. So when you then look at it in the context of the $12.3 million, it's the natural progression as we stand into an individual corporate function post demerger. Then if you then go to the next item, which is depreciation and amortization, the compare is a function of the demerger allocation. But then if you look at the second half of '25, that was $13 million approximately in D&A, and that did grow up 20% into the first half into $15.5 million and on track to be around $31 million for the full year. And then if you then go to the right there with net interest and finance costs, 12 months ago, at the half, we were in a positive situation, $600,000. Then in the second half of '25, we went to a negative $4.3 million, resulting in a $3.7 million for the full year of a net expense. Obviously, in the first half, we're at $7.4 million of net expense. And that's really a function of a couple of items there. Firstly, we did upsize our revolver, which does have a cost. Secondly, we did effectively reduce our cash balance by approximately $300 million, which we're getting the benefit for, firstly, through the demerger, handing $143 million over to Webjet. And then in the second half, $150 million through the buyback. And obviously, as has been the case over the last 7 or 8 years, our option premium costs are pretty much growing in line with our TTV numbers. So all in all, we're expecting net finance costs to be around $15 million for the full year. Going on to the next slide, which is our balance sheet. Strong healthy cash number, which John talked to earlier. Our working capital, which is our debtors and creditors is consistent now as we normalize after last year, where we did have a contraction around creditor days. Debtor days are sort of around 20 days going forward and creditor days are around the mid-30s going forward. So overall, quite pleased to see that both have stabilized. And I'll talk about the cash consequences of that on the next slide. Turning to the next item of substance, which is probably borrowing costs. You would see in our statutory accounts with the convertible notes due to mature April of '26, the borrowing cost has now been classified as current as opposed to noncurrent. But equally, as you would have seen 6 months ago during the April period of '25, we did upsize our revolver from $40 million to effectively $200 million, plus we've got an undrawn facility there of another $18 million. So all in all, we currently sit around $700 million of liquidity. So to the extent that we will be looking at a potential redemption event, we are well capitalized and have a well amount of liquidity to deal with that eventuality. Lastly, on capital efficiency, the key thing there is that it has grown materially from where we were at this time last year as our earnings grow organically through the generation of cash and earnings, it has now grown to almost 22%. And when I look back over the previous slide, it is now sitting in record territory, ROIC. And that will only continue to expand as we organic grow our business into the financial year. Then I'll turn to the next slide, on Slide 15, which is talk about cash. As always, our cash comes from our profits. And then the other key element to consider here is obviously working capital. We are working capital positive in the first half, which is consistent with the trading over that summer shoulder period. You got to recall, when we look at our TTV numbers being record levels across that August, September period, we do collect that cash. And then there's an unwind of payables that typically occurs across October and November. So what you'll see consistent with past years is in the second half, we'll have negative working capital, and that will result in approximately a cash conversion number of about circa 100%. Looking down to the next items there from a financing dividend perspective. Obviously, we'll continue to invest in our business and the prospects around growth. So no dividend has been declared. Talked about cash conversion being approximately 100%. And in terms of capital management, we talked about this 6 months ago. We obviously completed the buyback in the second half, which did address 88% of the potential dilution that could come from the node. We upsized the revolver, and coupled with the cash from operations, we are well equipped from a liquidity perspective to deal with whether it's commercial or redemption come April of '26. But come May of '26, we'll be a bit more explicit around how we think about capital management going forward once that event is behind us. And lastly, on the last slide being CapEx. No surprise there. We did churn spend half-on-half as a result of the point-of-sale solution being accelerated this time last year, which is why we ended up being smaller in spend this half. Going forward, we do see CapEx to be effectively like-for-like in terms of underlying functional currency versus '26 versus '25. And then from an outlook perspective, we do see that it will grow in line with inflation. So on that note, I'll hand over to John. John Guscic: Thank you, Tony. For those who have seen the ASX announcement this morning, you'll note that Tony has resigned from our business. It's bittersweet to make that announcement. We have sat across the table from each other for 15 of these half year results and full year results update. We will, in turn, spend plenty of time celebrating everything that Tony has done with us during the next 6 months. Tony will still be with us at the full year results, and we'll give him a proper sendoff there. And in between times, he will get his regular torture from me. So thank you for everything you've done for us, Tony. Tony Ristevski: Looking forward to it. John Guscic: So let's go on Slide 18 reconfirming the financial outlook statements. As you'll see on the left-hand side, in relation to WebBeds in functional currency, we made the following promises at the AGM in August that our TTV margin would be at least 6.5%. We are on track. Expenses to grow in high single digits. We are on track. EBITDA margin is expected to be between 44% and 47%. We delivered that in the first half, and we are on track. CapEx to be in line with FY '25, as Tony just covered, on track. If we get to the mothership at Web Travel Group, corporate cost is $24 million. We're consistent with what we said in August, D&A at $31 million. That's consistent with what we said in August. Net financing costs are at $15 million, that's circa $1 million lower than what we said in August, underlying effective tax rate, 17%, full year cash conversion, 100%. So everything we said in August, we have ticked and bashed. So now I spoke earlier about the impact of the euro to USD headwinds and the AUD to euro tailwinds. As we roll forward another 6 months, we expect that to be less pronounced based on existing exchange rates. And therefore, the results in FY -- in the second half of FY '26 will be less impacted by currency fluctuations based on what has happened today. I make no forward-looking statement about what might happen with those exchange rates. Moving on to FY '26 trading update and guidance. So second half TTV up until the 21st of November, we are up 23% versus the same time this last year. So strong growth in the second half, remarkably consistent with the growth in the first half. First half was skewed to first quarter outperforming second quarter being a little bit below that number. And now we're seeing a nice rebound into the third quarter, and we expect that to continue for the full year. Our EBITDA guidance is between $147 million to $155 million. That is an increase of circa the bottom range, 22% to the top 29%, which means basically that we are delivering significantly superior EBITDA in the second half because we delivered 17% in the first half. So to get to 22% means the second half at a minimum is going to be high 20s, 27-odd, and it could be as high as mid-30s in second half performance, which goes to the conviction and the confidence of all the things I spoke about of why the business has delivered against the promise of superior TTV growth and stabilized take rate, delivering increased and superior EBITDA, notwithstanding the continued investment that we make in our business. If we move to the final slide, and we start to think of what's next year going to look like. We continue to build out our marketplace. Our marketplace continues to be more relevant for all of our major players and all of our major partners. So we see no reason that we won't be able to deliver on our TTV growth rates that enable us to get to 30 -- sorry, $10 billion by FY '30. This time last year, I said that we just delivered circa 6.5% TTV margin we would for the next 12 months. I mean in the same position today, we will deliver it for the back half of this year. We'll deliver that number again in FY '27. I've spoken a couple of times about this, but I just want to make the point that the investment that we've made this year is in our OpEx this year around contracting staff, we believe will make a meaningful impact to our results in FY '27. And WebBeds remains a highly scalable business, and we expect to deliver circa 50% EBITDA margins in FY '27. So information, Web will provide for you and will stand by your side. You'll need a good companion for this part of the ride. Leave behind your sorrows, let this day be the last. Tomorrow, there'll be sunshine and all this darkness past. Big Web roll through fields where sunlight streams. Meet me in the land of hope and dreams. With that, Harmony, we will take questions. Operator: Your first question comes from Sam Seow from Citi. Samuel Seow: Congrats on the results. Just if I could just quickly ask on that 10 basis points of improvement in the revenue margin. You called out that optimization initiatives driving the growth. Could you possibly present some color on that? Is it direct contracting? Is it something you've done in Europe there looks like? Or yes, just any color on that would be greatly appreciated? And then maybe a question for Tony. What kind of uptick do you expect purely from the accounting change in the second half? John Guscic: Thanks for the question, Sam. We have increased the proportion of directly contracted sales during the half. So that's contributed to it. We have increased pricing in some jurisdictions. And as you will have noted from previous conversations where we've been very explicit, the other 3 regions beyond Europe, operate at a lower margin. And notwithstanding that they've grown in aggregate faster, we've still been able to increase the margin because of those activities. So that sharpening of focus around who we're selling -- what we're selling to who is what's contributed to that outcome. Tony Ristevski: And on the second part there, Sam, that uptick in trading is effectively offsetting less than pronounced delta half-on-half around the accounting change. I would describe probably 6 to 12 months ago. The underlying business performance is actually improving as a result. What we're seeing is less what I would call, variability half-on-half around that retrospective approach to the error rates that I would describe 12 months ago, landing on a margin for the year at least 6.5%. Samuel Seow: Got it. Got it. And just quickly, I noticed when you break down your TTV, your underlying market growth there at 5%, normally, that's pretty standard. But just of interest to me, obviously, particularly in the first half of your year, the market appeared to be quite volatile. So just kind of wondering how you put that 5% together? Is that your market specifically? Is it just more domestic focused? Because obviously, inbound in the U.S. was quite soft and some of your peers talking about channel changes, et cetera, and percentage of last minute bookings. But yes, just kind of that color on the 5%, it seems quite robust. John Guscic: Your question is very relevant, and it's one of the things that we've tried over the course of the last 4 to 5 years to talk about our geographic spread. We talk about our channel mix and in that portfolio of businesses, you have winners and losers. And even with the market up 5%, I'll be hazarding a guess that 15% of our customers went backwards. 10% of our geographies went backwards. You've called out the one that everyone can call out, which is inbound to America is down circa 15%. Americans going to Canada or Canadians go to America is down, I don't know, 20-odd percent. So all those things play out. I tend not to get overly focused on the individual travel corridors. I have lots of people in our organization who spend an infinite amount of time looking at these travel corridors. But when we roll them all up to a business that's up at $6 billion, there are winners and losers, and we end up with more winners than losers and that's why we continue to outperform the market. The second thing I'll touch on, which you, again, I think, was implicit in your question, and I didn't call it out, even though I spoke about it, even though it was written down in the deck somewhere that the macro events do impact us, but they impact us for a very short period because unless you're into a global issue, the markets are growing at, say, the underlying GDP growth is 2%, for example, and it goes to 1.5%, it has an outsized influence on businesses that are directly correlated to the underlying growth rate of their individual market. We're not in that state. So I called out in August that for the 2-week period, when Israel bombed Iran, all markets went backwards, and we still delivered 22% TTV growth and 18% bookings growth. At a transactional level, all of that, we had massive cancellations during that period that exceeded creative bookings, and we still delivered 18% bookings over the half. We had a phenomenal first 7 weeks, which we called out, that was significantly impacted, and we've recovered nicely into the second half of FY '26. So giving you more color is not going to help you is the short answer. It's in the aggregate. Does our business continue to grow faster than market? Checked. Where is it coming from? We've given you all of the regions. Within each of those regions, there's still winners and losers. There's still customers that win and lose. There's still geographies that win and lose. That's just the nature of having a global business in which we sell in more than 100 countries, and we sell to thousands of endpoints, and we sell thousands of destinations. Samuel Seow: That is actually very helpful. Just to kind of get an understanding of that diversification, but I might just jump back in line and appreciate some of your commentary. Operator: Your next question comes from Tim Plumbe from UBS. Tim Plumbe: Just 2 questions from me, if possible, please. John, just the first one around the directly contracted hotel strategy. Can you give us a sense in terms of how far progressed you are with the hiring? Do you still need to put on incremental heads? And in terms of getting full momentum of contracted hotels, where are we currently? And when would you expect to see full momentum? Is that kind of first half of '27 or second half of '26? John Guscic: Thanks, Tim. Look, we have -- depending on how you count it, we have circa 1/4 of our employees involved somehow in getting inventory onto the system through contracts or through negotiating contracts or through loading contracts through the myriad of solutions that we provide all of our partners to get those contracts for sale at any point in time. What I've called out in the -- at the end of last year's financial results is, well, I'll call it out here, we are well over 60% directly contracted in all regions except the Americas. And what we are doing is addressing that specifically in the Americas. So in aggregate, we're over 50% directly contracted but we're under 50% in the Americas, and we want to lift the Americas closer to what we're doing in the other 3 regions. There are some unique elements of that, which suggests that if we got to 50%, that would be an optimal structure for us. I don't think it will get to the circa 2/3 that we do in some of the other regions. For the large domestic market that we're servicing in America and the broad geographic spread of that, it just becomes inefficient to have more contractors. So our focus beyond our existing circa 500 people is adding contracting in America, and we expect that to -- it will start to improve our overall margins and our -- the surface ability of that inventory in FY '27. Tim Plumbe: Great. And then just the second question was a bit of a follow-on from Sam and for Tony. So just thinking about that seasonal skew, you mentioned less pronounced than before, like if you back solve the guidance that you guys put out previously, it kind of implied a 20 to 60 basis point half-on-half seasonal tailwind in the second half. Are you saying that there will still be a seasonal tailwind but less pronounced than previously expected? Or there is no seasonal tailwind? John Guscic: Correct. Tony Ristevski: Less than pronounced than, Tim. So as I said, you can do the math to back off the 6.5% is less pronounced than what we anticipated because of the portfolio growth in the business and the way it has. Operator: Your next question comes from Ben Gilbert from Jarden. Ben Gilbert: Just the first one for me. Just in terms of sort of the 3 pillars of growth as you look forward, it's been pretty consistent in terms of the composition. Do you envisage the composition changing much moving forward? I'm just interested in the comment around the change strategy that you talked over next 2 to 3 years. Is that more an opportunity around conversion? Or is that going to provide new supply in markets around the world? John Guscic: Supply will -- look, customers, we're slowing down in the rate of new substantial customers that can be added. That is slowing down, but supply is actually increasing. Not only for the direct customer conversation we had with regard to the incremental investment that we are making, but in particular to some of the larger chain hotels in getting greater access to the various rate plans that those hotels have on offer. So it's not unusual for a hotel to have 20 rate plans depending on your geography, the channel, the period, the season, et cetera. So we're getting -- as we become more relevant and more deeply entrenched as a reliable supply partner with those partners, we're getting access to more rate plans. So we see supply continuing to grow, customers are at a more moderate level. And the consequence of that will be that our conversion rate will continue to grow. And if I was to take a prediction 3 to 4 years out, the conversion factor would still be at least 3x the underlying new customer new supply mix because we are getting -- the data analytics in our business now has is remarkable compared to where we were 2 to 3 years ago. The sophistication of our conversations with our distribution partners and our supplier partners is predicated on that data. So we're not just saying, give us a deal, we're good guys. We're saying this is what we can do for you. This is how we will do it, and this is the benefit that you'll get. So that's why the conversion number ultimately continue to outperform the other 2 metrics. Ben Gilbert: So this is a lot of that work you did around the consolidation of the tech stack, right, when you sort of put the hotels, the DOTW in. So you're giving your customers also client or your supply partners confidence around your pricing deck, which is what's then allowing you to get the exclusives, little bit of that moat, if you like, so that you can then sell on to your customers. Is that fair? John Guscic: Correct. Ben Gilbert: Yes. So in terms of the competitive pressure you're seeing out there, it doesn't seem like there's any escalation in the competitive threat out there's. There's chatter previously that some of the bigger global OTAs might be trying to push into your space, but it doesn't really seem like there's much evidence of them having any impact at all based on the strength of those numbers. Is that fair? John Guscic: The simplest -- the way I can put your mind at rest, Ben, is that our sales to the largest global OTAs is greater than our underlying bookings growth of 18%. Operator: Your next question comes from Andrew Hodge from Canaccord Genuity. Andrew Hodge: Just a question sort of extending on that idea around the contracted increase, if you like, with the business development that you're putting in. When you think about the impact to the business, does it have a greater impact on your revenue margin or on your TTV growth? John Guscic: Thank you for the question, Andrew. I'll take a step back and see, just doing -- let's just do simple math. This is a hypothetical example. So last year, we're doing -- and I'll say, completely hypothetical, so don't take it literally. Last year, we did $5 billion of TTV. Let's say we did 50% directly contracted at that $5 billion. So we go back to our hotel partners and say we're selling you at a rate of $2.5 billion, and we're selling now from other people at $2.5 billion. And then I go to this year, and we're run rate of $6 billion. So we're selling, let's say, 60%, and again it's hypothetical. I'm not suggesting the delta is that great. Just the math works easier in my mind, and we deliver $3.6 billion of directly contracted hotels and only $2.4 billion of third party. So our $2.5 billion has gone to $3.6 billion. Our hotel partners see that. Then they're going, s***, these guys are delivering. And then our guys going, of course, we are. We always told you we would. It's only the investment analysts who didn't believe that we would deliver. But the rest of us, we believe we would deliver. So how do we fix -- how do we continue to show that we are a great partner, and we can get you sales from around the world. And then, as I said, go back to the previous question, what's the data analytic tools that we have that we arm our guys with, it gives them insights in where they're performing against their peers, where they're not performing against their peers, where their price is too high, where their price is too low. We're having that conversation. When you have that conversation, getting access to inventory, is a hell of a lot easier because, one, you're demonstrably better than you were a year ago. Two, you're giving them insights that they don't have. At the end of the day, a hotelier has an OTA as a booking engine to compare themselves but doesn't have the demand pattern that we do. So we can show them. Yes, this is what your price. You're $10 more expensive here, but it's costing you 10 basis points of occupancy or you're $10 cheaper, you can go up and still get the same occupancy that you're getting, et cetera. These are the conversations that we have, which are very different to the conversations we had when we just went in there and said, we promised to do good by you by selling your stuff. Andrew Hodge: And then just a clarification on the second half '26 trading update. I just want to make sure that, that's your report, that the numbers that you provided there are in your reporting currency rather than the functional currency? John Guscic: Correct. Aussie dollars. Operator: Your next question comes from Wei-Weng Chen from RBC Capital Markets. Wei-Weng Chen: So I appreciate your comments before about the consumer AI tools and I guess, downplaying the threat. But is there an opportunity for you guys to go maybe for a lack of better term, B2B2C kind of via partnering with these AI companies like Google and supplying them with inventory? John Guscic: I'll answer it that over the course of the last 2 years, in particular, as we're seeing this coming down the pipe, we have had many, many conversations about how we will take advantage of this and how we will -- how we think we can mitigate the risk to our business. So we have no confirmed plans about B2B2C, but it's certainly something that we focus on internally of how do we maximize the growth rate of our business and having a business like that potentially gets you there. I'm not saying we're going to do it, but it's one of the ones -- and there are a myriad of others, Wei-Weng, that we're also considering, but there are other opportunities as well that are in our consideration set as well. Wei-Weng Chen: Yes. Okay. And then I guess, speaking about opportunities. I mean your name is Web Travel Group, but in terms of operating businesses, you're still a group of one. So I guess what's the thinking in terms of building out more operating pillars? What are some of the organic opportunities you're looking into and maybe some of the inorganic options that might be available? John Guscic: I just came from a Board meeting yesterday where we perhaps made a more derisory comment about Web Travel Group versus WebBeds as the naming convention. We're still ambitious to be a travel group. We spend a little bit of time in the presentation talking about liquidity, and we spent a little bit of time talking about the fragmented nature of the industry. All of those things remain relevant to our thinking about what we do on an inorganic side. And on the organic side, you touched on it with your question. Are there other adjacencies to what we do, white labels, B2B2C, et cetera, how do they fit into the strategy? They're all things that we are currently contemplating. Wei-Weng Chen: Yes. Cool. And then just last question for me. I guess noting the comments about the business being increasingly Northern Hemisphere based and the challenges of managing out of Australia. Do you have a preference for where your next CEO -- CFO, sorry, is going to be based, balancing, I guess, management considerations with the fact that you've got a predominantly Australian investor base? John Guscic: The new CFO will be based in Australia. Operator: Your next question is from Abraham Akra from Shaw and Partners. Abraham Akra: Two questions from me. I suppose some of the concerns related to Google's agentic AI push into travel is increase in direct bookings to hotels and away from some of your customers like OTAs. What do you think about this assessment? John Guscic: It's a little bit muted. If the question was, are they going to be using OTAs more or less than currently? Abraham Akra: Using OTAs less given Google is going to partner with some of the hotel chains and hotel partners. John Guscic: Well, yes, that will be dilutive to everybody if they do that, clearly, but that would be an outcome that would be suboptimal to getting the overall results because the whole thing about what they're trying to do is they are the most sophisticated meta search in the world and the most sophisticated booking engine -- I'm sorry, the most anticipated results delivered agent in the world focused around your needs, you're not going to be just getting -- serving up chain hotels, you're going to be serving up everything. And if it is chains that they go through and chains bypass OTAs, yes, that will be a potential downside risk. I would hazard to guess that if we looked at what our performance would be in circa 3 years after this has launched, and let's pretend there's been a 10% dislocation to this market, 20%, pick a number, doesn't really matter. It's all conjecture at this point. Pick a number, 20% improvement -- sorry, this channel becomes 20% of the overall market, it will be a net contributor to Web Travel Group's business. Abraham Akra: Understood. John Guscic: Let me give you just one bit of color just so to put your minds at rest about why this is -- this is a threat, don't get me wrong, but it needs to be put into the context of what the threat actually is. So go to a market like Italy, massive destination for many people as an inbound market. I don't have the number off the top of my head, but I think it's circa 80 million or 90 million tourists go to Italy a year. And in Italy, they have 94% independent hotels. So as we have said previously, when we set this business up more than 10 years ago, we said we would be the distribution arm for independent hotels. That would be one of the strengths of our business, still remains one of the strengths, notwithstanding chain hotels. Chain hotels are massively important. They're our biggest supply partner and increasingly a bigger supply partner. And I don't have the time on this call to explain it to you, but if you go through the travel ecosystem and the legacy technology that sits within that travel ecosystem, you will know that there is nobody who ever can do everything for all people, whether you're an agentic AI or not. Just from a fundamental element of having a PMS, they are so old and clunky and putting booking engines on them has improved their direct conversion, but they still have significantly more supply from third-party distribution as a hotel chain than they do from direct. That's after 20 years of trying. So that's inevitable. Abraham Akra: Very helpful. And I suppose your comment earlier around the average booking window compression by 5%. Is that a function of your booking mix or customer booking trends? John Guscic: It's impossible for me to answer that with any certainty. All I can tell you is what's happened. It's a little bit like someone -- usually on one of these calls, some will say, who are you winning share from? How do I know? I just know we are. So I just know it is. I'm not sure why it's happening. It might be geographic mix, it might be the fact that -- but it's happening in 3 regions out of 4. So that's just unusual. That's all I'd point out. Just been a lot of last -- shorter booking window, last-minute bookings are less, the length of stays, moderately down, et cetera. Abraham Akra: Got it. And last one for me -- just a quick one. John Guscic: You've outplayed your hands. You have to cover the questions, Wei-Weng. Tony Ristevski: No, it's Abe. John Guscic: Apologies, Abe. I'm apologizing you. I apologize to Wei-Weng. Abraham Akra: He's a good analyst. And lastly, the 23% year-on-year TTV growth year-to-date in the second half. Do you mind providing a regional breakdown? John Guscic: We've given you in the first half. All 4 regions are up. They're not massively different to where they were so that's where we're at. Operator: Your next question comes from Mitch Sonogan from Macquarie. Mitchell Sonogan: Just a quick one on the EBITDA margin target in '27, guiding to around that 50% range. I guess can you maybe just talk to the key swing factors on how you're balancing that, just noting, obviously, given the 44% to 47% range for FY '26. So yes, just trying to understand the specific target around 50% and how you're thinking about it? John Guscic: Yes. We're seeing revenue growth faster than EBITDA -- sorry, expenses, and it doesn't require a big tick to go from somewhere between 44% and 47% to get to 50%. So it's not a stretch target in that sense. If we keep the revenue margin consistent and added the expected TTV increase, and we still had low single-digit expenses, it gets us there. So they're the sort of guardrails for you to think about. Mitchell Sonogan: Yes. And just noting you talked to potential impacts from macro events that have occurred over the last 6 to 12 months. Can you maybe just talk to what percentage of bookings in the different regions are domestic versus international, whether you can give that by the major regions? Because obviously, lots of people have looked at softer Australia into U.S. international travel, but the U.S. is a pretty domestic market. So yes, just keen to understand if you can give us some color on how we should think about that looking at future events that may come our way. John Guscic: There's always a sense of amusement when I see some travel-related data being announced publicly and all the travel stocks fall in unison in relation to it, in particular, in our case, less than 2% of our TTV is Australia. So in the game earlier of swings and roundabouts, if the entire Australian market was eliminated for some reason, we would have grown at 20% instead of 22%. So as I said, just -- I chuckle when I see investor response to news that's not relevant to what's happening to us as a global business. So to go to it, I'll just explain it as I have historically. Our biggest domestic market is clearly the U.S. And in most of our other markets, the domestic component is substantially less than half and what our sweet spot is, is interregional travel, Asians going to Asia, Americans going to America, Europeans going to Europe, Middle East going to the Middle East. That's where the vast majority of what we tap into which is, as you would expect, it's more frequent travel. It's short-haul travel. It's not your once-a-year Aussie going to Europe or going to New York and doing that. That's part of -- obviously part of our business, but it's not the main part of our business because that's -- you're once in a multi-generation trip. Our efforts on people going for 3 nights from Italy to Switzerland as going 6 nights from Paris to Majorca. There's a myriad of combinations. And literally, we have a dashboard that goes through them, and we look at the ups and the downs. But in the end, overall, the vast majority of our business is what we consider short-haul international travel, less than 6 hours. Most of it's around 3 hours flight time and you see what our average booking value is. All right. Have we lost everyone? Operator: Your next question comes from Patrick Cockerill from Ord Minnett. Patrick Cockerill: On behalf of John O'Shea. Just 2 very quickly from me. Firstly, on the revenue margin, noting that 6.5% now seems to be going longer than the initial 18 months or 3 reporting periods. Can you just give us a little bit of color around the factors at play there that has made that continue into your expectations for FY '27? John Guscic: I won't go through all the things I've said previously, Patrick, other than we have seen and will continue to see a noticeable shift towards directly contracted hotels operating at higher margins. And we continue to focus on geographic expansion, but it's sort of offset by some of the channel expansion, which gives us greater confidence in our ability to maintain that beyond -- into the next 3 reporting periods. So that's the major reason, and I've covered off that a few times already. So that's the key driver, Patrick. Patrick Cockerill: And then very quickly, just on your EBITDA guidance and the more pronounced 1H skew. Is this something we should expect going forward? John Guscic: More pronounced in what sense? The EBITDA number or the gross number? Patrick Cockerill: Skewed to 1H? John Guscic: But what's skewed? Sorry, I don't understand. Tony Ristevski: Look, I think, Patrick, we've always had a skew to first half. If you look at our reporting over the last so many years, that's why we changed our year-end from 30 June to 31 March to capture in the first half ending September, the contribution of the higher TTV that we get from Europe, which continues to be the trend in this reporting period. Operator: Your next question comes from Brian Han from Morningstar. Brian Han: John, in terms of future proofing the business to sustain growth, is it possible for cost growth to stay elevated in that high single-digit regions for the next couple of years? John Guscic: I wouldn't say that would be elevated if we're growing revenue at a multiple of it. So our focus -- whilst our public commentary is around things that investors can latch on to $10 billion TTV, 6.5% take rate, 50% EBITDA margin, our internal focus is on growing revenues at a rate faster than expenses with the exception of the markets in which we invest, and we've called it out in the presentation and in the Q&A about our investment in North American contracting. But if you strip that out and strip out the things that we are doing to maintain our overall competitiveness, our underlying growth rate is -- our expense growth rate is barely above CPI. Brian Han: Yes. I wasn't suggesting that that's actually a bad thing to grow your costs if it means, as you say, future-proofing the business to sustain the current growth rate? John Guscic: Yes. Look, look, the journey is an incredible journey that WebBeds as a business has been on, and you just need to go to slide -- we'll call it up, Slide 9 to see that. So over that journey, we've done things to enable us to continue to grow at the rate that we have. So whether it's building out specific tech for an individual region, building out analytics tools to support our sales initiative, building out efficiency tools to get better imaging, get better rates into the system faster, et cetera. We will continue to do that. We're not playing this game so that we can eke out system growth and defend our share. We are a disruptor in the overall industry and our growth rate reflects that. We have a clear vision about the value we add and how we can accentuate the difference between our competitors, and we've clearly demonstrated that over the last 15 years or 13 years. And there's no reason to suggest that, that run rate expires over the course of the next 2 to 3 years. There are lots of things for us to do, and we know what they are. Brian Han: It can't be clearer than $10 billion. Operator: Thank you. There are no further questions at this time. I'll now hand back to Mr. Guscic for closing remarks. John Guscic: Thank you, Harmony, and thank you to everyone who asked the questions. I'll just summarize that to all of our employees who have delivered this result, I'd like to give them a heartfelt thank you for their contribution to everything that we've been able to do in this year. We continue to have a highly engaged workforce, and none of this would be possible without them. So I'm delighted that they continue to provide the bulwark of what we need to enable us to continue to be the market leaders. And with that, I'll say, as I've said in the forward-looking statements, we've had a really strong first half. We will have an even stronger second half. With that, thank you very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good morning, everyone, and thank you for joining us today for Caledonia Investments Plc Half Year Results Presentation. [Operator Instructions] Please note that this call is being live streamed to a webcast for a wider audience and will be recorded. I would now like to hand over to Mat Masters, Chief Executive Officer, to open the presentation. Please go ahead. Mat Masters: Hello. I'm Mat Masters, CEO of Caledonia Investments, and welcome to our results presentation for our half year to 30th September 2025. You will also hear from Tom Leader, who leads our private capital strategy; and Rob Memmott, our Chief Financial Officer. Before we go through these results, a short reminder about Caledonia. We are long-term stewards of our shareholders' capital, including the Cayzer family who have entrusted us with theirs for generations. Looking after multigenerational capital shapes everything we do. We need to make returns, but do so whilst limiting the risk of losing capital. We target absolute returns of inflation plus 3% to 6%, and this influences the level of risk we're prepared to take. Over time, our approach to investing has delivered results at the top end of this target range at 9.8% per annum, outperforming inflation by 6.5% per annum, and we have consistently increased our dividend for over half a century. Our approach to investing is straightforward. We invest in high-quality businesses and hold them for the long term. Our maximum time well invested captures the essence of our approach perfectly. Our in-house investment team is fully aligned with shareholders. We do not manage anyone else's money, and there is no fundraising. Performance is measured against NAV per share over time and rewarded in Caledonia shares. So our incentives are directly tied to long-term value creation. Our investment strategy is perfectly encapsulated by time well invested. We use our strong balance sheet, long-term approach and in-house investment team to underpin our focus on long-term results and be robust during downturns and in fact, aim to use these to our advantage. We're organized across 3 main strategies, providing access to private and public companies across different sectors and geographies. We're looking for the same 3 key ingredients, which are attractive markets to operate in, resilient businesses with strong fundamentals and return characteristics and that are well managed and aligned with shareholders. The strategies have together generated Caledonia's overall performance, which is shown in the chart. Over 5 and 10 years, we have delivered at or beyond the top end of our targets and across all periods, both NAV per share total return and share price total return have kept ahead of inflation, which is our core aim. In the last 3 years, share price total return has been stronger than NAV per share total return as the discount has reduced from 37% to 33%. Moving on to the highlights for the half year. We're pleased to report another positive performance with NAV total return of 4.4% and total shareholder return of 8.5%. This was driven by strong public companies and private capital performance, partially offset by funds and including the impact of the pound strengthening against the dollar, reducing NAV by approximately 2%. Today, we are announcing our interim dividend of 3.68p per share, which reflects the change in dividend payment profile to 50% of the prior year's annual total dividend. This dividend will be paid on 8th of January 2026. Moving on to public companies. This comprises 2 portfolios, each taking a concentrated approach to making long-term investments in high-quality companies. We're looking for high-quality, durable businesses, which we think have got great futures ahead of them. We aim to buy well and hold for the long term. The overall public company strategy delivered 9.9%, driven by a capital portfolio and within that, primarily Oracle, Microsoft and Alibaba who are benefiting from continuing demand for cloud-based services, including AI. We initiated a new position in Charles Schwab, the U.S.-listed brokerage business that we've been tracking since 2017. We like Schwab because of its massive scale with just over $10 trillion in client assets and market-leading focus on driving down costs for its clients. Its track record speaks for itself with annualized total shareholder return of 17% since it listed in 1987. It's well managed with good continuity of leadership with the eponymous Charles Schwab still on the board. We deployed GBP 35 million, mostly on 7th of April, shortly after President Trump's Liberation Day, which was followed by a downturn in the equity markets and presented the lowest price that Schwab and the market traded in the last year. This derisked our point of entry and is a good demonstration of our time well invested approach. We purposely set ourselves up to buy shares in wonderful companies when they become more attractively priced. On the same theme, Oracle delivered a standout performance for us, and we were able to realize gains, selling 3/4 of the value of our holding at the start of the period as its share price doubled and its risk characteristics changed. We first invested in Oracle in 2014 when it was rated as legacy tech and judged late to the cloud and as a service. We look closer and saw a business with a good market position in an attractive market, excellent business fundamentals with high levels of recurring revenue and plans to increase this and excellent returns metrics, run by a management team that was certainly aligned with shareholders and very well proven. Our analysis helped us establish that long-term ownership was very likely to be rewarded. And as you can see from the chart, Oracle took a little while to get going, but we could see that they were doing what great long-term businesses do, which is accept some short-term pain as they invested in a comprehensive move to the cloud and as-a-service offering, whilst using their low rating to undertake a massive share buyback with them buying back $120 billion of their shares and the share count reduced by 38%. As their transition to the cloud and as a service became better understood by the market, share price performance improved. And more recently, Oracle's cloud offering and incumbent position in corporate and governmental data places them very well for AI, and this has driven the doubling of its share price during the first half of our year. Our overall investment performance from only Oracle has been good with GBP 35 million invested, delivering GBP 101 million in cash returns through top slicing and dividends with the position worth GBP 89 million at the end of the period, so 5.4x our money. I will now hand over to Tom to talk about private capital. Tom Leader: Thank you, Mat. Today, I'll walk you through our performance, portfolio highlights and recent developments, focusing on how we continue to support private companies in creating enduring value. As a reminder, Caledonia Private Capital is focused on making direct investments, usually on a majority basis into high-quality mid-market U.K.-centric businesses. Our model is built on permanent capital, genuine partnership, a patient long-term perspective with moderate use of leverage. Unlike private equity firms whose funds have limited life spans, restricting the time when investments must be made, grown and sold, we have no time limitations on our investments. We can build genuine partnerships with strong management teams and help them create enduring value without the constraints of short-term capital. Our current portfolio has a net asset value of GBP 907 million, invested across 8 companies and represents approximately 30% of the NAV of Caledonia as a whole. For the half year, we delivered a total return of 7.7%. This result was primarily driven by the agreed sale of our minority stake in Stonehage Fleming to Corient Wealth, on which we exchanged contracts in September, along with continued good operating performance from AIR-serv. I will cover Stonehage Fleming in a bit more detail on the next slide. But clearly, the sale, when it completes, will deliver an excellent result for Caledonia. AIR-serv was another strong performer, valued at GBP 193 million as at 30th of September. In the half year, it delivered an 11% return, driven by strong revenue and profit growth. The business paid Caledonia a dividend of GBP 24.5 million in the period. The other companies in the portfolio continue to make progress in executing their value creation plans. Looking at our long-term performance, Private capital has delivered annualized returns of 8.5% over 3 years, 20.7% over 5 years and 12.5% over 10 years, all versus our 14% target. Stonehage Fleming is a full-service multifamily office, helping discerning clients address the challenges of creating and preserving wealth. It is focused on the ultra-high net worth market, which is the fastest-growing segment of the wealth market. The firm's clients have entrusted it with the management, fiduciary oversight and administration of assets in excess of USD 175 billion. Stonehage Fleming provides its services from 20 offices in 14 geographies. With an initial investment of approximately GBP 90 million in July 2019, we acquired a minority stake alongside Giuseppe Ciucci and the other founder partners. The management were not looking for a conventional private equity investor, but instead for a capital provider, which shared their long-term perspective and multigenerational approach to preserving and growing capital. Together, we restructured the balance sheet and the shareholder base of the group to position it for the next phase of growth. Over the following 6 years, we have worked in close partnership with the leadership team to deliver upon our original investment thesis, which entailed, first, streamlining the governance structure by financing and supporting succession management; second, investing in technology, which improved margins and allowed Stonehage Fleming to internalize services that were previously outsourced; third, enhancing business development, which delivered strong organic growth; and fourth, completing 4 strategic acquisitions, which have expanded the firm's geographic reach and diversified its product and service offering. The business has been a consistent performer, a true compounder. Strong cash generation and disciplined reinvestment have driven returns steadily upward through our ownership. This investment is a hallmark example of our unique approach, long-term partnership-driven and unconstrained by fixed fund life and has delivered exceptional value for all stakeholders. We expect the deal to close in mid-2026, subject to the required regulatory consents at which point it should deliver cash proceeds of approximately GBP 288 million, representing including dividends received along the way, a 3.2x multiple on cost of investment. As of 30th September, Stonehage Fleming was valued in the portfolio at GBP 259.7 million, net of approximately 10% discount to reflect the transaction execution risk and the time value of money. The bubble chart here illustrates for all our major realizations since 2012 on the X-axis, the realized IRR and on the Y-axis, the NAV uplift at exit compared to the carrying value 12 months prior to exit. For Stonehage Fleming, the expected exit proceeds of GBP 288 million represent a 30% uplift to its carrying value as at the 31st of March 2025. This result is comparable with a 37% uplift relative to the carrying value when we sold 7iM in January 2024. Overall, across the portfolio, we have a strong track record of realizations. Since 2012, we've generated GBP 1.4 billion in proceeds, returning around GBP 700 million in net cash to Caledonia. Our realized investments have delivered a 17% IRR and a 2x multiple on cost, which, given the low appetite for and use of leverage, compares very favorably with the returns delivered by U.K. mid-market private equity. Let me finish by saying we continue to deliver strong and consistent returns, underpinned by our disciplined approach and the strength of our partnerships. The success of Stonehage Fleming exemplifies the power of our permanent capital model, enabling us to back exceptional businesses and management teams, support their long-term growth and realize substantial value for our shareholders. Thank you, and I'll now hand over to Rob. Rob Memmott: Thank you, Tom. Our funds pool has been running for more than 15 years. The opportunity is significant. These funds tend not to market in Europe, meaning that we are often the only European investor, a real differentiator. The pool NAV of GBP 884 million is a diverse portfolio invested in some 82 funds by 46 managers and in more than 600 underlying businesses. 64% of the NAV is focused on the North America lower mid-market buyouts. The funds are typically the first institutional investment into relatively small often owner-managed businesses. The playbook is to transform the companies by strengthening the management team, improving operational efficiency, growing sales by product and geography, both organically and through bolt-on acquisitions. These improved companies with greater scale provide feedstock to mid-market private equity. It's a very pure form of capitalism. Of the North American companies, 2/3 are providing services with the balance having very little exposure to international trade flows. 36% of the pool NAV is invested in Asian buyout, growth and venture. The buyout assets are focused on domestic consumption and supply chains, fueled by the aging population, growing middle class and tech adoption. The venture and growth funds are invested in government supported new technologies and health. Whilst there is very limited exposure to the direct impact of trade tariffs, as expected, economic uncertainty has reduced investment and realization activity in the short term. The pool has delivered solid returns of 13.3% over 5- and 10-year periods. Performance over the 6 months reflects the continuation of trends experienced for the last 3 years. During that period, the North American pool delivered local currency returns of 8.9%, driven by the trading performance of the underlying companies. In Asia, the companies are making progress. However, the continued reduction in capital market flows has impacted on fundraising and exits suppressing our returns. Overall, the pool NAV grew by 4.3% in local currency, but reduced by 1.8% in sterling. Our capital commitments are GBP 394 million, 75% of which is to North America. GBP 52 million was invested in the 6-month period and $55 million of new commitments were made to 2 North American managers. Looking at the cash flows in a bit more detail. The chart shows the realization and investment activity over recent 6-month periods. As I mentioned earlier and as expected, economic uncertainty has reduced investment activity in the last 6 months, which can be seen on the graph. The pie chart details the weighted average life of the primary portfolio. For North America, the weighted average life is 4.3 years. For Asia, it's 5.5 years. We expect a longer hold period in Asia given that the assets are weighted towards venture growth and fund of fund investments. And so to the numbers. During the 6-month period, our NAV total return was 4.4%, growing our NAV to just over GBP 3 billion, of which GBP 2.9 billion is invested in a diversified portfolio of listed and privately held companies and funds that have got global reach. Cash on balance sheet was GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million, enables us to act quickly to invest in companies and funds that we find attractive. This was demonstrated in April when we deployed approximately GBP 50 million into the public company strategy, taking advantage of opportunities provided by the market volatility around Liberation Day. We have reprofiled the interim dividend such that it is 50% of the prior year total. This equates to 3.68p, which will be paid to shareholders on the 8th of January 2026. And now to my beloved waterfall chart. This chart shows the movement in NAV over the period. We started the year at GBP 2.9 billion. The portfolio return of GBP 145 million includes the negative impact of foreign exchange. We then deduct management expenses of GBP 17 million. There is then the cash returned to shareholders, GBP 14 million allocated to share buybacks and GBP 28 million for the final dividend from the prior year. That results in a closing NAV of just over GBP 3 billion. Our OCR is 87 basis points, slightly up on the prior year, reflecting some investment in our teams. I expect this to increase slightly over the next 12 months, taking account of full year effects. 54% of our assets are domiciled in U.S. dollars and 37% in sterling. Movements in the sterling-dollar exchange rate will, therefore, impact our in-period results. In the last 6 months, we suffered an FX loss of GBP 59 million, reducing our NAV by approximately 2%. We have a robust balance sheet with no structural leverage. Walking you through the cash movements, we started the year with GBP 151 million, and net GBP 27 million has been invested. The investment income from our assets was GBP 47 million, higher than in previous periods as it includes the GBP 25 million dividend from AIR-serv. We have consumed GBP 24 million in the cash cost of management expenses and working capital. And next, there is the payment of the prior year final dividend, GBP 28 million and GBP 14 million allocated to share buybacks, resulting in a closing cash position of GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million means that we have liquidity of GBP 430 million. Of the revolving credit facility, GBP 150 million has just under 4 years remaining duration and GBP 175 million just under 2 years. We expect to complete the sale of Stonehage Fleming in Q2 2026 once all the regulatory approvals are obtained. GBP 251 million will be received on completion with 2 further amounts of GBP 18 million being due 6 and 12 months following. These amounts will come back on to the balance sheet. We feel no pressure to invest, and we will continue to appraise investment opportunities on their merits and as they arise. The discount at the end of the period was 33%. We believe this fundamentally undervalues the quality of the portfolio, our track record and prospects. We are taking actions over the things that we can control, including share buybacks, which remain an attractive investment for us. We have a prudent capital allocation policy to investments, our dividend and when appropriate, share buybacks. During the 6 months, we allocated GBP 14 million to share buybacks, increasing the total since March '24 to GBP 78 million, delivering a 7.44p NAV per share accretion. We continue to evolve our IR and communications to ensure that the Caledonia investment proposition is understood and rated. We held capital market spotlight events in January and June, focused on private capital and public companies. If you've not had the opportunity, I would encourage you to visit the website and watch the presentations. They provide a great insight into how the pools operate, what differentiates us and how we add value. When you visit the website, you will see that this has been significantly improved with new content. A date for your diaries, the 27th of January 2026, we will be holding the third spotlight session focused on the funds pool. We believe Caledonia is a great home for long-term investors. Following shareholder approval, we have completed the 10 for 1 share split. In addition, we have rebalanced the profile of the dividend, increasing the interim to 50% of the prior year total rather than the historic rate of approximately 25%. These measures will improve visibility of income, make payments more balanced, and I expect will improve accessibility for all shareholders. I'll now pass back to Mat. Mat Masters: Thanks, Rob. We're pleased with our 6-month performance, which supports our track record of delivering NAV total return of 9.8% per annum over the last 10 years, which is at the top end of our target range. Across both public and private markets, our portfolio is high quality, diversified and deliberately positioned to withstand short-term market volatility while compounding value over time. And none of this would be possible without our strong balance sheet, exceptional team fully aligned with shareholders and focused on long-term value creation. Thank you very much for joining us today, and we will now take questions. Operator: [Operator Instructions] Our first question comes from Iain Scouller with Stifel. Iain Scouller: I just wanted to ask about the valuation of Stonehage. I think in the statement, you're saying it's at a 5% discount to the expected proceeds. But in the presentation, you're talking about a 10% discount. So I just wondering if you could clarify that. Tom Leader: Certainly, the total discount relative to the expected proceeds is approximately 10%, comprising 2 separate adjustments: one, approximately 5% discount for execution risk and a 5% discount for the time value of money. The total discount relative to the expected proceeds is 10%. Iain Scouller: Okay. And when do you expect to receive the proceeds? Tom Leader: We expect to receive the proceeds on completion of all the regulatory approvals. But there are, in fact, slightly more than 20 regulatory approvals required in multiple jurisdictions. That process will take several months. So we expect the deal to complete towards the back end of the first half of calendar 2026. Operator: Our next question comes from Anthony Leatham with Peel Hunt. Anthony Leatham: A couple of questions, if I may. You were particularly active kind of April, that liberation day volatility on the public company side. How are you feeling about the environment and the positioning of the portfolio today? And then I had a couple of questions on the private equity side. Maybe a comment on the maturity profile of the funds portfolio. And then we're hearing from private equity trusts and managers that realization activity is actually improving. And I didn't know whether you had seen the same trend within your holdings. Mat Masters: Anthony, thanks for the question. Mat here. So yes, we did. So following President Trump's what's been Liberation Day sort of announcements and things, the stock markets sold off. And we added -- very pleased to add Charles Schwab to the portfolio. And that is absolutely sort of the playbook when we sort of invest in the quoted markets is to keep our powder dry until opportunities present themselves. And we also topped up other holdings in the wake of that, and that's all thus far performed very well for us. The portfolio is a long-term portfolio. We try not to judge precisely where it is on any particular day, but we do feel as we risk manage the portfolio as we go forward, we obviously talk about the fact that we to Oracle as that went up in value and loss rating went up, we did that across the whole portfolio. So we feel good about the medium and long-term prospects of the portfolio. Obviously, impossible to predict what share prices do on a day-to-day basis, I'm sure you'll appreciate. Maybe Rob could tackle the funds questions. Rob Memmott: Yes. Thanks, Anthony. Just in terms of the fund’s activity, as we mentioned in the presentation, the level of realization and investment activity in the last 6 months has reduced quite significantly. And what we're seeing is that start to increase the weighted average life of the portfolio compared to where we were a year ago. In terms of recent activity in the market, certainly, there is sort of noise of increased activity taking place. We're yet to see that sort of flow through into sort of real pound notes coming back through to us. And certainly, from a sort of planning and thinking about sort of liquidity, we're sort of still quite cautious in terms of the speed of that recovery getting back up to the norms, which I guess we were experiencing in the prior financial year. Operator: [Operator Instructions] There are no further questions on the webinar. I will now hand over to [Beck Hughes] to read out the written questions. Please go ahead. Unknown Executive: So the first question is about Oracle. What is your view and future prospects for your Oracle holding? And have you sold any more since the period end? Mat Masters: Thanks for the question. Mat here again. So we think Oracle has a fantastic future ahead of it. Most of its current trading is still sort of legacy type business. And what's really happened is its forward order book, it's grown a lot and a lot of that is sort of AI related. So actually, that's reflecting the opportunity expanding ahead of it. So we're quite excited about the future for Oracle. Nevertheless, the rating has changed materially during the period. And so we do sort of respond to that. And so we have also the size of the position during the we talked about the money we've had it over the course of our investment period. But over the year -- over the half year rather, we've taken GBP 54 million of it. So we have trimmed the holding according to the change in risk -- really around rating risk with it. We remain pretty excited about its medium and long-term future. Unknown Executive: A question on Stonehage. Are the proceeds contingent on anything or just deferred? And what are the most attractive areas for new investment? Tom Leader: So dealing with the Stonehage completion mechanism first. As I alluded to earlier, completion is conditional on reg approval in multiple jurisdictions. That will crystallize payment of the bulk of the proceeds, just over GBP 250 million. There is a deferred element, which is payable in 2 tranches 6 and 12 months post completion. Those deferred proceeds are interest-bearing, and they are subject to adjustment depending on the finalization of a closing balance sheet audit, which includes a true-up mechanism. So that could go either up or down, positive or negative against the estimated closing balance sheet just prior to closing. So there is bound to be a small difference between the 2, but we do not expect it to be material. In terms of the second part of the question, future opportunities, we scan somewhere between 300 and 350 new opportunities a year across a very broad range of sectors. Our historic strengths have been in financial services and business services and technology-driven industrial businesses. And there is a regular flow of opportunities in all of those sectors. But I would add that it is a difficult market in which to deploy capital. Good quality assets are still transacting at very high prices, and less good quality assets are either taking longer to sell or not selling at all. So we will remain selective and we have the liquidity to finance new acquisitions if and when we can find the right opportunity. Unknown Executive: Thanks, Tom. A question around discount. What plans do you have to reduce the very large discount now the buyback may have marginal benefits, but does not seem to benefit? And why have you only bought back GBP 13 million worth of stock given the discount is just over 30% and you have a lot of liquidity. Rob Memmott: Yes. Thank you, Beck. So as you rightly point out, the discount of around 33%, we certainly feel undervalues the value of the portfolio, our track record and our prospects. I guess the buybacks, we sort of see those as an investment opportunity for us. We don't see that -- we don't have a discount control mechanism. The things that we are doing to influence the discount are the things that we can control, which is continue to invest in a good quality, high-quality portfolio, make sure that we communicate with as large an investor base as possible to make sure that we -- the proposition is properly understood and rated. And then there are some smaller sort of tactical things that we've done around the share split, rebalancing the dividend payment to make sure that the shares are as attractive to a broader investor base as possible. Unknown Executive: Another question here about hedging. You mentioned return in sterling is diminished by your U.S. dollar weakness. Do you hedge? Rob Memmott: And the answer to that is that we do not hedge. We're a long-term investor. And if you like, the short-term volatility coming from exchange rates, we sort of understand those and sort of monitor them, but it is about sort of long-term sort of value sort of creation. And generally, if you sort of hedge the balance sheet position, you pay a premium in order to end up in the same place. So we don't hedge unless there are specific cash flows that we would do so for. And I think that the weighting of the portfolio is more dollar denominated reflects the fact that the size and the quality of the companies which we're investing in, a lot of those are based in North America or headquartered in North America. Unknown Executive: Another question here on special dividend. In the past, there was a loose policy of providing a special dividend every 3 years or so. Is this policy still operative? Mat Masters: So we have -- thanks for the question. We have a track record of occasionally paying special dividends. I don't think we've ever sort of announced a policy about when we would do it. And we've not made any announcement about paying a special dividend. So that is the case at the moment. Unknown Executive: Another question here about equity market valuations. What do you think of them. Mat Masters: Well, thanks for the question. So equity market valuations vary around the globe, and there'll be one market up and one market not quite so far up. And actually, it's a really difficult question to address and actually respond to in your portfolio. And so what we do is to try and keep it very simple. We invest in good quality companies and hold them for the longer term and try not to worry too much about what's going in the macro and make sure we invest in things where we don't have to worry too much about the macro. Okay. Well, we have gone through the questions now, and we're very grateful for everyone joining us on the call today and for the questions, and we look forward to connecting with you next time. Operator: Thank you for joining today's call. We are no longer live. Have a nice day.
Operator: Welcome, everyone, to Accsys Technologies plc Interim Results Presentation for the 6 months ended September 30, 2025. Today's speakers are Dr. Jelena Arsic van Os, Chief Executive Officer of Accsys Technologies; and Sameet Vohra, the company's Chief Financial Officer. Jelena and Sam will take you through an overview of the business and financial performance for the year before we open the floor to questions. Please note that we will prioritizing questions from analysts. [Operator Instructions] With this, I would like to pass over to our speakers. Jelena Arsic Os: Good morning, everybody, and welcome to Accsys' interim results presentation for the 6 months ended September 30, 2025. I am very pleased to report that we have delivered an excellent first half with a significant improvement in profitability. Our growth across all regions is beating the underlying market trends, showing our FOCUS strategy is effective and that the company is delivering on its promises. Accoya has seen strong growth across its sales regions with a 22% increase in total sales volumes, gaining market share from competitive and alternative materials. Our premium market positioning is proving resilient against continuing macroeconomic challenges. Group revenues increased by 23% on a like-for-like basis compared to the prior year. This comparison adjusts for the transfer of North American sales from the group to Accoya USA, our joint venture with Eastman Chemicals after it commenced operations toward the end of H1 last year. Accoya USA has had an excellent H1 performance. It has shown rapid volume growth with North American sales up 61% and positive momentum throughout the period. This demonstrates the strength of our technology, the Accoya brand and our customer relationships in the sizable North American market. Joint venture reported close to breakeven EBITDA for H1. This translates to Accsys joint venture equity accounted a modest EBITDA loss of EUR 0.3 million. This marks substantial progress compared to the equity accounted losses of EUR 4.3 million last year, and we are all excited about what's to come. Accsys maintained gross margin above our target of 30%, maintaining pricing discipline. We also continue to maintain cost discipline and have retained EUR 2.3 million in benefits from the business transformation program that we began in FY '24. We increased adjusted EBITDA for the half year by 160% to EUR 10.4 million. This is just slightly lower than the EUR 10.8 million we reported for the full financial year 2025. With our EBITDA margin at 11.6%, Accsys is almost at the level of our Phase 1 FOCUS strategy target. Crucially, we have made solid progress on deleveraging the balance sheet, a key strategic priority. Net debt has decreased by EUR 2.8 million since 31st March 2025, driven by improved operating cash flow, and we have improved our leverage ratio from 2.5x to 2.1x at September 30, 2025. During the period, we achieved operating cash flow of EUR 8 million. In October 2025, outside of this reporting period, we successfully negotiated new improved terms for financing our debt with ABN AMRO and HSBC. This refinancing strengthens our capital structure and further derisks our profile, positioning us to execute our strategy with greater confidence. Our good performance is a clear signal of our continuous progress. Accsys is delivering on its commitments and is laying a solid foundation for further growth. I want to take this opportunity to sincerely thank the entire team across Accsys and Accoya USA as well as our customers and partners. Thank you for your dedication. Your efforts continue to drive our success and position us very well for the future. We are progressing our FOCUS strategy, transforming Accsys into a fundamentally strong operationally efficient, customer-centric united, safe and sustainable business. Together, these efforts are creating a strong and lasting platform for growth. Compared to the first half last year, we have significantly derisked the company, having no exposure to large unfinished CapEx projects and significantly improved financial performance. The company now operates 3 production sites, Arnhem, Barry and the Accoya USA and has secured future growth funding on improved terms with the extended maturity to October 2029. We are operationally more efficient with like-for-like gross margin improvement of 1.1% compared to the prior period, driven by efficiency measures, amongst them, improved utilization of acetic anhydride in production. In addition, we have retained EUR 2.3 million of benefits from the business transformation program. As a growth company, we nevertheless continue to invest in volume expansion. We are investing in a new acetyl storage in Arnhem and have more than doubled our Accoya Color capacity in Barry from 6,000 to 14,000 cubic meters. Accsys aligns all its initiatives, investments and growth plans around maximizing customer value. With our fantastic products, we have customer centricity at our core and we continue expanding Accoya availability, adding 3 new distribution partners in the period, and Accoya projects continue winning awards, like a recent DNA Paris Design 2025 award for Casa Angra coastal home in Brazil. Accoya is gaining market share globally despite relatively soft overall market sentiment in the building material industry. An organization is only as strong as its talent. We are strengthening our workforce across sites through ongoing investments in revenue-generating commercial head count and strengthening our site teams. Last, but certainly not least, in the first half, we invested in health and safety and environment, improving working conditions in our Stacker hall in Arnhem. We also established our sustainability strategy, staying true to our purpose and values, and reaffirmed our commitment to building a better, more sustainable future. Accsys Cares sustainability plan introduced our first decarbonization commitments and targets, enhancing the already strong sustainability credentials of our products and our business. Before I hand over to Sam to discuss our financials, I wanted to share a short video of one of our projects highlights from this period, Accoya being used for the new roof and public space at a landmark NEMO Museum building in Amsterdam. [Presentation] Sameet Vohra: A truly remarkable project. Thank you, Jelena. Over the next few slides, I'm going to talk you through the financial results for the half year in more detail. This slide summarizes the strong financial performance for the first half of the financial year. I'll go into more detail on the financial performance in the next couple of slides by highlighting some of them now. Group sales volumes were up 1% to 30,575 cubic meters compared to the prior period. However, when you exclude the 3,802 cubic meters of sales made by the group to North America in the prior period before the Accoya USA joint venture commenced operations, the group sales volumes were up by 15%, with strong demand in all regions. Total sales volumes, which includes all of the sales volumes from the JV and more clearly shows global demand for Accoya increased by 22% to 38,618 cubic meters with 8,043 cubic meters coming from the JV. Group revenue increased by 5% to EUR 76.1 million for the first half of the year. However, like-for-like revenue, which adjusts for the group North America sales made in the prior periods increased by 23% year-on-year. Aggregated revenue, which includes 60% of the revenue of the JV was up 21% to EUR 89.9 million. Gross profit was EUR 1 million higher than the prior period at EUR 23.2 million, and the gross profit margin remains above our target level of 30%. Underlying EBITDA, which excludes the results of the joint venture increased by 29% to EUR 10.7 million compared to EUR 8.3 million in the prior period with a 260 basis point increase in the underlying EBITDA margin to 14.1%. This reflects a strong sales volume and revenue growth, maintaining a gross margin above 30% and the tight cost control discipline we have over operating costs. It was really pleasing to see that the Accoya USA JV was close to EBITDA breakeven for the first half of the year compared to a loss of EUR 4.3 million in the prior period. Sales are accelerating in North America, and we expect the joint venture to be EBITDA positive for the financial year. Adjusted EBITDA on a profitability performance measure was up by 160% to EUR 10.4 million, with an impressive 620 basis points increase in the margin to 11.6%, which is just below the target that we set for the end of Phase 1 of our strategy. The EUR 10.4 million adjusted EBITDA is also slightly lower than the EUR 10.8 million that we reported for the whole of the last financial year. Net debt at 30th of September 2025 stood at EUR 39.8 million, lower than the prior period and the figure at the end of March 2025. The leverage ratio improved to 2.1x. I'll discuss the changes in revenue, profitability and net debt in more detail in the coming slides. Going into more detail on our revenue performance for the year. As I previously mentioned, group revenue increased by 5% to EUR 76.1 million in the prior period, excluding the EUR 10.3 million of revenue from sales made to North America before the joint venture starts operations, like-for-like revenue growth was 23%. The sales growth we've seen in H1 across all regions has fully replaced the North America volumes transferred to the JV. Despite the challenging macroeconomic environment, we have maintained strong pricing discipline with a 1.7% increase in average Accoya sales price for the period. As Jelena previously mentioned, we doubled capacity in our Barry Color facility during the period due to increased demand for our color product. We saw a favorable product mix effect for this with the Accoya Color now making up a high proportion of group sales volumes through the prior period. Accoya Color also undertakes tolling for the JV and sales in the period increased by EUR 2.8 million from this. License fee and royalty income from the JV was EUR 1.6 million higher than the prior period as the group receives a royalty based on sales made by the JV. The final license fee payment was also received during the period, following successful completion of the performance test of the Kingsport plant, thereby granting exclusivity for the North American market to the joint venture. Other represents Tricoya panel sales and sales of acetic acid which are broadly in line with the prior period. Aggregated revenue, which includes 60% of the joint venture's revenue, increased by 21% to EUR 89.9 million. On a constant currency basis, aggregated revenue grew by 23%, given the weakness of U.S. dollar against the euro. On the face of it, the gross margin decreased by 20 basis points to 30.5% for the period. However, the prior period includes sales that were made to North America prior to the joint venture commencing operations. These sales amounted to 3,802 cubic meters, which represented 13% of group sales volume in the prior period. They contributed EUR 4 million of gross margin in the prior period and EUR 2.9 million of EBITDA as the average sales price in North America is higher than all other regions. Therefore, a more representative way to look at gross margin progression in the first half of this financial year is to exclude the EUR 4 million from the comparator, resulting in the like-for-like gross margin improving by EUR 5 million to EUR 23.2 million and 110 basis points to 30.5%. This EUR 4 million gross margin reduction has been offset by sales volume growth, favorable sales mix and higher average sales price from other regions, together with the receipt of royalties and license fees from the joint venture. Our main production costs related to raw material spend on raw wood and net acetyls. Raw wood costs are in line with the prior period as higher appearance grade raw wood costs have been offset by lower wood chip grade costs. We saw an improvement in gross margin arising on net acetyls from improved utilization of acetic anhydride in the production process, change in the supply mix and favorable FX as the U.S. dollar weakened against the euro. The increase in other costs reflects the investment in talent and headcount in operations to support sales growth, the effect of the annual salary increase and higher inventory handling costs. The gross margin at 30.5% continues to remain above our strategic level of 30%. This slide shows the adjusted EBITDA progression during the year, reflecting the strong financial performance. From an overall perspective, we saw a 160% increase in adjusted EBITDA from EUR 4 million to EUR 10.4 million and a 620 basis point increase in the adjusted EBITDA margin to 11.6%. This is already very close to the 12% target that we set for the end of Phase 1 of our FOCUS strategy, and it's very encouraging to see. The gross margin benefit to EBITDA amounted to EUR 1 million or EUR 5 million on a like-for-like basis, and we tightly controlled operating costs, which only increased by EUR 0.2 million compared to the prior period. EUR 2.3 million of the benefits from the business transformation program in FY '24 have been retained even after the investments we've made in sales and marketing and operational headcount and strengthening local management teams in key areas. There are no further costs associated with Hull after the business was placed into liquidation in December 2024. The joint venture is close to EBITDA breakeven for the period with our 60% share of the EBITDA loss amounting to only EUR 0.3 million as the Kingsport plant ramps up with accelerating North American sales growth. This is an improvement of EUR 4 million compared to the EUR 4.3 million loss recorded in the prior period. From a segmental perspective, EBITDA from our Accoya segment increased from EUR 10.7 million to EUR 12.7 million with healthy margin of 16.7%, up from 14.8% in the prior period. This growth is primarily due to the strong sales growth, the improvement in gross margin and tight cost control discipline on operating costs. Corporate costs amounted to EUR 2 million and were EUR 0.4 million lower than the prior period. Therefore, underlying EBITDA, excluding the joint venture increased by 28% from EUR 8.3 million to EUR 10.7 million. The margin improved by 260 basis points to 14.1%, reflecting the strong underlying profitability of the group. As I mentioned before, adjusted EBITDA increased by 160% from EUR 4 million to EUR 10.4 million. This slide shows the evolution of net debt during the year. Net debt at the end of September 2025 stood at EUR 39.8 million, a decrease of EUR 2.8 million compared to the start of the financial year. Debt reduction and deleveraging the balance sheet remains a key priority for us, and net leverage reduced from 2.5x to 2.1x at the end of September 2025. We experienced an increase in net working capital of EUR 4.2 million in the period, which is primarily related to higher inventory levels. This increase in inventory was planned to ensure product availability to support strong demand and customer service as well as building up inventory ahead of the annual maintenance stock, which took place in Arnhem in October. Accordingly, operating cash flow conversion was 75%, in line with our Phase 1 target. Tight working capital management remains a key area of focus for us. CapEx is EUR 2.9 million during the period, and this included expansionary growth CapEx on increasing our acetyl storage and making health safety and environmental improvements in the Stacker hall in Arnhem. Interest paid and accrued amounted to EUR 2.3 million, of which EUR 1.1 million related to accrued interest on the convertible loan notes. Tax received was EUR 0.7 million in respect to previous tax years. We recently completed the refinancing of our debt facility with a new EUR 55 million facility with ABN AMRO and HSBC on improved financial terms. The refinancing strengthens our capital structure, enhance its financial flexibility and further derisks our profile, positioning us to execute our FOCUS strategy and growth plans with greater confidence and resilience. The refinancing demonstrates continued strong support from ABN AMRO, and we are delighted to partner with HSBC, a bank of significant strength and reputation. So in summary, we've had an excellent first half of the year with a significant improvement in profitability. We saw strong total sales volume growth of 22%, with accelerating sales in North America, which increased by 61%. The joint venture was close to breakeven EBITDA in H1. Adjusted EBITDA was EUR 10.4 million, with a 11.6% margin, close to our Phase 1 target of 12%. We have continued to focus on deleveraging the balance sheet with net leverage decreasing to 2.1x and the recently completed refinancing strengthens our capital structure and enhances financial flexibility on improved terms. I'd like to now hand you back to Jelena, who will take you through the business review. Jelena Arsic Os: Thank you, Sam. In January 2025, we set out our FOCUS strategy, which will be delivered in 3 phases. The first phase to FY '27 focuses on resetting operationally, maximizing returns and cash flow from our existing operations and reinforcing the fundamentals, including reducing the debt and optimizing our capital structure. Our half year results demonstrate good progress against our Phase 1 targets. Our strong sales growth put us on a good trajectory to meet run rate target of 100,000 cubic meters by the end of FY '27. We have also significantly improved profitability moving from 5.4% in adjusted EBITDA margin from last year to 11.6%. We are very close to our adjusted EBITDA margin target of 12%. We are also in line with our operating cash flow conversion at 75%. Importantly, we are deleveraging and derisking the business, placing the company in a stronger position for growth. Our successful October refinancing gives us more favorable payment terms with a reduction in quarterly repayments going forward. Global demand for our products has been strong. We had outstanding growth in the U.S., which I will provide more details on in the coming slides. We saw very good growth in our key European markets despite continued macroeconomic uncertainty. The European market landscape reflects a mix of cautious recovery signals and ongoing challenges across key regions, shaped by economic pressures, regulatory changes, and involving demand in the construction and timber industries. Europe grew 22% in the reporting period. We saw growth in Germany, driven primarily by strong demand in the outdoor living market, high energy costs and slowing housing permits weigh on German outlook, but commercial and renovation segments remain more resilient. European growth was also supported by a good performance in Benelux where we had positive momentum in Belgium after onboarding a recent distributor. Government initiatives for energy-efficient building materials continues to favor sustainable timber products. We achieved 14% growth in the U.K. and Ireland, our most established market as we continue to build a strong reputation for joinery applications and gain more facade specifications. The softwood market in the U.K. remains weak with subdued import volumes and merchants limiting stock positions, pending market clarity with the U.K. budget approaching. The U.K. budget is being announced tomorrow with uncertainty of governmental measures to address the fiscal gap that is estimated between GBP 20 billion and GBP 50 billion. Across the rest of the world, we saw 28% growth with bright spots in Australia and New Zealand, as our partnerships with our distributors continue to develop and expand our presence. Accoya for Tricoya sales grew at a more moderate pace, with sales weighting towards the start of the period. Finally, we will be launching a new finished decking products in the second half with a phased market rollout. This will be the first time that we offer a finished product to the market and is an exciting new development for Accsys. We also continue to see Accoya specified for incredible projects worldwide. The start-up of Accoya USA last year was a significant milestone for Accsys. And I am very proud to share that it has got off to an excellent start. In North America, the joint venture grew sales volumes by an impressive 61% with sales acceleration across the period, driven predominantly by our existing distributors, many of whom we have a long-standing relationship with. The local availability and production provide them with the confidence to run faster. While a 10% tariff was announced in October on imported lumber, we have taken proactive steps to manage the impact of this going forward. So let's look at the more detail at the U.S. market developments. Our sales in the U.S. are outpacing overall market growth, allowing us to gain share from competitors. With forecast indicating strong and sustained demand for modified wood over alternative materials, we are confident that Accoya USA will continue to expand its presence in the growing market. Our main drivers in the U.S. are cladding and decking. These markets both have strong growth rates for modified wood with double-digit growth forecast for decking. Traditional timber products are seeing sharp declines in demand as customers opt for higher performance modified and engineered solutions. Furthermore, increased regulation on the import of hardwoods ipê and cumaru from Brazil has had a positive benefit for Accoya in the U.S.A., and it has limited the supply of these woods. As you can see in the table, the hardwood market for decking is expected to contract. Our growth in the U.S. predominantly came from our existing distributors. In addition, we have added 3 new distributors in the period, including one of the largest in the U.S. hardwood specialty products, GMX Group, a wholesale distributor with a focus on retail customer, and our first Mexican direct distributor, Klinai and expect to see these new channels contribute strongly in H2. We continue to strengthen our relationship, both with the direct distributors and our approved manufacturing partners. Our products are extremely well regarded in the marketplace, that this testimonial from Delta Millworks featuring the owner and CEO, Robbie Davis, and Baker Donnelly, regional sales manager, one of our long-standing Accoya manufacturing customers testifies. [Presentation] Jelena Arsic Os: This fantastic Delta video highlights value that resonates strongly with us: quality, performance and the long-term reliability. These principles are at the core of how we strive to build and maintain our customer relationship, and they are something I'm incredibly proud of. A big part of our FOCUS strategy is to maximize returns from our existing assets, driving sustainable profitable growth from our core sites in Arnhem and Barry. During this period, we have invested EUR 2.5 million in Arnhem to expand our acetyl storage capacity. From December 2025 onwards, we will gain improved logistical flexibility and increased uptime, enabling us to complete more batches per month. Furthermore, our logistical costs will reduce as we can now unload more acetyls during the week rather than in the weekend. On top of that, we are less vulnerable to interruptions in the chemical supply chain. In Barry, in response to strong demand for Accoya Color globally, we have taken steps to double our capacity. This includes introducing the second shift, expanding our own storage capacity and outsourcing some external drying. This builds on the planning facilities we added last December to be able to produce finished decking boards. We expect Accoya Color and finished decking boards to continue to be important demand drivers. Growth for this product range, including volumes sold out to the joint venture showed an increase of 56% year-on-year. We are very proud today to launch Accsys Cares, our first sustainability plan, which aims to deliver long-term value from all of our stakeholders. The plan highlights our commitments across 4 key pillars: people, planet, profit and governance. It introduces our first decarbonization commitments and targets, further enhancing the already strong sustainability credentials of our products and our business. Finally, wrapping up today's messaging, we have delivered a strong H1 and we entered the second half of the year from a position of strength. Our trading remains robust going into H2, supported by sustained global demand for our premium differentiated products. We expect continued sales acceleration in North America, and notwithstanding the impact of the recently announced tariffs, we expect the joint venture to be EBITDA positive for the financial year. While noting continuous macroeconomic challenges, the Board is confident the company will continue to deliver further growth and profitability improvements for the year ahead, consistent with expectations and to make further progress towards our strategic targets. Looking ahead, we remain confident in the long-term potential of our technology and strategy. We have a clear road map, market-leading products in attractive growth markets and a fully funded manufacturing base that position us to deliver significant shareholder value. I continue to be very excited by the prospects for our business. We are transforming we are delivering, and we are growing. Thank you all for your attention. With this, I will hand over to our operator now for the Q&A session. Operator: [Operator Instructions] We will now take the first question from the line of Martijn den Drijver from ABN AMRO. Martijn den Drijver: I have 4 questions, and I'll take them one by one, if I may. To start off on the U.S., just to give us a bit of a sense on where the existing -- so not the 3 new ones that you mentioned, but the existing distributors, can you give some color on where they stand in terms of ordering levels versus assumed potential? Just give us a sense of what -- with the existing distributors, what type of growth lays ahead? Jelena Arsic Os: Well, Martijn, our existing distributors are already active in the U.S. for a very long time. And as we know, the Accoya sales are pretty technical sales. You need to pursue the market that you do have, by far, the best product in terms of performance, stability and the long-term durability. We are seeing in this period significant growth. Most of the U.S. growth that you are seeing in this result is actually coming from our existing distribution partners. They are today placed on the East Coast of the U.S., West Coast and in Texas. We are working on increasing our presence in the Texas area because there, we do have big OEMs like Delta Millworks that you just saw the video about, they are located in Texas. But we do believe that, that area could provide us some more opportunity to grow. So new distributors that we put in place in this half of the year, they are all starting to take the inventories and to push the market predominantly gaining the market share and not fighting for the same business that our existing distributors are already having. So there is a lot of efforts from our side going into education, specification selling and helping the new distributors predominantly to actually focus on the new business generated and creating the Accoya pie to be bigger in this very sizable and profitable North American market. Martijn den Drijver: Just 1 follow-up, Jelena. The total distributors now, how much do you think you need more in terms of distributors to have a full national coverage, perhaps both in the U.S. and in Mexico? Jelena Arsic Os: I think in Mexico, this Klinai is quite a large player. So I believe we are going to give them an opportunity to deliver what we think that they can deliver. In the U.S., we do believe that today, we have a quite good mix of large regional players, and they have also quite a good network of secondary distributors that are working with them. So we do not expect that we will be adding a large amount of new distributors in the U.S. We would like the distributors that we already now appointed to actually prove that they can deliver on the expectations. And so we have a quite defined KPIs in place that we follow very, very clearly. So for the next half of the year, we are going to give the existing and the new ones chance to fully deliver. Martijn den Drijver: Got it. Got it. Then the second question on the U.S. for Sam. The breakeven has been achieved faster than expected. You're now guiding for profitable EBITDA levels for the full year. Does this have an impact on the planned/forecast equity injections from the group into the JV? I seem to remember that where guidance was still for EUR 4 million in fiscal 2026. Does that still stand? Or should we assume a different amount now? Sameet Vohra: Yes. Thanks, Martijn. Good question. So yes, I mean, as you saw the JV was very close to breakeven for the first half of the year, and we do fully expect it to be profitable for the full year. Our initial expectations were and in terms of what your modeling has in terms of capital injections going into the JV, that's all to do with growth. We -- the business needs wood and it effectively needs a high level of working capital to meet that significant level of growth that we're seeing, not just for this financial year, but also coming financial year because really, our strategy is about filling up that plant, and having it operating at full capacity within the 5 years of our strategy, so by the end of Phase 2. So any additional capital injections that we may need to put into the business will be all to do with providing it with additional working capital to fund growth. Martijn den Drijver: So it might actually end up a little bit higher than the initial guidance. Sameet Vohra: No, I don't think it will be any more than EUR 4 million that you've already got factored in. Martijn den Drijver: All right. Then moving on to Europe. I was just wondering, you mentioned good developments in the Benelux, Germany, already very strong in U.K. and Ireland. But you mentioned plans to support France. Can you elaborate a little bit on your plans in France? And perhaps on Germany, what type of -- where does Germany stand relative to prior sales levels? Are they approaching it? Or are they still far away from it? Jelena Arsic Os: Well, we saw -- as I told you, the levels in Germany are increasing. Of course, if you look from the period of a couple of years ago, we still have a space to develop. But if you look at the previous year, we do have quite a significant growth, and this is coming predominantly from the demand coming from outdoor living markets and with the outdoor living market, that is really decking, what we are seeing that it is taking off with our Accoya Color range being available in Germany. So we are continuing to work with our existing -- we have a very large distributor in Germany. We are continuing to work with them, but we are also working on expanding that distribution network as we go into H2. Looking at France, we are predominantly now looking to strengthen our team in France, and we need to add commercial headcount to help us to cover this quite large and still unexplored market for Accoya. We had a couple of very nice projects that we deliver in the country, but certainly with the size of France, there is quite a large opportunity to grow there. So we have good distributors in place, but we are adding a headcount -- commercial headcount in the region to help us grow this market share. Martijn den Drijver: Great. Then one final question on Color. Can you shed some light on what you produced in H1 in Color, given the capacity expansions that would probably help us to understand what could be expected going forward? Jelena Arsic Os: Well, what we said, we actually increased almost more than a double capacity of Color in Barry, starting from 6,000, what we had last year, and now we should be having certainly capacity of -- we could be able to produce up to 14,000. We do believe that in the -- given the good strong demand for Accoya Color, we certainly could be doubling what we actually produce, so 6,000 to up to 12,000 in this financial year. Of course, decking season is a seasonal -- so demand is quite seasonal. We do see that the season starts in spring and our distributors are starting to build inventories starting from beginning of our Q4. So that's why also our Q4 is one of the larger quarters that we have as a company due to this specific effect. Martijn den Drijver: All right. And my really final question is on your EBITDA -- adjusted EBITDA margin, close to your FOCUS one target already. If I look at Bloomberg consensus, it's considerably higher for fiscal '26, '27, around the 16% level. Is that something you feel comfortable with given these very positive developments, both in Europe and the U.S.? Sameet Vohra: Sorry, can you just repeat that percentage that Bloomberg is showing? Martijn den Drijver: Yes. Bloomberg is -- I think it says it's not quite clear whether that is now group or adjusted, but it's 16% level. Sameet Vohra: Yes. I mean, that's probably around group. I mean, we're already at group level. We are already -- I mean, as you saw for H1 at 14% underlying margin with the group at what adjusted being just over 12% target. So I mean, we're very confident, and we firmly believe that we're on track to deliver the margin targets that we laid out in our Investor Strategy Day earlier this year by the end of Phase 1 of our strategy. Operator: We will now take the next question from the line of Johan van den Hooven from Edison Group. Johan van den Hooven: Only 3 questions is for me for now. If you look at the volume growth was, of course, strong. We already talked about U.S.A Looking at the volume growth of Accoya for Tricoya that is, well, only 6%. Is there a special reason that there's a bit of a slowdown or is it just a mix effect or a different focus on the U.S.? That's the first question, and we'll do the others later. Jelena Arsic Os: Yes, you're absolutely right, Johan. As we reported, Accoya for Tricoya volume grew 6.4%. This is also lower than percentage-wise, what we also put in our market update in September, where we saw at the time, 25% growth of Accoya for Tricoya. The reason for it is basically slower demand from our customers for Tricoya that is also linked to the season, but also overall subdued soft market sentiment in the -- they all operate in that MDF space. So we are seeing this demand increasing and starting to pick up as of December this year. So they were really running through the inventory reduction going towards the end of the calendar year. And now we are seeing the order book for Tricoya starting to fill in as we go into December. Johan van den Hooven: Okay. That's clear. Another question about your sort of guidance for EBITDA. EBITDA for the full year is in line with your expectations. But I seem to remember that previously, sometimes we refer to consensus or in different words, is it too simple to just double the EBITDA of the first half -- for the full year, I mean? Sameet Vohra: So I think when you look at seasonality in terms of our business, quarter 4 is our largest quarter by sales volumes really because from a decking and cladding perspective, a lot of sales take place ahead of that spring season. So quarter 4 being our largest by volume, quarter 3 ultimately being our smallest because you've got the effect of December, our customers effectively stop ordering and taking collections just after mid-December, the Christmas shutdown. And then obviously in October, we have the annual maintenance stop in Arnhem, where we're selling out our finished goods. So you could think -- despite that revenue and volume seasonality, I mean, profitability is going to be very similar to 50-50 between H1 and H2, and that's why we're seeing it in line with our expectations. Johan van den Hooven: Okay. But then -- okay. So we can look at the doubling. But in the first half, of course, you had EUR 2 million license income, which might not reoccur in the second half, which also then not helps EBITDA? Sameet Vohra: No. I mean, you've got -- I mean, it's not just license income. You also get the royalty. The largest part of that EUR 2 million is actually the royalty that we get from Accoya USA sales. So we get a fixed percentage on their revenue. So as you've seen, as their sales are accelerating, we're getting a higher royalty fee from them. Johan van den Hooven: Yes. Last question for now, just about the import tariffs. It's only 10%, and you've said you've taken some actions, but can you tell us a bit more? Is it just raising prices, lowering costs or a mix? Jelena Arsic Os: Well, it is predominantly raising the prices, Johan. We already put it in place and we didn't receive too much of the pushbacks from our customers. I think everybody in the U.S. market is now getting accommodated to the tariffs having impact on the price inflation of overall materials, if you like. So we put a price increase in place starting from 1st of November. And we also have, of course, an ongoing dialogue with the sawmills where we are actively tracking what is the sentiment in the U.S. market and also looking with them how we can, if you like, share the pain, if that pain become larger. But so far with the 10%, we do believe that we can manage this quite well. Operator: [Operator Instructions] Our next question comes from the line of Alastair Stewart from Progressive Equity Research. Alastair Stewart: Two or three questions. First on the U.S.A., given that you've now got what tends to be a very solid distributor base and enthusiastic uptake by customers, have you any sort of -- can you give us any sort of guidance when you could be looking at further reactors from the U.S. facility? So that's the first question. Secondly, interested to see a new distributor in Mexico. But what sort of size do you think that -- what proportion of U.S. output could Mexico be? And is that -- is it in a similar sort of mainly decking and cladding markets? And looking above the bar, are there any plans for Canada or any indications of how Canadian uptake could develop? Jelena Arsic Os: Yes. Thank you, Alastair. Thank you very much. Good questions. So if you look at our distribution base in the U.S., we do believe that with capacity of the plant today at 43,000 cubic meters, we do have enough capacity for at least next 2 years to feed demand and growth in this region. So we are focusing the organization, and we are focusing basically everybody to get more returns from the existing assets in the next year or 2. So this is -- this was a part of our Phase 1 of the FOCUS strategy. So we just continue working on it. Now we are going to see in next -- in the next half of the financial year and also in the beginning of the financial year '27, which is a key year for the company because this marks end of our Phase 1 FOCUS strategy, how things are developing. And in order to start talking about second reactor, you need at least 12 to 16 or 18 months from the design to basically ordering the equipment and putting it in place. Today, we have enough space in the U.S. and already a foundation put in place for the next reactors. So that should speed up that process when the time comes. So we do have enough space in the U.S. to put additional 6 reactors if that is necessary but I would like to really spend next year, 1.5 years, next 18 months, utilizing what we already have. And we do believe that we have enough capacity to meet the demand from a broader North American market, not only U.S. but also talking about Canada and Mexico as well. Now your comment on -- does this answer your question? Alastair Stewart: Sorry, I would just add -- I was asking about Mexico again, sort of potential growth there. Is it the same sort of end market that decking and cladding -- and while I'm on also, it was interesting to hear about France as well. They seem to be slightly late to the party as it were. What's driving the uptick in demand from France? And that will be all my questions. Jelena Arsic Os: Okay. So let me go back to Mexico and Canada because I think that those were the other 2 questions. So the Klinai is a quite a large distributor that also have significant milling capacity. So they are also capable of making some of the end products. So they will be focusing on cladding and decking predominantly. And the market in Mexico is large. We also are supporting the Caribbean region from the U.S. So -- and we do have already a couple of very nice projects that are happening there. Is Mexico going to be bigger than the U.S.? I don't so. Alastair Stewart: No, I don't think I was suggesting that, but how big could it be as part of the U.S. output? Jelena Arsic Os: Well, we do have a quite ambitious expectations from them, but we just signed off that agreement with Klinai. I would like to give them at least half a year to see what they can deliver in order to start shaping an expectations and certainly communicating those expectations internally. They are quite capable professional company with the milling capacity that could be important for us. But for us, our U.S. market, is by far the fastest growing, the most profitable and certainly more than 90% of the Accoya USA sales should come from the U.S. itself. Looking at the Canada, we do have one of our largest -- well, actually, the largest distributor we have in the U.S. is a U.S. Canadian company with the roots in Canada. So we do sell Accoya in Canada already for some years. With the tariffs, import tariffs from Canada and between Canada and the U.S., some of the trade is being slowing down. But nevertheless, we also have an opportunity, if necessary, to ship smaller amount from Europe directly to Canada, if that is going to serve customers better. So as said, we do expect U.S. plant predominantly to serve U.S. market, but we do have now today established partners in Canada, Mexico and Caribbean as well. So in France, also decking and cladding market, we had a couple of good projects that were done in the country. And we also have a good collaboration with the architects in France. But you know, it is a huge country and with Accoya Color now being more available, also coming with the new decking collection, we do need more feet on the ground to educate and push growth to the faster pace. So predominantly, cladding and decking and Accoya Color is one of the most wanted products we see in France. Operator: We will now take the next question from the line of Adrian Kearsey from Panmure Liberum. Adrian Kearsey: Well done on a good set of results, guys. A couple of questions for me, although I have some more, but most of them have been asked already. Could you perhaps give us sort of a bit some more color in terms of the pricing environment across different territories? Are we seeing greater pricing in certain territories rather than the others? And then to go back to the question on distributor relationships. Would you be able to sort of give some indication about how conversations are progressing in certain territories with signing additional distributor clients? Jelena Arsic Os: Yes. So pricing, as we already reported today, the average sales price in the reporting period went up with 1.7%. We are not reporting specifically per country or per region. But in average, this was the good, I would say, marker for you to look across -- both across Europe and the U.S., very, very similar price increase. We do -- of course, we are very careful, and we know that what we are selling is the value. So we are very careful of keeping that premium place in the building materials. So we are reacting on the tariffs in the U.S. We are reacting on the inflationary pressures in Europe and U.K., and we will continue to do that. And it looks to us that market is actually accepting that as well. Looking at the distributors, adding new distributors across the region. As I already mentioned, we are talking with the distribution partners in Germany. We are also talking with the new distribution partners in Central and Eastern Europe. I'm not ready to announce anything yet but we do expect that we will be expanding our distribution base predominantly in the next half year in the markets where Accsys is providing Accoya and we do believe that as of today, the number of distributors and coverage in the U.S. is good, and we want to give our new distribution partners chance to actually deliver on the expectations that we have for them. I hope this answers your question, Adrian. Operator: I would now like to turn the conference back to Dr. Jelena Arsic van Os for closing remarks. Jelena Arsic Os: So thank you very much. As I said in the last page of our presentation, we are remaining confident in the long-term potential of our technology and strategy. Company is transforming. We are growing, and we are delivering, and we have a very clear road map in front of us with a market-leading product in very attractive growth markets. So we will continue to do what we are doing and then hopefully, next half year when we hear each other, we will just confirm the expectations that we all have. So thank you very much. And with this, we will close our results call for today. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, everyone, and thank you for joining us today for Caledonia Investments Plc Half Year Results Presentation. [Operator Instructions] Please note that this call is being live streamed to a webcast for a wider audience and will be recorded. I would now like to hand over to Mat Masters, Chief Executive Officer, to open the presentation. Please go ahead. Mat Masters: Hello. I'm Mat Masters, CEO of Caledonia Investments, and welcome to our results presentation for our half year to 30th September 2025. You will also hear from Tom Leader, who leads our private capital strategy; and Rob Memmott, our Chief Financial Officer. Before we go through these results, a short reminder about Caledonia. We are long-term stewards of our shareholders' capital, including the Cayzer family who have entrusted us with theirs for generations. Looking after multigenerational capital shapes everything we do. We need to make returns, but do so whilst limiting the risk of losing capital. We target absolute returns of inflation plus 3% to 6%, and this influences the level of risk we're prepared to take. Over time, our approach to investing has delivered results at the top end of this target range at 9.8% per annum, outperforming inflation by 6.5% per annum, and we have consistently increased our dividend for over half a century. Our approach to investing is straightforward. We invest in high-quality businesses and hold them for the long term. Our maximum time well invested captures the essence of our approach perfectly. Our in-house investment team is fully aligned with shareholders. We do not manage anyone else's money, and there is no fundraising. Performance is measured against NAV per share over time and rewarded in Caledonia shares. So our incentives are directly tied to long-term value creation. Our investment strategy is perfectly encapsulated by time well invested. We use our strong balance sheet, long-term approach and in-house investment team to underpin our focus on long-term results and be robust during downturns and in fact, aim to use these to our advantage. We're organized across 3 main strategies, providing access to private and public companies across different sectors and geographies. We're looking for the same 3 key ingredients, which are attractive markets to operate in, resilient businesses with strong fundamentals and return characteristics and that are well managed and aligned with shareholders. The strategies have together generated Caledonia's overall performance, which is shown in the chart. Over 5 and 10 years, we have delivered at or beyond the top end of our targets and across all periods, both NAV per share total return and share price total return have kept ahead of inflation, which is our core aim. In the last 3 years, share price total return has been stronger than NAV per share total return as the discount has reduced from 37% to 33%. Moving on to the highlights for the half year. We're pleased to report another positive performance with NAV total return of 4.4% and total shareholder return of 8.5%. This was driven by strong public companies and private capital performance, partially offset by funds and including the impact of the pound strengthening against the dollar, reducing NAV by approximately 2%. Today, we are announcing our interim dividend of 3.68p per share, which reflects the change in dividend payment profile to 50% of the prior year's annual total dividend. This dividend will be paid on 8th of January 2026. Moving on to public companies. This comprises 2 portfolios, each taking a concentrated approach to making long-term investments in high-quality companies. We're looking for high-quality, durable businesses, which we think have got great futures ahead of them. We aim to buy well and hold for the long term. The overall public company strategy delivered 9.9%, driven by a capital portfolio and within that, primarily Oracle, Microsoft and Alibaba who are benefiting from continuing demand for cloud-based services, including AI. We initiated a new position in Charles Schwab, the U.S.-listed brokerage business that we've been tracking since 2017. We like Schwab because of its massive scale with just over $10 trillion in client assets and market-leading focus on driving down costs for its clients. Its track record speaks for itself with annualized total shareholder return of 17% since it listed in 1987. It's well managed with good continuity of leadership with the eponymous Charles Schwab still on the board. We deployed GBP 35 million, mostly on 7th of April, shortly after President Trump's Liberation Day, which was followed by a downturn in the equity markets and presented the lowest price that Schwab and the market traded in the last year. This derisked our point of entry and is a good demonstration of our time well invested approach. We purposely set ourselves up to buy shares in wonderful companies when they become more attractively priced. On the same theme, Oracle delivered a standout performance for us, and we were able to realize gains, selling 3/4 of the value of our holding at the start of the period as its share price doubled and its risk characteristics changed. We first invested in Oracle in 2014 when it was rated as legacy tech and judged late to the cloud and as a service. We look closer and saw a business with a good market position in an attractive market, excellent business fundamentals with high levels of recurring revenue and plans to increase this and excellent returns metrics, run by a management team that was certainly aligned with shareholders and very well proven. Our analysis helped us establish that long-term ownership was very likely to be rewarded. And as you can see from the chart, Oracle took a little while to get going, but we could see that they were doing what great long-term businesses do, which is accept some short-term pain as they invested in a comprehensive move to the cloud and as-a-service offering, whilst using their low rating to undertake a massive share buyback with them buying back $120 billion of their shares and the share count reduced by 38%. As their transition to the cloud and as a service became better understood by the market, share price performance improved. And more recently, Oracle's cloud offering and incumbent position in corporate and governmental data places them very well for AI, and this has driven the doubling of its share price during the first half of our year. Our overall investment performance from only Oracle has been good with GBP 35 million invested, delivering GBP 101 million in cash returns through top slicing and dividends with the position worth GBP 89 million at the end of the period, so 5.4x our money. I will now hand over to Tom to talk about private capital. Tom Leader: Thank you, Mat. Today, I'll walk you through our performance, portfolio highlights and recent developments, focusing on how we continue to support private companies in creating enduring value. As a reminder, Caledonia Private Capital is focused on making direct investments, usually on a majority basis into high-quality mid-market U.K.-centric businesses. Our model is built on permanent capital, genuine partnership, a patient long-term perspective with moderate use of leverage. Unlike private equity firms whose funds have limited life spans, restricting the time when investments must be made, grown and sold, we have no time limitations on our investments. We can build genuine partnerships with strong management teams and help them create enduring value without the constraints of short-term capital. Our current portfolio has a net asset value of GBP 907 million, invested across 8 companies and represents approximately 30% of the NAV of Caledonia as a whole. For the half year, we delivered a total return of 7.7%. This result was primarily driven by the agreed sale of our minority stake in Stonehage Fleming to Corient Wealth, on which we exchanged contracts in September, along with continued good operating performance from AIR-serv. I will cover Stonehage Fleming in a bit more detail on the next slide. But clearly, the sale, when it completes, will deliver an excellent result for Caledonia. AIR-serv was another strong performer, valued at GBP 193 million as at 30th of September. In the half year, it delivered an 11% return, driven by strong revenue and profit growth. The business paid Caledonia a dividend of GBP 24.5 million in the period. The other companies in the portfolio continue to make progress in executing their value creation plans. Looking at our long-term performance, Private capital has delivered annualized returns of 8.5% over 3 years, 20.7% over 5 years and 12.5% over 10 years, all versus our 14% target. Stonehage Fleming is a full-service multifamily office, helping discerning clients address the challenges of creating and preserving wealth. It is focused on the ultra-high net worth market, which is the fastest-growing segment of the wealth market. The firm's clients have entrusted it with the management, fiduciary oversight and administration of assets in excess of USD 175 billion. Stonehage Fleming provides its services from 20 offices in 14 geographies. With an initial investment of approximately GBP 90 million in July 2019, we acquired a minority stake alongside Giuseppe Ciucci and the other founder partners. The management were not looking for a conventional private equity investor, but instead for a capital provider, which shared their long-term perspective and multigenerational approach to preserving and growing capital. Together, we restructured the balance sheet and the shareholder base of the group to position it for the next phase of growth. Over the following 6 years, we have worked in close partnership with the leadership team to deliver upon our original investment thesis, which entailed, first, streamlining the governance structure by financing and supporting succession management; second, investing in technology, which improved margins and allowed Stonehage Fleming to internalize services that were previously outsourced; third, enhancing business development, which delivered strong organic growth; and fourth, completing 4 strategic acquisitions, which have expanded the firm's geographic reach and diversified its product and service offering. The business has been a consistent performer, a true compounder. Strong cash generation and disciplined reinvestment have driven returns steadily upward through our ownership. This investment is a hallmark example of our unique approach, long-term partnership-driven and unconstrained by fixed fund life and has delivered exceptional value for all stakeholders. We expect the deal to close in mid-2026, subject to the required regulatory consents at which point it should deliver cash proceeds of approximately GBP 288 million, representing including dividends received along the way, a 3.2x multiple on cost of investment. As of 30th September, Stonehage Fleming was valued in the portfolio at GBP 259.7 million, net of approximately 10% discount to reflect the transaction execution risk and the time value of money. The bubble chart here illustrates for all our major realizations since 2012 on the X-axis, the realized IRR and on the Y-axis, the NAV uplift at exit compared to the carrying value 12 months prior to exit. For Stonehage Fleming, the expected exit proceeds of GBP 288 million represent a 30% uplift to its carrying value as at the 31st of March 2025. This result is comparable with a 37% uplift relative to the carrying value when we sold 7iM in January 2024. Overall, across the portfolio, we have a strong track record of realizations. Since 2012, we've generated GBP 1.4 billion in proceeds, returning around GBP 700 million in net cash to Caledonia. Our realized investments have delivered a 17% IRR and a 2x multiple on cost, which, given the low appetite for and use of leverage, compares very favorably with the returns delivered by U.K. mid-market private equity. Let me finish by saying we continue to deliver strong and consistent returns, underpinned by our disciplined approach and the strength of our partnerships. The success of Stonehage Fleming exemplifies the power of our permanent capital model, enabling us to back exceptional businesses and management teams, support their long-term growth and realize substantial value for our shareholders. Thank you, and I'll now hand over to Rob. Rob Memmott: Thank you, Tom. Our funds pool has been running for more than 15 years. The opportunity is significant. These funds tend not to market in Europe, meaning that we are often the only European investor, a real differentiator. The pool NAV of GBP 884 million is a diverse portfolio invested in some 82 funds by 46 managers and in more than 600 underlying businesses. 64% of the NAV is focused on the North America lower mid-market buyouts. The funds are typically the first institutional investment into relatively small often owner-managed businesses. The playbook is to transform the companies by strengthening the management team, improving operational efficiency, growing sales by product and geography, both organically and through bolt-on acquisitions. These improved companies with greater scale provide feedstock to mid-market private equity. It's a very pure form of capitalism. Of the North American companies, 2/3 are providing services with the balance having very little exposure to international trade flows. 36% of the pool NAV is invested in Asian buyout, growth and venture. The buyout assets are focused on domestic consumption and supply chains, fueled by the aging population, growing middle class and tech adoption. The venture and growth funds are invested in government supported new technologies and health. Whilst there is very limited exposure to the direct impact of trade tariffs, as expected, economic uncertainty has reduced investment and realization activity in the short term. The pool has delivered solid returns of 13.3% over 5- and 10-year periods. Performance over the 6 months reflects the continuation of trends experienced for the last 3 years. During that period, the North American pool delivered local currency returns of 8.9%, driven by the trading performance of the underlying companies. In Asia, the companies are making progress. However, the continued reduction in capital market flows has impacted on fundraising and exits suppressing our returns. Overall, the pool NAV grew by 4.3% in local currency, but reduced by 1.8% in sterling. Our capital commitments are GBP 394 million, 75% of which is to North America. GBP 52 million was invested in the 6-month period and $55 million of new commitments were made to 2 North American managers. Looking at the cash flows in a bit more detail. The chart shows the realization and investment activity over recent 6-month periods. As I mentioned earlier and as expected, economic uncertainty has reduced investment activity in the last 6 months, which can be seen on the graph. The pie chart details the weighted average life of the primary portfolio. For North America, the weighted average life is 4.3 years. For Asia, it's 5.5 years. We expect a longer hold period in Asia given that the assets are weighted towards venture growth and fund of fund investments. And so to the numbers. During the 6-month period, our NAV total return was 4.4%, growing our NAV to just over GBP 3 billion, of which GBP 2.9 billion is invested in a diversified portfolio of listed and privately held companies and funds that have got global reach. Cash on balance sheet was GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million, enables us to act quickly to invest in companies and funds that we find attractive. This was demonstrated in April when we deployed approximately GBP 50 million into the public company strategy, taking advantage of opportunities provided by the market volatility around Liberation Day. We have reprofiled the interim dividend such that it is 50% of the prior year total. This equates to 3.68p, which will be paid to shareholders on the 8th of January 2026. And now to my beloved waterfall chart. This chart shows the movement in NAV over the period. We started the year at GBP 2.9 billion. The portfolio return of GBP 145 million includes the negative impact of foreign exchange. We then deduct management expenses of GBP 17 million. There is then the cash returned to shareholders, GBP 14 million allocated to share buybacks and GBP 28 million for the final dividend from the prior year. That results in a closing NAV of just over GBP 3 billion. Our OCR is 87 basis points, slightly up on the prior year, reflecting some investment in our teams. I expect this to increase slightly over the next 12 months, taking account of full year effects. 54% of our assets are domiciled in U.S. dollars and 37% in sterling. Movements in the sterling-dollar exchange rate will, therefore, impact our in-period results. In the last 6 months, we suffered an FX loss of GBP 59 million, reducing our NAV by approximately 2%. We have a robust balance sheet with no structural leverage. Walking you through the cash movements, we started the year with GBP 151 million, and net GBP 27 million has been invested. The investment income from our assets was GBP 47 million, higher than in previous periods as it includes the GBP 25 million dividend from AIR-serv. We have consumed GBP 24 million in the cash cost of management expenses and working capital. And next, there is the payment of the prior year final dividend, GBP 28 million and GBP 14 million allocated to share buybacks, resulting in a closing cash position of GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million means that we have liquidity of GBP 430 million. Of the revolving credit facility, GBP 150 million has just under 4 years remaining duration and GBP 175 million just under 2 years. We expect to complete the sale of Stonehage Fleming in Q2 2026 once all the regulatory approvals are obtained. GBP 251 million will be received on completion with 2 further amounts of GBP 18 million being due 6 and 12 months following. These amounts will come back on to the balance sheet. We feel no pressure to invest, and we will continue to appraise investment opportunities on their merits and as they arise. The discount at the end of the period was 33%. We believe this fundamentally undervalues the quality of the portfolio, our track record and prospects. We are taking actions over the things that we can control, including share buybacks, which remain an attractive investment for us. We have a prudent capital allocation policy to investments, our dividend and when appropriate, share buybacks. During the 6 months, we allocated GBP 14 million to share buybacks, increasing the total since March '24 to GBP 78 million, delivering a 7.44p NAV per share accretion. We continue to evolve our IR and communications to ensure that the Caledonia investment proposition is understood and rated. We held capital market spotlight events in January and June, focused on private capital and public companies. If you've not had the opportunity, I would encourage you to visit the website and watch the presentations. They provide a great insight into how the pools operate, what differentiates us and how we add value. When you visit the website, you will see that this has been significantly improved with new content. A date for your diaries, the 27th of January 2026, we will be holding the third spotlight session focused on the funds pool. We believe Caledonia is a great home for long-term investors. Following shareholder approval, we have completed the 10 for 1 share split. In addition, we have rebalanced the profile of the dividend, increasing the interim to 50% of the prior year total rather than the historic rate of approximately 25%. These measures will improve visibility of income, make payments more balanced, and I expect will improve accessibility for all shareholders. I'll now pass back to Mat. Mat Masters: Thanks, Rob. We're pleased with our 6-month performance, which supports our track record of delivering NAV total return of 9.8% per annum over the last 10 years, which is at the top end of our target range. Across both public and private markets, our portfolio is high quality, diversified and deliberately positioned to withstand short-term market volatility while compounding value over time. And none of this would be possible without our strong balance sheet, exceptional team fully aligned with shareholders and focused on long-term value creation. Thank you very much for joining us today, and we will now take questions. Operator: [Operator Instructions] Our first question comes from Iain Scouller with Stifel. Iain Scouller: I just wanted to ask about the valuation of Stonehage. I think in the statement, you're saying it's at a 5% discount to the expected proceeds. But in the presentation, you're talking about a 10% discount. So I just wondering if you could clarify that. Tom Leader: Certainly, the total discount relative to the expected proceeds is approximately 10%, comprising 2 separate adjustments: one, approximately 5% discount for execution risk and a 5% discount for the time value of money. The total discount relative to the expected proceeds is 10%. Iain Scouller: Okay. And when do you expect to receive the proceeds? Tom Leader: We expect to receive the proceeds on completion of all the regulatory approvals. But there are, in fact, slightly more than 20 regulatory approvals required in multiple jurisdictions. That process will take several months. So we expect the deal to complete towards the back end of the first half of calendar 2026. Operator: Our next question comes from Anthony Leatham with Peel Hunt. Anthony Leatham: A couple of questions, if I may. You were particularly active kind of April, that liberation day volatility on the public company side. How are you feeling about the environment and the positioning of the portfolio today? And then I had a couple of questions on the private equity side. Maybe a comment on the maturity profile of the funds portfolio. And then we're hearing from private equity trusts and managers that realization activity is actually improving. And I didn't know whether you had seen the same trend within your holdings. Mat Masters: Anthony, thanks for the question. Mat here. So yes, we did. So following President Trump's what's been Liberation Day sort of announcements and things, the stock markets sold off. And we added -- very pleased to add Charles Schwab to the portfolio. And that is absolutely sort of the playbook when we sort of invest in the quoted markets is to keep our powder dry until opportunities present themselves. And we also topped up other holdings in the wake of that, and that's all thus far performed very well for us. The portfolio is a long-term portfolio. We try not to judge precisely where it is on any particular day, but we do feel as we risk manage the portfolio as we go forward, we obviously talk about the fact that we to Oracle as that went up in value and loss rating went up, we did that across the whole portfolio. So we feel good about the medium and long-term prospects of the portfolio. Obviously, impossible to predict what share prices do on a day-to-day basis, I'm sure you'll appreciate. Maybe Rob could tackle the funds questions. Rob Memmott: Yes. Thanks, Anthony. Just in terms of the fund’s activity, as we mentioned in the presentation, the level of realization and investment activity in the last 6 months has reduced quite significantly. And what we're seeing is that start to increase the weighted average life of the portfolio compared to where we were a year ago. In terms of recent activity in the market, certainly, there is sort of noise of increased activity taking place. We're yet to see that sort of flow through into sort of real pound notes coming back through to us. And certainly, from a sort of planning and thinking about sort of liquidity, we're sort of still quite cautious in terms of the speed of that recovery getting back up to the norms, which I guess we were experiencing in the prior financial year. Operator: [Operator Instructions] There are no further questions on the webinar. I will now hand over to [Beck Hughes] to read out the written questions. Please go ahead. Unknown Executive: So the first question is about Oracle. What is your view and future prospects for your Oracle holding? And have you sold any more since the period end? Mat Masters: Thanks for the question. Mat here again. So we think Oracle has a fantastic future ahead of it. Most of its current trading is still sort of legacy type business. And what's really happened is its forward order book, it's grown a lot and a lot of that is sort of AI related. So actually, that's reflecting the opportunity expanding ahead of it. So we're quite excited about the future for Oracle. Nevertheless, the rating has changed materially during the period. And so we do sort of respond to that. And so we have also the size of the position during the we talked about the money we've had it over the course of our investment period. But over the year -- over the half year rather, we've taken GBP 54 million of it. So we have trimmed the holding according to the change in risk -- really around rating risk with it. We remain pretty excited about its medium and long-term future. Unknown Executive: A question on Stonehage. Are the proceeds contingent on anything or just deferred? And what are the most attractive areas for new investment? Tom Leader: So dealing with the Stonehage completion mechanism first. As I alluded to earlier, completion is conditional on reg approval in multiple jurisdictions. That will crystallize payment of the bulk of the proceeds, just over GBP 250 million. There is a deferred element, which is payable in 2 tranches 6 and 12 months post completion. Those deferred proceeds are interest-bearing, and they are subject to adjustment depending on the finalization of a closing balance sheet audit, which includes a true-up mechanism. So that could go either up or down, positive or negative against the estimated closing balance sheet just prior to closing. So there is bound to be a small difference between the 2, but we do not expect it to be material. In terms of the second part of the question, future opportunities, we scan somewhere between 300 and 350 new opportunities a year across a very broad range of sectors. Our historic strengths have been in financial services and business services and technology-driven industrial businesses. And there is a regular flow of opportunities in all of those sectors. But I would add that it is a difficult market in which to deploy capital. Good quality assets are still transacting at very high prices, and less good quality assets are either taking longer to sell or not selling at all. So we will remain selective and we have the liquidity to finance new acquisitions if and when we can find the right opportunity. Unknown Executive: Thanks, Tom. A question around discount. What plans do you have to reduce the very large discount now the buyback may have marginal benefits, but does not seem to benefit? And why have you only bought back GBP 13 million worth of stock given the discount is just over 30% and you have a lot of liquidity. Rob Memmott: Yes. Thank you, Beck. So as you rightly point out, the discount of around 33%, we certainly feel undervalues the value of the portfolio, our track record and our prospects. I guess the buybacks, we sort of see those as an investment opportunity for us. We don't see that -- we don't have a discount control mechanism. The things that we are doing to influence the discount are the things that we can control, which is continue to invest in a good quality, high-quality portfolio, make sure that we communicate with as large an investor base as possible to make sure that we -- the proposition is properly understood and rated. And then there are some smaller sort of tactical things that we've done around the share split, rebalancing the dividend payment to make sure that the shares are as attractive to a broader investor base as possible. Unknown Executive: Another question here about hedging. You mentioned return in sterling is diminished by your U.S. dollar weakness. Do you hedge? Rob Memmott: And the answer to that is that we do not hedge. We're a long-term investor. And if you like, the short-term volatility coming from exchange rates, we sort of understand those and sort of monitor them, but it is about sort of long-term sort of value sort of creation. And generally, if you sort of hedge the balance sheet position, you pay a premium in order to end up in the same place. So we don't hedge unless there are specific cash flows that we would do so for. And I think that the weighting of the portfolio is more dollar denominated reflects the fact that the size and the quality of the companies which we're investing in, a lot of those are based in North America or headquartered in North America. Unknown Executive: Another question here on special dividend. In the past, there was a loose policy of providing a special dividend every 3 years or so. Is this policy still operative? Mat Masters: So we have -- thanks for the question. We have a track record of occasionally paying special dividends. I don't think we've ever sort of announced a policy about when we would do it. And we've not made any announcement about paying a special dividend. So that is the case at the moment. Unknown Executive: Another question here about equity market valuations. What do you think of them. Mat Masters: Well, thanks for the question. So equity market valuations vary around the globe, and there'll be one market up and one market not quite so far up. And actually, it's a really difficult question to address and actually respond to in your portfolio. And so what we do is to try and keep it very simple. We invest in good quality companies and hold them for the longer term and try not to worry too much about what's going in the macro and make sure we invest in things where we don't have to worry too much about the macro. Okay. Well, we have gone through the questions now, and we're very grateful for everyone joining us on the call today and for the questions, and we look forward to connecting with you next time. Operator: Thank you for joining today's call. We are no longer live. Have a nice day.
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the DICK'S Sporting Goods Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Nate Gilch, Investor Relations. Nate, please go ahead. Nathaniel Gilch: Good morning, everyone, and thank you for joining us to discuss our third quarter 2025 results. On today's call will be Ed Stack, our Executive Chairman; Lauren Hobart, our President and Chief Executive Officer; and Matthew Gupta, our Chief Financial Officer. A playback of today's call will be archived on our Investor Relations website located at investors.dicks.com for approximately 12 months. As a reminder, we will be making forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on Form 10-K and our quarterly report on Form 10-Q for the first fiscal quarter as well as cautionary statements made during this call. We assume no obligation to update any of these forward-looking statements or information. Please refer to our Investor Relations website to find the reconciliation of our non-GAAP financial measures referenced in today's call. And finally, a couple of admin items. First, a quick note on our comparable sales reporting. Foot Locker will be included in our comp base beginning in Q4 of next year, which will mark the start of their 14th full month of operations post acquisition. As such, all reported comp sales for this quarter and for the upcoming year pertains to the DICK'S business only. Second, I want to provide clarity on certain terminology we'll use throughout today's call and going forward. First, when we refer to the DICK'S business, we mean our existing DICK'S Sporting Goods operations, including the DICK'S Sporting Goods, Golf Galaxy, Going, Going, Gone! and Public Lands banners as well as GameChanger. Earnings per diluted share results for the DICK'S business excludes the dilutive effect of the 9.6 million shares issued as part of the Foot Locker acquisition. Second, the Foot Locker business refers to our newly acquired operations, including the Foot Locker, Kids Foot Locker, Champs Sports, WSS and Atmos banners. And finally, for future scheduling purposes, we are tentatively planning to publish our fourth quarter 2025 earnings results on March 10, 2026. With that, I'll now turn the call over to Ed. Edward Stack: Thanks, Nate. Good morning, everyone. Thanks for joining us today. This is an important call. It's our first earnings call as a combined company with Foot Locker. We have a lot to share. There's a lot of detail and a lot of numbers. We want to make it clear, we're doing all that our shareholders would expect us to do to make the Foot Locker business accretive in 2026. And I have to tell you, as the largest shareholder, I couldn't be more excited about the progress we're making and the opportunities ahead. As announced earlier this morning, we delivered another great quarter with comps of 5.7% for the DICK'S business and we continue to operate from a position of strength. Our momentum in the DICK'S business remains strong as we execute against the key priorities that have fueled our success: a differentiated on-trend product assortment in an industry-leading omnichannel ethlete experience. This is the flywheel of our success as a company, and it's driving consistent growth and performance. Now I will discuss the tremendous opportunity we see with Foot Locker. Completing this acquisition on September 8 marks a bold and transformative moment for DICK'S. Together, we're building a global platform that is at the intersection of sport and culture, one that we believe will redefine sports retailing. This powerful combination will allow us to serve a broader consumer base, deepen our partnerships with the world's leading sports brands and significantly expand our total addressable market. When we announced this acquisition, we knew that business was going to need work. Let me be candid. Foot Locker strayed from Retail 101 and did not execute the fundamentals. Post-COVID, Foot Locker did not react quickly enough when its largest brand pivoted toward a direct-to-consumer model, leaving Foot Locker with the wrong inventory. Too much of what didn't sell and not enough of what did sell. Consequently, as we enter this transitional phase, the Foot Locker business, as expected, comped negatively with pro forma comp sales for the full third quarter declining 4.7%, including a 10.2% decline internationally. Now after looking even deeper under the hood as the owners of Foot Locker, our conviction that we can turn this business around has only grown. We will bring our operational excellence, our supplier relationships and our merchandise expertise to return Foot Locker to its rightful place as a top player in the specialty athletic channel. Today, we're even more excited about the long-term value we believe this acquisition will deliver to our shareholders. We're committed to investing in Foot Locker's business to return it to profitable growth. We've assembled a world-class management team to lead the Foot Locker business, and I'm personally excited to guide this next chapter. As previously announced, Ann Freeman a long-time former Nike executive, is now serving as Foot Locker North America President. Ann brings deep industry expertise and leadership experience, and she is supported by a high-caliber team of senior leaders, a combination of key executives from Foot Locker, all of whom are well respected by the Stripers, Blue Shirts and our brand partners, experienced leaders from DICK'S and talent from other world-class companies. This team was handpicked to return Foot Locker to its rightful place in our industry, and we're already moving quickly in North America to build momentum. In addition, we're thrilled to have just announced that Matthew Barnes, former CEO of Aldi, will be joining our team next month as President of the Foot Locker International business. Matthew has nearly 3 decades of experience in global retail and a track record of transforming brands. We look forward to working to stabilize and ultimately accelerate that business with targeted turnaround strategies to meet the evolving needs of consumers globally. There's a lot happening to position the business for the short term and build for the long term. Our first priority is clear. We need to clean out the garage of underperforming assets. This means clearing out unproductive inventory, closing underperforming stores and rightsizing assets that don't align with our go-forward vision for the Foot Locker business. This is the groundwork for the transformation. We began this work shortly after the closing on September 8. We have identified an initial number of underperforming assets around the globe, including inventory that needs to be marked down and liquidated along with a preliminary number of stores that need to be impaired or closed. We initiated certain pricing actions in late Q3 and will be more aggressive in Q4 to clean up unproductive inventory. Our intent is to get the vast majority of the inventory charges behind us by the end of the year, so we can start 2026 fresh and position Foot Locker for an inflection point during the back-to-school season in 2026. As a result, we expect Q4 margin rates for the Foot Locker business to be down between 1,000 and 1,500 basis points with pro forma Q4 comp sales being down mid- to high single digits. We believe this aggressive purging of underperforming assets is what needs to be done to return Foot Locker to its rightful position as a key leader in this industry. Navdeep will share more details in his remarks about the charges we anticipate as part of this important cleanup effort. Importantly, we've met with all of our key vendor partners, and they are fully aligned with our vision and are eager to support a thriving growing Foot Locker. They indicated they are committed to investing alongside us to reignite the Foot Locker business. We're moving with urgency and have already kicked off an 11 store pilot to begin testing changes in product and the in-store presentation. It's early, but we're encouraged by what we're seeing and learning. Looking ahead, we expect back-to-school next year to be an inflection point as our new strategies, assortments and processes align to drive meaningful progress in the Foot Locker business. all supported by the work we're doing now by cleaning out the garage to position Foot Locker for future success. With these actions, we continue to expect Foot Locker to be accretive to our EPS in fiscal '26, excluding onetime costs. What amplifies our confidence are the talented people we found inside the Foot Locker business. Over the past 2 months, we spent time in Foot Locker stores, offices and distribution centers. Our teammates' passion is real, especially among the stripers and blue shirts along with the rest of the team members. They love sneakers, they're hungry for leadership, and they want to get back to playing offense. That energy is validating our excitement and building focus for what's ahead. In closing, at DICK'S, we've built a business that leads our industry in performance, innovation and customer loyalty. DICK'S has generated consistent growth and strong margins with a relentless focus on delivering shareholder value. While we're just getting started on Foot Locker's transformation, our deep expertise and our track record of growth and success fuel our conviction that we can turn this business around, and we are confident that Foot Locker will reemerge as a stronger, more resilient and more dynamic business. We will do this with the same grit vision and execution that got DICK'S to where it is today. Before turning it to Lauren, I want to take a moment to thank our more than 100,000 teammates across all of our banners for their passion and commitment during this exciting chapter for our company and wish everyone a happy Thanksgiving. With that, I'll turn it over to Lauren to share more on the continued momentum across the DICK'S business. Lauren Hobart: Thank you, Ed, and good morning, everyone. We're very pleased with our strong third quarter results for the DICK'S business which continue to demonstrate the strength of our operating model and our team's disciplined execution. We are entirely focused on delivering on our strategies and sustaining our strong momentum. As always, our performance is powered by our compelling omnichannel athlete experience, differentiated product assortment, best-in-class teammate experience and our ability to create deep engagement with the DICK'S brand. Today, we are raising our full year outlook for the DICK'S business. This updated guidance reflects our strong Q3 results and the ongoing confidence we have in our business, grounded in our team's execution of the 4 strategic pillars I just mentioned. We now expect comp sales growth of 3.5% to 4% for the year and EPS to be in the range of $14.25 to $14.55 for the DICK'S business. Now moving to our third quarter results for the DICK'S business. Our Q3 comps increased 5.7% with growth in average ticket and transactions. These strong comps were on top of a 4.3% increase last year and a 1.9% increase in 2023 as we continue to gain market share. Our gross margin expanded 27 basis points in line with our expectations, and we delivered non-GAAP EPS of $2.78 for the DICK'S business, up from $2.75 in the prior year's quarter. As we continue to execute through our strategic pillars, we're seeing strong momentum across the 3 growth areas for the DICK'S business that we are focused on for 2025. First, we're incredibly proud of the progress we're making in repositioning our real estate and store portfolio. In Q3, we opened 13 new House of Sport locations, the most we've ever opened in a single quarter, bringing our year-to-date total to 16 openings. This achievement reflects the outstanding work of our team whose focus and execution made this ambitious rollout a reality. We now have 35 House of Sport locations nationwide, a major milestone in the growth of this transformative concept. We also opened 6 new Field House locations in Q3 and opened another just last week, completing our 15 planned openings for the year and bringing us to a total of 42 Field House locations across the U.S. These innovative formats are delivering powerful financial results, deepening engagement with our athletes, brand partners and landlords and laying the foundation for long-term profitable growth for the DICK'S business. The second of our 3 major focus areas is driving growth across key categories. Our unparalleled access to top-tier products from both national and emerging brand partners continues to fuel athlete demand and excitement, driving strong growth across the DICK'S business. At the same time, our vertical brands are resonating incredibly well with our athletes, further contributing to this momentum. For Q3, this growth came from having more athletes purchased from us with more frequent purchases and more spending each trip. We feel great about the product pipeline from our brand partners, and our inventory is well positioned to meet athlete demand this holiday season. I also want to highlight our ongoing expansion into trading cards and collectibles. In partnership with Fanatics, we've launched the Collectors Club House in 20 Health of Sport locations with plans to include it in every new location going forward. These spaces feature trading cards, autograph memorabilia and more and the athlete response has exceeded our expectations. It's a unique and fast-growing category that's a great complement to everything we do, and we're very excited about the opportunity ahead. And our third major focus area, our multibillion-dollar, highly profitable e-commerce business continues to stand out as a growth driver, once again growing faster than the DICK'S business overall. I'd like to highlight 3 examples of ways we're building strength and differentiation in e-commerce. First, we're really leaning into our app experience, including app-exclusive reservations that are establishing us as a leader in launch culture across many key categories. Second, we're continuing to invest in capabilities to deliver more personalized experiences, content, product recommendations and search results. An example of this is how we're targeting NFL fans with personalized creative messaging and product recommendations for their favorite team. Third, for the holiday season, we're making it easier than ever to find the perfect gift with a new capability for athletes to build and share their wish list with family and friends. Lastly, as part of our broader digital strategy, we're harnessing the power of our athlete data and continue to be enthusiastic about the long-term growth opportunities we see with GameChanger and the DICK'S Media Network. Our GameChanger platform keeps expanding with new features, partnerships and content that enriches the whole youth sports experience and reinforces our leadership in the multibillion-dollar youth sports tech ecosystem. Great example is our new game insights feature, which gives coaches fast, actionable takeaways after every game, further elevating the value we provide to athletes, coaches and families. We're also seeing great momentum with our DICK'S Media Network, which is deepening engagement with consumers and key brand partners while expanding across new ad platforms. In addition to our collection of owned and our full spectrum of off-site channels, we're ramping up our in-store capabilities like our interactive digital experiences and programmable spaces that are driving impactful brand activations in our House of Sport location. In closing, we're very pleased with our strong third quarter results and remain highly confident in our long-term strategies to drive sustained sales and profit growth for the DICK'S business. We believe the power of our omnichannel athlete experience and our compelling differentiated product offering will resonate with our athletes this holiday season, supported by our fantastic holiday brand campaign, which launched a few weeks ago. I'd like to thank all of our teammates for their hard work and commitment and for their focus on delivering great experiences for our athletes throughout the season. And also a warm welcome to all Stripers, Blue Shirts and team members from the Foot Locker business. We're excited to have you as part of the DICK'S family and to achieve great things together. I share Ed's excitement about how we will bring our operational excellence, our supplier relationships and our merchandise expertise to return Foot Locker to its rightful place as a top player in the specialty athletic channel. With that, I'll turn it over to Navdeep to share more detail on our financial results and 2025 outlook. Navdeep, over to you. Navdeep Gupta: Thank you, Lauren, and good morning, everyone. Before I begin my review of our third quarter results, I would like to take a moment to provide important context for Foot Locker's performance included in our consolidated financial results. As noted in this morning's release, our acquisition of Foot Locker closed on September 8. As a result, our third quarter consolidated financials do not include the peak back-to-school selling season in August for the Foot Locker business. They reflect just 8 weeks of post-acquisition results in September and October, historically an unprofitable time period for the Foot locker business. Let's now move to a brief review of our third quarter results for the consolidated company, including continued strong performance for the DICK'S business. Consolidated net sales increased 36.3% to $4.17 billion, driven by an approximate $931 million sales contribution from a partial quarter of owning the Foot Locker business and a 5.7% comp increase for the DICK'S business as we continue to gain market share. On a 2-year and a 3-year stack basis, comps for the DICK'S business increased 10% and 11.9%, respectively. These strong comps were driven by a 4.4% increase in average ticket and a 1.3% increase in transactions. We also saw broad-based strength across our 3 primary categories of footwear, apparel and hardlines. As Nate said Foot Locker will be included in the comp base beginning in Q4 of next year, which is when they will commence their 14th full month of operation following the closing of the acquisition. For reference, pro forma comp sales for the Foot Locker business in Q3 in its entirety decreased 4.7% with the comparable sales in North America decreasing by 2.6% and the comparable sales in Foot Locker International decreasing by 10.2%, primarily driven by softness in Europe. Consolidated gross profit for the quarter was $1.38 billion or 33.13% of net sales, down 264 basis points from last year. For the DICK'S business, gross margin increased by 27 basis points and was in line with our expectations. Notably, the year-over-year decline in consolidated gross margin was driven entirely by the mix impact from the lower gross margin Foot Locker business. On a non-GAAP basis, consolidated SG&A expenses increased 40.8% or $320.9 million to $1.11 billion and deleveraged 84 basis points compared to last year's non-GAAP results. $259.9 million of this consolidated increase was driven by Foot Locker business. For the DICK'S business, expense dollar increased by 7.7% and deleveraged 45 basis points, which was in line with our expectation and driven by strategic investments digitally, in-store and in marketing to better position DICK'S business over the long term. Consolidated preopening expenses were $30.6 million, an increase of $13.8 million compared to the prior year. As Lauren mentioned, this supported the opening of 13 new House of Sport locations in Q3 our highest numbers opened in a single quarter to date, plus another 6 Field House locations we opened in the quarter. Consolidated non-GAAP operating income was $242.2 million or 5.81% of net sales compared to $289.5 million or 9.47% of net sales last year. For the DICK'S business, non-GAAP operating income was $288.6 million or 8.92% of net sales. This year's consolidated results included a $46.3 million operating loss in the quarter from the Foot Locker business which was primarily driven by the gross margin decline as we initiated certain pricing actions in late Q3. Importantly, since the acquisition of Foot Locker are closed on September 8, these results exclude a profitable back-to-school season for the Foot Locker business in August and through Labor Day. For reference, pro forma non-GAAP operating income for the Foot Locker business in Q3 in its entirety was approximately $6.8 million. On a non-GAAP basis, other income comprised primarily of interest income was $12.7 million, down $7.8 million from prior year. This decline was from lower cash on hand and a lower interest rate environment. Consolidated non-GAAP EBT was $239.9 million or 5.76% of net sales, including the Foot Locker business. This compares to an EBT of $297.1 million or 9.7% of net sales in Q3 of last year. Moving down the P&L. Consolidated non-GAAP income tax expense was $59.4 million or a rate of 24.7% -- while the income for the DICK'S business was taxed at a low 20% rate, the combined company was subject to a higher tax rate, primarily driven by the Foot Locker's EMEA business, where full valuation allowance remains in place. In total, we delivered a consolidated non-GAAP earnings per diluted share of $2.07 for the quarter. These results included non-GAAP earnings per diluted share of $2.78 for the DICK'S business based on a share count of 81.2 million, which excludes the dilutive effect of the shares issued in connection with the acquisition of Foot Locker. This is up from the earnings per diluted share of $2.75 last year. The DICK'S business results were partially offset by the effects of the partial quarter of contribution from the Foot Locker business, which include a $0.52 negative impact from Foot Locker operations, including the gross margin decline as well as the higher tax rate, a $0.19 negative impact from the increased share count, which was up $5.9 million prorated for the 8 weeks of the Foot Locker ownership. On a GAAP basis, our earnings per diluted shares were $0.86. This includes the noncash gains from our nonoperating investment in Foot Locker stock as well as $141.9 million of pretax Foot Locker acquisition-related costs. For additional details on this, you can refer to the non-GAAP reconciliation table of our press release that we issued this morning. Now turning to our balance sheet. We ended Q3 with approximately $821 million of cash and cash equivalents and no borrowings on our $2 billion unsecured credit facility. Our quarter end inventory levels increased 51% compared to Q3 of last year. Excluding the Foot Locker business, inventory levels for DICK'S business increased 2% compared to Q3 of last year. We believe the inventory in DICK'S business is well positioned to continue fueling our sales momentum. For reference, on a pro forma basis, inventory levels for the Foot Locker business increased approximately 5% as compared to the same period last year. And as Ed mentioned, the work is underway to clear out the unproductive inventory at the Foot Locker business. Turning to our third quarter capital allocation. Net capital expenditures were $218 million, which included $201 million for the DICK'S business and $17 million for the Foot Locker business. We also paid $109 million in quarterly dividends. Before I move to our outlook, I want to address a few key expectations surrounding the Foot Locker acquisition. First, as Ed discussed, our immediate priority is to clean out the garage of unproductive assets as we look to optimize the inventory assortment and store portfolio of the Foot Locker business. We expect these actions, along with other merger and integration costs to result in a future pretax charge of between $500 million and $750 million. Importantly, these future pretax charges are excluded from today's outlook. Second, we remain confident in achieving the previously announced $100 million to $125 million in cost synergies over the medium term, primarily from procurement and direct sourcing efficiencies. Third, as Ed said, we continue to expect the acquisition to be accretive to EPS in fiscal 2026, excluding onetime costs. Now moving to our outlook for 2025. Today, we are providing an updated outlook that is specific to DICK'S business and does not include the Foot Locker business, which we will address separately. We are taking this approach to ensure comparability of our performance across the quarters and to provide ongoing visibility into the DICK'S business. This outlook also excludes the investment gains as well as the merger and integration costs related to the Foot Locker acquisition. As Lauren said, we are raising our expectation for comp sales and EPS for the DICK'S business. Our updated guidance reflects our strong Q3 performance and includes the expected impact from all tariffs currently in effect. This outlook balances our confidence in the outcomes we are driving through our strategic initiatives and our operational strength against the ongoing dynamic macroeconomic environment. We now expect full year comp sales growth for the DICK'S business in the range of 3.5% to 4% compared to our prior growth expectation of 2% to 3.5%. Total sales for the DICK'S business are expected to be in the range of $13.95 billion to $14 billion compared to our prior expectation of $13.75 billion to $13.95 billion. Driven by the quality of our assortment, we continue to expect to drive gross margin expansion for the full year. We anticipate this expansion will be offset by SG&A deleverage as we are making strategic investments digitally, in-store and in marketing to better position ourselves over the long term. We still expect operating margins to be approximately 11.1% at the midpoint. At the high end of the expectations, we continue to expect to drive approximately 10 basis points of operating margin expansion. We now expect EPS for DICK'S business in the range of $14.25 to $14.55 compared to our prior expectation of $13.90 to $14.50. Our earnings guidance for DICK'S business is based on approximately 81 million average diluted shares outstanding and excludes the dilutive impact of the 9.6 million shares issued in connection with the acquisition. This outlook for DICK'S business also assumes an effective tax rate of approximately 24% compared to our prior expectation of approximately 25%. We continue to expect net capital expenditures of approximately $1 billion for the full year for the DICK'S business. Turning now to the Foot Locker business. We want to provide some perspective on our expectations for the fourth quarter. As Ed discussed, our priority is to position Foot Locker for a fresh start in 2026 and reset the business for long-term success. This includes taking strategic actions to address unproductive assets, including the optimization of inventory and the closure of underperforming stores. As a result of our actions to optimize Foot Locker's inventory, we expect Q4 gross margins for Foot Locker business will be down between 1,000 to 1,500 basis points as compared to Foot Locker's reported results in the same period last year, with the pro forma comp sales being down mid- to high single digits. Excluding the onetime costs associated with our actions to address unproductive assets, we expect Q4 operating income for the Foot Locker business to be slightly negative. Looking ahead, we expect next year's back-to-school season to be an inflection point to drive meaningful progress in the Foot Locker business. As a reminder, we continue to expect the Foot Locker acquisition to be accretive to our EPS in fiscal 2026, excluding the onetime costs. Before we wrap up, I want to provide a couple of consolidated company assumptions to provide clarity for your models. For the fourth quarter, we expect approximately 91 million average diluted shares outstanding, which includes the dilutive impact of the 9.6 million shares issued in connection with the Foot Locker acquisition. We also anticipate a consolidated company effective tax rate of approximately 29% for Q4, impacted by the expected Foot Locker losses in EMEA, where no corresponding tax benefit is anticipated. As Ed and Lauren said at the top of the call, we are proud that we continue to operate from a position of strength with robust momentum in DICK'S business and a significant effort underway to return the Foot Locker business to growth. We are doing all that our shareholders would expect to make the Foot Locker business accretive in 2026. We could not be more excited about our future together. This concludes our prepared remarks. Thank you for your interest in DICK'S Sporting Goods. Operator, you may now open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Robbie Ohmes with Bank of America. Robert Ohmes: My first question is, I know we're going to be talking a lot about Foot Locker today. But on the DICK'S business, it looked like a really, really great quarter, comps up 5.7%, et cetera, and you raised guidance. But just how are you driving that? And how are you guys thinking about your confidence going into holiday here? Lauren Hobart: Thanks, Robbie. We are so proud of the team for 5.7% comp. And importantly, we are comping strong comps, so a 2-year stack of 10%. And as you know, it's been several quarters -- 7 quarters in a row actually where we've had an over 4% comp. That really speaks to the fact that our long-term strategies are working. And I would point to the differentiated product assortment that we've been able to bring in, everything from newness from our strategic partners to emerging brands, our vertical brands, consumers, athletes are really resonating with the products that we are providing. And at the same time, our entire team is fully focused on delivering an engaging athlete experience. And that's in our stores, that's our digital environment. We are really focused on excelling and getting people the product that will give them the confidence, the excitement to do their absolute best. So our strategies are working. If you look at Q3, one of the great things we saw was that we had growth across all of our key categories. And when you think of back-to-school, you think of back-to-sport, you think of footwear and apparel and team sports, we knocked it out of the park with those categories, but also golf and as well as our license business and our trading card business really doing well. So as it flip to holiday, all of those themes are the reasons why we are so excited and confident as we look to Q4 and then we just raised our guidance. We've got an incredible product assortment for athletes. The consumer is fully focused on sport, and we are right sitting at the middle of the intersection of sport and culture. And we've got great gifts across our entire portfolio. So we're really pleased going into Q4. Robert Ohmes: That's really helpful. And then just my follow-up, just on Foot Locker, what kind of assumptions did you make about Foot Locker's cleanup of inventory in the fourth quarter having on DICK'S Sporting Goods? And also how many stores are you guys planning to close? And what would the timing be there? Edward Stack: Thanks, Robbie. As we take a look at store closings, we're still addressing that. We've got some stores that we think we're going to close. We're also looking to address just the upside that we think we have in these stores and how many really need to be closed and how many can we make more profitable. So we'll give you some more guidance on that at the end of our fourth quarter call. Navdeep Gupta: Robbie, let me quickly add on to the Foot Locker cleanup of the inventory in the fourth quarter. So what Ed said in his prepared remarks as well as what I said that we expect the gross margins in the Foot Locker business in the fourth quarter to be down between 1,000 to 1,500 basis points. As you can imagine, that is primarily driven by us quickly addressing the unproductive inventory that is in the system right now and have the room available to bring the excitement assortment that will position the business really well for 2026. Operator: Your next question comes from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: My first question on Foot Locker. So it looks like the business may have been a bit softer than -- the Street was expecting in Q3, and you're anticipating a slightly negative operating income in Q4, yet you're expecting the acquisition to be accretive to EPS in '26. Can you walk through the building blocks to achieve it? And then what gives you confidence? Edward Stack: Sure. Thanks, Simeon. I can't tell you we really couldn't be more excited about Foot Locker and the opportunity of Foot Locker. But there's some work that needs to be done to get it ready to -- for '26 and for it to be accretive to our business. So one of the things that we're doing, and we gave the Foot Locker team kind of a visual that we need to clean out the garage. So we're cleaning out the garage. We're cleaning out old unproductive inventory. We're going to be impairing underperforming assets. And from a confidence standpoint, those are all part of the building blocks that we need to put together to be ready for 2026. We have tremendous confidence in this management team that we've assembled in North America, as we talked about, it's being led by Ann Freeman, a long-time Nike executive that we've got a tremendous amount of respect for, and the brands have a tremendous amount of respect for. We just announced today that Matthew Barnes is going to run our international business, and he's a Brit, and we think that EMEA truly needs to be run by a European. We're making some real changes on how we are approaching the international business, which we think is going to be very positive. And one of the things we love about Foot Locker and one of the reasons we bought it when we went out and did our due diligence before is the men and women in the stores, the stripers and the blue shirts. These young men and women, they love sneakers. They love Foot Locker. They love to be around this product. And they're really our -- we really think they're our secret weapon as we go forward. And the other thing that gives us a tremendous amount of confidence is we've talked with every brand. And every brand has a renewed interest in being supportive to Foot Locker, and they've all talked that they want a stable and growing Foot Locker. And to be honest with you, it's great for our business, but it's also great for the brands business. And we've got complete alignment with the brands. And we are confident that in 2026, we do put all these building blocks together, we're confident that Foot Locker will be accretive to our earnings in 2026. Simeon Gutman: So my follow-up, I guess I'll make it 2 parts. First, just to that point on '26 accretion. That's Foot Locker stand-alone, including synergy. That's not, let's say, DICK'S Sporting Goods electing to buy stock back. That's Foot Locker math adding to DICK'S earnings base. That's part one of the follow-up. And then part 2, you don't tell us what your footwear gross margin is inside of core DKS. But if you look at Foot Locker, they've been on a steady decline for the last several years, and a lot of it does track with one of your major suppliers' proliferation of product. Is it feasible once you're done with your cleanup that you can get gross margins at parity with DICK'S Sporting Goods? Or is there something about the mix and the selection that you can't get it quite to that level? Meaning how much quick repair could there be once you clean up the assortment? Edward Stack: Well, we're not going to guide right now, and we'll give you some more guidance at the end of Q4. But we're not going to give you -- we're not going to tell you where it's going to be compared to DICK'S Sporting Goods, but we do know that it can be meaningfully different than it is right now. There's a huge opportunity. One of the reasons it struggled is they haven't had access to some of the key product. They haven't had allocation of some of the product. There's a number of stores that are out of stock in product that they don't have. I was just in a store in New York yesterday, as a matter of fact, and talking to the gentleman who runs the store, and he said, we're a great running store. We just got Nike's running construct in last week. And when you take a look at some things like that, there's just a huge opportunity. That product is being sold at full price. So yes, we're really confident that there'll be a meaningful increase in their gross margin. And we'll give you some more color on that at the end of the fourth quarter. Simeon Gutman: And then I don't know, Ed, sorry, it was a follow-up to the accretion comment, if you can comment any more on that, whether that included buyback or that's just core Foot Locker? Edward Stack: That's core Foot Locker. That's not to say we might not -- as we've said, we've been -- we'll be opportunistic based on what happens with the stock. We may buy back some stock. But we think from a core Foot Locker standpoint, it can be accretive to our earnings in '26. Operator: Your next question comes from the line of Kate McShane with Goldman Sachs. Katharine McShane: We were curious about how you're going to manage the markdowns at Foot Locker. I guess the concern is, is that if you do discount aggressively in the fourth quarter, do you think you'll be in a position where you can go back to full price selling and the customer be ready for that as new product comes into the store? And our second question on the discounting is, do you feel like the market is going to be heavy with discounts now in Q4? And how much do you expect that to impact the market and DICK'S own footwear sales? Edward Stack: Sure. Thanks for the -- thanks, Kate. I don't really think that that's going to be an issue with these markdowns and then going back to full price because the product that we're marking down is older product that hasn't sold product that's been sitting around for a while. So when we get the new fresh product, we'll sell -- we're confident we'll sell that at full price. And the consumer out there is looking for a new fresh product that is innovative in the marketplace. And that's what Foot Locker for the most part, doesn't have right now, and we'll be bringing that product in as we get into '26. From a discounting standpoint, right now and who knows things could change. But right now, we don't think that the discounting is going to be meaningfully different than it was last year. We do feel that we've got -- as Lauren said in her remarks, we've got different and innovative products, more premium product that you'll see product that's not as fully distributed in the marketplace, and we don't see that -- the promotional activity impacting our business a whole lot. Operator: Your next question comes from the line of Adrienne Yih with Barclays. Adrienne Yih-Tennant: Great. It's great to see the continued momentum at the DICK'S brand. I guess, Lauren and Ed, obviously, I'm going to talk a question from about Foot Locker. Is this a case of kind of just historically underperforming operations and with some closures and inventory management that you can control the controllables to kind of turn the business? Or are there more infrastructure investments and some longer-tailed structural things about the business? Secondarily, are there banners within Foot Locker that no longer perhaps make sense? And if you could talk about that. And then finally, my follow-up is on inventory. 1,000 to 1,500 basis points is quite a bit. Is there a write-off reserve within that? And -- is it just the depth of the promo? Or are you using third-party channels? Just trying to understand the magnitude of that and the quickness of trying to get through that in the next couple of months. Edward Stack: That's a lot, Adrienne. Let me start -- that's okay. So the idea of this is historically underperforming operations. I think that's a big part of this. So Foot Locker really didn't -- they kind of got away from retail 101 of trying to have the right product in the right store and having those -- I think turning this around, we don't think there's going to be some capital involved, and we're going to invest in the stores. But we've just done an 11-store test, and it was pretty capital light. And what we really did is we took the inventory -- most of the inventory out of the store, and we relaid out the wall. And one of the things that the DICK'S team is really good at, and we're bringing that expertise to Foot Locker is from a merchandising standpoint and how those visual merchandising really can help drive the store. We took the inventory out of the store and we redid the walls. And no real infrastructure back in there. But if you had walked into a Foot Locker store and still walk into a lot of Foot Locker stores other than these 11 and look at the wall, it's kind of merely a run-on sentence of shoes. And what we've done is we've taken and tried to segment it and show the consumer what's important in the stores. And we've got these 11 store test, and now it's only 11 stores, but the results have been -- we're pretty enthusiastic about the results. So we think that we can definitely turn this around. As far as the inventory being down 1,000 to 1,500 basis points, we are going to -- we're going to take markdowns to get this out of the store of older underperforming SKUs. And we do expect at the end of the year, there will be a program that we will sell some of this off to a jobber and just clean out what's left from the inventory and be able to get a fresh start in 2026. So that's why we're moving as quickly as we can to get a fresh start in 2026. Lauren Hobart: Yes. I want to just add to what Ed is saying from my perspective. If you look at the core challenges that we're facing with the business, it really is -- as you said, it's underperforming operations, it's inventory management. It's core Retail 101. And one of the things that's been so amazing to see if the team is coming together and Ed is spending a ton of time with them is that the core expertise in DICK'S, be it merchandising and the balance of art and science or the visual presentation, you can hear in his remarks, just talking about that, the fact that our -- we are a marketing-driven company and that we believe in brand. And so those plans are being worked on for next year. And the brand relationships, this is a heavy operational focus. All of those things are being transferred by osmosis coaching mentorship, all of that. And that's what gives me the confidence that we are moving in the right direction. Adrienne Yih-Tennant: Okay. And just to be very crystal clear, the markdowns of the inventory are on lifestyle and will have kind of no competitive impact with the performance -- premium performance at DKS. So there's no crossover there. Edward Stack: The product that we're marking down is not a key product at DICK'S Sporting Goods. It's an older product that quite frankly, and with the visual we used with the Foot Locker team and it is kind of caught on globally is we just got to clean out the garage. We've got to clean out all the inventory that's kind of in the corner that's not selling that we need to have out of our system. Adrienne Yih-Tennant: Fantastic. Makes 100% sense. Good luck. Operator: Your next question comes from the line of Michael Lasser with UBS. Michael Lasser: The first one is relatively straightforward. The expectation that Foot Locker will be accretive next year is based on the $14.25 million to $14.55 million for this year. Is that correct? And how dependent is the accretion expectation on inflecting the sales that you would anticipate by back-to-school for next year? Navdeep Gupta: Michael, thanks for that question. Yes, let me clarify on exactly like you said. Yes, the basis is on the $14.25 million to $14.55 million as the basis for 2025 results, and the kind of the dependency, I think it starts with what Ed said about the building blocks. It starts out with cleaning out the garage, positioning the inventory and having that excitement assortment and the newness that is resonating so well at DICK'S Sporting Goods with the gross margin expansion and the merch margin expansion that you are seeing is going to be the first and foremost priority as we look to the building blocks for how can this business be accretive. And keep in mind, we talked about as part of the cleaning out of the garage that there are other unproductive assets. We are looking into the store portfolio, where there are some unprofitable stores. But the opportunity we are looking at that is not only deciding if the store should be closed, but actually, the opportunity is the reverse to say if those stores had access to the right product and the right innovation and the newness can those stores be turned around and made profitable. So we are looking into that. We are absolutely looking into some of the unproductive assets that won't be part of the core business going forward. But to your point, it starts with sales and margin. And in addition to that, we'll look into cleaning up to the garage to position the business for a profitable growth into 2026, especially in the -- from the back-to-school season of next year. Michael Lasser: Got you. And my follow-up question is one of the key debates on the combined enterprise story right now is how do you ring-fence the core DICK'S business in order to ensure that the integration of Foot Locker does not become a distraction to slow the momentum of the core business. It does look like in the fourth quarter, you are anticipating a significant slowdown guiding to a flat to slightly positive comp for the core business. So a, what is fostering that expectation? And b, given you have owned this business for a matter of months now, give us a sense of how you anticipate that they won't be -- it won't become a distraction such as the core business can accelerate into next year and drive some growth on top of the accretion that you're anticipating for Foot Locker. Sorry, there was a lot of words in that question. Lauren Hobart: Got it. Thank you, Michael. One of the absolute prerequisites for us to do this acquisition was exactly what you're saying. We needed to ring-fence the DICK'S team and DICK'S needs to stay completely focused on driving our growth and our strategic priorities. And that is exactly what we are doing. I mean 8, 10 weeks in now, I'm even more confident that, that is how we're doing it. We've set up the team at Foot Locker. Ed is very much spending time over there. The DICK'S team is fully focused on the DICK'S priorities. And we're going to continue to just keep the teams sharing learnings, but not remotely working -- not distracting each other from what their core priorities are. When we look at Q4, you mentioned the deceleration, I want to be really clear about this. We just came off of a 5.7% comp, and we're up against a 6.4% comp last year. So the fact that you see our comp slightly moderating in Q4, we actually just raised the comp and the high end of our previous guidance now is the low end of our guidance. So we are really bullish on the holiday. We are just balancing that with an appropriate level of caution as we always do. We don't ever guide to the best possible outcome. But we are pumped and ready to go on the DICK'S side for Q4. Operator: Your next question comes from the line of Mike Baker with D.A. Davidson. Michael Baker: Great. A couple to start on. First, a little bit more detail on that 11 store test. Maybe any initial results or pop in sales? And I mean, is it just as simple as relaying a back wall or there's got to be more to what you're doing. So if you could address that, please. Edward Stack: Sure. So we're not going to lay out kind of the results. As I said, they're early, but we're really very encouraged on them. And it's not just as simple as laying out the wall as we've kind of taken some of the older product out of that -- those stores, put in some newer, fresher product that we were able to get our hands on. And one of the things we've also done is we're bringing the apparel business back to Foot Locker. They had really kind of walked away from the apparel business. And if you walk into these stores, you can see the apparel in there and the apparel is selling really quite well, too. So -- we think that there's an increase from a footwear standpoint, from an apparel standpoint going forward. And we'll -- we'll more than likely give you a little bit more color on this test at the end of the fourth quarter as we give guidance going into 2026. But there's a lot of just basic retail 101 that if Foot Locker gets back to that or when as Foot Locker gets back to it will have a meaningful impact on their business. Michael Baker: Great. Fair enough. One more follow-up, if I could. You're talking about a fresh start and getting everything cleared by the end of the fourth quarter, but back-to-school is the inflection point, not to put too much pressure on you or try to accelerate it, but why not spring as an example, as the inflection point? Why should the FERC, presumably, the first half not be as strong? Edward Stack: I think that's a really good question. And the main reason for that is our merchandising philosophy and how we're buying the product, we didn't buy that. It was bought by the previous management team. And we think that there's some -- and we're going to talk to the brands about trying to plug some holes. But the third quarter or the back-to-school time frame is the first time we will have had complete control over the assortment going forward. Operator: Your next question comes from the line of Christopher Horvers with JPMorgan. Jolie Wasserman: This is Jolie Wasserman on for Chris. Just following up with DICK's ability to affect inventory orders for Foot Locker. So just confirming that you're saying that you won't be able to fully affect it until the start of the third quarter, but are you able to have any sort of impact even if it's lighter in the first half? And just specifically on the percent of spring ordered since the acquisition, how much of that have you been able to order thus far? And how do you see that flowing into the fall? Edward Stack: We can have some impact on Q1 and Q2, probably hopefully a little bit more on Q2 than Q1, but we're working through that and working with the brands and they are being as helpful as they can to try to get product to us that we need. But it's really going to be in that third quarter that you'll see the big difference that our team will have fully bought that product and merchandise that product. Jolie Wasserman: That makes sense. And our follow-up question was just on gross margin with the third quarter. Just more broadly, if you could speak to what's going on there in terms of promotional environment -- this is all for DICK'S promotional environment tariff costs and the other inputs we discussed last quarter, like the GameChanger business? Navdeep Gupta: Yes. So we reported today a 27 basis points expansion in our gross margin. Keep in mind that, that 27 basis points of gross margin expansion is on top of 70 basis points of expansion that we saw. In terms of the promotionality within the quarter, the promotionality, as you can imagine, the overall marketplace continues to remain dynamic. We participated in select promotions, which we always do during the important back-to-school season. The tariff impact was within that quarter, our results as well within the merchandising margin. But keep in mind, we still delivered a merchandising margin expansion of 5 basis points on top of almost about 60 basis points of impact -- from a positive impact last year. And there was a slight unfavorable impact from the mix, like Lauren talked about the license business performed really well, which is a fantastic growth opportunity but has a slightly lower margin. So that -- we had a little bit of an unfavorable impact from the mix as well. And just to kind of round out that answer, I would say that if you look at it, we have guided that we expect our gross margin to expand -- on a full year basis, we expect gross margin to expand in our -- on the back half as well as within the fourth quarter. So overall, we feel great about the merchandising capability. The work that the GameChanger team is doing and the DICK'S Media network. Those ingredients continue to remain in place that drive our confidence in the gross margin expansion for this year and into the future. Operator: Your next question comes from the line of Paul Lejuez with Citi. Paul Lejuez: Can you talk about the $500 million to $750 million in charges that might be coming? How much of that is cash versus just write-offs? And how many stores are actually being reviewed when you think about that range of $500 million to $750 million? And any split that you can share in U.S., international or banner? Navdeep Gupta: Yes, Paul, we'll share much more of the detailed assumptions. As you can imagine, we are 10 weeks into this acquisition. And like I said before, we are balancing the evaluation that we are doing with the opportunity that we see in terms of driving growth and profitability expansion on a store basis. So on stores, we'll share much more of the detailed plans during our Q4 call. In terms of the makeup of the $500 million to $750 million, I would say there are 3 main buckets. The first and foremost, as Ed talked about, is the unproductive inventory, which makes up quite a decent chunk of that, that we will be addressing -- vast majority of that will be addressed here in Q4. That does include some of the store portfolio evaluation. And then we are looking deeper into the assets that we have in place, some of the technology assets, some of the legacy contracts that we will evaluate as part of the fourth quarter and clean that also have to position the business and the profitability of the business for 2026. In terms of the cash versus noncash, I would say it will be a combination of both things. Inventory definitely would be cash, but if there are some existing assets on the balance sheet that we'll be cleaning up, those will obviously be noncash. So we'll share more detailed assumptions behind all of this during our fourth quarter call. Paul Lejuez: Great. And then just on the synergy number, the $1 million to $1.25 million, how much of that are you assuming you can capture in F '26 to get to those accretion numbers? I'm curious if you're thinking that you might be actually playing for a bigger number than that $100 million to $125 million in longer term. Navdeep Gupta: Yes. Well, the $100 million to $125 million, I would say we have -- there's a lot of work that has already been done. What we are working through, as you can imagine, is just conversations with the brands, conversations with the nonmerchandising vendors, and those conversations are happening right now. So to now have a better line of sight, call it, 12 weeks from now as part of the fourth quarter. And in terms of looking for additional opportunity, you know us, we'll continue to focus on driving the top line and the bottom line results for the collective business now. So absolutely, that's a focus within the organization. Operator: Your next question comes from the line of Cristina Fernández with Telsey Advisory Group. Cristina Fernandez: I wanted to ask a question on the vision for the merchandising and Foot Locker. That business historically was heavy on basketball, sneaker culture and kids. So as you look at where there can be improvement, do you see that mix materially changing on the apparel side? Are you looking to lean more into private label? Or do you also see national brands playing a big role in their apparel expansion? Edward Stack: Yes. Foot Locker has always been steeped in basketball culture, and it will -- basketball will still be a very important part of that. The basketball construct that we see in the product coming forward from a basketball standpoint, we are really enthusiastic about across a couple of brands. And the apparel business, we do see the apparel business -- the national brands is where they had kind of stepped away from and leaned into their private brands, which we think the private brands certainly have a place there, but we feel that the national brands will have a meaningful increase in the apparel business in Foot Locker, which will help drive the AURs, and we think it will be very profitable. Cristina Fernandez: And then my second question is on Foot Locker also have been on a pretty significant remodel and refresh program. Have you continued with those Foot Locker reimagined stores? Or have you paused that program and looking to make changes in that real estate strategy that they have been on? Edward Stack: I think the Foot Locker reimagined stores has been an interesting test. As we've kind of gone through there, there's parts of the reimagined store that are very good and other parts that need to be rethought, and we're in the process of rethinking those right now. So as an example, what they characterize as the [ Kicket ] Club and the drop zone when you first walk into a Foot Locker store in the middle of the store, we're going to take that out, reimagine that, give better sight lines to the balance of the store and repurpose some of that place, which -- that area of the store, which was not very productive at all. It was more of a social place and turn that into giving the apparel presentation more space and really focusing from an apparel standpoint, which we think will drive the sales even better than they are. Operator: We have time for one more question, and that question comes from the line of Steve Forbes with Guggenheim. Steven Forbes: Ed, I was curious maybe to just explore like any demographic differences we should be aware of as we think about the performance spread between the 2 businesses. I think one of the thoughts out there is maybe more exposure to lower income, but I'd be curious to maybe just hear you summarize how we should think about the demographic exposure and how that sort of impacts your merchandising plans on a go-forward basis here? Edward Stack: Well, we'll merchandise Foot Locker for Foot Locker, which is going to be a bit more basketball inspired, a bit more trend inspired, definitely more urban than the DICK'S business. The DICK'S business will be more sport-led along with the lifestyle product. We think DICK'S is really kind of at the center of sport and culture and it's a more suburban concept. With that being said, all categories of consumer, if you will, are looking for a product that is new, innovative and different than what's out there in the marketplace right now. And Foot Locker didn't have that new and innovative product. As we get into the 2026, we'll start to have more of that product. And by the third quarter, we think we'll be fully invested in that newer -- the newer innovative product that the consumer across all income levels is looking for. Steven Forbes: And then just a quick follow-up for Navdeep. Maybe just so we're on the same page here, a slightly negative adjusted EBIT for Foot Locker on a pro forma basis, that compares to the $118 million last year. Just, I guess, confirm that. And then is there any way to sort of think through how you sort of view like a normalized 4Q or how you would speak to just where that LTM adjusted EBITDA profile is for the business relative to the $395 million that's in the presentation? Navdeep Gupta: Yes. So the comparison, you're right, it's comparing to a normalized on a non-GAAP basis, the results that the Foot Locker posted in fourth quarter of last year. And keep in mind, the connection point between the 1,000 or the 1,500 basis points of the margin decline versus the slightly negative operating income expectation for Foot Locker is the part of the cleanup of the garage inventory. And that's the piece that we have threaded between the 2, the numbers and the estimates that we gave out for the Foot Locker business. Operator: And that concludes the question-and-answer session. I will now turn the conference back over to Lauren Hobart, President and Chief Executive Officer, for closing comments. Lauren Hobart: Okay. Well, thank you all for your interest in the DICK'S story. We will see you next quarter. Have a wonderful Thanksgiving and a huge thank you to our entire teams of over 100,000 people around the globe. Thank you. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Zhihu Inc. Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Today's conference is being recorded and webcasted. At this time, I would like to turn the conference over to Yolanda Liu, Director of Investor Relations. Please go ahead, ma'am. Yolanda Liu: Thank you, operator. Hello, everyone. Welcome to Zhihu's Third Quarter 2025 Financial Results Conference Call. Joining me today on the call from the senior management team are Mr. Zhou Yuan, Founder, Chairman and Chief Executive Officer; and Mr. Wang Han, Chief Financial Officer. Before we begin, I'd like to remind you that today's discussion will include forward-looking statements made under the safe harbor provisions of U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. As such, actual results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward-looking statements, except as required under the applicable law. Additionally, the discussion today will include both GAAP and non-GAAP financial measures for comparison purpose only. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to our earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our IR website at ir.zhihu.com. This quarter, Victor Zhou, Zhou Yuan's AI agent will once again deliver the prepared remarks in English on his behalf. Victor is still in training, so we appreciate your patience as he continues to improve. Victor, please go ahead. Yuan Zhou: Thank you, Yolanda. Hello, everyone, and thank you for joining Zhihu Third Quarter 2025 Earnings Call. I am Victor Zhou, and I am pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, Founder, Chairman and CEO of Zhihu. The third quarter marked another meaningful step toward our goal of achieving non-GAAP breakeven on a full year basis. As our structural optimization initiatives continue to take effect, we further refined our service offerings and balanced commercialization with community health. We also maintained disciplined cost control and improved operating efficiency. As a result, our non-GAAP operating loss narrowed by 16.3% year-over-year in the third quarter. At the same time, our community ecosystem continues to strengthen user mix and engagement improved, while MAUs increased modestly from the second quarter. Daily time spent continued to trend higher year-over-year and quarter-over-quarter. Our users and creators remain highly active, supporting improved core user retention and a steady stream of reliable high-quality content on the platform. With our high-quality content, expert network and AI capabilities working greater synergy. We are accelerating our agentic AI upgrades to deliver trusted and differentiated experiences to users, both within and beyond the community. As the AI industry enters a new phase of real-world integration and accelerated deployment, Zhihu as a trusted source of high-quality content and data upstream of Chinese LLMs and AI applications is gaining prominence, creating expanding opportunities for collaboration. With rising high-quality content, a highly active base of professional creators and accelerating AI integration, our community ecosystem radiates vitality. Our competitive moat of trusted content continues to strengthen. In the third quarter, daily creation of high-quality content increased by over 25% year-over-year, with professional AI-focused content up by more than 30% compared to the same period last year. As AI technologies and applications rapidly advance in China, Zhihu remains a go-to platform for frontline engineers and researchers for sharing and lively discussions. AI-focused content covers a range of subjects, including deep technical analysis, innovative product applications, emerging industry trends, personal growth, career development and a growing array of emerging topics driven by rapid AI adoption from the technical debate between MiniMax and Moonshot AI over efficient attention, which sparks heated discussions on Zhihu and highlighted China's diverse approaches to LLM innovation to the in-depth engineering analysis of new models shared by leading companies. Zhihu has become a trusted source for authentic first-hand exchanges. These discussions have made our platform a place where AI innovations are first interpreted, validated and shared. Meanwhile, we continue to strengthen our trustworthy content ecosystem through ongoing improvements to content governance mechanisms and recommendation algorithms. Professional creators are a vital force in our community. In the third quarter, daily active high-tier creators increased significantly on both year-over-year and a sequential basis. The number of verified honored creators also grew by 29% year-over-year. Engagement among AI-focused creators also continues to strengthen. Zhihu now brings together more than 60 million continuous learners and 3.56 million proficient creators in science and AI and 150,000 ecosystem builders. These contributors not only add consistent high-quality input to our AI content ecosystem, but also show significant potential as future service providers for enterprises. Beyond the science and AI, creator activity in humanities and social sciences also remains strong across the platform. In September, we launched the co-benefit co-creation initiative [Foreign Language] in collaboration with leading institutions such as Alibaba Foundation, Tencent Charity Foundation, One Foundation, and Greenpeace alongside the psychologists, medical experts and the writers. This initiative generated a wide range of high-quality content across disability rights, mental health, environmental protection and more joining over 80 million views. We also hosted the 2025 Zhihu Humanities Season, Zhihu Renwenji event, which brought creators together through a blend of online and offline engagement. The campaign attracted nearly 30 influential creators, driving a 7.5% quarter-over-quarter increase in creator activity in the humanities category and generating 5.82 million topic views, reinforcing Zhihu's professional influence and cultural relevance. To better support professional creators, we continue to enhance the content creation and distribution experience. Our ideas product supports knowledge-based expression from high-tier creators and enables more diverse short-form content creation among mid-tier creators. As a result, average daily content volume and interactions increased by 21.7% and 33.1% quarter-over-quarter, respectively. Our Circles product also continues to serve as a focused space for users with shared interests to gather and interact with average daily views more than tripling sequentially during the quarter. We also continue to advance our agentic AI upgrades across the community. From a product perspective, Zhihu Zhida evolved into the agentic mode at the end of September, delivering more accurate and smarter search results. Most notably, Zhihu Zhida now serves as a helpful partner for deep thinking and creativity, capable of understanding user intent, performing multistep reasoning and synthesizing information across research, learning and content creation. Our advancements in agentic AI are also amplifying the value of our creators. By strengthening the attribution of content to trusted creators across the knowledge base and search, AI-generated responses now sites to verify the knowledge during the reasoning stage, significantly reducing hallucination and improving trust. This strengthens creator influence within the generative AI landscape and gives Zhihu a distinct advantage as a trusted content provider in the emerging AI ecosystem. Now moving on to commercialization. In the third quarter, our commercialization continued to recover on a healthier base with total revenues reaching RMB 658.9 million in the third quarter. We also made notable progress in exploring new monetization avenues by leveraging our core strengths. Let's take a closer look at our performance by business unit. In the third quarter, marketing services revenue was RMB 189.4 million. Notably, the year-over-year decrease narrowed, indicating the bottoming out of our adjustment cycle. We expect marketing services revenue to begin growing on a sequential basis in the fourth quarter. During the quarter, we made a solid progress in both optimizing our client mix and upgrading our advertising products. We continue to optimize client mix by deepening our focus on high-value accounts with our brand power and expanding commercial IP, driving strong uptake from enterprise clients, particularly in technology and other high-value verticals. In late September, we hosted the TechClub Conference, bringing together AI experts and some of the most influential tech creators from the Zhihu community to explore the latest developments and future applications of AI. The event showcased the technology's transforming role in everyday life and our unique ability to connect professional content with meaningful brand engagement, further expanding our high-value client base. Through the Zhihu platform, leading companies such as Gree, China Mobile, Huawei and FY Tech further strengthened their brand positioning in technological innovation and product excellence. Backed by the credibility of our brand and strong commercial efficiency created by professional discussions across our community, we made a solid progress in acquiring new clients across diverse sectors such as automotive, consumer and health care. This quarter, we also further upgraded a wide range of our commercial products by integrating AI more deeply across our portfolio. Our dual ecosystem optimization and product efficiency engines drove a significant increase in positive feedback from clients. For example, we launched the upgraded CCS for idea scenarios and introduced the product to more clients. By offering this short content plus precise scenarios format, it bridges authentic experiences and purchase decisions for brands and merchants. At the same time, it makes content consumption and the decision-making for users substantially more efficient. We are also seeing rising demand from clients to improve brand and product presentation in AI-generated answers. Leveraging our trusted content and high citation rate across the Internet, we launched our new GEM marketing solution in early November. This new solution provides core insights such as visibility across AI platforms and citation analytics. Leading technology clients we have worked with include Lenovo, FlightTech, Vivo and Proa. We have received a positive endorsement as we help enhance both their SEO and GEO performance for brands and new products. Looking ahead, with a healthier ecosystem, stronger client base and more robust service offerings, we will continue to leverage AI to drive a steady recovery and long-term growth in our marketing services business. And now for our paid membership business. In the third quarter, average monthly paid members increased by 8.1% sequentially to 14.3 million, with revenue reaching RMB 386 million. Our efforts to boost member retention and ARPU through diversified initiatives continue to generate positive feedback from both creators and users. The Yanyan Story long-form writing marathon came to a successful close in late October after 6 months campaign, generating tens of thousands of submissions in the third quarter alone. This initiative opened up new development pathways for aspiring creators and provided a steady pipeline of content for our library and the future IP development. At the same time, voice live streaming saw a further improvement in paid conversion rates. We also unlocked further commercial potential for our IP adaptations in China and overseas. During the quarter, revenue from IP licensing maintained its triple-digit growth rate year-over-year and generated high double-digit growth quarter-over-quarter. Year-to-date, revenue has nearly doubled compared with the same period last year. In mid-October, Yanyan Story debuted at the Frankfurt Book Fair, showcasing Chinese digital literature on a global stage for the first time. It also draw coverage from the U.K. magazine, the bookseller, which noted the new growth path for Chinese short-form digital literature in the international markets. By the end of October, Yanyan Story licensed more than 100 titles for publication across major Asian markets, including Japan, South Korea, Thailand and Vietnam. A number of works have also been adapted into short dramas for overseas markets and performed well, reflecting the growing popularity of Chinese short-form content abroad. Meanwhile, Yanyan Story has established partnerships with international platforms such as Mobile Reader and GoodNovel to translate works into English, Spanish, Japanese, Korean, Portuguese, Thai, Indonesian and other languages, further expanding its international reach. Going forward, we will pursue a diversified set of initiatives to improve member retention and ARPU. By enhancing content supply, membership benefits and personalized experiences, we aim to strengthen long-term member value. As AI enables more efficient content creation, the potential for IP development and commercialization will expand, unlocking new growth opportunities for our membership business. Starting this quarter, we are simplifying our revenue breakdown and will begin reclassifying vocational training revenue into other revenues to align with our overall strategy. Other revenues were RMB 83.9 million, of which we will continue to adjust our vocational training business with a focus on improving operational efficiency and prioritization. Although our vocational training business has been reclassified, we continue to build on its creator-driven foundation with the development of our column product. Designed primarily to serve super creators, column is intended to enhance the creator ecosystem rather than act as a new commercial growth driver. During the quarter, we enhanced the product by rolling out a PC version and AI tools that help creators generate column descriptions and cover designs. This enhancement drove sequential growth in both the number of leading column creators and creator user engagement. Monetization models for column creators is also becoming more diversified with overall GMV more than doubling compared with last quarter. Going forward, we will continue to operate with discipline, maintaining stability while investing prudently for sustainable growth. With the ongoing enhancements in efficiency and steady cost optimization, we are confident in achieving our full year profitability target. Building on this foundation, we will continue to invest with a long-term view to strengthen our AI capabilities and improve the efficiency of our core operations. Deeper AI integrations will drive greater synergies across content creation, distribution and monetized on Zhihu. Meanwhile, we will further refine our product and marketing strategies to capitalize on new growth opportunities from high-quality users and enterprise clients. With a healthier operating structure and ongoing innovation, we are well positioned to thrive in this next stage of high-quality growth. With that, I will hand the call over to our CFO, Wang Han. Han, please go ahead. Wang Han: Now I will review the details of our third quarter financials. For a complete overview of our third quarter 2025 results, please refer to our earnings release issued earlier today. In the third quarter, we maintained disciplined cost management and drove further improvements in operational efficiency. As a result, our non-GAAP operating loss narrowed by 16.3% year-over-year. We continue to invest in areas that reinforce our long-term growth potential, striking a healthy balance between efficiency and investment. Our total revenues for the quarter were RMB 658.9 million compared with RMB 845 million in the same period of 2024. The decrease was mainly the result of our continued efforts to optimize revenue mix and focus on sustainable, high-quality growth. Notably, the year-over-year decrease narrowed for the third consecutive quarter, in line with our expectations. Our marketing services revenue for the quarter was RMB 189.4 million compared with RMB 256.6 million in the same period of 2024. This decrease was mainly driven by our proactive refining of service offerings and optimization of client mix. Encouragingly, the year-over-year decrease narrowed meaningfully, indicating that our adjustment cycle has bottomed out. Paid membership revenue was RMB 385.6 million compared with RMB 459.4 million in the same period of 2024. While the number of average monthly subscribing members fell year-over-year, they rebounded and grew 8.1% sequentially to 14.3 million. We also continued to enhance retention and ARPU through diversified content and membership initiatives. Other revenues were RMB 83.9 million compared with RMB 129 million in the same period of 2024. The decrease was primarily due to the strategic refinement of our vocational training business. Our gross profit for the quarter was RMB 403.6 million compared with RMB 540.1 million in the same period of 2024. Gross margin was 61.3% compared with 63.9% in the same period of 2024. Our total operating expenses for the quarter decreased by 19.4% year-over-year to RMB 503.5 million. The decrease was primarily due to a more efficient cost structure and disciplined resource allocation across key operating areas. Selling and marketing expenses decreased by 14.9% to RMB 330.1 million from RMB 388 million in the same period of 2024. The decrease was mainly due to tighter control over promotional spending and optimized personnel-related expenses. Research and development expenses decreased by 36.2% to RMB 114.4 million from RMB 179.3 million in the same period of 2024. The decrease was primarily driven by continued improvement in research and development productivity and efficiency. General and administrative expenses were RMB 59 million compared with RMB 57.2 million in the same period of 2024. Our GAAP net loss for this quarter was RMB 46.7 million compared with RMB 9 million in the same period of 2024. On a non-GAAP basis, our adjusted net loss was RMB 21 million compared with RMB 13.1 million in the same period of 2024. As of the 30th of September 2025, we had cash and cash equivalents, term deposits, restricted cash and short-term investments of RMB 4.6 billion compared with RMB 4.9 billion as of the 31st of December 2024. As of the 30th of September 2025, we repurchased 31.1 million Class A ordinary shares for an aggregate value of USD 66.5 million on the open market. Additionally, we repurchased a total of 22.5 million Class A ordinary shares for an aggregate value of USD 34.5 million through the trustee of the company as of the end of the third quarter. Looking ahead, we are on track to achieve full year breakeven on a non-GAAP basis. We will continue to further strengthen our monetization capabilities and pursue new revenue opportunities that leverage Zhihu's strength in high-quality content creator expertise and AI-driven innovation. Together, these efforts will reinforce our business resilience and support sustainable long-term growth. This concludes my prepared remarks on our financial performance for this quarter. Let's turn the call over to the operator for the Q&A session. Operator: [Operator Instructions] We will now begin with our first question, and this is from Vicky Wei from Citi. Yi Jing Wei: Will management share some color about the AI progress of Zhihu? For example, the penetration rate of Zhihu Zhida and the progress of the AI integration with the Zhihu Community. Yuan Zhou: [Interpreted] Thank you for question. This is from Zhou Yuan, Zhihu CEO. First of all, I would like to say sorry about my weak voice because I didn't recover yet from my cold. Anyway, I would just start with your first question. So as you can see, Zhida remains one of our key products. Its overall usage and penetration rate continued to increase in the third quarter with the penetration rate existing 15%, nearly 4x higher than the same period last year. This not only reflects the ongoing evolution of our foundational AI capability across the community, but also demonstrates strong user endorsement of a very strategic depending of AI plus community. This also gives us a very strong confidence to continue upgrading this AI plus community experience updates across more touch points. Now let me just share some recent progress and upcoming plans. First of all, in the search scenario, by late November, Zhida will fully augment our general AI search capability to include Zhida-generated content for all users. Additionally, we will soon launch pilot features such as cross-topic content aggregation and the community trend summaries. This will formally navigate Zhida from secondary entry point to a primary one, further boosting AI adoption across the entire community. And second of all, on the content creation side, we are empowering professionals with strong AI copilot. In this quarter, we launched a suite of AI assistant writing tools for our creation assistant, which includes smart headlines, grammar and fact checking and lead paragraph generation. This will help creators optimize long-form structures and expert-level content. So by the end of 3Q, adoption of these new AI features has already surpassed 20%. Looking ahead, we plan to introduce additional capabilities such as AI-powered multi-model content conversion, intelligent formatting and short-form content generation and et cetera. These tools will significantly lower the barrier to entry for mid-tier creators, enabling more users to express themselves effortlessly to increase posting frequency, creation frequency and engage more actively. In addition, on the content consumption and distribution side, we are also expanding Zhida into high-frequency consumption scenarios. For example, AI-powered daily briefing on Zhihu's training topics and other vertical-specific topics as well as the ability to mention Zhida in threats or to also summarize discussions and surface key insights will help users quickly grasp complex conversations and participate more meaningfully. We believe this will further strengthen user engagements and community stickiness. Thank you. Operator: We'll now take the next question. This is from Luqing Zhou from Goldman Sachs. Luqing Zhou: So my question is on how do you see the current status of Zhihu's user ecosystem? And based on that, could management share more color on the directions for improving Zhihu's future product design and how is the progress so far? Yuan Zhou: [Interpreted] Thank you for your question. This is from Zhou Yuan, Zhihu CEO. We believe, overall, the community ecosystem is very healthy. We do not rely on any single metric to assess its health. Instead, we focus on content quality, user structure and user quality and whether our content creator incentives are forming a virtuous cycle. We have also deployed AI as a core product driver at a strategic level. Over the past few quarters, we have made the synergistic development of high-quality content, multiply expert network, multiply AI capabilities as a core path for driving our ecosystem in a positive direction. From this perspective, our ecosystem is stable and continuously improving. This is fully in line with our expectations as well. First of all, the trustworthiness and professionalism of our content are very crucial. They are crucial indicators of the ecosystem health. Over the past few quarters, we have continued to strengthen our trustworthy content ecosystem and our expert network while also cracking down on low-quality content and traffic to keep the ecosystem healthy at its core and reinforce the virtuous cycle. As a result, we have delivered several consecutive quarters of double-digit growth in daily high-quality content creation. The AI category is the most reflective of this progress with the professional AI-related content regarding double-digit growth for 4 consecutive quarters. On this basis, users' trust in our content has also continued to increase steadily. And secondly, our user structure and user quality have improved and users' need across different scenarios has been addressed. As we can see from last Q4, our MAU has remained stable on a sequential basis for 4 consecutive quarters. And building on that, average daily user time spent, which we believe as a proxy for engagement and retention has delivered double-digit year-over-year growth for 6 consecutive quarters. Our users remain mainly young and focused on learning and growth with user age between 18 to 30, accounting for more than 65% of our total user base. Among them frontline professionals in technology and AI have become one of the most representative groups. They have long-term professional learning, frontier exploration and interest development needs and contribute more content and provide a stronger positive feedback to the ecosystem. And last but not the least, the content -- the creator ecosystem continues to grow and expand. Output from top-tier professional creators have remained stable over 7 consecutive quarters. At the same time, by using AI tools, we are continuously lowering the creation threshold for mid-tier creators and increasing the creation frequency of the entire creator group. This makes the supply side of the community more diverse and keep social interaction within the community growing. So in summary, ecosystem health is foundational to Zhihu. Going forward, we'll continue to invest in trust content and expert network so that as a community scales, it can maintain its professionalism, vibrancy and trustworthiness. Let me just turn to the second question you mentioned. It's about our core product going forward plan. Here, we hold a few key beliefs. First of all, over the next 3 years, people will consume more AIGC content. At the same time, human-to-human interaction will become more valuable. So we believe both trends will coexist. And the second belief we hold here is that stronger AI becomes, the more people will experience a sense of diminished presence, which means the participation, social capital and relationships enabled by community will become increasingly scarce and increasingly demanded. And the third belief here is that high-quality human-generated content and data will become extremely scarce as well as valuable on the supply end. This supply matters on both ends. It's crucial for the advancement of AI as well as for human development. So going forward, Zhida will definitely integrate with our users' functional social needs. For example, when a user wants to ask a question, search or look for resources, AI will dramatically raise efficiency. And Zhida will push the community further towards utility, enabling even the first day users to get a meaningful experience immediately. At the same time, we will double down on the social needs that come from real human connection things like building recognized, growing together and finding people who share your identity. We want to build these things with user feel like a sense of belonging in an environment grounded in real people, real culture and trusted interactions. So our future product direction is built around 2 pillars: utility and identity. My hope is for Zhihu to become the connection layer for humans in AI era as a place where people can use AI tools to understand the world as well as a community where they can find renaissance and understanding from one another. At the same time, we plan to build a trusted content and expert network as 2 foundational layers of infrastructure. Thank you. Thank you again for your question. Operator: We will take next question. This is from Daisy Chen from Haitong International. Kewei Chen: Could management update the progress of the adjustments in each business line? Did you see any signs that the revenue has bottomed out or started to rebound? In particular, how do you expect the future of the advertising business? And also, could you share your outlook on the company's profitability? Wang Han: [Interpreted] Thank you for your question, Daisy. This is from Wang Han, Zhihu CFO. So I will just pick up your second question. Here's a quick take on our profitability outlook. After delivering solid profits in the first 2 quarters, we now see a very high likelihood of achieving our first full year non-GAAP profitability in 2025. So with that buffer in place, we are using Q3 and Q4 as a window to keep fine-tuning and investing where needed. That's why you will see -- you can see a small loss in Q3, which is well within what we can comfortably take. Let me just walk through the adjustments across our major revenue lines. First, about the marketing services. As we mentioned last quarter, this Q3 is -- it will become the bottom. And we expect a sequential recovery starting in Q4. What we see now give us confidence to maintain that guidance. Looking ahead to next year, our goal is for each quarter to stay above the baseline set by Q3 this year. And second, about the pay membership. This segment is still in a transition period. As we said before, even the best libraries and bookstores separate fiction from nonfiction, the real challenge here is how to differentiate and integrate them in a way that feels natural to users. We will continue experimenting here. So we cannot say membership -- pay membership revenue has hit its bottom yet. But even if there is some decline, it will be about products or cohorts with lower ROI and weaker profitability or less than ideal retention. Search is about vocational training. This business is no longer a drag on our overall bottom line. Given this relatively low base or small scale, we have now reclassified it into others. So overall, you've seen us deliver several consecutive quarters of profitability followed by the small loss in Q3. Even though we remain confident in achieving full year profitability. With that foundation, we are taking this period to make necessary adjustments and targeted investments. As we approach our first full year of profitability, we also want to use this moment to shed some legacy inefficiencies and to start fresh. We have no intention of staying where we are and simply just squeezing out profits. We are now operating from a healthier foundation and getting back onto a trajectory that aligns with Zhihu's long-term development. Also, we have a solid -- very solid cash position, and we are not reverting to the old model of spending aggressively just forth go. And this new AI cycle or in this AI era, our focus is on strengthening Zhihu's position in real people interactions, expert network and trusted content areas. And these capabilities are becoming increasingly important and carry real social value. Thank you for your questions. Operator: We will now take the next question. And this is from [ Jing Yi Wang from Guangfa ]. Unknown Analyst: Could management share some more color about the shareholder return pay in progress. Wang Han: [Interpreted] Thank you for your question. This is from Wang Han, Zhihu CFO. We can see over the past 2 years, we've been one of the most active buyback companies among U.S.-listed Chinese names. That conviction came from our confidence in reaching profitability. And this year, we expect to demonstrate that our outlook and the targets set 2 years ago are being delivered. Even so Zhihu's current market cap remains significantly below the cash on our balance sheet. So we believe we are super undervalued. Therefore, we intend to maintain our buyback program and expect to remain one of the most active repurchase in this sector. Thank you again for your question. Operator: That concludes today's Q&A session. At this time, I will turn the conference back to Yolanda for any additional or closing remarks. Yolanda Liu: Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or Christensen Advisory. Thank you so much. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good morning, and welcome to the Analog Devices' Fourth Quarter Fiscal Year 2025 Earnings Conference Call, which is being audio webcast via telephone and over the web. I'd like to now introduce your host for today's call, Mr. Jeff Ambrosi, Head of Investor Relations. Sir, the floor is yours. Jeff Ambrosi: Thank you, Gigi, and good morning, everybody. Thanks for joining our fourth quarter fiscal 2025 conference call. Joining me on the call today is ADI's CEO and Chair, Vincent Roche; and ADI's Chief Financial Officer, Richard Puccio. For anyone who missed the release, you can find it and relating financial schedules at investor.analog.com. The information we're about to discuss includes forward-looking statements which are subject to certain risks and uncertainties, as further described in our earnings release, periodic reports and other materials filed with the SEC. Actual results could differ materially from the forward-looking information as these statements reflect our expectations only as of the date of this call. We undertake no obligation to update these statements except as required by law. References to gross margin, operating and nonoperating expenses, operating margin, tax rate, earnings per share and free cash flow in our comments today will be on a non-GAAP basis, which excludes special items. When comparing our results to our historical performance, special items are also excluded from prior periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release. References to earnings per share are on a fully diluted basis. And with that, I'll turn the call over to ADI's CEO and Chair, Vincent Roche. Vincent Roche: Thanks, Jeff, and good morning, everyone. So our fourth quarter results reflect the ongoing business recovery with continued growth in revenue and earnings per share, both of which finished above the midpoint of our outlook. Now widening the aperture to our fiscal '25. Revenue accelerated throughout the year and returned to meaningful growth despite the persistent macro and geopolitical headwinds. All of our end markets increased by double digits, reflecting both cyclical and company-specific drivers, including strong execution against our Maxim revenue synergy targets. Top line strength, combined with margin expansion, resulted in earnings per share growth of more than 20% in fiscal '25. Our strong operating results and reduced CapEx enabled us to generate record free cash flow of more than $4 billion or 39% of revenue. We also returned more than $4 billion to our shareholders, supporting an 8% dividend increase as well as share count reduction. Innovation has always been integral to ADI's brand and our value proposition, forming the foundation for strong financial performance. Consequently, R&D activities received capital prioritization with record investments made in FY '25 to advance our leadership in analog, mixed signal and power technologies. We've also intensified our focus on software, digital and artificial intelligence capabilities to strengthen our core franchise, enabling us to address increased customer complexity and expedite their innovation cycles and time to market. Our comprehensive technology portfolio, combined with extensive application domain expertise uniquely positions us to proactively identify and resolve the most complex engineering challenges for our customers. As a result, we're realizing stronger value capture as reflected in the increase in our average selling prices, particularly in new products, where ASPs significantly exceed those of legacy offerings. Beyond product innovation, our dedication to customer success encompasses ongoing investments to streamline and accelerate their product development activities. To this end, we are rapidly expanding our development support environment from research to deployment with a combination of proprietary ADI tools and leading ecosystem and open-source platforms. Furthermore, following the acquisition of Maxim, we've allocated over $3 billion in capital expenditures to substantially enhance capacity, optionality and resiliency for our customers supporting our long-term vision for sustained growth. Now as you've seen, our relentless focus on driving customer success translates to strong results and a diverse design pipeline that grew more than 20% in fiscal '25. So I'd like to share a few examples of our success this past year. Within industrial, every sector grew, driven by improved cyclical dynamics and powerful secular trends such as AI, automation, and the drive for efficient and reliable energy generation, transmission and distribution. For example, the exponential growth in demand for AI and high-performance compute drove a record year in our automatic test equipment business, building upon and extending our strong position in the SoC and memory test markets. We anticipate further growth in FY '26 due to our expanding design pipeline industry transitions to HBM4 and expected double-digit growth in hyperscaler CapEx. In '25, robust automation design and growth was propelled by the burgeoning demand for enhanced productivity, efficiency and reliability across key sectors such as manufacturing, logistics and health care. This momentum was particularly evident within our Robotics segment, which saw notable expansion as customers increasingly prioritized automation to streamline operations and improve business outcomes. As highlighted in our previous quarter, we foresee tremendous long-term opportunity as advancements in AI fuel the emergence of content-rich humanoid robots positioning ADI at the forefront of the next wave of robotics innovation. Within health care, the proliferation of robot-assisted surgical systems represents a vibrant vector of growth alongside our Imaging and Diagnostics segments. Additionally, we expect growing demand for our suite of diabetes management solutions to continue to contribute to growth in FY '26. Energy was our fastest-growing industrial segment this past year, driven by high demand from the industrial, transportation and data center sectors. Design and activity was especially strong for grid management and battery storage systems, and we anticipate continued growth in '26 and well beyond. Aerospace and Defense achieved record results, and we expect further growth in the year ahead, driven by our expanding portfolio of advanced sensor, mixed signal and power solutions, coupled with an increasingly strong opportunity pipeline. We also expect to maintain our strong presence in the growing low earth orbit satellite market. Turning to automotive. Advances in autonomous driving and cabin digitalization led to a record year for ADI in fiscal '25 with growth outpacing light vehicle production. Our intelligent audio and video connectivity solutions, which avoid bulky and expensive cabling, drove multiple new growth awards across GMSL, A2B and our signal processing and safe power portfolios. Building on this success, our new E2B Ethernet bus is expanding our market, simplifying customer systems, boosting power efficiency and lowering costs as it gains traction. In the communications sector, AI CapEx investment led to a record year for our data center segment with design and activity more than doubling. Strong demand for high-throughput connectivity and power delivery solutions support our confidence in continued growth through '26. Wireless communications is one of the few areas of softness in '25 but we believe customers have completed their inventory digestion phase and that the market bottomed during the year. In addition, we see a positive impact of new products such as our software-defined AI-enabled macro base station on a chip solution for which we secured design wins from leading OEMs and service providers and see additional opportunity beyond telecommunications in private industrial networks as well as other secure communications applications. And finally, as consumer markets rapidly evolve, we're expanding our SAM and growing a diverse pipeline by delivering integrated solutions in hearables, wearables, gaming, AR, VR and many related areas. For example, our new Acoustics platform combines analog, power, digital software and machine learning for advanced environmental awareness and adaptive noise cancellation. We've secured design wins for these solutions in consumer and health care segments, enabling ADI to triple the value generated over legacy designs. We've also captured several new power management design wins in premium handsets and smart glasses in FY '25, positioning us for further growth in '26. So in summary, our diversified business model has proven agile and consistently capable of generating superior outcomes reflected in both last year's resilient margins and this year's strong rebound in profitable growth. While we're mindful of the macro environment and the continued impacts of tariffs and trade uncertainty, we remain confident in our growth in FY '26 and beyond as we continue to leverage our key differentiators, namely, an enviable technology leadership position at the intelligent edge as it becomes a center of gravity for a host of secular growth markets, unrivaled application domain expertise and the trusted brand that we have developed and strengthened with our customers over the decades. And so with that, I'll pass it over to Rich. Richard Puccio: Thank you, Vince, and let me add my welcome to our fourth quarter earnings call. I'll start with a brief overview of our full fiscal '25 financial performance. Revenue for the year came in at just over $11 billion, up 17% from fiscal '24, with double-digit growth across all end markets. Gross margin finished at 69.3%, up 140 basis points driven by higher utilizations. Operating margin finished up 100 basis points at 41.9% and includes the headwind associated with the normalization of variable comp. All total, earnings per share of $7.79 increased 22% versus fiscal 2024. Now on to our fourth quarter results. Revenue in the fourth quarter came in toward the higher end of our outlook at $3.08 billion growing 7% sequentially and 26% year-over-year. Industrial represented 46% of our fourth quarter revenue, finishing up 12% sequentially and 34% year-over-year. The stronger than seasonal results underpins the cyclical momentum we see across industrial as well as the secular growth unfolding in AI infrastructure, which drove record quarter for our ATE business. For the full year, Industrial increased 15% with growth across every major application, including record years for aerospace and defense and ATE. Automotive represented 28% of quarterly revenue, finishing up 1% sequentially and up 19% year-over-year. Double-digit year-over-year growth continues to be driven by our leading connectivity and functionally safe power solutions. For the full year, automotive increased 16% to an all-time high, driven predominantly by our higher content and share position across Level 2+ ADAS systems globally. Communications represented 13% of quarterly revenue, finishing up 4% sequentially and 37% year-over-year. Our data center segment surpassed the $1 billion run rate this quarter and on a year-over-year basis has now grown more than 50% for 3 consecutive quarters, fueled by continued strength in the AI infrastructure market. Wireless revenue was up double digits year-over-year for the second straight quarter, owing to improving cyclical dynamics. For the full year, communications was our fastest-growing market, increasing 26% driven by our data center segment, which had a record year, while wireless revenue was flat. Lastly, consumer represented 13% of quarterly revenue, finishing up 7%, both sequentially and year-over-year. For the full year, consumer increased 19%, driven by strong growth in handsets, gaming and a record year for our hearables and wearables segment. Now on to the rest of the P&L. Fourth quarter gross margin was 69.8%, up 60 basis points sequentially and 190 basis points year-over-year, driven by higher utilization and favorable mix. OpEx in the quarter was $809 million, resulting in an operating margin of 43.5%, up 130 basis points sequentially and up 240 basis points year-over-year. Non-operating expenses finished at $60 million, and the tax rate for the quarter was 12.7%. All told, EPS was $2.26, up 10% sequentially and 35% year-over-year. Now I'd like to highlight a few items from our balance sheet and cash flow statements. Cash and short-term investments finished the quarter at $3.7 billion, and our net leverage ratio decreased to 0.9. As I discussed previously, we continue to build die bank buffers for our fastest-growing applications. As such, our inventories were higher by $59 million sequentially while days of inventory declined by 1 to 159. Channel inventory increased but remains lean at approximately 6 weeks. Fiscal '25 operating cash flow and CapEx were $4.8 billion and $0.5 billion, respectively, resulting in record free cash flow of $4.3 billion or 39% of revenue, up from 33% in 2024. In total, we returned $4.1 billion to shareholders through dividends and share repurchases. As a reminder, we target 100% free cash flow return over the long term, using 40% to 60% for our dividend and the remainder for share count reduction. Now moving on to our first quarter of 2026 outlook. Revenue is expected to be $3.1 billion, plus or minus $100 million. Operating margin at the midpoint is expected to be 43.5%, plus or minus 100 basis points. Our tax rate is expected to be 12% to 14%. And based on these inputs, adjusted EPS is expected to be $2.29, plus or minus $0.10. In closing, fiscal 2025 was a strong year, highlighted by a return to growth, margin expansion and record free cash flow. Importantly, I'm confident in our ability to continue navigating macro and geopolitical challenges and believe we are well positioned to drive further profitable growth in 2026. With that, I'll give it back to Jeff for Q&A. Jeff Ambrosi: All right. Thank you, Rich. Now let's get to our Q&A session. [Operator Instructions] With that, can we have our first question, please. Operator: [Operator Instructions] Our first question comes from the line of Vivek Arya from Bank of America Securities. Vivek Arya: I had a near and a medium term. On the near term, I think you're guiding Q1 slightly up, which is a little bit above seasonal. So I was hoping you could give us some color by segment where you're seeing the strength because I do think industrial was slightly below what you had thought in Q4. So just any dynamics going into Q1. And then if we zoom out, when -- say, I mean, if I were to just annualize Q1 guidance, that suggests a very strong kind of 12%, 13% sales growth year in fiscal '26. And I was really hoping to get your perspective as you start the new fiscal year on what you're seeing from a broader macro perspective and whether this kind of growth rate is possible in fiscal '26? Vincent Roche: Sure. Thanks, Vivek. Rich? Richard Puccio: Vivek, I'll take the first part of your question. So Q1, which is our weakest sequential quarter with normal seasonality typically down mid-single digits. And our outlook is up slightly quarter-over-quarter, reflects our seventh straight quarter of above seasonal growth. And another key point is additionally, our outlook assumes sell-in and sell-through are equal. So from an end market color perspective, industrial, we expect to be up mid-single digits above seasonal. We expect auto to be down mid-single digits below seasonal, where we continue to see some risk there around tariff and some of the macro environment. Comms, we expect to be up 10% above seasonal. Again, as Vince mentioned, we're seeing real strength in the AI infrastructure and demand for our data center products. And then consumer seasonally down low double digits. And then all markets, we expect to be up year-over-year. Vincent Roche: Yes. So maybe if we look year-over-year, Vivek, so we believe we're well positioned to see broad-based growth in '26. And I think cyclical as well as many idiosyncratic factors giving us tailwinds. My expectation is that in '26, industrial and communications will lead the charge. I think when you look at industrial and comms, the -- as I said, the cyclical dynamics are good, bringing inventories out there. I think both of those markets bottomed some quarters ago. Data center, which is going to see, again, we believe, a strong surge in CapEx. We've got good exposure to that sector, and it's 2/3 of our comms business at this point in time. Aerospace and defense as well as ATE, which are together about 1/3 of the industrial market. We've got strong content growth stories in both. And coupled with the AI demand surge in the ATE business, I think, is very, very well positioned. And I think as well in consumer, we talked a little bit on the -- in the prepared remarks there about the higher content in key applications. And so we've got tremendous diversity in that business at a level we never had before as a company. So both in applications and customers and platforms, we're well positioned. Last but not least, if I talk a little bit about the auto sector. It's been -- I think SAAR has really been flat now for quite a while. We see that persist in '26. And given that we've been able to show against our 10% content growth per annum, we see that continue given the strength of the pipeline that we've got. But all that said, we've got a very uncertain macro environment. But my expectation is all the end markets will be up despite the outlook from a macro perspective. Operator: One moment for our next question. Our next question comes from the line of Joe Moore from Morgan Stanley. Joseph Moore: Great. Speaking of autos, I think you guys had indicated when you guided the quarter that you'd be slightly down, you ended up slightly up. Can you talk about what's coming in a little bit better? And you guys have been pretty good about helping us understand pull forwards and things like that. Any sign of any activity now? Richard Puccio: Sure, Joe. I'll take that one. So for us, auto has been our strongest market, right, double-digit CAGR through cycle driven by secular content gains, compounded by our share gains, particularly in connectivity and power for ADAS and next-gen infotainment systems. Here, I would note we've had pretty significant share gains in China, which where you see a lot of the light vehicle share getting increased. So that's been beneficial. Near term, the market has been more resilient than we and many have predicted, right, evidenced by the stronger volumes on vehicles. We do think some of the upside we've seen in the volumes in our business this year was tariff and policy related. We've talked in prior calls about our view that there might have been some pull-ins. I can't be precise or certain, but we did make that estimation. And given this, we did approach Q4 with some caution and expected to see -- I think I said on the last call, we thought we'd see some of this pre-buying unwind in the fourth quarter. That did not appear to happen to us. Our results were fairly seasonal and bookings were normal with a book-to-bill just below 1, which is actually pretty typical for Q4. We're still being a bit cautious on the market as it's unclear how the tariffs and volatilities we saw will ultimately impact us and our customers. And also just given short lead time orders, visibility tends to be pretty low right now. So as we think about our Q1 outlook is a sub-seasonal quarter or down mid-single digits sequentially, but up year-over-year. And given the content gains in this market and the positive design win traction that Vince mentioned, we do think fiscal '26 can be another strong year. Joseph Moore: Very helpful. Operator: One moment for our next question. Our next question comes from the line of Stacy Rasgon from Bernstein Research. Stacy Rasgon: I wanted to ask about gross margins. You sort of talked about being at 70% gross margins around $3 billion. So you're sitting over there and you're still -- I mean, even in the quarter, you came in a little below 70%. As far as I can tell, the guidance implies gross margins relatively flattish around that 70% range, you can let me know if that's right or not. But I'm just wondering why we're not seeing more leverage on the gross margin line, especially as utilizations are going up and everything else. Like why shouldn't we expect that more leverage on gross margins? Richard Puccio: Stacy, I'll take that one. So obviously, with our industry-leading gross margins, where you can see the impact that we get from the innovation premium, we did increase quarter-over-quarter and year-over-year, and we did have higher utilization and some favorable mix. We didn't get to the 70% as planned as the mix component wasn't as strong as we were expecting. As we've talked about, we had a much stronger result in auto, which kept the industrial mix a bit lower than we planned, and that's what kept us from getting all the way to the 70%. Now if I look out to Q1, the gross margin percent for us is typically lower in Q1 seasonally, given the annual shutdown factories for required maintenance and around the holidays in conjunction with customer shutdowns. However, based on our outlook, we are anticipating that the higher industrial mix in Q1, which we think will offset seasonal the seasonal component and hold gross margin flat. So you're right, embedded is a flattish gross margin where we get an offset from higher mix, which will offset the pressure from the shutdowns. And then I guess -- and the last piece, as we think about the continued go forward, Stacy, and at this revenue level, one of the things I'd like to remind is we did have a pretty significant capacity expansion while we were addressing our resilience over the last several years. And so it will take us higher revenue dollars to continue to expand beyond 70%. And also, as we've talked about, the continued movement in mix. And given the strength we see in industrial into going into '26, we expect that, that share of our business will continue to increase. Vincent Roche: Yes. I think just one other piece of color, Stacy. The pricing is in good shape. So it's really a question of mix and continuing to push the utilizations. Jeff Ambrosi: Thank you, Stacy. We move onto our next question, please. Operator: One moment for our next question. Our next question comes from the line of Christopher Danely from Citi. Christopher Danely: Just to follow-up on Stacy's question. Has the relative gross margin levels, have those changed at all between the end markets? Have any of them gone up or down versus the corporate average, I guess, just to cut to the chase, is -- have the auto gross margins gotten a little worse relative to the corporate average over the last like 2, 3 years or anything else changed? Richard Puccio: Chris, I would say that the way it was characterized the individual end market margins versus average has not changed, not in any meaningful way. Operator: One moment for our next question. Our next question comes from the line of Timothy Arcuri from UBS. Timothy Arcuri: Vincent, you talked about Maxim revenue synergies. Can you update us on that? I know you said you're on track, but maybe you can give us a sense of where that stands. And then Rich, can you tell us sort of what your sense of like a normal fiscal Q2? It seems like normal seasonal in fiscal Q2 is up like mid-singles. Is that sort of how you think about a typical fiscal Q2? And then maybe like what are the puts and takes as you kind of head into fiscal Q2? Vincent Roche: Yes. So Tim, I'll start with the synergies. So we began the conversion process, the conversion of the pipeline in '24 and began in earnest in '24. It contributed tens of millions of dollars to ADI's top line in '24. It's clearly accelerated in '25, and it's in the hundreds of millions against our $1 billion target by '27. And we expect an even stronger contribution in '26 given the momentum that we have in terms of new products and cross-sell. So we're seeing -- as we said, when we acquired Maxim, we saw tremendous complementarity in terms of some technology niches that Maxim filled, particularly in areas like power, these connectivity structures that we use in automobiles and now in industrial products. So the complementarity actually works for ADI right across the spectrum of applications, but particularly although as I've just said, consumer, health care and data center. So I think we are well on track to meet our commitment, possibly even a little earlier than what we thought. Rich, do you want to take that? Richard Puccio: Yes. Tim, you're absolutely right. Our Q2 tends to be our seasonally strongest quarter where we tend to be up mid-single digits. I think that's the right way to think about it. Jeff Ambrosi: Thank you, Tim. We move onto our next question, please. Operator: One moment for our next question. Our next question comes from the line of C.J. Muse from Cantor Fitzgerald. Christopher Muse: Vince, in your prepared remarks, you talked about ADO drivers led by AI in the data center. And I was hoping you could perhaps speak a bit more to a framework that we should be thinking about across both industrial and comms. Obviously, you dominate semi test analog. You've got some real design wins on the optical and power side. And then you also spoke about energy strength. So is there kind of a percentage of mix that we should be thinking about that should be growing significantly faster than the rest of your business? And if there's kind of numbers around that, that would be very helpful. Vincent Roche: Yes. Maybe I'll just give some color and Richard can give some numbers. Yes. So look, specifically when we talk about AI, there's the data center and the ATE businesses. And if I look at data center in '25, it grew about 50% and the ATE business, which also benefits from the skyrocketing compute intensities, the new memory types that are being used as well, new memory chips. That business -- so the ATE business grew at 40% last year. And we can -- we believe we'll see that growth continue in '26. If I just talk about where we are, data center, I think as Rich said in the prepared remarks, is running about $1 billion run rate at this point in time. And there are really 2 primary sectors there. One is at the electro-optical interface, and we're seeing tremendous upsurge in demand for 800 gig. Now we're seeing 1.6 terabit electro-optical interfaces that require very, very sophisticated power management and control systems. And then there's power more generally, I think, in the areas of protection, we're beginning to see a shift in very, very high-voltage technologies that require very sophisticated monitoring and control. There's power conversion and power delivery. And we're seeing our portfolios in those 3 areas gain significant traction. On the delivery side, we had mentioned before, vertical power. That technology now is beginning to be adopted broadly. So we're at the kind of -- we use the term in the electronics industry, we're at the knee of the curve. We're beginning -- I think we're in place to see exponential growth there. ATE, $800 million run rate. And as I said, very, very well positioned with all the key players, both the vertically integrated players as well as the OEMs in chip testing. And as the shift to HBM4 takes place, we're going to see higher pin count, more complexity, more speed, basically more instrumentation compute density in our chips. So I think we're in a good place from a customer engagement standpoint, from a technology standpoint. My sense is we should see double-digit growth in both those areas over the next few years. Rich, do you want to add anything? Richard Puccio: I will add my concurrence on your view about the outlook for the next few years in these areas. I look at -- if you look at the external factors, particularly around the data center piece and the high-performance compute, the like forecast continue -- forecast from all of the hyperscalers and the big buyers in the space continue to go up. And even recently, several of the large hyperscalers have added even further increases to their CapEx plans. So I do think that, that near medium-term spend is going to continue, and we should be a big beneficiary given our strength there. Jeff Ambrosi: Thank you, C.J. We move onto our next caller, please. Operator: One moment for our next question. Our next question comes from the line of Harlan Sur from JPMorgan. Harlan Sur: One of the other strong dynamics among several, which separates ADI from peers is obviously the strong exposure to aerospace and defense. This has been a growth area for ADI during this last downturn. I think the business is now driving well over $1 billion of annualized run rate revenues or roughly greater than 10% of your total revenues. It grew strongly double digits in fiscal '25. Does the team anticipate continued strong double-digit growth in fiscal '26? And maybe help us understand like what are some of the ADI-specific product cycles here that's going to continue to drive the strong growth profile going forward? Vincent Roche: Yes. Thanks very much for the question. So yes, I'd say the journey for ADI in that aerospace and defense market really took off in earnest when we acquired Hittite. And we got Hittite's really high-quality RF and microwave portfolio, which is central to all the communications activities right across the aerospace and defense market from defense systems, and every type of defense system you can imagine to satellite communications. The primary portfolios we have there are obviously microwave and RF sensors, the highest performance conversion products that we build on the precision and high -- very, very high-speed signal processing side are central. And increasingly, when we acquired LTC and Maxim, we were able to cross-connect with all those signal processing technologies, the power tech, all the power management technology. So if you look then at the market drivers, you've got -- the world isn't becoming any more peaceful. So there's going to be increasing capital deployment to build defense systems globally. We're seeing very strong demand and increasing demand in Europe and beyond. And we work with all of the primary OEMs. And so that -- all that coupled with increasing ASPs. I mean some of these products we built attract tens of thousands of dollars per system. So I think that business has the capacity by the end of the decade to more than double. Jeff Ambrosi: Thank you, Harlan. We move onto our next question. Operator: One moment for our next question. Our next question comes from the line of Joshua Buchalter from TD Cowen. Joshua Buchalter: Congrats on the strong results. I wanted to follow up on the comments about fiscal 2Q being a seasonal plus mid-single-digit percent. Could you maybe speak to what's driving the confidence in the visibility there? Any metrics you're able to give on lead times? And then bigger picture, how is your visibility looking forward changed as the mix has changed? Like do you think compared to a couple of years ago, there's more of your exposure tied to ADO drivers like aerospace and defense and data center, and that's increasing your visibility? I'd just be curious to hear because you mentioned there was some uncertainty on the shape of the year in the press release, I'd be curious to hear how you're feeling about visibility. Richard Puccio: Thanks, Josh. So first, I didn't guide for Q2. I confirm what the historical seasonality is. As we've been talking about, right, we still have -- don't have a ton of visibility beyond current quarter plus 1, right? As we've talked about, the lead times are -- most of our products have lead times sub-13 weeks. So we get a lot of orders in quarter. We get a lot of quarters -- a lot of orders with short lead times, which does reduce some of that visibility. So I think on the first part of your question, I don't think we've necessarily seen an improvement in visibility over the last 2 years. Although I do agree, I think that the -- we've now got broad strength in a number of the ADO areas that Vince described. But given where we are from an inventory on hand position as well as our cycle times, we're not getting a ton of outside of a quarter visibility. Jeff Ambrosi: Thank you, Josh. And we'll move to our last question, please. Operator: One moment for our next question. Our next question comes from the line of Tore Svanberg from Stifel. Tore Svanberg: Yes. So Vince, ADI has been always very thoughtful about allocating R&D dollars and the economy is changing in the front of eyes structurally quite significantly here. So how are you thinking about prioritizing your R&D spend right now? And are there any areas you would like to double down in and perhaps areas you would like to deemphasize as a company? Vincent Roche: Yes. Thanks, Tore. Yes. When I look at the analog space in the core analog business, we continue to push the edges of signal processing, data conversion systems and precision as well as very, very high speed. I think power management for ADI is still an opportunity with a lot -- a much, much bigger growth story. So that is a place that as we've gone through our strategy planning cycle in the last few quarters here, we're doubling down on for sure. The -- there are areas as well of our digital portfolio where we see very, very strong niches for what we do in terms of, for example, low power, low latency, these heterogeneous compute structures as well as algorithmic technologies. So I mentioned during the prepared remarks how we're enhancing the functionality of our core analog technologies by using machine learning techniques, for example, in base stations, in the consumer areas as well. So -- but I think most of what we do is making sure that we have the platforms to be able to compete globally across all the geographies, across the spectrum of markets that we find most attractive, solve the most important problems. And what I can tell you is that our customers are asking us to do more and more to tame their complexity and help them speed up their innovation cycle. So that's -- when we think about the investment portfolio. We're very opportunity-rich. And we've got a very high-quality problem, which is picking the most valuable opportunities in that spectrum of -- let's repeat with opportunity. Jeff Ambrosi: Thank you, Tore. Thanks, Tore, and thanks, everyone, for joining us this morning. A copy of this transcript will be available on our website and all available reconciliations and additional information can also be found in the Quarterly Results section of our Investor Relations website. Thank you for your continued interest in Analog Devices and Happy Thanksgiving. Operator: This concludes today's Analog Devices' conference call. You may now disconnect.
Operator: Good afternoon, and welcome to the PennantPark Investment Corporation's Fourth Fiscal Quarter 2025 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of PennantPark Investment Corporation. Mr. Penn, you may begin your conference. Arthur Penn: Good afternoon, everyone, and thank you for joining PennantPark Investment Corporation's Fourth Fiscal Quarter 2025 Earnings Call. I'm joined today by Rick Allorto, our Chief Financial Officer. Rick, please start off by disclosing some general conference call information and include a discussion about forward-looking statements. Richard Allorto: Thank you, Art. I'd like to remind everyone that today's call is being recorded and is the property of PennantPark Investment Corporation. Any unauthorized broadcast of this call in any form is strictly prohibited. An audio replay of the call will be available on our website. I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Our remarks today may include forward-looking statements and projections. Please refer to our most recent SEC filings for important factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at pennantpark.com or call us at (212) 905-1000. At this time, I'd like to turn the call back to our Chairman and Chief Executive Officer, Art Penn. Arthur Penn: Thanks, Rick. I'll begin today's call with an overview of our fourth quarter results and discuss our ongoing strategy to rotate out of equity positions. I'll then share our perspective on the current market environment and how the portfolio is positioned for the quarters ahead. Rick will provide a detailed review of the financials, and then we'll open up the call for Q&A. For the quarter ended September 30, core net investment income was $0.15 per share compared to total distributions of $0.24 per share. We've previously communicated our plan to rotate out of equity positions and redeploy that capital into interest-bearing debt investments, which will drive an increase in our core net investment income. For many positions, our ability to drive exits is limited. However, we remain focused on this strategy and are comfortable maintaining our current dividend level in the near term as the company has a significant balance of spillover income, which we are required to distribute. PNNT has $48 million or $0.73 per share of undistributed spillover income, and we plan to use the spillover income to cover shortfalls in net investment income versus the dividend at this time. Regarding the current market environment for private middle market lending, we are encouraged by a steady increase in transaction activity, which we expect will translate into higher loan origination volumes in the quarters ahead. Additionally, we continue to provide additional capital to many of our existing portfolio companies as they execute their respective growth initiatives, demonstrating the depth and resilience of our origination platform. We are optimistic that the increase in transaction activity will also result in opportunities to execute our equity rotation plan and rotate capital into new income-producing investments. We believe the current environment will favor lenders with strong private equity sponsor relationships and disciplined underwriting, areas where PNNT has a clear advantage. We continue to see opportunities to deploy capital into core middle market companies where leverage is lower and spreads are higher than in the upper middle market. In the core middle market, the pricing on high-quality first lien loans is SOFR plus 4.75% to 5.25%. Leverage is reasonable, and we continue to get meaningful covenant protections while the upper middle market is primarily characterized as covenant light. Turning to our portfolio performance. As of September 30, the median leverage ratio on our debt security was 4.5x and the median interest coverage ratio was 2x. For new platform investments made during the quarter, the median debt-to-EBITDA was 4.3x, interest coverage was 2.5x and the loan-to-value was 39%. Credit quality of the portfolio continues to perform well. We have 4 nonaccrual investments, which represent 1.3% of the portfolio at cost and 0.1% at market value. Two new investments were added and 2 prior investments were removed from the nonaccrual list. These strong credit metrics reflect the rigor of our underwriting process and the discipline of our investment approach. We continue to believe that our focus on the core middle market provides us with attractive investment opportunities where we provide important strategic capital to our borrowers. The PennantPark platform has a demonstrated track record of value creation through successful financing of growing middle market companies in 5 key sectors, enabling us to ask the right questions and consistently deliver strong investment outcomes. They are business services, consumer, government services and defense, health care and software and technology. These sectors have also been recession resilient and tend to generate strong free cash flow and have a limited direct impact to the recent tariff increases and uncertainty. The core middle market, companies with $10 million to $50 million of EBITDA is below the threshold and does not compete with the broadly syndicated loan market or high-yield markets, unlike our peers in the upper middle market. In the core middle market, because we are an important strategic lending partner, the process and package of terms we receive is attractive. We have many weeks to do our diligence with care. We thoughtfully structured transactions with sensible credit statistics, meaningful covenants and substantial equity cushions to protect our capital, attractive spreads and equity co-investment. Additionally, from a monitoring perspective, we received monthly financial statements to help us stay on top of the companies. Our rigorous underwriting standards remain central to our investment philosophy. Nearly all of our originated first lien loans include meaningful covenant protections, which is a key differentiator versus the upper middle market where covenant-light structures are more common. Since our inception nearly 18 years ago, PNNT has invested $9.1 billion at an average yield of 11.2%, while maintaining a loss ratio on invested capital of roughly 20 basis points annually, a testament to our consistent and disciplined approach through multiple market cycles. As a provider of strategic capital, it fuels the growth of our portfolio companies. In many cases, we participate in the upside of the company by making an equity co-investment. Our returns on these equity co-investments have been excellent over time. Overall for our platform from inception through September 30, we've invested over $596 million in equity co-investments and have generated an IRR of 25% and a multiple on invested capital of 2x. As of September 30, our portfolio totaled $1.3 billion. And during the quarter, we continued to originate attractive investment opportunities and invested $186 million in 9 new and 54 existing portfolio companies. Our PSLF joint venture portfolio continues to be a significant contributor to our core NII. As of September 30, the JV portfolio totaled $1.3 billion. And over the last 12 months, PNNT's average NII yield on invested capital in the JV was 17%. The JV has the capacity to increase its portfolio to $1.6 billion, and we expect that with this additional growth, the JV investment will enhance PNNT's earnings momentum in future quarters. From an outlook perspective, our experienced and talented team and our wide origination funnel is producing active deal flow. We remain steadfast in our commitment to capital preservation and disciplined, patient capital investment approach. We reiterate our objectives to deliver compelling risk-adjusted returns through stable income generation and long-term capital preservation. We seek to find investment opportunities in growing middle market companies that have high free cash flow conversion. We capture that free cash flow primarily through debt investments, and we pay out those contractual cash flows in the form of dividends to our shareholders. With that overview, I'll turn the call over to Rick for a more detailed review of our financial results. Richard Allorto: Thank you, Art. For the quarter ended September 30, GAAP net investment income and core net investment income were both $0.15 per share. Operating expenses for the quarter were as follows: interest and credit facility expenses were $10 million, base management and incentive fees were $6.1 million. General and administrative expenses were $0.9 million and provision for excise taxes were $0.7 million. For the quarter ended September 30, net realized and unrealized change on investments and debt, including provision for taxes, was a loss of $10.8 million. As of September 30, our NAV was $7.11 per share, which is down 3.4% from $7.36 per share in the prior quarter. As of September 30, our debt-to-equity ratio was 1.6x, and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt. The PSLF JV is evaluating the purchase of $120 million to $140 million of assets from PNNT, which would allow PNNT to reduce its leverage ratio to 1.25 to 1.3x, which is in line with its target ratio. As of September 30, our key portfolio statistics were as follows: our portfolio remains highly diversified with 166 companies across 37 different industries. The weighted average yield on our debt investments was 11%. We had 4 nonaccruals, which represent 1.3% of the portfolio at cost and 0.1% at market value. The portfolio is comprised of 50% first lien secured debt, 2% second lien secured debt, 12% subordinated notes to PSLF, 5% other subordinated debt, 6% equity in PSLF and 25% in other preferred and common equity investments, 91% of the portfolio is floating rate, debt-to-EBITDA on the portfolio is 4.5x and interest coverage is 2x. Now let me turn the call back to Art. Arthur Penn: Thanks, Rick. In conclusion, we remain committed to delivering consistent performance, preserving capital and creating long-term value for all stakeholders. Thank you to our team for their dedication and our shareholders for their continued partnership and confidence in PennantPark. That concludes our remarks. At this time, I would like to open up the call to questions. Operator: [Operator Instructions] We'll take our first question from Brian Mckenna with Citizens. Brian Mckenna: So on the dividend, I appreciate the equity rotation opportunity. I know that's something you guys have talked about the last few quarters here. But if you were to rotate $150 million of assets into income-producing loans at an incremental 10% yield today, that equates to about $0.20 per share of NII over the next year. So at the current quarterly run rate of $0.15, that implies about $0.80 of annual NII before any changes in base rates and credit quality, that's still $0.15 below the current dividend. So why not rightsize the dividend today so some of this incremental earnings from the equity rotation accretes NAV? Arthur Penn: Yes. Look, we're -- thanks, Brian. We're constantly evaluating the dividend. We do have substantial spillover that we need to pay out. It's really the question of how and when we do that at the same time as we're working on the equity rotation to try to figure out what the long-term sustainable NII is. So you've got 2 things going on. One is the equity rotation and the paying out of the spillover. And our current plan is to work both of those processes for the next few quarters, see where we land, come up for air and make some decisions. Brian Mckenna: Okay. That's helpful. And just in terms of timing around any realization events in some of these equity positions, I mean, has anything changed in the last quarter or 2? It sounds like a more constructive backdrop should be better for monetizing some of those. But I'm just curious if there's any update relative to expectations over the last quarter or 2. Arthur Penn: Yes. No, we're seeing more activity. As we said, we're hopeful that we're getting closer to some rotation opportunity. Nothing to announce here on this call today, but we're feeling and sensing that the M&A opportunity and the opportunity for some of these companies is closer at hand than it was. Operator: We'll take our next question from Robert Dodd with Raymond James. Robert Dodd: And just on that topic with equity rotation, we look at something like Flock, for example, it's now above -- it's marked above the original cost before you had to restructure. So a business like that, that seems to have had some stumbles that is performing extremely well. Do you think those are the kind of businesses that are more likely to transact in terms of get a realization for you, which you're not in control of or maybe a little bit more than Flock in the near term? Or do you think it's other kinds of businesses, maybe the ones that are still struggling a little bit, are those the ones that are more likely to turn over in the near term? What do you think? Arthur Penn: Yes. It's -- there's some that we have more control over like Flock. Flock happens to be in the business of busted credit card and busted receivables, consumer receivables. So we think that's a really interestingly placed company at this point in the economy with what's going on with the consumer. That's just -- I don't want to diverge from the question, but there are control positions. Flock is one, JF acquisitions is another, AKW is a third, where we do have more control. And the question there is timing and how do we optimize the exit. And then we have a variety of equity co-investments where we're not in control. But if there's a constructive M&A background, by definition, some of those equity co-investments will hopefully convert into cash. So the answer is both. We're hopeful for both. One of the flavors we have a little bit more control over. It's really just a question of how we optimize the outcome. Robert Dodd: Got it. Got it. On the other part, I mean, potentially transacting and selling some assets to, I mean, what it -- you said you're reviewing it, right? What are the hurdles that -- evaluating it? What are the hurdles that have to go through for you to feel comfortable with that? And also from a regulatory perspective, do you think the SEC would actually approve that? Because I've seen some BDCs try to do that in the past and the SEC just say no? Arthur Penn: Yes. No, I think you may have misheard. We're evaluating selling assets to the joint venture. So there, what we said is -- and we're aware that 40 Act to 40 Act company is something that has a high degree of difficulty. This is just the normal rotation of assets from the BDC, PNNT to the PSLF JV. Leverage was a little high at the PNNT level at quarter end, 1.6x. We generally like to wait to quarter end to get the freshest third-party valuation marks on the names and then PSLF is evaluating the purchase of $120 million to $140 million of those assets, which will move from PNNT to PSLF, bringing the PNNT leverage ratio back into line of our target of 1.25 to 1.3x debt to equity at PNNT. Robert Dodd: Got it. Got it. Yes, I misheard the -- on that -- I mean, to that point, right, I mean, your leverage is a little high right now. This is one of the initiatives to take it down, obviously, the others. But there's also the spillover, which you've got to distribute one way or the other. So keeping the dividend where it is takes care of it slowly. Other option would be a one-off, which would take care of it quickly. But any of those things which over distribute earnings tend to drive leverage up. So how comfortable are you that with the current dividend plan and the other initiatives, you can get down to that target leverage and stay there? Arthur Penn: Yes. Look, it's really a question of how we work down our spillover and when we work it down at the same time as we're working on equity rotation. Our target leverage long term for PNNT is that 1.25 to 1.3x. We will temporarily consider going above it if we're confident that PSLF will want some more assets and we can grow PSLF, which has been highly accretive to PNNT. So you've got multiple things going on. You've got the reduction of the spillover over time. You've got the equity rotation and you've got the leverage ratio at PNNT. So those are the constraints. We're doing our best. Some of the stuff we control, some of it we can't. We're always evaluating dividend policy. That said, we still have substantial spillover that we need to pay out, and we also need to keep our leverage reasonable and comfortable. So if you have suggestions, Robert, we're all ears, but these are the constraints we're working with. Operator: We'll take our next question from Melissa Wedel with JPMorgan. Melissa Wedel: I wanted to start on the NII this quarter. I'm wondering if there was anything maybe skewed in terms of timing during the quarter that may have been a headwind. For example, maybe paydowns came early and fundings came later. Was there anything like that we should be thinking about? Arthur Penn: I mean not off the top of my head. Rick, any thoughts from you? Richard Allorto: No, same, nothing jumps out in terms of timing of repayments. Melissa Wedel: Okay. Okay. And then a follow-up question on how you're thinking about the spillover income. I mean you've made it clear that you look at that as a way to supplement any shortfall versus the dividend. In terms of sort of banking any spillover income, do you look at that full $0.73 per share as something that could be used? Or are you looking to retain some level of spillover income? Arthur Penn: Yes. Look, there's certainly a level of spillover income that we certainly would consider and should consider retaining. For instance, if you look at PFLT, the sister BDC, I think there's like $0.25 or $0.30 of ongoing spillover, that kind of thing. So that might be a base level once you get down to that where you're comfortable that you're not required to pay it out, something like that. Operator: We'll go next to Arren Cyganovich with Truist Securities. Arren Cyganovich: With the investment activity picking up, can you provide a little color around what types of deals you're seeing? Are they more M&A focused? Are these kind of follow-on acquisitions? And maybe just if there's any particular industries that you're seeing more activity in? Arthur Penn: Thanks, Arren. It's a combination. A lot of it is add-on delayed draw term loans where we're already in existing credit and the credit needs growth capital. It's a big part of what we do is start with that company when it might be $10 million or $20 million of EBITDA, and they have plans to get to $30 million, $40 million, $50 million, and we set up a plan with them to provide the debt capital to fuel the growth. So quite a bit of it, I'd say at least half of the activity is with existing incumbent companies. Good news about that is we're on top of companies. We're not going to fund them unless they're doing very well. So by definition, the credit quality is very strong. We know exactly what we're getting into, and we're financing additional capital into companies that are performing well. And then about the other half is kind of our typical new deal, new platform, mid-4s leverage, over 2x interest coverage, 40%, 50% loan-to-value, SOFR plus 4.75% to 5.25% in this environment type of loan. Operator: We'll go next to Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: For the companies that you're funding, given that the EBITDA coverage is going down, the interest coverage is going up, is this a recipe to -- for dividend recaps by the private equity sponsors? Or do your covenants prevent that? Arthur Penn: Well, certainly, it's a great question. We had a dividend recap in PFLT, we talked about, which was a nice, realized gain where we were in the equity and the debt, but we have a substantial equity position. So dividend recaps for us as a lender are something that have a high bar. As a new lender, we are always cautious around use of proceeds and having alignment of interest and making sure there's substantial equity beneath us. That said, when companies do well, they look at their options, dividend recaps being one of them, sales, IPOs. So the dividend recaps have helped us where we have had the equity co-invest. We are very cautious about participating them as a lender. So sometimes it just happens. Someone comes takes us out to give an aggressive loan to a borrower, we get financed out of our debt and our equity gets some sort of dividend. So you're seeing a bit more of that in this market more recently, and we certainly experienced that in our other BDC. Christopher Nolan: And Art, how would you characterize the trends in the private equity space that you operate in because the hold times for the private equity in general has been quite extended. And are we starting to see a break in that log jam at all? Arthur Penn: Yes. So that's -- look, that's what we think about when we talk about equity rotation, many of our equity co-invests are kind of experiencing that. We co-invested with the private equity sponsor. It was coming into 2025, it was feeling pretty good. April 1 came around, which was Liberation Day, the M&A market really slowed down after Liberation Day for at least 3, 4 months. It's starting to pick back up again. This is kind of why we're a bit more optimistic today than we were last quarter about getting nearer to some equity rotation that's meaningful. Hopefully, the markets will permit some of this. Some of it is just kind of buyers and sellers kind of finally coming together now that there's been some stability in the market to cut a deal for a while, their sellers were holding out for higher prices, buyers were trying to get lower prices. And the other thing you got to throw in here is what happens if as interest rates come down, SOFR comes down, borrowing costs come down, how that could catalyze more M&A, more refinancings, et cetera. So it's been a murky world since Liberation Day. It seems to be clearing up today. As we speak, we'll see what the Fed does in early December. But we're -- without any major market turbulence, we're more optimistic that we'll get some reasonable rotation. Christopher Nolan: Got it. And one for Rick. Rick, just to rephrase, I think, Melissa's question earlier, given that revenues seem to go down while investment assets went up and there's a small decline in average yield. Were there timing issues involved in terms of closing deals late in the quarter? Richard Allorto: None that comes to top of mind. I think the biggest variance kind of quarter-over-quarter on the top line is you're going to see is in the PSLF dividend. That dividend did decrease in the current quarter. There were some expenses at the joint venture that were kind of onetime and reduced the dividend. Arthur Penn: I'd say, that's a good point. There's been some financing activity at the joint venture in the securitization side that kind of hit expenses to some extent during the quarter. Operator: We'll go next to Brian Mckenna with Citizens. Brian Mckenna: Art, just a bigger picture question for you. You've obviously been a leader in the space for some time now, and you've done a pretty good job managing PennantPark through a number of operating and macro environments, including the GFC, COVID, et cetera. There's clearly a lot of noise in the market today around private credit. And at least from my perspective, there continues to be a good amount of misinformation. So it would be great just to get your thoughts on all the current events and what you think is still underappreciated or misunderstood about your business and even the industry more broadly. Arthur Penn: Yes. It's a great question, and we get the investor questions as well, typically from investors who haven't been in the space very long. The average person hears the word default. And in some cases, they think that means a 0. And in the lending business, the default just means that you're coming to the table and negotiating the correct capital structure for the company going forward. And that could mean conversion of some debt to equity. It could mean more economics to the lender. It could mean both. Sometimes when you convert debt to equity, that equity can have long-term value over time. And in our 18, 19 years in business, we've certainly seen that where those equity conversions can actually create value. You can make more money from converting from debt to equity. So kind of just understanding how loans work and what being a lender is and when you say you're lending to 40% or 50% loan to value, that really means 50% to 60% of the value of the company needs to disappear before we lose a dime. So it certainly can happen, and it has happened, but there's a lot of cushion that's built into these things given the substantial equity cushion. If you go back to COVID, as an example, going into COVID, we had about 120 companies that we lend money to going into COVID. And there, the economy was shut down by the government. And the fact that we had quarterly maintenance tests that every 3 months, companies had a certain debt-to-EBITDA or EBITDA to interest coverage to meet meant that they had to come to the table, and we had very constructive conversations with our borrowers. And of that 120 companies, about 15 actually needed liquidity. They needed cash. And in all 15 of those cases, the private equity sponsors offered to put money in to solve the liquidity problem. And that was in a scenario where the economy was shut down, a very severe environment. So the only other observation I had going all the way back to the GFC is when people's fears get up where they're reading articles and people starting to get fearful, what the antidote to that for us was bring people in and go line by line through the portfolio. And here with the BDCs, these are -- the SOIs, the statements of investments are all public information. Let's walk people through the name by name, what -- who the company is, what they do, what the industry is, to the extent you can share it, the credit statistics, the debt-to-equity ratio, loan-to-value, name by name by name. And I think if people went through these books name by name, they realize and we give the stats on an overall portfolio basis. The overall portfolio has 4.5x debt to EBITDA, 40% to 50% loan-to-value, interest coverage over 2x. you go name by name and after a period of time, you realize these are pretty solid loan books, not just ours, but others. And the other thing you realize is we and our peers are all over these portfolios. We are all over these names. Every month, we get in the core middle market, every month, we get financial statements from our underlying portfolio companies. So if something starts to stumble, we are on top of it every month. And every quarter, they have a financial covenant to meet. So I think the quality of these portfolios is high, and we're all over them. So I think if investors actually had the time to dedicate and the -- we and our peers are willing to spend the time to go name by name, I think that would calm a lot of the issues that people seem to be having right now. I don't know if that's helpful. Operator: At this time, there are no further questions. I will now turn the call back to Art for any additional or closing remarks. Arthur Penn: Look, I just really want to thank everybody for participating today in this season of Thanksgiving. We are certainly grateful for the support of our shareholders. We wish everyone a safe and happy Thanksgiving and holiday season, and we look forward to speaking to you in early February. Operator: This does conclude today's conference. We thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the StoneX Group Inc. Q4 FY 2025 earnings conference call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Dunaway, CFO. Please go ahead, sir. William Dunaway: Good morning, and welcome to our earnings conference call for our quarter ended September 30, 2025, our fourth fiscal quarter. After the market closed yesterday, we issued a press release reporting our results for the fourth quarter and the full fiscal year. This release is available on our website at www.stonex.com as well as a slide presentation, which we will refer to during this call. The presentation and an archive of the webcast will also be available on our website after the call's conclusion. Before getting underway, we are required to advise you and all participants should note that the following discussion should be considered in conjunction with the most recent financial statements and notes thereto as well as the Form 10-K to be filed with the SEC. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements involve known and unknown risks and uncertainties and which are detailed in our filings with the SEC. Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the company's actual results will not differ materially from any results expressed or implied for the company's forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance. With that, I'll begin with the financial overview for the quarter and we'll be starting with Slide #4 in the slide deck. Fourth quarter net income came in at a record $85.7 million with diluted earnings per share of $1.57. This represented a 12% growth in net income. However, EPS grew at 1% rate due to the additional shares outstanding as compared to the prior year, primarily related to the issuance of approximately 3.1 million shares related to the acquisition of R.J. O'Brien. It is of note, the current quarter includes pretax acquisition-related charges of approximately $9.3 million, including $1.3 million of bridge loan financing charges and $8 million of investment banking fees which equates to approximately $0.13 per diluted share. Net income and diluted EPS were up 35% and 29%, respectively, versus our immediately preceding third quarter. This represented the 15.2% return on equity despite a 72% increase in book value over the last 2 years. We had operating revenues of just over $1.2 billion, up 31% versus the prior year and up 17% versus the immediately preceding quarter. As a reminder, our operating revenues include not only interest and fees earned on in our client balances, but also carried interest that is related to our fixed income trading activities. Net operating revenues, which nets off interest expense, including that which is associated with our fixed income trading activities as well as introducing broker commissions and clearing fees were up 29% versus a year ago and 20% versus the immediately preceding quarter. Fixed compensation and other expenses were up 24% versus the prior year quarter. This also represented a 14% or $36.3 million increase versus the immediately preceding quarter, with $32.4 million of this attributable to the acquisition of RJO and Benchmark during the quarter. Fixed compensation and related costs were up 23% versus a year ago and up 12% or $14.2 million versus the immediately preceding quarter. The increase versus the immediately preceding quarter was almost entirely as a result of the acquisitions I just noted. Professional fees increased $12.2 million versus the prior year, primarily as a result of the $8 million investment banking fee noted earlier. They were up $3 million versus the immediately preceding quarter with the investment bank fee just noted, partially offset by a $5.8 million decline in legal fees, primarily driven by an insurance recovery. The acquisitions of R.J. O'Brien and Benchmark contributed $22.1 million and $2.4 million in pretax net income, excluding acquired intangible amortization, respectively, for the quarter. Looking at it from a longer standpoint, our full fiscal year results show operating revenues up 20%. Net income was a record $305.9 million, up 17%, with earnings per share of $5.89 and a return on equity of 15.6% for the fiscal year, above our 15% target. We ended the fourth quarter of fiscal '25 with book value per share of $45.56 per share. Now turning to Slide #5 in the earnings deck, which compares quarterly operating revenues by product as well as key operating metrics versus a year ago. We experienced growth across all products with the exception of FX/CFDs. Transactional volumes were up across all of our product offerings with the exception of FX/CFDs and spread in rate capture increased in all products with the exception of payments down 4% and FX/CFDs, which declined 32%. Just touching on a few key highlights for the fourth quarter. We saw operating revenues drive from listed contracts increasing $89.4 million or 76% versus the prior year with the acquisition of RJO contributing $89.5 million. This also represented a 64% increase versus the immediately preceding quarter. Operating revenues drive from OTC derivatives increased 27% versus the prior year, however, declined 1% versus the immediately preceding quarter. Operating revenues drive from physical contracts increased 24% versus the prior year, primarily driven by a $19.5 million increase in physical, agricultural and energy revenues, which were partially offset by a $6.8 million decline in precious metals operating revenues. Operating revenues drive from physical contracts were up 18% versus the immediately preceding third quarter. Securities operating revenues were up 26% as volumes were up 25% and the rate per million increased 23% versus the prior year, with the improvement driven by strong growth in both equities and fixed income. Payments revenues were up 8% versus a year ago, but down 3% versus the immediately preceding quarter, primarily due to a decline in rate per million. FX CFD revenues were down 34% versus a year ago, resulting from a 7% decline in ADV and a 32% decline in rate per million, primarily driven by low volatility in FX markets. This also represents a 36% decline versus the immediately preceding quarter. Our interest and fee income earned on our aggregate client float, including both listed derivative client equity and money market FDIC sweep balances increased $52 million or 46% versus the prior year with the acquisition of RJO contributing $50 million. Average client equity and average money market FDIC sweep client balances increased 71% and 25%, respectively. For the current quarter, the average client equity includes the effect of an incremental $5.6 billion per month from RJO for the 2 months post acquisition or an incremental $3.8 billion increase to the quarterly average. Turning to Slide #6. This depicts a waterfall by product of net operating revenues from both the prior year quarter to the current one, as well as the same for the full fiscal year periods. Just a reminder, net operating revenues represents operating revenues less introducing broker commissions, clearing fees and interest expense. For the quarter, net operating revenues increased 29% and principally coming from securities and listed derivatives, up $48.7 million and $43.1 million, respectively. On a net basis, interest and fee income on client balances increased $28.8 million with RJO contributing $32.5 million, which was partially offset by a modest decline in legacy StoneX. As noted earlier, due to the lower FX volatility, we saw FX/CFD's net operating revenues decline $29.7 million versus the prior year. Looking at the bottom graph for the full fiscal year period. Once again, it is securities with the largest increase, up $126.1 million versus the prior year. driven by a 27% increase in ADV and a 9% increase in rate per million. In addition, listed derivatives and interest and fee income increased $46.3 million and $31.2 million, respectively, primarily as a result of the acquisition of R.J. O'Brien. Finally, physical contract net operating revenues added $34.7 million versus the prior fiscal year. Moving on to Slide #7. I'll do a quick review of our segment performance. Our Commercial segment net operating revenues increased 25% or $42.9 million, with $20 million of this being contributed by the RJO acquisition. Listed in OTC derivative contract volumes increased 32% and 27%, respectively. In addition, physical contracts increased 26%, while net interest and fee income increased 22%. The growth in listed derivatives and interest income were primarily driven by the acquisition of RJO. Segment income increased 25% versus the prior year. While on a sequential basis, net operating revenues were up 23% and segment income was up 35%. Our institutional segment saw record net operating revenues and segment income with growth of 67% and 73%, respectively. Versus the prior year, this represented growth of $117.5 million with the acquisition of RJO contributing $50.2 million. The growth in net operating revenues is principally driven by a $48.9 million increase in securities revenues. In addition, listed derivatives and interest and fee income increased $30.5 million and $20.7 million, respectively, primarily driven by the acquisition of RJO. On a sequential basis, net operating revenues and segment income were up 46% and 53%, respectively. In our self-directed retail segment, net operating revenues declined 35% and segment income was down 51%, primarily driven by a 4% decline in average daily volumes and FX/CFD contracts combined with a 31% decline in rate per million. On a sequential basis, net operating revenues were down 37% and segment income declined 62% in this segment. In our Payments segment, net operating revenues were up 7% and segment income increased 21%. ADV was up 13% versus the prior year, while rate per million was down 4%, versus the immediately preceding quarter payments and net operating revenues declined 2%, while segment income increased 7%. Now moving on to Slide #8. Looking at segment performance for the full fiscal year. We saw strong growth in our institutional segment with net operating revenues up 36% and segment income increasing 45%. In addition, our self-directed retail segment increased segment income 12%. Our Commercial and payments segment added 1% and 4% in segment income, respectively. Finally, moving on to Slide #9, which depicts our interest and fee income on client balances by quarter as well as the table showing the annualized interest rate sensitivity for a change in short-term interest rates. The interest and fee income, net of interest paid to clients and the effect of interest rate swaps increased $28.8 million to $112.2 million in the current period, and as noted, the acquisition of R.J. O'Brien contributed $32.5 million in the net interest in the current quarter. As noted in the table, with the addition of the $6.3 billion client assets from the RJO acquisition, we now estimate a 100 basis point change in short-term interest rates either up or down would result in a change to net income by $53.8 million or $1.02 per share on an annualized basis. With that, I will turn you to Sean O'Connor, our Executive Vice Chairman. Sean O'Connor: Thanks, Bill, and good morning, everyone. It is very gratifying to see that we've achieved yet another record financial result in what is a long string of record performances. We have managed to exceed our ROE targets despite our stockholders' equity increasing by 72% over the last 2 years. It is no easy feat to continuously compound at a high rate when you're reinvesting 100% of your capital. something we have managed to do for decades now. Turning to Slide 11 in the deck. As you are aware, over roughly the last 20 years, we've been active in the M&A market. especially following the financial crisis, having now completed over 30 acquisitions during this time. During the COVID pandemic and the years immediately following, our facility was notably limited on the M&A front. The prevailing market conditions at that time were characterized by bubble-like valuations based on peak earnings for most companies active in our space as well. We chose to focus on organic opportunities and to wait for valuation demands to become more rational. 2025 was our almost active year ever with us completing 6 transactions culminating in the acquisition of R.J. O'Brien, our largest ever and one we believe will be transformational for the organization. I thought it might be useful here to review our M&A approach, something that a lot of investors have asked me in calls over the last few years. We are very opportunistic around acquisitions. As an old M&A banker, I'm acutely aware that most transactions don't succeed for the simple reason that buyers are often desperate, maybe for a growth strategy, maybe a new strategy overall, new talent. And as a result, they tend to overpay. We pride ourselves on being very disciplined and we can afford to be disciplined because we have such a strong organic growth track ahead of us given the market dynamics we have spoken about previously with banks withdrawing and smaller firms being consolidated. When we evaluate a new opportunity, we always have to consider the risk and disruption that this may cause to our existing organic growth initiatives, and therefore, any opportunity needs to be compelling and accretive. We passed potential acquisitions through a number of screens. First, they need to be accretive to our ecosystem, adding either new products or capabilities or adding to our client footprints and increasing market share in existing or new markets. We then need to clearly understand how we drive value for our shareholders. Most often, that is by selling these new products and capabilities to our existing client base to drive incremental revenue. or in the case of client acquisitions, by leveraging our ecosystem of products into these new clients. Then of course, culture is all important. We are a client first business, and we seek to establish long-term embedded relationships with our clients. We also look at the requirement for resources and capital as well as cost structures and margins to make sure that these transactions can be quickly accretive to our bottom line and to our ROE. In many instances, we can achieve capital and cost synergies given our larger scale and global footprint. Then of course, we need to get to price. And given our desire to compound our capital, we tend to be on the conservative end of the value spectrum. We need to see how the acquisition can be accretive to our ROE and also quickly earn back any goodwill that may be incurred typically inside 36 months. I also strongly believe that we should take the leading role in due diligence rather than rely too heavily on bankers and advisers. This forces our team to roll up their sleeves and take ownership for the business we are acquiring and leads to quicker integration and synergies being achieved. Despite our strict criteria laid out above, we continue to find many good opportunities and I think our discipline and rigor on the front end have resulted in us having a very high success rate with acquisitions. Almost all have gone on to become multiples of the size they were at the time of acquisition. Turning to Slide 12. In the last several years, we get approached on around 85 to 100 opportunities per year, many of which are sourced internally by our own teams. We typically engage with around 70% of those at some level and getting to initial due diligence on around 50% and full due diligence on around 25% of those opportunities. That ends up with our submitting bids at around 15%. As you probably realize, this entails a fair amount of work and focus, and we are very lucky to have an extremely capable albeit small corporate development team who, of course, can leverage the internal expertise we have when needed. We are also likely to have an exceptional in-house legal team, which is involved in the process. We have received numerous complements over the years from our external bankers and lawyers on the exceptional corporate development and legal teams we have in-house here at StoneX. With that background, let's turn to Slide 13, and take a look at how we did in 2025 fiscal year. As a reminder for this year, we made 5 acquisitions, and we made one strategic investment. Starting with R.J. O'Brien, which we continue to believe will be a transformational acquisition for us, RJO was one of the oldest independent FCMs in the U.S., transacting with over 45,000 clients and over 200 IBs. This acquisition has made StoneX the largest nonbank FCM in the United States and a market leader in global derivatives, reinforcing our position as an integral part of the global financial market infrastructure. This acquisition has brought us new clients in the likes of regional banks, to whom RJO provides clearing and risk management and interest rate products, a large introducing broker network, which we believe we can leverage further, almost becoming an extension of our own sales team as well as an agency execution capability where we can offer block trading and futures options and customized solutions. It was an acquisition, which we also believe provides significant opportunities to improve our efficiency. As stated in our announcement, we expect there to be $50 million of expense savings and at least $50 million in capital synergies as we consolidate regulated entities. Abby Perkins from our executive team will be on this call and shortly provide an update on our integration progress with RJO. Coincidentally, we closed Benchmark on the same day as RJO. Benchmark is a midsized investment banking firm, offering a sales and trading platform, equity research and a highly experienced investment banking team. Benchmark brought us deep relationships in the hedge fund community, which were incremental to us as well as an investment banking capability. We are looking to leverage our broader trading and clearing capabilities into these new clients and, of course, offer investment banking capabilities to our StoneX clients. Additionally, Benchmark has been able to leverage our balance sheet to take larger roles in transactions than before. Lastly, on capital synergies by leveraging the existing larger StoneX broker-dealer balance sheet, which already supports our FCM and Securities businesses, Benchmark can reduce the capital requirement for its business. We acquired the assets of JBR, a leading U.K.-based silver recovery refiner at the beginning of our fiscal year, which allows us to produce our own silver London Good Delivery bars and further extended our physical capabilities in metals. This has proven to be -- to have been particularly valuable during the recent metals volatility and shortages experienced this year as we can now produce our own metal. It has also expanded our customer base by adding numerous industrial clients who see StoneX as a better capitalized counterparty and who can offer a range of storage, refining and hedging services. In September, we announced the acquisition of Right Corporation, a physical meat trading business in the U.S. RJO has a dominant position in the meat and livestock industry in the U.S. And with this acquisition, we now bring a downstream physical capability to our clients, much like the rationale behind the very successful acquisition of CDI back in 2022, which extended our cotton derivative experience into the physical. It adds a new relationship with meat suppliers and branches across beef, pork, poultry as well as buyers in the processor and distribution space. In February, we completed the acquisition of Octo Finance, a leading French fixed income broker, which provides credit research and expertise in the trading of European bonds and convertibles, we are now able to offer the European-based clients access to our broader product mix, enable Octo to participate in larger transactions and to add credit research and expertise in European bonds and convertibles to our suite of capabilities. We have begun to cross-sell clients of Octo new products and services as well as expanding their available credit products to include investment grade, high-yield and U.S. treasuries. Lastly, we made investments in Bamboo payments. which was accompanied with an option to acquire full ownership down the road. Bamboo brings deep expertise and a well-established in-country payment ecosystem in South America, which has extended our cross-border capabilities. Bamboo serves large regional marketplaces, ride-hailing services and HR platforms, which are new client types for StoneX to interact with. Turning now to Slide 14. Alongside our inorganic M&A growth, we continue to iteratively improve our product and services offered organically. This has included several enhancements to our business, which extends our ecosystem and addresses additional client needs with the intent of capturing more of their business. Some of these enhancements this year include the following: the build-out of our metals vault in New York, which now has more than $1 billion of assets under custody and is a CME designated depository and custodians. It has not only been a value-add to our wholesale precious metals business but also has attracted the global banks who would like to diversify their holdings away from other competing banks. It is highly complementary to our overall metal strategy of providing a full service offering in the market. And we are a unique industry participant in that we're both a regulated FCM and an exchange approved depository. Towards the end of the year, we entered into 2 agreements, bringing in the business of 2 LatAm focused wealth management firms, which have expanded our capability to service clients by providing brokerage and investment of revisery services. These 2 transactions bolstered our existing wealth management business further strengthens connection into Latin America and provide us with incremental clearing opportunities. Late last year, we were approved to provide digital asset services to institutional clients in Europe. This will allow us to provide execution and custody services alongside our existing suite of global prime brokerage services and other complementary offerings, including equities, ETFs, futures and fixed income. We have also been improving our digital offering, which provides automation of management, merchandising and origination of grain products. This is done through our proprietary platform called StoneX Hedge. This platform form integrates with existing grain elevators enterprise systems and back-office systems, to automate and proactively manage the industry -- inventory, sorry. We announced last year that this platform has surpassed total volume of over 1 billion bushels of grain, which is a significant milestone for us. Interestingly, RJO has a similar product offering, and we will be merging these 2 platforms to provide clients with the best of the 2 offerings. In prime brokerage, we offer a comprehensive custody and clearing platform across the globe aimed at financial institutions and funds. During the year, we have made several enhancements to our service offering which have included an expansion of our cap intra capabilities, improving consolidated reporting and margining for clients and addition of cross-currency products to the suite. These improvements have driven increased engagements particularly among large ETF issuers and mutual funds, resulting in strong momentum for this product in this business. Lastly, regarding our OTC and structured product capabilities. As we have mentioned in previous discussions, we see OTC as a tremendous growth opportunity to help our commercial clients run more complex and intricate scenarios, determining the best products for their needs and to get quotes instantly. In the year, we have further expanded our OTC products focus on agriculture, which includes shell [ A ] contracts and dairy derivatives. We believe we have one of the most comprehensive OTC platforms in the market today. These are just a few examples of our recent organic rollout of products and services, and we will continue to grow our ecosystem by launching adjacent products and services to better serve our clients. Moving back to RJO. We'd like to provide some time giving an update on the integration. As mentioned earlier, I would like to introduce a new one of our executives to you all, Abby Perkins who is a member of our Executive Committee. Earlier this year, we asked her to lead our M&A integration efforts, in particular, the RJO integration, given its importance and its financial impact to our company. She will be providing a more detailed update on our integration plans, actions taken and key milestones ahead. Abby, over to you. Abigail Perkins: Thank you, Sean. For those I haven't met, I'm Abbey Perkins. I've been with StoneX for 9 years and in finance for over 2 decades. For the past 5 years, I've served on the Executive Committee and until recently, I was the Chief Information Officer overseeing infrastructure, IT services, procurement and cybersecurity. As Sean mentioned, I stepped into a new role leading our M&A integration efforts with the primary focus on the R.J. O'Brien initiative. This is where I'm spending the majority of my time and energy today. So to get started, please turn to Slide 16. We remain very excited by the potential value creation for StoneX from the R.J. O'Brien transaction our most transformative acquisition of 2025 and the largest one we have done in terms of deal size. As we noted in the announcement, the acquisition rationale rests on 4 pillars. First is the transformational nature of the acquisition and the significant scale we have added as a result. With this combination, we are now the largest non-bank U.S. FCM by client assets and one of the largest FCMs globally. We are seeing a positive trend in growth in balances with RJO's average client equity increasing from $5.5 billion to $5.8 billion since close principally due to inflows from ID and institutional clients. This increase has helped drive our combined client equity balances to the highest ever at $13.7 billion at the end of September. In addition, during the trailing 12 months ended September 30, 2025, RJO cleared 156 million derivative contracts, which will now be consolidated on a single combined infrastructure, so truly achieving substantial scale. And ultimately, we know that the long-term transformative value will rest on the quality of the RJO clients and its people and both have exceeded StoneX leadership's expectations. Our second pillar was the strong opportunity to expand both our products and capabilities across the combined basis of both organizations and to reach new markets. We are seeing numerous opportunities to offer new products and services to the legacy RJO and StoneX clients alike. These include offering new OTC and physical products to existing listed derivative clients, interest rate derivatives and relative value trading strategies to fixed income clients and new hedging products and strategies to agricultural and other commercial clients. We are also quickly moving to leverage RJO's footprint in new markets with the regulated presence in the Dubai International Financial Center, becoming a key focus. StoneX has had a long-standing and successful presence in Dubai, offering precious metals trading in the Emirate metal zone, and operating a branch office to retail products in the Dubai mainland zone. The addition of RJO's business in the DISC, the Emirate Financial Institution Hub has provided a valuable complement to our efforts in this key growth market through the opportunity to compete with other financial brokerage firms by offering the full complement of StoneX products, which is an important enhancement to RJO's offering there. Lastly, we are able to achieve a combined and optimized technical ecosystem, taking the best from our world. The benefit of the StoneX complex of the combined technical offering will be significant. Our third pillar focused on the achievement of significant cost synergies. Our work since the closing of the transaction has strongly validated our cost synergy estimates, and we are working actively to achieve these cost savings. We've established a robust governance framework with a dedicated cross-functional team leading the numerous integration work streams. I will touch base more on the time lines of these cost synergies as well as an update on capital synergies on the next slide. But before we get there, on more pillar to cover. The fourth pillar is that the acquisition will be accretive to both EPS and ROE. I want to say that, first, across the board, our top priority is delivering a powerful combination that strengthens outcomes for our clients and supports both our internal and external brokers. And in line with that focus, the integration planning and progress we've achieved so far underscores our confidence that RJO will be accretive to both EPS and ROE over both the near and long term, creating lasting value for our shareholders. Moving to the next slide, we summarize our integration objectives and results. I'll be starting with our cost synergies. At the time of the transaction, we estimated $50 million of annual run rate and potential cost synergies. We now have a detailed plan with over 100 people involved in the process with over 50 defined work streams and are in full execution mode. We are first prioritizing the savings that are more readily achievable through the combination of the overlapping non-U.S. entities in U.K., Hong Kong, France and Singapore. This can be achieved relatively quickly as the RJO activities and business in these jurisdictions is well understood and more modest than StoneX's activities in these regions. We are also prioritizing combining our U.S. broker-dealer footprint as it is a relatively easy process as well as RJO's activities encapsulate just 1 pillar of the activities we have in our diverse U.S. broker-dealer offering. These 2 initiatives can happen relatively swiftly, and we anticipate completing them in Q2 of fiscal '26, accounting for roughly 25% of the aggregate synergy target. Our focus then turns to the integration of our 2 U.S. FCMs, the most complex of the entity combinations, which is currently being planned and will follow the non-U.S. integrations. Combination is set for around Q4 2026, while we both operate in the same system of record and the underlying products are identical, RJO has built customer tools with migration of which we need to make sure is as seamless as possible from a client perspective to ensure no revenues lost as a result. We will err on the side of caution here, and may delay we feel it's warranted. We estimate that the merging of the 2 U.S. FCMs will account for roughly 40% to 50% of the synergy target. The remaining 25% to 35% results from the runoff of contracts and space, and as such, may take a further 6 to 12 months to fully realize. Based on our work to date, we are confident that we will achieve our targets of $50 million in run rate cost synergies within 24 months of deal close. Indeed, just 4 months from the closing of the transaction, we have realized approximately $20 million in annualized cost savings. We believe that the remainder of the cost synergies are well defined and achievable. We will move on now to capital synergies. These synergies will be achieved as we collapse the operations that we set out before. We anticipate a $20 million to $30 million release of excess capital following the first set of business integrations of the U.K. business and the broker-dealer business, which is to be realized in approximately Q2 26. The remaining capital synergies will be realized from the merger of the U.S. FCMs in the approximate fourth quarter of 2026. We anticipate this to be north of $30 million. Lastly, and in addition to this, while technically not a capital synergy, we recently executed a $42 million dividend of excess cash from the RJO parent entity, providing additional liquidity to the StoneX Group of companies. In terms of brand revenue synergies, we did not disclose a specific target because these synergies are both hard to realize in the short term, it's very hard to track when they happen as revenue gets split between teams, et cetera. Despite this, we continue to have a high conviction around the revenue synergies opportunity over time. A first significant driver is that StoneX's equity and balance sheet is around 5x larger than RJO's, which should enable us to win more wallet share from the larger RJO clients. Alongside this is our position as a public company eases onboarding activities. Both of these were constraints experienced by RJO. To this end, we have already held and continue to hold numerous teach-ins and cross-desk meetings. On the fixed income side, we have seen extremely strong cross-group collaboration already resulting in the deepening of relationships and placement of new trays in from clients of both firms. On the IB side, where RJO has a major presence, we've introduced many of these [indiscernible]. Sean O'Connor: Operator. Did we lose Abbey operator? Operator: It looks like we lost her, but she still connected, sir. Sean O'Connor: Okay. Let's give it a second and see if he reconnects. Otherwise, I can finish up her comments. All right. Operator, I'll carry on. Okay. Operator: All right. Sir, go ahead. Sean O'Connor: Okay. So I think Abbey was talking about where we are with the IBs, so I will just follow on from there. So we've introduced many of our brokers and end clients, our OTC and physical capabilities. Many of them have asked for the necessary paperwork, are going through the paperwork and many of them have signed up with our swap dealer and our physical entity. So very encouraging signs there. People don't do the paperwork if they don't see an opportunity. On the metal side, we see clients expanding the business they have with us into new products. On the negative side, there was always a risk of some revenue attrition, either due to revenue producers leaving or due to the fact that there was client duplication. At the time of evaluating the deal. This was a key consideration for us. And our view was that the client overlap was limited and thus the risk of revenue attrition was not material. We're happy to report at this stage, the overall attrition is limited. So overall, we're tracking very well against all of the metrics related to the integration of RJO. In summary, we continue to believe as a management team that the RJO transaction will prove to be transformational for StoneX and this expanded group of clients as the integration of our collective client focus, the ability to leverage our combined scale and the complementary product expertise positions us as the leading franchise around the globe. We are highly encouraged by the early results and are pleased with and grateful to our teams affecting this work. We remain focused on executing with discipline and precision that have become the hallmarks of StoneX. In the end, the common thread across all our acquisitions is the exceptional collaboration between company leadership teams and the exceptional work being performed by a talented and dedicated employees. We are pleased with the value these transactions provide to StoneX and remain optimistic about our long-term growth. So with that, let's move to Slide 18, closing summary. This quarter was a record for us to close out what was, in fact, a record 2025. The quarter included 2 months of the RJO results as well as some of the one-off acquisition and related costs, which reduced diluted EPS by approximately $0.13 per share. The quarter saw strong results across most of our segments, especially equities, prime brokerage and fixed income and improved results in physical commodities. We recorded $85.7 million net earnings or $1.57 in EPS with an ROE of 15.2% on book value and just over an ROE of 20% on tangible book value. We achieved another record quarter for the year with operating revenues of just over $4 billion and net earnings of $305.9 million, giving us an EPS for the year of $5.89 and an ROE of 15.6% on book value and 17.9% on tangible book value. In addition, RJO and Benchmark and our other acquisitions should be strongly accretive. And together with strong organic growth should drive our results for 2026. There has been a notable growth in our client assets that we custody where the segregated funds on the exchange or through clearing and prime brokerage and storage of precious metals. This has significantly grown our recurring income stream providing a stable and predictable underpinning to our financial results. Our unique and best-in-class ecosystem underpinned by a fortress balance sheet, diverse offerings and exceptional client service enables us to deliver innovative solutions that provide clients with market access and create long-term value. I'm very proud of the StoneX team, who continued to propel us to new heights, and we'd like to thank them for the exceptional work during 2025. I would like to thank our bankers for their support and our Board for both their support and guidance and an amazing are around StoneX team. So with that, operator, let's see if we have any questions. Operator: [Operator Instructions]. Our first question from the line of Jeff Schmitt. Jeffrey Schmitt: How are early cross-selling efforts with RJO clients going? I know it's pretty early innings, but anything that's kind of standing out there -- and then when can we expect your estimate, I guess, on -- for revenue synergies overall. Sean O'Connor: So on the revenue synergies, I think it's going about as well as we expected. Obviously, this takes a lot of education. I think it takes time for people to understand the products. make sure that the products are suitable for their clients. They obviously -- people are always -- and we've gone through this 30 times. So we know how this works, right? So oftentimes, the relationship people are reluctant to open up a relationship to new people, to products, they're not certain of. So this just takes a lot of education. I think there's been a tremendous amount of interest from RJO in learning about all the new products we have. So they're being engaged. And I think in certain parts of RJO, there's been tremendous uptick. I mean we already have people -- on the fixed income side, going together to meetings, pitching products together, the actual transactions happening that are generating revenue. I think, as I said with IBs, we have a ton of IBs who asked for documentation. A bunch of them have signed the documentation. I think a couple of trades have happened. So all of those things are all very encouraging, and I think sort of validate our thought that this is going to provide us with a big boost. In terms of putting out a hard estimate, as Abbey said in her comments, it's really, really hard to do that because this stuff becomes really hard to track. If someone does more treasury business with us because they sort of like the fact we can do something with them on the RJO side. How do we measure that if they are really a customer, right? So it becomes pretty arbitrary to sort of measure this, so we can report back on the target. And that's our reticence in doing that is it just becomes very hard to audit and provide sort of a detailed feedback. The revenue often gets split between groups and it's hard to track that as well. So I'm not sure we are going to give you a target just because I don't think we can accurately report back on that. What I think we will see though is just a revenue uptick generally, and I think that's what we should be watching for. I don't know, Bill, if you think differently, but I think that's sort of where we stand on it. But I think our view is very happy about it. I think if anything, there's been sort of quicker uptick and better interest from any -- from everyone in sort of taking our new products. And as I said, we are already seeing tangible signs across various desks of new clients trading with us, existing clients doing more with us. And then the other thing with RJO is I do think the fact that all those clients know now, particularly they're sort of larger clients, we have a much bigger balance sheet. So if there was ever a sort of a constraint around RJO's size, maybe they really liked the RJO, but we're limiting what they did just because of the size of RJO. That's gone, right? Because we like 5 exercise, onboarding is very hard when you're a private company in the world today. You have to do all your KYC, you have to get verification of the owners of the company are. And it's just very hard. A lot of people just don't want to do it. But if you're a U.S. public company, it's the easiest possible route to onboard. So I think we've made things very easy. And I think that's going to just of itself is going to drive some additional revenue. So I'll stop there and see if there is anything to add. William Dunaway: I think you summarized it, Sean very well, and we'll -- I think we'll continue to just try to point out kind of the overall growth from RJO here over these next couple of quarters and we'll be able to demonstrate some of that growth that Sean is talking about. Jeffrey Schmitt: Yes. Okay. That makes sense. And then it looks like there was still some weakness in precious metals trading in the quarter. Did that improve after gold was officially exempted from tariffs in September? And maybe how did you see that trend in October and November? Sean O'Connor: Yes. So we had a lot of people -- well, the people we normally speak to shareholders and you guys asking us sort of last quarter, what happened on the commercial side because, obviously, it was a reasonably big delta. And it was really affected by 3 things, right you had just low volatility in the ag space generally, which has sort of continued into this quarter. Metals, notwithstanding. But if you look at the ag side, it's been pretty muted general tariffs have sort of disrupted the underlying commercial flows. So people don't know or I'm sure whether they should export what the prices should they hold on to their product. So those kind of disruptions just lead to sort of lack of hedging. And then on the margin, one of the biggest factors was our precious metals business because of the dislocation in the CME metals price, we started to impute a value for tariffs. Now obviously, everyone around the world, including us, used to use the CME derivative contract as the most liquid contract is the best way to hedge your precious metals. But if you were delivering precious metals to someone in Europe, you now had an ineffective hedge because the hedge was imputing a percentage of tariffs being imposed. And if you completed that transaction, you would have to close your hedge out at a loss. So that created a lot of dislocation in the market. Our way of handling that was to deliver our metal into the CME and in that way, we had an effective hedge effectively because you can deliver metal into a contract. But what it meant is a lot of additional costs for us because we had to hold on to that metal for a good number of days. We had to ship that metal, that cost money. And all of that significantly eroded the profitability of that business. Now it was better than what we would have taken as a loss on the hedge, so it was economic to do that. That has led to the precious metals business in Q3 being so close to breakeven, right, when it's generally a pretty profitable business for us. That carried on into this quarter. Obviously, the business sort of adjusted. So the impact was not as great as it was in Q3, and we are now not using the CME hedge. So we now have the flexibility. And in fact, it's now given us an opportunity to take advantage of those dislocations. So what was a negative is starting now to turn into a positive. So that's the story behind the metals. So it was sort of much worse in Q3. It was better in Q4 and I think you'll see in Q1 that it's actually turned into a pretty positive environment for us. So I think that's sort of gone full circle for us. Does that help? Jeffrey Schmitt: Yes. Perfect. And if I could just slip in 1 quick one on the institutional -- on the institutional business that the RPC for listed derivatives jumped quite a bit. I'm just curious what drove that or how sustainable that is. Sean O'Connor: Do you want to take that Bill? William Dunaway: Sure. I'll take that. That would be the introduction, Jeff, of the RJO business. So when they came in, there's they were incrementally higher than what we were doing. So that's really kind of what's driving it up. I think they were incrementally about $1 higher on average on their institutional rate per contract than we were, so the combination of the 2 drove that up. Sean O'Connor: Sure. So it's kind of a business mix issue, I guess, between us and RJO. William Dunaway: Correct. Operator: Our next question comes from the line of Dan Fannon with Jefferies. Daniel Fannon: Great. So I guess just sticking with the institutional business. So the other question is just on the security side. The rate per million also went up pretty significantly quarter-over-quarter. Just curious about the sustainability of that. Sean O'Connor: Bill, do you want to handle that? William Dunaway: Sure. I think we've seen -- Dan, I think we've kind of talked about this a bit last year, right, with some of the conditions that we saw in equity markets with some of the lower volatility and also kind of us expanding into more U.S. stocks that we kind of -- we expected to see a bit of a trough there and continue to increase from there. And we have seen that, right? The conditions have improved. And then the fixed income space as well, right, with that becoming a bit more volatile with the rates moving around, defend actions, I think we've started to see where last year, we kind of dipped as well when it came to the addition of more and more U.S. treasury activity. Now we're seeing spreads widen a bit in those markets. So we've seen a nice uptick both on the equity side as well as the fixed income and then also really nice contribution from our overall prime brokerage business on the security side contributing more and more revenue there, which is helpful. Sean O'Connor: I would say, Dan, one thing, and if you remember back over the last 2 years, we spoke about this a lot, as both the equities and the fixed income teams, and this started probably 3 years ago, expanded into sort of lower margin, but higher volume products. We saw a continual erosion of the rate per million, but an increase in revenue, right? Because we're doing lower margin business, a lot of it making money, but it was really affecting those numbers. And as that business ramped up, it continually sort of dragged down the higher margin that we saw previously. I think we've now got -- to I'm sort of -- I could be wrong here, but I think you've sort of got to a point where that business is now large enough that it sort of averaged out, so I think that sort of ongoing sort of slide as we built the business up, we've now sort of troughed out. And I think what's now going to affect it is sort of market conditions, right? So I think the sort of business mix argument as that adjusted over the last 3 years, I think, is sort of kind of close to the bottom and at the end now. And now, hopefully, that number reflects sort of a more keen view of the underlying market conditions available in the business. if that makes sense. Daniel Fannon: Yes. No, that's helpful. Just another question on the integration. I just want to make sure what I heard in the road map. So I think you said roughly $20 million has been realized in terms of the expense synergies and then, I guess, middle of Q2 of this year with the U.K., we should get I think another -- I just want to make sure what the next wave of and then you have the FCMs in the U.S. So can you just kind of walk through the amounts that kind of -- if you've already got $20 million, that maybe only $30 million left or you're raising the amount of synergies. Sean O'Connor: Yes, go ahead, Abby, you back with us. Abigail Perkins: I am -- thank you for your patience. The -- so we have achieved synergies from sort of natural movement and the ability to do some streamlining inside the organization. Right now, that annualized run rate is about $20 million going forward. We will then see the next uptick really in the spring time, a bit more that we expect from the U.K. combinations. We'll get capital synergies at that point as well. And then the dominance will come post the U.S. integrations, which are late Q4 2026. So you're talking sort of June, July, August time frame. Does that help, Dan? Daniel Fannon: Yes, but no change in the aggregate amount. Like I guess as you guys have gone in, do you think that $50 million is conservative? Do you think there will be more in the context of what you'll be able to save as a result of the combination? Unknown Executive: No, go ahead, Abby. Sorry. Abigail Perkins: We're pretty comfortable with the $50 million. We are very focused on ensuring that we do client support with added flow. There is a big chunk of the organization that is not impacted within StoneX on this. So we're pretty comfortable with the $50 million right now. Daniel Fannon: Okay. Cool. And then just a follow-up for you, Bill. Just looking at the balances now from an interest rate sensitivity perspective, they're higher. And as you look into next year, obviously, you've got some rate cuts. Any thoughts on the hedging strategy or other things to do to limit the impact or fluctuation from rates and the movements there? William Dunaway: Yes. I mean we'll continue to be active, Dan, like we have in the past, that's kind of looking out and trying to lock some of that in. We're taking a bit of a view right, that we may want to lock some in around that kind of 2-year window-ish. And this isn't anything new. We've kind of done this a couple of different times over the last 10 years. We've kind of viewed that 2-year 2-, 3-year window is kind of a good space for us. And so we will continue to kind of monitor that market and potentially go out on the curve a little bit with swaps, kind of almost like an insurance policy on this new group of assets that we've brought in, in order to kind of put a floor there. And then what we're excited about is just kind of bringing in the capabilities of RJO that's been more active on managing the portfolio and have seen to where they've been able to typically exceed kind of the 1-month treasury rate, which has kind of been our benchmark. So the combination of the 2 are trying to lock some in to keep a floor for us and incrementally increase kind of over that 1-month target, I think, is what we expect to do on a go-forward basis. We never will be hedging all of it or never be locking in all of it, but we will look to be active to try to put -- roll into some floors there that kind of protect us to the downside. Daniel Fannon: Got it. But you're not doing that currently that's the perspective? William Dunaway: That we've been -- look, we've been active in doing that since the integration, right? So there's -- we didn't have anything, any activity on it in the September quarter, but we have been starting to do some of that since then, modest amounts at this point. Just reflective in the sensitivity that we put out there. Sean O'Connor: I think they're not to be repetitive, but maybe just to sort of clarify Bill's comments, I guess, there are 2 ways to think about this, right? The one is all of our contractual arrangements with our clients in terms of how we pay interest are referenced off the 1 month or the 3-month T-bill rate. So that's the sort of benchmark rate. And typically, what we did is we invested that float in the one month or 3-month T-bill rate, right? What RJO was very good at and were sort of a market leader is they were more actively managing that money, and they were earning a spread to the 1 month and 3 months T-bill by going into floaters and things like that. So to the extent you can do that, 100% of that excess basis comes to us. So that can be quite impactful. Now that's not a huge amount of money. You're never going to make 75 basis points extra. But I think the target is somewhere around sort of 20 basis points potentially on some of that float. But on a $13 billion float, if we can add 15, 20 basis points on top of that base rate, which we get to keep 100% of, I mean, that can be quite meaningful. And then secondly is, do we try to protect ourselves by taking out swaps and taking some duration, protect ourselves against possible downside in the short-term rates. And when we took on RJO they had done that with -- I can't remember the amount, but it was sort of $1 billion or something of their float that had actually locked in to the 2-, 3-year range that we've taken that position on. And as Bill said, we are now starting to add to that position opportunistically when we see rates that we like. So I would like to think that at some point, if the world stayed where it is today, we would probably like to maybe sort of hedge out something like 30%, 40% of our underlying float to sort of the 2-year rate. But obviously, the world doesn't stay as it is and we still have to sort of keep looking at that as rates change. But that feels to be to sort of be prudent. Maybe you earn less because the negative yield curve environment, you're paying a bit of a price for that, but it does give you certainty over that period as to what that underlying revenue source is. And as I said in my comments, what's quite notable now at StoneX and something that over time, we would not probably try give you more clarity on is we are growing as a custodian of client assets in everywhere. Seg funds in OTC products, clients are leaving more money with us -- we are actually now a custodian for gold, and we charge just like we do on seg funds, we earn interest on the gold deposits we have. We have prime brokerage, we have equity clearing everywhere you look we are growing our underlying asset pool. And those assets kick off now a really large number, which gives us a fantastic underpinning to our business, right? So all the sort of transactional revenue, which is affected by sort of volatility and so on, is sort of the gravy on the top here for us. So if we can get to a point where as a custodian, we've sort of got the costs covered. We've got a stable underlying flow of revenue and then the sort of more volatile forms of revenue, which, again, we've diversified pretty broadly but those tend to be the incremental revenues. And I think we're getting to an interesting sort of situation where it's starting to look like that. So something to watch and something we're working hard to do. Does that help? Daniel Fannon: Great. That's very helpful. And just yes, it does. So lastly, just on the retail business, I know that volatility has been pretty subdued. But obviously, the fee per million or rate per million came in a lot. Anything else of note outside of just vol within that segment to think about on a kind of go-forward basis? Sean O'Connor: Well, I think this has come up a few times over the last maybe 2 years, I would say that we generally sort of budget and the way we look at the vol in this business, and I'm talking about the self-directed retail business is we look at a sort of a long-term average, right? Because the revenue capture number there can move around pretty materially. I mean, Bill, correct me if I'm wrong, but I think we are up at sort of $130 million in recent quarters as the high, right? William Dunaway: No, we actually have been as high as $185 million back in December, but that was December. Sean O'Connor: Oh my God. William Dunaway: That was an exceptional quarter. But if you go back a couple of years, we were $82.95 million range back in '23, '22. Sean O'Connor: So the long-term average range for us is sort of in the '80s, right? And I think over time, we've lifted that from, I think, in the game days, they were more like $75 million is what they use. And I think we've lifted that into the mid-80s, because of all the things we've chatted about, right? We're combining flow better, there's more internalization. All of that stuff is helping. But I don't think this is necessarily a bad revenue capture number. I think what's happening previously is we were outperforming a little bit on the revenue capture. So obviously, we'd like it to be a little bit higher than it is now, but this is sort of the long-term average. And so I don't think you should look at this and say, "Oh my god, what happened?" I think this is sort of the business as it sort of has performed over the long period. maybe slightly under trend. But I think we were significantly over trend when we were sort of reporting numbers $120 million and higher. I think that's sort of unsustainable. I don't know if that helps, but that's my thought on it. Any more questions? Operator: I'm showing no further questions, and I would like to hand the conference back over to Sean O'Connor for closing remarks. Sean O'Connor: All right. Well, thanks, everyone. Thanks for your time. We appreciate it. We're very happy with the results that we have managed to deliver to all of you in 2025. And as you gather, I think we're all pretty excited about what's coming in 2026. We've had a busy year, a lot of great acquisitions Obviously, RJO, very significant. I think Abbey and her team have really got their arms around that. We feel really good with the way that's tracking up, but benchmark is also doing great and some of these other acquisitions are all sort of kicking in. So we're very excited about the prospects for 2026. Looking forward to that. And with that, all I can say is to those who celebrate and are in the states happy Thanksgiving and happy holidays to everyone. I guess, next time we speak to you will be in the new year. So thanks again. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Benjamin Wilkinson: Good morning, everybody. Thanks for joining us for Molten Ventures interim results. This is the results for the 6 months to the end of September, and we'll take you through key movements in the portfolio. We've moved with the trading statement at the end of October and then now giving you the final numbers here. Today, you will be spoken to by myself, CEO, Ben Wilkinson; and also our CFO, Andrew Zimmermann, who will take you through the financial highlights. I'll just give a quick introduction, a reminder to Molten, and then we'll get into the numbers. So Molten Ventures is actually, next year, celebrating our 20th anniversary as a firm and has been listed since 2016. The benefit of that is obviously that we can get to show the model working over time. And I think here in these results, you'll see the breadth of the portfolio and the demonstration of that vintage creation that's been happening over these many years, 80-plus portfolio companies in the portfolio. And when we look at the PLC numbers here today, that's what we'll be talking to, but also we manage EIS and VCT funds alongside. So the capital pool is an important function and driver of our model and how we address the market. On the right-hand side, you can see the important factors. We've targeted 20% annual growth in the portfolio fair value, and that's -- we call that through the cycle because obviously, these things tend to be up and down somewhat, but actually delivered 26% when you take into account the 6 months growth. And then in realizations, the important factor is turning that value into cash, and we've delivered 14% versus our 10% target. And again, I think that's a differentiated point from us versus some other firms and something that we've been able to demonstrate through many years. So we'll touch on those returns. In aggregate, GBP 1.1 billion of capital deployed in those years as a public company and returning over GBP 700 million coming back, which is a really strong proof point of our model. A year ago, when I took over as CEO, we refocused our strategic priorities on these key areas, really focusing on our core investment strategy of Series A and Series B investing. Particularly at Series B, this is a part in the market in Europe where there's a gap to capital, somewhere where we have strong experience and it's where you see the commercial traction in those businesses coming through most strongly, but also requiring the venture capital skills that we can bring to bear to help grow those companies and manage their scaling journey. And so it's capital, but also active management that we bring to bear with these companies. Scaling our own portfolio and developing the co-investment pools of capital further continues to be a key priority for us. We'll touch on the progress in some of those areas, but having the public balance sheet, having the EIS and the VCT funds and then growing out our third-party capital on the private side is a key strategic priority for how we scale and grow within the market. And as part of that, thinking about our fund-to-fund program, which is the investment into funds at the earlier stage from when we invest directly, we've been going through that program and looking at a narrower cohort for the next iteration of investment. So the existing program is largely funded in good shape. It gives us quarterly reporting on 3,000 underlying companies, which is great for our deal funnel. But just thinking about the uses of our capital when capital is ultimately constrained, we want to put more of that into direct investing and thinking about the shape of our portfolio, how that evolves over time. Balance sheet strength, we're going to be able to touch on that today. It's clearly getting back to growth is an important factor within that, but also driving the liquidity from realizations and then thinking around the use of that capital as it comes back. And we always talk to this NAV accretive use of capital. And importantly, that can be buybacks of our shares when we're trading at big discounts, and we've demonstrated with GBP 50 million committed to buybacks, that's something we're willing to do, and we recognize the strength of doing that in terms of buying our portfolio at a discounted value, but also NAV accretive in terms of driving investment. A lot of the companies that we're going to talk about today, we invested in those businesses almost 8 years ago. And the growth that's come through over that time and management of those companies that's come through over that time, and that will drive the growth in the future by the investments we make now. Another part of our strategy is to invest in secondaries where we can acquire mature assets at discounts to their holding value by providing liquidity to an illiquid part of the market and giving ourselves and our shareholders access to those growth companies and that are known winners, if you like, in other people's portfolios is a very sensible way for us to use our capital. So when we talk about NAV accretive use of capital, we're thinking about it in a holistic way about what is the best use of that capital depending on the opportunity set. And clearly, driving a narrowing of our share price discount to NAV continues to be a focus. Some progress has been made on that, but a lot more to go. You'll see today that the NAV is growing, and therefore, the shares have to trade up even further as we drive value in the portfolio. And I will, therefore, hand over to Andy to take you through our financial highlights and demonstrate some of that. Andrew Zimmermann: That's great. Thank you very much, Ben. So I'm Andrew Zimmermann. I'm the CFO at Molten Ventures. About a year ago, I was interim CFO, presenting my first set of interim results. So it's nice to be here 1 year later as actual CFO. And we've got a really positive set of financial results to present. So without any further ado, we will get on to that. So very pleased to have -- talk about a 6% GPV uplift to NAV, GBP 135 million of uplifts offset by GBP 49 million of reductions. FX has added another GBP 11 million to that with the GBP euro being a tailwind, but GBP USD being a slight headwind. Market comps have helped sectors like AI and deep tech and hardware have obviously been stronger [Technical Difficulty] that's been offset a bit by consumer and SaaS. Core names like Revolut, people have read the news about yesterday and ISI have shown very strong commercial traction. Sorry, GPV and NAV are both up at GBP 1.4 billion GPV and NAV GBP 1.3 billion. Realizations have been slightly ahead of investments with some of that cash going to buybacks, again, as Ben referenced, recognizing the NAV accretive additive potential of those. Realizations were pleasing at GBP 62 million to the half year. There was also an additional GBP 23 million from another tranche of [Technical Difficulty] Revolut in October. So GBP 87 million so far year-to-date that we've done with some other little bits and pieces. Freetrade, Lyst and Revolut, the 2 partial Revolut-led secondaries are the drivers of that. So been at GBP 87 million already year-to-date after a very strong FY '25 of GBP 135 million. It's really pleasing to see that momentum continuing. From that cash, [Technical Difficulty] we've put GBP 33 million into the balance sheet, GBP 33 million. We'll come on to that in a bit more detail in terms of [Technical Difficulty] some of the things that we've done. Again, there's been more invested post period end with about GBP 25 million that's either been invested already or is about to be and will be announced. We've also done GBP 19 million of share buybacks. Again, that is NAV accretive to our NAV per share, that's added about 14p to our NAV per share. And we've just announced another GBP 10 million extension to that, which will take us up to GBP 50 million committed so far. OpEx, we've managed to reduce. We've been really disciplined. We've looked at technology and how we can drive some efficiencies from that. We've been able to, therefore, reduce our general admin costs from GBP 13.1 million to GBP 12.1 million year-on-year or half year-on-year, which is an 8% reduction, some reductions in headcount there are mainly on the operational side so that we can rebalance our investment and really drive that investment quality. So we're at 0.1% operating costs net of fee income, which is well below the 1% target of NAV. So that means we end the half year at NAV per share of 724p, which is 8% up on the year-end position, which is obviously a really strong, great position to be on, and then we'll be looking to build on that in the coming period. And our balance sheet at the 30th September had cash of GBP 77 million. We also have cash plus GBP 23 million from that Revolut tranche that came in, in October. And we also have funds available in EIS and VCT of about GBP 23 million available for investment. So we're in a really strong balance sheet position where we've managed to balance the investment with buybacks and cash available going forward. So this is a chart that you're used to seeing where we talk about our performance through the cycle. We have a target of 20%. Our average return through the cycle is now 26%. You can see from this chart, we -- obviously, there was strong growth with a real peak in FY '22. We were quick to take valuations down in FY '23. FY '24, things started to stabilize a bit. And then in FY '25, there's a smaller return to growth in FY '26. That first half, 6% for the half year is obviously a good start and obviously, not quite a hockey stick yet, but starting to turn up there in terms of the growth. So we'll be looking to see that continue in H2. I think with sensible marks for our portfolio and tailwinds behind a number of the core companies, there's good signs that, that will continue. Everybody has been reading a bit about a bit more activity in IPO markets and M&A. So with our diversified portfolio and our experience managing through the cycle, we're optimistic about this continuing. So the story on realizations is really similar -- similar shape. Our target is 10% through the cycle, and we've delivered 14% so far average return. Again, you can see that builds up towards FY '22, where it really peaked. Then obviously, it was a difficult market in FY '23 and FY '24, really slowed momentum for realizations. There's a positive return in FY '25, where we did work really hard to engineer different realizations for a number of the companies. And that's obviously pleasing to see that continue into FY '26, with a GBP 62 million to the half year 30 September and an additional GBP 25 million since then. We're obviously still working on other things. So we would hope to be able to generate more realizations before the end of the year. And obviously, our evergreen model then enables us to recycle that back into future investments, which are going to drive the future NAV growth as well as other NAV accretive opportunities like secondaries and buybacks when the discount is wider to the share price. So this is just a slide a little bit about our investment deployment. We've deployed GBP 33 million in the first half of the year. We've done more since then. So the cadence will pick up a bit in the second half of the year. I'll just call out a few deals. Ben will talk a bit more about the portfolio later in the presentation. But in new deals -- yes, GBP 6 million in new deals. One example in that is General Index, which is a data-driven energy pricing provider for the commodities market. In the follow-ons, we've done GBP 5 million, which is helping to scale and build our portfolio. For example, the one I'll call out is Manna, which those of you who know me know I like to talk about just like drones delivery food. But again, it's a good example of us investing in the ones that are going to be the future drivers of growth in the portfolio. In the secondaries, we did the secondary with Speedinvest for GBP 16 million in the continuation fund. These give us access to a portfolio of companies that we understand as venture managers that are later in life, so they've got a shorter exit window, and we can get them at a very attractive price. So it's another good option for us in terms of driving NAV. And then finally, we've put GBP 6 million into our fund of funds program. Obviously, we're trying to manage a tighter cohort going forward, but this helps us to scout the future winners that are going to feed through into the emerging and then the core in due course. We've also recently signed a GBP 12 million Series B with someone in the portfolio company, which we can't announce just yet, but we'll be working on that. So watch this space, you should see an announcement of that soon. But that's just a really good reaffirmation example of us backing our portfolio and backing the winners in our portfolio and getting back to more of this focus on Series A and Series B core investments. And then just on the chart here on the right, again, just to call out the shape of it, you can see FY '23, just before things started to go south, we deployed a more normal level of capital. FY '24 and '25, obviously, a bit more capital constrained, but we're now getting back more to a normal investment cadence with targeting somewhere around about GBP 100 million by the end of the year. So this slide just walks us through the fair value movement for the period in the portfolio. So you can see investments and realizations we've talked about, so slightly more realizations than investments, which are a net down in terms of the GPV. FX has worked in our favor. As a pan-European investor, we're obviously going to be exposed to movements in euro and dollar, but that's been a small net benefit for us this period. The real talking point, I think, is the movement in the core, GBP 92 million uplift, and we'll come on to talk about the specific drivers of that with the portfolio fund in due course. But that's like an 11% uplift, which is much more where we want to be and where we feel we should be. And so that's really pleasing to see. The fund performance contributed about GBP 7 million. That was offset by about GBP 30 million, a small write-down in the emerging portfolio, which I will actually now just come on to talk about. But overall, a really strong net 6% fair value increase for the first half of the year. So we've had a lot of feedback from people in terms of the emerging. We talk a lot about the core. That's obviously the biggest part of the portfolio by value, but the emerging are what's going to drive the future. So we're trying to talk about this a bit more and shed a bit more insight into it. Ben will talk about some of the specific companies, which I know people find really interesting and exciting. So that will add a bit more color. There's 68 companies in this emerging portfolio, so it doesn't lend itself to a big list, but this table gives you a sense of the diversity and range of across that cohort. So the average age of investment in this is about 5 years. And the average cost of investment is about GBP 4 billion. So you can see the average is obviously smaller. These are the earlier Stage 1s. There's obviously a broad range within that. And you can see from this doughnut here, about 3/4 of them are the smaller sub-$5 million positions. So these are the ones that are still proving themselves out. As they start to scale and grow, and we can spot the emerging winners and we have some conviction, then we can put more capital into them. And so the remaining 2 sections of the donut are as these companies start to grow and we can follow on and help them grow, we'll put a bit more money into them. And then eventually, these companies should grow, keep growing and some of them will get into the core as the future winners in the portfolio. In terms of the fair value movement in this segment, you can see that actually the majority or nearly the majority had an uplift in terms of the number of companies, a number flat and then about 1/3, there was a small reduction. Overall, although there were more uplifts in the portfolio, there was a small net reduction. There were 2 or 3 sort of larger write-downs just in specific companies in that emerging sector that meant it was a small net write-down of GBP 13 million. But overall, still positive momentum in that cohort of the portfolio. So this is the fan, which obviously you're familiar with seeing. Again, I would just call out the point that the scales are different, which is why it looks a little odd, but Revolut because it's so large by fair value had skewed the scale. So we've split the two halves slightly. The right-hand side are the smaller ones that are growing. The left-hand side are the more mature ones in the core. So just to call out some specific ones where there's been the more significant movements. So SimScale, which is cloud-native simulation. It's doing really well in terms of starting to add logos, starting to really grow revenue. It's got good ARR retention. So that one is starting to move up the fan. And obviously, we have a strong belief in that one going further. ISAR Aerospace is one that you may have seen like the rocket launch. It's a German space rocket company, hopefully, a European SpaceX. They got their first rocket away off the platform earlier in the year. It didn't -- it blew up, obviously, partway through, but that is expected as part of the development process. So they got all the data that they needed, didn't destroy the launch pad, so they were really happy. And they're already working towards launch 2. But that first successful launch in terms of the data collection unlocks a capital for EUR 1 billion valuation. So that one has shown good growth in the half year. Thought Machine, although it's not moved that much, I just thought I would call this one out because people are interested in that one. That's obviously core native banking software. You'll maybe remember a year ago, we'd actually taken that one down quite significantly as it sort of stalled in terms of the speed of its revenue growth. In the second half of last year, we started to write it back up, and we've done a little bit again in this first half of the year. The story hasn't really changed. It's a really good business. They're signing Tier 1 banks. They've got a good pipeline of logos. It's just the cycle for that particular line of business. It takes a while to turn it to permanent ARR and longer than they originally perhaps forecast. So as they get these books of business live, the ARR will grow again quite lumpy and that speed of revenue growth should start to accelerate again, justifying more of a premium valuation. So we should see that start to pick back up and walk back up as they hit those commercial proof points. ICEYE is another one that's had a really strong period. You may have read about it in the press, dual-use technology, it synthetic aperture radar satellites, which are just a very cool technology, can see through cloud, can see at night. They've just released their latest version of them, which are even more high definition. You can see things about the size of a laptop from space. Obviously, the shift in defense, particularly for European governments, financing themselves mean they've signed a lot of contracts with different European governments. So they've got really good traction, both in terms of hardware, the actual satellites themselves, but then the software in terms of delivering the images to people. And obviously, the comps in that sector have really benefited from that as well. So it's really strong growth in that one. CoachHub is the only one in the core really that we've had to take down much. That one, CoachHub is obviously coaching software for enterprises and it matches coaches with executives. That's had a slightly tougher year. Firms are probably being a bit more mindful of what they spend their money on and things like that can be the first to be paused. It's actually profitable, but the growth has just stalled. So in terms of the valuation, you need revenue to really be growing at a stronger level to justify a higher premium. So as they get back to that growth, we would expect to be able to walk that valuation back up again. But until they hit those commercial traction proof points, we've pulled that one back slightly. Aircall is business communications software, AI cloud-based, more than 20,000 customers, really good solid business. It's profitable. It's doing more than 20% revenue growth year-on-year, consistently performing a really good example of a mature company in the portfolio that should be heading towards some kind of exit scenario, whether it's an IPO or a trade sale as it really matures. Ledger, again, benefiting from really strong tailwinds, crypto and NFTs, it's a hardware wallet and software that goes with it. Really strong revenue growth, really strong performance. Comps are doing well because of the U.S. market being very favorable towards that kind of asset class. So it's been a strong beneficiary of that. And then finally, Revolut, you'll all have seen the news yesterday about their GBP 75 billion round. That obviously came a bit late for us in terms of this performance. So we've held it based on commercial traction and commercial milestones. It's obviously still performing really well, more than 60 million customers. They did GBP 4 billion of revenue last year, should do something like GBP 6 billion this year based on the growth rates they talk about. So we've been able to take that up quite considerably, but we obviously have a bit of scope to grow further if it's going to grow into that GBP 75 billion valuation. So overall, really positive, I think, for the core portfolio. So I think I would just say just before I hand back to Ben, it's a really positive set of numbers. It's pleasing to be up there talking about fair value growth coming back, really driving NAV per share. We've obviously continued to generate that momentum in realizations, which allows us to allocate capital to the new future winners of the investment and also to allocate some to buybacks, recognizing the NAV accretive benefit of being able to do that. So a nice set of numbers to talk about. And with that, I'll go to Ben, who can tell you a bit more about the portfolio. Benjamin Wilkinson: Thank you, Andy. So as Andy described, we wanted to give you a bit more of the breadth of the portfolio, at least 10 in the call there that's showing those uplifts. We're also trying to show a little more of a -- shed a light on the emerging so that you can see the core is driving the growth. There's GBP 888 million of value there, but the emerging, there's almost GBP 500 million of value sat within that. So what we'll do here is take you through some of the drivers of the growth in the core, but also give you a little bit more of an overlay of how the portfolio comes together. You can see here that gross portfolio value that we talk about GBP 1.4 billion, core being GBP 888 million of that. And then think about the emerging, that GBP 256 million in the light blue bar. We'll talk to some of the details of that. And Andy touched on the fact that there are 68 companies sat within there. And then there's GBP 293 million sat within fund investments. If you look to the right-hand side of this chart, you'll see how that splits down. That's splitting down between some secondaries that we've been doing over the last few years, also SPVs, special purpose vehicles that we've invested in through the years, but also the fund of funds. There's GBP 120 million in that seed fund of fund program where we're an LP into funds across Europe, and there's about 80 funds across Europe that we're invested into. So small checks going into those funds, but that supports the ecosystem, gives us the data on those companies as they come through to the Series A and Series B stages of investment where we can look to invest in those companies directly. And then finally, with Earlybird, about GBP 80 million sat there as value, which is value that's not sat within the core. There are a few assets like Aiven and ICEYE, which are sat in the core, which are look-through into Earlybird investments. So if we touch on the larger part of the portfolio first, the core companies, their growth is driven by their revenue growth, that commercial traction that then feeds through into fair value growth. And we can see that the margins are very strong in that part of the portfolio as they are through the rest. That really gives an indication of really strong technology businesses with 68% gross margins, 6 of those companies being profitable, also some of those moving to profitability in coming years. So we have about 40%, 45% of that core being profitable now as well. Companies are well funded and growing strongly. You can see here that growth has continued and just touched on some of the assets, in particular, that Andy has just taken us through, but it's that commercial traction in the underlying businesses that we really look to. So where we're taking valuations up or we're taking valuations down, it's really underpinned by the growth in the underlying companies. One thing in terms of the age of the portfolio, the average age of those companies is 11 years, and our average age of the holding that we've had is 6 years. So it gives you a sense of where we're investing in those businesses on their own journey. And it's really where we start to see those commercial proof points, commercial traction selling to customers, increasing that revenue, demonstrating that you can sell to a breadth of different customers, but also increase your value within each of those logos. So upselling to those customers as well. Those are the points of reference that we're looking to when we're first putting our investment tickets into these companies. So the emerging portfolio, trying to provide a bit more color on how that comes together. On the left-hand side, we've got the capital deployed. Obviously, now we've been deploying for 9 years, over GBP 1 billion deployed. A lot of that's gone into the core, and that's driving strong returns. But then a lot of that has also gone into the emerging. And you can see here that that's been invested over a period from 2017 right through to now with the majority invested up to 2021. So you can see on the left-hand side that there's a real balance of that vintage creation within the emerging. It's not just focused on any one vintage. And I think that portfolio construction point comes across strongly when you look at that left-hand side of the chart. Average holding is about 9% equity, which is in line with our 9% to 11% probably average across the portfolio, which is also really where we start to think around 10% to 15% of initial equity. Sometimes that gets diluted down. So that's all in line with our original investment thesis. And talking to scale, you can see on the right-hand side here, how much of that is split by revenue. So the blue, the 44%, that's GBP 10 million plus of revenue. So it demonstrates a degree of maturity of those underlying companies. Some of them are pre-revenue, particularly where they're in the deep tech parts of the market where revenue might come later than the traction in the technology. But also you can see that some of those are earlier-stage businesses, GBP 1 million to GBP 5 million of revenue or GBP 5 million to GBP 10 million as they start to scale through that journey. Our job is to portfolio manage. Some of those will not scale and grow, and we'll reduce them down in our holding value or sell them on. Some of them will scale and grow into the core. And we talk in a couple of weeks about one of the investments that we've made in one of our existing companies, a Series B investment where we've led the round in that company preemptively, that's where we start to see that commercial traction coming through, and we want to put more of our shareholder capital to work in that business and then those companies can become the core companies that drive the growth going forward. So I wanted to talk for the next few slides about some of the specifics. We're touching on four of the core portfolio companies, and we'll also touch on a little bit of the emerging as well to give you a flavor of those underlying businesses. Revolut, we've talked a little bit about here, and it's obviously very strongly in the press. I think the only comment I'd like to add in addition to what Andy said here is this is a business that was founded 10 years ago, now has over 65 million customers, was a company that was scaled in the U.K. and then grown into other markets, and it is now getting licenses in South America, Mexico, and Colombia as an example. And it's just driving growth globally. So this is a really good example of a success case in Europe that we need to celebrate, and we need to make sure that the capital that goes into these companies to enable that success is there for these businesses that have the ambition to have global scale. And we're talking about productivity earlier today in some of my conversations. We need to drive more productivity growth, and these are the types of businesses that really allow that to happen. If you look back and think about when you had to go into your bank at least once a week to process checks or to go and deal with anything that required an over-the-counter service or when you traveled and maybe you had to have travelers checks, for example, at a certain stage of that journey. Think about how seamless your banking is now relative to how it was perhaps even just 10, 15 years ago. And this is the productivity that's been driven through all of the companies in our portfolio and it's been driven by this part of the ecosystem that drives job creation and innovation. In a similar theme, ICEYE, we invested in that business in 2018 into 2019. So they have now 50 satellites up in low earth orbit. And those satellites, as Andy touched on, can take images of the earth giving a range of 400 kilometers from single pictures down to the laptop scale of granularity. And that allows security to be a factor and a use case, but it also allows use cases and climate change. So thinking around forest fires, thinking about flooding and the impacts of that on the insurance part of the business, that drives a massive efficiency looking at areas that are affected or impacted by that. And our use of space is going to drive a lot more productivity in our daily lives. It already drives productivity with things like GPS. But clearly, that's becoming an important driver of growth going forward. And this company is performing very strongly. And another business that's quietly under the radar for several years while we've invested into those companies. And then they start to emerge as growth companies and drivers in our portfolio. And then in the last year as security and defense becomes more of a theme and sovereignty around assets becomes more of a theme, you can see that these companies are getting much more focus in the press. A similar business that Andy touched on is ISAR Aerospace. It's definitely worth watching the launch, 30 seconds into the air was important. There's over 100,000 components coming together in a single rocket. That's the first test of that rocket. And so demonstrating that it can get off the launch pad, demonstrating that they can safely bring that rocket down as per the plans, but also taking all the data into that next launch. This is a business that's exciting to watch. And hopefully, in the next few months, we'll be able to give you a bit more of an overview of that next launch happening, and we can all watch that one. And then Ledger, Andy touched on Ledger, cryptocurrency, hardware, security layers, security in anything, clearly very important. Even more important, as we've seen all of the cryptocurrency marketplaces have their own ups and downs over the years. A lot of people are recognizing you have to have it stored on a Ledger device. That's the most prominent device, hardware wallet for crypto and blockchain applications. And there's about 20% of the cryptocurrency market stored on Ledger devices. So it gives you a sense of their scale and what they've been building. Very strong tailwinds now for crypto and blockchain, particularly out of the U.S. And as this institutionalizes as an ecosystem and Ledger at the forefront of that with their hardware devices and the software that they can drive to allow trading. And then some of our emerging companies, equally exciting, the ones that we'll be talking about in a lot more detail in the coming years. BeZero is a carbon market. It's verifying offset projects and creating a pricing market for carbon. This is a business we invested in 2022 in the financial year and is growing strongly and undertook its Series C funding round, total funding of over GBP 100 million. And again, this is a business that's driving a new part of the ecosystem, a new part of the market that doesn't currently exist and hopefully becomes ubiquitous and something that we just take for granted in the next few years. If I look at that productivity theme, Deciphex, which is focusing on workflows and AI-driven support for pathology, that's a part of the ecosystem where we're investing a lot of capital into the NHS and investing a lot of capital into health. But a lot of that capital needs to go into the productivity tools that drive efficiencies. Public sector efficiency has reduced over the last few years, not increased. And these are the tools that allow that to happen. In a similar way to the space theme, we have Satellite View, another company in the portfolio, which is looking at thermal imaging of buildings. And so low earth orbit satellites go up, images of those buildings, looking at the heat signatures, looking at the efficiency of buildings, looking at security aspects that go alongside that. And this is a company that has a really strong order book behind it already. And then finally, Andy's favorite company, Manna, delivering -- it's interesting when you think around if you stand in London and you talk to people about drone delivery, it's a pipeline dream. In Dublin, that's already happening. There's hundreds of thousands of deliveries that have been occurring already over 200,000. And Manna, as it expands, we will go into 11 sites across Dublin, but we'll also be expanding into Finland, into the Middle East. It's a company that's born in Europe, that's scaled in Europe that is already ahead of many of the big players that we would assume would be at the advanced stages of this. So Manna is a very exciting company that we'll be hearing more about this year. Give you a sense across the board of the excitement that comes through our portfolio. But one important factor within our portfolio is how we think about driving growth. Direct investing is clearly the heartbeat of what we do and fund-to-fund investing, as we've touched on, helps to drive the ecosystem. But another important part of our platform is driving growth through secondaries. I just wanted to touch on that for a moment because sometimes when we invest in secondaries, people are trying to understand, well, why are you investing in other people's portfolios. But if you think about the journey of scaling technology businesses, they often scale in years 10 to 15 of their life. You can see in our core, the average age of 11 years. And then if you reflect on the average time horizon for a private structure is a 10-year fund. And so those technology businesses that are the winning companies in those funds are scaling and maturing at the very latest years of those funds where the managers of those assets need to show realizations and drive returns. So we provide a liquidity solution to those managers that allows them to give money back to their investors that allows those investors in turn to put new capital commitments into the managers' new funds. So you're unlocking a part of the ecosystem, which is clogged up. For us, the benefit is clearly investing in scaled mature assets. And we've demonstrated with our track record here that we can drive returns averaging 2.4x multiple. A lot of that has been realized in a short period of time. And it's really a way for us to create additional value for our shareholders by being active in the market and using our network and using our relationships and using our ability to value technology businesses and being very fundamental about the value of those companies and drives additional value to the direct investing that we have in the portfolio. So delivering returns in excess of GBP 200 million on our secondary strategy. It's not something we do every year. It's something that we do where we feel there's pockets of value and discounts that we can take advantage of. So then finally, how does that drive to returns across our entire portfolio, over GBP 700 million of realizations over the 9 years and thinking about venture capital as an asset class, the returns are skewed to the winners. You have to run your winners. And in turn, the management skill of a venture capitalist is managing an entire portfolio and ensuring that you can drive returns from the rest of the portfolio as well. And you can see here that we've had over 5x plus returns, which have driven the majority of the value. That's the pure power law playbook of venture capital. And those are the companies that we'll naturally talk about a lot, but also driving returns coming from more modest multiples in the 1 to 3x ranges, that's an important part of what we do. And I think that's been very differentiated at Molten in terms of how we think about the portfolio and consistently driving those returns coming back through -- and even in the scenarios where we might not be making positive returns, we get less than 1x our capital back. We are in the risk business. We should be taking risks. We should be investing in companies that have great potential, but clearly, not all of those companies will make it to be the key returners. And therefore, trying to drive some returns of capital back is an important part of that portfolio management as well. So finally, as we look to wrap up, I'll just give a sense of the current market environment that we're investing into. Left-hand side, you can see Europe has been scaling as an ecosystem up until '21, a lot of capital put to work in that period, but has really settled to a level of around GBP 60 billion to GBP 70 billion a year being deployed. If you compare that with the right-hand side, though, we're seeing a lower number of companies being funded. And that deal count coming down has shown that the capital has been going into companies where there are perceived winners, particularly around AI. And therefore, there are companies that can raise substantial pools of capital, substantial amounts of capital, but that's not growing across the whole of the ecosystem. The area where we invest will be in the GBP 5 million up to GBP 20 million sort of range. So if you think about that in the context of these charts, that's the dark blue lines on the left-hand side going into the lighter pink lines. That's had a reasonable amount of consistency in terms of the capital that's been deployed there, but there's still a gap to capital. And one of the things we'd like to do is drive more capital coming from pension funds coming from our own institutions to support this part of the ecosystem where the opportunity set is fantastic. The innovation that's occurring in Europe is very strong. The opportunity to invest in generational shifts in technology is here right now. And these are technologies that are going to be profoundly changing our societies and how we work and the productivity that occurs over the next 20 years. This is the time to put capital to work, and we're the vehicle to do that through, and we've demonstrated that over many years. So finishing up before we move to questions, just to reiterate the priorities that we started out with the outset of this presentation, how are we performing against those, so core investing in Series A and Series B. We've demonstrated that. We've invested GBP 33 million in this first half of the year. We've also continued with our secondary strategy. And then post the period end, another GBP 20 million has been invested. The company that we've been indicating as a Series B investment exactly in line with our strategy of supporting our best companies, helping them scale and grow, and we'll be announcing that in the next couple of weeks. Co-investment capital touched on as an important feature, bringing more capital into the ecosystem. We have Molten East, which is focused on Eastern Europe and the technologies and the entrepreneurs and the engineering ecosystem that exists there. That is a fund that we'll look to close in the next calendar year, some good progress being made there, and that will demonstrate additional capital coming into the ecosystem that we will manage. Narrower fund of fund commitment, focusing that capital back to our direct investing and secondaries. We've been speaking to all of the managers in that ecosystem, supporting the ones that we're already an LP into, but also being clear that we'll put the capital into a narrower cohort of managers going forward. And then balance sheet strength, Andy has touched on this in some detail, continued realizations and continuing to redeploy that capital into those NAV accretive areas. And finally, narrowing that gap to our discount in the share price. So NAV 724p a share, shares clearly trading at a discount to that. So the buybacks have been an important feature of the model over the last year. And I think that flexibility we demonstrated of allocating capital that comes back into new investments, into secondaries and into buybacks has been a core pillar of the last year or 18 months that has been a way of us driving value. So looking ahead, extremely positive, strong portfolio, very good growth coming through the portfolio, strong balance sheet, capital pools expanding and then the performance coming through in the NAV accretion as well. So very happy to be up here and to demonstrate all of those pillars of our strategy and our platform and seeing those coming through the numbers. So I think with that, we will say thank you and go to questions. William Larwood: Will Larwood from Berenberg. Firstly, I was just wondering if you could give us a flavor of how valuations are changing across from Series A, Series D and then sort of more towards some of the later-stage businesses. And then secondly, if we think about future capital deployment, how should we think about sort of secondaries, primaries, buybacks? I noticed that you've got GBP 39 million committed or potentially going to be invested in your forecast for this rest of this financial year. So just a bit of a sense around that for this year, but also into the next couple of years as well. Benjamin Wilkinson: Thank you, Will. So taking them in order, valuations at this stage we're focusing on is A and B. At that stage, you will see -- let's take Series A, you'll see commercial tractions, maybe a couple of million of revenue. And then what you're focusing on at that stage is how much money the companies are raising, trying to make sure that's balanced between what they need to raise versus what they'd like to raise. And what I mean by that is if they're raising [ GBP 10 million ] because that unlocks the next level of proof points for them, that's usually a better thing for them to do versus raising [ GBP 30 million ] and having excess cash. And so the valuation is a function of how much they raise versus the dilution. So getting that balance of the size of the raise is important, but also being able to demonstrate to new investments that we're an investment house that can follow on in our capital. If you keep proving your growth, if you keep proving your commercial traction, we'll put more money to work. And that's when you start thinking about Series B investing. The tickets are going to be deeper. So you're thinking GBP 20 million type tickets as an average. And then again, it's a function of dilution. But by that stage, you should be seeing GBP 5 million, GBP 10-plus million of revenue. So it starts to become a function of multiples alongside. As you get to later stages, the commercial proof points come through, and therefore, you're really valuing those businesses more on financials and pure financials and there's more capital available at those stages. So you'll often see higher, larger raises, but also more availability of capital. So when I talk about gaps to capital and why we play in a part of the ecosystem, which is very important, it's because you need people with deep pockets that can write consistently GBP 20 million investment checks plus, but also have the venture skills to balance risk and growth and help those companies with active management. So that's why I think the part of the market that we invest into is quite important, but also something that we do, which is a unique point of reference. In terms of how we deploy capital going forward, we think about GBP 100 million is where we'll end up this year, GBP 95 million to GBP 100 million is what we're budgeting. We clearly want to put more capital into those Series B deals we've been talking about supporting those later A deals as well. And then secondaries are still an important feature. I think that's a great way of us balancing the portfolio. We've got this core, which is maturing. We think that those will turn to realizations in the next, call it, 2 to 4 years, you'll see a lot of that value coming back through to our portfolio. And our job then is to be NAV accretive allocators of that capital. So we want to put it into direct investing. We want to put it at the Series B stage, which is where we feel is that right balance of commercial traction, risk and upside. But also we want to be putting that into buybacks if we're trading at these discounts. So that's the way we'll think about it. Getting back to a level of GBP 100 million, GBP 150 million of deployment might be where we'll end up. But what we will be doing is balancing our capital deployment with other pools. So if we have third-party capital coming alongside the public balance sheet, that means that we can more consistently write those bigger tickets at Series B, and that's the way we're thinking about the strategy going forward. William Larwood: I just follow on with the Series A -- sorry, just the Series A and Series B valuations, how have they changed versus sort of 12 months ago or 18 months ago? Benjamin Wilkinson: It really depends on the type of business, honestly. If it's got an AI wrapper around it, clearly, those companies have been getting elevated valuations. And if it's a more normal, let's say, business that we like to invest in, clearly, companies that are driving productivity, innovation, they are infrastructure layers into certain themes, then I think they've been fairly stable, actually. You've seen a real degree of consistency. And when I showed you the European market and the movements we've seen in the market in terms of capital, a lot of the capital that's going to a fewer number of companies has been going into the AI ecosystem. Clearly, early stages in terms of the large language model levels, that's really intensive capital area. That's not somewhere that we've been looking to play. We're more interested in those application layers thinking around how do enterprises use the underlying technology, how does it drive productivity? How do you get more customers wanting to buy it? That's where we think about technology. Patrick O'Donnell: Patrick O'Donnell here, Goodbody. A couple of questions. So just on the secondaries, in terms of sort of what you alluded to in terms of near-term realization, anything you could give us whether it's relating to Connect and some of the key assets there or anything -- any developments strategically or commercially in some of the kind of secondary funds? Benjamin Wilkinson: Yes. When we invest in secondaries, we're pinpointing key assets that are a maturity profile that we can then map that out and look to get our target returns. In terms of the Connect Ventures deal, that gave us exposure to Typeform and Soldo, 2 very good businesses, also already levels of maturity that suggest within a 3-year time frame, which is roughly the average we've seen in secondaries, you might see those turn into liquidity. So that's the way we think about it. Not necessarily right, we've invested now go and sell the asset. It's more about -- it's within their maturity window, sell it at the right time to create the right value. And those companies are on that journey, but they're also scaling their own businesses. They're at a stage where scaling that and continuing to grow might be the best option, and we're going to get the benefit of that fair value growth that goes with it. So I don't want to paint it as a picture of we're invested now. This is your time, you're on a clock. It's just about value creation and value creation from growth is just as good as value creation from realizations. In the most recent SpeedInvest deal, again, we've got companies that we haven't been able to be specific about them, but there's at least 5 assets there, one key asset in particular that we're excited about that hopefully we'll be able to talk to you about a bit more next year. Patrick O'Donnell: Very good. And just on the sort of valuation, anything you could point to sort of since you bought, say, the Connect Venture assets, anything moving in the right direction or whether it's some of the key assets? Benjamin Wilkinson: There are some uplifts in the secondaries. When we bought them, we've acquired them at discounts, more often than not because you're providing liquidity to a part of the market where the LPs who are the investors in those funds can choose to stay in and ride the upside, but they might be in for a time period when they've already been in those companies for 10 years in those funds rather for 10 years that they would feel actually taking some cash off the table now is more appropriate. So we can usually acquire at discounts. And then with the commercial traction of those businesses, they continue to grow, then we can write those up. And you've seen, I think, on the last slide that I showed you that the multiples of capital on those most recent investments are in the positive territory. Patrick O'Donnell: Clear. And just maybe one last one. In terms of sort of the operating costs that you've flagged the sort of reduction over the last 6 months in general admin expenses. Would you expect a similar pattern of cost between H1 and H2 on that? And like is the H1 number broadly sort of a 50-50 split? Andrew Zimmermann: It should be, yes. We're continuing to work on efficiencies and managing our operating cost base, both in terms of third-party costs, administrative fees, technology and leveraging the maximum from those and also with our headcount. So we've obviously reduced our operational headcount slightly by being a bit more efficient, but maintaining that investment in the investment team so that we have that quality, high part quality with the investment team to keep growing that NAV in the portfolio. But we'll be very on top of the costs going forward because we're obviously mindful of that and how that benefits shareholders. Patrick O'Donnell: Understood. And very last one, just on the sort of core portfolio. You obviously have very mature assets now. You pointed a 2- to 4-year exit time frame on revenue. I'm actually a bit surprised at the length of it. Anything you can kind of give us on that? Are any nearer term sort of which ones you'd point to as sort of from an exit point of view that have the shortest timeframe within the core? Benjamin Wilkinson: Yes. We're always quite careful to talk about our targets through the cycle because things tend to be lumpy naturally. When we talk about exits, we want to talk them within a timeframe because it's ultimately what's right for the business. If you're going down an IPO path, as you know, that's a minimum 18 months project. And then if you're going through an M&A process, that can happen at any time on your journey, and it's then about working out what's right for the company and for the returns profile. So we always talk about them in broader terms because we're not in control of exactly when these things happen. If I look at the shape of the core, though, you have companies like Revolut that have a stated IPO target. I think in the press, most recently, they were talking about that within 2 years or at least 2 years. So that might be the horizon. For us, if the business continues to grow at 70%, 50%, let's say, uplifts, then the reality is we're going to create value by holding on to our position and just managing that as a portfolio position as we see pockets of liquidity, taking some off the table. We think that that's the right balance. Companies like ICEYE clearly scaling to a maturity, supporting parts of the ecosystem where naturally you think that might be a public company, certainly has a profile of a company that would perform well. And then things like Thought Machine have talked about potentially going public at some stage on their journey also. What is true, though, is that 85% of our returns have come through trade sales. So this is often an arbitrage of larger businesses acquiring great technology companies and then putting that technology into their existing customer channel. That's the arbitrage that often exists, and we'll see many instances of that as well. So I think the maturity of the core companies, the breadth of the technologies that they're addressing and the markets they're addressing really lends itself to us seeing a lot more coming through in the next -- in the coming years. James Lockyer: It's James Lockyer from Peel Hunt. Maybe just a follow-up to the last question about exits, not specifically timing, but given that you were able to exit some of the Revoluts, which allowed you to sort of demonstrate liquidity for your trophies. Are there others out there that you have the ability to do that? Because obviously, as they grow and those core are the ones that are going to grow most presumably, that risk in terms of proportion of your business gets larger. Is there any thoughts around going, well, as it gets to a certain size, we'll think about trimming if we can because then it reduces our lingering overexposure sort of threat perception, let's say? And then secondly, you seem to allude that your particular AI exposure isn't so much the bubble or perception around there. You said your valuation has been relatively steady. Is it fair to say that if there was an AI bubble burst, the assets you've got are less exposed to that? And how are you valuing the AI adjacent companies such as General Index, Polymodels and Deciphex in that context? Benjamin Wilkinson: You're going to ask me another one then. I was going to forget them. James Lockyer: I can, but... Benjamin Wilkinson: Yes. You always have a list. Thanks, James. Let's start with the Revolut position and thinking about the shape of the portfolio more generally. We look to take value off the table, thinking around returning costs, thinking around opportunities for balancing each of the investments. So I think we demonstrated that clearly with Revolut where it becomes a more significant asset. It's still growing strongly. Commercially as a business, very, very positive. But for us, it becomes a moment of thinking around what's the shape of the portfolio, what's the time horizon over the next few years. And we would take a bit of liquidity on the journey has been our strategy. And we'll do that with other companies as well. Quite often with funding rounds, there's an opportunity to take some liquidity, and we'll take some of that off the table. But what we'll also want to do is balance that with the commercial traction and the upside. So we'll always think around this point about NAV accretive use of capital. If we're going to recycle capital, we want to put it to work into assets that are growing faster than the company we're already in. And some of it is balancing because you don't want the luxury problem of risk, if you like, in the way you've described it. I think it's certainly a luxury problem. But you don't want too much of your eggs in one basket, and therefore, the balance of the portfolio is the way we will think about that. I think we've demonstrated that we've been sensible about taking liquidity at the right times, balancing with riding the upside and also balancing with reinvesting into new opportunities. In terms of the AI assets, the companies that we're investing in fundamentally are driving business by being efficient, if you like, for the customers that they're selling to. So think about a General Index, that's driving an efficiency in a market by using technology that makes it quicker and cheaper to get the data that people like Bloomberg and ICE ultimately need for their commodity prices. That doesn't go away if there's an AI bubble burst. It's about ultimately fundamentally, what's that technology used for. That's what we care about. And then the pricing of those deals, I would say, has very much been in line with the market. I don't feel like there's been a sense where we've had to massively overpay. And you say, okay, well, why would that be? It's because we build relationships with those teams. We build a trust that we understand their companies and we understand their markets, and we can help them grow and scale. Their chance of success in those businesses is higher with our capital and our support than if they didn't have that. That's ultimately the way that we will try and create value. James Lockyer: If I may ask a third question. Just on the 6% on that basis specifically on that 6% fair value growth, how much of that was financial upgrades versus multiple reratings, I'd say as a sort of split? Benjamin Wilkinson: Andy, if you want to... Andrew Zimmermann: It's a mix, actually, because comps have helped in certain sectors. So obviously, things like ICEYE, that's obviously been beneficial. They've probably not helped in some sectors like SaaS and cloud. But -- and CoachHub is a good example, I guess, where that revenue proof point has fallen away a bit. So we've had to reduce the premium for that value. But other ones have had very strong commercial traction as well as the benefit of the tailwinds, Ledger being a good example as well as Revolut. Benjamin Wilkinson: I think that brings us to the end of the questions, and we're about time. So thank you, everybody. It was a slightly longer presentation, but we really wanted to get into a bit more of the depth of the portfolio. So hopefully, those slides are very useful. There is also appendices to the presentation, which we won't take you through now, but there's some more interesting information to look at in there as well. So just leads me to say thank you to everybody. We're very pleased to have a positive set of results, and thank you for your attention.
Brian Bruley: Good morning, and welcome to United Bancorporation's Third Quarter 2025 Earnings Call. I'm Brian Bruley. I'm joined today by Mike Vincent, our President and CEO; Leigh Jones, our Chief Financial Officer; and David Stewart, our Chief Credit Officer. We'll be taking questions through the Q&A function of the Zoom call, [Operator Instructions] So with that, Mike, I'll turn it over to you. Michael Vincent: Very good. Thank you, Brian, and good morning, everyone. We appreciate you joining us once again for a quick call just to highlight some of the activities for the third quarter. So let me just jump right in. For Q3 2025, we are reporting a net income of $4.2 million and earnings per share of $1.29, that is compared to $5.1 million and earnings per share of $1.45 for the same period last year. Year-to-date, we are showing net income of $13.5 million and EPS of $4.07, that is compared to $20 million and $5.63 for the same period last year as well. Thus far, we talk about this almost on every one of these calls. Our net interest margin has remained strong as it has in prior quarters, this quarter was no exception. Year-to-date, we are reporting 4.59% on the margin. One thing I'll highlight, and we may touch on this a little bit later in the call, we do continue to repurchase shares. We have acquired 56,000 shares during the quarter. And I will tell you, for year-to-date, that's 163,000 shares that we have been able to repurchase thus far. So just with those few highlights, I'll turn it over to David Stewart, our Chief Credit Officer, let him talk a little bit about the loan book. David Stewart: Sure. Good morning, everyone. Glad to have you this morning. Year-over-year loan growth has been right at $46.5 million or 5.4%. Loan growth in Q3 was right at 1.4% or $12.3 million. Kind of the same story we've been along -- same story line we've been on for the entire year and most of last year. That's driven by multifamily construction, continue to see good production within that book as we exploit our specialty within the affordable housing space. And we've also seen good growth in commercial real estate. So pleased with what's going there. You will notice that non-accruals decreased in Q3 by $1.2 million to $7.5 million. Doing a little cleanup work. I think we've talked about this on prior calls. The Camden portfolio in Wilcox County, continue to see some adjustments there we're having to make associated with some cleanup work, frankly, that's a forest county in the state of Alabama, a heavy book of consumer loans. So we're just sort of working through resolution in that book. Also, you'll see that the charge-offs for the quarter were right at $1 million. That's related to that book and taking some marks on a couple of other credits as well. On the positive side, you will notice that ORE did decrease by just over almost 800 -- $701,741. We had a piece of property that had been in the bank's inventory for quite some time. We had possibly help for branch expansion. We decided to go ahead and market that and take that off the books. So that was due to -- that's kind of tells the story on the decrease in ORE. I did want to just highlight nonperforming are still a little higher than we would like to. They've come down quarter-over-quarter. They were at 70 basis points and then past dues ticked down a little bit as well, hovering around 2%. That's primarily driven, as we've talked about, some sticky larger credits. They're just taking time to resolve. We do have one that's got a resolution in our target. I don't have an estimated time frame, the associated government shutdown has slowed down some of that. And then we've got some other kind of larger credits just working through resolution, spend a lot of time there. But I think we are optimistic right now. As you guys know, we have a pretty sizable ag portfolio. We've had pretty good weather through Q3. So everybody's crops look good, yields look good. So we're hopeful on that front as long as prices on commodities hold up. So that's all I've got on the loan book. So I'll pass it over to Leigh for securities discussion. Leigh Russell-Jones: Sure. Good morning, everyone. So the securities book still maintains a book value of about $316 million with a yield of about 3.64%. The weighted average life fluctuates a little bit, but that is 6.7 years at the end of September and the duration just under 5 years. We still have about 20% of the book is floating on the securities side. Switching gears to talk about deposits. Year-over-year deposit growth has been about 3.9% or about $42 million. So we still continue to see growth there, primarily in time deposits -- and we have a train coming through. So bear with us here for a second. Anyway, the time deposit rates, we've maintained those yields a little bit higher to be competitive in the market and to continue to attract new depositors into the bank. And the competition does still remain strong in our markets. This has all supported our liquidity position. Our cash-to-asset ratio is 11.15%, and we still continue to monitor liquidity on a daily, monthly basis. And that's really all that I have. So I'll turn it back over to Mike now. Michael Vincent: Thank you, Leigh. I'll interject as well. That is our local economic barometer, I suppose. So the frequency of trains going by is actually a good thing, although maybe not as timely as we would like. So let me speak a little bit about the margin. I mentioned earlier that we've been able to maintain a pretty robust and strong margin year-to-date at 4.59%. That is pretty comparable to 2024 when we were reporting 4.57%. Earning assets at $5.78 versus 5.63% for prior year. Cost of funds, 1.40% versus 1.24% versus prior year. So all in all, pretty strong numbers, and we work very hard to maintain those levels. Quarter-to-date margin of 4.58%. So that's pretty well in line. You may see a few basis points tick up, tick down. But all in all, I think we're in pretty good shape. Looking at some forecasted impact of the rate environment that we find ourselves in. When we kind of shocked the balance sheet down 100 basis points, has an impact on net interest income of about 5%, down 200 is about 9.6%, 9.7%. So we recognize kind of what the interest rate environment looks like. Most likely, assuming a gradual 100 basis point decrease over a 12-month period, does show an income decrease of about $400,000. So we are managing it, I think, very closely, knowing what rates are likely to do over the next 12 months or so. One thing we've talked about with anybody that we've met with individually or we've had group conversations. This year has been a little bit different than many others. What you see in bank performance has pretty well been core bank activity. There's been very little impact from some of the CDFI programs that we have historically participated in. I will say UBCD, UB Community Development, our CDE entity recognized $560,000 in new market tax credit fee income during the quarter. So that is one thing I did want to point out to you as well. On the non-interest expense side, obviously, we've carried some elevated expenses higher than previous year. Much of this is related to the core conversion that we've talked about. Upgrading our cloud environment comes at about $1 million cost. Consulting fees to get us through the conversion about $0.5 million in cost. Miscellaneous, and I'll say miscellaneous, it's a very big number for miscellaneous, but $480,000 in various conversion-related expenses as well. So some of that -- much of that is, I would say, is onetime hits when you look at kind of a go-forward run rate. Some of these obviously will remain, the cloud environment kind of is where we are. But a lot of this, we will be glad to see in the rearview mirror and have behind us. On a capital perspective, tangible book increased to $45.06. That's up from $43.07. Price to tangible book at 1.23. Dividend is something that we continue to talk about. We focus on, we've been focusing on it for a couple of years more strategically with a yield of right around 2.5%. So all that being said, that gives us an ROA of 1.45%, return on tangible equity of 12.3%. I'll touch on ECIP. I know -- in fact, I think I saw an ECIP question. Leigh, I may enlist your input on this a little bit, too. So obviously, we have signed -- as we've talked about before, we've signed the ECIP option agreement outlining early disposition. We continue to measure and monitor. Obviously, with what's been going on with the government shutdown, there's been a lot of, I guess, a question and about what's going to happen, when it's going to happen. Leigh and her team continue to monitor and to measure what we're doing from a lending standpoint. Leigh, I don't know if there's something you may want to contribute from that perspective about how that's going. Leigh Russell-Jones: Sure. We are required to report quarterly to the Treasury, regarding our lending in the various categories of deep impact and qualified lending. So we are looking at that in relation to repurchase. I think that repurchase according to the lower guidelines as far as being able to repurchase through the mission-aligned nonprofit looks pretty favorable at this point. It's still kind of early to tell. We're very focused, as Mike said, on lending and what we can do to ensure that we are able to repurchase the capital in a timely manner and at the lowest rate possible. Michael Vincent: So let me give you just some -- I guess, some high-level comments on the quarter itself. We've mentioned core conversion multiple times. So that was finally put to bed. And I say put to bed, at least the actual conversion itself, it went about as well as I think a core conversion can go. Obviously, there's always going to be some hiccups here and there. You try to minimize the customer disruption, any kind of issues from a customer-facing perspective. But I think, all in all, that went extremely well. We are working on what we are calling day 2 items, things that were not part of the initial conversion weekend. We've got teams working on things like consumer lending efficiencies, that sort of thing, online activities. So there's more to come. There's more efficiencies to be gained. But all in all, having that behind us, one, from a cost perspective; and two, from an employee focus perspective is a very positive thing. It's been a heavy lift, as you would expect, for a whole lot of people, and we're glad to get that behind us. I do want to speak a little bit about CDFI and kind of what we hear, what I know, and what this means for us. So obviously, all year long, there has been some uncertainty regarding the fund itself, funding for the various programs, what support do you have or not have on a congressional level. So I will tell you, this year, it's really no different than other years, but we've certainly focused on congressional advocacy, making sure that we're in front of our leaders, both in the House and the Senate, making sure that they understand the importance of these programs, which they do. They have understood it. But it's interesting time right now, obviously, in Washington to try to get certain things done. Overlaying this, the government shutdown certainly did not help working through some of these issues. The employees, the fund, themselves received a reduction-in-force notification. So that put a lot of things at a standstill. Now that the CR has been approved and people are back to work, what that means about recertification applications, the various programs, the funding and that sort of thing. Still remains to be seen to a degree, the experts in that area seem to think that they would likely consider some extension to some deadlines. As we sit, there's a 12/31 deadline on recertification applications. Being shut down for as long as they were, obviously, has put them well behind the 8 ball, and they've got a lot of ground to make up. So what happens with that deadline remains to be seen. From our perspective, we have tried to take it as business as usual. We have continued to administer the funds as we were supposed to. We are doing all the reporting as we're supposed to, and we'll go from there. So -- as far as funding that is waiting to be, I guess, given out, that is a function of what can get pushed through OMB. We've had conversations with the Treasury Secretary, with others. And frankly, that process is just going to play itself out just a little bit, I think. As far as our group in Alabama, though, everybody seems to be really on board with what we're doing and they understand the importance so much so that the greater amount of our delegation did, in fact, actually sign a letter to Treasury and OMB advocating for the program and the funding to be released. So we keep on fighting and keep on making the calls and doing the things that we need to do. Running concurrently with all of that, though, interestingly enough, is the New Market Tax Credit Program itself being made permanent through the Big Beautiful Bill. It's something that we, along with many others in the space, have been advocating for, for quite some time. So we are excited to see that, that is going to happen. And as you might expect, those groups, our new markets group, our affordable housing group, they've got ample deals. They've got more deals, frankly, to get them through next year than we can really report on here. So it's not as if things have come to a grinding halt because they do have prior awards that they're trying to work through as well. So from that perspective, that's kind of where things are. So we've got a little bit of time. So I thought maybe we could kind of go through some of the questions. We do have a few in the queue here. So let's see if we can address some of this. Michael Vincent: I have a question about repurchasing shares, given our capital levels and what are we expecting in '26 on buybacks and capital allocation, generally speaking. So good question. We have tried to keep a buyback program in place. I'm pleased that we've been able to make up some ground this year and find shares to repurchase as we obviously feel like it's a good value and a good investment for us. I have no plans on changing that. We have -- we continue to find, albeit smaller blocks. That's fine. That's perfectly fine with me. So we continue to be in that space, looking for sellers if they exist. As far as just capital allocation in general, yes, it's really no different than what we've been doing. I think the M&A space certainly has picked up and gained a little bit of momentum, maybe not so much in Alabama, but we do know that any momentum is a good thing as far as that is concerned if you are a potential buyer. So we continue to kind of work our contacts, work with as many people as we need to and have those discussions, and we continue to do that. So I think that's certainly well in play. Leigh, there is a question in here. You may have touched on it just a little bit, but I'll ask you if you want to -- if you have any comments about the outlook for deposit pricing and just general cost of funds. Leigh Russell-Jones: Sure. So I guess thinking about deposit pricing, how we're thinking about it is we do have a strong margin right now. So we feel like we do have a little leeway on deposit pricing to continue to try to grow and attract new customers, as I said earlier, with some higher rates and establish those relationships. So that's kind of our thought process for this year, and we'll see how things kind of go into next year. We are anticipating some lower rates, and so we will be reviewing our deposits and pricing accordingly. So I guess I would expect deposit pricing to remain steady to fall slightly depending on what happens with Fed funds and markets. Competition, as I said earlier, still remains pretty strong in our markets for deposits and rates still remain on the higher end by some of the more local banks. So thinking about that, we're just having to be strategic about how we're pricing it and thinking about that. Michael Vincent: Okay. David, I wanted to hear for you maybe to speak about the level of the allowance to loans comparing to what it looked like earlier in the year, that sort of thing. David Stewart: Sure. As discussed, we have taken some right, some charge-offs and non-accruals off the table with the Camden book. So we were a little heavier on the allowance previously as we saw that there were some emerging issues there we would have to address. And also, we had some larger credits with kind of work towards resolution as well in the legacy United Bank book. So we're confident with the allowance where it is. I don't predict any substantial changes at this point. We proactively on a monthly and quarterly basis, identify specific credits that may need -- have some impairment, and we reserve accordingly. So we've also been very proactive in ensuring that we've got sort of a forward-looking view of any credit challenges. So short or long, I feel like we're in a pretty good spot where we are. It is down from where it has been in the past. But like I said, we've taken some of those credit issues and work them through to resolution. So that's kind of why you're seeing a little lower amount. Michael Vincent: There was a question here, and I'll speak to this and then maybe, Leigh, I'll see if you have any comments about it. Regarding salaries and benefits expense line item up from similar period from 2 years ago and then looking at deposits up substantially less than that over that same period. Asking for guidance on what this may look like in 2026. So I will say a couple of things about salaries and benefits. One, we've -- obviously, the cost of attracting and retaining talent continues to go up. It's obviously something that we look at very closely on a monthly and quarterly basis. We have made some strategic hires as well, knowing that the bank is growing. We're moving into new areas. And then I think the roll-in of the branch in Camden came with a little bit of, I guess, I'll say, maybe not the efficiencies that you might have expected to see with something like that. I do expect that to stabilize a little bit. I mean, as we go into 2026, that's been a very hot topic of discussion as far as controlling salary and benefit expenses, making sure that if we bring somebody else on that they are going to be somebody that can contribute to our revenue generation and not really wanting to add to overhead expenses as much as possible. I mean, Leigh, I don't know if you've got maybe a different perspective or some thoughts on that. Leigh Russell-Jones: No. I mean I think you touched on all the things. Like Mike said, that's been a hot topic, and we've been very focused on salary and benefits, and where the number is and just trying to manage it. So I think you should start to see some gains and some efficiencies into next year, I think, as we focus on that. Michael Vincent: A question about the M&A environment. I hope I've answered that, but I'll just say that in Alabama specifically, it has not been as robust as other areas. I work and I have conversations with a number of groups that are advising, counseling, helping us consider our options. Certainly, when we look at growth, I mean, it's going to come from either organic growth within the footprint, which is not off the table. We look at some of our existing markets and think where do we -- where can we bolster the franchise, and we've got some opportunities there. I look at our franchise in the Florida Panhandle and oftentimes, we talk about Alabama, and we don't talk as much about the Florida markets, but I think there's a lot of opportunity there. Obviously, in some of these areas, there is a glut of competition. You've got the overlay of the credit unions and that sort of thing and what that means from the M&A space. But I will say I'm not less optimistic. I won't say on the call that I'm more optimistic, but sometimes patience will pay off, I think, with this kind of stuff. And as long as you've got conversations in the works. I think we're, as an organization, are probably respected as much as anybody about how we have done things in the past. And certainly, we will have a seat at the table whenever there's opportunities that are there. There is a question about thoughts on receiving a Capital Magnet Fund award in 2025. Leigh, you can tell me the hush, but I don't see a Capital Magnet Fund award in 2025. Leigh Russell-Jones: Yes, I would not count on it. Michael Vincent: No, I don't think so. And I just -- with, frankly, the backlog of what's going on right now, I just don't know how they would even get to it if they really wanted to try to get it done. Now what that means for 2026, I don't know. But obviously, it's an impactful difference when you look back at prior years and you see Capital Magnet Fund awards of $9 million, I mean, you're going to see obviously a definite impact on the balance sheet and the income statement. So we will keep advocating and keep communicating, I guess, regarding what we hear from the CDFI fund in these various programs. But until something moves in Washington, I don't know that I would feel good about predicting anything on any of these words. So if nothing else, I'm asked often, what does the bank look like if you strip back some of this other stuff. And I think 2025 is going to be a good example of that. In what ways are we using AI in the organization? That is a great question. And one that we wrestle with almost daily at this point. We know that AI has got -- it is immensely powerful from a banking organization strategy perspective. It's -- I won't say dangerous, but it's something that we better understand how we're using it. Certainly, from a back-office noncustomer-facing perspective, if you can gain efficiencies either with meeting minutes, with policies and procedures and things like that, then I think it's immensely powerful. But what I will say is we are committed to making sure that we are at least -- I won't say on the cutting edge, but at least on the front end of how AI can be used in the banking space. Right now, I have got our head of our IT department that is going through a certification program, if you will. It's basically an AI strategist designation to try to help us determine what our options are and what makes sense. Certainly, we've got to have conversations with regulators and make sure that they understand how we're using AI. But I recognize the power of it and I recognize the necessity. If you don't figure it out and if you don't use it to the extent that you can, you're going to get left behind. And certainly, from a cost control perspective, it's something that we just have to have. So that is a great question. It's very timely, and it's one that we are wrestling with really on a monthly basis right now. So that is something that we'll talk more and more about going forward, I'm sure. I don't know that I've missed any questions. So if there's nothing else, Brian, I'll turn it back over to you. Brian Bruley: Thank you. If you have any other questions or think of something else you'd like to ask the team, you can send them to me at brian.bruley@unitedbank.com, B-R-I-A-N dot B-R-U-L-E-Y @unitedbank.com. Thank you for joining us today.
Operator: Welcome to Workday's Third Quarter Fiscal Year 2026 Earnings Call. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of the call. During the Q&A, please limit your questions to one. I will now hand it over to Justin Allen Furby, Vice President of Investor Relations. Please go ahead. Justin Allen Furby: Thank you, operator. Welcome to Workday's third quarter fiscal 2026 earnings conference call. On the call, we have Carl Eschenbach, our CEO, Zane Rowe, our CFO, and Garrett Katzmeyer, our President, Product and Technology. Following prepared remarks, we will take questions. Our press release was issued after the close of the market and is posted on our website where this call is being simultaneously webcast. Before we get started, we want to emphasize that some of our statements on this call, particularly our guidance, are based on the information we have as of today and include forward-looking statements regarding our financial results, applications, customer demand, operations, and other matters. These statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. Please refer to the press release and the risk factors in documents we file with the Securities and Exchange Commission, including our fiscal 2025 annual report on Form 10-Ks for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Workday's performance. Non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release, in our investor presentation, and on the Investor Relations page of our website. The webcast replay of the call will be available for the next ninety days on our company website under the Investor Relations link. Additionally, the prepared remarks of this call and our quarterly investor presentation will be posted on our Investor Relations website following this call. Our 2026 quiet period begins on January 15, 2026. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2025. With that, I will hand the call over to Carl. Carl Eschenbach: Thank you, Justin, and thank you all for joining us today. I'm pleased to report that Workday delivered solid Q3 results, with 15% subscription revenue growth and a 28% non-GAAP operating margin. Our teams executed well, and our value proposition is clearly resonating with organizations around the world. I've been on the road a lot lately, meeting with our customers and prospects, and they're all saying the same thing. They see the potential of AI, but they're stuck with disconnected systems, bad data, and closed platforms. That's where Workday gives them the ultimate advantage. By unifying HR and finance on one intelligent platform, we deliver business-ready AI that helps organizations adapt quickly, make better decisions, and deliver outcomes that truly matter. Now let's turn to our customer highlights for the quarter. In Q3, we continued to grow across industries, segments, and geographies. In HCM, we added new customers, including Sunnybrook Health Sciences Center, Fuji Electric, and the Magnum Ice Cream Company. Core financials also performed well, driving strong full suite adoption. In fact, half of all net new global deals in Q3 included both HR and finance, with key wins such as Arden Health, Kelly Services, and Specialized. We also expanded with customers such as CommonSpirit Health, Levi Strauss, and Novartis, and consistent with recent quarters, our customers' headcount levels continue to grow modestly. And our momentum isn't just from large enterprises. Workday Go is helping us drive strong new customer growth and continued ACV momentum in the medium enterprise. Just last week, we announced a major expansion of Workday Go, including global payroll, an expanded partner network, and a new AI deployment agent that can cut implementation time by up to 25%. Customers of all sizes and industries tell us that an investment in Workday is an investment in their AI strategy. More than 75% of our core customers are using Workday Illuminate AI, driving well over 1 billion AI actions on the Workday platform this year alone. And adoption keeps growing. More than three-quarters of net new deals and 35% of customer expansions included one or more AI products. Among the standouts, Eversort delivered another record quarter, and XtendPro grew net new ACV by more than 50% year over year. Altogether, our AI products added more than one and a half points of ARR growth this quarter. That doesn't include Paradox, which we closed in Q3 and is already off to a strong start. And with the rollout of flex credits early next year, we're making it even easier for our customers to adopt our AI and platform innovation. Our customer footprint spans every major industry. Tech and media and financial services, two of our billion-dollar industries, were standout performers in the quarter. And in Q3, healthcare became our sixth industry to exceed $1 billion in ARR with strategic wins like Arden Health, Ascendiant, and Northeast Georgia Medical Center. One of my favorites this quarter was a major win back at a large US health insurer. They were a long-time Workday customer that moved to a competitor several years ago and quickly regretted it. Now they're back with Workday and choosing our full suite with a ten-year commitment. Our public sector momentum was also strong in Q3, and despite the weeks-long government shutdown, engagement across federal agencies remained high. The Department of Energy's successful go-live in Q3 is a great example. They're the first cabinet-level agency to bring their core HR systems into our FedRAMP authorized cloud. We're also nearing completion of the first phase of our work with the DIA. This opens up an important long-term opportunity both with the agency and across the intelligence community and Department of War. In SLED, we welcome new customers including the County Of San Luis Obispo, the city of Concord, and Cleveland State University. And we expanded with Cornell University, which added both core financials and student. While we had a number of successes across our Fed, SLED, and healthcare teams, we also saw some isolated impacts within institutions that rely heavily on federal grants, primarily in higher ed. However, when they are ready to move forward, our win rates are very strong, and we're excited by the long-term opportunity ahead. Across all of these industries, we're delivering innovation that's changing how work gets done. And the market is taking notice. Gartner just named Workday a leader in three magic quadrants, including cloud ERP for service-centric enterprises, cloud HCM suite for 1,000-plus employee enterprises, and the first-ever MQ for Cloud ERP Finance, giving us the highest placement for both ability to execute and completeness of vision. If you joined us at Workday Rising, you saw how our organic innovation is only accelerating. We introduced new Illuminate agents that tackle some of the toughest challenges at work, from performance reviews and workforce planning to financial close. These purpose-built agents are powered by our unmatched HR and financial data and context, which is what makes them highly accurate, actionable, and trusted. And now we have more than 150 customers, including Target, Accenture, and Netflix, using our agent and agent system of record in early access. At the same time, we're opening up our platform so customers and partners can create their own AI-powered apps and agents with Workday build. And with Workday Data Cloud, along with our partners, including Databricks, Salesforce, Snowflake, and now Google Cloud, customers can unlock even more insight and value from their Workday data. We're also accelerating our innovation through strategic acquisition. We just closed our acquisition of Sana, an AI-native platform with an incredible team. They're going to help us completely reimagine our user experience for the age of AI. Our vision is very simple and straightforward. Make Workday the new front door to work by bringing together enterprise knowledge, AI agents, and all the HR and finance processes our customers run every day. This will make it easier than ever to find the answers, take action, and learn right in Workday. Customer feedback on this vision has been absolutely incredible. And Sana Learn brings hyper-personalized skill development and AI-generated content creation to Workday Learning. I can't wait for our customers to get their hands on it. We're not stopping there. Last week, we announced the intent to acquire Pipedream, a low-code integration platform for AI agents with more than 3,000 prebuilt connectors to the world's most widely used business applications like Asana, Jira, and Slack. When you combine that reach with Workday's trusted data, deep business context, and the capabilities from Sana and Flowise, our agents move from surfacing insights to truly getting work done. So, hopefully, you're seeing a theme here. While other vendors confuse the market with thousands of overlapping, general-purpose agents, we're focused on what we do best. And that is building powerful agents for HR and finance that deliver real ROI and measurable business value. Turning to international, we delivered solid performance across EMEA, APAC, and Japan in Q3. We just wrapped up our largest EMEA rising yet. There, we announced the new Workday EU sovereign cloud, which will let customers run our AI-powered HR and finance solutions entirely within the EU, keeping their data local, secure, and fully controlled. Also in Q3, we established a new AI center of excellence in Dublin, which is one of our major R&D hubs, and we announced a new office in Dubai. A few of the great wins we had across EMEA in Q3 included Bayer, ING Bank, and Tandem Bank. APAC also had a strong quarter with wins at Genesis Energy, DBS Bank, and MGM Grand Paradise. And we continued to build on our success in Japan with new and expanded relationships with Pioneer Corporation, Hoshino Resorts, and iSci. Our partners continue to play a critical role in our success. Once again in Q3, more than 20% of our net new ACV was sourced from partners, a testament to the strength of our ecosystem. In Q3, we brought on new Workday wellness partners, including Chime, Spring Health, and Strata, to expand the value we deliver to our joint customers. We also expanded our partnership with Microsoft to help joint customers securely manage their people and agents across both of our platforms. We're living in a new era of work, powered by AI and built on trust. And Workday is made for this moment. The momentum in our business and the energy I'm seeing across our customer community gives me a ton of confidence in what's ahead. A huge thank you to our global workmates, our customers, and our partners for helping us deliver another solid quarter. As we head into Q4, we're focused on finishing strong and setting ourselves up for an even more impactful FY '27. With that, I'll turn it over to Zane. Zane Rowe: Thanks, Carl. And thank you to everyone for joining today's call. Our Q3 results were driven by continued progress across several key growth initiatives as we accelerate innovation throughout the platform and bring exciting AI solutions to market. Turning to results. Subscription revenue in the third quarter was $2.244 billion, up 15%. Professional services revenue was $188 million, resulting in total revenue of $2.432 billion, growth of 13%. US revenue in Q3 totaled $1.825 billion, up 12%. International revenue totaled $607 million, up 13%. Twelve-month subscription revenue backlog, or CRPO, was $8.21 billion at the end of Q3, increasing 17.6%. We closed the Paradox acquisition in the quarter, which added over a point of CRPO growth and was not included in our backlog guidance. Excluding Paradox, CRPO came in slightly above the high end of our outlook. Total subscription revenue backlog at the end of the quarter was $25.96 billion, up 17%, and gross revenue retention rates remained healthy at 97%. Non-GAAP operating income for the third quarter was $692 million, representing a non-GAAP operating margin of 28.5%. We remain focused on making targeted investments to support long-term growth. This includes increasing our AI talent, organically and inorganically, entering new markets such as The Middle East and India, and investing in the medium enterprise. While we make these investments, we're also continuing to drive efficiencies as we scale the business globally. Q3 operating cash flow was $588 million, growth of 45%. In line with our expectations. As we discussed at our recent financial analyst day, we intend to accelerate the pace of our buyback. We made good progress in Q3, repurchasing $803 million of our shares during the quarter and $1.4 billion year to date. We plan to repurchase an additional $3.6 billion through the end of FY 2027, leading to $5 billion in total repurchases. As of October 31, we had $4.4 billion remaining under our current authorization. We ended the quarter with $6.8 billion in cash and marketable securities. Our headcount as of October 31 stood at 20,588 workmates around the globe, including roughly 600 workmates from the Paradox acquisition. Now turning to guidance. For Q4, we expect subscription revenue of $2.355 billion, growth of 15%, which includes revenue from the Sana acquisition and the expected delivery on the first phase of the DIA contract. We expect FY '26 subscription revenue of $8.828 billion, growth of 14%. Our Q4 subscription revenue guidance is consistent with our view from last quarter, excluding the expected contribution from Sana. While we did see some impact in Fed and SLED tied to fiscal funding, this was offset by strong execution across the portfolio, including the Paradox acquisition. We expect CRPO to increase between 15-16% in Q4. This includes approximately 0.25 of expected growth from the Sana acquisition, or about $20 million. And over a point of impact from tenants, which we begin to lap in Q1. For Q4, we expect professional services revenue of $168 million and for the full year, we expect it to be $715 million. We are executing well against our efficiency goals and expect a non-GAAP operating margin of at least 28.5% for Q4 and approximately 29% for the full year. We're optimistic about the AI-driven growth investments we are making and have ample capacity to continue to invest while we drive further efficiencies consistent with the framework from our Financial Analyst Day. We expect GAAP operating margins to be approximately nineteen and twenty-one points lower than our Q4 and full-year FY 2026 non-GAAP operating margins, respectively. The FY 2026 non-GAAP tax rate is expected to be 19%. We are increasing our FY 2026 operating cash flow outlook to $2.9 billion and we continue to expect capital expenditures of approximately $200 million, resulting in free cash flow of $2.7 billion, growth of 23%. Looking beyond this year, as we shared at our recent financial analyst day, we are targeting a subscription revenue CAGR of 12% to 15% through FY '28, along with continued margin expansion on both a GAAP and non-GAAP basis. For FY 2027 specifically, we continue to expect subscription revenue growth of approximately 13%, also consistent with the view we shared in September at our Analyst Day. We are confident in this growth rate based on the momentum we see across the business as reflected in our Q3 performance as well as our Q4 CRPO guidance. We are optimistic about our growth initiatives and our recent acquisitions and look forward to updating you with formal guidance for FY 2027 next quarter. We currently expect our Q1 FY 2027 subscription revenue growth to be approximately 14% year over year and flat sequentially, reflecting typical seasonality from Q4 as well as the expected revenue from DIA in Q4, which doesn't extend into Q1. We believe that the completion of this first phase sets us up for a larger opportunity with the DIA and the broader defense and intelligence communities. We remain on track and confident in our ability to achieve the financial framework we laid out at our Analyst Day back in September, including subscription revenue growth, non-GAAP margins, and stock-based compensation. In closing, I'd like to thank our workmates, customers, and partners around the globe that helped deliver this quarter's results. We enter Q4 well-positioned to close the year with strength and remain focused on our long-term opportunity of driving durable growth while expanding operating margins. With that, I'll turn it back over to the operator to begin Q&A. Operator: Thank you. We'll now begin conducting our question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. First question is from Mark Murphy with JPMorgan. Mark Murphy: Thank you very much. And I'll add my congrats on a very nice performance. Carl, we're hearing some feedback that the venture-backed vibe creating startups have started seeing a slowdown or at least that some of them have or elevated churn. And it's happening because companies are finding it's pretty difficult to operationalize them and put them into production. I'm wondering if you're seeing any signs of some of that novelty wearing off for those third-party, vibe coating products. And if so, do you see any accelerated adoption of Workday Extend where you know, presumably, they'd have all the security and all the other infrastructure is already in place. Carl Eschenbach: Yeah. Hi, Mark. Thanks for the question. And before I answer, I just wanted to say the following. Q3, Mark, was another solid quarter for Workday, reflecting in the strength. And as I always like to say, the diversity and durability of our business. Our customers are seeing clear ROI from Workday. And they're engaging more than ever. And we had more than 1 billion AI actions year to date, and it's only growing faster and faster. We feel really good the momentum of the business as we head into Q4 and into FY 2027. And I'm truly grateful for all the work both our partners and our workmates have done to get us to this point in the year. It's been a really good year for us so far. And Mark, really appreciate your question. It's similar to what Kash asked last quarter. When he talked about all of this potential disruption coming from these AI startups to more mature and larger SaaS companies like Workday. And at the time, I said I thought it was a completely overblown narrative. And I thought it was flat out wrong. And quite frankly, fast forwarding ninety days, think that's playing out exactly like, we thought it would. When I spend time with CXOs around the world that both customers and prospects they talk about three things that's hindering or slowing down enterprise adoption of AI. It is data quality, it's data integrity, and it's security. And by the way, none of these are an issue for Workday. As you know, we have one of the largest and cleanest and most highly curated datasets for HR and finance in the No questions asked. And we have the security compliance and controls in place because today, we onboard a large portion of the world's work and we can apply those same process and procedures to your workforce of the future, both human and digital. And when we spend time with our customers, while maybe they're enamored with these point solutions, they're ultimately coming back to the vendors they trust, who have been in their infrastructure for a long time, has that data set, and drives real business outcomes. The narrative we've been hearing the last couple of quarters is changing, and it's coming back to those who are highly penetrated in the enterprise already providing value, and are deeply trusted by our customers. So I agree with what you're seeing. Seeing it. We're hearing it, and it's reflected in customers continuing to bet on Workday for their future. Mark Murphy: Thank you so much. Operator: Our next question is from Kirk Materne with Evercore ISI. Kirk Materne: Yes. Thanks very much and congrats on the solid quarter. Carl, the other narrative that often comes up these days is clients see, you know, a big customer laying off people. And and I know you guys commented that your customers are are growing, you know, headcount slowly right now. You know, what are the mechanisms that you guys have of a customer? Were to have to lay out people to be able to keep growing ACV with them? Obviously, cross sell, upsell, are there discounts that go away? I just can you explain that a little bit? Because I think people believe there's sort of linear relationship between a number of on a per seat basis and I realized it's probably a little bit more complicated that especially at the high end of your business. Carl Eschenbach: Thanks, Kirk. I appreciate the question. And, yeah, in my prepared remarks, I once again want to articulate and share that on a net basis, the headcount of our customer base is up year over year. So while there are some layoffs out there, we're still growing headcount across our customer base. And what we're doing, you said it, we are selling back into our base. And we're focused not on just seats, but actually revenue per seat. And what we have now more than ever is we have a whole bunch of new solutions both organically innovative solutions and solutions that we got through acquisition that we're selling back into our customer base, whether it's Eversort, whether it's HiredScore, now it's Sana, now it's Paradox, now it's Flowwise, We have so much more to sell back into our customer base and that drives strength for us and offsets any potential impact we might see from headcount reductions in our customers. Also, our customers do do true ups with us both annually on their headcount. And we do have floors and minimums that the customer can bring their headcount down. And that gives us some protection. But overall, we're still seeing growth in headcount year over year. And we're selling just a lot more back into our customer base because they're betting on our platform. And they're using us as a consolidation platform across all of their point solution to drive a better total cost of ownership. Zane Rowe: Hey, Kirk. I just add, if you if you look at the aggregate, it is a net positive, but it's not a significant amount of our growth. So there are lots of elements, as Karl alluded to. That go into that growth number, and this is just one of them. Kirk Materne: Great. Thanks. Thanks, guys. Operator: Our next question is from Keith Weiss with Morgan Stanley. Keith Weiss: Excellent. Thank you guys for taking the question and congratulations on the solid quarter. I wanted to ask about some of the early success you guys are seeing with your AI solutions. Karl, I think on the call, said a point and a half of growth. In ARR already coming, from those AI solutions. Can you give us any rules of thumb that you're starting to see that could help us maybe model this out a little bit in terms of what type of uplift do you see on a typical deal or for a typical customer when they're buying the AI solutions or how broad is this? Like, what percentage of your customer base has already bought into the solutions, and how far do we have to go? Just something to help us extrapolate that early success into what this might look like in a year from now or two years from now. Garrett Katzmeyer: Yeah. Thanks for the question, Keith. And we gave some of these statistics at FAD just ninety days ago. That's why we called out again this quarter. Our AI solutions are adding a point and a half of growth to our ARR. And we're also trying to give you some color specifically on the strength of our AI solution. So for example, 5% of our new sales included in AI solution. 35% of our sales back to our customer base includes AI. We're seeing really good traction, and we're seeing really good early indications of demand from some of our acquired companies like Sana and Paradox. So overall, our AI momentum is as strong, if not stronger than ever, and it's being reflected in how our customers are buying our product. Both at time of new sales as well as our ability to sell back into our customer base. So I couldn't be more excited about where we're at Things like Eversort are had a record quarter We're seeing an acceleration in growth in Eversort. In XtendPro, we call that out, it once again grew 50% year over year. And then when we sell back into our customers, for example, when we sell something like a hired score recruiting agent, it's a significant uptick over what we would sell our standard recruiting, SKU for. Keith Weiss: Got it. Any any sense on how much of an uplift it is versus the standard? Garrett Katzmeyer: Yeah. On on for example, on hired score, for every dollar of recruiting we sell, we sell about $2.50 of hired score on top of it. Keith Weiss: Okay. That's super helpful. Thank you, guys. Operator: Our next question is from Michael Turrin with Wells Fargo. Michael Turrin: Hey, great. Thanks. I appreciate you asking the or appreciate you taking the question. And my congrats on the results as well. I guess just a a two parter for me. I I guess first, just I wanted to zoom in on some of the early feedback around Paradox and Asana, just what you're hearing from customers coming out of Rising and and if that can help the Workday business model continue to evolve towards just some of the questions around AI and Adjenta capabilities. That you're offering alongside the the Flex Credit program. And then Zane, maybe just coming out of Rising, an update on how you're thinking about the trade offs between growth and margin given some of the recent additions in the product portfolio and some of that feedback there as well? Thank you. Carl Eschenbach: Yeah. So maybe I'll start, then I'll kick it over to both Garrett and Zane specifically to follow-up on the questions. So first, as you know, we've closed the Paradox acquisition in October. And within two weeks, we were already off and selling it, and it had a small in the quarter, a few million dollars over a two week period. Just by our sales force going out and selling that into the market. I will tell you coming out of rising EMEA, the demand and excitement for Paradox in being a Workday product and selling on our paper was very, very strong. On 4,000 customers that have worked day learning today. And then, obviously, we're gonna refresh our UI UX leveraging the Sana platform going forward. So the early indications specifically on these two recent acquired companies is as strong as anything we seen when we acquire a company. And maybe, Gary, you can talk specifically about Sana because that one is off the charts, right now from a demand and from an excitement from our customers. Garrett Katzmeyer: Yeah. And as Carlos said, we are seeing tremendous interest around the three main of SANNA. One, as Carlos said, it's the leading AI learning platform So very natural for us to bring this to our customers. Of which we have a very scaled base of Workday learning customers, which are using Sana and are excited about Sana as a learning AI experience platform on top of that. Very natural, very immediate interest. And secondly, what Carlos mentioned, Sana is also now being developed into the leading UI experience for Workday. So you can think about a complete conversational experience around the Workday platform Workday being the innovation leader and our customers are tremendously excited about the massive simplification that brings to them. And if you imagine every employee having access to HR, and finance AI at scale, what that means in cost production, On the other side, you can see what drives that interest. And thirdly, you know, Sana goes much more beyond that, and I would recommend you look at the big picture with also PipeDream adding 3,000 connectors to the Sana platform. Which now allows our customers to take SANA knowledge management, actions in Workday, and the actions that Pipedream adds to really drive enterprise wide AI transformation with that model. And we see very strong customer interest across all of those three vectors. Zane Rowe: Hey, Michael. This is Zane. I'll just add, as you can hear between Carl and Garrett, we're thrilled with the early success that we're seeing from both Paradox and Sana. So as it relates to our financial framework, I'd say no change at all. We continue to invest in AI. Both organically and inorganically and are pleased with the investments we're making there. And at the same time recognizing the efficiencies and scale that we're driving across the business. So we're still driving that within the framework and very pleased with the progress we're making there. Thanks very much. Operator: Our next question is from Brent Thill with Jefferies. Brent Thill: Thanks. Just with with Paradox, I I know that SAP and other ERP installed bases are using that. Is your vision that you can sell this anywhere that you're gonna be agnostic to whatever platform is running in the back? How are you thinking about that from a go to market perspective? Carl Eschenbach: Yes. Thanks, Brett. Are super excited about the go to market capabilities we have around Paradox. Number one, we can sell it back into our customers right, as a an attachment to our already strong recruiting platform, including something like HiredScore. Now we have Paradox. So we have the industry leading AI recruiting platform out there today. At the same time, this is now a new product that is a land only product for our Salesforce who can now go and sell Paradox not only on top of Workday or back into our installed base, but also into our competitors' environment. In fact, a a significant portion of their existing customers aren't Workday today. And we're gonna continue to leverage that go to market model so it gives us another land product without someone having to decide completely on Workday, HR, or finance. They can go just with Paradox. And I've seen that come up multiple times just in the first sixty days of us having this great asset. Brent Thill: Okay. Zane, real quick. Just on CRPO, is there anything to consider in the guide, that you're maybe highlighting as a headwind, tailwind, any change to how you're thinking about that in terms of how we should we should think about modeling it? Zane Rowe: No. I mean, I think it's it's fairly clean, Brent. I mean, obviously, we feel good about what we saw in the third quarter. I mentioned that Paradox was over a point of that. We feel very confident. I mean, as always, CRPO the number of factors, both the net new business as well as renewal activity and just the volume that you get in any particular quarter. So we think we've got great strength heading into the fourth quarter. We've got terrific coverage on our expected subscription growth heading into next year, which I alluded to, as you think about even between the fourth quarter and the first quarter. So no, we feel good about the CRPO growth as well as the coverage. So net net, we feel good even on the sequential basis. I did call out how much of that was sawn as well. Which is a very small impact on revenue for the fourth quarter. Operator: Great. Thanks. Our next question is from Karl Keirstead with UBS. Karl Keirstead: Thank you, Haysayne. Maybe we can just continue that conversation. If if we try to take your 4q CRPO 15 to 16 and normalize it by deducting maybe maybe some of the the onetime stuff. So just just so I've got the thinking right. Maybe a point year over year from the tenant contracts maybe a point year over year from Paradox and a quarter from Sana. So maybe 2.25 points, from, more unusual stuff to to back out to get to more normalized. Is that roughly the right math? Zane Rowe: Yes, Carl. I mean, there are lots of things you can sort of move around within that c o p o growth. I mean, I think you've got it sort of generally in line. But again, there are other variables within the timing on renewal activity and things like that. One other call out I'll make if you're trying to understand sort of those components between the organic and the inorganic component in the fourth quarter, is, let's say, that both Sona and Paradox contribute roughly one point points to our Q4 subscription revenue growth. So just to help you contextualize that, I mean, I mentioned, my prepared remarks, absent Sana, we believe our Q4 was consistent with our view just a quarter ago. So we feel great about the activity there. But that helps you understand sort of the components of Q4 and the CRP CRC CRP growth. Karl Keirstead: Okay. Thanks. And maybe just in the spirit of a follow-up on 4Q, this time on the sub revs. It sounds like it's embedding a view of reaching those DIA go live milestones. I'm assuming that given that there's just two months left in the fiscal year, you Carl are feeling pretty good about that. Obviously, the shutdown, I suspect, didn't help. But can you just maybe express confidence level in hitting those DIA go lives? Thanks. Zane Rowe: Yes, it's a great call out. We're highly confident. Just give you a sense of size on that one, it's roughly $15 million in the fourth quarter. We feel great about the progress we've been making all year We're tracking it very closely, and it's embedded in our forecast in for fourth for the fourth quarter. Carl Eschenbach: Got Yes, Carl, we're tracking really well towards the contract requirements that give us that $15 million in Q4, and we're already talking talking to them about an expansion of taking that platform to the next level, which opens up a whole bunch of different opportunities across a broader Department of Defense or Department of War We're really excited about the momentum we're seeing with the federal government in this DIA project or the first favor phase of it is really opening us up to a great opportunity going forward. And as I said, we're already negotiating a follow on to take that platform to the next level. With further security requirements they're asking us for. Karl Keirstead: That's great news. Thank you both. Thanks, Carl. Operator: Our next question is from Brad Sills with Bank of America. Brad Sills: Great. Thank you so much. It's clear from all the announcements and what we saw out of conference, was, you know, that you're you're you're really going for with AI, that Sana acquisition, you know, Paradox, you know, more recently PipeDream, that partnership with Microsoft Microsoft. I mean, how how should we read that? Should we think of this as kind a year where you're building the foundation for AI and agents and that 1.5%, you know, points of growth, coming from AI, you know, goes materially higher perhaps in fiscal twenty eight, or is this more of a '27 event just given where you are with all the great innovation that you're kinda bringing together and and the time it might take for that to kind of sink into the sales cycle and pipelines? Thank you. Garrett Katzmeyer: Yeah. So, I think, first of all, Fastus is a continuation. As Carlos said, we have 1,400,000,000 AI already in production in the Workday platform today. So we have been doing this at Workday extremely successfully, and now we are just taking the next steps in leading AI technology to help our customers, you know, become truly AI driven enterprises. And specifically, the vectors of our innovation is myth paradox and in a bigger picture frontline fully bringing AI automation to the entire hiring journey, you put that together with our recruiting agent, Paradox as a candidate engagement agent in connection with each other. It basically builds the AI driven talent suite they're doing with Sana is we're acquiring leading knowledge management in a leading agent orchestrator to be the AI experience layer across Workday. So very important when we think about AI adoption that our conviction is AI is gonna be the new UI. And that all of the legacy vendors who are not having leading experiences are gonna get relegated through that. And thirdly, what you mentioned about Pipedream. Right? Our ambition and our cut customers' requirements are actually taking us much broader than Workday is in finance and HR, and really looking for enterprise wide orchestration. We think about it as an an enterprise AI fabric. That we are creating through Pipedream with Sana as the experience layer on top built on top of Workday's business process platform. Carl Eschenbach: Yeah. Brad, the only color I'd add there is clearly we're going all in on AI, and it's for the following reason. We're uniquely positioned versus everyone else out there today. We have the data, Right? We have the context of the data, and we're built in the business workflow. And our customers are saying time and time again, they no longer want to even evaluate point AI solutions. They wanna do it on the back of a trusted platform. Therefore, we go and we get something like Paradox. We get PipeDream. We get Sana. Last year, Eversort. Before that, we get HiredScore. And it's not just our customers who are saying they believe in our platform. It's partners To your point, we're partnering with Microsoft. So as they start to build agents, they see the most secure, reliable, and trusted way to onboard their agents is through Workday in our agent system of record because no one has more experience in onboarding employees than Workday. And now we're taking to the digital worker as well. Brad Sills: Great to hear. Thank you so much. Bye. Operator: Our next question is from Brad Zelnick with Deutsche Bank. Brad Zelnick: Great. Thank you so much, Brad. Following Brad, Congrats guys on a good quarter, and thanks for taking the question. My question is about Workday Go, where we continue to hear really good things. Particularly in ME and emerging enterprise. It was interesting to see it soon to be more broadly available. Perhaps looking at AI from a different angle, is there anything different Workday needs to deliver from an AI product perspective for the down market customer versus large enterprise? Thanks. Carl Eschenbach: Yeah, let me have Garrett take that and then I'll talk more about work day go and the big announcement we had at Rising EMEA last week. Garrett Katzmeyer: Yeah. And specifically, the AI side, and, Brett, you know, that two things to consider. Right? One is that also, medium sized companies wanna benefit from the best AI. So, course, you know, they're gonna get the full power of Workday's AI agents. Also, they delivered in Workday Go. That's the first part. Very important. And secondly, we are specifically innovating around Workday Go with specific AR models. Think about the whole configuration, administration, management of the setup complexity, we are working and announced a new deployment agent, which already is slashed deployment time and complexity down by a significant degree. It's a key investment theme for us. And, you know, just connecting it back to the broader partner network, you know, specifically before they go to new managed services like payroll, We are working on payroll AI, that is securely being connected into our ASR with our partners that are providing these services to also drive, you know, payroll automation, payroll simplification, benefits across the Workday Go global partner network. And that's specifically being created all from that angle to make the mid market customer run at the scale of Workday, but with unmatched simplicity. Carl Eschenbach: Yeah. And, Brad, you know, we announced, you know, Workday Go as I call it, 2.o last week at EMEA Rising. And I will tell you to Garrett's point, the feedback was unbelievable with three key components to it. We now offer global payroll if a customer wants it. By the way, if they don't wanna use a managed global payroll service from Workday, they can bring their own payroll. We have a partner network that's gonna help us take, you know, Workday Go, to the market around the world and resell it on our behalf. And then we have that AI deployment agent Also included in Workday Go is a payroll agent. To help people simplify how they're managing their payroll activity across the enterprise. Work they go, I will tell you, is on fire. People are excited about it, and people are leaning into Workday down market as we aggressively go attack that market. Segment around the world. Brad Zelnick: No, we really hear it's working well. Thank you so much for taking the question. Operator: Thank you, Brad. Our next question is from Alex Zukin with Wolfe Research. Alex Zukin: Hey, guys. Thanks for taking the question. Maybe just a quick two parter, Karl. First for you, when you think about, the commentary for next year, it's great to hear about the kind of reiterating the confidence and the growth rate of 13%. But since Analyst Day, is there anything that maybe you've seen that gives you even more confidence when you're talking with customers around things like budgets or their demand environments as we head 2026 or propensity to maybe allocate more from the AI budget specifically to Workday? That you could kinda comment on that gives you that confidence? Carl Eschenbach: Yeah. Thanks, Alex, for the question. As Zane said in his prepared remarks, you know, we feel really good about our midterm guide that we laid out for next year. And we think the approximate 13% guide on subscription revenue next year is solid. That being said, we feel really good about all the acquired companies and the momentum we're seeing early on with them as well as the organic innovation that we have coming out of our super strong product and technology organization. We haven't even talked about it, but we're also entering new markets like we've done the last couple of years in the federal market here in The US. We're taking that to the public sector around the world. We announced entrance into The Middle East And next week, we have a strong team led by Rob, our president of customer operations going and launching our efforts in India. So we're really excited about all the growth vectors that we have going into next year as well as all the momentum we have around our AI solutions, both organic solutions and these inorganic solutions that we're getting through M and A. Alex Zukin: Perfect. And then maybe just, Zane, as a follow-up, if if we think about next year's guide, that 13 and the acquisitions that you've made over the last couple of months, a, kind of how much do we think kind of comes from from inorganic, there? And then the pace of M and A are we kind of through like should we think about this pace continuing at at kinda current course and speed of these exciting technology tuck ins? Is or or have know, do you need to digest the ones that you've made here over the course of the next few week months? Quarters? Zane Rowe: Sure. Yeah. Look, I'll start with, you know, as we think about the acquired revenue, I mean, off, as you know and as you can see here, when we acquire companies, they quickly become part of the broader portfolio. If you look at the acquired revenue, I'd say it probably contributes approximately a point into next year. But as you can there's a lot more that we're doing around it and the whole portfolio benefits. So it's more there's significant synergy if you want to think about it more broadly. But on the acquired revenue, I'd call it sort of roughly a point heading into next year. And then we have a high bar on M and A. And as we've talked about, all along, I mean, we've kept consistent in thinking about the technology, the culture, the people and how they integrate either whether it's through adjacencies or tuck ins or for different reasons. So I'd say no change in how we think about that, and no change in in how incorporate that inorganic growth. Alex Zukin: Perfect. Thank you, guys. Operator: You. Our next question is from Raimo Lenschow with Barclays. Raimo Lenschow: Perfect. Thanks for squeezing me in. International is a big kind of driver for you. And you mentioned a little bit of that. But, like, if I look at the growth rates, this month, much difference between U. S. And international. Can you talk a little bit of what you saw in the quarter? And maybe there was more on the the pipeline build, etcetera? Thank you. Carl Eschenbach: Yeah. Thanks, Raimo. I hope you're well. So, yeah, we were really pleased with our international performance. And when I say international performance, it's across the three major, you know, regions that we describe as international. Europe, APAC, and Japan. All three of those markets had a really good quarter for us. We've historically been talking about our performance in Europe when we talked about our international results But this quarter, we're talking about it in the context of Europe. APAC and Japan because all three delivered solid results in the quarter. I think that's driven by two things. Number one, on the product side, we continue to internationalize and localize our product to serve all of these markets. Number two, we're leveraging a strong network of partners out there around the world to enter these markets. And the third is we continue to great talent to lead our Workday efforts around the world. The international market had great results. And we expect that momentum to continue as we see customers more and more lean into Workday for their platform of choice across HR and finance. Raimo Lenschow: Yep. Perfect. Thank you. Operator: Thank you. Our last question is from Kash Rangan with Goldman Sachs. Kash Rangan: Last question and it's my last birthday earnings call as well. So fitting. So congrats on the Q3 results, Carl and Zane. I want it's clear that you guys have seen a bit of quite a bit of AI momentum. And I agree with you that AI disruption risk seems to be a little overstated. But I think we can look at the numbers and say that AI, there's some tangible content your backlog, twelve month twelve month backlog growth rate. Although it did include some acquisitions, it did do a little better. Right? These acquisitions too. The anniversary of they are growing very nicely. That should lead to an actual acceleration of the organic growth here as well. But that effect conceptually we put your thinking hand off thinking hat on. Sorry. That was the flu. A little too discombinative. If you were to rebuild a company on an AI native stack, an HCM company, AI native stack today, what would that functionality be able to do? That is what would that thing exactly able to do that could be disruptive that you can do as a Workday customer with the tools that Workday is providing, be it organically or through these accounts. Combinations of acquisition. Thank you so much. Carl Eschenbach: Hi, Kash. Thanks for the question. And let me say thank you. Going all the way back to our founders, David and Neil, and all of our workmates over the last, you know, twenty years, we want to thank you for your continued coverage of Workday. I know this is your last call with us, and I just wanted to say thank you. And Neil said hello. And he also wanted to send his regards as well as do I and everyone else. You been a great analyst for us, and we really appreciate your support over the years. We all hope you enjoy your next phase of life, which you're telling us is retirement. I hope that's the case and you really do go out and spend some quality time with your amazing wife and family. With that, I'll hand it over to my friend Garrett to talk about how he would build a new HCM or finance around AI going forward. Garrett Katzmeyer: Yeah. Hey, Kash. Thank you for ending on such a beautiful question. So, let's start in a look at the core principles of building AI systems at scale. Right? And that's just look at what it really is. The first thing that you need is a vast set of data basically describes the domain. The domain of finance, the domain of HR, and you need a vast set of data that basically codifies how the data is being used. Right? That is ingredient number one. You know, if you look at AI at scale, it's about learning and using patterns. So you need to have that global database Secondly, data represents. So you need to have you need to have strong semantics and clarity about what both a data model that defines what data element represents what entity in the business, What do they relate on? And what are the rules for these business entities? Because data is not created equal Right? They have integrity. They have meaning. They have purpose. And you need to have a business process system, which now basically tells you how to activate this data in a way so it can drive towards a business outcome. Even more so, you need to have clarity on what that business outcome is. Those are, you know, the basics of building a successful AI solution. Now take a look at Workday. We are the only scale SaaS vendor born in the cloud with a consolidated dataset. Our 50 to 75,000,000 users that we have contribute to a uniform data model, which is completely clean. We have all of the process data in a formal business process description codifying 70,000 core business process pes, which are instantiated across all of our customers and thousands of variations. We have ample data of, you know, usage and how these processes are being used in the business. And most importantly, the domain knowledge to specify what are the target outcomes to drive. So if you were to build a system, that is built for enterprise AI at scale, it would look like Workday. And what we are doing right now specifically is that we are opening up our core and basically integrate reasoning models and AI systems to automate these processes We lay Osana on top to lead the experience AI innovation on top of that. If you look at all of that in aggregate, you know, it truly is the AI stack for the enterprise of the future. Kash Rangan: Amazing. I wish you well in achieving all these and dreams in the future. Thank you so much. Till then. Bye now. Operator: Thank you. This concludes our question and answer session. Ladies and gentlemen, thank you for your participation on today's conference. I'll now turn it over to Mr. Eschenbach for final comments. Carl Eschenbach: Thank you, operator, and thank you again for all of you who joined us today. Thank you for those who will continue to look into Workday and watch our results and provide guidance and input everyone out there in the market. For those celebrating, I wanna wish all of you a happy Thanksgiving. I'll close by once again my deep appreciation to all of our workmates, our customers, and partners for their continued commitment to Workday. We'll see you all next quarter. If not before. And, again, for those celebrating, happy Thanksgiving. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
Operator: Good morning. My name is Joelle, and I will be your conference operator today. [Foreign Language] I will now introduce Mr. Mathieu Brunet, Vice President, Investor Relations and Treasury of Alimentation Couche-Tard. [Foreign Language] Mathieu Brunet: English will follow. [Foreign Language] Good morning. I would like to welcome everyone to this web conference presenting Alimentation Couche-Tard's financial results for the second quarter of fiscal year 2026. All lines will be kept on mute to prevent any background noise. After the presentation, we will answer questions from analysts during the web conference. We would like to remind everyone that this webcast presentation will be available on our website for a 90-day period. Also, please remember that some of the issues discussed during this webcast may be forward-looking statements, which are provided by the corporation with its usual caveats. These caveats or risks and uncertainties are outlined in our financial reporting. Therefore, our future results could differ from the information discussed today. Our financial results will be presented by Mr. Alex Miller, President and Chief Executive Officer; and Mr. Filipe Da Silva, Chief Financial Officer. Alex, you may begin your conference. Alexander Miller: Thank you, Mathieu, and good morning, everyone. Thanks for being with us today. Before we dive into the results, I'd like to flag something for your calendars. On February 11, 2026, we'll host a business strategy update where we'll walk you through the next phase of our growth journey and our vision for the future of convenience and mobility. We'll share a clear and thoughtful view of where we're headed and what it means for our customers, our network and the opportunities ahead. You'll receive a formal save the date and additional details in early December. Today's focus is very much on the solid progress we've made this quarter. It's been a little over a year since I stepped into the CEO role, and I'm genuinely proud of the way the business is performing and of the relentless focus our team is putting on winning the customer. Since the start of the fiscal year and for the second consecutive quarter, we've delivered positive same-store sales in every geography, along with steady, reliable performance in fuel. In an environment that remains challenging for many of our customers, they continue to respond to the value and convenience we're working hard to deliver, both inside our stores and on our forecourts. Our customer-focused initiatives are gaining traction, and we're seeing clear proof of that in this quarter's results, which are outperforming the industry. As we strengthen our value proposition and continue enhancing the customer experience across our network, we're also expanding our reach through disciplined organic growth. Together, these efforts are creating meaningful opportunities to welcome new customers and deepen the relationship with those we already serve. We are well on our way to reaching our goal of 500 new stores in 5 years with 29 new stores opened since May, and we are on track for more than 100 new locations in North America this fiscal year with many offering high-speed diesel to serve our B2B customers, and we continue to seize opportunities in rural communities, along with our traditional metro area sites. As of today, we have another 73 stores currently under construction, and our real estate team has 1,000 sites in the pipeline for potential future development. In Europe, our rebranding of TotalEnergies retail assets is progressing across our 4 new business units with the Circle K brand and programs now at 80 sites as of the first half of the year, and half of those sites feature the Circle K car wash offer. Our rebrand of the EV offer in mid-Europe is now complete. In my recent visits to these stores, I've been very pleased to see our team members energized, embracing our programs, executing them with excellence and engaging with our customers who are responding enthusiastically. Along with our efforts to grow and optimize our network, we are also investing in capabilities to support our stores through best-in-class inventory management solutions and supply chain optimization, which Filipe will address later. This past week, in Otsego, Minnesota, we cut the ribbon on the first of 3 new distribution centers in the U.S. that will open in the third quarter. These 3 facilities will support approximately 1,600 stores across 14 states. With these openings, combined with our existing facilities in Texas, Arizona and Quebec, approximately 3,200 stores across North America will be supported by self-distribution. It is an important milestone in our efforts to strengthen and better align our North American supply chain, enhancing speed, accuracy and product availability while enabling the broadening of product assortment. Now let's turn to our convenience business. As I mentioned earlier, we're continuing positive trends in same-store sales across our geographies for the second straight quarter, with the U.S. up 1.2%, Canada up 5.4% and Europe and other regions up 0.5%. U.S. revenues increased on solid performance in food, packaged beverage and other nicotine products. Canada's growth benefited primarily from alcohol and food. Food also contributed to the positive sales results in Europe and other regions segment. Given the challenging consumer environment, these results are especially meaningful, and we're seeing clear gains in customer traffic and share, which speaks to the strength of our offering and the compelling value and ease of our experience. We believe the disciplined focus on the customer is helping us distance ourselves from broader industry trends and continue delivering quality, sustainable growth. Looking at our food category, as consumers look for ways to stretch their dollars, our meal deals are meeting their needs with the choices and options they want at an attractive price point. Meal deals are winning with customers, thanks to effective communication across our in-store and digital platforms, along with a focus on simplicity and execution. Food penetration continues to rise, and the strong adoption of meal deals across markets further highlights the increasing contribution of food to our overall growth trajectory. In North America, same-store food growth had its best performance in well over a year, fueled by disciplined execution and the ongoing strength of our meal deals platform. This quarter, we sold over 10 million bundles up from 8.6 million in Q1, averaging over 850,000 bundles per week. I'm even more excited to share that at the very start of Q3, we surpassed the 1 million meal deals mark sold per week in North America. This milestone underscores the growing relevance of our food offering and the value we are bringing to our customers, and we're just getting started. In the months ahead, we'll continue expanding the meal deals platform, introducing greater variety and innovation, strengthening vendor partnerships and offering customers unmatched optionality. We are also seeing meaningful customer excitement and incremental sales growth from our exclusive partnership with Guy Fieri, which we announced in September. The Flavortown inspired menu rollout across the Northern Tier business unit is contributing to an increase in overall hot food weekly units alongside meaningful margin dollar contribution. We are encouraged by the customer response to this differentiated offer as we prepare for a broader North American expansion. In addition, our SKU reduction initiative launched in FY '25 continues to drive margin improvement in our U.S. business units, enabling us to focus on execution excellence and maintain reliable in-stock performance while also reducing spoilage. In Europe, food continues to be a bright spot driven by increased in sales per store. Sweden, Norway, Ireland and the Baltics were key markets with substantial growth in hot dogs, burgers, sandwiches and bakery items. Building on our success in North America, we accelerated the European rollout of meal deals last quarter with 3 well-defined offers at tiered price points to capture a broader range of customer occasions, from smaller impulse buys to full meal solutions. The early results are promising. Turning to our efforts to own thirst. U.S. packaged beverage category delivered solid performance with basket size and pricing offsetting category-wide declines in trip frequency. Energy drinks continue to lead the category with same-store sales growth in the mid-teens, supported by ongoing innovation, meal deal inclusion and exclusive vendor partnerships that are driving consumer engagement. Dispensed beverages are also seeing strong growth in the cold and frozen segments, lifted by our loyalty pricing strategies. Meanwhile, we're launching new programs to drive excitement into the hot dispensed category. Earlier this month in the U.S., we kicked off our win free Coffee for a Year Sweepstakes in partnership with International Delight creamers, inviting customers to enter for a chance to win 1 of 14 prices. We are also piloting an aggressive Inner Circle price on hot coffee to complement our highly popular any size Polar Pop offer for loyalty members. In adult beverages, we continue to see healthy beer and wine growth in Canada. While we expect growth trends in this category to normalize, these results more than offset the declines in nicotine in Canada resulting from the illicit tobacco trade and government restrictions on pouches in the convenience channel. In the U.S., our performance in nicotine is strong with mid-single-digit same-store sales growth. We've outpaced the convenience channel in cigarette sales and trips driven by market-centric pricing and affordability across premium and discount segments. Our September ZYN promotion sparked double-digit unit growth for ZYN as we distributed close to 8 million free cans. Not only did this offer increased total nicotine trips year-over-year and versus the pre-promotion period, but it also boosted the overall modern oral segment and sustained increased nicotine trips post-promotion. These results highlight our successful vendor collaboration and customer engagement as well as our ability to deliver value and maintain momentum in a complex regulatory landscape. In Europe, amidst a challenging regulatory and market environment, our nicotine business continues to outperform the broader market with other tobacco products driving year-over-year category growth while we still see some volume gains versus last year from the supermarket bans on tobacco in the Netherlands and Belgium. Looking at our loyalty programs with our launch of Inner Circle in Texas in September, we added more than 1 million new customers in Inner Circle, surpassing 12.5 million members across the U.S. as of the end of the second quarter. With the completion of our rollout in the West Coast business unit earlier this month, Inner Circle is now available at more than 5,000 sites across the U.S., and we expect enrollments to continue to accelerate in the coming months. As we bring Inner Circle to new customers across the U.S., our retention rates are sustained and healthy. More than 85% of members are active in fuel, 65% are active inside the store. We are leveraging some of our recent investments in our customer data platform and personalization capabilities to help drive repeat visits from Inner Circle members, and we are seeing existing members visit more frequently. Elsewhere in Europe, we've taken a major step forward with the rollout of our enhanced extra loyalty program, a unified visit-based model that rewards customers for every interaction, whether they fuel, charge, shop or wash their cars, the new platform delivers a more seamless personalized experience that strengthens engagement and customer loyalty across our network. Following a successful pilot in Sweden, we have now completed the expansion to Poland and the Baltics this quarter with other markets to follow. Turning to our fuel business. Same-store road transportation fuel volumes were down 0.6% in the U.S. and 1.8% in Europe, but up 1.1% in Canada. Despite these declines, overall volumes remain healthy and are outperforming industry peers, and margins are holding steady compared to previous quarters. We remain focused on unlocking additional value from our fuel supply chain across our global operations with our supply, trading and logistics teams working to expand lower-cost supply options and execute programs that deliver meaningful value to our customers, such as our seasonal Fuel Day events. Our October Fuel Day in Canada drove traffic and excitement to more than 1,100 sites across the country with savings of $0.10 per liter. In the U.S., we have tied recent Fuel Day events to Inner Circle not only providing great savings for our customers, but also driving sign-ups to the membership program and deepening customer engagement. In B2B, our European business continues to navigate a dynamic environment with mixed volume trends. Card volumes came in just below last year's levels, but this was offset by robust margin gains. Non-fuel income continues to be a strategic growth area as steady increases in B2B transit charging volumes helped counteract accelerated declines in traditional fuel and bulk fuel volumes remain healthy. While slightly lower this quarter due to price competition among resellers and a volatile biofuels market, they were offset by improved margins. We are seeing sustained growth in mobile payment adoption, up 30% versus last year, with the Baltics leading in customer onboarding and transaction volume with rollout of new digital platforms and functionalities such as self-service enrollment and instant virtual card issuance, we are gaining market share and operational savings for our customers. In the U.S., our B2B fuel share continues to grow as we build strong customer relationships, leverage the national scale and reach of our network and work to provide a reliable, seamless fueling and payment experience for drivers, focusing on direct partnerships, commercial diesel growth and strategic collaborations that have set us apart. We are seeing higher retention and increased usage among fleets of all sizes. We are also increasing Inner Circle penetration with B2B members as customers enjoy personal rewards for commercial fueling, enabling both acquisition and retention. Shifting over to e-mobility. We are building on our market leadership in Europe adding more than 230 DC ultrafast Circle K branded charge points and 33 new sites added across our European network during the second quarter. Overall, we now have close to 630 locations with Circle K branded chargers up nearly 30% versus a year ago. And our fast-charging network now consists of just under 3,900 charge points. In addition, we saw nearly 2 million charging transactions on Circle K branded chargers in Europe, an increase of 55% versus same quarter last year. As we expand the network with an emphasis on Scandinavia, we are also increasing our focus on new markets in our mid-European business, where our sites contributed more than 300,000 charging transactions. With that, I'll now turn the discussion over to Filipe, who will provide further details on our financial performance this quarter. Filipe Da Silva: Good morning, everyone. We closed the second quarter with growing optimism, reflecting steady progress supported by consistent execution and effective cost management across our operations. Core operating expense growth remained under control, while we continue to advance our multiyear investment journey to unlock new capabilities that strengthen our network and create greater value for customers. As Alex outlined, this quarter extends the positive momentum we began in Q1, with U.S. same-store sales growing for the second consecutive quarter, reinforcing that our self-help initiatives are delivering steady measurable progress. Food remained a bright spot, continuing its upward trajectory, supported by strong in-store execution. Shrink improved further, now at its lowest level in about 9 quarters, while food service gross margin expanded by more than 400 basis points year-over-year, providing an important lever in managing inflation and supporting margin resilience. This also marked the first full quarter from GetGo, which further broadens our food and convenience offering in the U.S. and unlocks new opportunities for customer engagement. For example, just this month, we're testing a small pilot in Ohio that lets myPerks members from Giant Eagle redeem point at Circle K. It gives customers more flexibility and helps connect directly with fuel shoppers. It's still very early days, and we'll watch how it performs before looking at next steps. In Canada, performance remained robust, supported by the ongoing benefit from the alcohol legislation changes in Ontario. As we move closer to cycling last year's favorable impacts and face a more tempered retail environment, we are approaching the coming quarters with a prudent outlook with continued focus on execution and compelling food offerings. In Europe, all regions posted healthy results with broad-based category growth driven by compelling food offers and attractive meal deals, helping us to capture additional market share. In Asia, operations were temporarily disrupted by the typhoon. However, the overall financial impact was minimal and did not materially affect EPS. Turning to our TotalEnergies assets, synergy delivery remains ahead of plan. That said, we did see a modest acceleration in the Netherlands, where the prior year benefit from the supermarket tobacco ban is not fully cycled. Overall, merchandise and service gross margin expanded by approximately 140 basis points year-over-year, and fuel margin also improved by nearly 600 basis points. These results demonstrated meaningful progress in both performance and integration. I will now go over some key figures for the quarter. For more details, please refer to our MD&A available on our website. After nearly a year, net earnings attributable to shareholders of the corporation returned to positive territory in the second quarter of fiscal 2026, which stood at $741 million or $0.79 per share on a diluted basis. Excluding certain items described in more details in our MD&A, adjusted net earnings were approximately $734 million or $0.78 per share on an adjusted diluted basis, representing an increase of 5.4% compared to the corresponding quarter of last year. Now let's review in detail each of our business segments on an FX-adjusted basis. The adjusted EBITDA for the second quarter of fiscal 2026 increased by approximately $94 million or 6.2% compared with the corresponding quarter of fiscal 2025, mainly due to the contribution from acquisitions, which amounted to approximately $75 million, improved merchandise and service and road transportation fuel gross margin as well as organic growth in our convenience activities, partly offset by the impact of the regulatory divestiture related to the GetGo acquisition, which amounted to approximately $8 million. During the second quarter, merchandise and service revenues increased by approximately $254 million or 5.8%, primarily attributable to the contribution from acquisitions which amounted to approximately $163 million in organic growth, partly offset by the impact of regulatory divestiture related to the GetGo acquisition, which amounted to approximately $20 million. Merchandise and service gross profit increased by approximately $126 million or 8.3%. This is primarily attributable to the contribution from acquisition, which amounted to approximately $56 million by organic growth as well as by improved merchandise and service gross margin in the United States partly offset by the impact of regulatory divestiture related to the GetGo acquisition, which amounted to approximately $7 million. In a context where we are delivering increasing value to our customers across all regions, I am happy to report that our gross margin expanded this quarter. In the United States, our merchandise and service gross margin increased by 0.9% to 34.7%, favorably impacted by the Zyntember promotion as well as by strong food execution. On the food side, the margin lift also reflect a significant reduction in shrink of more than 400 basis points alongside our 2025 rationalization efforts, ensuring that our promotions and assortment are relevant to our customers. In Europe and other regions, our merchandise and gross margin increased by 0.7% to 38.9%, mostly driven by a favorable mix -- product mix from lower tobacco revenues and e-mobility continued momentum in Scandinavia. In Canada, our merchandise and service gross margin increased by 0.6% to 34.2%, driven by a favorable change in product mix from cigarette revenues. Moving on to the fuel side of our business. Our road transportation fuel gas margin was $0.4586 per gallon in the United States, a modest decline of $0.0024, but overall consistent with previous quarters. In Canada, margin averaged an impressive CAD 0.1507 per liter, an increase of CAD 0.0172. Fuel margins remained healthy across the network, supported by ongoing supply chain optimization and strong in-store effectiveness. We're also advancing our data-driven approach to pricing and promotions, helping us stay agile and competitive in a dynamic retail environment. In Europe and other regions, our road transportation fuel gross profit was USD 0.1151 per liter, an increase of USD 0.01, driven by favorable foreign exchange translation and effective supply chain management, partly offset by the impact of lapping a onetime gain from a prior year fuel supply agreement adjustment. Turning to SG&A. Normalized expenses increased by 3.4% year-over-year in the second quarter of fiscal 2026 driven by disciplined core operating costs and targeted investments. Roughly 2/3 of the increase came from our core operating expenses, which continue to be managed effectively and remain on pace with average inflation across our regions, supported by our fit-to-serve. This also reflects targeted effort to scale our food service offering with resources directed towards enhancing capabilities at the store level. The remaining 1/3 reflects planned investment in technology and operational capabilities to support long-term growth and enhance the customer experience. I would like to emphasize that year-to-date, our normalized expense growth remains in line with inflation, aligned with our focus on cost discipline and maximizing operational leverage. I'm pleased to report that we exceeded our fit-to-serve target of $800 million ahead of schedule. This achievement reflects the collective commitment of our teams to deliver real measurable improvement. It's an important milestone that strengthens our ability to reinvest with purpose while maintaining disciplined expense control. Moving on, we continue to see gains in more workforce productivity. In the U.S., overtime wages remain below 3% for the 23rd straight month and below 2.5% for the 12th consecutive month, landing at 2.1% in Q2 versus 2.7% last year. These results speak to the effectiveness of handheld devices, smarter labor scheduling and automation tools that are translating into more impactful customer-facing hours. We are also capturing incremental savings through our centralized procurement efforts for goods not for resale, further leveraging our global scale to reduce cost and drive efficiency. Turning to strategic investment. We continue to advance our digital capabilities and operational tools to position the company for long-term growth. A key focus this quarter has been the North American pilot of our RELEX ordering and space planning platform now underway across 6 locations in 4 business units. Fuel scale deployment remains on track for the first half of calendar 2026. Early results are promising, with notable gain in product availability and inventory accuracy. As we scale, RELEX is expected to further reduce spoilage and also inventory efficiency, support margin resilience and strengthen vendor collaboration, all while streamlining in-store operation by simplifying ordering and optimizing shelf layouts. Beyond RELEX, we are making solid progress on other elements of our digital road map. Our upgraded handheld devices and labor scheduler are now embedded in more locations, continuing to streamline operations and improve team productivity. We're also seeing early promise from our AI task management pilot, helping store manager quickly translate data into clear, actionable insights. These investments are sharpening execution at the store level and helping deliver a more seamless and personalized customer experience. Turning over to depreciation and amortization expenses increased by approximately $59 million or 12.6% year-over-year, including the GetGo assets, which amounted to approximately $23 million, along with equipment upgrades, store remodel program, new store openings, technology enhancement and EV charger deployment. This initiative represents significant strategic investment made in recent quarters. From a tax perspective, the income tax rate for the second quarter of fiscal 2026 was 22.8% compared with 23.4% for the corresponding quarter of fiscal 2025. The decrease is mainly stemming from the impact of a different mix in our earnings across the various jurisdictions in which we operate. As of October 12, 2025, we recorded a return on equity at 17.7%, and our return on capital employed stood at 11.9%. During the fiscal year, our leverage ratio stood at 2.21. We also had strong balance sheet ability with $2 billion in cash and an additional $3 billion available through our revolving unsecured operating credit facility. During the quarter, we issued Canadian dollar denominated and U.S. dollar denominated senior unsecured notes totaling CAD 500 million and USD 1.2 billion, respectively. The $1.6 billion net proceeds from the issuance were used to repay indebtedness under our United States commercial paper program. Additionally, we repurchased 16.6 million shares for an amount of nearly $900 million through the buyback program, while for the first half of the year, we invested close to $900 million in capital expenditure, reinforcing our balanced approach to capital allocation. Subsequent to the end of the quarter, 6.1 million shares were repurchased for an amount of approximately $306 million. Turning to the dividend. The Board of Directors declared yesterday a quarterly dividend of CAD 0.215 per share, an increase of 10.3% for the second quarter of fiscal 2026 to shareholders on record as at December 3, 2025, and approved its payment effective December 17, 2025. In closing, our second quarter results reinforced the resilience of our business model and the operational excellence of our teams. We are encouraged by the continued top line momentum across key categories, particularly in food, packed beverage and fuel as well as by our progress in loyalty, underscoring the advancement of our customer initiatives. Looking ahead, we remain committed to delivering earnings growth over the course of the year by maintaining our cost discipline, thanks to fit-to-serve initiatives and by enhancing our gross margin profile through continued progress on shrink and spoilage food growth and vendor-funded promotions. We are also deploying capital with purpose, investing in tools that optimize execution and elevate the customer experience to support long-term value creation and deliver best-in-class returns. I thank you all for your attention. I will turn the call over again to our President and CEO, Alex Miller. Alexander Miller: Thank you, Filipe. As we move forward, our priority remains clear, delivering meaningful value for our customers and making every visit to our stores and forecourts easy and enjoyable. We're strengthening our execution, making better use of our scale and sharpening our operations, so our sites consistently have what customers need. We're also elevating the loyalty experience in ways that make it more personal and more engaging, helping customers come back more often. I'm proud of the work our teams are doing across the network and the progress we're making together. As we move into the back half of the year, we're well positioned to keep serving customers reliably and to be the stop they trust most when they're on the go. On that note, let's turn it over to the operator to answer analyst questions. Operator: [Operator Instructions] Your first question comes from Martin Landry with Stifel. Martin Landry: I want to touch on your U.S. merchandise margins. They have expanded nicely on a year-over-year basis in the last 2 quarters. And they've reached levels that are near the highest in the last 10 years. And you seem to have good margin drivers. You've talked about white nicotine. You've talked about food, energy drink, vertical integration of your distribution and then even SKU reduction. But -- so I'm trying to understand a little bit where are we in that journey for your merchandise margin in the U.S. How much more upside do you see there? And if you can talk a little bit about what is left in terms of drivers to get these levels higher? Alexander Miller: Yes. Thank you for the question. I'm pleased with the 90 bps improvement year-on-year for the quarter. I think the -- for this quarter specifically, about 38 of the bps came from white nic and our ZYN promotion. We continue to improve shrink, as Filipe talked about, that's contributing nice to our ongoing margin improvement. I think I've talked in past quarters about our improvements around promotions and our ability to analyze promotions and our data capability, doing less promotions but doing promotions that really add value to consumers and drive traffic and present real value to them. We talked about the ongoing new distribution centers. We just opened one. I was -- last week, I was in Minnesota and saw our new facility. These facilities are going to improve our COGS as we go forward. They're going to help us service our stores better when our stores really want and need to be serviced for the less lease disruption. So we -- and then lastly is food, right? I mean we continue to grow food. Our food, we grow in the U.S., we improved food by 480 bps quarter on -- versus last year in the same quarter, and we believe we will continue to do these things. So we're executing quite well against the items we're very focused and feel good about the direction of our margin gains, really not just in the U.S., in all 3 of our big geographies. Filipe Da Silva: Yes. And just to complement, Alex. So I think also, Martin, as we are integrating more the supply chain, we'll have the possibility also to get more control on the negotiation with suppliers. And we believe that there is also a nice potential upside there. Of course, we need to continue to reinvest in value, as mentioned by Alex, many times this morning. But yes, overall, the profile of the gross profit, we feel good about the prospect and what we can continue to build in this aspect. Operator: Your next question comes from Irene Nattel with RBC Capital Markets. Irene Nattel: Can you talk about the cadence of same-store sales improvements as you went through Q2 and where you're tracking Q3 to date, please? Alexander Miller: Yes. Thanks, Irene. The quarter was pretty consistent. We continue to see pretty big variations across the United States. So an example would be our Midwest business unit, which is Iowa, Illinois and Indiana for the quarter. Same-store sales were up 5.3%. Same-store volume was up 2.3%. And we can send -- and that's offset by challenge along our Southern states. And the Midwest BU at 7% of our merch sales. Texas and Arizona specifically remain challenged. They were slightly negative in the quarter. And those 2 areas are 23% of our merch sales. So we continue to see those kind of large differences across the United States. With that said, our teams in Texas and Arizona are performing very well from a market context and taking considerable share, and so then as we look forward, we did see a slight softening due to the government shutdown. And specifically, we believe the SNAP or EBT benefits, just slight softening for a couple, 3 weeks. Since the government has reopened and those programs are back, we've kind of pivoted back to really consistently where we've been this past quarter, Irene. Irene Nattel: So then do you think this sort of 1% to 1.5% level, Alex, should be sustainable through the balance of the year? And then, I guess, how do you accelerate it from there? Alexander Miller: We're going to -- we're feeling good. We've had several weeks and periods of success and seeing our business strengthening. And again, it's -- I'm never going to try and predict the future, Irene, but I feel really good about the activities of the team, the focus of the team. Our operating metrics are just extremely sound. Our food numbers continue to grow, and we're continuing to see that as we're into P3, our execution against those programs, our production availability. Our zero, zero for heroes, the products we sell the most, we have them in stock on the shelves, the proliferation of our meal deals really in all 3 of our geographies, consumers continue to really respond to those programs. And as I mentioned, we passed 1 million for a couple of weeks ago, which was a huge benchmark for all of us here, and we're celebrating that. Our digital platforms continue to grow. We added 1 million members in the quarter. Our visits were 6.6 versus 6.1. we grew traffic by 7%. So the areas we're focused on, Irene, we're gaining momentum, and they're working. And other nic and energy -- other nicotine, specifically white nicotine and energy, our execution, our vendor relationships and partnerships, we feel like we're clearly winning in those spaces, and we will continue to lay into those spaces. So I remain -- I'm cautiously and positively optimistic as we go forward, Irene. Operator: Your next question comes from Chris Li with [ Desjardins. ] Christopher Li: Sorry, can I just -- maybe a quick follow-up to Irene's question. So for Q3 to date in U.S. merchandise comps, Alex, is it trending more or less in line with what you achieved in Q2? Alexander Miller: Yes. P7, we softened just a bit. And again, we're pretty sure that was the government shutdown and EBT and SNAP, not a lot. We softened a bit. But as we've gone into P8, the last 2 weeks and the government reopened in those programs, we've converted right back to the trends we were seeing and really see acceleration in those programs that we saw before. Christopher Li: Okay. That's helpful. And then, sorry, my main question is just maybe on the SG&A growth rate. It did sort of accelerate in Q2. And I wanted to ask, for the second half of the year, how should we think about the normalized growth rate? Filipe Da Silva: Thanks, Chris, for the question. I think we feel good about the SG&A. Year-to-date, we are in line with the inflation, and I think we need to realize how much transformation we are doing in this company and investing for the long term. We have been talking a lot about supply chain, digital capabilities, RELEX. All these [ we mentioned ] that are really there to make us a better company. And we are doing all that, again, being able to match inflation. So it means that there is a lot going, and I have to recognize the hard work done by the team there, just to find ways to be more productive. So just on the quarter, we have been very disciplined in terms of labor hours being down in hours by 0.8% compared to last year across the regions, a lot going on from the procurement side. So Chris, I think we are -- yes, we are very confident by the plan. As I mentioned earlier in the call, we already reached the ambition that we had on the 5-year plan regarding fit-to-serve. There is more there. So when you look at the full year, yes, that's -- our ambition is to continue to be kind of in line with inflation. And at the same time, making sure that we do the right thing for the business and investing for the future. We have a lot to do there. But again, confident that we'll keep our discipline in cost. That's what we have been in the past and we will continue to be, Chris. Operator: Your next question comes from Michael Van Aelst with TD Cowen. Michael Van Aelst: So in your OpEx discussion, it did pop up in terms of your normalized operating growth from Q1 to Q2. And I think you mentioned for the first time you segregate a comment about investments to accelerate growth in food service. So can you explain to us what these investments are? And should this drive -- is this something you expect to drive same-store sales in the U.S. north of 2% eventually? Filipe Da Silva: I can take maybe on the expense side. So yes, we are investing, for example, in U.S. We are investing on the digital capabilities, helping to get a better forecasting. So we are investing on that. We are partnering there to get a tool. And that really makes a big difference, making sure that we have the food at the right time when the customer needs it and the employee knows when to put that in the shelf. So there has been a lot of investment there. And also, we are investing in -- on additional shifts from a labor standpoint to make sure that food is there when it's needed. So again, here, when you look at the overall labor hours, we have reduced the number of hours versus last year, reducing from an administrative point of view, the hours used in stores, but redirecting that to customer-facing activities and part of it is food. So we'll continue to do that because that's the right thing to do for the business. So feeling confident that, again, looking at the overall expense profile, we will continue to invest in food for sure. But having in mind that we want to be in line with inflation as a whole in expense. So looking for productivity in other parts of the business. Alex, do you like to take the... Alexander Miller: Yes. I can just build -- yes, build on that a little bit. I think that some onetime investments in food around production availability and the rollout of a specific program, I view those as onetime investments. We absolutely see food growing, and you see it in our results. And food, like anything, it's driving increased transactions and increased transactions are good. We continue to grow that percentage. And I think as I've shared with you previously, our goal is to get to 20% penetration in North America, and we believe we can do that, and we have a long runway to do that. I think from a cost perspective at the operating level, the last year has been absolutely focused on operations and back to our core, and our operating metrics are as good as I have ever seen them. Our turnover levels, our retention levels are -- just continue to improve. We referenced our overtime percentage, our labor hour compliance, our scheduling compliance, our shrink continues to go down. So the focus on our core -- at our core, we are operators, we are focused on operations, providing the tools at our stores and to our customers to be successful, and it's resonating. And part of that core culture of ours is controlling cost. We are doing that at the operating level and offsetting these strategic investments. And we will very much aim to continue to do that. Michael Van Aelst: Okay. And just to clarify, the meal deals, is that available throughout the U.S. network now? Alexander Miller: Absolutely, it is. It's not just the U.S. network, it is available across our entire footprint now. We are growing them in Canada. We've launched them in Europe and feel pretty strongly. We're already hitting levels close to our U.S. levels in Europe, where our food penetration is higher. It's really one of the most exciting things when I'm out with our teams in stores, just hearing it resonate with customers and hearing our store teams talk about how customers relate to the value that we can provide. So we will continue to lay into meal deals. We think we've really found something here that is really resonating with consumers and consumers that are strapped for cash. Operator: Your next question comes from Mark Petrie with CIBC. Mark Petrie: Hoping to just go deeper on some of your comments with regards to U.S. same-store sales, specifically the regional performance. Could you talk more about the drivers there? Is that just a matter of traffic? Or are there other factors like loyalty penetration, category mix, food, et cetera? And then if you could also just expand on the market share comment. Are you taking more share in those slower-growth regions? Or would you say it's more generally consistent across regions? Alexander Miller: Yes. I don't think -- I think our execution level continues really to improve across the company. I think it's more of a macro dynamic that's happening in the United States. The Texas and Arizona traditionally have been big growth states and big growth areas. We are very happy with our positions in these southern geographies. We absolutely believe this to be transitory. But we are seeing fairly significant differences in the Southern states versus our Midwest states currently. We think that will ultimately normalize as we go forward. And again, we're very happy to have those positions. It's not -- our loyalty penetration, it differs by business unit, but they're -- it's growing everywhere. Our execution on food differ slightly, but it's growing everywhere. And again, I'm just really proud of the teams. We've been very focused. We're executing against programs, and we're taking market share not in every business unit. But clearly, in total, we are. And in most business units, we are taking share in merch and in fuel. Mark Petrie: Okay. And sorry, just to clarify, when you talk about the slower growth in Arizona and Texas, for instance, is that mostly in traffic? Or does that show up in basket size as well? Alexander Miller: Sorry, I didn't catch the last bit of your question there? Mark Petrie: When you talk about the slower same-store sales growth in some of your regions like Arizona and Texas, is that mostly just in slower traffic versus like the Midwest? Or is it also in basket? Or how does that show up? Alexander Miller: Yes. I think traffic is a little more challenged in those geographies. We're growing basket in pretty much every business unit. So it generally is traffic driven, yes. Operator: Your next question comes from Bobby Griffin with Raymond James. Robert Griffin: Congrats on the performance. Alex, I just -- I want to double-click into the food category as a whole, given some of the success here with the sales as well as the margin improvement? Ultimately, where is that category as we stand today from its full margin potential? Is there still hundreds of basis points left? Or is it getting close to something you would say is running from a margin side of things, best-in-class or up to where you would like it to be at? Alexander Miller: So where we sit today, we are laser-focused on growing sales and continuing to grow sales. Our spoilage rates in our food category is about where we want them now. And obviously, we've improved 400 to 500 basis points versus previous year. So our spoilage rates are about where they want them. We are really focused on growing sales. As we go forward and as we grow sales and as we continue to improve our supply chain, we absolutely believe there is future margin expansion as we continue on this journey. Operator: Your next question comes from Vishal Shreedhar with National Bank. Vishal Shreedhar: Alex, as it relates to food, Couche-Tard has been on a journey for food for, call it, more than a decade and sometimes the initiatives didn't necessarily come through as investors might have anticipated. So as you look at the -- your food programs right now and you've expressed confidence, what gives you more certainty that this confidence will be realized in actual performance and hitting your targets at this time? Alexander Miller: Yes. Thanks for the question. I do have a great deal of confidence, and I think we've talked to you about it, we needed to reset. So we rationalized our SKUs. We really focused on the underlying processes and programs on the products, the taste of the products, what was resonating with consumers, and we've largely finished that reset. And you're seeing it in our results. You're seeing the growth in both traffic and sales and margin improvement, and we are now poised for significant growth. Our production availability, our operating execution continues to improve, and we are reaching levels that we believe are very solid going forward. We've talked about our meal deals and the unique nature of us to be able to really offer value and to bundle products that are unique to QSRs. And candidly, we see a lot of people perhaps copying us or taking that. So we think we might be on to something there. But I've never had this much confidence in our journey in food. This organization, we are operators, when we get focused on things, we execute pretty well. I hope that doesn't sound arrogant. But our teams are focused on food. We are executing every period, every quarter at an improved level, and I think we're in for some really strong growth as we look at the quarters ahead across our footprint. Vishal Shreedhar: Okay. And could you just update us on the acquisition backdrop, maybe what you're seeing? Alexander Miller: Yes. Thank you. Very active. We are active with files in all 3 of our large geographies in Canada and Europe and in the United States, both smaller and larger files out there today. We're engaged, and we continue to see quite a bit of deal flow. And I think we'll be able, as we have done historically, to continue to execute on M&A inside of our financial framework and at multiples and return levels that we have consistently delivered on, I think, in our 46-year history. So it remains very active. And hopefully, we'll be able to announce to you in the coming quarters that we've gotten some stuff done. Operator: Your next question comes from Luke Hannan with Canaccord. Luke Hannan: I wanted to go back to the discussion on meal deals. Alex, you talked about expanding that platform in the coming months. And I'm curious to know, what does that look like? Is that more availability of certain deals, let's say, within the existing price points? Do you anticipate there being an expansion of the price points available? And then maybe also sort of as a follow-up to that, introducing more complexity and SKUs naturally might also get to a point where similar in the past Couche-Tard has run into issues when it comes to spoilage, how do you make sure that you put the guardrails in place to ensure that you don't introduce too much complexity as part of expanding the meal deals platform? Alexander Miller: Yes. I think when we think about meal deals, first and foremost, it's about value. So the value element is resonating with consumers who are increasingly stretched. And through our vendor partnerships, our procurement capabilities, we're able to offer these meal deals at margin profiles that work for us and that work for our partners. So as we look to the future, we will continue to offer value. We will continue to keep it simple and straightforward in what we are offering, and we will leverage down even harder with our vendor partners to give the products that our consumers want. The energy sector is growing rapidly, continues to grow rapidly across all 3 of our geographies. We have great relationships. Consumers look to us for those products. So continuing to make those various drink products with our best-selling food items at value will be our focus as we look to the future. Operator: Your next question comes from John Zamparo with Scotiabank. John Zamparo: I'm wondering if you could add a bit more color on the Flavortown initiative? I know it's quite early, but can you say what level of growth you're seeing at those stores? And is there anything you can say to give a sense of how incremental this is and what impact it has on margins? And then lastly, can you remind us on the pace of that rollout, you've said national within a year, but I'm wondering when this will hit most of the U.S.? Alexander Miller: Yes. Thanks for the question. This is a great example of making sure we stay disciplined on SKUs. So we added 11 Flavortown items in our Northern Tier business unit. We stopped selling 12 other items as part of that. We've reached about 65% to 70% of our goal of unit growth from those items. And I think more importantly, it is serving to grow hot food in Northern Tier, and we are growing hot food in Northern Tier as a result of Flavortown. We're still working through some supply chain elements for the 10 states we're serving. We're still working with the Flavortown team around the various products and what -- how consumers are responding to those. But we feel good about where we're at this far into the journey, and we continue to see a strong likelihood that we will expand across the U.S. We've got a little bit more work to do. And probably we'll be able to update you more next quarter, I think, on where we're at on that and what the expansion plan will be. Operator: Your next question comes from Bonnie Herzog with Goldman Sachs. Bonnie Herzog: Alex, I wanted to ask a high level strategic question. You talked through a lot of your key initiatives this morning to accelerate growth and expand margins. So hoping you could give us a sense of the top maybe 1 or 2 initiatives that you believe will have the greatest positive impact on your business in the next, I don't know, 2-plus quarters. And then maybe drill down a little further on how impactful you expect these initiatives to be on your top and bottom lines? And then also, where do you see the biggest risk to your business in the next couple of plus quarters? Alexander Miller: Thanks for the question, Bonnie. Our focus remains right where it's been. First and foremost, operations, execution, operating metrics, serving our customers, the equipment in our stores work friendly, customer ready. So that has been our focus the last year, and I'm really proud of the improvement. I have talked with you at length about food and the journey and meal deals, it remains right there. Growing our digital platforms is absolutely and increasingly personalizing our platforms. We are seeing just uptake in our programs, increased visits, increased basket. We're going to layer down into these programs and feel really good about those. We have some tailwinds, right? The energy sector is great. We have some mix tailwinds. We've talked a lot about other nicotine and white nicotine specifically. Nicotine was positive in both Europe and the U.S. for this quarter. And we continue to see that transition, and our relationship with the vendors in these spaces and just how we work with them strategically, we feel really good about. So Bonnie, it's going to be more of the same. We're going to lay into those things. I guess the greatest risk, I feel strongly about our teams and our culture and how we're executing and the momentum we have. I continue to see us widen our gaps versus our data that we see from various markets. It's the underlying environment and how the consumer is doing and just -- that is obviously impossible for me to predict. And that's -- I don't spend a ton of time worrying about that because it's not something I can control. We're focused on the things we can control. And we feel good about the momentum we have. Operator: [Operator Instructions] Your next question comes from Mark Carden with UBS. Mark Carden: So you guys talked about opening the 3 new DCs to bring in some more self-distribution. How long would you expect the ramp to take at those locations? And then to what degree could you see yourself ultimately using self-distribution across even more of your footprint? Alexander Miller: Yes. Thanks for the question. Our focus will -- we opened our one in Minnesota. It was great to go visit, and then we'll open our one in St. Louis and Columbus in the coming couple of months. And our focus for the first couple of 3 months is really just servicing our stores, making sure that we're getting the products to our stores in a timely way when we're supposed to. I think after those first couple of 3 months, we will then start to optimize around when we deliver to stores. We're obviously starting conversations and different things with vendors and our partners around products. We will continue to look to expand assortment and enable additional local assortment through these DCs. And for us, I think I've spoken previously, we will go into our food supply chain as well. We believe the path of going into our supply chain on the merchant food side, we see a lot of incremental value both in the assortment we can carry, our underlying cost of goods, simplifying how we serve our stores and serving them when it makes sense for them and for our customers. So this is not a near-term thing for us. This is -- we've been planning this for a long time. It's great to get this first one open, and this will be a journey for us over the coming years. Operator: There are no further questions at this time. I will now turn the call over to management for closing remarks. Mathieu Brunet: Thank you, Alex and Filipe. That covers all the questions for today's call. Thank you all for joining us, and we wish you a great day and look forward to discussing our third quarter 2026 results in March. [Foreign Language] Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Hello, everyone, and thank you for joining us today for GBG First Half Results for Fiscal Year 2026. My name is Sammy, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Dev Dhiman, CEO, to begin. Please go ahead, Dev. Dev Dhiman: Good morning, everyone, and welcome to the GBG results announcement for the first half of fiscal year '26. We are pleased with the progress that we've delivered in the first half of the year, we're on track to meet our financial plan for FY '26, and we're confident in the acceleration that we'll see in the top line growth as we enter H2 and beyond. Whilst today is a chance for us to take you through the financial results, it's also a chance for us to remind you of the impact GBG has on the world at large in how we enable safe and rewarding digital lives for genuine people everywhere. The slide on the screen here speaks to that impact and the scale at which GBG operates. And I'm really proud of the mission that drives every one of Team GBG to show up and give more every day of the week. The statistics on this slide also serve to remind us all that the majority of the GBG business continues to perform strongly. However, we are very clear as to where the acceleration will come from, from here. 18 months ago, you heard me talk about the need for us to focus on 4 foundational areas. I'm really pleased with the progress we've made on each of these, whether that's in the way we've come together as a single global brand to remove complexity, whether that's how we've now recently signed to migrate our entire cloud to AWS to make sure we are globally aligned, whether that's the launch of GBG Go in April, driving our innovation agenda or whether that's the way we've rebalanced and reworked our entire performance frameworks for our people. We feel like a lot of the heavy lifting on these 4 areas are done, and therefore, our attention is now firmly turning towards driving shareholder value, in particular, through accelerating the top line. So how will we focus on creating shareholder value? We'll focus on 4 key areas. The first is around protecting and growing our amazing customer base. The second is about winning more new logos, more customers that need to work with GBG. Thirdly, we will unlock synergies in the GBG operating model. We've made some good progress on being globally aligned and removing complexity, but we think there's even more we can do, not just to drive efficiencies, but also to drive top line growth. And lastly, following a period of really hard work to get our balance sheet into a much stronger position, we'll talk about how we will optimize capital allocation. In my section, I'm going to focus on how we will drive revenue and unlock synergies. David will come back to talk about how we'll optimize capital allocation in his section. The good news is, underneath those key pillars, there are really only three things that matter. The first is how we complete the turnaround of our Americas business. The second is how we transition to the GBG Go platform. And the third is how we evolve our operating model to better serve customers, to innovate more quickly and to drive efficiencies that we can then redeploy into go-to-market. So let's start with, I'm sure what's on all of your minds, the Americas and where we're at with the turnaround. When I spoke to you 6 months ago, I talked about how we needed to strengthen the leadership team, execute the turnaround by driving productivity and focusing on metrics, evolve our commercial model away from pay-as-you-go towards subscriptions and commitments to lead with the GBG brand and to focus our teams on long-term growth and not distract them with short-term headaches. So where are we up to? So when it comes to our leadership team, in the first half of this year, we have appointed 6 new leaders. And it's important to stress those leaders come with deep industry experience. These are not people figuring out how to do this for the first time. Some of the measures that give us confidence that we're on pace for the turnaround. In the first half of this year, we have driven 4x more new business than we did in the first half of last year, and we're activating that new business more quickly with 28% faster in taking a deal from signature to go-live and ultimately when we start to earn revenue. In terms of our commercial model, standout progress with 8 renewals in the second quarter signed with a minimum commitment, almost the first time we've done that as a business. More encouragingly, as we look ahead, 74% of our upcoming renewal pipeline contains minimum commitment that's already been socialized with the customer. In terms of leading with the brand of GBG, you can see on the page a screenshot of the team at Money20/20, where we showed up as one team. That wasn't just Americas Identity. It was also the GBG Locate business showing up alongside our Americas Identity colleagues, really turning up as one business as GBG. And then lastly, as we focus on long-term growth, we took the decision this year to sunset a legacy platform, one that was creating significant distraction for the team and one that was never going to get our business to be a stronger underlying one, which is our complete intent as to how we focus on making decisions that drive the Americas business forward. Turning now to GBG Go and our transition to a platform business. At the end of FY '25 in our results presentation, you saw me demonstrate the benefits of Go for our customers. But today, I want to focus on the benefits of Go for GBG. We are confident that Go will increase the pace of our growth through the ability to win new customers. That momentum will build confidence in our teams and accelerate the opportunity to upgrade existing customers, driving cross-sell and upsell. Go is an adaptive platform. It's built for what's to come. It will meet evolving customer needs and drive advocacy and also improve NRR. From a technology perspective, Go enables us to rapidly innovate, build once and scale globally, releasing new capability to customers at the flick of a switch. The outcomes of our focus on Go will be accelerated growth, sustainable differentiation and a platform that unlocks efficiencies at GBG as we focus on 1 and not 16. And lastly, let me talk about how we will evolve and transform the GBG operating model. Really, there are three flavors to this initiative. The first is how we move to a functional organizational structure. Again, we've talked about the need for GBG to be simple and to align globally, and this is about taking that and ensuring it's embedded in our DNA. It enables us to ensure that we prioritize the key initiatives because we're now prioritizing across the whole portfolio and not by business unit or segment. And obviously, it reduces cost and duplication, which enables us to reinvest into our key initiatives, largely our go-to-market function. The second flavor of this initiative is how we innovate at a scale that we've not done before. By investing in a GBG-wide innovation system, we will deliver on the opportunity to combine all of the assets that we have in the GBG shop to create powerful new solutions for our customers. And lastly, this is also about driving improvements in our go-to-market. As a business, the majority of our revenue comes from about 15% of our customers. And we need to focus on those customers differently and treat them as GBG customers, not as identity or location or fraud. We believe our focus in this area is a meaningful revenue accelerator. And by increasing singular ownership of our largest accounts, we'll be hardwiring cross-sell into pay plans and the targets that we set to our salespeople, no longer relying on collaboration and lead sharing across teams. So what does all of that mean? It means that we are really clear on the three priorities that will make our boat go faster. And this is already turning into tangible benefits in the first half with more to come in H2 and beyond. So let's just give some of the key highlights. So driving the Americas turnaround. Year-to-date, we are on pace. We've got encouraging early proof points. I've spoken about those just now. And in the second half, you should expect the Americas business to return to growth by our continued focus on driving go-to-market execution and further improving some of the metrics I've spoken about. GBG Go and our transition to the platform. We launched the platform in April. We've had 18 new customer wins in the first half. And we've also integrated 200 digital identity schemes into the platform, which those 18 customers now have access to. In terms of what's ahead, we have a very strong sales pipeline, which we will execute in second half. From a capability standpoint, next on the road map is our no-code release and also really excitingly, our AI-driven insights module, unlocking synergies in the GBG operating model. In the first half, we have signposted a move to a global functional operating model. We have already combined our product and technology teams under single leadership, and we have created and funded the GBG innovation lab. In the second half, we'll continue the move to a functional model. The next phase is really focused on our go-to-market teams, and we'll continue to find efficiencies to reinvest in our key priorities. And lastly, how we'll optimize capital allocation. After a period of really hard work in getting our balance sheet into a much stronger place, GBG is now returning to optionality in how it deploys its free cash flow. In the first half of the year, we executed GBP 35 million in share buybacks, and we completed the first acquisition of this management team with the integration of DataTools in Australia, a business that we've worked closely with for a number of years and made huge sense strategically and financially. And as we look ahead to H2, this morning, we've announced a further GBP 10 million buyback as we continue to deploy our free cash flow to drive growth and shareholder returns. With that, I'm going to pass to David to take us through the financial results. David Ward: Thank you, Dev, and hello, and good morning, everyone. Thank you for joining us. I will now take you through a more detailed review of GBG's financial results for the 6-month period to the 30th of September 2025. We are pleased that the results we delivered in the first half of this financial year are in line with the plan that we built for this year and represent the operational progress that we are making towards an accelerating top line. We delivered revenue of GBP 135.5 million, which represents growth of 1.8% in constant currency terms. Setting aside two short-term impacts that were fully anticipated and which I will explain more shortly, constant currency growth on an underlying basis was 4.4%. This illustrates the improving momentum that we have already generated and which underpins our confidence in delivering a similar level of revenue growth in the second half of this year. Adjusted operating profit, also on a constant currency basis, increased 4.6% to GBP 29.5 million, reflecting our continuing cost control and profit margin control. Cash conversion remained strong at 85.8%, leading to a net debt-to-EBITDA ratio that remained below 1x at GBP 66.6 million. And demonstrating the Board's confidence in our plan, we have in FY '26, already before today committed a total of GBP 46 million in shareholder returns. And as Dev has already outlined, we have today announced a further GBP 10 million of share buyback. I can confirm that we are today reiterating our financial outlook for the full year, which is in line with consensus. So now let me provide an overview of the income statement here presented on an adjusted basis with the statutory format included as an appendix to this presentation. The headline is that we have maintained our strong control of margin, while at the same time, we have recycled cost savings from our ongoing transformation to a single global platform business into our growth-focused priorities, specifically for our largest segment of Identity. On a reported basis, revenue declined by 1% to GBP 135.5 million, but in constant currency terms increased by 1.8%. Our gross profit margin improved by 40 basis points over the prior year as we continue to focus on pricing as well as disciplined management of our data and cloud hosting costs. Adjusted operating expenses reduced by 1.5%. This too was impacted by FX translation. And on a constant currency basis, operating expenses increased by just 1.1%. That led to an adjusted operating profit of GBP 29.5 million, which represents an increase over the prior year of 4.6% in constant currency terms. As expected, our net finance costs decreased over the prior year as a result of the lower average level of net debt. And on tax, our effective adjusted tax rate for the period was 23%, which is a little lower than the 25% that we still expect for the full year due to accounting timing differences. As a result of the combination of the growth in adjusted operating profit, the reducing finance costs and tax charge, adjusted diluted earnings per share increased by 12.6% over the same period last year. As I said in my last presentation of our FY '25 full year results, we planned to continue with our business transformation initiatives and the costs associated with a few of the larger discrete items have been recognized as exceptional costs. These included the costs incurred in the period on our business systems unification and data insights projects as well as the costs of our move from AIM to the Main Market. The total cost recognized in the first half was GBP 3.6 million. Across the next two slides, I have more detail and analysis to explain the key dynamics behind our revenue performance. As I have already said, on a reported basis, revenue declined by 1% to GBP 135.5 million, but in constant currency terms, increased by 1.8%. That 1.8% was impacted by two short-term factors that we feel has somewhat masked the progress we have made in building greater momentum. The first of those two factors is the fully expected impact of high project-driven transaction volumes for Santander U.K. in the first half of FY '25. And the second is a decision we have taken to retire one of our legacy technology platforms as part of the Americas turnaround. As you can see from the bridge chart on this slide, without those impacts that both relate to our Identity segment, the underlying growth in the period was 4.4%. We feel it is important to share this sign that we have generated improved revenue momentum and also most importantly, because delivery of our plan for the full year assumes that we will continue to grow at approximately the same rate in H2, when there is no headwind from the Santander volumes and the headwind from the platform retirement is much smaller. My last comment on this slide is that we continue to enjoy a high proportion of repeatable revenue at 95% of our total. And we have a clear focus, as you have already heard from Dev, on increasing the 54% of that, which comprises subscription revenues. We now move to our rolling 12-month metrics and a reminder that these cover our two core segments of Identity and Location, covering 93% of the total group revenue. Global Fraud Solutions, our smallest segment, is excluded. It's pleasing to see the strong growth from new logo wins with this increasing to 4.1% for the last 12 months. This was assisted by a couple of larger wins with enterprise customers in the Location segment. We continue to see opportunity for us to maintain a growth rate of 3% to 4% from this factor, particularly as we make progress in closing the strong sales pipeline we have for GBG Go. Net revenue retention at the 30th of September was a little lower at 97.8%, but this was impacted by the short-term factors that I have already mentioned and which affected our identity growth rate. Excluding these, the trend for net revenue retention has been holding quite steady at around 100%. We continue to see improvement in net revenue retention as our largest opportunity for driving an overall growth rate improvement. And Dev has already outlined a number of initiatives that we are prioritizing to get net revenue retention back sustainably above 100%. Moving on to how each of our reporting segments performed. Identity, which represents 63% of total group revenue, grew 0.4% in constant currency terms and broadly maintained a consistent contribution margin. We generated strong growth in APAC and EMEA, although, of course, the EMEA growth was impacted by the unusually high Santander volumes in the prior year. While we had a small decline in revenue in Americas, we have been pleased with how the business is generally much more stabilized and gross retention has improved. The turnaround project has the highest level of focus and the momentum we carry into H2, together with the improved sales pipeline, we have confidence that this important component of our business will return to growth in the second half of the year. And Dev has already mentioned the encouraging early signs for GBG Go. Setting aside the two short-term factors that affected the first half and the comparative period from the last financial year, there is a trend for an improving growth rate in Identity. Location, which represents 30% of total group revenue, continues to be the main growth engine for the group with constant currency revenue growth of 4.8% in H1. That was despite some tariff-related softness in Q1. In terms of notable customer activity, we were pleased with our wins at Urban Outfitters and Alibaba and our scaled-up renewals at Shein and TalkTalk. Growth via our partner channel continues to be strong with customers like Oracle. And similarly, large enterprises like Microsoft are also recognizing the value of GBG's market-leading global addressing data for use in their own data quality processes. And finally, our smallest reporting segment of Global Fraud Solutions, which represents 7% of group. In this business, we are continuing to see very strong customer retention and subscription renewals, including the logos included on this slide. New business and the related implementation services has been a little bit weaker than a couple of years ago. And overall, we are reporting 1.4% growth. The contribution margin from the segment has expanded considerably as a result of the strategic review undertaken last year and which has led to some material cost reduction, which allowed investment to be redirected to our highest priorities of Americas go-to-market and the continued advancement of GBG Go. And then finally, and before I hand back to Dev for some closing remarks, a few comments on the balance sheet and capital allocation. As I said in our last year-end presentation back in June, with our debt leverage coming into this year comfortably below 1x EBITDA, we did feel that for the first time in a while, we had a greater degree of optionality on capital allocation. And so we have been proactive in utilizing that optionality to drive improved shareholder value. Firstly, of course, we paid the final dividend declared in respect of the previous financial year. And we have been continuing with our investments via exceptional items into our transformation initiatives and the costs of our move-up from AIM to the Main Market. We are confident that these initiatives will achieve strong returns for shareholders. We have also announced two share repurchase programs prior to today, the first ever in GBG's history. Those totaled GBP 35 million. Including the GBP 10 million that we have announced today, we have committed to share repurchases totaling GBP 45 million, with GBP 17 million of this completed in the first half of the year and a further GBP 28 million now committed to be completed by the end of the financial year. Given the share prices that we have been executing these programs at, we expect that in total, we will have repurchased approximately 7% of our issued share capital, and this should drive EPS accretion on a fully annualized basis of close to 4%. And finally, we were very pleased that we were able to add the DataTools business and team into the group. This was a financially attractive bolt-on opportunity to acquire a business that was known to us and which will add additional scale in a market where we are already seeing strong growth. Based on these capital allocation decisions that we have taken so far this year, we still currently expect to be able to exit this financial year with a net debt-to-EBITDA ratio of approximately 1x. With that, that concludes my section. Now back to you, Dev, for some closing remarks. Dev Dhiman: Thank you, David. So let's close out with a summary of some of the key messages you've heard today. 18 months ago, I said that GBG was a high-quality global business with scale, and that rings out even more truly today. I said we needed to focus on getting strong foundations in place for what was to come. And I think we've done a great job in getting that to a place where we can now turn our attention to driving acceleration of the top line. In the first half, we've shown exactly how we will deliver effective capital allocation through the buybacks and acquiring DataTools in Australia. And what you should really take away from this is that we have a very clear strategic direction, a direction that means that our focus on Americas, Go and our operating model will make the boat go faster. We have confidence in improving growth rates and those growth rates start to improve in the second half and beyond. Thank you all for your time, and we will now turn to questions. Operator: [Operator Instructions] Our first question comes from Andrew Ripper from Panmure Liberum. Andrew Ripper: I hope you can hear me okay. I got two questions, if that's okay. First question is for Dev. You counted through quite a few KPIs there, Dev, in relation to North American Identity. I wonder if you can tell us a little bit more about where you are winning, where the new leadership team is making a difference. And when you referenced that new bids have been 4x the level of the previous year, how significant is that in terms of being a delta on future revenue? Dev Dhiman: Thanks, Andrew. Sorry, we're waiting for your second one to come through at the same time. So I can take that. So I think as you said, we've seen some encouraging proof points as to where we're at with the Americas turnaround. And obviously, it is one of our three key focus areas, and we're putting a huge amount of effort and energy into making sure that we are on pace, which we feel like we are. I think in terms of some of those metrics, so 4x more new business, not only that, we're also activating that new business more quickly. You all know as a SaaS business, signing a deal is great, but then actually getting the customer live is as important, if not more. And we've seen encouraging progress on both of those. One of the reasons why we have won more new business kind of plays to your supporting question, which is we are focusing much more on where we win, and that's financial services, fintech and gaming. So almost all of that new business has come from those three verticals. And as a result, our win rate has ticked up. We've also seen in Americas where a customer has a more complex need and a larger order value, our win rate again increases. So we're getting much more analytical with Tom now at the helm and doing some of the things that he's done in former turnaround roles that he has performed. In terms of significance, it varies. A lot of those deals will be mid-market, but a couple of those, and we talked about price picks before, are more significant in terms of their revenue has until this year. Operator: Our next question comes from Nick Dempsey from Barclays. Nick Dempsey: I've got three, if that's possible. First of all, can you give us some more color on the initiatives that you have in place to get NRR back over 100%? And do you expect to be at least 100% in H2 2026? Second question, can you talk about the strength of your data relationships with the key credit bureau, Lexus, et cetera? Are you confident that you will have all of the existing data built into your offerings for many years to come? And is that starting to prove a real competitive advantage for retention and new logo wins? And then the third question, do you have any more legacy platforms, which could be in line for sunsetting, which could be a headwind at some point? Dev Dhiman: Thanks, Nick. I will maybe start with some of the color on the initiatives and then let David comment on the point around 100%. So I think we -- I think the good news is that, again, I'll just refer you to three key initiatives that drive NRR. The first is Americas, which has been a laggard in terms of revenue growth and therefore, NRR. And I think we've spoken already to Andrew's question and in the presentation around the work we're doing there. The second is Go, which we think obviously underpins our NRR because we moved to a licensed model versus consumption model. And obviously, we think the opportunity to drive cross-sell and upsell is significant. And the third is our operating model. You heard me talk in the presentation around how the majority of our revenue comes from, it's effectively an 80-20 rule, 80% of our revenue from 20% of our customers. And by focusing more on those 20%, I think that's where we see a big opportunity to upsell and cross-sell the whole breadth of GPG solution rather than treating them as a kind of divisional customer, if that makes sense. Maybe, David, you can talk about the kind of trajectory of NRR. David Ward: Nick, thanks for the question. I think a couple of points I'll just add to Dev's commentary there. I think the other point that I think came through in the presentation we just gave was also how we're now seeing the benefit of pricing coming through. That's been a really big focus for us for the last 18 months or so. And that's now much more embedded into everyday practice for our go-to-market team. So that's also having an impact for us. In terms of where do we expect it to get, we've talked that -- we've said previously that across the medium term, we do think that NRR should be able to get back to 105%, so that's our goal. That's probably a goal for a few years out. And we see sort of a relatively steady improvement towards that sort of number. For the second half, specifically, we will still have a bit of a headwind from the short-term factors I mentioned in the presentation. But I think the combination of what we're doing, plus particularly the improvement in gross retention in the Americas, which I talked about, I think should see us get back to 100% even before making any adjustment for Santander. Dev Dhiman: And then moving to your second question, Nick, around data relationships with bureaus or credit reporting agencies. I think the short answer is strong and strengthening. If, for example, for a couple of years now, we've been the only provider in the U.K. that has been able to have access to all three bureaus that operate here. Similarly, in ANZ, since Experian acquired Illion, we've now stepped in -- they have now stepped into our very close commercial relationship that we previously had with Illion and is now with Experian, and we've extended the length of that contract also in the first half. And in Americas, alongside everything you've heard me talk about, there's a lot going on, and therefore, we focused on the key things, but there's also work underway to drive data advantage and some early conversations with some of the people we've spoken about. So I think we feel like we're in a good place. Obviously, it's my background. For many years, we worked really closely with all three bureaus, large global bureaus as well as [Illion]. And it's an area where we continue to have a strong relationship and are talking about more what they could also take from us. And then the third question around legacy platform. So I think really important to remind everybody, we currently talk about having about 16. In the first half, we have taken the action to retire two. And those two are the ones that were most obvious to retire, the ones where revenue was going in the wrong direction and was not significant, but also cost was high and therefore, made them really easy decisions. The next 14 won't be as easy. And Nick, just to reassure you, what we're not saying is that as we retire those 14, we're going to see revenue go the wrong way. Our focus is on driving revenue growth, not shrinkage. And therefore, we're going to be really deliberate and mindful as to how we upgrade those customers to Go over the next 5 to 7 years. I think the good news in that is that there are operational efficiencies that, therefore, are not one-off, and we'll continue to see those over the midterm, and those will continue to help us drive reinvestment into our key priorities of Americas, Go and go-to-market. Operator: Our next question comes from Gautam Pillai from Peel Hunt. Gautam Pillai: I had a couple of questions on Go and to the comment you just mentioned, Dev. So when you migrate customers to Go, what is the typical level of recurring revenue uplift you're seeing per customer? And also beyond compliance and onboarding, what would you see are the differentiated capabilities of Go that kind of ensures pricing power and stickiness against competition? And one more follow-up on pricing generally, especially in the U.S., are you seeing customers push back on pricing at all? And how are the competition strategies kind of evolving from a discounting standpoint? Dev Dhiman: I can probably have a go at both of those and David, you can chip in. So I think on Go, Gautam, just important to remember that in the first half and probably for the rest of this year, our focus is on new business. We are not launching a migration of customers across. We have offered customers on the compliance platform the opportunity to move across, but -- so the answer to your question from a proof point standpoint is it's too early to say what the NRR uplift has been and will be. We think it's accretive to growth. But for right now, it's too early. The reason we think it's accretive to growth, though is your second question in that, which is the differentiated capability. So really Go moves us away from an onboarding solution into an insights platform. When we talked in the presentation about some of the things we're doing to get our data into better shape, it's also that we can deliver more insights to customers. So how are -- how is a gaming company performing in terms of its onboarding against its competitor set? What other things could we deploy into the workflow that will increase both the customer experience, making it better, but also increase the number of accepted customers and reduce fraud. So it's the analytics and the insights that we think will really differentiate us. We already have the underlying capability. So this really puts the icing on the cake is the way we think about it. And then on pricing, so I think a little bit linked back to the question around NRR. We're not waiting for Go to drive NRR. Some of the work we've done in the second quarter, in particular, in Americas to get 8 customers to renew with commitment has been driven partially through a pricing conversation. So a conversation that says, you've got the opportunity to defray price increases by signing up for commitment. The really good news is we have not had to give any of those 8 customers a haircut on price to get them to commit. It's the benefit of having someone that's done this for 20 years, Joe, who's joined our team to run our account management book, just driving best practice. We are also in Americas, launching pricing initiatives, especially around the long tail to see where we can see uplift. And those have not yet been launched, but the work that's underway, and we'll update you on those as we close out the year, I'm sure, in June. Operator: Our next question comes from Kai Korschelt from Canaccord. Kai Korschelt: I had a couple and just one is just to follow up on pricing, maybe more at an industry level. I mean it seems like there are a lot of players in the identity verification space. And I think previously, Dev mentioned that there's been sort of a downward trend on pricing. So I'm just wondering how do you plan to avoid commoditization, I guess, if that's the right word, and offset pricing pressure. It seems like Go is an important part of it, but just sort of more general, if you had any thoughts on a midterm basis, that would be helpful. And the second one was just around the capital allocation and specifically, how do you weigh, I guess, doing more share buybacks versus paying down debt as you also get accretion from lower interest cost as you've obviously shown in the half. Dev Dhiman: Thanks, Kai. So I'll take the pricing one and David maybe can chip in on the capital allocation. I think it's really important. It's another good example and an opportunity for me to remind everybody that the majority of our business, we have been really successful in maintaining and increasing price, be that the identity business in APAC, EMEA or the Location business worldwide. So really, where we've had -- where we've suffered on NRR has been Americas and part of that has been the commercial model, which has been pay-as-you-go. We think about pricing as a growth lever. We've demonstrated that, as I said, in most of our businesses, and we'll shortly be testing that in Americas. The ability for us to move customers to minimum commit underpins my confidence. And what else underpins my confidence is the fact that the majority of our industry is pricing in that way. So in Americas only, we are catching up. The point around commoditization, I think you kind of answered your own question, Kai, Go is what we think will differentiate us, in particular, the move to an insights-driven platform rather than a point in time tick in the box, which is never what we were, but I think that's kind of the underlying question that you have in the question that you've asked. And maybe, David, on capital allocation. David Ward: I'll pick up the question on capital allocation. I think we feel good that we've got much more optionality than we've had for a few years now. I think it's been great coming into this year with a level of debt below 1x. As I outlined in the presentation, the actions we've already taken and the decisions we've announced will probably mean that we exit this year at about 1x EBITDA to net debt leverage, which I think we feel very comfortable with. And obviously, at the moment, very aware of where the share price is at and particularly versus the level of interest costs that we've got on our debt, buying back shares is attractive for us at the moment. I mentioned in my presentation that based on what we've announced in terms of share buybacks, based on our forecasting assumptions, we expect about 4% accretion to EPS on a fully annualized basis. So that's pretty attractive. At the same time, it's been great that we've been able to execute our first acquisition in a while to be able to add a relatively small bolt-on business, but actually a business that gives us a bit more scale in a market that was already enjoying good growth. So we've added a business that was growing. It has got good profit margins, and we've added some very capable team members in a region that's important to us. I think it is also attractive. So it's great to have sort of that full range of options around how we deploy capital. But I guess the punchline is we are very focused on delivering improved returns for shareholders, and we will deploy capital in the best way to be able to do that. Operator: Our next question comes from Julian Yates from Investec. Julian Yates: I'd just like to dig a little bit more into the North America business versus EMEA to try and understand where we are in the upside. Do you have any color on sort of return on investment metrics? Like what is EMEA doing in terms of revenue per sales, head revenue per account, return on investment versus what North America is doing at the moment? And when -- and can North America move up to those sort of EMEA levels? Is there quite a lot of upside to go? And then on the flip, is it just massively underinvested in [indiscernible] the fact that there's going to be a cost taker for a couple of years before we see maybe sort of margins or [indiscernible] move up to that EMEA level? David Ward: Julian, it's David. So I'll have a go answering that one for you. And I think the first thing I would say is that the turnaround that we are executing in Americas actually looks very similar to the process that we went through for EMEA a couple of years ago. So there are great similarities, which, to be honest, is very helpful for us and obviously means that some of the expertise that we have in the EMEA team has been really helpful to the Americas team as well as the new capability and stronger team that we've deployed into that region. So I think there are some similarities. I think the way we think about the Americas business -- has been that we have had to strengthen the team that we have deployed there. We've talked about all of the actions that we've done to do that. We've also given them increased and better tools. So they've got better internal tools. They've got better support from the enabling functions. And at the same time, we are -- we've talked about unifying our back-office systems and CRM tools. So all of those things we have done, and we are almost through finishing. So that gives us a really solid foundation. Dev has talked about the fact that relative to our EMEA team, the Americas team is under resourced, but we've always felt that we needed to solidify those foundations first. And once we've done that, there is a really good opportunity for us to then enjoy the benefits of economies of scale as we employ and deploy more salespeople into the region. So I think that's how we think about it. I'm not sure I'd necessarily agree that it's going to be a cost taker. I think that was the phrase you used. I think we see that it's a business that should scale relatively well from here. We do want to deploy more cost into the region, but we expect pretty constant and relatively quick returns on that cost. So I think from here on in, we expect the opportunity for margin improvement for Americas. It will be relatively modest as we put the cost in there. And obviously, there's the benefits of Go to still add on top of that. So I think there's a number of things that we're pretty excited about. Operator: Our next question comes from Tintin Stormont from Deutsche Numis. Tintin Stormont: Just -- I think it's two questions, maybe three. The first one is the quality of the pipeline. Is there anything that sort of a sense that you could give us that obviously, there's the volume and the actual increase in the pipeline. But when you're trying to convey to us a sense of the improved quality of the pipeline, is there anything that you can share in that regard? And then, David, just picking up on your point on resourcing in the U.S., where are we in terms of the resourcing? And how easy is to find that additional resource in the market and for them to sort of kind of have the impact that you want them to have? And finally, from a competition standpoint, if you could just maybe describe sort of kind of in the environment if there are particular players that you're winning against with the GBG Go product? And sort of kind of -- I think, Dev, you talked about the features that are differentiating you, but would be really interested in that, the areas that you choose to play in, FS, gaming, fintech, et cetera, if there are particular competitors that seem to be relatively losing out to you now with this platform? Dev Dhiman: I think all 3 probably for me, Tintin. So in terms of quality of pipeline, so I think, again, we don't really disclose volume of pipeline. I think we talked about the number of Go opportunities specifically, but our pipeline is obviously much broader than that. I think what I can say is I think there are a handful of key opportunities that I'm very close to that feels a bit different maybe this time last year. So I won't say any more than that because I'm breaking my own cardinal rule to not talk about those. In terms of resourcing in Americas, I think, as I said in my presentation, we've hired 6 new leaders have all come from this space. It has not been difficult to find people that, number one, have deep industry experience, and it's not been difficult to find people who want to be part of the GBG story. I think what's been encouraging is how we've seen many of those 6 leaders bring in people from their network. That's interesting to me for two reasons. One, I think we've hired the right people if they know people. But secondly, the fact they're bringing people in that they trust and trust them means that their commitment to the cause and their ability to see the end of the turnaround and the start of acceleration is quite high. So open rates in the Americas, I think we measure them in days, not months. And then lastly, on competition, I'm going to answer this slightly differently. I think we're focused on ourselves and maybe that's also a bit different to a year ago. I think we're focused on how we stand out from our competitors. And I'd rather talk about what we're doing than what we're seeing in the market. Again, a good chance for me to remind everybody that for many years now, we've won against our competitors in location. We've won against our competitors in EMEA, and that's getting increasingly so, I would say. And in APAC, for a number of years, we continue to have a really strong market share in ANZ that should only get stronger with the integration of DataTools. So yes, hopefully, that answers your questions. Operator: We have no further questions. Dev Dhiman: Yes, I think that brings us to the end of questions. So thank you, everyone, for your time and for the questions. I will just close with a few short comments that really reiterate what I said at the end of the presentation as it was. I think a good chance for us to always take the opportunity to remind everybody what a great business this is that operates in a really fast-growing space that is only getting more interesting and the scale that we enjoyed. Good to be able to stop now talking, hopefully, in these presentations around the 4 focus areas that we set out on back in June of last year, although albeit our work is kind of never done on those. I think what you have heard today is really two things, a very effective and deliberate capital allocation that is all about driving increased shareholder returns and a very clear strategic direction that really means that you'll only really hear me talk about three things: Americas, GBG Go and our operating model, all of which gives David and myself and the Board confidence in improving growth rates, which, as I said in the presentation, start now. Thank you all for your time, and have a great rest of the day and week.