加载中...
共找到 18,361 条相关资讯
Unknown Executive: 3 quarters of 2025. And as you maybe already saw in the presentation, we have plus 6.7% in revenue to CHF 845 million. EBITDA is up 2.4% to EUR 377 million and group net profit up 4.2% to EUR 215 million. So overall, very, very encouraging results. The only problem we face since maybe the last 3 years, but especially '24 and '25 is an ongoing cost pressure, which burdens our EBITDA and is slightly reducing our productivity. As you see in the latest figures of passenger growth, our guidance for 2025 is well based, and we can confirm it right now with already a clear visibility for full year expectations. What we need now is an efficiency improvement and cost reduction program, which is under work right now because we are in the process of making our budget for 2026, which will be for approval in our Supervisory Board mid of December. And details for the program, we will release beginning of January with the traffic results of 2025. But what we hope for is and what we are working on is to at least partially mitigate the effects of the tariff reduction and maybe lower traffic results for the coming year. I mean, cost management is always a very important issue. And I'm very positive that we will reach a lot of effects throughout the whole company in all departments, in all our daughter companies. And last but not least, we will also reduce our personnel costs, which is the most challenging issue all the time. But with a step-by-step approach, I think we will be also successful there. If we look at the figures more in detail, you see that despite the fact that interest rates are going down, we maintained a positive development of our financial results, only slightly below the first 9 months of 2024 with now EUR 11.6 million compared to EUR 11.9 million. And from today's perspective, we will have a lower EBITDA margin. It was 46.5% in the first 9 months of 2024. It's now 44.6% for the first 9 months. So it's not too bad at this level, but definitely, it's less than it was the year before. And the reason for that is that cost increases all over the board and especially also with personnel costs negatively impacted overall profitability. If we move on to expenses, you see that consumables and services used could kept more or less stable. Personnel expenses went up by 9.2%. If we put into account the change in consolidation of our subsidiary GET2, which is responsible for the cleaning, the personnel cost increase would even be 13.4% year-on-year, including also a high degree of increase from Malta. That's even beyond the cost increase here in Vienna. Other operating expenses went up by 11.6%. That is the other side of the coin of the personnel expenses of GET2, which has been included for in the personnel expenses and is now in the other operating expenses. Depreciation is slightly below the figures of 2024 and as already mentioned, EBITDA margin at 44.6% compared to 46.5% and EBIT margin at 33% compared to 33.9% in the last year. If you look at our cash flow, you see that it is slightly down. Cash flow from operating activities from EUR 322 million to EUR 268 million. On the other hand, the free cash flow went up 26% from EUR 114 million to EUR 145 million. The increase in CapEx is as planned. So we went up from EUR 131 million to EUR 199.5 million. And we will see how much will be added until the end of the year. So we will end up below the expected EUR 300 million, but not too far from that. The net liquidity was slightly reduced also by the high dividend payout and is now at EUR 438 million compared to EUR 511 but it's still on a very satisfying level given the fact that we are now in a cycle of investments and still we plan that we will finance the major investments of the coming years out of cash flow and net liquidity. So we will not need credits for the foreseeable years now. Equity went up from EUR 167 million to EUR 1.731 billion, so a plus of 3.7% and an equity ratio of roughly 70%, which still is a very good figure. Our Southern expansion of Terminal 3 is on budget and on schedule and will open as planned in 2027. We now are going to work on the tenant fit-outs and interior construction work and all the technical systems and the energy supply and as well as the connection to the existing terminal areas, but everything so far is on plan and no major issues there. We are also expecting the new hotel to open operations already in December. And we will start in the next weeks the expansion of our Office Park 4 so that we can start the operation there at 2028. A lot of other projects are underway. And so far, everything is within the plan. So last but not least, to remember the financial guidance for 2025. We expect a revenue of EUR 1.80 million, EBITDA approximately EUR 440 million or even a little bit better. Group net profit approximately EUR 230 million, maybe a little bit better given the latest traffic results and CapEx somewhere below EUR 300 million, but more or less close to EUR 300 million, we should end up at the 31st of December. So that are the main information and figures from my side, and I hand over to Julian. Yes. Julian Jäger: Yes, I will continue with the traffic development. In the first 3 quarters, we saw growth in the group of 4%, 32.9 million passengers, mainly driven by Malta, plus 10.8%; Vienna, plus 1.9% [indiscernible] nearly 10% growth. Yes, we had a strong October. Vienna was better than in the rest of the year as well with 3.1 million passengers, plus 3.7% Malta, again, a stunning 16.7% and [Kosice] more than 15% growth. So overall, we are at 4.3% growth in the group in January to October and plus 11% Malta, plus 10%, [Kosice] plus 2% Vienna. If we continue on the next slide, the peak was very strong. So we had a solid passenger growth in summer. We had in August, the highest month passenger volume in history, 3.4 million passengers in Vienna. We had a new single day record with more than 120,000 passengers in August. So overall, a very positive development here in Vienna, ongoing robust cargo growth of 7.8% to 233,000 tonnes in Q1-Q3. So overall, I think we can be happy with the development as well. Although we know we will not reach these figures next year, but I'm coming to that later. I think growth factors are really strong. If you look at October, last year, we had a record year in terms of growth factors. This year, October was even better and January to October, slightly below the 2024 figures. So overall, I think we can be quite happy with the development. If we look at the regional distribution, I think the only thing which is probably outstanding on this slide is Asia Pacific, plus 25% market share, 4%. So we saw growth to Tokyo, Bangkok, Singapore, Beijing, Chengdu. Overall, as expected, Asia, East Asia is coming back with a certain delay after the pandemic. North America, essentially flat, Europe essentially flat with the exception of Eastern Europe, here, mainly Southeastern Europe, Tirana, Pristina, Chisinau, Burgas growing. Middle East, slight below growth, plus 2.2%; Africa, plus 2.9%. So overall, I would say, a satisfying development. Looking at the lines, Austrian, slight growth, plus 0.8%; Ryanair flat this year, Wizz Air already a slight reduction of minus 4.4%, Yes. And I think the rest is pretty solid. Pegasus growing, Etihad growing. Overall, I would say, yes, an okay development. Lufthansa Group pretty much flat, close to 50% market share. Low-cost carriers probably for the last time for a couple of years, above 30% market share, 30.4%. So we will see here quite some significant changes in the distribution of our passengers next year. But overall, yes, a good picture this year. What works really well in Vienna is operations, punctuality, again, amongst the top 3 above 25 million passenger airports, just also in Copenhagen in front of us with an average of 83.7%. Again, like most airports this year, we improved punctuality in 2025, but we are still, yes, in the top 3. So I think better than Munich, better than Frankfurt, better than Zurich. So especially within the Lufthansa Group, we kept our lead as the operationally best hub of Lufthansa Group. Yes, what do we have to expect in terms of low cost next year? Wizz Air will close their base operations in Vienna already went down to 3 aircraft in the winter schedule and will close the base completely mid-March. Essentially, I think this was the result of a strategy change of Wizz Air. I think they will concentrate again more on Eastern Europe. We had -- until, yes, mid this year, we had interesting discussions with the top management about a possible base of XLR here in Vienna and flights to India. As you know, they reduced the order of the XLR then very significantly from more than 40 to less than 10. So I think this strategy has changed from Wizz Air again. They are leaving the Middle East essentially. In Vienna, we always had a high proportion of flights to the Arabian Peninsula. So overall, yes, we would have had to reduce our charges so significantly that on the one hand, we didn't want to do that. On the other hand, I think even legally, this would not have been possible for us. So that's why we eventually decided to close their base here. Ryanair, in my perspective, will attack Wizz now in Bratislava, and we will see quite some growth here in Bratislava next year. My impression is that Ryanair wants to get rid of Wizz Air in the catchment area. So therefore, yes, my impression is that what we've seen here in 2019 that Ryanair is fighting their turf and showing with their limits will happen next summer in Bratislava. And yes, it's anybody's guess how this will end. Obviously, I would say, in terms of Ryanair reductions, we are a bit the victims of the circumstances in terms of tax environment in Vienna. We have a flat EUR 12 per passenger tax. As you know, Ryanair is fighting all the governments, which have taxes on aviation in place. So -- the same here in Vienna. They are taking the Austrian government quite fiercely. If this strategy works out or not, we'll see in the future. But obviously, if you take this EUR 12, this is roughly a 40% increase on our airport charges. And obviously, in a competitive environment where Hungary, Sweden reduced their charges to 0, where Slovakia is actively supporting airlines, especially for the intra-Slovakian flight from [indiscernible] to Košice. This is a competitive disadvantage. So therefore, we will, yes, do our utmost to get here at least a reduction in the future. But yes, which is difficult to achieve on the short term. We still don't exactly know the flight plans of Ryanair for next summer. I think we will see -- hopefully, we have some more clarity here in January. I mean those reductions are painful and will put pressure on revenues, costs and result next year. But I think we have to see it a bit in perspective as well. And you probably -- those who are covering us for a couple of years already know that we had extraordinary change in 2018, '19 following the Air Berlin bankruptcy. So to a certain extent, it was always clear that probably not all of the growth is really there for the long run and really sustainable. So we saw huge growth between '17 and '19. We went from 24 million to 32 -- or nearly 32 million passengers. We recovered very quickly after the pandemic. And now we will see next year a reduction of something around 2.5 million passengers from Ryanair and Wizz Air, probably a bit more. But overall, if you see our average growth, which was 5.3% between 2000 and 2019, so significant above the European average, I think we will sustain a year or 2 where we are below our record, which we will achieve this year. And I'm pretty optimistic that we will reach the 32 million passengers and probably surpass this mark in 2025. To talk about the positive developments, Austrian is, let's say, fighting back. They will base 2 additional aircraft next summer. They will launch a Dubai service. We will see increased frequencies to Bangkok, to Mauritius to Rome. So overall, I think a good summer flight schedule as far as we see it today for '26. Scoot will increase next year by frequency to Singapore, Air Corsica launches new flights to Ajaccio and Bastia, Air Baltic resumption of flights to Tallinn as of March. SES has come back to Vienna recently, 12 frequencies per week to Copenhagen. Condor just increased their frequencies to Frankfurt up to 3 daily. EasyJet is expanding their offering. Air India is going to 4 frequencies. Air Arabia with a daily frequency to Sharjah. What is not on this slide, but what news which reached us very recently, we expect Etihad to increase by 4 weekly frequencies by next summer. So overall, there are positive developments as well, and we will lose a bit of ultra-low cost, but we will get some other capacity as well. And I would say, overall, the passenger outlook for 2026 remains challenging at this point. Typically, airlines announce their capacity at the beginning of the year. So there's still a lot of movement. And you can see here that we still get news in the one or other direction. So therefore, as I said, the capacity reduction of Wizz and Ryanair from today's perspective should be roughly 2.5 million passengers, maybe a bit more, but we are confident to compensate around 1/4 of this reduction. And as usually, we will get in much more detail in this respect in January. Yes, I think I've said everything to this slide. We can confirm our passenger guidance. We will probably slightly head the 32 million in Vienna. We will get very close to the 10 million in Malta. We will have a record in Košice. So I'm optimistic that we will surpass the 42 million passengers in the group. Yes, record results wherever we look, but we all know that 2026 will be challenging for us. Still, I would say there are some -- we can see some light on the horizon as well. I think -- if the Middle East remains or will get more peaceful than in 2025, I think this would be a huge opportunity for Austria. I think these are extremely important passenger flows from Tel Aviv to the U.S., but as well from Tirana. So the whole region, Aman. So I think there's a lot of potential for Vienna in the Middle East. obviously, Ukraine was always a very important market for us and would be a strong market for us again. So midterm, we are optimistic that sooner or later, these geopolitical tensions will ease, and I see quite some growth potential from these areas. Coming to the segment results, starting with the Airport segment. Yes, I think we obviously capitalize on the passenger growth Q1 '23, plus 7.8% in EBIT, plus 4.1% EBITDA, plus 5.7% revenue. Overall, healthy results, I would say. Obviously, there as well. And in so far, we'll get a double whammy next year with reduction in passenger numbers, reduction in passenger charges. So the passenger service charge, minus 4.6%, landing fees, minus 2.1% to be expected. The formula kicks in again. But obviously, this will not make our life easier in 2026. Coming to handling, I think we had a strong third quarter overall, still below the 2024 figures. EBIT of EUR 8.4 million versus EUR 10.9 million in 2024. Obviously, this is the area where the personnel expense increase hits the most. We've got 1,500 people in ground handling. We have 1,000 people in security. So overall, this is where we feel the hit. Still, I think in terms of revenue, things are going in the right direction. Cargo, in particular, very strong. So overall, we -- I think the development is okay. We are significantly positive, but we see here the pressure in terms of staff costs, and this is an area where we will have to focus on a lot in the coming months and years. Just last week, we celebrated the establishment of AIRZETA, the newly established South Korean cargo airline, which officially launched their operations in Vienna and selected us as their primary European hub. So overall, we are still optimistic that cargo will continue to grow, and we are doing our utmost to keep here very close relations, in particular, with the big Korean airlines like Korean and the newly founded AIRZETA, which is joint venture of Asiana, which went bust and Incheon. Retail & Properties, yes, I think in reality, the result is better than the figures shown here actually because we have a flat EBIT development when the revenue increased by nearly EUR 8 million or even more than EUR 8 million. I think we had a number of negative one-offs, respectively, one positive one-off in the same period of last year. So we were impacted here by increasing personnel expenses, mainly provisions and costs related to the demolition of existing buildings for the purpose of space optimization. This is a negative one-off, those are the 2 negative one-offs in the third quarter this year, and we had a positive effect relating to the reversal of a bad debt allowance in the previous year. So overall, if we remove these one-offs, we would have the normalized margin here in the Retail & Properties segment. So overall, I think the negative one-offs were a bit more than EUR 4 million. The positive effect last year was a bit more than EUR 1 million. So overall, we are talking about more than EUR 5 million one-offs, which seem to burden this segment. What is still encouraging. So I think overall, sales in center management and hospitality and parking in Vienna are above the passenger development. So center management revenue plus 7%, parking plus 5%, rentals plus 2%. And we see a lot of interest in our tender for the space in the South extension of Terminal 3. We are in the very final stages of choosing the operators for our 10,000 square meter extension. And in particular, in terms of F&B space, we are at the very late stage, and it will be sincerely best of Vienna with very good commercial offers as well. So we will disclose this in the coming weeks, and we are quite happy with the outcome of this tender. Yes, let me come to my last slide, Malta, yes, uninterrupted rise in passenger volume, revenue, plus 10%, EBITDA plus 6.7%, EBIT plus 5.4%, EUR 62.7 million, strong growth to Poland, again, Ryanair growing, Wizz Air growing more frequencies, new destinations in the winter flight schedule. So as far as I can judge. I think the outlook for next year is not bad as well. Hotels being built or extended in Malta. So overall, Malta is still banking a lot of growing tourist numbers. And therefore, yes, we remain optimistic in Malta as well. Obviously, as you know, we have a very significant investment program in Malta. We need to urgently extend the terminal building, which just started now, I would say. We have already extended the Apron, which will now cover us for, yes, the coming decades, I would say, in terms of aircraft parking space. We are building a new Sky Park building. We are building a hotel. So overall, I think there's a lot going on here in the next 3 years, I would say. But due to the significant growth, this is urgently needed to cater for the growing passenger numbers. Yes, that's it from my end. Thanks a lot for your attention, and we are happy to discuss our report now. Unknown Executive: Yes, let's start the Q&A session. Happy to discuss any topics of interest. Hands are already raised. Let's go in order, Vladimira, please go ahead. Vladimira Urbankova: Congratulations to a very solid set of numbers and it seems to be that growth is maybe more dynamic now in October than one would originally anticipate. Yes. My questions would be focusing on upcoming challenges. That means 2026, you said that you plan to introduce cost reduction and efficiency improvement program. Could you a little bit more elaborate what are the key elements of the program? And if you can share maybe already some preliminary scope of savings you want to achieve? And next would be, yes, you pointed out to the lower passenger numbers because of the withdrawal or partial withdrawal of low-cost carriers. Do you have maybe some plan here how to improve position of Vienna, increase its attractiveness? Do you take some active measures to fill in this gap and get maybe more passenger traffic? Or you simply wait and see what are the plans of other carriers? So this would be my major questions. Julian Jäger: Yes. Starting maybe with your first question, that's our daily work now and work in progress because we are in the second half of our budget process. And what you can expect is that through the whole company in all departments, in all our daughter companies, we defined measures to improve productivity and to lower costs. So material costs, service costs, personnel costs. So in all parts of our operations, we are defining such measures. What is not possible right now is to give you an exact number what it will end up because this is part of the budget that will be approved by the Supervisory Board in 4 weeks from now. And what I can generally claim is that we try to offset as much as possible from the effects for 2026. Will we be able to offset all of the problems? No, that would overstretch, I think, the possibilities, but it will be a very substantial part of it. Günther Ofner: Yes. Let me continue with your second question. We obviously never just wait and see [indiscernible]. So I think we are always very actively engaging with our airlines regardless if these airlines are already operating in Vienna or they are not yet operating to Vienna. So we are obviously -- and our team is in touch with, I would say, all relevant European airlines. And obviously, it will not be easy to replace 8 or 9 aircraft here in Vienna on the short run. There is no airline I can see, which would just come and base 8, 9 aircraft here in Vienna. So I think we will have to work with many individual airlines to replace the capacity over the years in total, but not with one bang and one airline. I mean, obviously, easyJet comes to anybody's mind, but easyJet is a very slow mover. And therefore, as I said, I think -- and I think you saw the list. So there is a number of good news and airlines coming back to Vienna growing in Vienna, but it will take until we replace this intra-European capacity. And on long haul, me and my team, we are constantly in touch with airlines, mainly in Asia who could fly into Vienna. And there, I'm optimistic as well we will see in the next 1 or 2 years, like we saw in recent years with the comeback of ANA Air India. Now this year, we got school from Singapore. So I'm very optimistic that we will see here some long-haul growth as well. In terms of conditions, we reduce our charges or we have to reduce our charges next year anyway. So this should improve our competitive position a bit. We will definitely do our utmost, but probably in a completely different style than Ryanair to convince our government that overall, it would be a net contribution to the Austrian budget if there would be a reduction in the tax because this would be financed with more tourists coming to Austria. But I don't foresee next year any other changes in terms of charges. I think a reduction on average of 4% is anyway a significant improvement. And what we will stop next year is the winter incentive. So the winter incentive is still applicable now in January and December, but it will not be applicable anymore next year. Vladimira Urbankova: Yes. This was my sub question, if you have any incentives already in plan maybe to attract more airlines. Günther Ofner: I think honestly our. Vladimira Urbankova: Of existing players. Günther Ofner: For new airlines and new destinations, we have an attractive package anyway in place. For airlines which have a certain volume, I think we have good conditions. I think what really harms us is the ticket tax, and you can see the development in Germany, where the German government now is reducing the ticket tax. They are not abolishing it. But I think in terms of ultra-low cost, our biggest problem is the ticket tax. And I think it shows how strong our market is that in the years after COVID, they didn't care. But now more and more countries reduce aviation taxes, and this makes obviously the competitive environment for us more difficult. Unknown Executive: Henry, please continue. Henry Wendisch: Congrats on the strong results. I have, yes, one question regarding the latest topic we just talked about the air taxes. So we already mentioned Germany is reducing them, not abolishing them. But I've seen that in Austria, there's a parliamentary motion to abolish it completely. This is, I think, by the FPU, or the opposition party. So sort of what is your assessment on this that it might go through even? And then a direct follow-up question, would this maybe alter the decision of Ryanair and Wizz Air to reduce? Or is this more or less final? And maybe then speaking more long term, if this may be reduced, we will see this effect now, the Ryanair and Wizz Air reduction now, but then maybe 2027, 2028, they will come back now because the capacity planning is already done. So what sort of your idea here? What's your take on this? Julian Jäger: I think there's a 0% chance that this motion goes through. I think it does not help. And this is where I completely disagree with Michael O'Leary, although probably not in content, but in style. I think there would be a lot of discussions behind closed doors necessary to get a reduction or an abolishment of the ticket tax. It does not work with the sledge hammer, I would say. But let's see. So I don't think that -- I mean, we have a double budget. '25, '26 and nobody in the government will touch this budget now. So the earliest imaginable reduction would be in 2027. We will do our utmost, and I think we have a lot of good arguments, but there will be no change immediately. I think Wizz Air even -- I mean, in the end, they had a lot of troubles in recent years as well with the capacity, with engines and so on. So I don't see Wizz Air coming next soon. I think we will -- it will be interesting to see how the battle between Ryanair and Wizz Air will turn out next year in Bratislava. But obviously, yes, if there would be a significant reduction or even an abolishment, [indiscernible] year to date. So I think we will have to wait and see. We will try to convince our government to give here really a reduction in the financial burden on the airlines. And then I would be optimistic that we would see ultra-low-cost growth again in Vienna, probably more from Ryanair than from Wizz Air. Henry Wendisch: Thanks for the political sort of more color on this. That helps a lot. because we don't follow in Germany here, your Austrian news on a daily basis. So it's always good to have this picture. Then second question for me is maybe for Dr. Ofner, I've seen the operating cash flow was lower due to cash out for taxes, mainly in this I see if I look at the P&L, there's a discrepancy between P&L taxes and cash taxes. So what's sort of the difference here? And can we expect something like that to revert back in the coming quarters or years? Or what's sort of behind this? Günther Ofner: Yes. I mean, in the phase of Corona and immediately after that, all our prepayments have been reduced. And now we have to, let me say, refill what we didn't pay in advance. And we also have now higher advanced payments. And all that sums up to roughly EUR 120 million. And it includes also the tax payment in Malta for 2025, which amounts to roughly EUR 33 million. So it's a normal process. And in '26 and the following years, we will not see such extraordinary events because the prepayment now is adapted to the expected results. Henry Wendisch: Right. And then my last question, I think also for you, Dr. Ofner, on next year personnel expense. So now the inflation rate is still at 4%. The [indiscernible] expects 2% for 2026, if my understanding is correct. So that gives us sort of something between 2% and 4% for, I think, a demand for the collective labor wage increase for next year as well. So this is sort of against your cost efficiency program or one step against this. What sort of your take if you had a -- I mean, you don't have it, of course, but if you had a glass ball to look in the future, what would your estimate be on the wage inflation for 2026 for the one in May, actually? Günther Ofner: So it will definitely below inflation rate. I mean, finally, we will have to agree for the new collective agreement in May 2026. But we definitely will be below inflation. And we will reduce workforce throughout the year. So altogether, I hope that we can see an absolute reduction in personnel expenses compared to 2025. Unknown Executive: Philip, your questions are still on the table. Philip Hettich: Hope you can hear me. First question, I just would like to revert on the incentives on the winter incentives of Wizz Air again. So could you elaborate again why you don't want to repeat those incentives given the pressure on traffic is much higher this year. So what basically changed here on your thinking compared to last year? And then also regarding traffic, can you already judge how much of the planes of the ultra-low-cost carriers that have left the Vienna base will maybe be compensated by them still flying into Vienna from other bases? Is there any visibility that you have here? So this would be the first 2 questions that I would have. Julian Jäger: Yes. To start with your second one, no, we don't have visibility there. I don't expect that Wizz Air will fly a lot into Vienna, probably not at all. But Ryanair, we don't have yet full visibility. So we don't even have full visibility for February and March. So there are still some things in the air. And yes, overall, I just have to delay this discussion for January. We'll get every day some good news, some bad news, but the net effect of the reductions of the ultra-low cost in next year, we will just get a better idea in January. Regarding your first question, I think this is pretty easy to answer. When we introduced the winter incentive this year, we looked at a very significant increase in airport charges, plus 4.6% passenger service charge. And what our idea was back then to even it a bit out. So that's why we introduced the winter incentive. And I would not see that, again, the winter incentive would have any significant positive impact on capacity next year. And therefore, with a reduction of 4.6% on our passenger service charge and security charge, we -- that's why we discontinued this incentive for next year. Philip Hettich: Okay. Okay. Understood. And then maybe one more for the retail segment. Do you also see any weakness here as regards to the spending per passenger from any potential weaker macro? So is there a feeling that you see that passengers just take back on their spending at your shops at the airport? Julian Jäger: Actually, this is something we expect all the time, but it doesn't really happen that much. What we see is a reduction in banks. This is not a major part of our business. So the market share here is minute. But this is an area where we see constant decreases, which is not a big surprise given that we don't have a lot of Russians anymore that we -- so passengers from areas where you usually carry some cash and exchange it are significantly less than probably before the pandemic. But all the rest is at passenger development or even above. So this year, so far, we cannot complain. And in terms of F&Bs, it's good. or it's significantly above the passenger development. duty-free is slightly above the passenger development. So overall, we are satisfied, I would say, with the development. And yes, as I said, PRR center management and hospitality cumulated is 5.7%. Passenger development is below 3% in Vienna. So overall, it's okay, I would say. Philip Hettich: Okay. And then maybe one more, if I can, on Malta. So the EBITDA margin reduction in Malta that led to basically a flat Q3 EBITDA year-over-year. Is it mainly due to investments that you are now conducting? Or is there any other effect here weighing as well that you would see pressuring margins? Julian Jäger: I mean it's -- I would say it's not only investment. We see some cost uplift overall in motor as well. But CapEx is part of it and CapEx will expand in the coming years. So we will invest more than EUR 100 million probably next year, and we will invest more than EUR 300 million until 2030, so in the next 5 years. So overall, I think we -- I mean, if you see the passenger numbers going through this small terminal, which has insignificantly changed since I left in 2011 when we had 3.5 million passengers. I think everybody will understand that we will have to invest here very significantly. And therefore, yes, I would say probably not next year, but in the years to come, the margins in Malta will reduce here as well. But overall, I see still a very strong sentiment in Malta. I see a very ambitious government in terms of how to grow tourism figures. I see a very strong cooperation between the tourism industry, the airport and government. So overall, we are very optimistic for the future development here. But yes, obviously, to sustain these levels of passengers and cater for future growth, we will have to invest here very significantly. Unknown Executive: Any further questions? No hand is raised, then I would thank everybody in the call for discussing the topics of interest for showing the interest in Vienna Airport. And the next scheduled event is January 20 with the traffic figures for 2025 and the outlook -- financial outlook for 2026. Thank you. Julian Jäger: Thank you. Bye-bye. Vladimira Urbankova: Thank you. Bye-bye.
Operator: Hello, and welcome to BJ's Wholesale Holdings, Inc. Third Quarter Fiscal 2024-'25 Earnings Conference Call. [Operator Instructions]. I now pass the call over to our host, Anj Singh, VP of FP&A. Please go ahead. Anjaneya Singh: Good morning, and welcome to BJ's Third Quarter Fiscal 2025 Earnings Call. Joining me today are Bob Eddy, Chairman and Chief Executive Officer; Laura Felice, Chief Financial Officer; and Bill Werner, Executive Vice President, Strategy and Development. Please remember that we may make forward-looking statements on this call that are based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the Risk Factors sections of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today's press release and latest investor presentation posted in our Investor Relations website for a cautionary statement regarding forward-looking statements and non-GAAP reconciliations. And now I'll turn the call over to Bob. Robert Eddy: Good morning. Thank you for joining us to discuss our third quarter results. Our business delivered strong results in Q3 and performed well in an incredibly dynamic environment. Once again, we gained share and grew traffic, marking the 12th consecutive quarter of market share growth and the 15th consecutive quarter of traffic growth. These consistent results are a testament to the value that we provide to our members each day as we are guided by our purpose of taking care of the families who depend on us. This purpose has never been more relevant as many of our members are dealing with a considerable level of unpredictability in their everyday lives. This has impacted consumer confidence, which has been at low levels for much of this year. And we are taking these conditions as a call to action to lean even further into value for our members' everyday needs. Some of our actions include incremental offers to those members that may need a little bit more help in the current environment. In addition, we're rolling out reduced delivery fees to make our most convenient shopping channel even more accessible. The combination of value and convenience is a powerful unlock for us, and this will help our members realize even more value from their BJ's membership. We've also launched a 10% discount for our team members as a way of thanking those who are on the frontlines living our purpose every day. For the quarter, we delivered merchandise comparable comp sales growth of 1.8% and adjusted earnings per share of $1.16. It's helpful to evaluate the performance on a 2-year stack basis to normalize for the impact of last year's port strike and hurricane activity. Our 2-year stack comp was 5.5%, an acceleration of nearly 1 point versus the first half. Our Q3 comp performance was evenly balanced across our 2 reportable divisions. Our perishables, grocery and sundries division grew comp sales by 1.8% with a 2-year stack that accelerated sequentially of 6%. The investments we've made in both Fresh 2.0 and our category management process have driven continued share gains across our consumables franchise. We saw the most strength in perishable categories such as fresh meat, dairy and produce, aided by our Fresh 2.0 investments. We also saw strength in nonalcoholic beverages and candy and snacking, driven by enhanced assortment and more prominent placement in our clubs. Our general merchandise and services business also grew by 1.8% on a comp basis in the quarter. Consumer electronics comped in the high single digits on success in computer equipment and tablets. Apparel, which we've highlighted on several recent calls, continues to grow, comping in the low single digits. The offsets we saw this quarter were in home and seasonal, which continued to be impacted by lower discretionary demand and consumer confidence, as well as some of the decisions we made earlier this year to tighten our inventories in light of the anticipated impact of tariffs. Our services business also contributed to the improved performance in this division during the quarter. Looking at the behavior of our membership base this quarter, we continue to see members across all income levels remain cautious, which tracks with what we broadly see in the consumer confidence data. We saw members exhibiting value-seeking behavior, including higher sensitivity to promotions, increasing purchasing of private label items and some trade down. For example, given the high price of beef, we saw higher purchasing of ground beef versus more expensive cuts. Despite this type of behavior, member trends exhibited stability quarter-over-quarter across all cohorts when adjusting for the noise from the port strike. While value-sensitive members remain more exposed to the macro backdrop, we did not see any incremental pullback from them. That resilience reinforces BJ's position as a trusted destination for strong value and convenience when it matters most. The environment continues to move quickly, but our teams haven't lost sight of the fundamentals. By zeroing in on our controllables, they're advancing our strategic agenda, increasing member stickiness, making our clubs better places to shop, expanding convenience and growing our physical footprint. These elements are central to creating value over time, and we built further momentum in each this quarter. I'll now provide an update on how those pieces are evolving. Our membership results continue to be robust, and we grew membership fee income by nearly 10% this quarter, driven by strong member counts, mix benefits and the effects of our recent fee increase. We expect the growth rate to show further improvement into the fourth quarter and to once again deliver a 90% tenured renewal rate for the full year. The core of our membership health is driven by growing the number of members as well as improving the mix of those members. In the third quarter, our higher tier membership penetration reached another new record, improving by 50 basis points sequentially. And we continue to see more opportunity to push here. We would not be able to deliver sustainable membership growth without parallel improvements in our merchandise. We are launching many new owned brands products, which are aimed at improving the member experience by offering excellent quality at an unbeatable price. Some of the products we are excited about include Wellsley Farms branded tortilla and potato chips, protein shakes, frozen poultry and coffee pods. This is just a small list of many new high-quality products that we plan to launch at amazing price points. Owned brands products have a multitude of benefits as they are typically priced at about 30% below national brands while offering comparable quality of national branded items. This gives our members even more compelling value for their hard-earned dollars, which in turn drives loyalty and higher lifetime value. Owned brands products also deliver higher penny profit for us, which we can use to invest back into the member experience, further propelling the flywheel that drives our business. We're excited to see how our customers respond to our improved offerings. Our efforts to continue to improve the convenience of shopping our clubs can be seen in the digital growth of 30% this quarter and 61% on a 2-year stack basis, driven by strength in BOPIC, same-day delivery and ExpressPay. We're looking to further drive innovation by utilizing AI to deliver enhanced content highlights and attributes, making shopping even easier for our members. We also recently beta launched an AI shopping assistant and personalized member shopping lists, and we're looking forward to taking these live to our members soon. Last but not least, our new club footprint expansion. We opened our club in Warner Robins, Georgia during Q3. And just last week, we opened our fifth Tennessee club in Sevierville. I'm pleased to report that both clubs are off to a great start, joining the class of 2025 clubs that have outperformed expectations, with membership counts 25% ahead of plan. The community reaction at all of our recent openings has been nothing short of phenomenal, and we are proud to serve these communities. Our expansion strategy has been a sustained and accelerating success, with clubs opened over the last 5 years delivering comp performance about 3x the chain average. On deck for new club openings, our Springfield, Massachusetts; Sumter, South Carolina; Casselberry, Florida; Chattanooga, Tennessee; Soma, North Carolina and Delray, Florida. That will make 14 new clubs for the year, the most we've had in many years. We remain on track to add 25 to 30 new clubs in 2 years, and our pipeline of new clubs is as large as it has ever been. Speaking of our pipeline, we are excited to announce 2 more 2026 openings in Foley, Alabama and Mesquite, Texas as well as a relocation of our club in Rotterdam, New York. Mesquite will be our fifth Dallas-Fort Worth Club opening in 2026. We've been impressed with the warm welcome we've received as we've introduced the BJ's brand to the market over the past few months, including our Friday night life sponsorships, which was capped off with South Grand Prairie taking home the trophy and the [ Prairie Bowl ] sponsored by BJ's Wholesale Club. The enthusiasm we've seen in these new markets has been awesome, and we can't wait to bring the value of BJ's Wholesale Club to Texas families early next year. As I look at our business, I see improving momentum. Our membership is growing in size and quality. We are making improvements in merchandising and continue to capitalize on the convenience of our digital offerings. And as I just said, our footprint expansion is accelerating and successful. While the short term may be somewhat unpredictable, I'm confident that our company is in an excellent position to deliver value to our members and make good on our commitments to shareholders. We will continue to act with purpose in building our structurally advantaged business for the long term, and you should continue to expect that we will run the business with lifetime value at the core of our actions. Before I turn it over to Laura, I want to thank our team members. Your dedication to serving the families who depend on us and your commitment to supporting one another make BJ's a great place to shop and a truly special place to work. I'm proud of all that we are accomplishing together. Laura Felice: Thank you, Bob. I'd like to start by recognizing the outstanding efforts of our team members in our clubs, at our club support center and throughout our distribution network. Your hard work and commitment to serving our members and communities are instrumental in delivering a solid quarter and advancing our long-term growth agenda. Let's look at our third quarter results. Net sales for the quarter were approximately $5.2 billion, growing 4.8% over the prior year. Total comparable club sales in the third quarter, including gas sales, increased 1.1% year-over-year as the average price of gas declined mid-single digits year-over-year. Merchandise comp sales, which exclude gas sales, increased by 1.8% year-over-year and by 5.5% on a 2-year stack. We are pleased to grow traffic and units in the quarter. This quarter, we lapped the surge of business brought by last year's port strike. At this time last year, we estimated it to have contributed about 1 point of comp in September. Moving to this year, September was by far the weakest month as we comped the strike, with August and October generally performing in line with our expectations. We believe it may be helpful to evaluate trends on a 2-year stack basis to assess the business, and I'll reference this metric in my overview. Our third quarter comp in our grocery, perishables and sundries division grew 1.8% year-over-year with a 2-year stack of 6%, showing slight acceleration versus the first half. Our general merchandise and services division comp also increased by 1.8% in the third quarter with a 2-year stack of about 2%, an improvement versus the declines seen in the first half. As Bob noted earlier, traffic and market share grew again in this quarter, and we experienced approximately 1 point of inflation. Digitally enabled comp sales for the third quarter grew 30% year-over-year and 61% on a 2-year stack. Our digital businesses performance is an affirmation of the values our members find in the improved and dramatically more convenient shopping experience. We find that the members that engage with us the most digitally and utilize all of our offerings, end up being the most valuable members with the highest lifetime value. We will continue to invest in our digital capabilities to gain even more wallet share of our members. Membership fee income, or MFI, grew 9.8% to approximately $126.3 million in the third quarter on strong membership acquisition and retention across the chain. We also continued to benefit from the fee increase that went into effect at the beginning of the year. Our underlying member growth remains healthy, and we continue to improve the member mix. Moving on to gross margins, excluding the gasoline business, our merchandise gross margin rate was flat on a year-over-year basis as we continue to invest in our business and in our members, along with execution towards our longer-term objectives. We expect to continue to invest in Q4 and beyond as we lean into our purpose and do the right thing for our members, which will be the right thing for us in the long term. SG&A expenses for the quarter were approximately $788.2 million and deleveraged slightly as a percentage of net sales year-over-year. Adjusting for the legal settlement benefit that we realized last year, SG&A as a percentage of net sales was about flat year-over-year. We continue to grow comp gallons and gain share in our gas business. Our comp gallons in the quarter grew 2% year-over-year, a nice improvement versus Q2's flat performance and again significantly outpaced the industry, which declined low single digits on a comp basis over the same time frame. We have been in a much less volatile gas margin environment this year with profitability just modestly ahead of our expectations in Q3. Our third quarter adjusted EBITDA was down about 2% year-over-year to $301.4 million, owing largely to lapping the benefit of a legal sentiment last year. Adjusting for the settlement, adjusted EBITDA grew approximately 5% year-over-year on higher top line and strong cost discipline. Our third quarter effective tax rate was 26.9%, slightly lower than our statutory rate of approximately 28%. All in, our third quarter adjusted earnings per share of $1.16 decreased approximately 2% year-over-year due to the legal settlement. Adjusted earnings per share grew approximately 8% year-over-year, normalizing for the settlement benefit last year. Moving to our balance sheet, we ended the third quarter with total and per club inventory levels down 1.5% and 5% year-over-year, respectively, while our in-stock levels increased by 90 basis points. Note that we are operating 9 more clubs in our chain compared to a year ago. The favorability in our inventory investment continues to be related to reduced inventory buys. I am proud of our team's hard work to stock even more of our merchandise our members want while improving the operating efficiency of our business. This is yet another driver of the flywheel, with which we can pass along even more savings to our loyal members. Our capital allocation strategy remains consistent. We believe profitably growing the business is our best use of cash and investments to support membership, merchandising, digital and real estate initiatives will continue to be funded by our cash flows. We ended the third quarter with net leverage of 0.5x. Share buybacks are a key component of our capital allocation framework. And in Q3, we took advantage of the lower share price and repurchased approximately 905,000 shares for $87.3 million. As of quarter end, we have approximately $866 million remaining under our recently renewed repurchase authorization. We will continue to take a disciplined and balanced approach to deploying our capital to maximize shareholder value. Looking ahead to the remainder of the year, we are confident in the momentum of our business and our ability to deliver sustained growth, especially in an uncertain economic backdrop. Our teams are focused on controlling the controllables while executing towards our long-term objectives. With regards to guidance and as we have been speaking to on this call, the macro environment is challenging. We have made decisions to be prudent with inventories in the face of this environment, challenging our ability to grow general merchandise sales. We made that choice in order to allow continued investment in member value in the rest of the business. While it will hamper sales in the short term, we remain confident that this was the right decision. With that in mind, we are narrowing our guidance for the full year merchandise comp sales to a range of 2% to 3% for the full year. We are also increasing our range of expected adjusted earnings per share to be $4.30 to $4.40. The actions we've taken to support stronger, more sustainable growth are working, and our long-term roadmap is solid. With a resilient business model and clear strategic direction, we're well equipped to keep building on our success and deliver substantial value to our shareholders in the years ahead. Bob, back over to you. Robert Eddy: Thanks, Laura. As I noted earlier, we are making progress in building momentum. We're elevating the quality of our membership base while it grows. We're curating a stronger, more relevant assortment at prices that reinforce our value promise. Our digital tools are improving member experience, and our expansion strategy is bringing the BJ's model to new high-potential markets. Looking forward, our commitment doesn't change. We will keep living our purpose and focusing on the people and communities who rely on us every day while executing on the long-term priorities that drive our growth. Thanks again for joining us today and for your support of BJ's Wholesale Club. We will now take your questions. Operator: [Operator Instructions] Our first question comes from Peter Benedict of Baird. Peter Benedict: I wanted to ask about some of the income demographics and the behavior. It sounded like it was relatively stable. And I think we're hearing a lot this week about kind of that lower and facing some struggles. Can you remind us maybe your exposure to maybe the SNAP program, talk about the renewal rates you're seeing maybe across these income demographics, just anything further below the surface in terms of behavior across income demographics, both in the third quarter and then as you're kind of entering here into the holiday season? Robert Eddy: Pete, maybe I'll kick this one off, and Laura can add to it if she sees fit. Our prepared remarks tried to tackle this question because we knew it would be out there. Certainly, everybody is concerned about the low-income consumer. The continued inflation provides clear pressure on that segment of all consumers and certainly that segment of our members. With that said, removing the noise from the port strike and the hurricanes and stuff last year, we saw their performance in Q3 as being pretty resilient. The purchasing habits were very stable, and we're pleased to see that. There certainly was a lot of noise at the end of the quarter and the beginning of the fourth quarter around the SNAP program and the government shutdown. I guess, I would say there was a slight disruption in the end of Q3, a more meaningful disruption in the opening days of Q4. But now that, that program is back on track, we're recovering. Those participants as they get access to their benefits are choosing to come to see us and -- as they have more opportunity to spend. So we're encouraged by that showing from those members and from the members in the medium- and high-income cohorts that we saw during the quarter as well. And maybe one final point. We're also encouraged, going forward, by the administration's help recently on the tariff front and reducing the cost of things that are not made or grown in the United States. And so that should be helpful to all consumers, but most pressingly, the low-end consumers that you referenced. Laura Felice: Yes, I think I'd just add on top of it from a membership perspective, we're really proud of our member -- our continued membership results throughout the year. We are acquiring members in our existing clubs, so comp clubs in our new markets and our new clubs that we've opened at the beginning of this year. And there isn't anything, when we look at the details of membership to your question about kind of cohorts, that looks different. We're acquiring members across all the cohorts. And so we're really happy with our continued strength from a membership perspective. Operator: Next question comes from Kate McShane from Goldman Sachs. Katharine McShane: We wanted to ask if you believe that the right long-term same-store sales growth for this business is in the 3% to 4% range. If so, why? And what do you think is holding you back from achieving this comp over the last several quarters? Robert Eddy: Kate, as you know, we've been transforming our business over the last several years with the idea of really four things: one, growing and maintaining a stickier membership; two, improving our merchandising; three, improving our convenience through digital; and then finally, increasing our footprint through real estate expansion. And as we talked about in the prepared remarks, all those things are heading in the right direction. Certainly, the things that we're doing sometimes conflict with what happens in the outside world. We certainly have the luxury of competing against great competition, and it's certainly been a choppy economic backdrop out there. So we have tremendous confidence in our long-term ability to grow this business from a top line perspective. We're showing signs of that in all four of those pillars. And we'll continue to work on each of those to get to that point. The thing that we try hardest to do, obviously, is put the right products on the shelf at the right value. And we made tremendous strides, I think, during Q3 to do that. Our merchandising team has put a lot of effort this year into that idea of greater products, greater values. And we made considerable investments in Q3 with that in mind. We'll continue to do that because that's what we believe wins. Value and convenience are really what we're after for our members. And we'll keep plugging. We're very optimistic in our long-term aspirations. Katharine McShane: And if I could just follow up with one question, you just mentioned the competitive environment. We were curious about what the competitive response has been when you open in some of these new markets, particularly Dallas, which has a really strong grocery offering and other club offering already. It sounds like things are going well there, but I wondered if you had any more details with the fifth store opening? Robert Eddy: Sure. The real estate growth story, and I'll let Bill talk about it since he is the architect of it, is a great one. It's certainly a continuing, sustained success and getting even faster with 14 clubs this year in lots of great markets. Those clubs are doing really well. And so we're very enthusiastic about this ability to grow our company. And we've been received well in the markets that we've entered. So why don't I let Bill talk a little bit more about it? William Werner: Kate, I think as Bob mentioned, we're really proud and excited about the success of the new clubs this year thus far and what's left to come for this year. And then as we look forward into Dallas next year, the prospect of going in and winning in that market is really important to the team. We've talked about it a couple of times on these calls that the culture that we've built around new clubs is really important. And the team is actually at a high level. As we look back at this year so far, I think 2025 will go down as the best class of new clubs. As far back as I can remember, with the success we've had with our 8 openings to date now and 6 more to go for the rest of the year, what we're seeing so far in those new clubs that haven't opened yet with preopening membership and the engagement of the community, we know that they're going to be outperformers as well. And so as we take that momentum from this best class of openings into next year into Dallas, combined with the work that we've done in the market of raising awareness for our brand and engaging with the community, we have a ton of confidence that not only will we compete, but we'll be in a position to have great success there. Operator: Our next question comes from Robby Ohmes from Bank of America. Robert Ohmes: I wanted to follow up on the inventory positioning that Laura talked about. I just wanted to understand how you're thinking about that for the fourth quarter. Is it the positioning that sort of limits sales upside, but supports margins? Just how -- what's the pluses and minuses of the tight inventory and semi-related Fresh 2.0 was like a great tailwind in comp driver, the benefit, the tailwind has slowed here. Is there anything that can reaccelerate? Is there a Fresh 3.0 or something like that, that's in the work here to kind of get that to reaccelerate? Robert Eddy: Robby, maybe I'll take a shot at starting off, and Laura can fill in. I think what you're referencing is Laura's comments around proactively managing our general merchandise inventory. When we were in the beginning part of the year, I'm trying to understand where prices would go and costs would go as a result of tariffs, we made some proactive decisions to manage potential markdowns to allow us to fund greater investment in overall value for our members. And I think that was the right decision. I think you want us to do that every day. That is really why we're here. We've taken those dollars and in fact, invested them across the rest of the business. In Q3, significantly reduced pricing on own brands water, on several other beverages, on some paper products across our produce assortment. So we are really trying to balance those two things. And so we do have a more conservative inventory position from a general merchandise perspective, that was true in Q3. It remains true for the fourth quarter. And I do think it will limit the upside of the general merchandise business, but again, allow us to continue investing for the overall value for our members. I think the other story within inventory is really an absolutely terrific performance in managing the overall inventory levels of the company. The team has done a really masterful job in the whole business to have our in-stock rates go up 90 basis points into inventories that are down. We are doing a much better job allocating inventory throughout our chain, making sure that things are where they need to be, when they need to be there and to be in stock for our members every day. We need to keep turning that handle and get better and better every day, but I couldn't be more proud of the team to make a performance like that happen. Anything else, Laura, on inventory? No? Fresh 2.0, I think it was another terrific program, continues to yield benefits. You know that started out in our produce business. We had terrific produce results during the quarter again. And what you're seeing from the perishables business overall is some of the reduced benefits from egg inflation and things that are offsetting some of that great performance. So with that said, we've talked about the next iteration of Fresh 2.0 and call it what you want, 2.1 or 3.0. We have made another set of considerable improvements in meat and seafood. And we're looking to doing the same in bakery and other categories as we go forward. The mission there is the same, right? Our best members interact with us in these categories. If we can show them the greatest product, the freshest product at compelling value, is displayed in a way that is compelling, freeing our team members so that they are experts in all these disciplines; we can provide a better experience for our members, get more people into those categories and grow the overall traffic of the business. That is certainly the result that we saw from Fresh 2.0 in the produce segment. The early returns on meat and seafood are good as well. And so we're very optimistic about that program and its ability to drive sales within those categories, but also to get to that further bigger goal of driving traffic in the whole business, which obviously drives lifetime value. So some of these investments are expensive, but they're very much worth it in terms of driving the top line and the overall value of membership to BJ's. Operator: [Operator Instructions] Our next question comes from Steven Zaccone from Citi. Steven Zaccone: I wanted to ask about the implied fourth quarter same-store sales because you referenced in the release that you've also seen some holiday momentum -- or excuse me, momentum to start the holiday season. Can you just talk through your category assumptions in the fourth quarter? And then, how you think about low end versus high end of the range? Robert Eddy: Sure. Again, maybe I'll start, and Laura can fill in, Steve. We certainly, I think, had a good performance in the third quarter. I keep using that word resilient. But into the face of the port strike and the hurricane activity and all that stuff, our sales were a bit higher than we thought they might be in the range of outcomes. And the team's preparation for the holiday season, I think, has been fantastic. We've been investing in value, we've got incremental promotions out there, we're continuing our really successful Free Turkey promotion, where if you spend $150 in 1 basket, you can get a free turkey for your family for Christmas. We're doing a lot of these things to really build on the momentum we saw in Q3 and get our members in our clubs and make them happy. With that said, it's a choppy economic backdrop out there, right? We talked about the low-end consumer at this point. And we certainly have a little bit of a harder hill to climb from a comparative perspective, we had a good Q4 last year. But net-net, while it's a wide range of outcomes that can happen in any quarter, most notably the fourth quarter, we are cautiously optimistic about our ability to put up some good numbers in the fourth quarter. Laura Felice: Steve, the only thing I might add to all the commentary Bob just said is I'd remind you about our inventory positioning that would be already talked about for general merchandise. So we've factored that into the range of outcomes. That doesn't mean that we will be out of stock in general merchandise. It just means that we've tightened up the buys and we've picked the best of the best assortment. So we're ready for Thanksgiving, like Bob talked about. And we're ready for our members for holiday kind of as we roll into December. Steven Zaccone: Okay. The follow-up I have then is on that general merchandise. So when we think about the inventory planning assumptions and maybe just talk about the buying environment, how does that look for the first half of next year, right? Because you made changes to the second half, presumably based on tariff uncertainty. But how does that apply to general merchandise plan as we kind of glance into 2026? Robert Eddy: Yes. Look, it's -- I don't want to get too far over skis and talk about next year. But obviously, the fourth quarter seasonal merchandise was bought in the spring when there was considerably more uncertainty around what the tariff exposures might be and what the consumer's response might be to any increase in prices. Every quarter we go through, we get more and more clarity and we get more information from our members as well. And so we obviously alter our buys accordingly. I guess the other thing I would say is Q4 typically is a higher general merchandise penetration and obviously lower in the first quarter. And so this question becomes a little bit less important as we get into the beginning of the year. Operator: Our next question comes from Mike Baker from D.A. Davidson. Michael Baker: I hate to focus on the short term so myopically. But the guidance, your fourth quarter implied guidance, to me, I'm calculating around 2, 2.5 or something in that range. Correct me if I'm wrong on that, at least at the midpoint of the outlook. But if you are in that range, that's a pretty big pickup on a 2-year basis against the 4.6% last year. So given all the caution you're talking about, can you square that? Or is it more reasonable to think about maybe the low end of the implied fourth quarter guidance, in other words, consistent on a 2-year basis? Robert Eddy: Mike. Look, let's just focus on the fact that we're cautiously optimistic, as I said earlier. We've done a lot of planning, a lot of action around providing our members the right products at the right value. We talked about incremental promotion and building into that. We're certainly where we need to be from a digital perspective. People are loving interacting with our digital properties to get what they need from a convenience perspective. And we just -- we are trying to act within our purpose and take care of the families that depend on us. And that is all those things, right, getting those -- getting the products on the shelf. We're doing a fantastic job doing that in an improved way, putting sharper prices on things, which we, again, had considerable improvements in during the quarter. And really trying to take care of all the different communities within our membership. And we talked a little bit in our prepared remarks about our team members, maybe I'd take one minute to thank those team members out there every day, taking care of our members. They have the hardest job in our company. And guys, I'd really like to thank you for all your efforts. We initiated for the first time in our company's history, a 10% discount for our team members to really say thank you, to acknowledge that it's tough out there for everybody and to help our team members through their holiday season purchasing as well. So I think we have a lot to be proud of. I think we have some momentum coming out of the quarter. The early days of Q4 have been reflective of that momentum. But we understand that there's a lot of road to go throughout the quarter. We're only a couple of weeks in. Next week -- this weekend and next week are huge for the quarter as are the remaining weeks in December. So we feel like we're in a good spot, but it's very, very early. And so that thought process really is what drove us to have the guidance that we put out there. Operator: Our next question comes from Ed Kelly from Wells Fargo. John Park: This is John Park on for Ed. It sounds like the messaging is that you've been investing in price, but I guess merchant margins were flat. So I guess, what are some of the offsets in gross margin that helps you get there? And then anything on Q4 merch margins and how we should think about that? Robert Eddy: John, we certainly have invested -- we widened our price gaps in Q3 considerably with those investments versus competition. So I'd like to say thanks to our merchandising team for making those moves. It's important to our company, important to our members, for sure. And we have many different levers to offset that throughout the business, not just within the margin construct. We will try and be as efficient as possible throughout the business to fund investments in member value. Certainly, some of the offsets that you might think about within the merchandising world would be being more efficient in the distribution centers, trying to be more efficient from a trends perspective, growing our retail media program, which has been growing very, very nicely, the team is doing a great job there. There are many different things that we've tried to do so we can pass more value back to our members, and we'll continue to do that. Operator: [Operator Instructions] Our next question comes from Simeon Gutman from Morgan Stanley. Pedro Gil: This is Pedro Gil on for Simeon. Nice job continuing to grow your digital business, really impressive. Could you comment on the work you're doing in retail media there? And also more broadly, we've heard some of your peers recently announcing partnerships in agentic commerce. Could you give us an update how you're thinking about the AI opportunity in e-commerce? Robert Eddy: Sure. As we've talked about, our digital business is an important part of our strategy. It has been growing by leaps and bounds for years now. So 30% during the quarter, over 60% on a 2-year stack. It is approaching 17% of our sales at this point. We are at a point that, frankly, a few of us didn't think we'd ever get to. And so we have a lot to be proud of there. It all comes on the back of convenience. We have an incredibly talented digital team that builds these capabilities for our members to help them get access to tremendous value in a more convenient way than they otherwise might. Most of our business, as you know, is in what we call BOPIC, Buy Online, Pickup In Club; as well as same-day delivery, as well as ExpressPay, where you check out in the club using your phone. Well over 90% of our total digital sales are fulfilled by our clubs. So we are efficiently building this business. It is certainly a moneymaking opportunity for us. We are really pleased with the way that it's growing. Included in there is our retail media program that you referenced, and I talked a bit about it a few seconds ago. While still small, our team has been growing that quite nicely as well as we improve our website, as we improve the way that we partner out there with our advertisers, the way that we really coordinate between our different properties, whether it's our website or our app. We are coming up with more ways to engage our members and allow our advertising partners to reach our members with compelling values that first and foremost, to help our members but also help us and our advertising partners. So we will continue to invest in that business in the future. Again, it's still small, but is growing quite nicely and allows us to make other investments in member value as we go forward. Everyone talks about AI, we are no different. AI is a big part of our future. It is most notably used in our digital group at this point. And the use cases would not surprise you. They were on the vanguard of using it to make coding more efficient, making testing code more efficient. And they will continue to use AI in consumer-facing avenues as well. And so I'll give you a couple of examples. As we talked about in the prepared remarks, we've got beta-launched AI shopping assistants and are using AI to do predictive shopping lists for folks. Probably the thing that's most well along, however, is partnering AI with the robotics that we have in our stores. We have a robot that roams our stores named Tally. And initially, Tally was just helping us with inventory accuracy and price line accuracy. And now we have taken that much farther where Tally's imagery creates a digital twin of each of our buildings, something that we've never had before because our buildings don't have warehouse management systems. And that has enabled really cool things from an operational perspective where not only are we getting better inventories and better pricing accuracy, but we are efficiently spotting problems for our team members to take care of, we are efficiently generating to-do list for our team members in the clubs find inventory and what needs more inventory, what should they be doing first within the building. We are using it to make help us spot quality issues in our Fresh businesses as well, so we can make sure that our standards there are tiptop every day. We're finding new ways to use Tally and the data that provides every day. I think the thing that's been most effective so far has been using those digital twins to predict the most efficient pick path for our team members to pick orders for BOPIC or curbside or same day, where they are about 40% more efficient today than they were before. So we'll continue to build on the use of AI. We'll continue to focus on long-term investments that really will allow us to continue our mission, which is to offer our folks the best products at the best prices. Probably the next thing up from a robotics and AI perspective will be our automated distribution center in Ohio that will go live next year. That will be when it gets going far more efficient than a traditional distribution center and will operate almost entirely in a robotic fashion. So it will be fun to see that. I've been out there to see it recently, and I can't wait to see it with all the machinery going in there to see how it works. But it's all in the same spirit of providing even greater value for our members. Laura Felice: Pedro, I'd just add all that commentary that Bob just said about Tally and the robotics we have in our club, there is a closed tie to that with the work that our planning and allocation teams are doing that we already spoke about in our prepared remarks. And that is producing our in-stock levels that have improved kind of year-over-year. So there is a tie beyond some of the digital efforts into how we're putting product on our shelves and how our teams internally are using the data from Tally as well. Pedro Gil: Awesome. Fantastic. And as a follow-up, if I could ask you, if you could comment on the competitive environment. You had a nice improvement in merch margin in the first half, a little more even this quarter. To the extent that you can comment, and I totally get it, it's still early; how should we think about the level of investments next year? Are there any particular areas within grocery or gen merch that you're looking to prioritize? Robert Eddy: Look, I don't want to talk too much about next year, but I would just echo the comments that I've already made around the fact that our job is to provide our members great value every day. We've made considerable investments all year in doing so and have been pretty creative to find ways to fund it, having the merch margin results that we had in Q3, while making the investments that we made was a good result. I would anticipate further investment going forward. As the competitive environment out there is, I think, consistent, but it's consistently competitive, and we need to continue to do our jobs to reward our members for their faith in us and the membership fees that they pay. So we will continue to try and ride that balance between margin and value, but we will always err on the side of value to try and operate the business for the long term. Operator: [Operator Instructions] Our next question comes from Chuck Grom from Gordon Haskett. Charles Grom: On the margin front, just to move down the P&L a little bit, your SG&A per square foot levels have been really tight, which is good. But your peers are up a lot, suggesting maybe some investment in technology and other areas. So I guess my question is, how sustainable do you think maintaining that SG&A per square foot at that level over the next couple of years, particularly as you move into Texas? Robert Eddy: Yes, it's a good question, Chuck. Our teams have done a good job over time being very efficient with our buildings, making sure that, that they're in good shape. They're in far better shape today than they were 5 years ago. With that said, we need to continue to do that and maybe even accelerate it. I think one of the things that we're seeing out there is our competitors getting sharper with their boxes. And so we will have to continue to do that, not just because of the competitive environment, but we want to show our members the best box we can every day. And so I would imagine we'll spend some capital going forward, remodeling our boxes. We will obviously continue to spend into our new club pipeline as well. And we'll do that as efficiently as we can, but obviously, with an eye for the long term. William Werner: Chuck, it's Bill. I'll just tack on to that as well. In addition to our existing clubs for the first time ever, we've really started to build a relocation program for some of our older clubs as well. So we had great success with our recent relocation in Mechanicsburg, PA. We announced this morning that we're going to relocate Rotterdam next year. And so it's not just an eye to our existing clubs, but also to the long-term future of these strong markets where we may have buildings out a little bit on the older side. We're taking the opportunity to invest into the future there as well. Charles Grom: Got you. Great. And then on general merchandise, right, like up 1.8% on the stacks much better than front half of the year, even with limiting inventory. You talked a little bit about the category improvement. I guess what do you think it's going to take to get home and seasonal to catch up to CE and apparel and other areas? And then I guess anything that you guys are excited about as we walk stores over the next couple of months into the holidays? Robert Eddy: Yes, sure. Maybe I'll start, and you guys can pick up. Look, I think we've -- we've done some great things from a general merchandise perspective. As we talked about, we had a strong showing in Q3 from a consumer electronics perspective and from an apparel perspective. Consumer electronics has been a hallmark of GM for a while. It's always been a pretty good business for us, and it gets better. We have very talented merchants in that group. Our apparel team has done a great job over the past few years really making sure that we simplify our assortment and bring in better brands, put great value out in front of our members every day. We need to continue to do those things, right? We might need to simplify our assortment a bit more. We need to continue to put great brands out there and put fantastic values on there as well. We need to apply those same lessons to the rest of the business. And we are actively at work on those things. We've seen some green shoots in previous quarters, we've talked about those with you like toys and some of our gifting in previous quarters. I like our toy assortment this year as well. And I'm excited about the way our gifting looks in the front of our clubs as well. But we need to have more sustained transformation in home and then seasonal going forward. These are probably the toughest categories, particularly the seasonal categories, maybe in the building. But certainly, among the GM categories, these are really tough categories. You need to be right on trend, you need to be right on style and color, on price point, all sorts of different things. And while we've made strides, we're not done. We're not satisfied with where we are. We need to continue to turn the crank and get better going forward. So we were under no illusions that renovating general merchandise would be easy or short in tenure. We've had nice success in the past, and we need to keep investing in that business because it is such an important part of the wholesale club model, where provides that treasure hunt, that emotional connection, those cool wow items that are so important to driving incremental trips. And quite honestly, that question around membership renewal is not only tightly linked with the grocery business, but it's really tightly linked with our general merchandise business when you can have more opportunity to save your entire membership fee in one purchase rather than stacking up just good values on smaller ring items. You can save a couple of hundred bucks on a television or a mattress or a great seasonal item. That becomes a really important part of our overall long-term growth of our company. So let me see if the guys want to file on, no? All right? So we're happy with our GM so far. We've got to get better and we'll continue to work at it. Operator: Our next question comes from Rupesh Parikh from Oppenheimer. Rupesh Parikh: Just going back to your commentary about 2025 clubs, the membership count is 25% ahead of plan. What do you think is contributing to that significant outperformance? William Werner: Rupesh, it's Bill. I always come back to the success with the new club program comes back to the culture that the team has built. I think I've mentioned this a couple of times on previous calls that everyone that has evolved within new club program internally is fully engaged and fully bought in and want to see us be successful. So we started this program way back in 2016 and the reps that we've built along the way. We talked about the goal of making the next opening, the best opening in the history of the company. Opening a new club where you have to build up, especially in the new market, membership base entirely from scratch is not easy to do, and it takes a lot of practice and a lot of learnings to do it right. And we're executing at a higher level than we've ever executed. And as we think about going into the Dallas-Fort Worth market next year as well as all the other markets, a market like Foley, Alabama that we announced this morning is a really cool, unique market, and we're going to be really excited to be there. And we wouldn't be able to do that, we wouldn't have the confidence to do that without all the success that we've built up to this point. So like I said, we're really pleased with what we've done here in 2025. It really has been probably the best class that we've ever opened in at least as far as I've been here. And it gives us a lot of confidence going forward. So more to come, but excited about what we've accomplished. Operator: Thank you very much. This marks the end of the Q&A session. I'd like to hand back to Bob Eddy for any closing remarks. Robert Eddy: Thanks, Carl. Thanks, everybody, for your attention this morning, for your thoughtful questions, for your interaction, your support of our company. I wish you all a happy Thanksgiving, and we'll talk to you at the end of the fourth quarter. Thanks so much. Operator: As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.
Mark Heine: Apologies for those who are joining us now. We'll just kick off, sorry, we're a bit late. And good afternoon, everyone, and thank you for joining us today for FY '26 annual half year results. I'm Mark Heine, CEO of EROAD. I'm delighted to be introducing Ciara McGuigan, EROAD's new CFO, who commenced at EROAD in September. I'll start by outlining our performance for the half, and Ciara will take you through the financials. We'll then finish with outlook and guidance before opening up for questions. Turning to the key numbers for the half. Free cash flow remains a real strength for EROAD coming at $6.2 million. We've delivered consistent cash generation over multiple periods, thanks to the operational discipline that's been built into the business. Reported revenue was just over $99 million, a 3.3% with steady performance across the installed base and contributions from ongoing rollouts. Annualized recurring revenue increased to over $178 million, up 6.9% or 3% in constant currency. Growth continues to come from higher-value subscriptions and enterprise expansion. Normalized EBIT was $2.5 million, lower than the prior period due to some higher costs and lower R&D capitalization. Ciara will step through these movements in more detail in the finance update. The results show our business remains strong and resilient across its core fundamentals. First, our cash generation continues to be a standout. Free cash flow was over $6 million or almost $17 million on a normalized basis once the one-off 4G upgrade costs are removed. With that program finishing this year, the underlying cash profile becomes much clearer and provides greater visibility in how we allocate our investments. Liquidity remains strong at over $62 million, giving us confidence in the pace and focus of our investment decisions. Second, we've maintained strategic focus on the eRUC passenger opportunity in New Zealand. As the country moves towards universal electronic road user charging, we're preparing the technical, commercial and operational components needed to support a nationwide rollout with clear relevance to emerging global models as well. Third, we are focused on regional market conditions. New growth investment is being directed to Australia and New Zealand, where the near-term return profile is strongest. North America remains important, but slower conditions mean we're managing spend carefully while preserving capability. The impairment of goodwill and other assets in North America of $135 million recorded in the half relates to the previously signaled softer economic conditions, the increased competition, the nonrenewal of a large U.S. customer and our focus on ANZ. And finally, our customer focus and operational capability have continued to improve. Partnerships have been strengthened and boosted by the ramp-up of our Manila office, providing our customers with enhanced responsiveness and support. These improvements are translating directly into outcomes, including the newly inked enterprise agreement with Cleanaway, valued at $5 million ARR once fully deployed. Turning to our sustainable growth across our core markets. Let's start with free cash flow. We delivered 4 halves of sustained reported cash generation. That consistency gives us the flexibility to invest selectively and accelerate where market conditions are most favorable, while also evidencing that management takes a prudent approach to investment. In Australia, our enterprise momentum is driving sustained double-digit annualized recurring revenue growth. Once the new Cleanaway Enterprise deal is fully implemented, ARR in Australia is expected to grow significantly. And finally, the eRUC opportunity presents a global opportunity for EROAD, which we will dig into this opportunity over the next few slides. I'm incredibly excited to be talking about New Zealand's move towards a universal electronic road user charging system and the direction of travel is very, very clear for EROAD. The New Zealand government has committed to transitioning all vehicles, including petrol and light vehicles to eRUC. A series of bills and consultation steps are already scheduled through 2025, with implementation targeted for 2027. EROAD is deeply embedded in the current system, having pioneered eRUC for heavy fleets, and we now facilitate around $946 million in annual RUC collection for the New Zealand government. That experience, combined with our established regulatory relationships and platform capability puts us in a strong position as the country moves to a fully electronic usage-based model. New Zealand is moving early on this transition and the work underway positions us well for what is coming next. What we see in New Zealand is part of a broader shift starting to emerge internationally. As fuel tax revenue declines and EV uptake grows, governments are looking for a more sustainable way to fund their road networks and usage-based charges come to focus in several larger markets. Our priority is to get it right in New Zealand first. As the market moving earliest, it gives us the chance to prove capability at a national scale, while policy conversations elsewhere continue to develop. At the same time, the longer-term opportunity extends beyond New Zealand. New Zealand has 4.7 million vehicles. Australia has around 4x that amount with approximately 20 million vehicles, while the U.S. is around 60x the size of New Zealand, with more than 280 million vehicles. Those markets are actively examining alternatives to fuel in size and the scale involved is significant. This includes the Eastern Transport Coalition mileage usage-based pilots in the United States, which EROAD has participated in, in the past. So while the immediate focus is on New Zealand, our line of sight is global. The preparation underway is intended to ensure we're well positioned to take part in those conversations as they progress. As the New Zealand government works towards design of the future system, we've been preparing so that we're in a position to move quickly once the requirements are confirmed. A key part of that preparation has been testing different ways the service could be delivered, depending on how the government chooses to structure the program. That includes early prototyping of consumer pathways and exploring how the existing EROAD platform might support the scale and simplicity required for light vehicle users. We've also been building a clear view of the commercial considerations, the economics, the potential pricing envelopes and what a high-volume operating model would require. This work ensures any approach we take is both viable and scalable when the program rolls out nationwide. And alongside the core charging model, we're looking at adjacent opportunities that may become relevant as policies develop, such as time of us in concept, tolling and other services that could logically sit next to distance-based charging over time. The intent of all this preparation is to make sure we're technically ready, commercially informed and operationally capable when governments finalize the shape and timing of the program. And New Zealand offers the opportunity to prove capability at a national scale. Doing that well keeps options open in other markets as usage-based models continue to evolve globally. Now on to the regions. New Zealand delivered a stable and disciplined half, with growth across revenue, annualized recurring revenue and ARPU. Annualized recurring revenue increased over 6% year-on-year to $93.2 million, supported by consistent demand from our installed base and continued uptake of higher-value services. Revenue grew almost 5% to over $52 million and EBITDA reached over $35 million, underpinned by strong asset retention at 92%. ARPU lifted at 4.4%, reflecting the mix shift towards higher-value opportunities and the final stage of churn associated with the 4G upgrade program. Importantly, most of the reduction in the period came from fleet resizing rather than actual customer losses. Around 88% of the annualized recurring revenue impact from unit reductions relates to customers adjusting fleet size due to broader economic conditions. These relationships remain in place. A expansion upsell activity across the portfolio more than offset the reduction to give us a net positive annualized recurring revenue position. A quick update on our 4G program. Australia switch is now complete. And across ANZ, as at the half year, 87% of all units out there were EROAD and were 4G compatible. And as of today, this has now reached approximately 90% being 4G compatible. The remaining work is in New Zealand, where one is the schedule to switch off 3G in December of this year. The final activity is planned for the second half and remains fully funded from operating cash flow with no change to total programming costs. With completion now firmly on site, we have been forced to retire this site going forward. North America had a soft half and our numbers show that. Annualized recurring revenue reduced to just under $70 million, down almost 6% on a constant currency basis year-on-year. This was driven by normal churn that wasn't offset by much new growth in the period. Customer decisions have slowed and many fleets that have taken on a more cautious stance on new investment given tariffs, higher operating costs and a broader uncertainty in the freight sector. Revenue was $39 million, down 1.5% and EBITDA was $9 million. ARPU increased 4.1% as the mix continued towards higher-value contracts with lower value units coming out of the base. As previously signaled, North America will be impacted in Q4 by the nonrenewal of a large customer around 10,000 connections. However, North America remains a vital region for EROAD. Our focus is on protecting the core by supporting our customer base, maintaining capability and aligning spend conditions to the region is ready to scale when momentum returns. And finally, Australia. Australia delivered a strong first half with sustained growth across revenue, ARR and EBITDA. Annualized recurring revenue increased by 30% year-on-year to over $15 million, driven by continued enterprise expansion and high adoption of safety and compliance products. Revenue rose 23%, while EBITDA increased to $3.7 million. Retention sits very high at 95.5% and ARPU grew 8.3%, supported by product mix improvements and pricing actions. The standout development of this period was the recently announced Cleanaway Enterprise partnership, covering a national fleet of more than 3,000 heavy vehicles. This Cleanaway partnership is a significant milestone for EROAD and the Australian market. It's a 5-year agreement covering the full safety and vehicle monitoring platform across Cleanaway's national heavy vehicle fleet. The solution includes AI cameras with dual connections, fatigue and rollover detection, critical events monitoring and satellite connectivity for remote options and operations. Deployment has already begun, with full rollout expected by November 2026. The agreement represents $5 million of annualized recurring revenue in Australian dollars with fixed annual escalators over the term. And during this tendering, Cleanaway conducted a comprehensive valuation process. The partnership strengthens our position in the Australian enterprise segment and reinforces the strategic relevance of the investment we've made in product and operational capability. Over the last 3 years, EROAD has secured renewals or wins with a number of marquee Australian businesses, including Boral, Woolworths, Programmed, Ventia, Downer and now Cleanaway. This underscores how significant the Australian market is becoming, and EROAD is committed to focusing on further growth here. I'll pause and hand over to Ciara to take you through the financials for the half. Ciara McGuigan: Great. Thank you, Mark, and good afternoon, everyone. From a financial perspective, we have continued to execute on the 4 pillars of our financial strategy. As a reminder, these are position the company to generate cash, maintain operating leverage in the cost base, invest in innovation to drive growth and maintain a strong financial position. As Mark mentioned, first half revenue of $99.1 million is growth year-on-year of 3.3%. This was driven by annual price increases and an enterprise rollout over the last 12 months, with a strong performance in our SaaS business, where annual recurring revenue also grew by over 5.3%. This underscores the resilience in a challenging environment and the meaningful value that we are offering to customers. Following the recent Cleanaway announcement, the rollout is underway. We began procuring inventory over the previous months and expect to have approximately $2 million in inventory and hardware built up by year-end. About 1/3 of the units are expected to be deployed by year-end, contributing $1.8 million in revenue for the period. The remaining units are scheduled for rollout by November 2026. You will see that we reported a loss in the financial statement of $133.9 million. This was entirely driven by an impairment of the North American asset of $134.7 million. If we remove this plus the 4G hardware upgrade program, our normalized EBIT becomes $2.5 million, and this compares to $4.7 million in the same -- in the half last year. EBIT was impacted by lower capitalization of R&D. This will normalize or is normalizing as we exit the year and the accelerated amortization of a large customer termination in North America. On to the next slide, operating costs. So the chart on the left illustrates that operating costs were 71% of revenue. These include costs as we ramp up our investment in the Philippines office. Last year also included a one-off benefit to transaction revenue due to a change in the GST treatment of transaction fee income. If we exclude these one-off items, operating margins would be broadly in line with last year. Remembering, of course, that by building our engineering and customer support teams in Manila, we are growing our capability at a lower price point to support operating leverage. As a technology business, where transition and change are to be expected, it goes without saying that we will continue to relentlessly focus on cost discipline. Operational efficiency. The chart on the left, our cost to acquire remains stable as a percentage of revenue. Capitalized cost to acquire were lower at the start of this year, which we expect to increase, which will reflect the commissions relating to the closing of the Cleanaway deal in Australia. The chart on the right, our cost to support our customers has increased as a percentage of revenue as we have increased our service and support costs slightly to build capacity to support large enterprise rollouts. I think we skipped a slide of research. Now turning to free cash flow. We are pleased to have generated the significant free cash flow to the firm of $6.2 million in the period, which illustrates the strength of our core business, as Mark referred to. This is the fourth consecutive reporting period that we've delivered positive free cash flow. Once we remove the temporary impact of the 4G upgrade program, the company generated $16.7 million in normalized free cash flow, which you can see illustrated on the chart. This normalization shows the true underlying performance of our business. As the 4G upgrade program is completed by the end of this calendar year, and we continue to deliver on our strategy, we expect to see free cash flow continue to accelerate. There was an inventory buildup in the first half of the year to support our 4G upgrade program, which we expect to normalize in the second half as the program comes to a close. Subsequent to balance date, inventory was purchased to support the rollout of the Cleanaway contract, which is now underway. We also saw the benefit of $2.8 million related to the rollout of our annual billing program in Australia and New Zealand and a large North American account. We continue to see the benefit of this shift in the second half of the year. So turning to our research and development spend. In the first half of FY '26, our R&D expenditure totaled $19 million, which represents 19% of revenue. This is broadly consistent with last year, as you can see on the chart. Our R&D efforts have been more heavily focused on platform scaling, which is not capitalizable. We expect our future R&D investment to be more balanced towards innovation and growth initiatives, which will be capitalizable with a specific call out to work completed to win the Cleanaway deal. We believe this type of customer-led innovation is low risk and generates long-term value as we deploy these features across our customer base. Liquidity. We have maintained our disciplined approach to debt, repaying $2.5 million of outstanding facilities with cash generated from operations, reinforcing our strong balance sheet. Our liquidity remains significant at $62.3 million, providing a high degree of optionality. In addition, we're progressing plans to extend our facilities to ensure we are optimally positioned to execute on forthcoming growth opportunities. And with that, Mark, I'll hand back to you. Mark Heine: Thank you, Ciara. I'll now turn to the outlook and guidance for the rest of the year. Our outlook for the second half of the year is consistent with the updated guidance provided to the market in October as part of the strategic refocus. New growth investments being directed towards Australia and New Zealand, where we see the strongest near-term return profile. North America remains an important market, but the U.S. environment continues to be slow with cautious customer investment. Our approach is retain the base, maintain capability and align spend to the pace of the market. For FY '26, we are reaffirming the guidance we set in October. Revenue of $197 million to $203 million, ARR of $175 million to $183 million and a free cash flow yield of between 5% and 8% of revenue, normalized for the temporary impact of the 4G upgrade program. And finally, we plan to hold Investor Day in March to take you through our product road map and our long-term strategic and financial targets. Further details will follow closer to the time. And with that, we'll now open to any questions. Jason Kepecs: Thanks. The queue is open for questions. The first question is noting the reduction in units in the U.S., how many of those remaining units are part of the core strategy? Mark Heine: So if you look at the U.S. unit base that we have, about 40% of them are cold chain customer units. So a good chunk of it is. The rest are in other verticals, including transport and also ones who are particularly focused on health and safety. EROAD has a really strong product suite in health and safety. And so we're really confident that we can focus on retaining those other customers as well. If you're looking forward, in the U.S., there's over 700,000 cold chain trailers in that market and of which only half of them have any technology in them to date, which means that it provides a great greenfield opportunity for EROAD to grow into that space as economic conditions rebound in that market. Jason Kepecs: Second part to that question is there was a slight reduction in the unit count in New Zealand. How much of that was due to economic factors? And how much of that was due to the 4G hardware upgrade? Mark Heine: We believe a big chunk of that. And in fact, I think we mentioned over 80% was linked to customers reducing the size of their fleet as opposed to leaving EROAD entirety. And that suggests it's largely driven by economic conditions. New Zealand has had a rather challenging economic period over the last 3 years, which impacts particularly the freight sector. And so we are seeing customers park vehicles up, but we expect as economic conditions improve, those customers who have largely stayed with us will add additional units into their fleets. Jason Kepecs: And a question about the free cash flow, strong result at $16.7 million of free cash flow normalized for the half. The guidance suggests a midpoint of $13 million. But wanting to understand what that might mean for the second half of the year and also how to think about the trend for FY '27 in terms of whether that will be a year to harvest the free cash flow or to reinvest in the eRUC opportunity? Ciara McGuigan: So yes, I would agree with all of those points that was a highlight. And the guidance, your point about guidance is correct where you see it sitting broadly. There's obviously timing shifts between the 2 halves. We've got some big inventory purchases and then cash goes out in the different halves. So there is an element of reset between the 2 halves. In regards to the point to FY '27, we'll be obviously talking about that more towards the end of the financial year. We're going through quite a bit of planning, but our intention is certainly to be investing to leverage the eRUC opportunity, and that's where we land at the moment. Jason Kepecs: There's a lot of questions in the queue about the eRUC opportunity. I'm going to list them out, and we'll address them all at once. On the eRUC opportunity, questions about the size of the opportunity, how much service revenue is up for grabs, what the operating margins might be versus fleet management margins, what the revenue model might be? Was it a fixed fee or a percentage of the RUC collected? How capital intensive the opportunity might be? Whether it's free cash flow positive from year 1 and what the potential opportunity is in Australia following this rollout or deployment in New Zealand? Mark Heine: Great. Thank you, Jason. So looking through sequentially. So first, the size of the opportunity. In New Zealand right now, EROAD can service about 1 million vehicles using eRUC. Of that, it's about 200,000 heavy vehicles, and we have a substantial number of them already. And there's about 800,000 EVs and diesel vehicles already need to pay RUC in some form. Some have EROAD technology in them, but a lot of them are passenger vehicles. So right now, we're looking at what sort of passenger consumer-focused applications we can launch for them to really target that part of the market. In addition to those 1 million vehicles, there's an additional 3.5 million to about 3.7 million vehicles, which are petrol. And the government has indicated they want to move all those petrol vehicles starting in 2027 over to eRUC. So we're absolutely focused on winning a substantial part of that share of the market when it comes online. In terms of operating margins and revenue model, those are the things we're working through right now. EROAD is looking at whether we go direct or we work with partners across a range of sectors, including telco, insurance, gen trailers and the like, there's a whole bunch of opportunities for us around how we service that segment. And as part of that, we'll work through what the financial model could look like. And as we indicated in the past, we are looking in March to provide an investor update to go into that in a bit more detail as we have a bit more certainty around what that model looks like. I'll probably reserve for March also the free cash flow impact and what it would mean from year 1. But as you've seen historically, over the last 4 quarters -- 4 halves, sorry, we've provided reported free cash flow positive half, and we're going to continue to be focused on making sure that whatever we invest here that's going to have a strong return for our shareholders in the short to medium term. And turning to the Australian opportunity. So the Treasurer in Australia has noted that this is an area that they clearly need to get into. There's lots of pressures from the states, in particular, New South Wales, who indicated they want some form of road charging in the market by 2027 to help sort of fund their infrastructure challenges. And Victoria likewise are key to do something, too. So we expect movement over the next year or 2 in the Australian market to really unlock the eRUC opportunity there. More broadly, we are aware of RUC being rolled out in Hawaii recently. There are other states in the U.S. looking at it too. And EROAD also participating in past, and we've been invited back around looking at some pilots on the Eastern corridor in the U.S. around how eRUC could be used to fund road up there. So there's no shortage of opportunities, but we're focused on doing New Zealand first really, really well. We'll come to the market, hopefully in March with a bit more detail around what they will look like from a cost and revenue perspective. But we are continuing to watch this space very carefully and explore the opportunities that presents. Jason Kepecs: There's a question about the current pipeline that's in place following the landing of the Cleanaway deal. Was that in your pipeline? And what remains? Mark Heine: Sure. So yes, Cleanaway was in the pipeline. You may recall investors that at the beginning of the year, we said there are 5 enterprise customers in the pipeline, 3 in North America and 2 in Australia. Cleanaway was one. There's another Australian customer that has rather been a big bang, they are more of a customer who's got a large subcontractor fleet that we're working our way through over time. In North America, the other 3 opportunities we've deferred into future years. Just with the economic conditions we're seeing there now, they're quite challenged and it's sort of deferring buying decisions. On top of that, though, we are still exploring other pipeline opportunities. In New Zealand, with the recent all-out government win EROAD's had, we see a number of government fleets really interested in the EROAD solution in this market. And also in Australia, given the opportunity in that market and the size of it, it also -- we don't particularly have very strong competitors, well-resourced competitors in the Australian market. We're seeing more and more customers or potential customers come to us more on that sort of enterprise level between $100,000 and $1 million as opposed to something in that large enterprise, which is Cleanaway, which is above obviously $1 million and a $5 million ARR opportunity. Jason Kepecs: And the customer that didn't renew in the U.S., wondering when that phases off. Mark Heine: So we're working with the customer at the moment around the transition planning. We don't have a definitive date yet, but we expect to happen before the end of the financial year. Jason Kepecs: And on the U.S. business, would you be looking to grow that going forward at what rate? Who is expected to lead that? And what will the cost allocation generally look like? Mark Heine: So start with the first question in terms of -- sorry, Jason, say the first part of the question again? Jason Kepecs: Is it -- what kind of growth are you expecting out of that business going forward and the cost allocation and who's going to be leading that business? Mark Heine: Sure. So in terms of growth expectations, we expect the rollout of this customer, revenue will be backwards both this year and probably into FY '27 as well. In the medium term, we're looking at growth around 3% and greater than that. We expect it to pick up over time as the economy rebounds back. We'll certainly be focusing though on the cold chain opportunity, which should have a strong growth opportunity and ideally pushing towards low double digits or high single-digit growth in '28 and '29. In terms of who will lead it, right now, we are kicking off an Executive General Manager search for the U.S. market around helping to drive sales and marketing with a particular focus, obviously, on the cold chain experience very key here, too. Jason Kepecs: A question on the cold chain market. How much of the opportunity exists in New Zealand? And how much has been captured and same in the Australian market? Mark Heine: So we believe there's about 1 million cold chain trailers in the 3 markets we operate in. So about 300,000 dispersed between Australia and New Zealand, of which between 40 -- 20,000 to 40,000 are based in New Zealand based on type of truck we're talking about. There's relatively low penetration in the cold chain trailer space in New Zealand. It's not one that's particularly been a strong adopter of technology. So we believe we can target existing customers. Indeed, we recently announced or internally at the very least, we won 2 cold chain trailer customers in New Zealand recently who were already existing customers with the front of care part of our business. In Australia, we see greater growth there. Woolworths is one of our cold chain customers in that market, and we're going to be looking to see who else we can leverage from around the cold chain opportunity given it's a very hot continent over there. Jason Kepecs: Great. And final question. What proportion of your customers are now on upfront billing? And what is your target in the future? Ciara McGuigan: So currently, we have about 5% of our customer base on annual bill, and that brings in just under 10% of our revenue. Our ambition is still to go for a strong penetration of annual bill. We won't hit the 40% in FY '26, but we are still very front and center for us. Jason Kepecs: Great. That's it for the questions. Mark Heine: Thank you, Jason. And I just want to close by saying, as you can see, we're disciplined in how we're allocating capital. We're focused [Audio Gap] market showing the strongest returns, and we're preparing well for the structural opportunities ahead in eRUC. Thank you, and have a great rest of your day.
Operator: Good day, and thank you for standing by. Welcome to the Ubisoft H1 Fiscal Year 2026 Earnings Webcast and 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, Yves Guillemot, Ubisoft Co-Founder and Chief Executive Officer. Please go ahead, sir. Yves Guillemot: Welcome, everyone, and thank you for joining us today. Before we begin, I would like to start with the reason for the delay in publishing our results. First, we have appointed a new panel of auditors that was approved at the AGM last July. Their position as part of their review of the H1 financial accounts required a restatement of our financial year '25 annual accounts that had been previously approved by our former panel of statutory auditors in May. In this context, we required additional time to finalize our accounts for our Board of Directors to approve them. Frédérick will walk you through this point in more details later in the call. The closing of our strategic transaction with Tencent, which will see Tencent become a minority shareholder in our new subsidiary, Vantage Studios, is now imminent, as all conditions precedent have been satisfied. This will mark a pivotal milestone in Ubisoft transformation, significantly strengthening our financial position by bringing in EUR 1.16 billion of cash, enabling the group to deleverage as planned. It will also empower Vantage Studios to accelerate the growth of our 3 flagship IPs under a dedicated leadership team. In a highly competitive market, Ubisoft delivered net booking above guidance on the back of stronger-than-expected partnerships that underscore the appeal and reach of our brands. Our portfolio showed contrasting dynamics this quarter with softer trends for Rainbow Six Siege, reflecting a phase of evolution for the game in an intense competitive first-person shooter environment, offset by strong performances across the rest of the catalog. The Assassin's Creed franchise exceeded our expectations, confirming its positive momentum and ability to engage players over time. The Division 2 also continued to perform strongly, benefiting from the momentum of the Battle for Brooklyn expansion, with the game's first semester already exceeding last year's annual bookings. Additionally, the progress we've made in addressing our fixed cost base brings with it confidence that we can continue to drive structural efficiencies across the organization that together with top line growth, will contribute to ensure a return to strong cash generation in the coming years. Vantage Studios represents a key element of the transformation of the company toward a new operating model built around creative houses. We will have finalized the design of this new organization by the end of the year. These creative houses will be autonomously efficient, focused and accountable business units, each with its own leadership, creative vision and strategic road map. This group-wide transformation reflects our ambitions to renew how we create and operate in order to deliver great games for our players and lasting value for our partners and shareholders. The full details of this new operating model will be unveiled in January. On the innovation side now, we are making great strides in applying GenAI to high-value use cases that bring tangible benefits to our players and teams. It's a big -- it's as big as a revolution for our industry as the shift to 3D, and we have everything to lead on this front. On the player experience side, we are continuing to make progress on groundbreaking player-facing generative AI application, building on our NEO NPC announcement in 2024. We have already advanced from prototyping to player reality, and we are looking forward to sharing more before the end of the year. On the production side, we now have teams in all our studios and offices embracing this new technology and constantly exploring new use cases in programming, art and overall game quality. On the transmedia side, we also, after greenlighting the Assassin's Creed live-action TV series in July, I would like to highlight the recent success of the animated Netflix series, Splinter Cell: Deathwatch that premiered on October 14, obtaining an 86 score on Rotten Tomatoes and landing the daily top 10 across more than 12 countries, including 6 consecutive days in the U.S. This strengthens our brand's long-term value ahead of the Splinter Cell's remake currently in development at the Ubisoft Toronto Studios. Last but not least, I would like to celebrate the successful launch of Anno 117: Pax Romana that expands the city-builder genre. This level of quality, innovation and sales set the standard against which we want to measure our future releases performance in the coming years. So I will now let Frédérick give you details on half year performance. Frédérick Duguet: Thank you, Yves, and hello, everybody. H1 net bookings stood at EUR 772 million, up 20% year-on-year with 34 million MAUs and 88 million unique users across consoles and PC, slightly down year-on-year when excluding XDefiant from the base. Turning to our second quarter. Net bookings stood at EUR 491 million, above guidance and up 39% year-on-year. The outperformance was driven by stronger-than-expected partnerships, demonstrating the power and attractiveness of our portfolio as well as a meaningful contribution from live TV and animated series. Excluding partnerships, overall back-catalog performance this quarter was robust and in line with expectations, broadly stable year-on-year, but marked by contrasted dynamics. The Assassin's Creed franchise posted a strong performance in Q2, with both Assassin's Creed Shadows and the rest of the brand’s catalog overperforming. In the year to date Assassin's Creed has generated 211 million session days, around 35% higher than the last 2 years' average. Shadows benefited from the launch of the New Game+ mode, which was widely anticipated by the community and introduced greater difficulty and new challenges for players. The Claws of Awaji expansion released on September 16 and contributed to re-engaging players. It was praised as a solid addition to the base game, offering new unique boss fights in a beautiful and dark atmosphere. Looking ahead, Assassin's Creed Shadows will reach a broader audience with its launch on the Nintendo Switch 2 on December 2. Beyond Shadows, the rest of the AC back-catalog also performed strongly, highlighting the strength of the franchise. Turning to the current quarter, we launched Valley of Memory on November 18, a free major update for Assassin's Creed Mirage, which brought new content and a fresh chapter in Basim's story set in AlUla. First feedback from the community is very positive, with player activity on Assassin's Creed Mirage doubling following the launch of the update, enabling the game to reach the 10 million player mark. In a highly competitive first-person shooter market, Rainbow Six Siege continued to attract new players this quarter, with acquisition levels twice as high year-on-year, and sustain activity levels, with unique players stable quarter-on-quarter and up double-digit year-on-year. Session days and playtime also increased both sequentially and year-on-year. However, as part of the evolution of Siege and its move to free access, a temporary surge in cheating has impacted activity and player spending versus expectations. With additional resources now in place and further hires planned, the team has identified the main issues and is actively addressing them with a robust plan in place. Having focused most of this year on establishing a new foundation for the game, the team is exploring a new seasonal approach that introduces multiple updates throughout each season, focusing on the core gameplay experience and heavily engaged players. This shift is designed to offer a steadier stream of fresh experiences with more variety keeping players engaged and supporting long-term franchise growth. The Siege community remains highly engaged and passionate about the game’s success. The development team is equally committed to working closely with players to address recent feedback, with a strong focus on anti-cheat measures and gameplay balance. As announced at the Munich Major on November 16, starting in Season 4, the team will double the number of anti-cheat updates per week and introduce new prevention solutions. On the balancing front, the team is accelerating efforts in Season 4, with four balancing updates per season planned for Year 1, aligned with the new content cadence. To celebrate Siege’s 10-year anniversary in December, players can look forward to daily rewards and a special in-game event launching mid-December. Elsewhere in the catalog, I would like to highlight a few notable performances. The Division 2 continued to benefit from the momentum of the Battle for Brooklyn DLC release in May, as well as regular content updates, continuing to attract new players to the game. Along with rising player numbers, player engagement is up, with a record second quarter in terms of Session Days since financial year '21. The game’s performance this semester has already exceeded last year’s annual net bookings. Avatar: Frontiers of Pandora posted a strong performance this quarter on the back of the July third person update announcement, that was widely anticipated by the community. The game also regained momentum with the announcement of the From the Ashes expansion that will come along with the movie. Star Wars Outlaws launched on Nintendo Switch 2 in September to strong critical and player reception. The release expanded the game’s audience and was praised for its exceptional visuals, technical optimization, smooth performance and seamless transition to Nintendo’s new hardware. Total digital net bookings reached EUR 436 million, up 62% year-on-year and PRI stood at EUR 323 million, up 110% year-on-year. Both of these metrics benefited this quarter from tailwinds linked to partnerships. Within PRI, mobile amounted to EUR 26 million, slightly down year-on-year. First, you will find our non-IFRS P&L on Slide 7 of our presentation. Gross margin was strongly up year-on-year by more than 3.5 percentage points, which reflects the fact that this semester saw more high-margin partnership than the first semester last year. R&D was down year-on-year, and we come back -- I will come back to that point in the following slide. SG&A was down 16%, reflecting lower variable marketing expenses due to the absence of major releases this semester, while last year's first half saw the release of Star Wars Outlaws and XDefiant Overall non-IFRS EBIT came back to the positive zone at EUR 27 million this semester, which marks a strong improvement to last year's EUR 250 million loss. Please refer to our press release or presentation appendix for the full IFRS to non-IFRS reconciliation. Turning now to Slide 8. P&L R&D was down year-on-year and mainly reflects lower depreciation of in-house software-related productions coming from the absence of new AAA releases this semester compared with accelerated depreciation for Star Wars Outlaws and XDefiant last year. For its part, total cash R&D was down 11% or EUR 70 million and reflects our continued efforts addressing our fixed cost base. Looking at cash flow statement on Slide 9. Free cash flow stood at minus EUR 251 million compared with a negative EUR 126 million the previous year. This free cash flow consumption mostly reflects the following impacts. On the one hand, a negative EUR 139 million cash flow from operations, reflecting the fact that we had no new releases this semester, which was half the outflow of last year, again, illustrating a strong improvement versus the year before. And on the other hand, a negative EUR 102 million change in working capital requirements, notably driven by trade payables decrease comparing with a significant higher gain in receivables last year, which mainly reflects cash in from Q4 fiscal year '24 partnerships. Non-IFRS net debt stood at EUR 1.15 billion, slightly up versus last year, and cash and cash equivalents amounted to EUR 668 million, down EUR 265 million versus last year, mostly driven by the reimbursement of around EUR 245 million in debt. The -- sorry, the EUR 1.16 billion cash injection from the Tencent transaction will deleverage the group and strengthen its balance sheet. I would now like to provide an update on the continuous progress we have been making on the group's transformation. First, all conditions precedent of the transaction with Tencent have been satisfied, enabling the sale of a minority stake in our new subsidiary, Vantage Studios to Tencent to close in the coming days. This marks a major milestone in our transformation journey. The proceeds of this transaction will deleverage the group on a consolidated non-IFRS net debt basis while providing enhanced financial flexibility to support our strategic transformation. A new leadership team is being formed around Vantage Studios, including heads of franchises to drive creative excellence and operational agility across each brand on their path to building annual billion euro brand ecosystems. Second, we will have finalized by the end of the year, the design of our new operating model built around creative houses, independent business units with the objective of driving stronger creative vision, greater focus, efficiency, autonomy and accountability. We will unveil the full details of this model in January. Overall, we benefit from a strengthened balance sheet. Our non-IFRS net debt position stood at EUR 1.15 billion at end September with a cash and cash equivalent position of EUR 668 million. The EUR 1.16 billion proceeds from the Tencent transaction will enable us to deleverage the group and notably proceed with the early repayment of the term loan and Schuldschein loans, which have an outstanding principal amount of approximately EUR 286 million. Of note, EUR 210 million were due next month. Additionally, we will cancel the undrawn revolving credit facility and initiate discussions with our banking partners with the objective of putting in place a new facility designed to support our strategic ambitions, in line with the broader transformation currently underway. Overall, we plan to rely on a very comfortable cash and cash equivalent position at end of March 2026 of around EUR 1.5 billion. Third, we continue to make progress on our new cost reduction program, which targets at least EUR 100 million in fixed cost savings by fiscal year '27 versus fiscal year '24 -- versus fiscal year '25, sorry. Thanks to continued discipline in hiring and targeted restructuring efforts. The group's global head count stood at 1,797 at the end of September, representing a decrease of around 1,500 employees over the past 12 months and about 700 since the end of March. Since the end of the semester, a targeted voluntary leave program and a proposed restructuring were introduced at our Nordic studios. Overall, the H1 fiscal year '26 fixed cost base stood at around EUR 701 million, a decrease of EUR 69 million or 9% year-on-year, including a favorable EUR 19 million foreign exchange impact. Out of the EUR 69 million reduction, approximately EUR 55 million came from lower capitalized investments. Before I turn to the outlook, I would like to cover an IFRS update. As Yves mentioned, we had to delay publishing our results. Towards the end of the review process of our H1 financial accounts, our new panel of auditors reviewed the analysis that had led to the fiscal '25 accounts being validated by our former panel of auditors in May. This related specifically to the IFRS 15 revenue recognition of one meaningful partnership in fiscal '25. The new panel of statutory auditors considered that utilization-based payment schedules must now be recognized under IFRS 15 as revenues over utilization even if the commitments are firm. This ultimately led to the restatement of our fiscal '25 account as per IAS 8. We then had to assess the impact of this restatement as well as the implication of this new position on the second partnership booked in Q2 along the same initial principles. The combined effect of what I've just described results in the company not complying with its leverage covenant ratio under certain existing financing agreements at September 30, 2025. However, this is being addressed by the aforementioned actions relating to the concern debt instruments. The restatement of the prior year financial accounts are detailed in the appendix of our press release, and the IFRS accounting restatement has no impact on the group's non-IFRS indicators given the firm nature of these amounts and has no impact on the operating cash flow profile of the group. Beyond this technical restatement, I want to make one thing clear. Our approach to B2B partnerships as a critical complement to our B2C business has always been and will continue to be centered around maximizing the value of our catalog, which we measure in terms of cash flow generation over time. Turning to the full year outlook. The stronger-than-expected benefit from partnership increases our visibility for the fiscal year in a context where, on the one hand, there remains a number of new releases to come by the end of the fiscal year. And on the other hand, Rainbow Six Siege faces an increased competitive FPS environment. In this context, we reaffirm our full year objective with net bookings to be stable year-on-year, non-IFRS operating income to be around breakeven and negative free cash flow, reflecting the group's transformation. Following the closing of the Tencent transaction, we expect to maintain a consolidated non-IFRS net debt position of around 0. Looking at Q3, we expect net bookings of approximately EUR 305 million, which will represent a slight increase year-on-year. Q3 will notably see the releases of Anno 117: Pax Romana as well as the Avatar Frontiers of Pandora from the Ashes expansion. Anno 117: Pax Romana launched on November 13, and marked a bold new chapter for the Anno franchise, building on the series strong momentum and releasing simultaneously for the first time on PC and console, it showcases impressive scale, striking visual fidelity and a deep economic simulation. The title has already received strong industry recognition, including winning Best PC Game at Gamescom and has now launched to strong critical reception with an 85 Metacritic score, the best score ever in the franchise, which translates into solid consumer spending growth after 1 week compared to the successful Anno 1800. IGN awarded it 9 out of 10 calling it "a gorgeous antique city-builder that is worthy of a standing ovation". For the first time in the series, players can choose their starting province is defined by distinct cultural identities and unique gameplay mechanics that emphasize player choice. This innovation expands the game's depth and replayability, laying the foundation for sustained player engagement and rich post-launch experience. The Avatar: Frontiers of Pandora - From The Ashes expansion is set to launch on December 19. Timed to coincide with the theatrical release of Avatar: Fire and Ash. This bold expansion sees players embark on the journeys of So’lek, a battle-hardened Na’vi warrior who seeks revenge against the ruthless Ash clan. The expansion introduces new visceral gameplay set in a ravaged Kinglor Forest and unveils a new subregion known as The Ravines. Ahead of that, a highly anticipated free update introducing a third person mode will arrive on December 5 and will feature long requested by the community. Together, this content should further strengthen engagement and extend the game's momentum into the holiday season. And for its part, Q4 will see the release of the Prince of Persia: The Sands of Time remake, Rainbow Six Mobile, The Division Resurgence as well as an unannounced title. Beyond fiscal '26, we expect to return to positive non-IFRS operating income and free cash flow generation in fiscal '27 and to see significant content coming from our largest brands in fiscal '27 and fiscal year '28. Finally, as always, here are a few fiscal '26 housekeeping items for modeling purposes. The stock-based compensation is expected at around EUR 32 million, down versus prior guidance and reflecting the lower share price. The non-IFRS net financial charge, excluding foreign exchange, is expected at around EUR 45 million, unchanged versus prior guidance and reflecting a year-on-year increase, primarily attributable to a lower interest income. The non-IFRS tax rate is not relevant in the context of breakeven non-IFRS operating income and the number of diluted shares is expected at around EUR 132 million, reflecting the fact that with an expected negative net income, the dilutive nature of our instruments no longer kicks in. We are now ready to take your questions. Operator: [Operator Instructions] And your first question today comes from the line of Aleksander Peterc from Bernstein. Aleksander Peterc: The first one would be pertaining to the breach of covenants. So although this is quite temporary, I'd still like to know if there are any of your other debt instruments that don't have these covenants, but have a standard cross-default clause that could be enforced. Is that a risk over the coming days or not? It's just a hypothetical, but just to clear that for me. And the second question is, given your below expectations third quarter, it seems to me that the implied fourth quarter is extremely strong, down only 15% year-on-year. But last year, you had the Assassin's Creed Shadows release, which has delayed and that's propped up the fourth quarter quite substantially. So can you help us understand how are you going to achieve this super strong fourth quarter? Frédérick Duguet: Yes. Thank you, Aleks. Yes, so that's on your first question, so we are addressing the topic by settling the repayment of our covenant-based debt, Schuldschein and term loan, and we are canceling the RCF before building a new credit backup line facility by repaying EUR 286 million in principal amount, keeping in mind that we were anyway preparing to repay EUR 210 million that were due in December and EUR 50 million in September. So overall, the net acceleration is estimated to be around EUR 25 million if we look at the impact on the medium-term cash trajectory for the company. So that has nearly no impact. We don't expect any impact on the overall debt structure. And keeping in mind that we will benefit from a very comfortable EUR 1.5 billion cash and cash equivalent position at the end of March. In terms of Q4, yes, as you mentioned, it would be significantly lower than the Q4 that we posted over the last 2 years. Keeping in mind that Shadows only impacted Q4 last year for 10 days. So this quarter will benefit from slate of new releases, including the remakes of Prince of Persia: The Sands of Time, Rainbow Six Mobile, The Division Resurgence and unannounced title. We have a meaningful contribution of partnerships, B2B partnerships, but to a lower extent than last year. We expect a strong Rainbow Six Siege that will go through the Six Invitational and starting into the next year. We will have the follow-on sales impact from Anno 117 and the Avatar expansion. So all this will contribute to the key building blocks of Q4. Operator: [Operator Instructions] And your next question comes from the line of Nick Dempsey from Barclays. Nick Dempsey: So my first question is, have the auditors looked at all of the partnership deals that you have done going back several years, so we can be comfortable that what we are seeing here is the final restatement impact, we won't get more, for example, at the full year '26 results. Second question, if I look at the restatement for FY '25 and the restatement for the last 12 months period, it seems quite a big difference. I understood something, but can you perhaps explain the difference between those 2 restatements, given that I thought it related to particularly one partnership deal? And then the third question, in terms of any partnership deals landing in Q4, do you have good visibility on when they land and whether they will land? Frédérick Duguet: Yes. So on the first question, so there is no risk on the prior year financial accounts. It's, by the way, interesting to have in mind that when you look at the many partnerships that we've been signing over the last 7 years, if you look at all the partnerships between fiscal year '19 and fiscal year '25, all of them have converted into cash. So that traces back to the quality of the earnings and the very strong cash conversion coming from these various partnerships. In terms of -- so on your following questions, I understand that you're talking about the fiscal '25 restatement. So it refers to a meaningful partnership. And if you look at the first half fiscal '26, you see the difference between IFRS revenues and non-IFRS net bookings, and you'll see that also it's driven by the second partnership that I mentioned earlier. And in terms of Q4, so as we said, we've had an increased visibility on this B2B partnerships performance. And so yes, we have a meaningful contribution that is expected in Q4, but to a lower extent than last year. Nick Dempsey: But you have full visibility on that landing in that time frame or you don't? That was my question. Frédérick Duguet: Yes, we have a good pipeline of partnerships that we are working on. Operator: There are currently no further questions. I will hand the call back to you. Yves Guillemot: So thank you very much for your questions, and have a good day or a good evening. Thank you. Frédérick Duguet: Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning. Thank you for standing by, and welcome to Buckle's Third Quarter Earnings Release Webcast. [Operator Instructions]. Members of Buckle's management on the call today are Dennis Nelson, President and CEO; Tom Heacock, Senior Vice President of Finance, Treasurer and CFO; Adam Akerson, Vice President of Finance and Corporate Controller; and Brady Fritz, Senior Vice President, General Counsel and Corporate Secretary. Before beginning, the company would like to reiterate its policy of not providing future sales or earnings guidance. All forward-looking statements made on the call are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to risks and uncertainties described in the company's SEC filings. The company undertakes no obligation to publicly update or revise these statements, except as required by law. Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without its expressed written consent. Any unauthorized reproductions or recordings of the calls should not be relied upon as the information may be inaccurate. As a reminder, today's webcast is being recorded. And I'd now like to turn the conference over to your host, Tom Heacock. Thomas Heacock: Good morning, and thanks for being with us this morning. Our November 21, 2025, press release reported that net income for the 13-week third quarter ended November 1, 2025, was $48.7 million or $0.96 per share on a diluted basis compared to net income of $44.2 million or $0.88 per share on a diluted basis for the prior year 13-week third quarter, which ended November 2, 2024. Year-to-date net income for the 39-week period ended November 1, 2025, was $128.9 million or $2.55 per share on a diluted basis, compared to net income of $118.3 million or $2.35 per share on a diluted basis for the prior year 39-week period ended November 2, 2024. Net sales for the 13-week third quarter increased 9.3% to $320.8 million compared to net sales of $293.6 million for the prior year 13-week third quarter. Comparable store sales for the quarter increased 8.3% in comparison to the same 13-week period in the prior year, and our online sales increased 13.6% to $53 million. Year-to-date net sales increased 7.2% to $898.7 million compared to net sales of $838.5 million for the prior year 39-week fiscal period. Comparable store sales for the year-to-date period increased 6.3% in comparison to the same 39-week period in the prior year, and our online sales increased 11.6% to $142.9 million. For the quarter, UPTs decreased approximately 1.5%, the average unit retail increased approximately 4% and the average transaction value increased about 2.5%. Year-to-date, UPTs decreased approximately 1%, the average unit retail increased approximately 3% and the average transaction value increased approximately 2%. Our gross margin for the quarter was 48%, a 30 basis point increase from 47.7% in the third quarter of 2024. The current quarter margin expansion was a result of 40 basis points of leverage buying, distribution and occupancy expenses, partially offset by a 10 basis point reduction in merchandise margins. Our year-to-date gross margin was 47.4%, up 50 basis points from 46.9% for the same period last year. The year-to-date increase was the result of a 20 basis point increase in merchandise margin, along with 30 basis points of leverage buying, distribution and occupancy expenses. Selling, general and administrative expenses for the quarter were 29% of net sales compared to 29.1% for the third quarter last year. And year-to-date, SG&A was 29.5% of net sales compared to 29.6% for the same period in the prior year. The third quarter decrease was due to a 35 basis point reduction related to nonrecurring digital commerce investments made a year ago, a 35 basis point decrease in store labor-related expenses and a 5 basis point decrease in certain other SG&A expense categories. These decreases were partially offset by a 50 basis point increase in incentive compensation accruals and a 15 basis point increase in G&A compensation-related expenses. Our operating margin for the quarter was 19% compared to 18.6% for the third quarter of fiscal 2024. And for the year-to-date period, our operating margin was 17.9% compared to 17.3% for the same period last year. Income tax expense as a percentage of pretax net income for both the current and prior year fiscal quarter was 24.5%, bringing third quarter net income to $48.7 million for fiscal 2025 compared to 44.2% -- $44.2 million for fiscal 2024. Income tax expense as a percentage of pretax net income for both the current and prior year, year-to-date periods was also 24.5% bringing year-to-date net income to $128.9 million for fiscal 2025 compared to $118.3 million in fiscal 2024. Our press release also included a balance sheet as of November 1, 2025, which included the following: Inventory of $165.8 million, which was up 11% from the same time a year ago and $371.3 million of total cash and investments. We ended the quarter with $162.3 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $11.1 million and depreciation expense was $6.2 million. For the year-to-date period, capital expenditures were $34.5 million and depreciation expense was $18.2 million. Year-to-date capital spending is broken down as follows: $30.4 million for new store construction, store remodels and technology upgrades and $4.1 million for capital spending at the corporate headquarters and distribution center. During the quarter, we opened 2 new stores and completed 6 full store remodels, 3 of which were relocations in new outdoor shopping centers. Additionally, post quarter end and during November, we have opened 2 new stores and completed 2 store relocation projects in advance of the holiday selling season, which brings our year-to-date count through today to 6 new stores, 17 full remodels and 3 store closures. For the remainder of the year, we anticipate completing 4 additional full remodeling projects. Buckle ended the quarter with 442 retail stores in 42 states compared to 445 stores in 42 states as of the end of the third quarter last year. And now I'll turn it over to Adam Akerson, Vice President of Finance. Adam Akerson: Thanks, Tom, and good morning. Our women's business continued its acceleration in year-over-year growth rate during the quarter, with merchandise sales increasing about 19%, which was on top of 3% same week growth a year ago. For the quarter, our women's business represented approximately 51% of sales, which compares to 47% last year. This growth continued to be led by the performance of our denim category with women's denim increasing approximately 17.5% and average denim price points increasing from $81.15 in the third quarter of fiscal 2024 to $86.95 in the third quarter of fiscal '25. This AUR increase continues to be primarily the result of strong growth in our Buckle Black Label, which has outperformed the total denim business, along with strong growth of other higher price point national brands. Complementing our strong women's denim selection, our team continued delivering compelling trends and fashions for our guests, for the quarter, we achieved growth across all women's merchandise categories with the most notable growth in knits and sweaters, casual and fashion bottoms and accessories. In total, average women's price points increased about 6% from $49.95 to $53.05. On the men's side, we were pleased to see growth for the second consecutive quarter with men's merchandise sales up about 1% against the prior year, representing approximately 49% of total sales compared to 53% in the prior year. This growth was also led by our men's denim category, which was up about 1% for the quarter. Average denim price points increased from $88.10 in the third quarter of fiscal '24 to $88.15 in the third quarter of fiscal '25. In other categories, we saw nice performance in both our short and long sleeve tees business in a variety of lifestyles as well as strong selling of our vests, jackets and accessories. For the quarter, overall average men's price points increased approximately 2.5% from $54.30 to $55.70. On a combined basis, accessory sales for the quarter increased approximately 7.5% against the prior year, while footwear sales were essentially flat. These 2 categories accounted for approximately 10% and 4.5%, respectively, of third quarter net sales, which compares to 10% and 5% for each in the third quarter of fiscal '24. For the quarter, average accessory price points were up approximately 3.5% and average footwear price points were up 4.5%. Also on a combined basis, our kids business continued its strong growth trend, increasing approximately 22% year-over-year. This continues to be a category where our teams are excited to keep building the business and selection for our guests. For the quarter, denim accounted for approximately 46% of sales and tops accounted for approximately 29%, which compares to 46% and 29.5% for each in the third quarter of fiscal '24. As previously mentioned, with strong selling and trends in many of our brand styles, our private label business decreased as a percentage of our total mix for the quarter. For the quarter, private label represented 47.5% of sales versus 48.5% for the third quarter of fiscal 2024. And with that, we welcome your questions. Operator: [Operator Instructions]. Our first question comes from Mauricio. Mauricio Serna Vega: This is Mauricio Serna from UBS Research. First, maybe could you speak on a high level what you're seeing on the health of the U.S. consumer coming into the holiday season. There's been some talks about maybe some pressure on the lower income consumer. So I was interested in hearing from your side, what have you been seeing? And then also, could you speak about the denim business? I think you talked about the momentum in women's being up 17%. What do you -- how do you -- how are you thinking about the sustainability of this growth? And maybe could you talk about what you saw in men's denim demand over the quarter? Dennis Nelson: Thank you for the question. On the consumer, we haven't seen a big change in our stores. I mean the team and guests seem excited about our product response. There's probably a slight caution in some as our units per sale are off very slightly. But overall, we feel good about it. And if the guest is excited about the product and the quality we have, it's been going pretty well. The ladies denim business continues to be excellent. There's still a lot of variety of styles and fits. We've added some of our branded sources to the mix, which has added some higher price points, have been good for the business. And our fashion brands and our private brands continue to sell well. So we're optimistic about the gal's denim business throughout the rest of the year. On the men's denim, our private label brands are consistent and doing well, having good sell-throughs. We haven't seen as much from other brands adding to the private brands mix, but feel our denim business is solid in men's as well. Operator: There are no further questions in queue. [Operator Instructions]. Okay. It looks like we have another question from Mauricio. Mauricio Serna Vega: Great. Just on the other thing that I wanted to ask was the merchandise margin. It was down 10 basis points. Maybe could you elaborate on what were the puts and takes behind the merchandise margin trend in this quarter? Thomas Heacock: Thank you, Mauricio. This is Tom. Yes, merchandise margins were down 10 basis points for Q3 and up 10 basis points for Q2. So I think if you look year-to-date with everything going on with tariffs, we feel really strong about where we're at from a merchandise margin perspective. And we've been operating at a high level of merchandise margins for a long time and have continued to improve that. So both Q1 and Q2 were all-time highs merchandise margins and we were off just a little bit in Q3. So I feel really good about where we're at. The biggest drivers are really -- Adam called out the decrease slightly in private label business with some of the brands performing really well, especially in women's denim. That's the biggest driver probably of the shift this year and especially Q2 compared to Q3 and then a slight increase in costs with tariffs and other flow-throughs. Operator: There are no further questions in queue. [Operator Instructions]. Okay. It looks like there are no further questions. I will now turn the call back over to Buckle for any closing remarks. Thomas Heacock: Thank you for your participation today. It will be a quick call, but I wish everyone a wonderful weekend and a wonderful holiday season. So thank you for joining us today.
Operator: Good morning, and welcome to Auna's Third Quarter 2025 Earnings Conference Call. My name is Eric and I'll be the operator for today's call. [Operator Instructions] And please note that this call is being recorded. [Operator Instructions] Now I would like to turn the call over to Ana Maria Mora, Head of Investor Relations. Ma'am, please go ahead. Ana Maria Mora: Thank you, operator. Hello, everyone, and welcome to Auna's conference call to review our third quarter results. Please note that there is a webcast presentation to accompany the discussion during this call. If you need a copy of the presentation, please go to our Investor Relations website or contact Auna's Investor Relations team. Please note that when we discuss variances, we will be doing so on a year-over-year basis and in FX-neutral or local currency terms with regard to Mexico and Colombia, unless we note otherwise. Let's move to Slide 2. In addition to reporting unaudited financial results in accordance with International Financial Reporting Standards, we will discuss certain non-IFRS financial measures and operating metrics, including foreign exchange neutral calculations. Investors should carefully read the definitions of these measures and metrics included in our earnings press release of yesterday to ensure that they understand them. Non-IFRS financial measures and operating metrics should not be considered in isolation as a substitute for or superior to IFRS financial measures and are provided as supplemental information only. Before we begin our remarks, please also note that certain statements made during the course of today's discussion may constitute forward-looking statements, which are based on management's current expectations and beliefs and which are subject to a number of risks and uncertainties that could cause actual results to materially differ, including factors that may be beyond the company's control. This includes, but are not limited to, our target leverage ratio, the expected resolution of the issues with physicians, suppliers and information systems in Mexico, the results of the key initiatives we are implementing in Mexico, the expected capacity and market of Torre Trecca once built, the execution of our strategic plan including the recovery of our growth levels and the rollout of the AunaWay in Mexico, our collaboration with Sojitz Corporation of America, our planned investments in Mexico and the creation of further growth and sustainable value for our stakeholders. For a description of these risks, please refer to our Form 20-F filing with the U.S. Securities and Exchange Commission and our earnings press release. Slide 3, please. On today's call, we have Suso Zamora, our Executive Chairman and President; Gisele Remy, our Chief Financial Officer and Executive Vice President; and Laurent Massart, our Executive Vice President of Strategy and Equity Capital Markets. They will discuss Auna's consolidated and segment financial and operating results for the third quarter, and will also provide updates on our various strategic growth initiatives. After that, we will open the call for your questions. Suso, please go ahead. Jesús Zamora Leon: Thank you, Annie. Good morning, everyone, and thank you for joining today's results call. In this quarter, we're reporting weaker financial results, a flat quarter principally dragged down by our Mexican operations. However, in Mexico, we are seeing evidence of stable and growing operational activity, the strength of our business model, the stage of development of our operations and the resilience of our owners integrated regional platform were reflected in the strong results of our Peruvian and Colombian segment in the third quarter, which partially offset the 5% decline in total adjusted EBITDA that was the result of Mexico's performance. Peru's strong top line and EBITDA growth was driven by a still improving health care pricing mix and strong insurance MLR as well as robust growth in plans. Our risk mitigation measures implemented in Colombia strengthened EBITDA and cash flow there. At our Mexico business, despite soft results, our hospital operations remained stable during the quarter, and we saw a second consecutive quarter of higher surgery volumes as well as an increase in oncology and cardiology services. However, the quarter was marked by slower-than-expected recovery from legacy doctors volumes and an impact from the implementation of new hospital information and ERP systems at Doctors Hospital. We are making important inroads that are positioning Auna to capture the many long-term growth opportunities that we see in Mexico. We anticipate 2026 to be a year of full recovery in Mexico, and with the New Mexico team in place, we remain very bullish in the medium term. Despite lower adjusted EBITDA, Auna's leverage was unchanged, thanks to less gross debt at the end of the quarter. Further, our debt profile improved significantly with our successful refinancing earlier this month. Our adjusted net income was a solid PEN 58 million for the quarter. And now let's turn to Slide 5. Peru and Colombia drove the 1% increase in FX-neutral consolidated revenue. Their top lines in local currency grew 9% and 4%, respectively, partially offset by Mexico's 12% decline. Capacity utilization, shown in the bottom left of the slide, decreased 3 percentage points to 64%, unchanged versus the second quarter. On a year-to-year basis, a 1.5 percentage point increase in Peru's total capacity utilization was more than offset by a 5.2 percentage point decrease in Colombia and a 4.4 percentage point decrease in Mexico. While lower utilization in Mexico was due to a year-over-year decrease in surgery volumes and emergency visits, Colombia's decrease has been a result of the risk mitigation measures that we implemented there earlier in the year, including proactively managing contracted services with government-intervened payers, while Peru's decrease was a function of the addition of beds to the operating capacity. Finally, I'd like to highlight that the total operating capacity utilization in Mexico modestly grew from the previous quarter. Planned memberships grew 8% at OncoSalud, while its MLR fell further to 49.3%. Now let's take a closer look at the segment results, beginning with Mexico on Slide 7. Of course, there were several bright spots in Mexico during the quarter. First, surgery volumes increased for the second consecutive quarter, as I noted before. Second, oncology and cardiology services, which are integral to our long-term growth strategy, increased 48% versus second quarter 2025, accounting for 15% of Mexico's revenues. Let me highlight this. An important part of our high complexity footprint in Mexico is growing. And relatedly, third, the revenues from Opción Oncología’ increased 21% over the previous quarter as well. This is where Auna makes a huge difference in the transformation of health care in Mexico. This is exactly where we make the difference with patients, payers and physicians. Weighing on revenue this quarter was a slower market. Also affecting our revenue was a slower-than-expected recovery in volumes, which were impacted by the doctor supplier relationships that have slowed the implementation of the AunaWay model in this market. It is important to note that we have experienced similar hurdles when disrupting Peru's and Columbia's health care markets. Another factor was unexpected problems in migrating Doctors Hospital to new information and ERP systems, which affected billings. The implementation of these systems is part of a broader multiyear IT transition to harmonize technology across Auna's businesses and geographies as well as to improve the quality of data and information that we use to manage Auna and to serve patients. Lower revenues impacted Mexico's gross profit, and therefore, adjusted EBITDA, and there were other factors, including a higher mix of lower-margin services related to service contracts at our OCA facility has for state employees. Nevertheless, the margin was 29% in the third quarter. Before discussing the performance of our other business segments, I'd like to give an update on the key growth initiatives that we have underway in Mexico, which we have summarized on Slide 8. So attracting and retaining and investing in talent is integral to our growth strategy in Mexico. Health care talent is thin in the Monterrey marketplace. However, we have revamped the leadership team in Mexico. Alejandro Torres leads our Monterrey health care operations. Previously, he held senior roles at Star Médica and TecSalud. We also hired a new Chief Medical Officer, a prestigious and very credible physician in Monterrey, who is having a significant and positive impact as we engage with physicians to grow our practices and improve medical resolution for our patients. We've also hired a new Head of Commercial Operations joining the company this week as well as other senior leaders for our Mexican hospitals. All of them bring to Auna significant, combined and complementary experience in Mexico's health care market as well as decades of experience in Monterrey. We are rolling out a series of package service offering and strengthening our collaboration with leading physicians to further penetrate 3 important market segments. This, of course, will expand revenue streams and increase capacity utilization at our health care facilities. One is the Out-of-Pocket segment, which is profitable and currently only represents 8% of our revenue in Mexico and which we intend to increase to 20% by the end of next year. In the third quarter, we increased this segment by 15%. In the Corporate segment, we continue developing attractive cost-effective packages to deliver additional services to the employees of corporate clients. Another attractive segment is government agencies. Accordingly, we are evaluating tailored services for the employees of municipalities that run Monterrey as well as those of government entities within it. Physician engagement and productivity are also integral to our Mexico strategy, including attracting the best doctors and nurses in high complexity management. This includes a series of productivity and quality initiatives that have been gaining momentum. By targeting just 140 of our top physicians who represent approximately 25% to 35% of our revenues at each of our hospitals, we've improved our alignment with them, with payers and with suppliers as well. This simple initiative has enhanced medical practices, improved operating performance, cost predictability and of course, control. Last month, half of those doctors experienced a double-digit increase in productivity month-over-month. Additionally, in the same month, we were able to attract a group of 10 physicians from a competing local hospital. On the payer front, we aim to expand Auna's participation with some of Mexico's largest insurance company preferred provider networks. Consequently, commencing in 2026, our health care facilities anticipate supporting heightened patient access and service volumes, thereby propelling capacity utilization. Scaling and enhancing Auna's oncology capabilities is another key component of our growth strategy in Mexico. At the end of October, we hosted Auna's Second Oncology Congress in Monterrey, an event that gathered more than 70 oncologists from across Mexico. We also used the occasion to officially inaugurate a new OncoCenter at our Doctors Hospital. It will serve as a center of excellence, providing oncology services in a single location and improving patient care and experience while being integrated with Auna's regional health care network. Our oncology efforts are already paying off, and this new center should significantly increase our activity in Monterrey. This is, again, the implementation of the AunaWay, which will grant Auna the differentiating aspects that will sustain our high growth ambitions in high complexity. Lastly, on this slide, there is the implementation of a new comprehensive IT system for our Mexico operations to bring it to our standards. Among many benefits, it will enhance the integration of financial and operational data, improve management visibility across the businesses, help us better control costs as well as enhance decision-making at our health care facilities. Let's move to Slide 9 to discuss Peru's third quarter performance. Our Peru business, Auna's scalable, integrated and best practice health care platform, demonstrated the strength and predictability of our model when it's operating at scale. As it further penetrated the country's health care market and expanded its business with third-party payers, health care revenues grew 9%, mainly on increases in ticket and volume of emergency visits and ambulatory care. OncoSalud, the health plans business, increased revenues 8%, primarily due to the increase in membership and to annual price adjustments. We continue to see substantial opportunity ahead and Peru will remain a key contributor to Auna's growth. Peru's adjusted EBITDA increased 15%, with a margin increasing 1.1 percentage points to 22.7% driving EBITDA growth were higher efficiencies with respect to surgical procedures and improved pharmaceutical costs at OncoSalud, which contributed to its low MLR. Turning to Colombia on Slide 10. Colombia's top line grew 5%, primarily the result of implementing risk-sharing models like prospective global payments, which are unique, given the difficulty to replicate them, produce stable margins and high occupancy and produce a reliable and positive cash cycle. These represented 18% of Colombia's revenue, up from 14% in the third quarter of 2024. Also, as of the end of the third quarter, the share of revenues from Nueva EPS, one of the major government-intervened payers in Colombia decreased from 20% in last year's quarter to 13%. And we added Salud Total as a payer under a new PGP program, reflecting the success of our efforts to diversify the payers that Auna serves in the country. And despite the lower surgical volumes stemming from us, limiting services to intervene payers, higher average tickets for surgery and an increase in chemotherapy and imaging services more than offset this decrease and contributed to the quarter's revenue growth. That growth drove an 18% increase in Colombia's adjusted EBITDA and margin expansion of 1.7 percentage points in addition to lower impairment losses in the quarter, and offset by increases to doctor remuneration. That concludes my review of the quarter. Now over to Gisele for her part of today's presentation. Gisele Ferrero: Thanks, Suso. On Slide 12, we break down the revenue contributed by each geographic component of Auna's diversified regional platform. As you can see in the bar charts, Peru still accounted for well over half of our platform's third quarter and year-to-date revenues. And with its top line increasing 9% in the quarter, Peru continues being a strong and reliable driver of growth and cash flow. Colombia, despite the risk mitigation measures that we put in place to maintain a healthy cap cycle, also contributed to revenue growth, growing 4% in local currency for the quarter. Regarding Mexico, we note, again, that the 12% revenue decline was a product of a still slow recovery of volumes, a slower market and also included nonoperating impacts such as the multisystem migration. Finally, as Suso pointed out, we expect Mexico's revenue to begin growing again next year. Let's now turn to Slide 13. Peru was also a strong contributor of adjusted EBITDA growth at 15% growth. It also had a solid margin of 22.7% in the quarter. And despite us favoring cash preservation over growth, Colombia also supported our profitability while expanding its margin versus last year's quarter, thanks to increased revenues and lower provisions. Mexico accounted for the 5% FX-neutral decrease in our consolidated adjusted EBITDA due to the significant revenue decrease as well as the quarter's mix of payers and services. We expect EBITDA growth in 2026 as we advance the implementation of our business model, as various growth initiatives gradually gain traction and as we bring the learnings from the systems implementation at Doctors Hospital for the next phase of migrations. On Slide 14, we break down the year-over-year change in adjusted net income. The biggest one being Mexico's impact on operating income. This was partially offset by PEN 11 million of additional finance income related to FX and PEN 21 million or 16% decrease in interest expenses, both of which you can see in the middle of the bridge. There was also a PEN 31 million decrease in non-cash and extraordinary items, which include a positive impact in 2025 from the OCA holdback obligations from the third quarter in 2024. Let's now move to the cash flow bridge on Slide #15. Our pretax operating cash flow decreased 5% to PEN 595 million during the 9-month period, mainly due to lower revenues in Mexico and accounts receivable delays related to the systems integration there. Another contributing factor was the payment of performance bonuses to doctors at Opción Oncología as part of their transition to Auna. Compared to the second quarter of this year, our pretax operating cash flow increased 65% sequentially with improved collections and cash conversion in Colombia. Because Auna is a major health care provider in the country, this means that intervene payers generally make us a priority with regard to outstanding payments and collections remain healthy. However, the situation with the intervene payers remains fluid, and we continue being vigilant. Near the center of the bridge, you see PEN 119 million of investments. This is 31% lower than the first 9 months of 2024. These investments mainly consisted of PEN 98 million in CapEx; PEN 21 million in amortized payments related to the OCA holdback obligations, which were completed in the second quarter; and the IMAT Oncomedica earnout which currently only have an outstanding balance of PEN 12 million. Moving further along the bridge, you see PEN 336 million of cash used for financing, which was 3% below last year's 9-month period. This amount consists of PEN 163 million of term loan payments, PEN 26 million of hedge premium and swap interest payments, PEN 58 million of interest paid on our 2029 notes, PEN 50 million of interest paid on our working capital facilities, and finally, PEN 39 million of borrowed working capital. That brings us to our cash position at the end of the quarter, which was a healthy PEN 226 million, albeit 4.2% lower than the beginning of the year. Now a few words about our debt, beginning on Slide #16. We continue to maintain a healthy debt structure and remain committed to improving our leverage to 3x net debt to EBITDA in the medium term. As part of our efforts to effectively manage Auna's liabilities, we took advantage of market conditions in the debt market as well as continued appetite from both bond investors as well as banks in order to undertake the recent $765 million debt refinancing that we communicated to the market earlier this month. Our refinancing included the successful issuance of $365 million of senior secured notes. We also closed on a $400 million equivalent term loan in Mexican pesos. This matches Auna's business exposure to Mexico. The loan also contemplates an incremental $60 million equivalent tranche in Peruvian soles, which we expect to disperse in the very near term. Both the U.S. dollar bond as well as the Mexican peso term loan represent 125 basis points in savings versus the interest rates on the previous debt structure. We are also very pleased to have added new lenders to the debt structure, including the IFC, which not only participated in the Mexican peso term loan, but also anchored 10% of the bond offering. Overall, in addition to extending our maturities, reducing financing costs and enhancing short-term liquidity, the refinancing gives us more financial flexibility to continue to invest in our medium- to long-term growth initiatives. For these reasons, the rating agencies applied a B+ rating to the 2032 notes and consider the transaction credit positive. That concludes my review of the results. Before we take your questions, Suso would like to provide a wrap-up on the quarter. Jesús Zamora Leon: Thank you, Gisele. I would like to conclude today's presentation with a summary of our strategy and priorities as we look ahead to the end of 2025 and into 2026. As our third quarter demonstrates, Auna's diversified footprint and integrated model provides enduring resilience. Peru embodies Auna's scalable, integrated and best practice health care platform and demonstrates the strength and predictability of our model when operated at scale. Peru continues to make strong contributions to Auna's near to midterm growth driven by an improving MLR, consistent profitability and our proven vertically integrated model operating at scale. The key lever we're engaging now is more growth in mid-segment market as well as risk sharing with private and public payers. In Peru, the recent milestone of Trecca reinforces the strong confidence in Peru's health care future and highlights the long-term opportunity we continue to see in the country. Peru continues to be a formidable growth market for Auna, as we roll out our capabilities in a market that has a private insurance penetration of only 6% and where we envision taking a sizable piece of the next racket of partially insured and uninsured in the country. In Colombia, measured growth continues to fuel the business and our risk mitigation strategy has truly paid off. Despite difficult externalities, results were very strong this quarter as Auna successfully diversified away from intervene payers and prioritized reliable cash flows from PGPs in the past year. Colombia remains a key market for us and an important contributor to scale and medical best practices across the region. As I have tried to communicate, we are focused on Mexico. We have a great, new, highly experienced team of local leadership that is excited about what we can do in Monterrey and in the country, leading the charge to reignite growth. We have made real progress seeing a second consecutive quarter of volume recovery in surgeries and stellar 48% growth in oncology and cardiology services. It is also important to note our recent public announcement on our partnership with Sojitz. This will allow us to accelerate growth in Mexico beyond what we can achieve on our own, while maintaining our disciplined deleveraging path and our target of bringing leverage below 3x. Finally, we remain acutely focused on our fellow investors and shareholders. Following the successful completion of our debt refinancing this quarter, we've already executed a major step in strengthening the capital structure and reducing long-term financial risk. In the remainder of the year, we will continue to evaluate all options to support and enhance shareholder value, as we strongly believe that Auna's current share price does not reflect the intrinsic value of our integrated platform and its long-term potential in the Latin American health care market. We are excited about what we can deliver in 2026. Thank you for your time, and we are now ready to take your questions. Operator: [Operator Instructions] Your first question comes from the line of Mauricio Cepeda with Morgan Stanley. Mauricio Cepeda: I have 2 questions, a little bit more about future strategy. So on your plans for Mexico and this MoU that you announced with Sojitz. Could you explain or walk us through the rationale for expanding in Mexico so soon? And how this new agenda align with your goal to deleverage Auna and to ramp up operations in Mexico? And my second question is about Colombia. Do you think that a potential change in the country's leadership there could help ease these pressures on the EPS? Or are there deeper structural issues that might limit any meaningful improvement over the next few years? Jesús Zamora Leon: Thank you, Mauricio. So on Mexico, so as we've always represented, Auna is a growth story and notwithstanding 2025 results, we do have a very interesting opportunity, growth opportunity in Mexico, repeating what we've done elsewhere. As our insurance plans have solidified certain service offerings in the different cities Guadalajara and Tijuana and [indiscernible] and Mexico City as well, some of those create opportunities for investment in the future. Today, I have to be very, very clear. Today, leverage is a key concern, and we want to bring it below 3x. So we don't have a balance sheet to use to allocate capital. Today, the share is really depressed. So we were also limited there in terms of issuing of shares. So we have found with Sojitz a really interesting opportunity . We've been working with Sojitz, a great an admirable company and a set of executives. And we have engaged with Sojitz for the last 5 years looking at different opportunities to collaborate. The MoU we negotiated during the last few months formalizes our relationship and puts up a framework to co-invest together in Mexico. So investors must read the press release that we issued a few months ago about what we plan to do in Mexico with this MoU with Sojitz. It is an MoU to accelerate Auna's growth in Mexico. Sojitz is a great partner, and we're very excited as together, we will be able to achieve more. This was -- this is again, this helps us capture the opportunity in Mexico, maintaining our leverage target. That's very important for us. On the EPS in Colombia, I think the political environment in Colombia, given elections, in particular, will not change things in the next 6 months. I'm not as optimistic either for the full year 2026, but I think that the sector is stressed enough to require of some action from the government. And I see there's certain milestones that are important. [indiscernible] which is the intervene insurance, EPS insurance payer, they have been recently capitalized by the central government, making it again a creditworthy institution. So I do see certain actions that are going to be fundamental in bringing stability to Colombia's health care sector. But I see because of the lateral year, I see some delay on that, maybe to the second semester next year, most probably the year after that. But again, our preferred status as a provider of high complexity services to most of the insurance companies in Colombia that grants us faster payments, good margins, large volumes. This has been tested in the worst of times in Colombia. So I'm not at all pessimistic on what Auna positioning in a very difficult circumstance in Colombia will produce, I think, attractive returns and growth. I want to highlight our Columbian operations continue to grow, notwithstanding the situation in Colombia. We're very privileged to have the positioning, the trust of many patients, the trust of many payers. And we're excited about Colombia, notwithstanding the uncertainties in the political environment. Thank you, Mauricio. If I forget anything, Gisele, please complement if need be. Gisele Ferrero: Yes, Mauricio, just to complement on the second part of the Colombia question, I would add, as Suso has mentioned that we remain very constructive on Colombia. As you know, it's an integral part of the Auna platform. And we have been able to manage the situation successfully even with the context of the external headwinds. We are constructive that there are some political noises that impact the flow of payments, and we do think that towards the end of next year and going into 2027, there will be certain opportunities for catalysts in the operation. And also kind of to add to Suso's point and clarify, as we've mentioned, we've reduced our exposure materially to [indiscernible] over the past year from 20% to 13% of the Colombian revenues. They have recently -- also, we've seen the announcement, the shared stakeholdership between the government vis-a-vis [indiscernible] and we also see that the government's direct stake in this payer is a positive sign. Jesús Zamora Leon: And Gisele, I also want to complement again the -- my previous response, Mauricio. Again, Auna has a very attractive pipeline in Mexico because of Sojitz and a limited balance sheet today and the share price. We want to make sure we can continue to act in the pipeline within the partnership of Sojitz. That's a critical part of that response, Mauricio. Mauricio Cepeda: Yes. But is it -- just a follow-up, is could be part of this interest of Sojitz to invest in Auna itself and helping the capital structure or it's just for new opportunities? Jesús Zamora Leon: I think that -- I mean I don't want to speak for Sojitz, but the dialogue that we've been having for years is very clear. They like our integrated model. They like Auna. We've been discussing things previously on Peru. They like the insurance business integrated to the health care side. So I don't want to -- it's a wide range opportunity to discuss things in the MoU, but I think it's not limited to new things, it's limited to making sure that we can push the growth opportunity of Auna, particularly in Mexico, but also I think of all Auna. Operator: [Operator Instructions] There are no more questions from the phone lines. So I will now turn the call over to Ana Maria Mora from Auna, who'll proceed with questions from the webcast platform. Ana Maria Mora: Thank you, operator. So the questions, we're going to see that repeated, so if we miss anything, please let me know, but internally. But the first question on the webcast comes from Joseph Giordano from JPMorgan. If could you provide more details around the partnership with Sojitz and Trecca project? What are the advancements in Mexico over Q4 '25? And when should we see the operations getting back to 2024 levels in terms of operating leverage? Jesús Zamora Leon: Great. I'll take part of it and Gisele, if I forget anything, please complement. So on Trecca, I think on Sojitz we spoken a lot about -- we make sure that we keep the market updated as we progress with that MoU. So on Trecca, Trecca is a public-private partnership awarded to Auna back in 2010. So these are some of the hidden opportunities we have within Auna. We've been working with Salud, which is a Social Security Peru and PROINVERSIÓN, the investment promoting agency there to amend the concession and to get all the necessary permits to start the project. What we disclosed is that the building permit was authorized, which was a big hurdle in the last couple of years. I want to summarize, this is a very interesting project. As one sees health care in the world. One sees, of course, in limited, but in Latin America, for us, it will be sizable total addressable market of private payers. And then a large segment of indirectly or directly state-owned payer. So this is a contract, it's an 18-year contract with a 2-year building period. So we'll start building mostly at the beginning of next year. It will take us 2 years, and then we have 18 years. During those 18 years, we're talking about 1.9 million ambulatory services, 0.5 million prevention package services and others that sum up to 3.2 million services a year. This is a big endeavor to serve social security beneficiaries in Peru. This contract will deliver certainly sales of over $200 million a year when it scales. It's a very interesting opportunity as we grow our footprint, not only within our total addressable market in the private sector, but also indirectly with the state-served sector. So I'm really excited about Trecca. It's not only about Peru. These are the conversations that we have with government authorities in Mexico as well. So it's really interesting to prove capabilities to deliver services to millions. And I think that's what we are going to show we can do in the next couple of years with respect to Trecca. Gisele... Gisele Ferrero: Yes. I would complement there, Suso, with respect to Trecca the way that public-private partnerships are structured in Peru. This can be structured in such a way that it's debt-neutral for Auna. Jesús Zamora Leon: That's very important. Thank you, Gisele. This and the pipeline in Mexico is debt-neutral to debt reduction for Auna, very important. We're going to continue to grow without exposing our balance sheet to any additional debt. This public-private partnerships in Peru have a certain -- have a very defined process as the state finances not only the building but also all the services. So this will have no impact on leverage for Auna. There were some other questions from Joe, I think, Gisele. Gisele Ferrero: Yes, which we covered the subject announcement as well as the progress that we're making in Mexico. Jesús Zamora Leon: Great. I did -- so I think Joe also asked something about whether we're going to get back to 2024 levels in terms of operating leverage. And I know that we're reluctant to give a lot of numbers -- forward-thinking numbers or guidance. 2025 will be a flat year. 2026 will be a growth year. And definitely, it will be a growth year in Mexico. Ana Maria Mora: Thank you, Suso. Let me continue with the questions since we're getting plenty of questions right now. The next question comes from [indiscernible]. So on the turnaround and expected inflection, we understand the turnaround strategy is in motion, but what key KPIs should we track to confirm a tangible recovery in 2026? For instance, occupancy, payer mix, surgical productivity. When do you expect to see meaningful improvements in revenues and EBITDA? There is also another question on recent share price weakness. The share has underperformed despite resilient operations in Peru and Colombia. Do you have visibility on whether specific institutional investor has been exiting? Are you in conversations with such holders to reinforce the investment case? And just 1 more. The third one that I need to read it, but we probably already answered it. On Sojitz potential, could you provide more detail on next steps with Sojitz Mexico? Do you see any opportunities for co-investment in new assets or potential partial assets, asset sales to accelerate returns on capital? Jesús Zamora Leon: Great. So I think I'll take first. The share price question. So first of all, we are convinced the current prices now reflect the company's fundamentals. There has been no significant change from what we've been reporting to the company's fundamentals. We are, of course, always evaluating alternatives to support and enhance shareholder value, and we will be sharing with all of you these as we progress and these are things that we'll be discussing at the Board level very soon. Now we can speculate a little bit because we saw from public filings early this year that one of our competitors in Mexico had made a filing with the Mexican antitrust authority where they request to buy more Auna's shares. From public recent SEC filings, we can see that this leading health care player in Mexico has been selling stock consistently in the past month, which makes us suspect the requests did not move forward. No, we can't be certain of this. There's nothing -- a lot of information that's public, except what has been declared to SEC. And we've seen very high volumes in comparison to what we've seen in the past that coincide with this antitrust findings. So that's our speculation. We, of course -- the recent filings were made public a week ago, and we're making sure that we can approach whoever is selling and see if we can try to propose some block trades that would not impact the share price as it has impacted. Again, I want to insist there is nothing within the company fundamentals has changed in the last 45 days when the stock has dropped, I think, I don't know, I don't know a number, 25% or 30%. Nothing is changed in Auna to produce that. Ana Maria Mora: Thank you, Suso. So let's go to the next question. It comes from [indiscernible] from Deutsche Bank. Please comment on return on investment time line on Mexico performance and commentary on the share price performance. Jesús Zamora Leon: So on the share price, I think we've covered. Gisele, do you want to talk about return on investment? Gisele Ferrero: Sure, of course. So I think it's important to note that we evaluate all our investments as well as our operations throughout Auna from a return on invested capital perspective. And that is why we are constantly looking for ways to optimize those returns by making our assets more productive and reducing the amount of invested capital. Specifically in the case of the investment time line on Mexico, as we've mentioned in the call, we have had setbacks this year as a product of the factors that have already been discussed. However, we do expect 2026 to be a growth year for Mexico. Ana Maria Mora: Thank you, Gisele. The next question comes from [indiscernible] from Fundamental Capital. Regarding expansion plans, are you planning to add more beds in Peru? And in Mexico, about the 500 million in expansion plans, how many beds do you expect to add there? Jesús Zamora Leon: So we don't give guidance on projections on capacity growth. But directionally, you will see Auna increase capacity, not only of beds, but of chemotherapy and radiotherapy and surgery rooms, which, of course, fill our beds in Peru, in particular. Some growth there. We see some plans that would be mostly inaugurated in 2027, not 2026. We see ourselves also investing in countries or cities in which we have already large hospital footprint, more in ambulatory care as [indiscernible] particularly oncology, orthopedics and cardiology is moving towards outpatients. And in Mexico, we see ourselves trying to repeat our strategy of urban ecosystems of health care and high complexity that requires beds of -- between 75 to 150 beds minimum landing in each of the cities to produce this urban ecosystem of health care. Ana Maria Mora: Thank you, Suso. The next question comes from [indiscernible]. And the question after that comes from [indiscernible] SG Analytics. I'm just going to bundle them because they're very similar and related to the same topic. And it's about the partnership with Sojitz. Could you clarify whether this collaboration is intended to be part of the previously announced $500 million investment plan for Mexico over the next 3 to 5 years. Or is this a separate initiative? And additionally, how should we think about Sojitz's role in terms of co-investment, capital contributions or participation in the execution of the pipeline. Do you have -- could you provide light on what is the nature of the $500 million investment? And are there any quantifiable impacts on the top line? Thank you. Jesús Zamora Leon: So I think we've -- and I think I made the case that yes, the $500 million is related to our MoU Sojitz. So the opportunity is a 5-year opportunity of $500 million. And what we've signed MoU with Sojitz, it doesn't have a specific number on it, but it's a sizable part of our investment plan in Mexico. Of course, this partnership will produce significant top line growth, and we've seen in the past also in our EBITDA growth. And of course, it is the intention of all these investments is to continue to grow our top line at high-teens and above. Am I forgetting anything, Gisele or Annie? Ana Maria Mora: I think you're good. I'm going to read the next one or unless Gisele wants to chip in. Gisele Ferrero: No, I think we're good. Jesús Zamora Leon: Okay. Ana Maria Mora: Okay. So the next one comes from [indiscernible] from Deutsche Bank. Please comment on the insurance risk management policy of Auna at a group level. Jesús Zamora Leon: Great. That's a great question. It's a complex answer, but we managed risk very much in relation to MLR by policy type, I can talk about oncology, for example. So we manage the underlying oncology risk of our insurance plan with a 50% MLR. That as a goal produces 2 distinct action paths. One is pricing, and the other one is cost containment. Cost containment will be managed by making sure doctors adhere to our protocols, that we purchased the most effective drugs and devices and therapy treatment, that at scale are difficult to replicate by others. And that produces in a consistent fashion that 60%. We're doing the same thing with the very few policies that we have in Peru and general health care with really also attractive MLRs in which we are contain underlying risk. So by this ability to manage all these plans continuously. We reprice continuously, and we contain costs and see things that creep up and how we -- and we contain them on a continuous basis every month in different practices with doctors meeting a lot of the discussion of why not to include that service, why not to include that drug because we're always about scale at the plans and what we deliver for plan members. Ana Maria Mora: Thank you, Suso. And this is the last question we have on the website. It comes from [indiscernible] from HSBC. If I recall correctly, the preferred payer network and bundled package for corporates in Mexico were discussed last year. Have they been launched or are these initiatives different? How do you plan to increase out-of-pocket sales mix in Mexico? Jesús Zamora Leon: Great. So the preferred payer network has been launched, but it's a continued dialogue with payers now. We are very excited and very enthusiastic and we believe that in this -- these things are negotiated, we negotiate every year, so we are in the midst of that. And I think we're going to have really positive results these coming weeks to be in the most preferred networks of the largest insurance companies in Mexico for our operations in Monterrey. So this continues. It's not something that's done in -- it's about cost containment again and how we dialogue with payers now. The out-of-pocket sales mix is something that we, I think, have been doing in Monterrey with less ambition. And we're definitely moving that. I think as I mentioned in the press release. We are trying to double the penetration of sales -- more than double the penetration of sales by out-of-pocket patients. And we do that by 2 things principally. A lot of packages from attorney for certain preventive procedure colonoscopies and even surgeries, orthopedic surgeries as well. We package services in an integrated way from diagnosis all the way to the post surgery aggressively with good margin, but aggressively with respect to what the patient sees in other hospitals. And secondly, we've launched, I think, midyear, we've launched a very -- is a very fast-paced response to out-of-pocket patients that come in to ask for a quote of certain services. And our ambition is to capture anything that comes into the hospital quote and not lose it. So we're being very aggressive in pricing for our out-of-pocket patients. I must insist the out-of-pocket category has very high margins. So there's a lot of cushion to be very aggressive in those. So we've launched an internal process that is very agile, has urgency to respond and to capture the out-of-pocket patient that comes in. Gisele Ferrero: Perhaps I would add there, Suso, to further clarify to [indiscernible] question what Suso presented today were 6 very important and concrete initiatives that we're working on in the Mexican operation. Some of them are new, others have already been rolled out, but are continuing to evolve in their level of maturity and these are the actions that are concrete and taking us to resume growth in 2026. Ana Maria Mora: Thank you, Gisele, and thank you, Suso for your answers. I don't see any other questions on the call. So at this point, I'd like to turn the call back to Suso for his closing remarks. Jesús Zamora Leon: Thank you very much, Annie, and thank you very much the Auna team as well as all the shareholders and investors that follow us and as well as the research community that also follows us. It's been a difficult year, yes. We've done a lot of things. Some of them we can share with the public investors, some of the things that are in process of being implemented. Mexico. There's no doubt, Mexico will be a huge and growth market for Auna. We're really excited what we can bring to the table. We can see evidence of the engagement with a lot of counterparties with respect to that. Sojitz and their interest in Mexico is a testament to what we're doing and what the opportunity is. So a difficult year, yes. Very promising future for Auna in Mexico and the rest of the region, no doubt. I want to also highlight, sometimes we represent Peru as a mature market. We are the dominant player there and it's not a mature market. Trecca demonstrates how Auna can have a significant increase. It's not even mapped anywhere of how we grab more and more market share from -- not from the established traditional players, but from the state and from the out-of-pocket. Colombia growing, not withstanding the difficulties in Columbia. I don't want to minimize the difficulties of Colombia. We're growing. We're growing profitably, even more profitably, we're collecting well in a very stressed market. This is what Auna can do. And Sojitz, Trecca all these things are hidden gems that we have that will produce significant growth results in the future. We will definitely do something about the share price. We're not going to stay without acting on it, and we'll be discussing that at the Board level at the right time as well. Thank you very much for your support. Thank you very much for your coverage. And with that, I would like to end the earnings release call and the Q&A section of it. Thank you very much. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to VinFast Auto Limited Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the call over to your first speaker today, Ms. Nhi Nguyen. Please go ahead. Hoang Nhi Nguyen Le: Thank you, operator, and good morning, everyone. Welcome to VinFast quarterly earnings call. Joining me today are Chairwoman of the Board, Madam Thuy Le; Deputy CEO of Investments, Ms. Anne Pham; and our CFO, Ms. Lan Anh Nguyen. Before we begin, please note today's call will include forward-looking statements under U.S. federal securities law. These statements reflect our current views on future events, financial operational performance and other matters that involve risks and uncertainties, which may cause actual results to differ materially. Please refer to our most recent filings with the SEC for a discussion of these risk factors. We will also reference certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP figures, along with explanation of their use is included in our presentation issued earlier today. With that, I would like to invite Madam Thuy to begin the management remarks. Thuy Thu Le: Thank you, Le. Hello, everyone, and thank you for joining us today. In addition to Lan Anh, our CFO, I'm very pleased to have Anne Pham, Deputy CEO of Investment on the call with us today. This quarter VinFast marked a significant milestone. We became the first automobile brand in Vietnam to surpass 100,000 vehicle sales within the first 3 quarters of a single year. This follows 13 consecutive months as the nation's best-selling carmaker, underscoring our unrivaled leadership in the domestic automotive market. Growth across our core international markets also continued to gain momentum. Before I go into the country updates, I would like to start with the 3 key takeaways for this quarter. First of all, VinFast remains in growth mode, both at home and abroad. In the third quarter, we delivered 38,195 EVs, representing a 74% increase year-over-year and 7% quarter-over-quarter growth. For the first 9 months of 2025, VinFast delivered 110,362 EVs to customers globally, representing a 149% increase year-over-year. We remain on track for our 2025 guidance to at least double the volumes. VX 3 and VX 5 together contributed 47% of total deliveries, while the Green series accounted for 25% of deliveries. We delivered 120,052 e-scooters and e-bikes, representing a 535% increase year-over-year and 73% quarter-over-quarter growth. The number of EV deliveries to related parties, including GSM, represent 26% of total deliveries. E-scooter deliveries to related parties, including GSM, accounted for less than 1% of total volume, reflecting overwhelming demand from retail consumers. The strong momentum in our e-scooters volume showcases the accelerated shift towards electric 2-wheelers following the announcement of a new policy to restrict gasoline motorbikes from entering central district in Hanoi and Ho Chi Minh City, starting in mid-2026. In Vietnam, we are strengthening our leadership position by broadening our EV e-scooter lineup and deepening our presence in the B2B fleet channel. Internationally, we continue to expand our green mobility ecosystem, a key differentiator for Vintast while growing our dealership network and introducing new products as each market matures. The second takeaway for this quarter is about investing in innovation, which is central to Vintast's long-term competitiveness. Our R&D investments are focused on 3 critical areas: vehicle platform, electrical and electronic architecture and autonomy. Anh will share more details shortly on this exciting road map. Last but not least, we are prioritizing top line growth through targeted investments while viewing cost rationalization as a disciplined medium-term priority. As I have shared before, finding the balance between growth and cost remains a long-term priority. This principle continues to guide our decisions as we invest in expansion and R&D in the near term to strengthen our foundation for the future. Lan Anh will provide more color on this in her remarks. Now let me go into the detailed update by market, starting with Vietnam. Based on aggregated data from Vietnam's Automobile Manufacturers Association and domestic manufacturers. The auto industry reported a mixed result for the quarter with sales dipping in August due to a typhoon before rebounding in September. The industry delivered 94,593 passenger vehicles, flat compared to Q3 2024 volumes, whereas Vintage Vietnam volumes grew 82% year-over-year during the same period. During this quarter, we ramped up production of the VF 3 at the Hà Tinh factory and launched 2 new models, the Limo Green, a 7-seater MPV received strong market response with over 2,000 units delivered in September. We also proudly delivered the Lac Hong 900 LX fleet to the Ministry of Foreign Affairs, marking the first Armored EV certified to VPAM VR7 standards, one of the most recognized international standards for vehicle armored. In our 2-wheeler segment, we continue to see strong momentum. As policies accelerate the phaseout of gasoline motorbikes, consumers are looking to switch to electric 2-wheelers. VinFast now offers a full product range of electric 2-wheelers from affordable models for students to premium options for professionals. Two new e-scooter models with expanded range are planned for 2026. V-Green, an affiliated charging company is expanding battery infrastructure nationwide. Now turning to our international markets, starting with India. Our CKD factory in Tamil Nadu commenced operation this August, partnering with an initial 38 local suppliers. We plan to further expand our local supplier network to enhance localization and strengthen the Made in India footprint of our vehicles. Sales in our first month in India exceeded our internal forecast, reflecting a decisive market debut and a stronger start than any of our previous Asia launches. In October, VinFast ranked within the top 8 for EV registration in the country. As of September 30, we opened 20 dealer stores, announcing financing partnerships with leading domestic banks and third-party aftersales service network. Moving over to Indonesia, where the overall auto market declined about 11% year-over-year from January to September, though BEV sales rose sharply to around 55,000 units, up from about 43,000 units a year ago. VinFast joyed the GAIKINDO Association recently and is now ranked fifth amongst the top 5 BEV brands year-to-date and 15th amongst the 45 automakers. Despite temporary disruption from the August protest, we have expanded our dealership network to 33 locations. Year-to-date, VinFast has captured approximately 5% of Indonesia's BEV market. Indonesia is the first market where we introduced our green mobility ecosystem in partnership with GSM, an affiliated company. GSM now operates in 4 cities in Indonesia and serves passengers at Jakarta, Soekarno-Hatta International Airport. With GSM using VinFast vehicles on the road and V-Green emerging as the second largest charging network in Indonesia, we are strengthening awareness of VinFast holistic offering and setting ourselves apart from other OEMs. In the Philippines, we are capitalizing on this momentum with a stronger marketing push in the last quarter to build awareness of our core products, the VF 3, VF 5 and VF 6. We are introducing a residual value guarantee program this month and expanding our battery subscription model. These programs are unprecedented in the Philippines auto market, and we are proud to be pioneering such consumer-first policies. VinFast continues to grow in line with overall market. As of September 30, we had 13 showrooms. As consumer confidence in VinFast grows, local enterprises are also embracing our green mobility vision. GSM Philippines has partnered with Xentro Motors to deploy 2,000 VinFast EVs across Metro Manila and key urban centers, a strong endorsement of our sustainable mobility model. In the U.S., we opened our first dealership in California and aim to strengthen brand visibility across the U.S. by partnering with our dealer network. Through joint participation in major events such as Electrify Expo in Chicago, New York and Dallas, key markets where our top dealers are based, we strengthened collaboration and amplify their local market presence. Planning also continues for our North Carolina manufacturing facility, which will support our long-term U.S. growth strategy. Over in Europe, our debut at Busworld Brussels was well received, marking an important milestone for VinFast's entry into Europe's commercial vehicle segment. Our EB 12, the full-size 12-meter city bus already meet UNECE and CE standards is now available for order in Europe while the more compact EB 8 will be introduced at a later stage. In Middle East, we announced our strategic partnership with the Arabian Automobile Association to launch comprehensive roadside assistance for VinFast customers across 6 countries in the region. Taking a step back, when we look at the progress that we have made across our international markets, we recognize that as a new engine, it will take time for both our brand and green mobility ecosystem to fully mature from expanding our dealership network to improving charging accessibility through V-Green and ensuring consumers benefit from a competitive total cost of ownership, we are executing our vision to make sustainable mobility accessible to everyone with deliberate thoughtfulness and discipline. As we look ahead, innovation remains at the heart of our journey. With that, let me turn it over to Anne, who will share more about our exciting R&D road map and how these investments are shaping VinFast's future. Anne Pham: Thank you, Madam Thuy. At VinFast Mobility Day held at Hai Phong Automotive Factory on November 10, we unveiled our product innovation and R&D road map as we're investing in shaping the future of mobility in years to come. In 2026, VinFast will offer 3 distinct brands. The first one, VinFast, comprised of smart EVs for everyday life designed for mainstream consumers who want reliability, safety, technology, attractive cost of ownership and best-in-class warranties. The Green series, EV solutions for commercial purpose and raise utilization for fleets. And last but not least, the Lac Hong series, which is designed and catered to the ultra-luxury market that embodies Vietnamese hospitality, premium materials and quality craftsmanship. We're investing in the latest technologies to enhance customer experience and strengthen our competitiveness. VinFast is evolving its technology stack around 3 pillars: vehicle platform, architecture and autonomy. By increasing commonality and reducing components, our next-generation platform will be more cost efficient to produce and have more enhanced features. We are also reengineering our EE system into zonal architecture. All core softwares will now be owned and controlled by VinFast for suppliers to provide standardized hardware platforms. The centralized computing hub, which is essentially a vehicle supercomputer, enables rapid OTA updates, faster feature deployment and consistent system stability. Finally, on autonomy, VinFast is taking a 2-step approach towards our ADAS autonomous driving road map, choosing to work collaboratively with external partners while strengthening our in-house capabilities. At Mobility Day, we unveiled a demo of our robotaxi project, whose intelligent system utilizes low computing power and vision-only technology. This approach allows for lower hardware cost, higher energy efficiency and greater scalability. Our vision is that VinFast will be a multi-brand full-line EV manufacturer spanning passenger, commercial and autonomous segments. We will move from building EVs to building an entire mobility ecosystem for everyone everywhere. With VinFast still very much in its growth phase, achieving our vision requires continued investment in R&D to strengthen our long-term competitiveness. There are still significant white space opportunities across our core markets, and our strategy remains to stay nimble and responsive to market dynamics while creating the right conditions for sustained EV adoption over the long term. With that, I'll now hand it over to Lan Anh, who will walk you through the financial highlights for the quarter. Anh Thi Nguyen: Thank you, Anne. I'd like to frame our financial results win in the context of our 100,000 vehicle milestone, a significant achievement reaching record time. Now let me walk you through our results in more detail. The company's strategy in Q3 2025 continued to focus on driving top line growth. As a result, total revenue was USD 719 million, representing a 47% year-over-year increase and 9% quarter-over-quarter. We entered Q4 2025 with strong order backlog from the Green series. Cost of goods sold for this quarter was USD 1.1 billion, an increase of 85% year-over-year and 21% quarter-over-quarter, reflecting the continued ramp-up in deliveries. Gross margin was negative 56.2% in the third quarter of 2025 compared to negative 24% in third quarter of 2024 and negative 41.1% in the second quarter of 2025. Gross margin this quarter was primarily impacted by the recognition of cost of goods sold for vehicles already delivered under customer contracts, while the revenue recognition will occur in the subsequent period. This amount was USD 176 million and reflects a timing difference rather than an economic loss. We also recorded higher warranty costs in the U.S. and Europe as we shifted to third-party service workshops. Excluding the impact mainly due to delayed revenue recognition and NRV adjustments, gross margin would have been negative 17.1%, an improvement from negative 20.8% in Q2 2025 and negative 27.3% in the same period last year. Moving to the operating expenses. R&D expenses were USD 106 million, an increase of 15% quarter-over-quarter and 28% year-over-year as we booked the development cost for the Green Series Lac Hong and EC Van and for models that we plan to launch on our new vehicle platform in 2026. As a percentage of revenue, R&D in Q3 2025 was 15%, marking the fifth consecutive quarter where this is under 20%. Our existing models will undergo a technology refresh on the new vehicle platforms, which will drive additional R&D in 2026. SG&A expenses for the quarter was USD 172 million, an increase of 27% quarter-over-quarter and 25% year-over-year. The higher SG&A expense was due to an impairment charge of USD 49 million that we booked for the battery project and closure of our D2C showrooms in the U.S. and Europe. Adjusted EBITDA, which excludes net loss from financial instruments was negative USD 576 million and adjusted EBITDA margin was negative 80.2%, excluding the impact mainly due to the delayed revenue recognition and NRV adjustment, adjusted EBITDA margin would have been negative 33.1% compared to the negative 44.9% in the same period last year. Net loss for this quarter was similarly impacted. Net loss was negative USD 953 million and net loss margin was negative 132.7%. Excluding the impact mainly due to delayed revenue recognition and NRV, net loss was negative 81.8% compared to negative 109.1% in the same period last year. CapEx for this quarter was USD 261 million, an increase of 24% quarter-over-quarter and 108% year-over-year, driven by CapEx for the new factories overseas and for the expansion in Vietnam. Finally, an update on our liquidity and the previously announced grant and borrowing commitment in late 2024. As of 30th of September, VinFast outstanding borrowing from Vingroup under this commitment were USD 460 million. The company received a total of USD 1.1 billion disbursement from our founders pursuant to the grant agreement. Our total available liquidity as of 30 September is USD 3.7 billion, which reflects cash proceeds from the Novatech spin-off transaction, fundraising commitment from Vingroup, our founder and an ELOC facility. Operator, let's open for Q&A. Operator: [Operator Instructions] First question comes from the line of Anand Balaji from Cantor Fitzgerald. Anand Balaji: This is Anand on for Andres Sheppard at Cantor. Congrats on the quarter. So I just wanted to start with some autonomy items from the Mobility Day a couple of weeks ago. So I was wondering maybe what's your expected time line and cost expectations for developing your autonomy stack. Last we spoke, there's a lack of formal regulatory framework in Vietnam for AV. So what are the potential gating factors for this? Thuy Thu Le: Anand, good to hear from you again. Well, we developed both the autonomy stack both internally as well as leveraging other suppliers. So I think the plan for launching is next year in 2026 for the low-cost version for like robotaxi in our Group ecosystem, in Vingroup ecosystem or in Vingroup development, probably around 2028. Anand Balaji: Got you. And for the second question, I was wondering if you could refresh us on your capital needs and potentially when are you guys targeting a positive gross margin? If we could just get a little color on your trajectory on that front. Thuy Thu Le: Well, I think as of now, we have -- our total liquidity is like $3.7 billion at the end of the quarter. So we're good for another 18 months based on our current projection. Yes. And so right now, we're keeping our head down to execute on our operational milestones, and we wait for the market to be better for EV. Operator: Our next question comes from the line of James McIlree from Chardan Capital Markets. James McIlree: I was -- can you help me understand the percent of sales in Q4 you think are reasonable to come from outside of Vietnam? That is in the first 3 quarters, it's been 90% to 95% of the vehicle sales in Vietnam. And the question is, is that likely to continue in Q4? Or is there a larger contribution from non-Vietnamese locations in Q4? Thuy Thu Le: James, good to hear from you. I think in Q4, you will see a little bit more from outside of Vietnam, proportionately a little bit more from outside of Vietnam than in the first 3 quarters. The ramp-up will be mostly come from India, a little bit from Indonesia and some smaller relatively from U.S., Europe as well. It takes time for our overseas market to ramp up. So it takes a few more months to -- for manufacturing for the whole organization to operate to function kind of seamlessly, but it's coming. You're going to see a bigger portion next year coming from overseas markets. James McIlree: Okay. Appreciate that. And secondly, it was mentioned that there would be an increased R&D in order to support the new platform, I was hoping you could help me understand how much that increase might be? Are we talking a 5% increase over current levels, a 20% increase over current levels? I'm just trying to get a feel for how big that increase might be. Thuy Thu Le: So I think Lan Anh I will give you a little bit more specific, but I think this year, we target to spend about $1.6 billion in CapEx and R&D, and we have spent about $1.1 billion in the first 3 quarters. Over 35% is capitalized R&D for the new models and product like uplift refreshes and over 65% is to build the CKD facility in -- across Asia in [indiscernible], in Vietnam, India and Indonesia. And I think most of -- for the new platform, most of it has been spent so far. There's -- because we already launched the new platform on the Limo Green, and we started rolling out on other models in 2026. So most of the spending is already there. Anne, you want to go further into details? Anh Thi Nguyen: Yes. So for the R&D for the new platform that we focus in 2025 to 2026 and the spend for R&D expected to normalize from 2027. And actually, for the flexible payment timing, we're going to manage the pace of spending to ensure about the target to launch the new platform also improved for the cost optimization. Thuy Thu Le: Yes, talking about cost optimization, that's actually a very good point because some of the vehicles, right? The loan cost can be reduced by like 50%. So really, I mean, the investment is worth. James McIlree: Okay. And one more, if I might. When we think about the new platform in 2026, can you give us an idea about how many of the units might come from the new platform? Thuy Thu Le: How many units per year, how many units -- which vehicles? I mean... James McIlree: As a percent of sales for 2026, how many -- what percent of sales will come from the new platform? Thuy Thu Le: Pretty much Asia will all come from the new platform, pretty much. I think probably around 80% would come from new platform, 70%, 80% and then the rest is the old platform. But at the beginning of the year, they all roll out, but gradually in the new year. So at the beginning of the year, there will still be legacy platforms and then we start rolling out one by one in the new year. So maybe a little bit positive, probably 50-50 or something. Operator: There are currently no more questions from the phone line. Please continue. Hoang Nhi Nguyen Le: Thank you. We have the first question from the webcast audience. As more dealerships close in the U.S., what are VinFast's plans for long-term support? Madam Thuy, would you like to take the question? Thuy Thu Le: Well, we -- realistically, we're waiting for the new platform to be developed to roll out in like North America and Europe to get us to profitability. So we're not going to -- given -- in the U.S., given the tariff situation and the instability in the EV market, we just need to see how that settle before we kind of push hard in the U.S. So there would only be like this year and maybe next year as well, there would only be a certain number of vehicles that we can share across the dealership. So we -- of course, we would like our -- the dealerships that are committed to us to be profitable and have enough vehicles to get to profitability quickly. So I think until we see some growth and stability in the U.S. market, we don't intend to open more dealerships. Instead, we cultivate the relationship with the existing dealers and make sure that they can get to profitability faster. Hoang Nhi Nguyen Le: We have the next question from the webcast. Why did loss per car increase Q-over-Q in Q3 despite surge in volumes? What should we expect for loss per car in October and Q4? Ms. Lan Anh, would you like to take the question? Anh Thi Nguyen: Yes. For the car loss for this quarter, that's primarily due to the certain orders that we already delivered our vehicles, but yet recognized as a revenue. Even though the related goods like our vehicle transfer out of stock, that's because for the revenue recognition in line with the accounting standards, so we yet recognize as a revenue. So the revenue is expected to be recognized for -- in the subsequent period. So on an adjusted basis, excluding these orders, the results show a slight improvement compared to the previous quarter. Hoang Nhi Nguyen Le: Thank you, Ms. Lan Anh. We have the next question from the webcast. Please provide 2026 guidance for 4-wheeler and 2-wheeler delivery volumes and EBITDA expectation. Anh Thi Nguyen: So we plan to release our 2026 guidance early next year, and we expect that we maintain a strong growth trajectory in 2026 because we prioritize volume expansion to reach the economies of scale. Hoang Nhi Nguyen Le: Thank you, Ms. Lan Anh. We have the next question from the webcast. Do you plan to introduce a hybrid model? And when will it launch? Ms. Anne, would you like to take the question? Anne Pham: Thank you, Le. Well, as an innovation-driven company, our R&D team continuously explores advanced technologies, including powertrain solutions to enhance product performance and deliver superior customer experience. So today, our core team strategy remains focused on fully EVs. The decision to launch any new product undergoes rigorous testing and commercial validation, and we'll only do so once these standards have been fully met. At the moment, we're not working on any hybrids in the R&D platform. Hoang Nhi Nguyen Le: Thank you, Ms. Anne. We have the next question from the webcast. You mentioned a solid order backlog going into Q4. Which models are seeing the strongest demand within that backlog? And are you on track for 2025 target? Madam Thuy, shall you like to take the question? Thuy Thu Le: So as of mid-October, we are seeing a very strong order backlog from the Green series, particularly the Limo Green, the new MPV 7 seaters and the Minio Green, which together make up about 50% of our total backlog. So we can't deliver enough vehicles to meet our backlog. In October, deliveries in Vietnam surpassed 20,000 units, making VinFast the first brand in the country to sell more than 20,000 cars in a single month. And in Vietnam alone, we have cumulatively delivered over 120,000 EVs. We remain positive about our 2025 guidance. And I think we are going to have -- we're reaching a 30,000 vehicles delivery per month. So [indiscernible]. Hoang Nhi Nguyen Le: Thank you, Madam Thuy. We have the next question from the webcast. Regarding the cooperation agreement with Saigon Glory, what is the rationale for entering into a real estate development when cash flow should be focused on vehicle production. Are there any near-term plans to enter other real estate projects or partner with [ VinFast ]? Madam Thuy, would you like to... Thuy Thu Le: Well, our core priority remains EV innovation and driving cost down and the technology refresh program is fully funded with the cash that Madam Nguyen has mentioned earlier and the liquidity that we've secured for the next few years. The investment cooperation that VinFast recently entered into is a 5-year passive investment under which VinFast may contribute up to around USD 800 million in VND equivalent, while our partner provides development rights and expertise. The investment assures full capital recovery of the investment amount of around up to $800 million at maturity, generating a committed pretax profit of approximately above USD 830 million, subject to the full amount of committed investment being invested. The capital contribution is supported by unused funds or spare liquidity to the extent that it has not been used and disbursement of capital is expected to be in line with the implementation progress of the invested project without materially affecting operating cash flow of global EV manufacturing and expansion plans of VinFast. Hoang Nhi Nguyen Le: We have the next question from the webcast. Will ASP need to be much lower compared to Q3 in order to achieve '25 volume guidance? Ms. Lan Anh, would you like to take the question? Anh Thi Nguyen: So far in 2025, our ASP has been weighted towards our more affordable models. So for the full year, we expect that the VF 3, VF 5 make up just under the 50% of total deliveries. So for the rest of the year and looking ahead to 2026, our current sales spend poised to more like a balanced mix with VF 3, VF 5 on one side and the Green series along with the VF 6, VF 7 on the other, especially as we begin ramping deliveries for India. So for ASP, we're assuming it remains roughly flat in the coming period. The higher ASP from VF 6, VF 7 is expected to be offset by the slightly lower ASP from the Green series. Hoang Nhi Nguyen Le: Thank you, Ms. Lan Anh. We have the next question from the webcast. Could you give us an update on the production ramp-up at Hà Tinh plant? Anh Thi Nguyen: Sure. Thanks, Le. The Hà Tinh factory is ramping up very well. It is currently producing 15 jobs per hour compared to the maximum of 35 jobs per hour. We've shifted production of our smaller models from Hai Phong to Hà Tinh as well, and the plant has already produced several thousand VF 3 units in the third quarter as part of its ramp-up. Looking ahead, Hà Tinh will be the main production site for the Minio Green, VF 3 and the EC Van. Hoang Nhi Nguyen Le: Thank you, Ms. Anh. We have the next question from the webcast. As you look into 2026, which markets or product lines will be VinFast's biggest growth drivers? Thuy Thu Le: In 2026, we expect more contribution as the Green series scale more and the new VF 6 and VF 7 platform will come online. These products are designed to be more competitive, both from the cost as well as market perspective. So that contribution should build steadily as we move through 2026 and into 2027. Across our international footprint, we anticipate more meaningful volumes coming from India, Indonesia and the Philippines as we expand the lineup in each of the markets. Vietnam will remain our anchor market in the near term. For the next year, we expect Vietnam to account for roughly 70% to 80% of total deliveries with the balance coming from international markets as they continue to scale up. Hoang Nhi Nguyen Le: We have the next question from the webcast. How is battery costs tracking in the past few quarters? How is it expected to trend in the upcoming quarters? Anh Thi Nguyen: Thank you, Le. Battery costs have continued to decline quarter-over-quarter, extending the downward trajectory established in 2024. On the average, we have seen battery prices come down by approximately 10% or 12% year-over-year across various models. We are transitioning to a new more cost-efficient battery generation underpinned by our suppliers' technology advancement that meaningfully lower unit cost. And also, we expect like further cost optimization going forward, driven by continued improvements in battery technology and manufacturing efficiency. Hoang Nhi Nguyen Le: Thank you, Ms. Lan Anh. We have the next question from the webcast. Further sharing regarding the new lines of vehicle, you mentioned 3 brands. Can you share the philosophy around that? And what is the split percentage for each brand to contribute? Anne Pham: Thank you. I think, first of all, it is still a little bit early for us to break out the expected financial contribution from each brand. The primary objective behind establishing the 3 brands is really to sharpen our customer segmentation, ensuring that each brand has a clearly defined audience and purpose. With a portfolio that spans more than a dozen models, creating intuitive brand spaces help our customers immediately understand what each line represents and which use case the brands serve. Strong brand segmentation also allows us to fine-tune pricing strategies, tailor our marketing messages and run more targeted campaigns for each customer group. It helps us to optimize our product road map and go-to-market approach by reducing overlap and minimizing cannibalization between brands. Over time, as the brand architecture matures and our market scale, we'll also have better visibility to commence on the individual brand contributions towards our top line and bottom line. Hoang Nhi Nguyen Le: Thank you, Ms. Anne. We have the next question from the webcast. How is VinFast and V-Green planning to accelerate the rollout of its battery swap network for e-scooters? Thuy Thu Le: Okay. So V-Green plans to leverage the strategic partnership to accelerate the rollout of battery swapping for e-scooter in Vietnam. So V-Green is working with a really large retail organizations in Vietnam like IPT Retail, a lifestyle electronic retail network with Viettel Post to allow us to put the swapping -- battery swapping stations at the subloocations, co-locate shopping station with the postal and distribution hubs for Viettel Post. So this not only give us access to large high traffic sites, but also create synergies with existing delivery and shipping fleet. To scale even faster, it could explore a franchise or revenue sharing model like we did with the EV battery -- EV charging stations. And we expect that the cooperation as well as the rollout of the battery swapping locations to increase very quickly, especially now that in major cities in Vietnam, like in Hanoi and Ho Chi Minh City from mid-2026, right, the 2-wheelers -- internal combustion engine 2-wheelers are no longer allowed in central locations. Hoang Nhi Nguyen Le: Yes. Thank you, Ma'am Thuy. And on that topic, we also have another question from the webcast. Your 2-wheeler business has delivered exceptional volume growth this year. And we've seen at least one major legacy competitor publicly acknowledge the impact that recent government policies have had on their sales VinFast appears to be one of the clearest beneficiaries of this policy to shift towards encouraging electric 2-wheelers. With these tailwinds in place, how are you thinking about the outlook for 2-wheeler business in 2026? Thuy Thu Le: I think in 2026, we -- the 2-wheeler business for VinFast will grow at an accelerated level, demonstrative of the ongoing electrification megatrend and policy tailwinds in Vietnam. While we have not provided the guidance for 2-wheeler business, yet, VinFast has been continuously increasing our production in response to the market opportunity and remain optimistic about the outlook for this market segment. This year is the first time we have seen 2-wheeler volumes outpaced 4-wheelers in our business. And this segment contribution to overall revenue is still under 10%. So next year is going to be a big year for 2-wheelers in Vietnam and 2-wheeler will also start. So we target like 1.5 million 2-wheelers in deliveries in 2026 in Vietnam alone. So about 60% of the total new sales in Vietnam. So that is our target. And we will start rolling out in, I think, earlier in the year in Indonesia, in the Philippines and later in the year in India and maybe other markets as well. So it's going to be -- next year is going to be a good year for our 2-wheelers. Hoang Nhi Nguyen Le: Thank you. And we have the next question from the webcast. How do you view VinFast international markets in terms of near-term profitability versus long-term ecosystem development? Anh Thi Nguyen: Well, first of all, VinFast does not disclose profitability on a market-by-market basis. As with most global OEMs, the development of our ecosystem in new international markets will take time to reach scale and mature as what Madam Thuy has explained a little bit earlier on this call. It's important to underscore that we manage profitability at the enterprise level, reflecting the full portfolio of products, regions and ecosystem services rather than evaluating performance by individual model or individual geography. Hoang Nhi Nguyen Le: Thank you, Ms. Anh. We have the next question from the webcast. Can you provide a little bit of update on the North Carolina facility? Thuy Thu Le: There's still no change to our plan to have our North Carolina facility SOP by 2028, and we will provide more update on the resumption of construction in 2026. Hoang Nhi Nguyen Le: Thank you, Madam Thuy. We have the next question from the webcast. Can you please break down the liquidity runway that the company has continued to implement its strategy over the next 12 months? Ms. Lan Anh, should you like to take the question? Anh Thi Nguyen: So for the -- our total liquidity as of the 30th of September 2025 is USD 3.7 billion, providing us with approximately 18 months of runway of support operations and growth plans. So like for the cash and cash equivalent, we have the USD 349 million. We have like the USD 930 million of the fundraising commitment from Vingroup, USD 837 million from our founder and the remaining from like the ELOC facility and also for the announced completed Novatech spinoff transaction. Hoang Nhi Nguyen Le: Thank you, Ms. Lan Anh. We have the next question from the webcast. Are new dealerships currently in the pipeline do you plan to open in California? Madam Thuy, should you like to take the question? Thuy Thu Le: We are exploring a few dealership candidates in California right now with the opening of the dealership -- first dealership in San Diego in August. Right now, we still have 2 or 3 territory open in California for applications. I mean California accounts for about 35% of the EV sales in the whole U.S. So we can -- we need a strong presence in California. Hoang Nhi Nguyen Le: Thank you, Madam Thuy. On the U.S. topic, we have the next question from the webcast. How much inventory does VinFast have in the U.S.? And do you expect to sell in the U.S. in 2026? Thuy Thu Le: So VinFast has proactively reached vehicles to the U.S. before April 20. The remaining stock is still sufficient for a few months of sales, and we are planning new shipments to the U.S. as well. Hoang Nhi Nguyen Le: Thank you, Madam Thuy, thank you Ms. Lan Anh. That's all the questions we get from the webcast today. Thank you, everyone, for attending. Operator, back to you. Operator: Thank you. Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.
Operator: Hello, and welcome to the X Financial Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Victoria Yu. Please go ahead. Victoria Yu: Thank you, operator. Hello, everyone, and thank you for joining today's call. The company's financial results were released earlier today and are available on our Investor Relations website at ir.xiaoyinggroup.com. On the call today from X Financial are Mr. Kan Li, President; Mr. Frank Fuya Zheng, Chief Financial Officer; and Mr. Noah Kauffman, Chief Financial Strategy Officer. Mr. Li will start with a brief overview of our business progress and financial performance. Then Mr. Kauffman will go over some Q3 metrics and highlights. After that, Mr. Zheng will share updates on financials, regulatory insights and our 2025 outlook. Afterwards, Mr. Li, Mr. Zheng and Mr. Kauffman will be available to answer your questions during the Q&A session. I remind you that this call may contain forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve known or unknown risks, uncertainties and other factors. These factors are difficult to predict and many are beyond the company's control, which may cause actual results, performance or achievements to differ materially from those described in these statements. Further information on these and the other risks can be found in our SEC filings. The company undertakes no obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required by law. It is now my pleasure to introduce Mr. Kan Li. Kan Li: Thank you, Victoria, and hello, everyone. The third quarter of 2025 marked a very different phase for our business compared with the strong momentum we experienced in the first half of the year. After a record performance in Q2, we deliberately moderated our growth pace to navigate a more regulated and disciplined operating environment. During the quarter, we facilitated and originated RMB 33.64 billion in loans representing an 18.7% increase year-over-year, but 13.7% decline sequentially from the previous quarter. This moderation was intentional as we prioritized asset quality and risk management over near-term volume expansion. Our team remained focused on maintaining prudent risk discipline while serving qualified borrowers and protecting portfolio health, enhancing our technology platform, data analytics and underwriting precision to improve decision-making and efficiency, strengthening partnerships and operational process to support long-term scalability under evolving regulatory standard. We also continued improving borrower experiences by simplifying application flows, accelerating approval times and expanding transparency across our credit and repayment channel. At the same time, we refined our collection infrastructure and monitoring system to proactively managing credit risk and improve repayment outcomes. These initiatives allow us to better serve customers while protecting the platform's long-term stability. Despite a softer operating backdrop, we maintained solid profitability and positive earnings. Total net revenue reached RMB 1.96 billion, reflecting a 23.9% increase year-over-year though down 13.7% sequentially from Q2 record level. This performance demonstrates our ability to adapt quickly and maintain resilience through disciplined execution and operational control. Credit quality. We did observe early signs of credit pressure during the quarter, consistent with broader market trends. As of September 30, our 31- to 60-day delinquency rate rose to 1.85% compared with 1.16% at the end of Q2 and 1.02% a year ago. Our 91 to 180-day delinquency rate increased to 3.52%, up from 2.91% in Q2 and 3.22% in Q3 2024. This movement reflects a more cautious borrower environment and rising repayment stress among certain segments. In response, we lightened our underwriting criteria reinforced collection effectiveness and expanded borrower engagement. While we expect conditions to remain challenging in the short term, these steps position us well to preserve asset quality and protect the long-term stability of our platform. With that, I'll now turn the call over to Noah, who will walk through additional financial and operational highlights from the third quarter. Noah? Noah Kauffman: Hello, everyone. It's great to speak with you again. As Kan mentioned, the third quarter required a measured approach following a very strong first half. We deliberately tempered origination growth to ensure prudent risk management and operational stability amid an evolving regulatory environment. I'll begin with an update on that context and then discuss our operational and financial positioning. On the regulatory environment, China's fintech sector remains under close supervision with regulators continuing to prioritize consumer protection, transparency and responsible lending practices. During the quarter, authorities reiterated these objectives and discussed further measures to lower borrowing costs for consumers and promote more sustainable development across the online lending industry. We fully support these efforts and continue to operate with a compliance-first mindset. While these changes may continue to exert pressure on industry pricing and profitability, we believe that a clearer and more consistent framework will ultimately favor disciplined, well-capitalized and transparent platforms. Our long-standing commitment to regulatory alignment and strong internal controls remains a core foundation of our business. On the operational overview, during the quarter, we facilitated RMB 33.64 billion in loans, up 18.7% year-over-year and ended the period with RMB 62.83 billion in outstanding loan balance, up 37.3% from last year. We facilitated approximately 3.48 million loans, representing a 32% increase year-over-year with an average loan size of RMB 9,654. Our active borrower base was approximately 2.44 million, 14.4% lower sequentially, but 24.2% higher year-over-year. These figures demonstrate the resilience of our franchise even as we moderated new origination activity to preserve credit quality. We refined our risk models, reduced exposure to lower tier channels and focused more heavily on established higher-quality borrower sources. We also continued to strengthen our AI-driven analytics to improve borrower identification and early delinquency detection. On financial positioning, from a financial perspective, the third quarter reflected the necessary adjustment phase following our record first half. Profitability remained positive but contracted sequentially as overall activity normalized. Year-over-year, revenue and earnings growth was supported by the scale achieved earlier in the year that we recognize that the operating environment will likely remain challenging for several quarters. Our focus now is on cost efficiency and disciplined execution, ensuring that every aspect of our expense structure reflects today's more measured pace of activity. We also maintained a conservative capital position and ample liquidity. Our balance sheet continues to generate healthy cash flow and remains a source of strength for the organization. We are managing funding and capital deployment with caution, maintaining flexibility to adapt to any future regulatory or market adjustments. Our financial strategy remains centered on capital efficiency and long-term value preservation. We continue to deliver returns on equity above 20%, supported by tight cost management and share repurchases that have reduced our outstanding share count. Even as industry conditions soften, we remain focused on stability, liquidity and financial discipline rather than pursuing growth at the expense of prudence. Looking ahead, our priorities remain clear: safeguard asset quality, strengthen liquidity and maintain financial resilience. The external environment may stay uncertain but our disciplined financial management and focus on operational control position X Financial to navigate continued volatility and adjust responsibly as the market evolves. With that, I'll now hand the call over to Frank to discuss our financial performance in greater detail. Go ahead, Frank. Fuya Zheng: Thank you, Noah. Hello, everyone. I will walk through our third quarter financial results and discuss our capital position and outlook. The financial highlights. In the third quarter of 2025, total net revenue was RMB 1.96 billion, representing a 23.9% increase year-over-year, but a 13.7% decline from Q2. The year-over-year growth was supported by higher average loan balances and the carryover effect of prior facilitation activity, where the sequential decline reflect our intentional reduction in loan volumes. Income from operations was RMB 331.9 million down 29.9% year-over-year and 46.4% sequentially, primarily due to higher provision for credit losses and a guarantee liability. Our operation margin was 18.5% compared with 29.7% in Q2 and 32.2% a year ago. Net income came in at RMB 421.2 million, up 12.1% year-over-year, but down 20.2% sequentially. Non-GAAP adjusted net income was RMB 438.2 million, up 1% from last year and down 26.1% from Q2. Basic and diluted earnings per ADS were RMB 10.56 and RMB 10.08 respectively, while return on equity stood at 21.5%. These results reflect the impact of higher provision and lower volume, but also show that our core business remains profitable and cash generative despite a more cautious operational environment. Balance sheet liquidity. Our balance sheet remains strong. Total assets stood at RMB 14.69 billion, up 26.4% year-over-year and the total shareholders' equity was RMB 7.93 billion, up 15% year-over-year. We ended the quarter with approximately RMB 1.55 billion in cash and restricted cash, providing ample liquidity to support operations and capital returns. Capital returned to the shareholders. From January 1, 2025, through November 20, 2025, X Financial repurchased an aggregate of approximately RMP 4.26 million ADS, including approximately 3.80 million ADS and 2.76 million Class A ordinary shares, for a total consideration of approximately $67.9 million under its share repurchase program. The company now has approximately $48 million remaining under its existing $100 million share repurchase plan, which is effective through November 30, 2026. This program underscores the company's confidence in its long-term growth outlook and its commitment to enhancing the shareholder value. Repurchases under the program remains subject to market conditions and other factors and may be modified or suspended at the management's discretion. Outlook for Q4 2025. Based on current trends, X Financial expects the total loan amount facilitated and originated in the fourth quarter of 2025 to be in the range of RMB 21 billion to RMB 23 billion. The total loan amount facilitated and originated for the full year 2025 is expected to be in the range of RMB 128.82 billion to RMB 130.8 billion. This guidance reflects a measured pace of origination following the sequential decline in the third quarter and the management's continued focus on asset quality, credit discipline and the probability optimization rather than aggressive volume expansion. The company remains attentive to evolving regulatory landscape and the changing credit conditions while maintaining confidence in resilient borrower demand, prudent risk control and disciplined execution to support sustained long-term growth. With that, I hand the call back to our President, Kan Li for closing remarks. Kan Li: Thank you, Frank. The third quarter marked a period of recalibration for our company. We have made a deliberate choice to prioritize quality and discipline over near-term growth, ensuring our platform remains resilient amid a changing operating landscape. While we expect challenges to persist in the coming quarters, we remain confident in our ability to navigate them with prudence, maintain profitability and position X Financial for steady, sustainable performance over time. Victoria Yu: This concludes our prepared remarks. We will now open the call for questions. Operator, please go ahead. Operator: [Operator Instructions] The first question today comes from Chen Yang with [indiscernible]. Unknown Analyst: So my first question is around the take rate guidance. So the management has provided guidance on the fourth quarter loan origination volume, which is quite 30% lower than prior levels. What would be the expected take rate for the fourth quarter given the current risk situation which may be stabilizing or deteriorating in the past week or so or the past 2 months. And my second question is around the capital allocation. So given the business volume is already lower since the third quarter and maybe even further reduced in the coming years, the return on equity may drop significantly in the future. So is the company considering returning more capital to shareholders and keep the company running on a smaller book while higher capital efficiency? So I will also translate my question in Chinese, if that would help. [Foreign Language]. Fuya Zheng: This is Frank. I'll answer your take rate question and let Kan answer your return on capital question. Noah will take a capital return question. You start to see the effect of impact of this so-called new regulation in the third quarter a little bit. But I think the full impact will not be fully realized in another quarter 2 or so. So I think at this time, whatever talking about next year regarding even take rate is very premature, and we have a very wide guess gap. But we also did not never disclosure to take rate before. So we are not going to do that. But I will say that, I think that this new regulatory regime will have a material negative impact on everything on volume, on margin, on profitability, and take rate is part of a effect of profitability. So you will -- you will -- you can assume the take rate will have a material negative impact in the future. That's I can -- at the best I can discuss with you. Noah, do you want to have a second question to answer? Noah Kauffman: Thanks, Chen, for the question. So on capital return. Capital return remains an important part of our strategy. We've been making active share repurchases, buying approximately [ $67.9 million ] through November 20. And as Frank mentioned before, we still have about $48 million remaining under the $100 million authorization, which runs through November 2026. We'll continue to use the program in a disciplined manner subject to market conditions, and we view repurchases at current valuation levels and attractive investment in our own business. On the dividends, of course, we maintain a recurring dividend and based on the current profitability profile, even with the industry-wide margin pressure that Frank just spoke to, we expect to be able to maintain and sustain the dividend at the current level. We believe having sufficient -- we believe we have sufficient earnings power and balance sheet strength to support that commitment. And more broadly, just in terms of how we think about capital allocation, the Board regularly evaluates optimal capital allocation, including balancing organic growth, share repurchases and dividends. And so today's share price buybacks, I think, still remain a compelling use of capital, but we remain open-minded and focused on whichever option delivers the highest long-term value for shareholders. So in summary, we intend to continue executing the buyback program prudently, maintain the current dividend and allocate capital in the way that best supports sustainable growth for shareholders. Operator: The next question comes from Joseph Martelli with [ Spark Capital ]. Unknown Analyst: How does the team view the regulatory environment going ahead into early 2026? And may we have more color on the uptick in delinquencies? Kan Li: I'll take that question. I think, again, it's very difficult to forecast what the regulators will do in the future. So our approach has always been just be compliant with whatever regulations specified. So that being said, what we saw right now is regulators are very focused -- very focused on the consumer protection. So our approach has -- considering that we have lowered our loan volume, that we are not aggressively growing our portfolio in the sense that we are trying to shrink our portfolio a bit in order to making sure that we are not generating a lot of complaints from our side. I think that's probably what we can do at this moment. Sorry, what's your -- I think you have the -- can you repeat second part of it? Unknown Analyst: I was asking about the delinquencies, the uptick in them and how we might see that continuing? Kan Li: Yes. I think we do. Yeah, I think whenever there's a huge impact on the industry and especially considering that the overall economy in China right now is not at the greatest time. So I think it's natural for us to see an uptick in the portfolio delinquency. I think that's what we're experiencing right now. Our forecast, again, the forecast future is very difficult for us, but we do think that the delinquency rate will continue to climb. So Frank just mentioned that we think it's going to take 1 or 2 quarters for it to stabilize. So even though that we are not sure when it's going to stabilize. And our approach can only be that we are trying to be very stringent in our credit policy. That is why you see our portfolio scale begin to drop. Fuya Zheng: Let me just say a few more words. On the redisclosure of 91 days and 180 days delinquency rate for the Q3 is like 3.52%, which is higher than previous quarter 2.91% and the previous 3.22%. So it's higher than previous quarter, higher than last year. We have been -- everyone is having -- trying to -- everyone's best -- to its best to control it. By the time we try -- the delinquency rate is still developing, still not stabilized yet. But we believe maybe in a month or 2, it should be stabilized. Unless there's more negative impact from the new measures were coming up. Otherwise, we fully anticipate within like 1 or 2 months, delinquency rate will be stabilized very soon in 1 or 2 months. I hope that will add some color to your question. Operator: [Operator Instructions]... Noah Kauffman: Joseph, if I could just add a little bit to what Frank and Kan have already said just on the delinquency side. So -- of course, we see higher delinquencies in Q3 consistent with the broader industry environment. The macro backdrop has been challenging, and that's affected borrower repayment behavior across multiple segments in response. Of course, we've tightened the underwriting standard and shifted further towards higher-quality borrowers and intensified our collection and verification process. These actions basically give us confidence that we can appropriately -- will be appropriately reserved for current delinquencies and potential losses. But I think a key point that both Frank and Kan were pointing to is that the loans typically have a duration of 10 to 12 months. And so when delinquencies rise in a particular period, those vintages generally run off within a few quarters and the newer vintages originated under the tighter underwriting become a larger share of the book. The result is a natural credit cycle effect where you have elevated delinquencies from prior vintages working through the system. And then performance gradually reverts towards historical norms as the tightened vintages season. The entire industry is, of course, in a contractionary phase with most platforms tightening risk criteria and pulling back from higher-risk segments. While this environment can temporarily put pressure on borrowers and repayment behavior, it also sets the foundation for better quality vintages going forward. So as the older weaker vintages mature and exit the portfolio, we expect credit metrics to gradually normalize over the medium term. The near-term volatility is still possible and presumably likely. Our focus remains on prudent underwriting and disciplined portfolio management and strong collections, and we will continue to provision conservatively and manage the book to ensure losses remain within our tolerance. That's all for me, but thanks for the question, Joseph. Operator: [Operator Instructions] The next question comes from [ Ramzi ] with NTS Trading. Unknown Analyst: I have 2 questions. Well, the first one is given the concerns around the credit quality, I'm curious if any of the funding partners have reduced their funding commitments or changed or structured their terms. And then the second question, which I think, Noah, you did go over, but I want to know if management -- or what would it take for management to consider being more aggressive on the share buyback program, just given the depressed price? And have you guys ever considered anything such as an accelerated share purchase program? That is all yes. Noah Kauffman: This is Noah. Thanks very much for your question. So I guess, first to the first part on the funding and liquidity. Our funding and liquidity position remains stable. As of September, we held about RMB 1.5 billion in total cash and restricted cash which provides a solid liquidity buffer for our operations. We manage liquidity conservatively and maintain sufficient cash to support near-term needs across servicing, collection and platform operations. On the funding side, we work with a diverse network of institutional partners, including banks and licensed consumer finance companies that originate loans through the platform. And these relationships have been built over many years, and the vast majority of our partners have completed the required regulatory white listing and continue to operate with us normally. Regarding our actual funding costs, we did see a general rise in funding rates from 2024 into 2025, in line with the broader industry trends. However, on a quarter-to-quarter basis, funding costs have been relatively stable, and we've not experienced any material disruption in accessing funding. And so looking ahead, as regulatory implementation becomes clear and both banks and platforms adapt fully to the new framework, we're hopeful that the funding costs will gradually normalize from the elevated levels seen this year. Basically, clarity and consistency in the regulatory environment should also help reduce risk premiums over time. So we'll continue to maintain prudent liquidity management, keeping adequate cash reserves and coordinating closely with funding partners and ensuring our platform remains compliant and attractive from a risk management standpoint. As far as what would motivate us to do a more aggressive buyback. I don't know, Frank, do you have any comments on that? Fuya Zheng: Yes. We have almost continuously to do the buyback in this year from May 2025 all the way down to late November. And we did most of buybacks from open market. We still believe the buyback is the best way to return shareholder value. But the result is not that great. And currently, our stock is a little bit higher, maybe 50%, 60% higher than the same period last year. But a lot of our peers, their stock is already below last year's period. But almost everyone, the balance sheet is more strong than -- at this time, the balance sheet is more strong than the same time last year. So I think the market is assuming we're not just -- don't have -- the stock price tells us the market believe us probably do not even have a future. And also, we will waste our money in our hand and just waste it. Otherwise, not make anything new. But I think that is not the belief we have. We think we have -- we can -- we believe we can do both. We can take care of the shareholder return and maybe do something new. And whether Chinese cash loan market is totally dead or not, once again, we will have that judgment to maybe a little bit long, maybe in another quarter or 2. But I think even with that new regulatory regime, I think we are -- we still have -- at least we still have cash to do something new, right, to try something new. So that's regarding the buyback. And also, I'd say it again, we are -- as Noah already said, we are determined to maintain the current dividend rate which is $0.28 for 2 times in a year. So based on current stock price, $9, it is a 6% yield. So I think even without buyback, it's a decent return for the shareholder. It's better than you put the money in the banks, right? And so that's our thinking. We will continue to do and we will maybe rely on more next year, rely more on the dividend side instead on the buyback side. And that's what I try to say. Thank you. Noah Kauffman: Just to add on really quickly to what -- I think as the valuation became deeply disconnected from the fundamentals of the stock trades at levels that imply excessive credit or regulatory risk relative to our performance. Buybacks would become the highest return on capital. But I think as it stands, historically, it's always a trade-off between ROIC from organic growth versus share repurchases versus dividends. Hope that answers your question. Unknown Analyst: We can say too now, right now, the markets are pricing that isn't the case. But it's just a matter of what makes the most sense for X via... Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Victoria Yu for any closing remarks. Victoria Yu: Thank you, everyone, for joining us today. If you have additional questions, please reach out to our Investor Relations team directly. We appreciate your interest and look forward to speaking with you again soon. Operator, back to you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Peter Podesser: Good morning, ladies and gentlemen, and thank you for joining us in this call presenting our Q3 and 9-month figures as well as an overview of the business right now. Together with Daniel, we will lead you through all the key figures, but also key facts relevant to the 9-month period right now, but also naturally on to the outlook. And thereafter, we will be happy to answer all your questions. No question, we are looking back to a soft quarter. We're looking back also to a challenging period here in the business. We have to say, as also anticipated as this was one of the key reasons why we saw ourselves obliged to bring down the guidance back in Q3 at the end of July. But naturally, starting with this point, I think we want to give you, let's say, a solid and concrete analysis on this. If we look at the development here in the first 9 months, we see a slower growth than originally planned in core parts of the business. And if we look into the main reasons of deviations, I think we have to start off with the biggest impact on the defense business. In India, we saw a postponement of the follow-on programs here for our EMILY and JENNY deployments -- EMILY and JENNY fuel cell deployments to the Indian Army based on a decision that was basically a repurposing of funds during this current fiscal year. We have spent quite some time in various meetings on site in India. And I think within the last 3 months, we see -- I think we see solid signs and we see, let's say, basis also for a rebound within, let's say, the next fiscal year here for the business in India, maybe not back to immediately the levels of the 2024 business, but at definitely higher levels than we see it in '25. Two additional elements here. We have signed service and repair contracts, comprehensive maintenance contracts now for all the deployments with the Indian Army, which going forward as of Q4, and we have signed them last Friday. So going forward, this is basically also covering more or less local cost and also yield a proper capacity loading here for our operation in India. And we have also started last weekend local methanol filling here as we do it in other parts of the world, North America and Asia as well. So we are also able now to provide local methanol, address also cost concerns from customers there and also see this as a basis also for the rebound. So India, the first element here of deviation this year, definitely, I'd say, volume-wise, the biggest impact. If we look at our organic growth, we also see a growing -- we still see a growing business in the U.S. Overall, in the first 9 months, we see about 28% growth, but we have to say, especially with new customers, we were expecting also based on historical growth rates, a significantly higher growth. The overall economic uncertainties have an impact on decision-making of our customers there. And therefore, we have missed out on the original plan to see growth above 40%. As said, 28% organic in the first 9 months and a corridor that we also expect until the end of the year is per se, a solid growth number, but definitely not what we had planned for and what we expected. The third element, and Daniel will dive into this, yes, we have seen 3 functional currencies, I'd say, devaluating significantly against the euro, U.S. dollar, Canadian dollar as well as the Indian rupee with an impact on sales and earnings, getting into this in a bit. If we look now into, let's say, the reaction on these developments, I think we are seeing first fruits out of, let's say, cost alignment and cost measures that we have implemented right immediately in third quarter. We are seeing, let's say, a normalization, especially on IT and ERP spending and I think also functional cost, you will hear from Daniel is, I think, an alignment on what we implemented. As also mentioned before, we are not talking about here now a significant headcount reduction at all. I think we are in a selective hiring mode here in those areas where we see growth, and we are reallocating also resources to those areas where we see growth, and we are taking capacity out in those areas where we don't see growth. If we now look into the third quarter, we have to -- we are seeing a significant increase especially on the order intake side, which also is the basis for us expecting a strong fourth quarter. We are overall seeing an increase to a book-to-bill ratio of 1.2 compared to about 0.76 in the first half of the year. And combined with, let's say, a product mix also impacted and positively impacted by a higher defense sales ratio in the fourth quarter, we see a positive impact also in the fourth quarter. If we now look also into, let's say, the next steps of implementing our strategy, I think the acquisition of a 15% stake in Oneberry Technologies in Singapore is a key element, on the one hand, for the regional expansion of the business, we are seeing Singapore as the regional hub for the expansion in Southeast Asia. The closing process is in a final phase. And besides the regional expansion, I think we have a unique opportunity here to learn and to step into a business model that is highly attractive and profitable where Oneberry is operating under a security as a service business model for their AI-based unmanned security solutions from border protection to drone defense applications and critical infrastructure protection. Overall, we have an option also to take majority ownership, and we are working actively on this as also a platform for further growth in Asia as of 2026. Furthermore, important to inform you about the U.S. operation. We are on track for the ability to do the local production to ramp up the local production in our facility in Salt Lake City. Strengthening our local-for-local program here at the end helps us to reduce exposure to import tariffs. But over time, naturally also makes us less vulnerable and depending on exchange rate and currency risks by establishing a local supply chain. Our team from the U.S. right now is here in Europe for training. And therefore, we will be ready to have a first pilot series produced still this quarter and ready for production early 2026. So overall, looking at the sales performance, we see a decline of 2.4% as said, not happy with this performance, the reasons for the deviation, the reasons for the decline, the main reasons mentioned here. If we look into, let's say, the order intake, I mentioned this, seeing EUR 34.6 million in the third quarter, we see a significant increase to the previous quarters. So the book-to-bill ratio now is up 1.2% in this quarter, and this also naturally gives us a solid basis here now for the final weeks of the year. If we look at the overall backlog here being around EUR 79 million, that is definitely significantly lower than at the beginning of the year with EUR 104 million, reflecting the weak order intake we had, especially in the first 6 months of the year. Here, I would like to also draw your attention to the fact that we naturally have a part of the business being highly transactional, which means it's kind of a rolling order book that is turned around within the quarter. And we are looking here at a ratio between, let's say, slightly below 40%, up to 50% of the revenue also turned around within a quarter. So we are looking at, let's say, this year, EUR 14 million to EUR 15 million turnaround in the quarter. So -- having this in mind also, you put in perspective the order backlog. If we look at the segments, the big impact here on the revenue and the significant impact here was mainly on the clean energy segment. The biggest segment, clean energy still is accounting for about 69.7%, so almost stable to the year before, but still here, we see a drop in revenue of about, I'd say, 2.5%. I mentioned this, the U.S. and the Indian defense business being the biggest impacting factors. Looking at the end markets there, we still have to see that the Industrial part of the fuel cell business is growing above 10%, 10.8% and the security part in this, that is basically CCTV application, civil security business is running above 15% growth. So there is an intact growth curve, I think, visible. Looking at the Clean Power Management, around 30% of the business, a decline of 2%, strictly leading back to a single project missed in the Canadian oil and gas business of, I'd say, a EUR 2.8 million business here for power products, VFDs with one customer in Canada that was basically in our forecast, but lost to competition. Looking at the clean energy business in Canada, we see also this part on a solid growth curve. With this, I will hand over to Daniel leading you through the financial results here of Q3 as well as the first 9 months. Daniel Saxena: Good morning. Thank you for dialing in. Let me go into the margins a little bit as well as the cost basis. I think as a summary, what we could say is that those negative impacts that we have seen in the first half year have continued. To some extent, they have lowered, but there was still a negative impact. I believe from the cost base, you've seen we are running rather stable in the underlying because costs are rather optimized. But let me go into that quick and highlight certain developments. So when it comes to the overall gross margin in the first 9 months, we've seen the negative effects that we also have seen in the first half year, especially with regards to the segment's clean energy, which is the less favorable product mix with a lower share of the defense revenue. We mentioned that before, that really play an essential role in the unfavorable gross margin development that we've seen since the beginning of the year. But what we also have seen now is that the customs duty that have been introduced slowly negatively impact our gross margin. Like I said, it will be unlikely that we'll be able to avoid the entire customs impact. So we -- it is not that we'll see a huge impact, obviously a slight impact from those custom duties. And then what we also see in the segment clean energy is the less favorable exchange rate with regards to the U.S. dollar and the Canada dollar. So if we compare the average exchange rates of those 2 major currencies, the U.S. dollar in average depreciated by 1%. The -- Canadian dollar in average depreciated by 4%, which has an impact on the gross margin. So the overall group's gross margin 40% in the first 9 months, which is slightly below what we've seen in the 9 months of 2024, while we had a gross margin of 41.7% and it's also moderately below the level of the previous full year margin, which was 41%. Nevertheless, we consider the group's gross margin to be on a level with which we're not entirely satisfied for a good reason. At the beginning of the year, we had higher goals and higher targets. We may not have anticipated entirely the economic turmoil ahead of us at the beginning of the year. We may not have seen entirely the development of the exchange rate, but also the development in India, all of it has an impact on the gross margin, especially with regards to the segment clean energy. It is a heterogeneous development in the gross margin, we've seen that, we have a gross margin expansion in the segment Clean Power Management, where we see the gross margin going up to 29.7% from 26.9%. So that is something that we are happy and content with. The main reason for that, the increase is basically that in both main product line in that segment. So the power management solution, we were able to implement a higher pricing also because I mentioned that in the first half year report call already, also due to our own products that we've been operating, but we've also been able to implement higher prices in the drive motor control products. So if we then look at the EBITDA margin and the key impact on those operating expenses, R&D and G&A, I think there's -- again, there's 3 major topics that we've seen in the first half year, which is the extraordinary cost for exchange rate losses. That is the IT spending for the implementation of SAP as well as making our IT overall landscape more robust. We've seen those costs, or those expenses having come down in the third quarter, but there was still an extraordinary expense in there. And what we've also seen in the third quarter is a lower rate of capitalization of R&D, which is something we've had in the first 6 months and which is also something that will unlikely change because that is pure accounting and that has also impacted EBITDA negatively compared to the first 9 months in the last year. So if we add up those 3 facts and look at the last year, make a like-for-like comparison, those 3 effects together have impacted EBITDA negatively with approximately EUR 5.5 million, which really shows that our cost basis is solid. The earning power is still there. We believe we take those 3 effects away. We know that they're there, but you'll see that we didn't do that bad. Let me dig into the exchange rate losses. First of all, so you've seen we had an income from exchange rate gains of EUR 1.8 million in the first 9 months, which were entirely offset by the exchange rate losses of EUR 5.1 million in the first 9 months. So that comes to a net effect of EUR 3.3 million, which negatively impacted the EBITDA or 3.2% of revenues. So out of these exchange rate losses that we've seen, EUR 4.4 million or 85% is unrealized losses and out of which approximately EUR 4 million are related to intercompany positions, i.e., shareholder loans and intercompany receivables. I mentioned that already in the first half year. So that's why you would not see that in the cash flow statement. Yes, we'll book it, but this unrealized losses for the exchange rate. But still it does impact our EBITDA negatively with 3.2% rather highly. The next position is the extraordinary cost for IT in the G&A expenses. These are costs relating to the SAP implementation. So in the first 9 months, the total cost has been EUR 1.9 million. They have come down notably in -- the spending has come down notably in the third quarter, but it's still over the first 9 months translates into 1.8% negative impact of the revenues on the EBITDA. We also had costs for improving our IT system that amounted to approximately EUR 1.4 million in the first 9 months, which again would then mean a 1.4% negative impact on the EBITDA. Together, if you see the amount that we really spend on IT, and yes, it's necessary, we need to make our system more robust. We need to make a step forward in higher efficiency and automation in our system. So this is not something that we're just doing for doing it. It really means making the major steps in getting our system safer, more secure, more robust, increased efficiency, also increase effectiveness of our operations. While it's a huge investment that we've seen, we'll see further investment in the fourth quarter. We also will see some of those investments still in the next year until we got the system entirely implemented. And then the third impact is the lower rate of capitalized R&D expenses. So the total R&D spending amounted to EUR 8.7 million in the first 9 months of 2025 compared to EUR 7.5 million in the previous year's 9 months. So you see a decent hike in our R&D spending. But what you will also see is that in the previous years, approximately 23% of these costs were capitalized, in the current year, we are capitalizing 30% of the cost. So on a like-for-like basis, this would also translate into a negative impact on the EBITDA on EUR [indiscernible]. To go into this really briefly, so capitalizing R&D expenses is not a choice or not an option, which we do. It is, as I mentioned at the beginning of the call, it is an accounting principle. So projects can be capitalized, certain projects cannot be capitalized. And that's a little bit depending on your R&D focus, but also what you have in the pipeline. Remember, any capitalization going forward means also depreciation, additional cost. So it's not that you're optimizing your cost, you're just pushing those expenses into the future. In any event, it is what it is, but you'll see that our R&D spending as though it has increased, it has not a huge jump that you see in the P&L and the earning power, that's why I said at the beginning, is still at a decent level. So what does it mean for the adjusted EBITDA, for the adjusted EBITDA, it means that we reached EUR 10.81 million, which, of course, is significantly with 56% below what we've seen in the previous year's 9 months. It is, of course, a factor of revenue growth of gross margin and those negative effects in the other operating costs that I just mentioned. Depreciation and amortization, you don't see a big change in there. Depreciation, EUR 5.8 million versus EUR 4.5 million, 40% of the depreciation is IFRS 16 related. So you will not see a huge change in that position going forward either. That brings us to the adjusted EBIT, which is -- came up to EUR 5 million. That represents an adjusted EBIT margin of 4.9%. That's significantly lower from what we've seen in the first 9 years (sic) [ 9 months ] in 2024. Again, we're not entirely happy with that, as you can imagine. Let me finalize with the cash flow and our cash position. Cash freely available at the end of the first 9 months were EUR 40.8 million compared to EUR 60.5 million, which we had at the end of 2024. So it's EUR 20 million lower from what we have seen. The financial debt on the other side also decreased by approximately EUR 1 million to EUR 3.1 million, which gives us a net debt -- sorry, net cash position of EUR 37.6 million, pretty much EUR 20 million below what we've seen at the year-end. Our equity decreased by EUR 1.5 million. That is due to the negative earnings. But remember, the negative earning also those nonrecurring effects with regards to the IFRS 2 and the stock option programs that are reflected. Cash flow, the operating cash flow before the change in net working capital was EUR 10.5 million. That compares to EUR 18 million in the first 9 months of the previous years. So what we see is it is significantly lower, but it's still at a good level with EUR 10.5, so it is 40% -- sorry, what we see then is the net working capital development. The net working capital increased by EUR 21.5 million. That compares to EUR 2.5 million in the last 9 months. So the working capital ratio to last 12 months net sales went up to 40% as of September compared to 25%, what we see at the year-end. So we're really trying hard to manage that working capital. It is really the inventory that we need to look at. It's really looking at the accounts receivable. The largest impact is really the increase in the inventory, which has gone up by EUR 10.3 million. That has changed the days of inventory to 237 compared to 131 at the end of the year. That is an extreme high value, and we are fully aware of that. That is something that we need to manage more actively and bring it down. We are fully aware of that. We have a lot of material sitting in there. It is mostly fuel cell components and material, which we intend to bring down in the next 6 months. So it's nothing that is going to go bad or will become obsolete. It is really material that have been acquired as bought this program. You also see a large impact on the increase of the accounts receivables. They increased by EUR 8.1 million compared to year-end. That translates into a 12-month trailing days of sales outstanding of 114 compared to 90, which we had at the end of the last year. So we see an increase in the sales outstanding. We don't see any bad receivables out there. But this is something also that we are managing actively and intend to bring that number down again towards the 90 days. Then what you also see is that the accounts payables have gone down EUR 2.8 million. That brings the payables outstanding down 52 days from 66 days So then with the tax payments of EUR 1.4 million, you'll see that the operating cash flow after net working capital and tax is becoming very negative with very negative, it means minus EUR 12.4 million, all driven by the net working capital development. Cash flow from investing activities is much, much lower from what we've seen in the last year. We are looking at EUR 2.6 million compared to EUR 6.4 million in the last year. So all those large investments that we have made last year are done and completed. So EUR 2.6 million is at a decent level. It includes, of course, the capitalized R&D. Then you see the cash flow from financing activities of EUR 2.8 million, a large portion of that is related to leases. And if you add those numbers up, you'll see a change in the cash position of EUR 17.9 million, and then we'll still have to add the exchange rate impact on our cash in foreign currency. So overall, cash has reduced, like I said, in summary, mostly net working capital. We've seen the margin decline. Still, I think we are at a good level, but not a level which we are happy or satisfied with, and we are fully aware that we need to keep on working on further implementing measures and structures to optimize especially our cash consumption. With that, I'll return it to Peter. Peter Podesser: Thank you very much, Daniel. So summarizing where we are, I think on the basis of the performance to date, also, we talked about the order backlog and also, let's say, still some, I'd say, challenging macro conditions here. We've done, I think, a concise assessment here on the year-end forecast, and we are expecting the revenue at the lower end of the target corridor that we had out there -- that we have out there as a revised guidance. We see EBITDA adjusted as well as EBIT adjusted in the lower half of the corridor that is out there for EBITDA, the corridor is EUR 13 million to EUR 19 million and for the EBIT, respectively, it is the corridor of EUR 5 million to EUR 11 million. As said, we are expecting to end up in the lower half for both ratios. So looking at this, I think after years of continuous and significant growth and increasing profitability, while you see ourselves here clearly and honestly disappointed with those results here after 9 months. We also have to be self-critical here in terms of some maybe too aggressive and optimistic plannings in some areas, especially of the top line against the macroeconomic also environment that we are operating under. But at the same time, I think we have done a thorough analysis of the situation, we also see the reasons of deviations and we have implemented clear and targeted measures. We've talked about the cost part. I think on the inventory part, yes, the defense part of the business has downsides with, let's say, longer procurement cycles. But the good thing is those products are not turning anywhere that, as Daniel mentioned. So this is naturally the basis here for the improvement also on the cash flow side to get let's say, this out of the door as fast as possible. And that's why you see ourselves here, let's say, this clearly, let's say, a realistic moat, but with all the dedication to get this back to a growth curve. And again, I think for all of us here, we have an organic growth in the business, be it, let's say, our civilian security business, be it the industrial business, we are talking here about double-digit growth here between 11% and 15% and also our U.S. business, significantly above 20%. So the expectation there is to continue on this growth path to return to a growth path in India, as I said, service contracts in place, local methanol filling, all basis also for further, I'd say, satisfying the customers' needs there. And we've been intensively working on OEM programs on the defense part of the business in Germany as well as in NATO states. And naturally, we are expecting an impact of this in the year to come. We are doing, again, our regional expansion with the investment in Singapore. We expect a growth impact out of this. We are seeing our products performing properly well also for new applications like drone charging, and I also mentioned the drone defense activity here in Singapore. So all over, yes, the situation, especially the last 2 quarters are very, let's say, disappointing. We've taken the measures now, and we are looking at a strong year-end and again, a return to growth and improved profitability here based on all the measures that we mentioned together. With this, we close our presentation and would like to open the floor for questions. Thank you very much. Operator: [Operator Instructions] The first question comes from Karsten Von Blumenthal from First Berlin Equity Research. Karsten Von Blumenthal: My first question is regarding Oneberry. You have now a 15% stake. And perhaps you could shed some light on your future activities. You have a 50% option. When and how will you try to get this option? Daniel Saxena: So we have that option to be exercised in the short term. Short term within this year, potentially beginning of next year. That option apparently, as we said, is to increase our holding in Oneberry to a majority for a fixed valuation. So this is something that we intend to do, and we put this option in there in order to exercise it. And of course, we'll have to review certain things with the business. We'll have to complete a bit more on the due diligence side, everything that is such a process and then we will likely exercise that option. Peter Podesser: If I can add here, Karsten, just to, let's say, shed a little more light on, let's say, the business model. At the end, they are engaged in long-term multiyear contracts with the Singaporean government, the pipeline they have and the backlog they have is more than 90% government business there. And this is something that we want to continue to drive, but then also replicate this model to other parts of the region and if possible, also in other parts of the world, a rental business, so security, unmanned security automated based on, let's say, significant also, let's say, AI content to, let's say, recognition parameters here. At the end, with a higher profitability than we see it in our own business. And well, having been partners for quite some years, I think we also have a good trust base there to roll this out to other areas in the region as well as in other parts of the world. Karsten Von Blumenthal: So there's a high likelihood that you will be able to consolidate Oneberry next year when you exercise the option. Could you shed some light on sales and EBIT Oneberry reached, for example, last year in 2024 that we can have an idea what will be the impact on your P&L next year? Peter Podesser: I think we would -- at this point also of the negotiations there, I think it's good to have a ballpark figure here in terms of revenue, we're looking at about EUR 20 million revenue. And as that profitability, I'd say, above our own EBIT and EBITDA level. Daniel Saxena: Consolidation -- well, let's assume that we exercise that option, let's assume that we'll get the control as defined for consolidation, then currently, let's assume that we will close that transaction, then yes, we would consolidate Oneberry from next year on. The numbers we are saying are not in IFRS to be also to make that sure, right? We're talking about Singapore GAAP [indiscernible]. Karsten Von Blumenthal: All right. That is very helpful. Next question, you mentioned the postponement in India, and you said that you expect a rebound in 2026, but not as high as in 2024. Could you roughly tell us how high revenue was in India in 2024? Peter Podesser: Well, the defense revenue in India was around EUR 12 million. And being, let's say -- now, let's say, 60% below last year's revenue, as said, is one of the major impacting factors this year. The fiscal year there ends at the 31st of March, and that's why we are, as we speak now in the assessment of, I think, the right level of -- or the right budgeting level together with our partner on site and will naturally be based on the experience, a cautious assessment for next year, but still we expect a rebound and growth based on what we have learned over the last 3 months out there. Karsten Von Blumenthal: All right. One follow-up question regarding the U.S. You mentioned that you are on track for local production in your facility in Salt Lake City. Could you shed some light on the next milestones you want to reach? So when will production start? How quick do you want to scale it up? Peter Podesser: Pilots, we have our team of the U.S. right now in Europe for training for, I'd say, still the next weeks here. And then we do the first pilot trial still in December so that everything is geared up for 2026 series production. The plan here is to have especially, let's say, our high runners, the EFOY 2800 all produced locally next year. And that's why we are looking, let's say, at a shift here from production from Germany as well as Romania to the U.S., whereas the core elements as the specs still will be mounted here in Brunnthal. So it's pretty the same exercise we did here with India, and we did with Romania in the last, let's say, 12, respectively, 24 months. So we are not reinventing the wheel here. So it's basically copying the process. Karsten Von Blumenthal: Yes, that was certainly facilitated. Could you roughly give us an idea about the value of this shift in terms of revenue for 2026? Peter Podesser: You mean end customer revenue or simply the transacted systems? Karsten Von Blumenthal: No. What -- how much revenue will you generate with the U.S., or you plan to generate with the U.S. production next year roughly, very roughly. Peter Podesser: Well, this will be somewhat above EUR 10 million because still part of the products will be shipped from here as we are not transferring the whole product line over there. We also do refurb of old EFOYs here in the market where we will not shift the entire production of this and therefore, in the first, I would say, 2 years, we will still see a mix dominated by also the old version here that is in the market. And then step by step, I think we will fade this one out and then the entire production for the U.S. consumption of EFOYs is planned to be there. And in addition, naturally, we will also have to see how the defense part of the business evolves. I think -- we were particularly pleased to be invited by the U.S. Army on the occasion of the AUSA, this defense show here a couple of weeks ago to again reengage into a fuel cell development program, and they were particularly happy about the fact that we already had prepared local manufacturing capacity there, which I think is also a big argument for us being a partner for them doing the local production also on defense over time on site in the country. Operator: The next question comes from Michael Kuhn from Deutsche Bank. Michael Kuhn: Three essentially. First of all, you mentioned OEM programs in the defense space into 2026. Is there any possibility to roughly quantify that scope already? Or would that be too early? Second question would be on the contract loss you mentioned in North America, I think, where you lost versus a competitor. Was that a fuel cell competitor? Or was a customer there going for, let's say, a different technical solution? And last question would be on working capital. I think you talked about a 6-month time frame to reduce that. So just to confirm that and maybe get a confirmation on, let's say, that working capital won't dramatically change over the course of the fourth quarter. Peter Podesser: First, OEM programs in defense. I think with, let's say, all the experience we just are undergoing, yes, we are a little hesitant now to come out, let's say, with numbers on those programs that are still work in progress. What we see today is that, I'd say, with a very, let's say, favorable financing environment based on all the political decisions, we also see that still capacity, the capacity on the administrative part of the purchasing or procurement part, but also the capacity in, let's say, some of the OEMs manufacturing capacity is a limiting factor. And we, let's say, therefore, expect all this to happen, let's say, in 2026. Part of it, I would say, on the earlier part of '26. But I'd say the visibility at this point in time is not at the point where I would feel comfortable to, let's say, put numbers out. We are looking at programs in Germany, but we are also looking, as you recall, we have, let's say, this also partnership here with Polaris on where, let's say, our products are under a NATO procurement contract. So we know that this program, the tender has been awarded here to Polaris, but we have not been, let's say, informed about individual numbers here out of the different countries participating. And I think the same thing here now with our German program. We are working on it as soon as we have more clarity, even if this is still before Christmas, we would be, let's say, able to share this. On the contract loss in Canada, we are talking here -- we are not talking about the fuel cell business. So it is, let's say, on the power management side, where we are integrating VFDs where we are integrating equipment also from ABB, and this was a loss based on, let's say, tough pricing here with an oil and gas OEM. At the same time, I think we also see, let's say, that's a competitive market. So it's -- but it's the single reason for, let's say, seeing a deviation from the original plan here. Otherwise, in the, let's say, Canadian oil and gas business, also especially on the EFOY side, we are still on our growth plan. And the third question, I would hand over to Daniel for answer. Daniel Saxena: So with regards to the working capital, yes, there are 2 positions that we're really working on, as you rightly said, the first one will be inventory, bringing inventory down. That, of course, is a function apparently of selling and manufacturing those fuel cells because the largest part of the inventory increase, as I mentioned, is in the German entity and happening in Germany. So that is really our intent to get back to a normalized level, which would be looking at what we had at year-end. One impact that is -- one factor that is negatively impacting our inventory is the platinum pricing. Remember that a large part of our membrane is platinum that has been -- the price has increased significantly in the last 9 months to all-time high, I think the highest thing I've seen for a couple of years. The amount of platinum that we have in our inventory is over EUR 1 million. So of course that and we tend to buy platinum when it's at a low price or relatively low price. And then we intend to buy an amount of platinum that covers us for at least 2 to 3, sometimes 4 quarters. That is really making sure that we can lock in the cost. That will have an impact on our inventory, like I said, right now, we only have EUR 1 million. On the accounts receivable, yes, we intend to bring them down significantly. We expect collections. We don't see any receivable [indiscernible] write-off there. So that is something we expect to improve towards the year-end. I know you made the math with regards to revenue. So what we expect in terms of revenue in the fourth quarter. And currently, the higher revenues at the end of the quarter, the higher the accounts receivable, but everything that we have right now to turn around quickly. Operator: The next question comes from Malte Schaumann from Warburg Research. Malte Schaumann: First one is on the customer behavior. I mean, during the second quarter call, one of the reasons for the weak order intake in the first half of the year, you mentioned that especially new customers kind of hesitated to adopt new technologies, place orders, et cetera. Do you actually have in the recent weeks registered a change in the customer behavior or more or less the same U.S. tariff discussions, et cetera, and still lead to existing uncertainties? Peter Podesser: I think at the end, we see, let's say, with new customers still, let's say, hesitation out there. And I mentioned before also that the U.S. pattern of the business still, yes, seeing, let's say, a growth of significantly above 20% organically is a solid growth, but it's not at what we have seen here, let's say, historically over the last 3 years. And that's why I think we -- with the environment, let's say, not being more stable and continuing as it is in the macro part for the new customer business, we have also factored this into our year-end planning. Existing customers, I think, being -- we published a significant order a couple of weeks ago with one of our largest civilian fuel cell customers here in Europe. We see a consistent repeat business. As mentioned before, the overall CCTV part, civilian security part of the business is also above 15% growth. But the change or the decision-making to, let's say, embark on a new technology here and complementing the existing whatever battery and solar devices with fuel cells definitely is delayed with, let's say, the environment as it is. So therefore, I think we can differentiate this pretty clearly and see this also in, let's say, the customer behavior. Malte Schaumann: Okay. And then maybe kind of an early view next year or your level of confidence that order levels will -- would you expect kind of subdued order levels going into early next year and then hope for a recovery later next year? What's your visibility or your level of confidence then going into 2026, where do you see maybe increasing customer activity and where uncertainties still prevailing kind of reducing the visibility? I mean you have alluded to in some areas, still unstable situation, low visibility. But then on the other hand, you might have kind of gained some confidence in the meantime that, for instance, India will return as a major customer in defense. So maybe you can shed some light on what are your thoughts on maybe how 2026 can [indiscernible]. Peter Podesser: As you can imagine, now we are doing, let's say, a constant analysis on this and let's say, also assess, let's say, the regional part of -- or the different regions of the business and also the different end markets. And looking at where we are right now, I think we see, I'd say, this repeat part of the business on a constant, let's say, growth curve that we also would, let's say, assume as a basis, and we are also doing this in our planning right now because it's budgeting time. We are finalizing our planning rounds right now. So we are expecting, let's say, an organic growth out of this. We are seeing, let's say, signs of, again, improvement again in India, where we have this deviation this year. With this coming back to, let's say, a modest growth part, I think we are in a corridor here of mere organic part that is somewhere around, let's say, low double-digit growth. And we also do, I'd say, this analysis here on our, let's say, what we call this rolling part of the order book that is intra-quarter business transactional, where we have a pretty good view on it. As I said, this is between, let's say, 40% to 50% here that comes in and out within a quarter. So adding this all up, I think -- and then also looking at what we have, let's say, done on the cost side. We're also looking at our product pricing here based on raw materials, platinum being a big factor here. We will have to adjust this, and we are preparing for this. And therefore, I think a growth corridor just organically, as mentioned here of a good 10% is, I think, a solid ratio across everything. This does not include, let's say, a big impact also of when we look at, let's say, a larger defense program. And at the same time, we have just discussed with Karsten also the impact here of a potential majority acquisition of the Singapore business here adding up to, let's say, the planning then in 2026. Also, with the caveat, we have not exercised this option yet. But naturally, we have done this to go through this process and hopefully get to a positive end also here with our partner in Singapore. Malte Schaumann: Okay. Then Oneberry, in the press release, I think you laid out the scenario for potential significant growth in the years ahead. So maybe you can shed some more light on where do you see growth? I think you mentioned EUR 100 million potential revenue contribution. So maybe you can shed some more light on that number? And where does the growth primarily come from? And what should happen that this will materialize in maybe, I don't know what the time frame is 5 years, 5 years plus. So what are your thoughts on that? Peter Podesser: Yes. Oneberry has been very focused and fully entrenched in the Singaporean security architecture also by, let's say, family roots here of the owner of Oneberry. And also, let's say, looking where, let's say, such a family business then stays also in terms of, let's say, further investment into regional expansion, the planning of the owner here, the family owners was not to expand this and roll this out, let's say, into the region. With us being on board, this is a key element, really copying what we have -- what they have built up, integrating also our products into those security services and roll this out. And naturally, it is logical. We have done some business development in Indonesia. We have done in Malaysia and Thailand and in the Philippines. And this is, at the end, the overall business plan that we have already sketched out with them. But naturally, first of all, we need to take the next step and close the transaction and talk about, let's say, the option. And then it is initially a regional play, but we are also seeing large customers in our civilian security business looking for potential rental solutions, and we might also have to -- and be able to, let's say, copy this part or this business model here in other regions. And if we look at the, let's say, potential in, let's say, Asia, this is, let's say, what we have developed together as a scenario with the owner family of Oneberry that is also at the end, a reflection of what we see in terms of demand here in Asia, which at the end, again, is the most populous region. Time frame, yes, as you said, we are talking definitely midterm, and we are talking about a 5-year scenario. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Dr. Peter Podesser for any closing remarks. Peter Podesser: Well, with this, we thank you all for your time and interest. As always, we are at your disposal also for bilateral discussions here with Daniel, myself and also Susan. We are heading through some rough waters here. Stay with us. I think we have a solid plan ahead of us. And we have shown that we are able to, let's say, implement plans apart from naturally, not neglecting the fact that we have seen 2 very tough quarters behind us. Thank you very much.
Jose Antonio Calamonte: Good morning, everyone. Super happy to see you here one more time in our -- in this case, fiscal year '25 results announcement. And I'm going to cover the first part, the strategic part, and I'm going to then hand over to Aaron, who's our CFO, and I will give him the opportunity to introduce himself much better later. He will do a better job, and he's going to cover our financial results over fiscal year '25 and our outlook for fiscal year '26. And then we will move to Q&A that I'm sure this is what you guys are looking forward to. So let me start sharing with you a couple of reflections, and I promise I'm going to be short. Since I joined ASOS 4 years ago and since I became the CEO 3 years ago as well, I think it's clear in my mind, and I'm pretty sure you feel the same every time you come here, that this is a place full of energy, full of passion and with a very bold ambition to become the most inspirational destination for young fashion lovers in the planet. But it was also clear that we had a lot to do to get there. And what I'm going to try to do today briefly is to try to cover these 2 things. The first one is like -- and you already know, but I think it's always good to do a little bit of balance and to take stock. It's like what is it that gives us the right to compete in a market that is as dynamic as -- probably, I should say, ultra dynamic as our market and a market that is changing so much and where things like -- I mean, like AI is bringing a complete evolution to the market. So what is it that makes ASOS different and gives us the right to compete? And where are we in this journey to transform ASOS into this very ambitious vision that we have. So let me start with the first one. What is it that makes us different? And as I said before, we have a pretty bold ambition. We want to be the most inspirational destination for young fashion lovers in the planet, and we want to do it while at the same time, we have a business model that delivers excitement, but sustainability in terms of profit. So it is a really, really bold, if you want, ambition. And there are 3 main pillars that support this ambition, 3 main things that, in our mind, makes ASOS different and gives us the right to compete and to win. The first one is our obsession to always offer consumers the most relevant product. And relevant means it's the right product at the right time at the right price. We have a unique model here. We are -- we have a perfect blend between our brands and the best brands in the planet. And that is very weird to find. You're going to find great brands out there. You're going to find great retailers out there, but it's very difficult to find a formula like ours. And we are working very, very hard in making sure that our assortment is the most relevant all the time for consumers. And I hope during the course of these years, I have been able to convey how important both elements are our brands and our partners. And if not, hopefully, today, I will be able to do it so that you see that the value of our formula and why is it different. The second part is that we are obsessed with offering an inspirational shopping experience, and we offer today a different shopping experience. I'm going to say that with this picture you are seeing here that probably for you is just a nice and a beautiful picture. But in this picture, you see a model she's wearing 4 different brands. She's wearing Good American. She's wearing Mango, she's wearing ASOS Design and Dragon Diffusion. ASOS is the only place where you can see a picture like that. It's the only place where consumers can see a picture as realistic as this one because this is how they behave. Most consumers don't dress top to down with one brand. This is how they behave. And by the way, this is incredibly valuable for the brands as well because this is the only place where they can be in this type of context. And that makes ASOS shopping experience different and unique and inspirational, and we think that gives us the right to compete and a place in the market. And we do all that underpinned by an efficient operating model. We're obsessed with efficiency, with effectiveness. And this is really underpinning everything we do. That's what we -- that's why we're convinced we have a place in this market, and that's why we're convinced we can win and be relevant for our consumers. But to really deliver that, there was a lot to do. And I want to go fast over what we have done over the course of the last 3 years. I know 3 years is a very long period of time, but I think it's a good time to make this balance, and that's why I'm going to do it, and I'll not talk to you for too long. This has been a long journey with 3 clear steps. And I'm going to go fast over the first -- over the 3 steps. The first part of this journey was we had to deal with the legacy that we had. 3 years ago, this company had 2 main issues: stock and debt, very clear. We had GBP 1.1 million pounds in stock. That is a lot of stock. That is more than 100 million units in our warehouses. That is a lot of stock. During the course of these 3 years, and you have heard me a lot talking about stock, maybe too much. I'm not going to talk about stock today, but you have heard a lot of that from me, we have gone from GBP 1.1 billion to around GBP 400 million -- a little bit less than GBP 400 million in stock. That is a massive reduction of stock, somewhere between 50 million and 70 million units of stock reduction. That is really, really big, just put it into the context of the population of this country, and that will give you an idea of -- to what extent that was a big challenge. And why it was so important? Well, for a lot of reasons, but 2. One, we were sitting on a lot of money. Obviously, that is not very smart when you're sitting on money and you're not doing anything with it. And the other one, this old stock was preventing us from offering new stock to consumers. And remember, we want to offer the most relevant stock. The stock from last year and last, last year is the opposite of being relevant. So we really needed to clear that, and we've done it successfully. By doing that, we unlocked a great opportunity, which has been to optimize our footprint in terms of supply chain. And we have reduced our footprint in more than 50%. Obviously, that unlocks cost improvements, cost optimizations, and we have really seized that opportunity and taken it. And the second big challenge was debt. And as you have seen during the course of these 3 years, we have been restructuring our debt. We have been looking for flexibility and liquidity. The last time, it was last week. So you saw that we announced a successful restructuring last week that is giving us even more flexibility and more liquidity, and this is exactly what we wanted to get. And while we have done this, we have reduced our net debt in approximately 40%. So we can see there that we have successfully reset the essential foundations of our model. It was absolutely a must. There was no way to move on without doing that, and we are happy we've done it, and this is water under the bridge. Then we had to transform, refresh, I don't know which one is the right word, our business model. We were transitioning from a business model that was built on a lot of stock, as I said before, a lot of promotion, a lot of performance marketing into a business model based on speed, agility and profitability. It was very, very important to prove that we can make money while we do business. Otherwise, we become a different type of organization. And we started that journey by focusing on what is important to our consumers. That is to give them better product. This is what they want. They want relevant product, what they are looking for at the moment. They are not looking for a bargain necessarily. They're looking for something they like at a competitive price. And we did that built on 3 critical ideas. The first one was we want to make sure that we are first for fashion and the work behind that is speed. We have to be very fast to be able to offer our consumers what they want right now. This is one of the critical elements that our own brands play in that equation. They are our best opportunity to be super fast and react much faster to what the consumers are demanding. And that's why we're in a better place than just a pure retailer because we have a weapon they don't have. During these 3 years, we have been working on systematic solutions, not just a solution. We want a system that brings improvements and continues bringing improvements. And that is what we have done pretty much in everything we have been implementing and obviously, on the product side. And I think this is also a very important idea that I wanted to share with you, this obsession with systematic solutions. So we have been working on accelerating our time to market. And on average, we have accelerated our time to market by 30%. But if we go to our flagship project in this space, that is our Test & React that I also talked a lot about Test & React in the past, not today. It was a project. Today, it is more than 20% of our business in our own brands. Today, it's a reality that is really changing how we show in front of our consumers and the type of value proposition we can put in front of them. The second big idea was to bring more flexibility in the relationship we have with our partners. More flexibility means more ways of doing business, not just one avenue. Now we have several avenues. And this is helping us to do quite a few things. Obviously, one is to deepen the relationship with some of them. Some of them are growing very healthy because of that. And today, it has gone from a project to be more than 10% of our business with our partners, is done through these flexible models, either what we call partner fulfills when they do the delivery or ASOS fulfillment services where we take care of the delivery, but it's like businesses -- it's a different way of doing business. And also very important is the work we've been doing in how do we define our portfolio of brands, what we offer our consumers. I told you that this is about offering them relevant product. Not all the brands are relevant to consumers all the time. So in these 3 years, we have done a lot of, I don't know if the word is, cleansing or sharpening our brand portfolio. We had approximately 900 brands 3 years ago. Today, we will be more around 600. That has not been a journey of minus 300 because in this journey, we have added more than 100 new brands. So that gives you a little bit of the idea we have probably changed 50% of the portfolio one way or another. And we have not only done that, we are working more and more with our partners to develop exclusive products. Today, we develop exclusive products with approximately 40 brands. Again, our flagship project here is our collab with Adidas that you have seen all over the place. It's quite a unique collab. That is a multiyear type of collaboration that I think shows the role that ASOS can do with these type of brands, and it's generating a lot of positive effects with Adidas and a lot of interest in other brands, and we continue going in this direction. So we feel we have really had an impact on the assortment, on the value proposition our consumers see in front of their eyes. And this additional speed and this additional flexibility has been complemented with a very rigorous inventory management. Remember what I told you about systematic solutions before. We have a systematic way to deal with our inventory. We have a systematic way to tackle the problems early and not late. And putting together speed, flexibility and rigorous inventory management has helped us to significantly accelerate our stock turn or to reduce our -- I always -- reduce our cover, increase our stock turn. It's pretty much the same one way or another. In the last 2 years, we have reduced our cover by 20%, and that is having a very big impact on the quality of what our consumers see and what they're exposed to, but also our profitability because by offering our consumers better product, they buy more product at full price and then we can improve our margins. And that has had an impact, obviously, on our margins. We have systematically increased our gross margin. Last year, 370 basis points, we landed more than 47%. I remember 3 years ago when I said our ambition is to go to 50%, some people said, you are crazy, and probably they were right, but not because of that. Today, we're at 47%, and we are convinced we're in the right way to get to 50%. We are really taking the right steps to get there. And this is pretty much built on this flexibility and this capacity to sell more full price by coming faster to the market. That has been complemented with our effort in our efficiency. As I told you it is one of our pillars. We have looked for systematic solutions that is giving us relevant changes like we have significantly reduced our returns -- our underlying returns in 150 basis points or we have reduced our supply chain costs during the course of the last year, approximately 20%, and we continue finding new ways to improve our costs with these systematic solutions. When we put it all together, we wanted to change our business model to have a business model that gives us speed and profitability. I've been talking about the speed. Let me tell you about the profitability. Last year, we increased our EBITDA by more than 60%. We have increased our profit per order by 30% approximately. This is now a healthy business model that is producing profitability. So we feel in this second step of the journey, we have certainly moved the needle here, and we are in a place where we are now having a business model that is giving us what we wanted. That's why we feel that the time has come to really focus on reengaging with our consumers, focusing on bringing them back to ASOS on regaining their hearts and minds and again, positioning us as the most inspirational destination for young fashion lovers. And we are going to do that based on 3 main ideas. There's always 3. I'm sorry, I'm a pretty boring guy, but it's 3, 3, 3. You can call me Mr. 3, if you want. Three main ideas. The first one is a product we sell fashion -- I have told you many times, we are a fashion company that has technology that runs through our veins. So it's -- we are going to double down on all the exciting things we are doing to have the best product, the most relevant product in front of the eyes of our consumers. We're going to invest in putting our brand more in front of our consumers with a really ROI-driven mentality that is very important. And we are reinventing our shopping experience. Let me give you a little bit of color on each and every of these ideas, but this is what is giving us the confidence that we are in the right path to really return to sustainable and profitable growth. So let's talk about product. Let's talk about what is it that we're going to do this year. And the expression is quite simple. It's double down. We're going to continue doing what we've been doing, but more. So we're going to continue working on speed and flexibility. We're going to take our Test & React from 20% to 25%. We're going to take our flexible fulfillment from 10% to 15%. We're going to continue accelerating. We're going to continue going fast, fast, fast, more relevant, more relevant, more relevant. We're going to also invest more in quality. We are investing in fabrics. We're investing in [ workmanship ], in fits. We're going to continue doing that, investing in improving the sustainability of our fabrics and -- our materials, fabrics in general, not only fabrics, but also trends. And that can be seen in some of the new lines we've been launching recently. These are 3 examples here. You will see here a range, BreatheMax and AS Collective. Different lines we have launched recently, all of them with a focus in higher quality, all of them very successfully. They are having a very, very good reaction from our consumers and they are really resonating with them. And the last thing, we will continue sharpening our brand portfolio. That means new brands coming. So there are going to be more brands coming. That means more collaboration with the brands. The same thing we have done with Adidas, where we are going to -- this is a systematic solution again. We're going to start expanding that to other type of collaborations with other type of brands once we have shown to the world what we can do. Let me go to taking our brand in front of our consumers. And we're convinced that there has never been a better time to do that. And why is that? Well, first of all, because we have the right product. Second, because we have the right economics. As I told you, we have increased our profit per order by 30%. And third, because during the last years, we have learned a lot about how to do it, and we have increased the return on the ROAS of our marketing actions during the course of fiscal year '25. The second idea why we think there's never been a better time to do it is because we have a very, very clear strategy. We will continue increasing the ROAS of our performance marketing, where we are in a very positive path. And we are going to invest in expanding, in more frequency, in more breadth, in more quality of interactions with consumers. These interactions happen in real life, with pop-ups, with events. They happen in social, they happen in campaigns. And we have been learning how to do that, and we feel we are now much better equipped to do that. And what is giving us the confidence that this is true is that we are seeing very positive signs right now. We have seen that during the course of fiscal -- what we have a fiscal year '26, new consumers are growing in the U.K. by approximately 10%. We are seeing that we are getting more engagement and more average spend from our consumers. We are seeing that our retention rates in fiscal year '25 have improved in general, but more especially with our best consumers where they have improved 80 basis points. And we are seeing that some of these marketing actions, that it took us some time to learn, now they are having an impact. I just illustrated, for instance, with the pop-ups we are doing, at the beginning, we were really not getting there. The last 2 pop-ups we have done, one in the U.S. and one here, we have got sales per square meter -- sorry, I still think in square meters. I don't know how to do it in square feet. I still struggling with that. Sales per square meter, that are comparable with the most relevant operations in the market, and they are generating halo effects that are really visible for us, and we are seeing how it is impacting in the areas where we do these pop-ups. So we see it starting to work the way we want. So we are convinced this is the time to double down on what we're doing with marketing. And the last thing comes to the shopping experience. And let me go back to this idea that we offer a unique shopping experience. And again, this is -- you see a picture here, but what I see here is 3 brands perfectly blending into one picture. Here, you will see ASOS Design blending with another story and with ARKET. There is no other place in the planet where you can see that. That's why I say we always offer a unique experience, but we want to make it even more special for our consumers. This is going to be done on 3 axes, on 3 ideas. Again, 3, sorry. Outfits, outfits was always at the core of what we do, but we're going to take outfits to a different level, engagement and personalization. And all this is powered by AI. I know it's going to sound like, okay, you have to drop AI at a certain point in time. Now is the time to drop it. That is not the case. It's like AI is transforming this industry. I'm absolutely sure, and it's not just a belief because I believe in that, I'm seeing it. I'm seeing it with my own eyes, and I'm seeing it in ASOS. It's just like AI is opening possibilities that a few years ago, even months ago, but certainly years ago, were just like a dream, like an ambition, but it was not possible. Today, it's possible. And that is going to bring a lot of, I would say, tailwinds to the digital world. Tailwinds, yes. And we are right there to do it, and we are very, very much into it, always with this mentality of systematic solutions and with a mentality of very rigorous investment, but we are there. So this is something we have already started recently, and let me share with you some of the things we have started to do. One is the launch of our loyalty program, ASOS.WORLD, where we have launched a loyalty program really aligned with our value proposition of delivering excitement, inspiration. So it's not a loyalty program based on discounts. Sorry, if you were expecting that. This is giving access to consumers to exclusive products, early access, exclusive experiences. We launched it with a small cohort of consumers, I think it was in March. We really opened it to a bigger audience in the summer. In the U.K., both during the course of the first 6 months, we reached 1 million consumers -- 1 million members. Today, we are north of 1.6 million. We're very, very excited to see how fast this is growing and even more excited to see the impact design on consumers because what we see is that consumers that join our program increase their frequency and they not only increase their frequency, we get a more qualitative relationship with them. So we depend less on paid marketing, which obviously is good news for us. Second one is ASOS Live. We launched on-demand shopping platform. Every consumer that is interacting with that, 50% of them go to review the product, and they all increase the quality of their relationship with us, increase their conversion rates and the time they spend with ASOS, which is also very important for us. And the third one, the third example that I wanted to show you here is Topshop. We relaunched Topshop.com in the summer. We have seen that the vast majority of the consumers that are interacting Topshop.com are new consumers to ASOS. So it's not consumers from ASOS that now running through Topshop, it's new consumers to ASOS. And these are consumers that are coming with bigger baskets. So it's quite interesting way of capturing consumers. This is only the beginning. There is so much more to come. And I want to share with you just some examples because this is much more of the things that are coming. And I told you there are 3 main ideas. One is outfits. So you're going to see outfit generators. So consumers will be able to choose one item and then request that we generate an outfit for them, but we will use what we know about them and what we know about the trends to generate an outfit that is relevant for them in this moment. They're also going to be able to save outfits, to search outfits, to look for -- to look into the outfits of their celebrities they follow. So there's going to be a lot of a completely new experience or improved experience around the area of outfits that was already present in ASOS, as I've been telling you. Second idea was about engagement, and there's a lot about making it more immersive. And obviously, that means a lot of video. We're going to see much more video coming to the landing page, to the product pages, to the list pages. We're going to be -- we're going to see shoppable reels. We're going to obviously expand our loyalty program. Consumers will be able to search by trend, by occasion. We are going to incorporate much more community and influencers. There's a big, big change here. And the third idea that I told you is personalization, absolutely critical. There is this 4 you tap. We launched an AI Stylist in the past in a collab with Microsoft that we are going to improve even more in a renewal of our collaboration with Microsoft, and consumers will be able to personalize their search, make sure that the brands they love are more present in their search. So it's really a big, big change. But instead of hearing me talking, talking, talking, I thought that maybe it's interesting that you see it all together because when you see it all together is when it comes to life much better. So let me share with you, if I can. [Presentation] Jose Antonio Calamonte: They say that image is better than a thousand words, especially they are my words. So very, very ambitious program, really a step change in our customer proposition, in our shopping experience and a step change that is going to be delivered this fiscal year '26. And you're going to see a big change between what you see now and what you will see in a few months. So we are very, very excited about that. And I'm sure our consumers are going to be as well. This is such an amazing change. So let me conclude by kind of summarizing. As I told you, we have a very bold ambition. We think we have a place in the market and we can win, and we have to go through different steps to get there because it was a big change. We feel we have addressed these issues -- these legacy issues, and we have set the right foundations, structural foundations for this business. We have successfully transformed our business model so that we can offer to our consumers what they want in a profitable way. We are in the right moment, in the right time to really reengage with our consumers. We have a very clear plan. You've seen it. We have all the determination. The first signs we are seeing from the market are positive. We see growth in new consumers in the U.K. We see some geographies offering very interesting performance. We see visits doing much better. We see that the signs are here, and we are totally determined that now is the right time to do it. So now I'm going to hand over to Aaron. He's going to be really giving you the real stuff I gave you the blah, blah. So please, Aaron. Aaron Izzard: Thank you, Jose. But before I jump in, my name is Aaron Izzard, as I've met some of you before, but I'm really proud to be standing as CFO to present the FY '25 financial performance. And before I jump into the numbers, I think it's important to step back and say what was FY '25 about from a financial perspective? It was about delivering the second stage of our transformation, delivering sustainably profitable baseline for us to move forward and deliver against the third stage confidently. And it was really important to me in stepping into this role to make sure that we approach that second stage with the appropriate depth and rigor that it required to make sure that we can move confidently forward. That meant a deeper focus on variable and fixed cost optimization to make sure that we explored and delivered additional opportunities to set us up for FY '26. And the financial performance I'm going to talk you through reflects that. So I'll talk you through all the metrics. Firstly, GMV. This is our appropriate new measure for customer purchases, if you like, and it's our primary indicator of sales. So this reduced by 12% year-on-year, which is a reflection of the cautious consumer backdrop, but also the deliberate profitability actions that we took. Because of this, the quality of our sales improved. Gross margin increased by 370 basis points as a result of the increase in our full price mix and reduction in discounting. Cost to serve, whilst reduced by 12% in absolute terms, increased by 130 basis points, but when taking account of the deleveraging impact of our volume reduction of 200 basis points, there was around 100 basis points of efficiency improvements, which I'll talk about a bit more later. This contributed all of this together towards an improvement year-on-year in our EBITDA -- adjusted EBITDA of over GBP 50 million to GBP 132 million. From a balance sheet perspective, we reduced our stock further by GBP 118 million down to just over GBP 400 million. This is a reduction of 23%, reflecting the new operating model that is now fully embedded and the rollout of our new flexible fulfillment models. This represents the inventory cover that we will take forward, as Jose has already referred to. Free cash inflow of GBP 14 million, slightly reduced versus last year owed to the huge increase in -- reduction, sorry, in inventory that we delivered in FY '24, yet still the GBP 14 million was ahead of guidance. And finally, our net debt improved by GBP 112 million to GBP 185 million. This is as a result of the Topshop, Topman JV that we entered and the subsequent structural refinancing that we undertook in early FY '25. So looking at the geographies. As you can see, there was a reduction in GMV across these geographies, but the important point to note is that profitability improved across the board, which was our main priority for FY '25. There are a couple of geos though that I want to explicitly call out. The U.K. at minus 7% was more resilient as our home market, where consumers really responded to the product actions that we took, but also, of course, in a cautious consumer backdrop. And the other one is the U.S., minus 18%, does not tell the full story. The U.S. was the first market that we took deep profitability actions in FY '24 and many of those actions annualized in the second half of FY '25. When combined with the benefit of our sales of moving the fulfillment back to Barnsley and from the Atlanta closure, this opened up a wider assortment of product to the consumers. And those 2 actions combined with a number of other specific growth-driving activity that was in the U.S. H2 performance was minus 7% year-on-year. And Jose has already touched on it, but I'll talk a little bit more about some of the more recent trends later on. Key driver of our profitability improvement, as we've already said, was our gross margin improvements year-on-year. The main benefit within this was from the commercial model. And what this highlights, again, as Jose has already touched on, is that when we surface the right product, fresh product to consumers, they're willing to pay full price. And that's highlighted in the improvements in our margin through the new commercial operating model. We also delivered improvements through the success of our commission-based flex fulfillment models, and this contributed to the 370 basis points improvement in gross margin. It's important to note, though, that this isn't the result of profitability actions. This is a result of the improved offer that we've generated for the consumer and the gross margin is the output. More choice, newer, fresher product and a cleaner on-site experience all delivers a better experience, and that's resulted in the improvements in our gross margin. I've touched on this already, but our overall cost to serve in absolute terms reduced by 12%, but that is an increase as a percentage of sales to -- by 130 basis points. The volume deleverage, as I've mentioned, accounts for 200 basis points reduction, but also, we absorbed the inclusion of the Topshop royalties, which weren't prevalent in FY '24. That meant an underlying improvement in our efficiency, variable cost, in particular, efficiencies of around about 100 basis points, which was predominantly driven through supply chain, through reduction in returns rates, again, Jose has already touched on, but various different efficiency projects that we've landed. There is also a modest improvement in these numbers from a number of sizable projects that we landed towards the end of H2, most notably, the exit from the Atlanta warehouse, which generates annualized savings that we've talked about previously, but in particular, renegotiation of global distribution contracts, which has delivered a significant benefit, all of which will be felt in FY '26. All of -- the combination of embedded in this new operating model and the cost efficiencies more than offset the volume deleverage and was the main contributors towards our improvement in adjusted EBITDA of GBP 50 million year-on-year. This represents significant progress. And alongside those locked-in benefits that I've already mentioned that we delivered towards the end of Q4 gives us the platform to confidently move forward into our third stage of our transformation. Moving to cash. FY '25 saw modest inflow of cash of around GBP 14 million, ahead of our guidance, as mentioned, and as a result of our improved profit and discipline across the board. The new operating model delivered net working capital benefits of around GBP 40 million, as we normalize our inventory cover. Continued investment discipline reduced our CapEx by GBP 50 million year-on-year to GBP 86 million, although this increases to GBP 100 million when you include the Atlanta automation spend, which was subsequently reclassified to non-underlying. Net interest of GBP 33 million reflects reduced term loan interest from the refinancing that we did at the start of FY '25, but only includes half a year of the 2028 convertible bond interest. I'll talk a little bit more about structural free cash flow in the guidance section. Finally, before I move on to the outlook, I wanted to talk about the refinancing that hopefully you all saw announced last week. So maintaining our investment discipline is absolutely critical going forward to deliver on the final stage, but we embarked on this process in addition to the efficiency projects that we landed to create the investment fuel towards the end of FY '25. We embarked on this project and that one to increase -- improve our flexibility, as we move into the final stage. And I'm confident that this refi supports that flexibility required. This refinancing effectively replaces our first lien Bantry Bay facility, the RCF and term loan and delivers 3 significant improvements for us, extended term of 5 years out to 2030, additional liquidity headroom of GBP 87.5 million and a reduction in our interest rates, which delivers cash interest benefits on an LFL basis of around GBP 5 million. This refinancing reflects the strategic and profitability actions that we've taken and also reflects the partner confidence in our strategy going forward. So I'm just going to turn to outlook now. The clicker works. Thank you. So we expect in FY '26 with the new offer that we're accelerating for our GMV to show improving trajectory throughout the year. And within that, our GMV, we expect to perform around 3 to 4 percentage points ahead of revenue performance. Now we touched on it already, but we've already seen an improvement from the enhancements that we're making to the consumer offer in the metrics that we're seeing in FY '26. So there's been an improved sales trajectory, in particular, in the U.K. and U.S., some of our core markets. But more importantly, the lead indicator for midterm growth is new customer acquisition. And our new customer acquisition is improving across the board and is in 10 percentage points of growth in the U.K. year-to-date. We expect gross margin expansion of at least 100 basis points above 48%. And this, coupled with the efficiency benefits in the sizable projects that we landed towards FY '25, combined gives us the confidence in delivering GBP 150 million to GBP 180 million adjusted EBITDA in FY '26. We're expecting broadly neutral free cash flow in FY '26, which I'll come on to and talk about on the final slide. In the medium term, our guidance hasn't changed. We're expecting a return to GMV growth and adjusted EBITDA margin of 8%, which will contribute towards adjusted EBITDA sustainably being ahead of CapEx, interest and leases to generate structural free cash flow positive. Finally, I wanted to give a bit more context. I've been talking about this structural free cash flow throughout this presentation. But I think it's important to do that to look back over the last couple of years and how we generated our cash. And the chart on the left here shows that a big driver of our free cash flow positivity in the last couple of years has been through the benefits in working capital, as we've reduced our inventory. But we have shown improving structural free cash flow benefits in the left -- the far left-hand graph here, which shows our free cash flow, excluding working capital. We expect our FY '26 adjusted EBITDA of GBP 150 million to GBP 180 million to offset the CapEx leases and interest. But if I move -- if I use FY '26 as the platform for our medium-term aspirations and targets, there are a number of additional aspects in our midterm guidance, which we expect to deliver sustainable structural free cash flow generation. Improvements in our operating leverage through our GMV growth, continued expansion in our gross margin towards 50% and CapEx of 3% to 4% of sales will all represent opportunities to continue to enhance our structural free cash flow, and we are not reliant on any one of them individually to be able to deliver that. To wrap up, we're really, really pleased with the progress we've made in FY '25. FY '25 was about setting a structurally profitable base for us to move confidently into the third stage -- third and final stage of our transformation. And we're really, really confident in the plans that we've got in that final stage to be able to deliver growth and meaningfully free cash flow positive generation. Thanks for your attention. We'll now move to Q&A. Emily MacLeod: Thank you, Jose. Thank you, Aaron. For Q&A, as usual, we'll start with questions in the room first. If you could introduce yourself and where you're from before you ask your questions, that would be great. It looks like it's Anne first. Anne Critchlow: Anne Critchlow from Berenberg. I've got 2 questions, please. So I noticed that average basket value was up more strongly in the U.S. and the U.K. Just wondered if you could comment a little bit generally about average basket value, splitting it out between like-for-like inflation and mix. And do you see perhaps more potential to add more premium brands to the site? Is that the direction of travel? And then secondly, if you could just comment on performance by category, so womenswear, menswear, sportswear and formal versus casual, anything that's interesting and anything that you need to work harder on? Emily MacLeod: Thanks Anne. Jose, do you want to start with both of those questions. Aaron would follow... Jose Antonio Calamonte: Yes. Happy to do that. Good to see you. So we have seen average -- sorry, I was going to say ABV [indiscernible] shouldn't do that. Average basket value evolving positively during the course of the last -- not only the last 12 months, probably more the last 24 months. And we read that obviously, as an impact of our strategy to be able to have a more collective relationship with consumers and then they buy more full price, hence, less of a discount. So we've seen growth of 3% to 5% consistent year-on-year, one year and another year. And that has happened, if you want so far, not through a growth of number of units, but not with a decrease of number of units. So it's pretty much stable. It's more a growth of the value of the items consumers are putting in the basket. A different thing is what you were asking about more premium brands. And we have added a lot of brands, 100, during the course of the last 12 months. Some of them are more premium, and I was showing a picture with ARKET that can be considered for us a more premium brand or another story. In the other picture, it was Dragon Diffusion, but it is a bags brand, also can be considered more premium. It is having a very good -- Good American could be probably another example. It is having a very good reception with our consumers. So we are seeing an interest in brands that are -- I mean, the word premium is premium for our consumers in the perspective of the market. They are a little bit of mass market or higher up, the upper part of the mass market. The high end of the high street, probably I could say, is having a very good reception. Our consumers want relevant products. And when it's relevant, if it's a little bit more expensive, they are willing to pay the money for it. So certainly, it's a direction of travel. We are bringing more of these brands because we are seeing that our consumers are interacting well with them. So at the same time, we keep on bringing other brands that are lower price points, and we have other consumers that are fine with that. We always try to keep a very, very broad assortment for different type of consumers. So -- and then in the performance by category, we are happier with the performance in womenswear, definitely. It's the part that is working better. It's where we have put more effort. And -- I mean, not trying to damage anyone. Clearly, this is the core of our business, just like the business in fashion at least for ASOS is pretty much in womenswear. So this is where we're seeing a better performance. Sports, we are seeing a very good performance in apparel of sports, which was not the case in previous years that all the performance of sports was coming from footwear. Now it's coming more from apparel. Footwear is a little bit weaker, to be honest. And in our case, I mean, apparel is doing incredibly well, also fueled by some of the call-ups -- we are doing the call-up, we're doing with Adidas, is having a really big impact. So obviously, that is also doing it -- if you want, is amplifying the impact. In terms of categories, we are happy with jersey, with needs, but it's not -- there is not a clear standout, if you want, in terms of categories. So we're happy with what we're seeing in the collection and it's fairly well balanced. Emily MacLeod: John, would you like to go next... John Stevenson: Yes. John Stevenson at Peel Hunt. A couple of questions as well, please. Interested in the -- who the customer is in terms of the 10% growth in U.K. customer base you're seeing coming through. Are they hitting the same metrics as your existing core? Are they buying the same stuff for the KPIs you saying? Can you sort of talk about how you're attracting these guys in and what they're delivering to the mix? Secondly, just in terms of cost efficiency, Aaron, you mentioned, obviously, a lot of the work done last year. There's obviously a lot of like-for-like cost reduction coming in this year. Can we quantify that? And finally, if you can comment on what you think the right balance sheet structure will be for ASOS in the sort of 2, 3 years out? Emily MacLeod: Thanks, John. Jose, do you want to take the question on new customers first? And then, Aaron, you can take the second and third questions. Jose Antonio Calamonte: John, good to see. So yes, we are happy with what we're seeing in the U.K., seeing new customers. Obviously, it's very early to understand very well these new customers because the fact that they are new means that they have not interacted so much with us. But if you want in general terms, what we're seeing is that customers are improving the quality of the engagement with us. Let me explain what I mean with that. They're buying more categories. We are moving away from -- I mean, moving away, not completely, but we are reducing the amount of new customers that come on buy only one category. They're buying more categories. They are buying less promotion. We're also seeing that. And also, they are buying more fashion-oriented type of products. So in principle, it's all good signs because we know when consumers buy more categories or buy more fashion categories, they tend to be better consumers over time. But it's still early to know if that is going to have an impact or not. What we have seen is during the course of fiscal year '25, we have reduced churn on all types of consumers. So I think it's probably somehow correlated. Aaron Izzard: Thank you, John, for the question. I'll take the first part first. So the cost benefits I'm not going to quantify it, but what I can tell you is a number of the various different projects that we've done. So as I mentioned already, we have the benefit from the annualization of exit in Atlanta. We've already talked about the values there. Significant benefits from renegotiation of our distribution contracts, that's globally. It started in the U.K. As you can imagine, a sizable project that we expect to have huge benefits in FY '26. We are also reviewing all of our various different SaaS contracts and SaaS operations to streamline our underlying support in tech and continuing to review our returns fair use policy and various different activities to improve the experience for consumers, and that we expect that to improve our returns rate as well. In terms of the balance sheet structure in 2 to 3 years, look, our goal is to be neutral on debt and not have a net debt. But ultimately, what we want to do over the next few years is focus on growth. And the important thing for me when delivering the refinancing was making sure that we give the flexibility to the teams and the focus to make sure that if there are high ROI opportunities that we can invest in them for growth. But ultimately, we're building towards generating free cash flow and getting ourselves into a net neutral position, which will also help us capitalize, of course, on interest costs in the future. John Stevenson: How much of a restriction was the lack of headroom in the old facility? Did that actually stop you? Aaron Izzard: So I wouldn't say a restriction. Ultimately, we've created more flexibility. We had previously GBP 150 million term loan and the RCF wasn't available based on the ABL facility. What we've got now is a facility of GBP 150 million and GBP 87.5 million, which is readily available. So it creates additional headroom for us that allows us the flexibility, as we move forward. Emily MacLeod: Mia, I think you've got a question next. Mia Strauss: It's Mia Strauss from BNP Paribas. Just 2 for me. Maybe -- if we can maybe look at the customer profile over the last 5 -- say, 5 to 7 years, what sort of age demographic you're looking at? So maybe is the customer 5 years ago, someone who was 20 years old and they've now grown to 25? And do you have enough of the Gen Z cohort in that? Or do you need them? And then secondly, what sort of impact are you seeing from TikTok Shop? How you plan to compete with them? Because they're obviously more of a discovery sort of platform. So I appreciate the AI initiatives you're doing on your side, but is it maybe a little bit too late? Or just how you plan to address that? Emily MacLeod: Thanks. I think, Jose, if you take both of those questions, please? Jose Antonio Calamonte: So on the customer profile, obviously, we measure the average age of our customers. And what we have seen over the course of the last 5 years -- probably not sure 5, maybe it's a little bit too, but over the few years, is that it has not changed significantly. I think we have got, I'm going to try to be too precise, probably I'm wrong, 11 months older. So it's not a massive change. It's pretty much in the same space. You were dropping something interesting in the question that was like this Gen Z, do we need them? It's like our bull's eye, if I can use that expression, is 20-something. We used to use that expression. It's people in their 20s. Obviously, Gen Z would be probably a little bit young. But anyway, so -- but that doesn't really mean that we only talk to these consumers. You go to your bull's eye, but you know you have consumers that are older and younger for sure. So yes, having some Gen Zs -- of course, having Gen Zs plays a role, and we do have Gen Zs and actually, that's why we have such a broad assortment. We have some of our brands that are more targeted towards these younger consumers, whether Gen Zs or Gen Alpha, whatever they are now. So -- but it's not the core of our consumer. It's not that Gen Z is where we are -- it's not the bull eye, if that makes sense or not yet. One day, they will become bull eye. Then on the TikTok Shop, we are present in TikTok, which seems to be something really, really big in the U.S., not so big in the U.K. We are not seeing such a huge explosion in the U.K. We really use TikTok as a place of discovery, but not necessarily where people are executing the purchase. So we are present in TikTok with the TikTok Shop, and we also have our social marketing happening not only in Instagram, but also in TikTok, we're pretty active. And it's true. It's a place of discovery. It's a place where people go to find new brands. But at least in the U.K. and in Europe, we are not seeing this explosion that they seem to be having in the U.S. But we are there. And if that becomes a bigger channel, we will obviously capitalize on that because our obsession is to be where our consumers are. So it's like we are agnostic about that. It's like we want to be wherever they are. Mia Strauss: Just to follow up on that. Maybe what is your approach to the marketing side? So I appreciate that maybe the transaction doesn't happen on TikTok, but how do you get them from TikTok onto ASOS when you've got tools like the AI Stylist and things like that? Jose Antonio Calamonte: That's a great question. TikTok or Instagram could be similar. Obviously, we have a big presence there. We are working not only organically, we also work with content creators, with influencers from more well known to less well known. When we did, for instance, the relaunch of Topshop.com, we work with Cara Delevingne, super iconic, but we are working every day with influencers. So the ambition is, as I was saying before, to be where our consumers are, to be top of mind for our consumers. Then there is a transition into ASOS when they have more the intention to buy. Once they come to ASOS, tools like the AI Stylist plays a very important role in going back to this idea of the outfit. It's like consumers, what we see is that consumers don't buy one thing isolated. They want to buy a dress, but they want to understand how to wear this dress, which are the right shoes, which one is the right bag, which one is the right makeup, which one is the right. So there -- today, we have always been, in that sense, different because we've always brought this idea of outfits. But it was, if you want in a sense, a little bit static. It was much better than going to a physical store because in a physical store, you could see 10 outfits. And in ASOS, you could see 100,000 outfits. But it was static. Everybody was exposed to the same outfit. Suddenly, the AI Stylist, so AI as an enabler, is giving us the possibility to generate a specific outfit for every consumer, and that is incredibly powerful. What we're seeing is that the consumers that interact with the AI Stylist, they increase by 50%, I think it is, the amount of items they save for later. And we know that this is a leading indicator. When people start saving for later, they end up buying. So it is having a big impact. We're working -- as I said before, this is something we did in collab with Microsoft. We are not generating our own LLMs or anything like that. That would be completely crazy. And we will continue -- we are renewing our strategic alliance to continue developing that and to make it even better. The more we train the model, the better the model knows the consumers and the better the recommendations. And we are seeing an evolution there. So we see that there is a very natural flow from I discover a place where I can find what I want to I really want to transact with that place and then I want to do it in a more comprehensive way. Sorry, a very long answer. But don't let me talk too much because I could talk for hours. Emily MacLeod: Super. Sarah, do you want to go next and then Yash after? Sarah Roberts: Sarah from Barclays here. So just firstly, on the guidance of adjusted EBITDA of GBP 150 million to 180 million. Can you just take us through the puts and takes of what you need to believe in to get to the higher and the lower end? And at the higher end, do you have to believe in a return to growth next year? And then secondly, more broadly, we've seen a lot of headlines about agentic e-commerce in the news recently, potentially changing how consumers shop online. Just curious what your thoughts are on how ASOS fits into an agentic e-commerce world? Are you making investments in tech and product at the moment? And I suppose, are you -- could you consider partnerships with some of the AI players as we've seen Shopify do in the U.S. Emily MacLeod: I think, Aaron, if you take the first question on guidance and Jose, you can take the second one on agentic AI. Aaron Izzard: Yes. Great. Thank you, Emily. Thank you, Sarah, for your question. We've built our guidance for next year so that it doesn't require growth. That's the exact reason that we, you might say, extended our process on the second stage of this journey, creating us the flexibility, creating the investment fuel to be able to move confidently into the third stage. So within that guidance range, there is no explicit requirement for us to return to growth. But of course, what we've guided to is an improving trajectory on GMV, and that's what we're building towards. I think for us, really, the key thing is we've landed that second stage. We've created the efficiencies that enable us to move into structural free cash flow positive. The focus now is on making sure that we double down, as Jose said, on that final stage across investment in marketing, which will have a higher return on investment against it, against the customer experience and continuing to enhance our product offer. That's the focus. That's what we're getting everyone in this business focused on. And as we do that, it will enable us to continue to move through the guidance range. Jose Antonio Calamonte: Yes. So on agentic e-commerce, I guess you refer to checkout happening directly in ChatGPT or whatever of these things. So obviously, probably, we're going to get there. I think it's a very, very likely direction of trouble that is going to move from what today we call SEO more to, I think they call it GO -- sorry, I'm awful with these DLAs. There are so many. But -- so it's a different type of search engine type of optimization and marketing into this. And it will be a big change in the market. But at the end, the consumers will have to find a place to close the transaction. So obviously, we are open to that. I mean, as I said, we want to be wherever our consumers are, we don't skip. We just want to make sure that we offer the best assortment, the best shopping experience, and we are convinced that, that is the winning formula. Then you were talking about us partnering with AI specialists. And we do that. I mean we have -- as I said before, we have a strategic alliance with Microsoft. We have another alliance, an aesthetic project with a player called Sierra. Probably you guys never heard of them, but they are probably one of the biggest players in terms of AI solutions for customer care. And today, almost 50% of the interactions we have with customers in the U.K. happen through an AI solution and growing. And we're partnering with smaller start-ups as well. We have a partnership with a Turkish start-up. We have a partnership with some start-ups here in the U.K., in Israel. So we have a really big setup of different ways of approaching AI. As I said, we are doing that because we see that this is a fundamental change in the industry, and we are really embracing it. But we are doing that with a lot of rigor, making sure that our investments are really always under control, and they always bring value added to our consumers. So we're really focusing on that. But yes, we're really embracing the AI opportunity because we're convinced it is not going to change. It's already changing, as I said before, this market. I don't know if that was what you were looking for, Sarah. I hope it is. Emily MacLeod: Thanks. I think, Yash, you might end up being the last question in the interest of time. So just go ahead. Yashraj Rajani: Yashraj Rajani, UBS. So the first question is, if I just look at some of your competitors, whether it's the European pure plays or some of the U.K. omnichannel players, right, there's a big dichotomy in the performance of you versus them. And I appreciate there's been some legacy issues that you've been dealing with. But now that the legacy issues are behind us, who do you think you can take share from, especially given that some of these players are meaningfully larger than you, right? So that's the first question. And the second question related to that is, Jose, you spoke about trying to train the models and actually models getting better over time. Again, some of your competitors have bigger customer bases than you. Maybe they're a little bit ahead in some of that journey. So do you feel like you're playing a little bit of catch-up on that front? And if so, I mean, how are you making sure that you're getting in line or better than them? Emily MacLeod: I think Jose, if you take those questions. Jose Antonio Calamonte: Yes. So on our competitors, well, this is probably one of the most competitive markets in the planet. And I've said that so many times that that's why it's so fragmented. So we will be taking share from a lot of them, not just from one. It's not that we are going behind one. Our consumers today buy in ASOS. They buy in a lot of these competitors, you have implicitly mentioned. They are buying in other competitors you have not mentioned like secondhand or -- so there is like -- and we are not just going after one. We are not going after the entry price point. We're going after these individuals that they are interested in fashion at a competitive price. I think our current and future consumers are pretty much everywhere. There is not one target. There's not -- we're going to take it from competitor A, B or Z or whatever. We're going to take it probably from most of them. And this is what we're seeing in these new consumers that we are receiving. Actually, almost every consumer buys in more than one place. It's almost impossible to find a consumer that only buys in one place or consumers buy in different places. So it's also changing the share of wallet that they have here and there. On how do we train the models and if we are playing catch-up? That's quite an interesting question. When we talk to companies like Microsoft, clearly, we're not playing catch-up. We're ahead of the curve. We are one of their key partners globally to do that. So -- and it is true having a lot of information is very important. We have 16 million consumers, so we do have a lot of information. But it's not only the information you have, it's the quality of the information you have. And a lot of these competitors might not have the same quality of information. Omnichannel brands have normally less quality of information because -- so the offline interactions are less qualitative in terms of data, I mean. And even some of the online players, they are more worried about the transaction itself, where we're very worried about also the styling behind the transaction. So we have a very, very qualitative type of information about how consumers interact with different styling. And that is incredibly important for the journey we are trying to define, not for a different journey. So I think I'm convinced we're not playing catch-up. If anything, we're ahead of the curve, and we are determined to continue being ahead of the curve. Aaron Izzard: I think if I may, just to build on that. AI for us, we feel we're uniquely positioned to capitalize on AI, not only versus the offline players, but also if you think about the -- what Jose described around outfits and personalization, with this being a really core part of our proposition that we're going to add for consumers, that is different to what others are doing. And the use of AI can really turbocharge that, presenting outfits across tens of thousands of different products that we hold across a multitude of different brands and being able to surface them to the consumer in a really personalized way. I think this really gives us an opportunity for us to capitalize on, and that's how we're thinking about this with our new strategy and how we can utilize AI to turbocharge. Emily MacLeod: That's us at time. Thank you, everyone, for your questions. Jose, I'll just pass over to you. Jose Antonio Calamonte: Just wanted to thank all of you for coming here, especially on a Friday. I know it's not the easiest day to come. So thank you so much. As we both have said, we're incredibly excited about where we are and the prospects. We are very, very excited about the signs we're getting from the market at this beginning of fiscal year '26. And we will continue with this journey to completely finalize our journey to make ASOS the most exciting fashion destination in the planet, and I hope you guys will all witness this soon. So thank you so much, and looking forward to the next interaction with you guys. Thank you. Have a nice weekend.
Operator: Good day, and thank you for standing by. Welcome to the Ubisoft H1 Fiscal Year 2026 Earnings Webcast and 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, Yves Guillemot, Ubisoft Co-Founder and Chief Executive Officer. Please go ahead, sir. Yves Guillemot: Welcome, everyone, and thank you for joining us today. Before we begin, I would like to start with the reason for the delay in publishing our results. First, we have appointed a new panel of auditors that was approved at the AGM last July. Their position as part of their review of the H1 financial accounts required a restatement of our financial year '25 annual accounts that had been previously approved by our former panel of statutory auditors in May. In this context, we required additional time to finalize our accounts for our Board of Directors to approve them. Frédérick will walk you through this point in more details later in the call. The closing of our strategic transaction with Tencent, which will see Tencent become a minority shareholder in our new subsidiary, Vantage Studios, is now imminent, as all conditions precedent have been satisfied. This will mark a pivotal milestone in Ubisoft transformation, significantly strengthening our financial position by bringing in EUR 1.16 billion of cash, enabling the group to deleverage as planned. It will also empower Vantage Studios to accelerate the growth of our 3 flagship IPs under a dedicated leadership team. In a highly competitive market, Ubisoft delivered net booking above guidance on the back of stronger-than-expected partnerships that underscore the appeal and reach of our brands. Our portfolio showed contrasting dynamics this quarter with softer trends for Rainbow Six Siege, reflecting a phase of evolution for the game in an intense competitive first-person shooter environment, offset by strong performances across the rest of the catalog. The Assassin's Creed franchise exceeded our expectations, confirming its positive momentum and ability to engage players over time. The Division 2 also continued to perform strongly, benefiting from the momentum of the Battle for Brooklyn expansion, with the game's first semester already exceeding last year's annual bookings. Additionally, the progress we've made in addressing our fixed cost base brings with it confidence that we can continue to drive structural efficiencies across the organization that together with top line growth, will contribute to ensure a return to strong cash generation in the coming years. Vantage Studios represents a key element of the transformation of the company toward a new operating model built around creative houses. We will have finalized the design of this new organization by the end of the year. These creative houses will be autonomously efficient, focused and accountable business units, each with its own leadership, creative vision and strategic road map. This group-wide transformation reflects our ambitions to renew how we create and operate in order to deliver great games for our players and lasting value for our partners and shareholders. The full details of this new operating model will be unveiled in January. On the innovation side now, we are making great strides in applying GenAI to high-value use cases that bring tangible benefits to our players and teams. It's a big -- it's as big as a revolution for our industry as the shift to 3D, and we have everything to lead on this front. On the player experience side, we are continuing to make progress on groundbreaking player-facing generative AI application, building on our NEO NPC announcement in 2024. We have already advanced from prototyping to player reality, and we are looking forward to sharing more before the end of the year. On the production side, we now have teams in all our studios and offices embracing this new technology and constantly exploring new use cases in programming, art and overall game quality. On the transmedia side, we also, after greenlighting the Assassin's Creed live-action TV series in July, I would like to highlight the recent success of the animated Netflix series, Splinter Cell: Deathwatch that premiered on October 14, obtaining an 86 score on Rotten Tomatoes and landing the daily top 10 across more than 12 countries, including 6 consecutive days in the U.S. This strengthens our brand's long-term value ahead of the Splinter Cell's remake currently in development at the Ubisoft Toronto Studios. Last but not least, I would like to celebrate the successful launch of Anno 117: Pax Romana that expands the city-builder genre. This level of quality, innovation and sales set the standard against which we want to measure our future releases performance in the coming years. So I will now let Frédérick give you details on half year performance. Frédérick Duguet: Thank you, Yves, and hello, everybody. H1 net bookings stood at EUR 772 million, up 20% year-on-year with 34 million MAUs and 88 million unique users across consoles and PC, slightly down year-on-year when excluding XDefiant from the base. Turning to our second quarter. Net bookings stood at EUR 491 million, above guidance and up 39% year-on-year. The outperformance was driven by stronger-than-expected partnerships, demonstrating the power and attractiveness of our portfolio as well as a meaningful contribution from live TV and animated series. Excluding partnerships, overall back-catalog performance this quarter was robust and in line with expectations, broadly stable year-on-year, but marked by contrasted dynamics. The Assassin's Creed franchise posted a strong performance in Q2, with both Assassin's Creed Shadows and the rest of the brand’s catalog overperforming. In the year to date Assassin's Creed has generated 211 million session days, around 35% higher than the last 2 years' average. Shadows benefited from the launch of the New Game+ mode, which was widely anticipated by the community and introduced greater difficulty and new challenges for players. The Claws of Awaji expansion released on September 16 and contributed to re-engaging players. It was praised as a solid addition to the base game, offering new unique boss fights in a beautiful and dark atmosphere. Looking ahead, Assassin's Creed Shadows will reach a broader audience with its launch on the Nintendo Switch 2 on December 2. Beyond Shadows, the rest of the AC back-catalog also performed strongly, highlighting the strength of the franchise. Turning to the current quarter, we launched Valley of Memory on November 18, a free major update for Assassin's Creed Mirage, which brought new content and a fresh chapter in Basim's story set in AlUla. First feedback from the community is very positive, with player activity on Assassin's Creed Mirage doubling following the launch of the update, enabling the game to reach the 10 million player mark. In a highly competitive first-person shooter market, Rainbow Six Siege continued to attract new players this quarter, with acquisition levels twice as high year-on-year, and sustain activity levels, with unique players stable quarter-on-quarter and up double-digit year-on-year. Session days and playtime also increased both sequentially and year-on-year. However, as part of the evolution of Siege and its move to free access, a temporary surge in cheating has impacted activity and player spending versus expectations. With additional resources now in place and further hires planned, the team has identified the main issues and is actively addressing them with a robust plan in place. Having focused most of this year on establishing a new foundation for the game, the team is exploring a new seasonal approach that introduces multiple updates throughout each season, focusing on the core gameplay experience and heavily engaged players. This shift is designed to offer a steadier stream of fresh experiences with more variety keeping players engaged and supporting long-term franchise growth. The Siege community remains highly engaged and passionate about the game’s success. The development team is equally committed to working closely with players to address recent feedback, with a strong focus on anti-cheat measures and gameplay balance. As announced at the Munich Major on November 16, starting in Season 4, the team will double the number of anti-cheat updates per week and introduce new prevention solutions. On the balancing front, the team is accelerating efforts in Season 4, with four balancing updates per season planned for Year 1, aligned with the new content cadence. To celebrate Siege’s 10-year anniversary in December, players can look forward to daily rewards and a special in-game event launching mid-December. Elsewhere in the catalog, I would like to highlight a few notable performances. The Division 2 continued to benefit from the momentum of the Battle for Brooklyn DLC release in May, as well as regular content updates, continuing to attract new players to the game. Along with rising player numbers, player engagement is up, with a record second quarter in terms of Session Days since financial year '21. The game’s performance this semester has already exceeded last year’s annual net bookings. Avatar: Frontiers of Pandora posted a strong performance this quarter on the back of the July third person update announcement, that was widely anticipated by the community. The game also regained momentum with the announcement of the From the Ashes expansion that will come along with the movie. Star Wars Outlaws launched on Nintendo Switch 2 in September to strong critical and player reception. The release expanded the game’s audience and was praised for its exceptional visuals, technical optimization, smooth performance and seamless transition to Nintendo’s new hardware. Total digital net bookings reached EUR 436 million, up 62% year-on-year and PRI stood at EUR 323 million, up 110% year-on-year. Both of these metrics benefited this quarter from tailwinds linked to partnerships. Within PRI, mobile amounted to EUR 26 million, slightly down year-on-year. First, you will find our non-IFRS P&L on Slide 7 of our presentation. Gross margin was strongly up year-on-year by more than 3.5 percentage points, which reflects the fact that this semester saw more high-margin partnership than the first semester last year. R&D was down year-on-year, and we come back -- I will come back to that point in the following slide. SG&A was down 16%, reflecting lower variable marketing expenses due to the absence of major releases this semester, while last year's first half saw the release of Star Wars Outlaws and XDefiant Overall non-IFRS EBIT came back to the positive zone at EUR 27 million this semester, which marks a strong improvement to last year's EUR 250 million loss. Please refer to our press release or presentation appendix for the full IFRS to non-IFRS reconciliation. Turning now to Slide 8. P&L R&D was down year-on-year and mainly reflects lower depreciation of in-house software-related productions coming from the absence of new AAA releases this semester compared with accelerated depreciation for Star Wars Outlaws and XDefiant last year. For its part, total cash R&D was down 11% or EUR 70 million and reflects our continued efforts addressing our fixed cost base. Looking at cash flow statement on Slide 9. Free cash flow stood at minus EUR 251 million compared with a negative EUR 126 million the previous year. This free cash flow consumption mostly reflects the following impacts. On the one hand, a negative EUR 139 million cash flow from operations, reflecting the fact that we had no new releases this semester, which was half the outflow of last year, again, illustrating a strong improvement versus the year before. And on the other hand, a negative EUR 102 million change in working capital requirements, notably driven by trade payables decrease comparing with a significant higher gain in receivables last year, which mainly reflects cash in from Q4 fiscal year '24 partnerships. Non-IFRS net debt stood at EUR 1.15 billion, slightly up versus last year, and cash and cash equivalents amounted to EUR 668 million, down EUR 265 million versus last year, mostly driven by the reimbursement of around EUR 245 million in debt. The -- sorry, the EUR 1.16 billion cash injection from the Tencent transaction will deleverage the group and strengthen its balance sheet. I would now like to provide an update on the continuous progress we have been making on the group's transformation. First, all conditions precedent of the transaction with Tencent have been satisfied, enabling the sale of a minority stake in our new subsidiary, Vantage Studios to Tencent to close in the coming days. This marks a major milestone in our transformation journey. The proceeds of this transaction will deleverage the group on a consolidated non-IFRS net debt basis while providing enhanced financial flexibility to support our strategic transformation. A new leadership team is being formed around Vantage Studios, including heads of franchises to drive creative excellence and operational agility across each brand on their path to building annual billion euro brand ecosystems. Second, we will have finalized by the end of the year, the design of our new operating model built around creative houses, independent business units with the objective of driving stronger creative vision, greater focus, efficiency, autonomy and accountability. We will unveil the full details of this model in January. Overall, we benefit from a strengthened balance sheet. Our non-IFRS net debt position stood at EUR 1.15 billion at end September with a cash and cash equivalent position of EUR 668 million. The EUR 1.16 billion proceeds from the Tencent transaction will enable us to deleverage the group and notably proceed with the early repayment of the term loan and Schuldschein loans, which have an outstanding principal amount of approximately EUR 286 million. Of note, EUR 210 million were due next month. Additionally, we will cancel the undrawn revolving credit facility and initiate discussions with our banking partners with the objective of putting in place a new facility designed to support our strategic ambitions, in line with the broader transformation currently underway. Overall, we plan to rely on a very comfortable cash and cash equivalent position at end of March 2026 of around EUR 1.5 billion. Third, we continue to make progress on our new cost reduction program, which targets at least EUR 100 million in fixed cost savings by fiscal year '27 versus fiscal year '24 -- versus fiscal year '25, sorry. Thanks to continued discipline in hiring and targeted restructuring efforts. The group's global head count stood at 1,797 at the end of September, representing a decrease of around 1,500 employees over the past 12 months and about 700 since the end of March. Since the end of the semester, a targeted voluntary leave program and a proposed restructuring were introduced at our Nordic studios. Overall, the H1 fiscal year '26 fixed cost base stood at around EUR 701 million, a decrease of EUR 69 million or 9% year-on-year, including a favorable EUR 19 million foreign exchange impact. Out of the EUR 69 million reduction, approximately EUR 55 million came from lower capitalized investments. Before I turn to the outlook, I would like to cover an IFRS update. As Yves mentioned, we had to delay publishing our results. Towards the end of the review process of our H1 financial accounts, our new panel of auditors reviewed the analysis that had led to the fiscal '25 accounts being validated by our former panel of auditors in May. This related specifically to the IFRS 15 revenue recognition of one meaningful partnership in fiscal '25. The new panel of statutory auditors considered that utilization-based payment schedules must now be recognized under IFRS 15 as revenues over utilization even if the commitments are firm. This ultimately led to the restatement of our fiscal '25 account as per IAS 8. We then had to assess the impact of this restatement as well as the implication of this new position on the second partnership booked in Q2 along the same initial principles. The combined effect of what I've just described results in the company not complying with its leverage covenant ratio under certain existing financing agreements at September 30, 2025. However, this is being addressed by the aforementioned actions relating to the concern debt instruments. The restatement of the prior year financial accounts are detailed in the appendix of our press release, and the IFRS accounting restatement has no impact on the group's non-IFRS indicators given the firm nature of these amounts and has no impact on the operating cash flow profile of the group. Beyond this technical restatement, I want to make one thing clear. Our approach to B2B partnerships as a critical complement to our B2C business has always been and will continue to be centered around maximizing the value of our catalog, which we measure in terms of cash flow generation over time. Turning to the full year outlook. The stronger-than-expected benefit from partnership increases our visibility for the fiscal year in a context where, on the one hand, there remains a number of new releases to come by the end of the fiscal year. And on the other hand, Rainbow Six Siege faces an increased competitive FPS environment. In this context, we reaffirm our full year objective with net bookings to be stable year-on-year, non-IFRS operating income to be around breakeven and negative free cash flow, reflecting the group's transformation. Following the closing of the Tencent transaction, we expect to maintain a consolidated non-IFRS net debt position of around 0. Looking at Q3, we expect net bookings of approximately EUR 305 million, which will represent a slight increase year-on-year. Q3 will notably see the releases of Anno 117: Pax Romana as well as the Avatar Frontiers of Pandora from the Ashes expansion. Anno 117: Pax Romana launched on November 13, and marked a bold new chapter for the Anno franchise, building on the series strong momentum and releasing simultaneously for the first time on PC and console, it showcases impressive scale, striking visual fidelity and a deep economic simulation. The title has already received strong industry recognition, including winning Best PC Game at Gamescom and has now launched to strong critical reception with an 85 Metacritic score, the best score ever in the franchise, which translates into solid consumer spending growth after 1 week compared to the successful Anno 1800. IGN awarded it 9 out of 10 calling it "a gorgeous antique city-builder that is worthy of a standing ovation". For the first time in the series, players can choose their starting province is defined by distinct cultural identities and unique gameplay mechanics that emphasize player choice. This innovation expands the game's depth and replayability, laying the foundation for sustained player engagement and rich post-launch experience. The Avatar: Frontiers of Pandora - From The Ashes expansion is set to launch on December 19. Timed to coincide with the theatrical release of Avatar: Fire and Ash. This bold expansion sees players embark on the journeys of So’lek, a battle-hardened Na’vi warrior who seeks revenge against the ruthless Ash clan. The expansion introduces new visceral gameplay set in a ravaged Kinglor Forest and unveils a new subregion known as The Ravines. Ahead of that, a highly anticipated free update introducing a third person mode will arrive on December 5 and will feature long requested by the community. Together, this content should further strengthen engagement and extend the game's momentum into the holiday season. And for its part, Q4 will see the release of the Prince of Persia: The Sands of Time remake, Rainbow Six Mobile, The Division Resurgence as well as an unannounced title. Beyond fiscal '26, we expect to return to positive non-IFRS operating income and free cash flow generation in fiscal '27 and to see significant content coming from our largest brands in fiscal '27 and fiscal year '28. Finally, as always, here are a few fiscal '26 housekeeping items for modeling purposes. The stock-based compensation is expected at around EUR 32 million, down versus prior guidance and reflecting the lower share price. The non-IFRS net financial charge, excluding foreign exchange, is expected at around EUR 45 million, unchanged versus prior guidance and reflecting a year-on-year increase, primarily attributable to a lower interest income. The non-IFRS tax rate is not relevant in the context of breakeven non-IFRS operating income and the number of diluted shares is expected at around EUR 132 million, reflecting the fact that with an expected negative net income, the dilutive nature of our instruments no longer kicks in. We are now ready to take your questions. Operator: [Operator Instructions] And your first question today comes from the line of Aleksander Peterc from Bernstein. Aleksander Peterc: The first one would be pertaining to the breach of covenants. So although this is quite temporary, I'd still like to know if there are any of your other debt instruments that don't have these covenants, but have a standard cross-default clause that could be enforced. Is that a risk over the coming days or not? It's just a hypothetical, but just to clear that for me. And the second question is, given your below expectations third quarter, it seems to me that the implied fourth quarter is extremely strong, down only 15% year-on-year. But last year, you had the Assassin's Creed Shadows release, which has delayed and that's propped up the fourth quarter quite substantially. So can you help us understand how are you going to achieve this super strong fourth quarter? Frédérick Duguet: Yes. Thank you, Aleks. Yes, so that's on your first question, so we are addressing the topic by settling the repayment of our covenant-based debt, Schuldschein and term loan, and we are canceling the RCF before building a new credit backup line facility by repaying EUR 286 million in principal amount, keeping in mind that we were anyway preparing to repay EUR 210 million that were due in December and EUR 50 million in September. So overall, the net acceleration is estimated to be around EUR 25 million if we look at the impact on the medium-term cash trajectory for the company. So that has nearly no impact. We don't expect any impact on the overall debt structure. And keeping in mind that we will benefit from a very comfortable EUR 1.5 billion cash and cash equivalent position at the end of March. In terms of Q4, yes, as you mentioned, it would be significantly lower than the Q4 that we posted over the last 2 years. Keeping in mind that Shadows only impacted Q4 last year for 10 days. So this quarter will benefit from slate of new releases, including the remakes of Prince of Persia: The Sands of Time, Rainbow Six Mobile, The Division Resurgence and unannounced title. We have a meaningful contribution of partnerships, B2B partnerships, but to a lower extent than last year. We expect a strong Rainbow Six Siege that will go through the Six Invitational and starting into the next year. We will have the follow-on sales impact from Anno 117 and the Avatar expansion. So all this will contribute to the key building blocks of Q4. Operator: [Operator Instructions] And your next question comes from the line of Nick Dempsey from Barclays. Nick Dempsey: So my first question is, have the auditors looked at all of the partnership deals that you have done going back several years, so we can be comfortable that what we are seeing here is the final restatement impact, we won't get more, for example, at the full year '26 results. Second question, if I look at the restatement for FY '25 and the restatement for the last 12 months period, it seems quite a big difference. I understood something, but can you perhaps explain the difference between those 2 restatements, given that I thought it related to particularly one partnership deal? And then the third question, in terms of any partnership deals landing in Q4, do you have good visibility on when they land and whether they will land? Frédérick Duguet: Yes. So on the first question, so there is no risk on the prior year financial accounts. It's, by the way, interesting to have in mind that when you look at the many partnerships that we've been signing over the last 7 years, if you look at all the partnerships between fiscal year '19 and fiscal year '25, all of them have converted into cash. So that traces back to the quality of the earnings and the very strong cash conversion coming from these various partnerships. In terms of -- so on your following questions, I understand that you're talking about the fiscal '25 restatement. So it refers to a meaningful partnership. And if you look at the first half fiscal '26, you see the difference between IFRS revenues and non-IFRS net bookings, and you'll see that also it's driven by the second partnership that I mentioned earlier. And in terms of Q4, so as we said, we've had an increased visibility on this B2B partnerships performance. And so yes, we have a meaningful contribution that is expected in Q4, but to a lower extent than last year. Nick Dempsey: But you have full visibility on that landing in that time frame or you don't? That was my question. Frédérick Duguet: Yes, we have a good pipeline of partnerships that we are working on. Operator: There are currently no further questions. I will hand the call back to you. Yves Guillemot: So thank you very much for your questions, and have a good day or a good evening. Thank you. Frédérick Duguet: Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Jonathan Oatley: Good morning, ladies and gentlemen. I'll just start with a few introductions for those of you who don't know us. My name is Joe Oatley. I'm the Chairman. To my immediate left, Frank Doorenbosch, CEO; and to his left, Ian Tichias, CFO. The bit of introduction is, I believe you should be able to submit questions at any time during the presentation, and then we'll come back to them and answer them at the end. I think the key takeaway for me from this set of half year results is, it's really steady progress, a really robust performance, and we've delivered what we said we're going to deliver. In a moment, Frank and Ian will take you through the details, and I don't want to steal their thunder, but there is one thing I wanted to just pick out and highlight. Some 3 years ago, we set off on a journey of transformation under Frank's leadership, and he set some quite stretching and ambitious financial goals for the business on return on sales and return on capital employed. And I'm really proud and delighted that the business is now at a level of performance and achievement where we are meeting those goals. You'll see some more detail on that as we go through. As we're now moving into the next phase of our strategy where we're seeking growth on top of that stable platform that we've now delivered, it's important to remember that we will continue our focus on cost discipline. We'll continue our focus on capital discipline and we'll continue our laser focus on operational effectiveness and operational performance. And those are the underpins for our future success. I think with that, I'll hand over to Frank to take us through the presentation. Frank Doorenbosch: Thank you, Joe. So yes, good morning, and thank you all for joining us. As Joe said, I'm Frank Doorenbosch. I'm the CEO of Carclo. And today, we are presenting our half year results. And besides Joe, I'm also very pleased to say that we have delivered on our projection. So through the agenda, this morning presentation will have 3 parts. First, I will take you through the journey, the transformation we've executed over the past 3 years. Ian Tichias, our CFO, will then walk you through the status, the financial results and what they mean for our balance sheet. And I will close with the future, how we scale this platform further. So let's begin. When I took over the helm at Carclo in 2022, we set out to transform this business from volume to value. Three years on, the transformation is complete. We've rebuilt the portfolio. We strengthened the margins. We improved capital efficiency, and we fortified the balance sheet. This was disciplined, structured and deliberate. So let me show you what we delivered. Before we discuss financials, let me start with something more important, safety. We maintained our incident frequency ratio at 0.6 in the first half, sustaining the significant improvement we achieved in full year '25. There is a saying we use internally. Safety is operational excellence in disguise. When you perfect the art of preventing accidents, you accidentally perfect everything else. This is not just good ethics, it is good business. This culture of operational excellence flows through everything we do in quality, efficiency, margin discipline. You will see that in the numbers. So we delivered on our projections, 4 numbers will tell the complete story. 10.1% return on sales as we transitioned from volume to value; 28.8% return on capital employed to optimize capital deployment; 1.4x leverage, strengthening our balance sheet; and GBP 57.2 million in revenue via disciplined portfolio repositioning. Four metrics, one story from volume to value. So let me put those numbers in context. In '23, we have set medium-term targets that were ambitious, but we knew they were realizable in the business we are, 10% return on sales and 25% return on capital employed. We have now exceeded both 10.1% return on sales and 28.8% return on capital employed. This wasn't luck. It was portfolio discipline and operational focus. And we've done it while reducing leverage from 2.5x in FY '22 to currently 1.4x. Control before growth, that was the plan, and we delivered it. This chart shows the portfolio transformation from FY '22 to today. We stopped the Manufacturing contract, which would deliver insufficient margin when we would have started that into with manufacturing. We've also exited low-margin, capital-intensive business. GBP 13 million of revenue we have choose to walk away from. The overhaul of asset revitalization project is now behind us, and we are now moving to focus ourselves on scalable growth and innovation programs. And in the past 3.5 years, we have grown the chosen CTP Manufacturing Solutions by 4% cumulative growth rate and Specialty by 14%, both on a constant currency basis. The results versus FY '22 when we started. Our portfolio margin has expanded from 4.1% to 10.1% return on sales. Our capital productivity has quadrupled and our balance sheet leverage has improved from 2.5x to 1.4x. The portfolio reset is complete. We now focus our talent, capital and engineering capabilities on highly critical opportunities in regulated markets. So here's what it looked like across our divisions. Our CTP Manufacturing Solutions demonstrate the disciplined portfolio management and strategic resilience. In FY '23, we generated GBP 92 million from our core focused portfolio. The COVID-19 PCR testing boom temporarily inflated FY '23 results. As the market normalized, we've experienced the expected decline through FY '24 to GBP 85 million. However, this masks the real story, our deliberate pivot towards high-value life science and safety and security solutions. Since FY '24, we have delivered consistent growth, reaching GBP 19 million in the trailing 12 months half year '26. This steady upward trajectory reflects the strength of our repositioned portfolio and validates our strategic focus on sustainable, high-value market segments. The business we've built today is more resilient. It's more focused, it's more valuable and positioned for continued growth in markets with strong structural demand. And Specialty, GBP 10 million was delivered with 14% cumulative growth rate in the last 3.5 years, mainly driven by our aerospace manufacturing. The CTP Design & Engineering operates on a project basis, driving natural volatility. FY '24's peak reflected our asset revitalization program, addressing years of underinvestment across our partnerships. With operational excellence restored and margins expanded, we are pivoting to growth and innovation programs, recurring revenue streams built on sustained asset quality. We're staying on top of our maintenance to ensure we will never slip back. The portfolio is optimized for sustainable growth in high reliability precision solutions in restricted regulated markets of life sciences, aerospace and safety and security. Strategic exits are complete, low-margin. Capital-intensive business is eliminated. The result, Carclo has stronger margins, enhanced ROCE and a scalable platform for growth. That's the journey. And now Ian will take over and get you through the numbers in detail. Ian Tichias: Thanks, Frank. It is a pleasure to announce our half year results for the financial year 2026, which we believe demonstrate continued performance in line with our expectations. Starting with the overall group financial performance. On a reported headline basis, revenue has dropped, and that's something I will explain in more detail on the next slide as it has been impacted by some FX headwinds as well as comparing to HY '25, which included revenue from sites impacted by our exit from the non-core activities completed a year ago. Despite this drop in reported revenue, we have grown underlying operating profit from GBP 3.4 million in HY '25 to GBP 5.5 million this year. And alongside that, EBITDA has grown to GBP 8.6 million, which is now 15% of revenue when compared to 11% a year ago and 13% at the last year-end in March. This excellent EBITDA delivery has driven positive cash generation, which after accounting for the expected working capital outflow in the period is still strongly positive at GBP 3.9 million. Net debt now stands at GBP 24.5 million. Now I will cover the detailed movement in net debt later, but key to point out that this is now 3% lower than the same time last year. So moving to look at the revenue profile. The profile demonstrates the benefit of the hard work of previous years as we have tightened the product portfolio and focused on key value drivers across the business. We have absorbed negative FX impact of GBP 1.5 million on revenue, primarily coming from the translation of our U.S. business and the impact in the last 6 or 7 months of the GBP-U.S. dollar rate as well as other currencies from the various markets in which we operate. Within CTP, our focus has been on portfolio refinement and completing strategic customer projects. Accordingly, D&E project revenue has dropped GBP 2.9 million. As we have previously discussed, we have exited non-core primarily short-run business. The final site exit related to this was in the comparative reporting period last year. Accordingly, there is GBP 2.2 million revenue included in last year's numbers. So pleasingly, allowing for this, on a like-for-like basis, our CTP Manufacturing Solutions revenue has grown by 4.5% in constant currency. The Specialty division also continues to thrive and grow, and we report 14% growth in the business, driven primarily by the aerospace sector. As Frank has previously told you, we are delighted to deliver improved margins. This is demonstrated by exceeding the medium-term target we set ourselves a couple of years ago by hitting a return on sales of 10.1%. This has come about through consistent delivery of improved margins over time. For this reporting period, we have continued to improve efficiencies through reduced wastage, materials usage and more efficient power usage. And this focus on a more streamlined value-added portfolio has enabled us to absorb increases in labor costs and some non-repeatable costs. So moving now to look at the divisional breakdown and firstly, with CTP. So as previously described, revenue is down on a reported basis. CTP Manufacturing Solution has increased 4.5% on a like-for-like basis, allowing for the GBP 2.2 million from site closures last year. D&E revenue reduced by 44% to GBP 4 million. And as a result of the portfolio reset, we have had lower customer activity, primarily in the U.S., which has been the key driver. Performance in EMEA. Project activity is strong in EMEA with revenue up 21% compared to the previous year. We have grown operating profit due to the self-help increased efficiencies that I just mentioned. And through enhanced machine utilization, rigorous cost control initiatives, we have steadily improved margins for several reporting periods now, and this trend has continued throughout HY '26. This sees our operating margin in CTP increased from 8.1% -- 8.2%, sorry, to 13.8% and is also up from the 12% in FY '25. So turning now to Specialty. The robust demand in aerospace, coupled with a return to growth for light and motion in this business unit have driven growth of GBP 1 million, which is over 14%. The operational focus and discipline in the business has also increased operating profit margin to over 21%. So now moving to look at our cash generation. Strong EBITDA growth has driven operating cash generation of GBP 3.9 million. This has been partially offset by an anticipated normalization of working capital. At the year-end, we previously talked about working capital being particularly low due to higher-than-normal provisions and accruals, and this has largely been unwound as we anticipated. And accordingly, working capital is now at 7.5% of revenue. This is at the higher end of the range we have previously talked about and should now be at a normalized level. Looking at net debt. This has dropped to GBP 24.5 million on the next slide, please. So this has now dropped to GBP 24.5 million when compared to a year ago. In comparing to the year-end balance of GBP 19.2 million, it has increased, and this is primarily due to the one-off pension deficit recovery payment made in April '25 of GBP 5.1 million. This payment was made as part of the refinancing arrangements we completed in April. Our new facilities with our lending partner, BZ is working very well, and we are very pleased with this arrangement. Moving now to the topic of the pension scheme deficit. At the last results presentation, we discussed how we are being proactive in managing the deficit and acknowledging that the subject of the deficit has previously been somewhat ignored. I think it's important to acknowledge the significance and also the actions we are taking with a proactive approach to reducing the deficit. We are aligned and work collaboratively with the trustees, which is vital to managing the position and reducing the technical provisions deficit. Since March '21, the deficit has reduced from GBP 83 million to GBP 61 million at the end of March '25 and further reduced to around GBP 53 million at the end of September. This has been achieved through a combination of higher investment returns and company contributions. Having a clear and agreed deficit recovery plan is important in derisking cash flow for the company. This chart shows that as we have continued to deliver performance, growing EBITDA, we have also been able to manage the risk more closely, seeing pension administration costs come down and accordingly, the cash cost and risk to the business has reduced. We will continue in our approach to further derisk the company cash flows. So finally from me, in summary, the business is more financially resilient. We have a stronger balance sheet with well-managed working capital and net debt. Delivering higher margins is now a solid trend, supporting good quality of earnings, and we continue to make sure our assets deliver more for the business. Thank you very much. I'll hand back to Frank. Frank Doorenbosch: Thank you, Ian. So you've seen the journey. You've seen the status. Let me now show you how we scale from here. Next slide, please. This pyramid shows our strategic road map. The foundation is complete. You saw the proof in Ian's numbers, financial resilience, operating excellence. And that foundation gives us the platform to move into Phase II, disciplined expansion and Phase III, innovation. From control to growth, that's where we are now. Let me show you the markets we are targeting. We're positioned in 3 high-growth, highly regulated markets. The IVD solutions, so our diagnostic consumables, we partner with 6 of the top 10 IVD OEMs and the market is growing with 5.6% cumulative growth rate between now and 2030. Drug delivery, auto-injectors and inhalers, custom solutions with regulatory excellence, the market is growing at 10.8%, which is the fastest of the 3 and delivering good opportunities for us. In aerospace, for our extreme performance parts, we are the leader in the [ MRO ] cables and wires, and we're adding machining to our portfolio. The market itself grows at 5.6%, with our additional machining portfolio addition will bring us to the high double-digit growth. We've got 3 restricted regulated markets. We've got strong positions and we've got structural tailwinds. And we're focused on where we have competitive advantage. So why do we win in these markets? Three reasons: technology, trust and transformation. Technology. We've got 40-plus years of precision engineering experience. We've got ISO 13485, FDA and AS9100 registered sites and our manufacturing platform now delivers 85% plus overall equipment efficiency. Trust. We partner with key players in all these respective markets. Our average relationship tenure is 15 years plus. And with 98% plus on-time delivery performance, we also there deliver on our commitments. Transformation. We've delivered it. 10.1% RoS, nearly 2.5x FY '22; 28.8% ROCE, 4x '22. And we've approximately invested GBP 14 million in the period FY '22-FY '25 to uplift our organization. So technology validates us. Trust creates stickiness and transformation proves execution. That's our competitive advantage. So we are now investing to widen our competitive moat through proprietary innovation with 3 priorities. The technology platform, for example, the C-Mould, our new modular tooling system, which accelerates time to market for our partners by 40%. We build it once, we deploy it globally. It's scalable capitation and replicatable region to region. In product innovation, working on an inhaler platform, which integrates counter and reusable holder. And on material development, we're managing wettability tuning for fluids. It's platform-led solutions for regulated markets. And digital intelligence. Our platform [ Syncura ], will be a digital layer for packaging and devices, real-time orders ready and traceability. So innovation isn't an idea. It is a system and our begins long before the product. We're building defensible IP that compounds our competitive advantage. So let me bring this together and why we are confident in delivering sustainable profitable growth and ensuring value for all stakeholders. Again, we've achieved the milestones set in 2023. 10% return on sales, target met; 28.8% ROCE, target exceeded. Recent highlights reinforce confidence. Safety culture is embedded with an IRR of 0.6. We've got a 5-year contract renewal from our major customer secured in July. We've got GBP 36 million in financing funding arranged in April. Now we're focused on 3 growth priorities: Life Sciences expansion, advancing our presence where high-precision solutions remain in robust demand. Specialty growth, sustaining the momentum in Aerospace with our Specialty division and further margin enhancement, continuing the journey from volume provider to value solution partner. So yes, we are confident in delivering sustainable profitable growth and ensuring value for all stakeholders. So thank you, and we're happy to take your questions. Jonathan Oatley: Thank you, Frank. I'm slightly disturbed that I don't have any questions showing on my system. Can I just check? Hold on. Let me refresh and see if it comes through. We do have one question coming from Chris. And the question is for the full year -- looks like this one is for you, Ian. Will the full year accounts include distributable reserves? Ian Tichias: Well, I'm not going to be in a position to forecast our numbers for the full year. So it's quite difficult to actually answer that directly. But we are confident in terms of how we are performing at the moment and confident in delivering our full year numbers. Jonathan Oatley: Okay. Another one just coming from Andrew. In previous presentations, you reported on the improving trend in environmental sustainability for the group. Seeing that nothing is included this time, I wonder if you could provide an update? Still with you, Ian. Ian Tichias: Yes, happy to take that. So we do tend to focus on that in our full year results. But I can kind of talk to the fact that we measure our energy intensity ratio, which is a measure of our carbon emissions per GBP 1 million of revenue. That's consistently dropped in the last 3 years. And actually, the reporting period now for HY '26 shows a continuation of that. So we're at 76.4 now, which is actually a 25% reduction from the number of 3 years ago. Jonathan Oatley: I'll just allow another minute or 2 to see if anybody has any further questions. There's nothing else showing on my screen. Ian Tichias: I can probably just add to that, actually. We are also in the process of establishing a governance structure for our ESG and our sustainability targets. And as I said, we'll report more on that full year. Jonathan Oatley: Okay. I think if we have no further questions, Frank, do you want to say a couple of words to wrap up, just to summarize? Frank Doorenbosch: Yes. I'm extremely proud to be -- being part and coaching the journey of this team. We've got a very, very motivated team to change in this organization. We've been able to keep ourselves focused and disciplined. And at the end, people are now focused on the growth. We now restructured in the right way, got the right platform. We've done it in 2.5, 3 years. That was within the plan. We always said medium term to get somewhere. I know people were very skeptical in the beginning, but we said the returns were there now. I think we are return-wise roughly where the market asks us to be. And now it's for us delivering the growth in the future. Jonathan Oatley: Thank you very much. Thank you, everybody, for joining. We hope to see you all in just over 6 months' time when we're doing the full year results. Ian Tichias: Thank you very much. Frank Doorenbosch: Thank you.
Jakub Frejlich: Welcome again. We are sitting here in Orlen headquarters in a meeting room to discuss Q3 and 9 months of 2025 ending September 30 financial and operating results. We are here in the room with Slawomir Jedrzejczyk, Group CFO; Daniel Obajtek; and my name is Jakub Frejlich, I'm Head of Investor Relations. Please don't -- please mind that we're doing it old school without video. So this is normal [indiscernible] function or technical problem. We would like to keep it that way for the time being and maybe further. So we will kick off. We're still having some joiners coming in. But since this is 5 past already, we'll be kicking off. And now I'll hand over to Slawomir, please. Unknown Executive: Thank you, Jakub. So good morning, ladies and gentlemen. Let me start only by saying it's good to be back. Warm welcome to everyone. It's my pleasure and privilege to present Orlen quarterly results. I would like to start with the highlights. First of all, macro environment and mixed views on that. First of all, lower oil and gas prices. So as you know, that impacted our upstream business. However, very good refining environment, very high margins. In petrochemicals, still, we see market pressure, both in terms of margins and volumes. Electricity, stable prices. And in terms of retail, fuel retail, we observed lower fuel consumption, especially in diesel. And let's look at operations, and this is very positive news, I believe. We delivered very good results in operations, higher gas production, distribution and sales, higher throughput and wholesale fuel sales. However, lower sales in petrochemical, as I said, higher electricity production and higher nonfuel sales in retail. So as a result, if we look into the financials, we delivered very solid EBITDA, close to PLN 9 billion, very high cash flow from operations altogether for the first 9 months of 2025, PLN 34.4 billion. And we managed to continue our CapEx program. Altogether, we spent PLN 21.1 billion for the first 3 quarters, and we paid record high dividend of PLN 7 billion. So as a result, we managed to decrease our debt level by PLN 6 billion in 2025. So now let's move to Slide #4, which is highlights, financial results highlights. As you can see, revenue dropped to PLN 61 billion in the third quarter. However, that was due to the fact that oil and gas prices were lower. Then very solid EBITDA, close to PLN 9 billion altogether, close to PLN 30 billion in the first 3 quarters. Very good cash flow from operations, as I said, although in the third quarter, slightly lower than in past quarters due to the fact that we increased our working capital by PLN 2 billion in the third quarter due to the fact that the prices increased and the volume increased. CapEx, we continue our CapEx program. Our budget was PLN 35 billion. So currently, after 3 quarters, PLN 21.1 billion. I will come back to this in the slide dedicated to CapEx. And as a result, free cash flow close to PLN 1 billion and very, very safe net debt position and net debt-to-EBITDA of 0.14x. So now let's move to EBITDA delivered by segments. As you can see, we delivered good results in all the segments, Upstream and Supply, PLN 3.3 billion; downstream, PLN 2.4 billion; Energy, PLN 2.2 billion and customer and products, PLN 1.6 billion. So altogether, PLN 8.9 billion. And what's very interesting, I believe, is that the bottom is a change year-on-year. So in Upstream, it's minus PLN 3.2 billion, but I would like to pay your attention that basically the results of '24 were, let's say, inflated, PLN 1.8 billion out of this PLN 3.2 billion is basically higher gas prices we achieved in '24 due to the fact that we contracted '24 based on '23 prices, PLN 0.8 billion is basically purchase price allocation that inflated results in '24. So you may say that this drop is, of course, due to the fact that there were lower prices of oil and gas. However, please bear in mind that '24 is not comparable due to those 2 one-offs, let's say. In Downstream, PLN 1.9 billion higher results, which is, I believe, great due to fantastic macro environment in refining from the refining margin point of view. Very solid results in Energy and Consumer Products. Corporate functions increased by more than PLN 200 million. PLN 100 million is, you may say, phasing and PLN 100 million is due to the fact that we increased our labor and general expenses by a few percentage points year-on-year. Now let's move to Slide #6, where we present our operational results. And this is evidence what I said that from operations, it was a very good quarter. So we increased production and wholesale gas sale in upstream and supply. We slightly increased crude oil throughput and wholesale fuel sale by 1 percentage point. However, you can observe here minus 16% drop in petrochemical, and this is clear evidence that petrochemicals under huge pressure, both from petrochemical margin perspective as well as volumes. In energy, steady growth in almost all areas, gas distribution plus 3%; heat generation, plus 5%; electricity generation, plus 7%. And what's very important, renewables generation increased by 43%. So what I can say is that currently in the electricity generation, renewables constitute 17%. This is 4 percentage point increase as compared to last year. As regards Consumer and Products, very good results in the retail gas and electricity sales. However, we see some pressure on the consumption of fuel in Poland, especially diesel. That's why you can see that our retail fuel sales dropped by 2 percentage points. Now let's move to each segment where we elaborate more. So let's start with Page #7, Upstream and supply. We managed to produce up to 200,000 BOE per day. Majority of this -- more than half of this is, of course, Norway, but then we have Poland and the remaining amount is Canada and Pakistan. Majority of this is gas production. And if you can see, the result is lower by PLN 3.2 billion. But as I explained, upstream Poland and Upstream International, this negative -- huge negative impact of lower gas and oil prices was to some extent or even a big extent, offset by higher production, both in Poland and Norway. And this PLN 2.8 billion, as I explained before, basically, this is lower realized gas sale price. So you may treat it as a kind of one-off from '24 and negative impact of the settlement of PPA, this is PLN 0.8 billion again from 2024. So now let's move to Downstream. And definitely, high refining margins help us a lot. So in the third quarter, that was almost doubling USD 15.2 per barrel. However, petrochemical margin is under pressure, 16% drop to PLN 168 per ton, but was very good. I believe crude oil production improved by 1%. So utilization of our Polish operations was basically 100%, whereas Lithuania, 94%. And in Czech Republic, that was lower utilization, 75% due to plant and unplanned shutdowns. So there was a failure in Litvinov. So that's why we produced less petrochemical products. So as you can see on this slide, petrochemical is minus PLN 92 million contribution to EBITDA LIFO. However, if it hasn't been for Litvínov failure, I believe that would be a kind of slight plus in the petrochemical business as well. However, we all know that we are looking at downstream business from the whole value chain perspective. So of course, great refining is offset by weak petrochemical business. However, altogether, I believe Downstream delivered very solid results of PLN 2.4 billion. Now let's move to Energy. The biggest improvement, higher result by PLN 500 million basically and the biggest improvement is in distribution networks of PLN 318 million, and that was basically due to increase in gas distribution volumes and higher gas and electricity distribution tariffs. In all other areas, as you can see, heating, conventional energy, new energy and electricity trading, we delivered positive results as well. Now let's move to Consumer & Products. Very stable result in retail, fuel and shops. And we see some pressure on the consumption and on the volumes. That's why it was a slight -- slight drop in this -- in that area. However, we managed to regain that drop from the nonfuel sale. We continued our promotions during summer period. So that decreased the margins. However, we managed to regain that from the nonfuel sale. And this increase of PLN 300 million is basically retail electricity and gas. But please bear in mind that part of this increase was again a kind of one-off from '24 that was positive impact of the settlement of PPA, roughly PLN 100 million, so slightly inflated the results. Altogether, PLN 1.6 billion EBITDA, very good result in Consumer Products. Now let's move to CapEx. So you can see the split of CapEx, our budgeted CapEx for '25, PLN 35 billion, and that's almost evenly spread across upstream supply, downstream and energy. However, in the past quarters, we indicated that our CapEx program is roughly between PLN 33 billion and PLN 35 billion. So looking at utilization of CapEx -- realization of CapEx for the first 3 quarters, probably we may expect to be at the closer to the lower end of this range. However, we'll see how this develops in the fourth quarter. Of course, we continue our projects in upstream and supply to increase our production according to our strategic goals. In downstream, of course, we have 3 areas of projects. One is enlarging value chain, which is new chemical project. Then we improve our product slate, and this is the construction of, for example, hydrocracking unit in Mažeikiai or hydrocracking oil block in Gdansk. And of course, we are doing projects that create biocomponents, second-generation bioethanol like [indiscernible] bioethanol in Jedlicze. In energy, of course, we all know that energy transformation is not only renewable energy, but we need to absolutely enlarge and modernize distribution network. So that's why you can see expansion and modernization of power grid and gas distribution network. And our key projects in the renewables energy is, of course, Baltic Sea. So we continue this project, and we target in the second half of 2026 to have this farm fully operational. We continue as well our CCGT project and Ostroleka and Grudziadz second half of '26 should be operational. And of course, we started the new projects like CCGT, Gron, the second plant and in Gdansk. As regards Consumer and Products, we expand and modernize and rebrand our fuel network stations, and we build alternative fuel stations network. So this is ongoing tasks, and we allocate sufficient CapEx for that project. So now let's move to our liquidity position. On Slide #12, we present the waterfall. So we generated -- or we delivered PLN 34.4 million operational cash flow. That was, of course, inflated by a working capital decrease, PLN 4.8 billion altogether for the first 3 quarters. However, the first quarter itself was a kind of minus PLN 2 billion. So we observed this effect of increasing oil and gas prices and volumes increase. So we spent investment cash flow PLN 21.9 billion. That includes our leasing cash out and managed to pay a record high dividend of PLN 7 billion. So altogether, we decreased our debt by PLN 6 billion. So we are in a very good financial position for the next years to come. We all know that we have quite significant CapEx program for the next 3 years. So this safe debt position is very helpful. Maturity, this is very important as well. Average maturity. We have like 2022 and '23, so like 7 years -- 6, 7 years of average maturity. So to finalize outlook, which is probably the most interesting slide in my presentation because here, we present how we see the macro environment and our operations. So we believe that we see fourth quarter so far, at least '25 as compared to third quarter '25 positive in upstream -- positively in Upstream and Energy segments, more or less stable in downstream and lower due to seasonality in customer and products. If we deep dive a little bit in all the segments. So in Upstream and supply, higher production because we don't have any significant maintenance works. We expect higher gas prices due to seasonality and higher sales volumes as well. However, lower oil prices that can, of course, impact the upstream business as well. But altogether, we believe it can be, at least, as I said, so far, good quarter for us. From the energy point of view, again, seasonality, so higher production sales and distribution, higher heat production, higher electricity quotations and higher gas prices may affect slightly negatively, of course, in Energy segment, however, altogether, positive as well. And mixed views in downstream, of course, refining is absolutely great, as we know. So this continues to be great. However, we may expect a little bit lower throughput, lower fuel wholesale volumes due to seasonality and of course, challenging environment in petrochemical business. So that's why, all in all, probably a kind of stable situation is the most probable outcome in downstream. And Consumer & Products, due to seasonality, we expect lower fuel sale and energy and gas negative as well. Of course, higher gas sales volumes, but we expect a negative impact of electricity tariff reduction and maintained frozen prices for household. So that concludes my presentation. So we are ready now for Q&A. So Jakub? Jakub Frejlich: Yes. Thank you very much. As usual, I would like to take your questions by saying who raised their hand first. And surprisingly, but not so much to ourselves. It's Anna from UBS, who's going to be asking the first question. Please go ahead. Anna, we can't hear you. Anna Butko Kishmariya: Can you hear me now? First will be around the wholesale margin in the refining. Can you please provide more details around what is the dynamic there? Because it looks like given how strong the refining margins currently are, it should be a very good support for the downstream segment in fourth quarter? And my second question will be around Azoty Polymers, if you can provide any color around when can we expect any updates for the deal? Unknown Executive: Thank you for your questions. As regards to the first one, we have Slide #17, where we present the kind of the most current macro situation in the fourth quarter. As you can see, model refining margin is absolutely extraordinary. This is 18. per barrel. We all know the macro environment, I believe. So I'm not going to elaborate much on that. This is definitely due to shortage of supply and basically the situation in Russia or the war in Ukraine. So this continue to be like that. Of course, in our base case scenario for the next quarters to come, we don't assume such a high refining margin. This is definitely extraordinary from our perspective. As regards the polymers projects, I can only confirm what is officially published. That means that we put on our offer of 1 billion cash-free debt-free and our offer is valid officially till the end of this year. So we are waiting still for the response of Grupa Azoty. So no progress official progress at least from what we are hearing in that area. Hopefully, this will develop in a positive way, but it's too early to conclude. Anna Butko Kishmariya: But regarding the wholesale refining margins, which you mentioned are a bit on the lower side. What's driving that? Unknown Executive: You mean this model refining margin, as I explained. Anna Butko Kishmariya: No, no, no. Like in the comments for the downstream segment, for example, one of the reasons you mentioned like lower wholesale margin. So can you please clarify there, what does it mean? Unknown Executive: Yes. This is more or less like inland premium we generate, and this is due to seasonality and lower consumption. So that's why this is our indication that in the wholesale business, the margins can be slightly lower. So this is basically the explanation. Anna Butko Kishmariya: And do you see those getting worse in fourth quarter or it will be stable? Unknown Executive: Sorry? Please say it again? Anna Butko Kishmariya: Comparing in fourth quarter to third quarter, do you expect it to worsen further? Or will it be stable? Unknown Executive: You mean fourth quarter? Anna Butko Kishmariya: Third quarter versus third quarter. Unknown Executive: We expect to be slightly lower, of course, as we indicated here, lower wholesale margins in refining. But slightly lower due to seasonality, basically. So this is not going to be a significant impact, I guess, as positive impact of model refining margin, definitely. Jakub Frejlich: Tomasz Krukowski. Santander. Unknown Executive: We can't hear you. Tomasz Krukowski: I think you can hear me now. Tomasz Krukowski, Santander. Three questions. The first one is specifically to Mr. Andre. And actually, I would like to hear your view on the dividend policy of the company. The company has a dividend policy. We are aware of that. But I'm wondering whether do you fully support this policy or you would like to introduce some changes to it. So this is the first one. The second is on the Energa situation. If you could give us some color in direction the analysis which you are performing is going? And the third one is on the refining. You already mentioned that you do not expect the refining macro to be so strong going forward. But actually, what is your reading of the situation right now? I mean, do you see any kind of lack of the product on the market, which is driving the prices? How is the situation with the Russian imports? What's your take on this? Unknown Executive: Thank you so much. As regards dividend policy, of course, we have official dividend policy, which was approved by the Management Board and Supervisory Board. So definitely still valid. And I'm in a position individually to change it, of course. I can give you just my comment on dividend, and I express those comments all the time. I was CFO in Orlen a few years ago. basically, my view is that the best dividend policy is basically to prove to the market that we are a dividend-paying company and consistently each year to pay slightly higher dividend. So if there is no extraordinary situation, my personal view is that Orlen absolutely should be a dividend-paying company, and we try to pay slightly higher each year, which was included in the strategy of Orlen from '25. And the second point, Energa, my comment on Energa is as follows. We have 4 segments, as we know, and we are much bigger due to those acquisitions we did a few years ago. So now absolutely, we should focus on creating a very efficient 4 business lines. And we are working on this efficiency in all the segments, so not only Energy segment, but as well in upstream and supply and customer and product. So this is the task which is ahead of us. We should create as agile and as flexible organization as we can. Of course, we are very, very complicated business, but we should be, as I said, as agile and flexible because macro environment can be challenging, can be dynamic. So that's why we are focusing to create in energy as well a very solid business line. However, no formal final decisions have been made so far. So it's difficult for me to comment at this stage apart from all official information we put is going to happen with Energa. As regards to refining margin, so I believe I said that this is basically perception of the market and the shortage of fuels, which is due to the fact that some installations in Russia were attacked by Ukraine. So basically, there's a shortage of fuel, and this is basically the -- we don't expect the situation continue in a sense that it would be absolutely unwise to create base case scenario based on this margin. So that's why I said that in our base case scenario for the next year and for the next years, of course, we don't assume double-digit refining margins so that we are a little bit conservative, let's say, looking into the current situation. And it's better to be conservative, I believe, in this area than to create a business plan and then CapEx and cash out based on the huge refining margin. So that's my comment on that. Tomasz Krukowski: And actually, do you see the lack of the product on the market? Do you have the clients calling you and saying, giving more diesel or sending more diesel? Unknown Executive: As regards our markets, no, we don't see a shortage. So from our perspective, absolutely, we are fully full of products. Jakub Frejlich: [indiscernible]. Unknown Analyst: Okay. So the first question, again, about dividend policy. Will the payout still be based on operating cash flow rather than free cash flow? Unknown Executive: So as I said the policy. And of course, unless we change it, we are going to follow it. So as regards to dividend policy, this is, as you know, up to 25% operational free cash flow minus interest, but this is up to. So each time each time, as you can imagine, we look before we give the final recommendation as regards to dividend payout, we look into current financial situation, current financial sting. And of course, we will propose this dividend in the second quarter of next year, probably. So we have still 2 quarters to go. So we will see how the market develops, how our cash flow look like, how our CapEx programs continue, and then we'll make the final decision. But yes, this is our... Unknown Analyst: Okay. So you don't assume any changes in dividend policy? Unknown Executive: Unless we update our strategy and we change. Unknown Analyst: Okay. The second question from my side. isn't your approach too conservative when you look at downstream segment for the fourth quarter, assuming current $25 a barrel refining margin? Unknown Executive: Of course, this is our perception. Maybe that's my view. It's better to be slightly less conservative than more optimistic. However, this is our assumption based on 6 weeks of the fourth quarter. So still, we have 6 weeks to go, and anything can happen. So this is our impression so far. And if you look purely from the refining margin, model refining margin perspective, which is more than PLN 18 billion -- USD 18 per barrel. So this is absolutely great. However, we have some challenges, as you know, in petrochemical business. Petrochemical margin is lower than the third quarter. Of course, our volumes should be slightly higher. We still don't know from the operations point of view, how our assets will operate. So that's why we are more cautious on that. That's why we present more or less stable situation. So stable situation means small pluses, small minuses, and we'll see. We'll see how the fourth quarter. Jakub Frejlich: We don't have follow-ups, please, Ricardo [indiscernible]. Ricardo Nasser de Rezende Filho: Can you hear me? Jakub Frejlich: Yes. Ricardo Nasser de Rezende Filho: A couple of questions on my side, if I may. The first one is on the CapEx. You mentioned that you're probably going to be at the lower end of the guidance of PLN 33 billion for this year. Can we assume that those -- that the PLN 2 billion would be spent next year? Or do you expect some CapEx savings and you might not have to disburse those PLN 2 billion? And then the second one is on the Consumer Products segment. You're talking about some of the margin pressures because of promos during the summer, just how the market is in Poland now. Do you still see some pressures there and you're still doing -- having to do some promos? And when should we expect margins to stabilize or even see some inflection on the margin side? Unknown Executive: Thank you so much. So as regards CapEx, -- if you assume that we have the budget of PLN 35 million, and I said that the range was PLN 33 million, 35 million. So basically, there are 2 items -- 2 big items that affects lower CapEx utilization. First one is CapEx spend on gas ships. Probably we explained that, that in the base case CapEx, we assumed 4 ships to be delivered. However, this year, only 2 will be delivered and the next 2 will be delivered next year. So that's why out of PLN 2.4 billion CapEx, PLN 1.2 billion will be booked this year and PLN 1.2 billion will be booked next year. So this is a kind of movement to next year. And second billion, we explained probably as far as my colleague told me, it was first quarter upstream, upstream projects. So we decided to just not to continue with one of the projects. That's why we decreased the CapEx plan for upstream. So it's difficult for me to say whether this is postponed or not, but because in Upstream, of course, we have our plan to deliver more production in the next years to come. So definitely, in Upstream, we'll prepare the CapEx for '26, which is appropriate to the targets we initiated in our strategy. So this is as regards CapEx. As regards Consumer & Products, I would say the margins are stable, and this is a kind of market time to time, we create promotions. If we create promotions, basically, we create promotions and to decrease the margins or to decrease the sales prices. And as a result, the margin slightly decreases. However, our goal is to regain this in nonfuel sale. We have more customers enrolling to our VITAY program as a result, so loyalty program. So definitely, we are going to continue with that. Ricardo Nasser de Rezende Filho: And if I may follow up on the upstream. On the strategy update, you had mentioned that you were looking at potential M&As in North America and the North Sea as well to increase your upstream production. Is there any updates on that front? Unknown Executive: I can give you a little bit kind of my personal view and the corporate view as well. Basically, we have quite significant CapEx for the next years, 3 years to come. Our flexibility in this CapEx is not very significant as we know. And in our strategy, we indicated that we have CapEx, basic CapEx and options for M&A. And this M&A -- in M&A, definitely, we have flexibility. So that's why I'm very cautious as regards putting any meaningful targets in M&A. We need to look into our cash flow position. We need to look into the macro environment development, and then we'll decide how much money we have -- we can allocate for M&A projects. So at this stage, I can confirm there are no meaningful projects on the table as regards upstream in U.S. Jakub Frejlich: [indiscernible]. Unknown Analyst: I got a question on your Upstream and Supply segment. First of all, can you tell us what kind of production dynamics do you expect next year? I think you mentioned that you plan to upgrade production in the next years. And the second question, can you tell us anything on your gas wholesale margins going forward? When I look at your gas contracts signed for next year, I see very big spreads. And can you comment on it? Unknown Executive: So as regards to the gas production, we are in the process of budgeting for '26. So I will not give you at this stage a kind of precise number, of course. And I can confirm what's in the strategy we put as far as I remember, the number of PLN 6 billion production from Norway, like PLN 4 billion from Polish operations. So this is a kind of target for 2030. So step by step, we are going to increase this number. As regards TO the -- can you be more specific as regards to the wholesale margin? You mean wholesale in Poland or wholesale from the kind of U.S. contracts. And... Unknown Analyst: What I mean is the gas margins in Poland, the margins which you book in the upstream and supply segment. So what I mean is the contract signed on TGE, yes, compared to 1 month TTF? Unknown Executive: Of course, we should look into development of gas prices, of course. And you are perfectly right in a sense that I explained a little bit this positive impact in '24. So '23 gas prices were very high. We booked at the high level, then prices dropped. So as a result, we managed to deliver roughly PLN 1.8 billion extra money. As regards to development of gas prices, of course, this is a big question, what kind of development we will see in the 2026. So at this stage, we don't provide a kind of full visibility on our goals. But generally, is going to be more stable than it used to be in the previous year. So I would not assume a very significant differences year-on-year on that. Unknown Analyst: Okay. So if you look at the EBITDA of the upstream segment this year and a scenario for next year that it is stable. Is it like reasonable? Is it optimistic or pessimistic at this moment? Unknown Executive: At this moment, I would assume stable, definitely. So we had this big drop as compared -- 2025 as compared to '24. So if you look longer term, like '26, '25, so it should be more or less -- I would assume this is the most realistic scenario, maybe slightly lower, but generally, not such a significant difference as '24, '25. Unknown Analyst: Okay. Okay. Understood. And a follow-up on CapEx. You mentioned that this year's CapEx will be like in the lower range, like closer probably to PLN 33 billion. And can you say anything about next year's CapEx? Will it -- is the PLN 33 billion benchmark a good one? Or should we expect higher CapEx because where there were some -- a few delays and I don't know, investments kick in. Can you say anything about this? Unknown Executive: Okay. At this stage, I can refer only to our strategic plan. And if you look into the strategic goals, of course, the CapEx is higher than 33%. So I would not assume at this stage that 33% is our benchmark. So please refer to our strategic plan, which is still valid. And -- of course, in the strategic plan, we indicated this M&A as well, which is flexible. So we will be very cautious on that area. But definitely, the range in the strategic plan was higher, as you know. Jakub Frejlich: [indiscernible]. Unknown Analyst: I got 2 questions, if I may. The first question will be a follow-up on refining because you said that you expect lower throughput. Is this because of the -- strictly because of the seasonality? Or do you have like planned turnaround on your plants in fourth quarter? And if so, which installations are you going to turn around? Unknown Executive: Basically, this refers to the planned shutdowns. So for example, in Orlen Lietuva, we have vacuum Flesher and this braking shutdown, plant shutdown. So that's why utilization of Orlen Lietuv is going to be below 80%. As regards Czech Republic, we have planned shutdowns as well in the steam cracker. So utilization of Czech Republic, if you assume roughly 85% would be the good assumption. As regards quartz, we are, of course, trying to achieve as much. It should be close to 100%. However, we have some shutdowns as well. So all in all, probably will be slightly lower than 100%. So if you summarize everything and compared to the third quarter, you can assume slightly lower throughput. Unknown Analyst: Okay. And second question will be about your Orlen project because I think it was like that you plan to come up with some review of that project in September, maybe lower -- maybe changing something in a budget or in assumptions for that project. Is there anything we should know about this? Or you are going to come up with... Unknown Executive: We continue our project. Yes, yes. Thank you for this question. We continue this project. We have only one item still on the table, which is final agreement with general contractor, CHT. And our goal is at least to conclude this up to the end of this year. However, we'll see how the situation develops. And when we have this final agreement with synchronized all the timetables and created the budget, the final kind of budget allocation and budget update. And once we are ready, we'll go to the market and communicate the full picture of that investment. So we should expect that probably first quarter next year. Jakub Frejlich: It does seem that the last speech [indiscernible] because there are no further questions unless this is for the -- we have a follow-up from Tomasz, good timing. Tomasz Krukowski: Yes. Just one on the CapEx. There's quite a lot of investments, especially in the downstream and in energy, which will be completed next year in 2027. And could you give us an estimate what kind of contribution to EBITDA would you expect from those completed investments in 2026 and in 2027, given current macro conditions, not the one which you had when you started those projects, but those that are at this moment. Unknown Executive: One minute ago, I was happy that I answered all the questions. However, finally, there is a question I cannot answer. So sorry for that, but those are the numbers we basically don't specify in details. And first of all, let's wait let's wait for these projects to be concluded. Once they are concluded, we look at into the macro environment, and then we may discuss in more detail. So sorry for this. But at this stage, please allow me not to give you any specific numbers. Tomasz Krukowski: But in general, do you expect this contribution to be positive? Or you think that there are going to be some projects which will be burning at the beginning? Unknown Executive: We believe that all the projects will be positive. However, the question is about the returns. And that's why we book this kind of impairments. Maybe this is the topic we can elaborate. In the third quarter, we booked PLN 1.1 billion impairment of new chemical projects, PLN 0.3 billion on the bottom of the bar in Mažeikiai. So you can -- this is a clear evidence that those projects are not delivering the return higher than weighted average cost of capital. However, this is not negative projects from the EBITDA point of view because it hasn't been negative from the EBITDA, it's a kind of wise move to just basically close this down, as we know. So you can assume definitely positive and which projects are difficult from the return perspective, you can observe our impairments, which we post. Jakub Frejlich: Now it seems that we left you speeches. So we will be concluding before the market opens. Thanks very much for answering this wake-up call from Orlen today. We may consider doing that going forward to have it before the session kicks off, but we're open for your feedback. Thanks very much for joining us today. If you have a spare hour in half an hour, we're having a press conference, including the CEO, so you can access it online. But for joining us. Thanks very much for your insightful questions, and see you in a quarter unless we see on the road before. Unknown Executive: Thank you very much. Thank you Bye-bye. Jakub Frejlich: Thank you very much.
Jose Antonio Calamonte: Good morning, everyone. Super happy to see you here one more time in our -- in this case, fiscal year '25 results announcement. And I'm going to cover the first part, the strategic part, and I'm going to then hand over to Aaron, who's our CFO, and I will give him the opportunity to introduce himself much better later. He will do a better job, and he's going to cover our financial results over fiscal year '25 and our outlook for fiscal year '26. And then we will move to Q&A that I'm sure this is what you guys are looking forward to. So let me start sharing with you a couple of reflections, and I promise I'm going to be short. Since I joined ASOS 4 years ago and since I became the CEO 3 years ago as well, I think it's clear in my mind, and I'm pretty sure you feel the same every time you come here, that this is a place full of energy, full of passion and with a very bold ambition to become the most inspirational destination for young fashion lovers in the planet. But it was also clear that we had a lot to do to get there. And what I'm going to try to do today briefly is to try to cover these 2 things. The first one is like -- and you already know, but I think it's always good to do a little bit of balance and to take stock. It's like what is it that gives us the right to compete in a market that is as dynamic as -- probably, I should say, ultra dynamic as our market and a market that is changing so much and where things like -- I mean, like AI is bringing a complete evolution to the market. So what is it that makes ASOS different and gives us the right to compete? And where are we in this journey to transform ASOS into this very ambitious vision that we have. So let me start with the first one. What is it that makes us different? And as I said before, we have a pretty bold ambition. We want to be the most inspirational destination for young fashion lovers in the planet, and we want to do it while at the same time, we have a business model that delivers excitement, but sustainability in terms of profit. So it is a really, really bold, if you want, ambition. And there are 3 main pillars that support this ambition, 3 main things that, in our mind, makes ASOS different and gives us the right to compete and to win. The first one is our obsession to always offer consumers the most relevant product. And relevant means it's the right product at the right time at the right price. We have a unique model here. We are -- we have a perfect blend between our brands and the best brands in the planet. And that is very weird to find. You're going to find great brands out there. You're going to find great retailers out there, but it's very difficult to find a formula like ours. And we are working very, very hard in making sure that our assortment is the most relevant all the time for consumers. And I hope during the course of these years, I have been able to convey how important both elements are our brands and our partners. And if not, hopefully, today, I will be able to do it so that you see that the value of our formula and why is it different. The second part is that we are obsessed with offering an inspirational shopping experience, and we offer today a different shopping experience. I'm going to say that with this picture you are seeing here that probably for you is just a nice and a beautiful picture. But in this picture, you see a model she's wearing 4 different brands. She's wearing Good American. She's wearing Mango, she's wearing ASOS Design and Dragon Diffusion. ASOS is the only place where you can see a picture like that. It's the only place where consumers can see a picture as realistic as this one because this is how they behave. Most consumers don't dress top to down with one brand. This is how they behave. And by the way, this is incredibly valuable for the brands as well because this is the only place where they can be in this type of context. And that makes ASOS shopping experience different and unique and inspirational, and we think that gives us the right to compete and a place in the market. And we do all that underpinned by an efficient operating model. We're obsessed with efficiency, with effectiveness. And this is really underpinning everything we do. That's what we -- that's why we're convinced we have a place in this market, and that's why we're convinced we can win and be relevant for our consumers. But to really deliver that, there was a lot to do. And I want to go fast over what we have done over the course of the last 3 years. I know 3 years is a very long period of time, but I think it's a good time to make this balance, and that's why I'm going to do it, and I'll not talk to you for too long. This has been a long journey with 3 clear steps. And I'm going to go fast over the first -- over the 3 steps. The first part of this journey was we had to deal with the legacy that we had. 3 years ago, this company had 2 main issues: stock and debt, very clear. We had GBP 1.1 million pounds in stock. That is a lot of stock. That is more than 100 million units in our warehouses. That is a lot of stock. During the course of these 3 years, and you have heard me a lot talking about stock, maybe too much. I'm not going to talk about stock today, but you have heard a lot of that from me, we have gone from GBP 1.1 billion to around GBP 400 million -- a little bit less than GBP 400 million in stock. That is a massive reduction of stock, somewhere between 50 million and 70 million units of stock reduction. That is really, really big, just put it into the context of the population of this country, and that will give you an idea of -- to what extent that was a big challenge. And why it was so important? Well, for a lot of reasons, but 2. One, we were sitting on a lot of money. Obviously, that is not very smart when you're sitting on money and you're not doing anything with it. And the other one, this old stock was preventing us from offering new stock to consumers. And remember, we want to offer the most relevant stock. The stock from last year and last, last year is the opposite of being relevant. So we really needed to clear that, and we've done it successfully. By doing that, we unlocked a great opportunity, which has been to optimize our footprint in terms of supply chain. And we have reduced our footprint in more than 50%. Obviously, that unlocks cost improvements, cost optimizations, and we have really seized that opportunity and taken it. And the second big challenge was debt. And as you have seen during the course of these 3 years, we have been restructuring our debt. We have been looking for flexibility and liquidity. The last time, it was last week. So you saw that we announced a successful restructuring last week that is giving us even more flexibility and more liquidity, and this is exactly what we wanted to get. And while we have done this, we have reduced our net debt in approximately 40%. So we can see there that we have successfully reset the essential foundations of our model. It was absolutely a must. There was no way to move on without doing that, and we are happy we've done it, and this is water under the bridge. Then we had to transform, refresh, I don't know which one is the right word, our business model. We were transitioning from a business model that was built on a lot of stock, as I said before, a lot of promotion, a lot of performance marketing into a business model based on speed, agility and profitability. It was very, very important to prove that we can make money while we do business. Otherwise, we become a different type of organization. And we started that journey by focusing on what is important to our consumers. That is to give them better product. This is what they want. They want relevant product, what they are looking for at the moment. They are not looking for a bargain necessarily. They're looking for something they like at a competitive price. And we did that built on 3 critical ideas. The first one was we want to make sure that we are first for fashion and the work behind that is speed. We have to be very fast to be able to offer our consumers what they want right now. This is one of the critical elements that our own brands play in that equation. They are our best opportunity to be super fast and react much faster to what the consumers are demanding. And that's why we're in a better place than just a pure retailer because we have a weapon they don't have. During these 3 years, we have been working on systematic solutions, not just a solution. We want a system that brings improvements and continues bringing improvements. And that is what we have done pretty much in everything we have been implementing and obviously, on the product side. And I think this is also a very important idea that I wanted to share with you, this obsession with systematic solutions. So we have been working on accelerating our time to market. And on average, we have accelerated our time to market by 30%. But if we go to our flagship project in this space, that is our Test & React that I also talked a lot about Test & React in the past, not today. It was a project. Today, it is more than 20% of our business in our own brands. Today, it's a reality that is really changing how we show in front of our consumers and the type of value proposition we can put in front of them. The second big idea was to bring more flexibility in the relationship we have with our partners. More flexibility means more ways of doing business, not just one avenue. Now we have several avenues. And this is helping us to do quite a few things. Obviously, one is to deepen the relationship with some of them. Some of them are growing very healthy because of that. And today, it has gone from a project to be more than 10% of our business with our partners, is done through these flexible models, either what we call partner fulfills when they do the delivery or ASOS fulfillment services where we take care of the delivery, but it's like businesses -- it's a different way of doing business. And also very important is the work we've been doing in how do we define our portfolio of brands, what we offer our consumers. I told you that this is about offering them relevant product. Not all the brands are relevant to consumers all the time. So in these 3 years, we have done a lot of, I don't know if the word is, cleansing or sharpening our brand portfolio. We had approximately 900 brands 3 years ago. Today, we will be more around 600. That has not been a journey of minus 300 because in this journey, we have added more than 100 new brands. So that gives you a little bit of the idea we have probably changed 50% of the portfolio one way or another. And we have not only done that, we are working more and more with our partners to develop exclusive products. Today, we develop exclusive products with approximately 40 brands. Again, our flagship project here is our collab with Adidas that you have seen all over the place. It's quite a unique collab. That is a multiyear type of collaboration that I think shows the role that ASOS can do with these type of brands, and it's generating a lot of positive effects with Adidas and a lot of interest in other brands, and we continue going in this direction. So we feel we have really had an impact on the assortment, on the value proposition our consumers see in front of their eyes. And this additional speed and this additional flexibility has been complemented with a very rigorous inventory management. Remember what I told you about systematic solutions before. We have a systematic way to deal with our inventory. We have a systematic way to tackle the problems early and not late. And putting together speed, flexibility and rigorous inventory management has helped us to significantly accelerate our stock turn or to reduce our -- I always -- reduce our cover, increase our stock turn. It's pretty much the same one way or another. In the last 2 years, we have reduced our cover by 20%, and that is having a very big impact on the quality of what our consumers see and what they're exposed to, but also our profitability because by offering our consumers better product, they buy more product at full price and then we can improve our margins. And that has had an impact, obviously, on our margins. We have systematically increased our gross margin. Last year, 370 basis points, we landed more than 47%. I remember 3 years ago when I said our ambition is to go to 50%, some people said, you are crazy, and probably they were right, but not because of that. Today, we're at 47%, and we are convinced we're in the right way to get to 50%. We are really taking the right steps to get there. And this is pretty much built on this flexibility and this capacity to sell more full price by coming faster to the market. That has been complemented with our effort in our efficiency. As I told you it is one of our pillars. We have looked for systematic solutions that is giving us relevant changes like we have significantly reduced our returns -- our underlying returns in 150 basis points or we have reduced our supply chain costs during the course of the last year, approximately 20%, and we continue finding new ways to improve our costs with these systematic solutions. When we put it all together, we wanted to change our business model to have a business model that gives us speed and profitability. I've been talking about the speed. Let me tell you about the profitability. Last year, we increased our EBITDA by more than 60%. We have increased our profit per order by 30% approximately. This is now a healthy business model that is producing profitability. So we feel in this second step of the journey, we have certainly moved the needle here, and we are in a place where we are now having a business model that is giving us what we wanted. That's why we feel that the time has come to really focus on reengaging with our consumers, focusing on bringing them back to ASOS on regaining their hearts and minds and again, positioning us as the most inspirational destination for young fashion lovers. And we are going to do that based on 3 main ideas. There's always 3. I'm sorry, I'm a pretty boring guy, but it's 3, 3, 3. You can call me Mr. 3, if you want. Three main ideas. The first one is a product we sell fashion -- I have told you many times, we are a fashion company that has technology that runs through our veins. So it's -- we are going to double down on all the exciting things we are doing to have the best product, the most relevant product in front of the eyes of our consumers. We're going to invest in putting our brand more in front of our consumers with a really ROI-driven mentality that is very important. And we are reinventing our shopping experience. Let me give you a little bit of color on each and every of these ideas, but this is what is giving us the confidence that we are in the right path to really return to sustainable and profitable growth. So let's talk about product. Let's talk about what is it that we're going to do this year. And the expression is quite simple. It's double down. We're going to continue doing what we've been doing, but more. So we're going to continue working on speed and flexibility. We're going to take our Test & React from 20% to 25%. We're going to take our flexible fulfillment from 10% to 15%. We're going to continue accelerating. We're going to continue going fast, fast, fast, more relevant, more relevant, more relevant. We're going to also invest more in quality. We are investing in fabrics. We're investing in [ workmanship ], in fits. We're going to continue doing that, investing in improving the sustainability of our fabrics and -- our materials, fabrics in general, not only fabrics, but also trends. And that can be seen in some of the new lines we've been launching recently. These are 3 examples here. You will see here a range, BreatheMax and AS Collective. Different lines we have launched recently, all of them with a focus in higher quality, all of them very successfully. They are having a very, very good reaction from our consumers and they are really resonating with them. And the last thing, we will continue sharpening our brand portfolio. That means new brands coming. So there are going to be more brands coming. That means more collaboration with the brands. The same thing we have done with Adidas, where we are going to -- this is a systematic solution again. We're going to start expanding that to other type of collaborations with other type of brands once we have shown to the world what we can do. Let me go to taking our brand in front of our consumers. And we're convinced that there has never been a better time to do that. And why is that? Well, first of all, because we have the right product. Second, because we have the right economics. As I told you, we have increased our profit per order by 30%. And third, because during the last years, we have learned a lot about how to do it, and we have increased the return on the ROAS of our marketing actions during the course of fiscal year '25. The second idea why we think there's never been a better time to do it is because we have a very, very clear strategy. We will continue increasing the ROAS of our performance marketing, where we are in a very positive path. And we are going to invest in expanding, in more frequency, in more breadth, in more quality of interactions with consumers. These interactions happen in real life, with pop-ups, with events. They happen in social, they happen in campaigns. And we have been learning how to do that, and we feel we are now much better equipped to do that. And what is giving us the confidence that this is true is that we are seeing very positive signs right now. We have seen that during the course of fiscal -- what we have a fiscal year '26, new consumers are growing in the U.K. by approximately 10%. We are seeing that we are getting more engagement and more average spend from our consumers. We are seeing that our retention rates in fiscal year '25 have improved in general, but more especially with our best consumers where they have improved 80 basis points. And we are seeing that some of these marketing actions, that it took us some time to learn, now they are having an impact. I just illustrated, for instance, with the pop-ups we are doing, at the beginning, we were really not getting there. The last 2 pop-ups we have done, one in the U.S. and one here, we have got sales per square meter -- sorry, I still think in square meters. I don't know how to do it in square feet. I still struggling with that. Sales per square meter, that are comparable with the most relevant operations in the market, and they are generating halo effects that are really visible for us, and we are seeing how it is impacting in the areas where we do these pop-ups. So we see it starting to work the way we want. So we are convinced this is the time to double down on what we're doing with marketing. And the last thing comes to the shopping experience. And let me go back to this idea that we offer a unique shopping experience. And again, this is -- you see a picture here, but what I see here is 3 brands perfectly blending into one picture. Here, you will see ASOS Design blending with another story and with ARKET. There is no other place in the planet where you can see that. That's why I say we always offer a unique experience, but we want to make it even more special for our consumers. This is going to be done on 3 axes, on 3 ideas. Again, 3, sorry. Outfits, outfits was always at the core of what we do, but we're going to take outfits to a different level, engagement and personalization. And all this is powered by AI. I know it's going to sound like, okay, you have to drop AI at a certain point in time. Now is the time to drop it. That is not the case. It's like AI is transforming this industry. I'm absolutely sure, and it's not just a belief because I believe in that, I'm seeing it. I'm seeing it with my own eyes, and I'm seeing it in ASOS. It's just like AI is opening possibilities that a few years ago, even months ago, but certainly years ago, were just like a dream, like an ambition, but it was not possible. Today, it's possible. And that is going to bring a lot of, I would say, tailwinds to the digital world. Tailwinds, yes. And we are right there to do it, and we are very, very much into it, always with this mentality of systematic solutions and with a mentality of very rigorous investment, but we are there. So this is something we have already started recently, and let me share with you some of the things we have started to do. One is the launch of our loyalty program, ASOS.WORLD, where we have launched a loyalty program really aligned with our value proposition of delivering excitement, inspiration. So it's not a loyalty program based on discounts. Sorry, if you were expecting that. This is giving access to consumers to exclusive products, early access, exclusive experiences. We launched it with a small cohort of consumers, I think it was in March. We really opened it to a bigger audience in the summer. In the U.K., both during the course of the first 6 months, we reached 1 million consumers -- 1 million members. Today, we are north of 1.6 million. We're very, very excited to see how fast this is growing and even more excited to see the impact design on consumers because what we see is that consumers that join our program increase their frequency and they not only increase their frequency, we get a more qualitative relationship with them. So we depend less on paid marketing, which obviously is good news for us. Second one is ASOS Live. We launched on-demand shopping platform. Every consumer that is interacting with that, 50% of them go to review the product, and they all increase the quality of their relationship with us, increase their conversion rates and the time they spend with ASOS, which is also very important for us. And the third one, the third example that I wanted to show you here is Topshop. We relaunched Topshop.com in the summer. We have seen that the vast majority of the consumers that are interacting Topshop.com are new consumers to ASOS. So it's not consumers from ASOS that now running through Topshop, it's new consumers to ASOS. And these are consumers that are coming with bigger baskets. So it's quite interesting way of capturing consumers. This is only the beginning. There is so much more to come. And I want to share with you just some examples because this is much more of the things that are coming. And I told you there are 3 main ideas. One is outfits. So you're going to see outfit generators. So consumers will be able to choose one item and then request that we generate an outfit for them, but we will use what we know about them and what we know about the trends to generate an outfit that is relevant for them in this moment. They're also going to be able to save outfits, to search outfits, to look for -- to look into the outfits of their celebrities they follow. So there's going to be a lot of a completely new experience or improved experience around the area of outfits that was already present in ASOS, as I've been telling you. Second idea was about engagement, and there's a lot about making it more immersive. And obviously, that means a lot of video. We're going to see much more video coming to the landing page, to the product pages, to the list pages. We're going to be -- we're going to see shoppable reels. We're going to obviously expand our loyalty program. Consumers will be able to search by trend, by occasion. We are going to incorporate much more community and influencers. There's a big, big change here. And the third idea that I told you is personalization, absolutely critical. There is this 4 you tap. We launched an AI Stylist in the past in a collab with Microsoft that we are going to improve even more in a renewal of our collaboration with Microsoft, and consumers will be able to personalize their search, make sure that the brands they love are more present in their search. So it's really a big, big change. But instead of hearing me talking, talking, talking, I thought that maybe it's interesting that you see it all together because when you see it all together is when it comes to life much better. So let me share with you, if I can. [Presentation] Jose Antonio Calamonte: They say that image is better than a thousand words, especially they are my words. So very, very ambitious program, really a step change in our customer proposition, in our shopping experience and a step change that is going to be delivered this fiscal year '26. And you're going to see a big change between what you see now and what you will see in a few months. So we are very, very excited about that. And I'm sure our consumers are going to be as well. This is such an amazing change. So let me conclude by kind of summarizing. As I told you, we have a very bold ambition. We think we have a place in the market and we can win, and we have to go through different steps to get there because it was a big change. We feel we have addressed these issues -- these legacy issues, and we have set the right foundations, structural foundations for this business. We have successfully transformed our business model so that we can offer to our consumers what they want in a profitable way. We are in the right moment, in the right time to really reengage with our consumers. We have a very clear plan. You've seen it. We have all the determination. The first signs we are seeing from the market are positive. We see growth in new consumers in the U.K. We see some geographies offering very interesting performance. We see visits doing much better. We see that the signs are here, and we are totally determined that now is the right time to do it. So now I'm going to hand over to Aaron. He's going to be really giving you the real stuff I gave you the blah, blah. So please, Aaron. Aaron Izzard: Thank you, Jose. But before I jump in, my name is Aaron Izzard, as I've met some of you before, but I'm really proud to be standing as CFO to present the FY '25 financial performance. And before I jump into the numbers, I think it's important to step back and say what was FY '25 about from a financial perspective? It was about delivering the second stage of our transformation, delivering sustainably profitable baseline for us to move forward and deliver against the third stage confidently. And it was really important to me in stepping into this role to make sure that we approach that second stage with the appropriate depth and rigor that it required to make sure that we can move confidently forward. That meant a deeper focus on variable and fixed cost optimization to make sure that we explored and delivered additional opportunities to set us up for FY '26. And the financial performance I'm going to talk you through reflects that. So I'll talk you through all the metrics. Firstly, GMV. This is our appropriate new measure for customer purchases, if you like, and it's our primary indicator of sales. So this reduced by 12% year-on-year, which is a reflection of the cautious consumer backdrop, but also the deliberate profitability actions that we took. Because of this, the quality of our sales improved. Gross margin increased by 370 basis points as a result of the increase in our full price mix and reduction in discounting. Cost to serve, whilst reduced by 12% in absolute terms, increased by 130 basis points, but when taking account of the deleveraging impact of our volume reduction of 200 basis points, there was around 100 basis points of efficiency improvements, which I'll talk about a bit more later. This contributed all of this together towards an improvement year-on-year in our EBITDA -- adjusted EBITDA of over GBP 50 million to GBP 132 million. From a balance sheet perspective, we reduced our stock further by GBP 118 million down to just over GBP 400 million. This is a reduction of 23%, reflecting the new operating model that is now fully embedded and the rollout of our new flexible fulfillment models. This represents the inventory cover that we will take forward, as Jose has already referred to. Free cash inflow of GBP 14 million, slightly reduced versus last year owed to the huge increase in -- reduction, sorry, in inventory that we delivered in FY '24, yet still the GBP 14 million was ahead of guidance. And finally, our net debt improved by GBP 112 million to GBP 185 million. This is as a result of the Topshop, Topman JV that we entered and the subsequent structural refinancing that we undertook in early FY '25. So looking at the geographies. As you can see, there was a reduction in GMV across these geographies, but the important point to note is that profitability improved across the board, which was our main priority for FY '25. There are a couple of geos though that I want to explicitly call out. The U.K. at minus 7% was more resilient as our home market, where consumers really responded to the product actions that we took, but also, of course, in a cautious consumer backdrop. And the other one is the U.S., minus 18%, does not tell the full story. The U.S. was the first market that we took deep profitability actions in FY '24 and many of those actions annualized in the second half of FY '25. When combined with the benefit of our sales of moving the fulfillment back to Barnsley and from the Atlanta closure, this opened up a wider assortment of product to the consumers. And those 2 actions combined with a number of other specific growth-driving activity that was in the U.S. H2 performance was minus 7% year-on-year. And Jose has already touched on it, but I'll talk a little bit more about some of the more recent trends later on. Key driver of our profitability improvement, as we've already said, was our gross margin improvements year-on-year. The main benefit within this was from the commercial model. And what this highlights, again, as Jose has already touched on, is that when we surface the right product, fresh product to consumers, they're willing to pay full price. And that's highlighted in the improvements in our margin through the new commercial operating model. We also delivered improvements through the success of our commission-based flex fulfillment models, and this contributed to the 370 basis points improvement in gross margin. It's important to note, though, that this isn't the result of profitability actions. This is a result of the improved offer that we've generated for the consumer and the gross margin is the output. More choice, newer, fresher product and a cleaner on-site experience all delivers a better experience, and that's resulted in the improvements in our gross margin. I've touched on this already, but our overall cost to serve in absolute terms reduced by 12%, but that is an increase as a percentage of sales to -- by 130 basis points. The volume deleverage, as I've mentioned, accounts for 200 basis points reduction, but also, we absorbed the inclusion of the Topshop royalties, which weren't prevalent in FY '24. That meant an underlying improvement in our efficiency, variable cost, in particular, efficiencies of around about 100 basis points, which was predominantly driven through supply chain, through reduction in returns rates, again, Jose has already touched on, but various different efficiency projects that we've landed. There is also a modest improvement in these numbers from a number of sizable projects that we landed towards the end of H2, most notably, the exit from the Atlanta warehouse, which generates annualized savings that we've talked about previously, but in particular, renegotiation of global distribution contracts, which has delivered a significant benefit, all of which will be felt in FY '26. All of -- the combination of embedded in this new operating model and the cost efficiencies more than offset the volume deleverage and was the main contributors towards our improvement in adjusted EBITDA of GBP 50 million year-on-year. This represents significant progress. And alongside those locked-in benefits that I've already mentioned that we delivered towards the end of Q4 gives us the platform to confidently move forward into our third stage of our transformation. Moving to cash. FY '25 saw modest inflow of cash of around GBP 14 million, ahead of our guidance, as mentioned, and as a result of our improved profit and discipline across the board. The new operating model delivered net working capital benefits of around GBP 40 million, as we normalize our inventory cover. Continued investment discipline reduced our CapEx by GBP 50 million year-on-year to GBP 86 million, although this increases to GBP 100 million when you include the Atlanta automation spend, which was subsequently reclassified to non-underlying. Net interest of GBP 33 million reflects reduced term loan interest from the refinancing that we did at the start of FY '25, but only includes half a year of the 2028 convertible bond interest. I'll talk a little bit more about structural free cash flow in the guidance section. Finally, before I move on to the outlook, I wanted to talk about the refinancing that hopefully you all saw announced last week. So maintaining our investment discipline is absolutely critical going forward to deliver on the final stage, but we embarked on this process in addition to the efficiency projects that we landed to create the investment fuel towards the end of FY '25. We embarked on this project and that one to increase -- improve our flexibility, as we move into the final stage. And I'm confident that this refi supports that flexibility required. This refinancing effectively replaces our first lien Bantry Bay facility, the RCF and term loan and delivers 3 significant improvements for us, extended term of 5 years out to 2030, additional liquidity headroom of GBP 87.5 million and a reduction in our interest rates, which delivers cash interest benefits on an LFL basis of around GBP 5 million. This refinancing reflects the strategic and profitability actions that we've taken and also reflects the partner confidence in our strategy going forward. So I'm just going to turn to outlook now. The clicker works. Thank you. So we expect in FY '26 with the new offer that we're accelerating for our GMV to show improving trajectory throughout the year. And within that, our GMV, we expect to perform around 3 to 4 percentage points ahead of revenue performance. Now we touched on it already, but we've already seen an improvement from the enhancements that we're making to the consumer offer in the metrics that we're seeing in FY '26. So there's been an improved sales trajectory, in particular, in the U.K. and U.S., some of our core markets. But more importantly, the lead indicator for midterm growth is new customer acquisition. And our new customer acquisition is improving across the board and is in 10 percentage points of growth in the U.K. year-to-date. We expect gross margin expansion of at least 100 basis points above 48%. And this, coupled with the efficiency benefits in the sizable projects that we landed towards FY '25, combined gives us the confidence in delivering GBP 150 million to GBP 180 million adjusted EBITDA in FY '26. We're expecting broadly neutral free cash flow in FY '26, which I'll come on to and talk about on the final slide. In the medium term, our guidance hasn't changed. We're expecting a return to GMV growth and adjusted EBITDA margin of 8%, which will contribute towards adjusted EBITDA sustainably being ahead of CapEx, interest and leases to generate structural free cash flow positive. Finally, I wanted to give a bit more context. I've been talking about this structural free cash flow throughout this presentation. But I think it's important to do that to look back over the last couple of years and how we generated our cash. And the chart on the left here shows that a big driver of our free cash flow positivity in the last couple of years has been through the benefits in working capital, as we've reduced our inventory. But we have shown improving structural free cash flow benefits in the left -- the far left-hand graph here, which shows our free cash flow, excluding working capital. We expect our FY '26 adjusted EBITDA of GBP 150 million to GBP 180 million to offset the CapEx leases and interest. But if I move -- if I use FY '26 as the platform for our medium-term aspirations and targets, there are a number of additional aspects in our midterm guidance, which we expect to deliver sustainable structural free cash flow generation. Improvements in our operating leverage through our GMV growth, continued expansion in our gross margin towards 50% and CapEx of 3% to 4% of sales will all represent opportunities to continue to enhance our structural free cash flow, and we are not reliant on any one of them individually to be able to deliver that. To wrap up, we're really, really pleased with the progress we've made in FY '25. FY '25 was about setting a structurally profitable base for us to move confidently into the third stage -- third and final stage of our transformation. And we're really, really confident in the plans that we've got in that final stage to be able to deliver growth and meaningfully free cash flow positive generation. Thanks for your attention. We'll now move to Q&A. Emily MacLeod: Thank you, Jose. Thank you, Aaron. For Q&A, as usual, we'll start with questions in the room first. If you could introduce yourself and where you're from before you ask your questions, that would be great. It looks like it's Anne first. Anne Critchlow: Anne Critchlow from Berenberg. I've got 2 questions, please. So I noticed that average basket value was up more strongly in the U.S. and the U.K. Just wondered if you could comment a little bit generally about average basket value, splitting it out between like-for-like inflation and mix. And do you see perhaps more potential to add more premium brands to the site? Is that the direction of travel? And then secondly, if you could just comment on performance by category, so womenswear, menswear, sportswear and formal versus casual, anything that's interesting and anything that you need to work harder on? Emily MacLeod: Thanks Anne. Jose, do you want to start with both of those questions. Aaron would follow... Jose Antonio Calamonte: Yes. Happy to do that. Good to see you. So we have seen average -- sorry, I was going to say ABV [indiscernible] shouldn't do that. Average basket value evolving positively during the course of the last -- not only the last 12 months, probably more the last 24 months. And we read that obviously, as an impact of our strategy to be able to have a more collective relationship with consumers and then they buy more full price, hence, less of a discount. So we've seen growth of 3% to 5% consistent year-on-year, one year and another year. And that has happened, if you want so far, not through a growth of number of units, but not with a decrease of number of units. So it's pretty much stable. It's more a growth of the value of the items consumers are putting in the basket. A different thing is what you were asking about more premium brands. And we have added a lot of brands, 100, during the course of the last 12 months. Some of them are more premium, and I was showing a picture with ARKET that can be considered for us a more premium brand or another story. In the other picture, it was Dragon Diffusion, but it is a bags brand, also can be considered more premium. It is having a very good -- Good American could be probably another example. It is having a very good reception with our consumers. So we are seeing an interest in brands that are -- I mean, the word premium is premium for our consumers in the perspective of the market. They are a little bit of mass market or higher up, the upper part of the mass market. The high end of the high street, probably I could say, is having a very good reception. Our consumers want relevant products. And when it's relevant, if it's a little bit more expensive, they are willing to pay the money for it. So certainly, it's a direction of travel. We are bringing more of these brands because we are seeing that our consumers are interacting well with them. So at the same time, we keep on bringing other brands that are lower price points, and we have other consumers that are fine with that. We always try to keep a very, very broad assortment for different type of consumers. So -- and then in the performance by category, we are happier with the performance in womenswear, definitely. It's the part that is working better. It's where we have put more effort. And -- I mean, not trying to damage anyone. Clearly, this is the core of our business, just like the business in fashion at least for ASOS is pretty much in womenswear. So this is where we're seeing a better performance. Sports, we are seeing a very good performance in apparel of sports, which was not the case in previous years that all the performance of sports was coming from footwear. Now it's coming more from apparel. Footwear is a little bit weaker, to be honest. And in our case, I mean, apparel is doing incredibly well, also fueled by some of the call-ups -- we are doing the call-up, we're doing with Adidas, is having a really big impact. So obviously, that is also doing it -- if you want, is amplifying the impact. In terms of categories, we are happy with jersey, with needs, but it's not -- there is not a clear standout, if you want, in terms of categories. So we're happy with what we're seeing in the collection and it's fairly well balanced. Emily MacLeod: John, would you like to go next... John Stevenson: Yes. John Stevenson at Peel Hunt. A couple of questions as well, please. Interested in the -- who the customer is in terms of the 10% growth in U.K. customer base you're seeing coming through. Are they hitting the same metrics as your existing core? Are they buying the same stuff for the KPIs you saying? Can you sort of talk about how you're attracting these guys in and what they're delivering to the mix? Secondly, just in terms of cost efficiency, Aaron, you mentioned, obviously, a lot of the work done last year. There's obviously a lot of like-for-like cost reduction coming in this year. Can we quantify that? And finally, if you can comment on what you think the right balance sheet structure will be for ASOS in the sort of 2, 3 years out? Emily MacLeod: Thanks, John. Jose, do you want to take the question on new customers first? And then, Aaron, you can take the second and third questions. Jose Antonio Calamonte: John, good to see. So yes, we are happy with what we're seeing in the U.K., seeing new customers. Obviously, it's very early to understand very well these new customers because the fact that they are new means that they have not interacted so much with us. But if you want in general terms, what we're seeing is that customers are improving the quality of the engagement with us. Let me explain what I mean with that. They're buying more categories. We are moving away from -- I mean, moving away, not completely, but we are reducing the amount of new customers that come on buy only one category. They're buying more categories. They are buying less promotion. We're also seeing that. And also, they are buying more fashion-oriented type of products. So in principle, it's all good signs because we know when consumers buy more categories or buy more fashion categories, they tend to be better consumers over time. But it's still early to know if that is going to have an impact or not. What we have seen is during the course of fiscal year '25, we have reduced churn on all types of consumers. So I think it's probably somehow correlated. Aaron Izzard: Thank you, John, for the question. I'll take the first part first. So the cost benefits I'm not going to quantify it, but what I can tell you is a number of the various different projects that we've done. So as I mentioned already, we have the benefit from the annualization of exit in Atlanta. We've already talked about the values there. Significant benefits from renegotiation of our distribution contracts, that's globally. It started in the U.K. As you can imagine, a sizable project that we expect to have huge benefits in FY '26. We are also reviewing all of our various different SaaS contracts and SaaS operations to streamline our underlying support in tech and continuing to review our returns fair use policy and various different activities to improve the experience for consumers, and that we expect that to improve our returns rate as well. In terms of the balance sheet structure in 2 to 3 years, look, our goal is to be neutral on debt and not have a net debt. But ultimately, what we want to do over the next few years is focus on growth. And the important thing for me when delivering the refinancing was making sure that we give the flexibility to the teams and the focus to make sure that if there are high ROI opportunities that we can invest in them for growth. But ultimately, we're building towards generating free cash flow and getting ourselves into a net neutral position, which will also help us capitalize, of course, on interest costs in the future. John Stevenson: How much of a restriction was the lack of headroom in the old facility? Did that actually stop you? Aaron Izzard: So I wouldn't say a restriction. Ultimately, we've created more flexibility. We had previously GBP 150 million term loan and the RCF wasn't available based on the ABL facility. What we've got now is a facility of GBP 150 million and GBP 87.5 million, which is readily available. So it creates additional headroom for us that allows us the flexibility, as we move forward. Emily MacLeod: Mia, I think you've got a question next. Mia Strauss: It's Mia Strauss from BNP Paribas. Just 2 for me. Maybe -- if we can maybe look at the customer profile over the last 5 -- say, 5 to 7 years, what sort of age demographic you're looking at? So maybe is the customer 5 years ago, someone who was 20 years old and they've now grown to 25? And do you have enough of the Gen Z cohort in that? Or do you need them? And then secondly, what sort of impact are you seeing from TikTok Shop? How you plan to compete with them? Because they're obviously more of a discovery sort of platform. So I appreciate the AI initiatives you're doing on your side, but is it maybe a little bit too late? Or just how you plan to address that? Emily MacLeod: Thanks. I think, Jose, if you take both of those questions, please? Jose Antonio Calamonte: So on the customer profile, obviously, we measure the average age of our customers. And what we have seen over the course of the last 5 years -- probably not sure 5, maybe it's a little bit too, but over the few years, is that it has not changed significantly. I think we have got, I'm going to try to be too precise, probably I'm wrong, 11 months older. So it's not a massive change. It's pretty much in the same space. You were dropping something interesting in the question that was like this Gen Z, do we need them? It's like our bull's eye, if I can use that expression, is 20-something. We used to use that expression. It's people in their 20s. Obviously, Gen Z would be probably a little bit young. But anyway, so -- but that doesn't really mean that we only talk to these consumers. You go to your bull's eye, but you know you have consumers that are older and younger for sure. So yes, having some Gen Zs -- of course, having Gen Zs plays a role, and we do have Gen Zs and actually, that's why we have such a broad assortment. We have some of our brands that are more targeted towards these younger consumers, whether Gen Zs or Gen Alpha, whatever they are now. So -- but it's not the core of our consumer. It's not that Gen Z is where we are -- it's not the bull eye, if that makes sense or not yet. One day, they will become bull eye. Then on the TikTok Shop, we are present in TikTok, which seems to be something really, really big in the U.S., not so big in the U.K. We are not seeing such a huge explosion in the U.K. We really use TikTok as a place of discovery, but not necessarily where people are executing the purchase. So we are present in TikTok with the TikTok Shop, and we also have our social marketing happening not only in Instagram, but also in TikTok, we're pretty active. And it's true. It's a place of discovery. It's a place where people go to find new brands. But at least in the U.K. and in Europe, we are not seeing this explosion that they seem to be having in the U.S. But we are there. And if that becomes a bigger channel, we will obviously capitalize on that because our obsession is to be where our consumers are. So it's like we are agnostic about that. It's like we want to be wherever they are. Mia Strauss: Just to follow up on that. Maybe what is your approach to the marketing side? So I appreciate that maybe the transaction doesn't happen on TikTok, but how do you get them from TikTok onto ASOS when you've got tools like the AI Stylist and things like that? Jose Antonio Calamonte: That's a great question. TikTok or Instagram could be similar. Obviously, we have a big presence there. We are working not only organically, we also work with content creators, with influencers from more well known to less well known. When we did, for instance, the relaunch of Topshop.com, we work with Cara Delevingne, super iconic, but we are working every day with influencers. So the ambition is, as I was saying before, to be where our consumers are, to be top of mind for our consumers. Then there is a transition into ASOS when they have more the intention to buy. Once they come to ASOS, tools like the AI Stylist plays a very important role in going back to this idea of the outfit. It's like consumers, what we see is that consumers don't buy one thing isolated. They want to buy a dress, but they want to understand how to wear this dress, which are the right shoes, which one is the right bag, which one is the right makeup, which one is the right. So there -- today, we have always been, in that sense, different because we've always brought this idea of outfits. But it was, if you want in a sense, a little bit static. It was much better than going to a physical store because in a physical store, you could see 10 outfits. And in ASOS, you could see 100,000 outfits. But it was static. Everybody was exposed to the same outfit. Suddenly, the AI Stylist, so AI as an enabler, is giving us the possibility to generate a specific outfit for every consumer, and that is incredibly powerful. What we're seeing is that the consumers that interact with the AI Stylist, they increase by 50%, I think it is, the amount of items they save for later. And we know that this is a leading indicator. When people start saving for later, they end up buying. So it is having a big impact. We're working -- as I said before, this is something we did in collab with Microsoft. We are not generating our own LLMs or anything like that. That would be completely crazy. And we will continue -- we are renewing our strategic alliance to continue developing that and to make it even better. The more we train the model, the better the model knows the consumers and the better the recommendations. And we are seeing an evolution there. So we see that there is a very natural flow from I discover a place where I can find what I want to I really want to transact with that place and then I want to do it in a more comprehensive way. Sorry, a very long answer. But don't let me talk too much because I could talk for hours. Emily MacLeod: Super. Sarah, do you want to go next and then Yash after? Sarah Roberts: Sarah from Barclays here. So just firstly, on the guidance of adjusted EBITDA of GBP 150 million to 180 million. Can you just take us through the puts and takes of what you need to believe in to get to the higher and the lower end? And at the higher end, do you have to believe in a return to growth next year? And then secondly, more broadly, we've seen a lot of headlines about agentic e-commerce in the news recently, potentially changing how consumers shop online. Just curious what your thoughts are on how ASOS fits into an agentic e-commerce world? Are you making investments in tech and product at the moment? And I suppose, are you -- could you consider partnerships with some of the AI players as we've seen Shopify do in the U.S. Emily MacLeod: I think, Aaron, if you take the first question on guidance and Jose, you can take the second one on agentic AI. Aaron Izzard: Yes. Great. Thank you, Emily. Thank you, Sarah, for your question. We've built our guidance for next year so that it doesn't require growth. That's the exact reason that we, you might say, extended our process on the second stage of this journey, creating us the flexibility, creating the investment fuel to be able to move confidently into the third stage. So within that guidance range, there is no explicit requirement for us to return to growth. But of course, what we've guided to is an improving trajectory on GMV, and that's what we're building towards. I think for us, really, the key thing is we've landed that second stage. We've created the efficiencies that enable us to move into structural free cash flow positive. The focus now is on making sure that we double down, as Jose said, on that final stage across investment in marketing, which will have a higher return on investment against it, against the customer experience and continuing to enhance our product offer. That's the focus. That's what we're getting everyone in this business focused on. And as we do that, it will enable us to continue to move through the guidance range. Jose Antonio Calamonte: Yes. So on agentic e-commerce, I guess you refer to checkout happening directly in ChatGPT or whatever of these things. So obviously, probably, we're going to get there. I think it's a very, very likely direction of trouble that is going to move from what today we call SEO more to, I think they call it GO -- sorry, I'm awful with these DLAs. There are so many. But -- so it's a different type of search engine type of optimization and marketing into this. And it will be a big change in the market. But at the end, the consumers will have to find a place to close the transaction. So obviously, we are open to that. I mean, as I said, we want to be wherever our consumers are, we don't skip. We just want to make sure that we offer the best assortment, the best shopping experience, and we are convinced that, that is the winning formula. Then you were talking about us partnering with AI specialists. And we do that. I mean we have -- as I said before, we have a strategic alliance with Microsoft. We have another alliance, an aesthetic project with a player called Sierra. Probably you guys never heard of them, but they are probably one of the biggest players in terms of AI solutions for customer care. And today, almost 50% of the interactions we have with customers in the U.K. happen through an AI solution and growing. And we're partnering with smaller start-ups as well. We have a partnership with a Turkish start-up. We have a partnership with some start-ups here in the U.K., in Israel. So we have a really big setup of different ways of approaching AI. As I said, we are doing that because we see that this is a fundamental change in the industry, and we are really embracing it. But we are doing that with a lot of rigor, making sure that our investments are really always under control, and they always bring value added to our consumers. So we're really focusing on that. But yes, we're really embracing the AI opportunity because we're convinced it is not going to change. It's already changing, as I said before, this market. I don't know if that was what you were looking for, Sarah. I hope it is. Emily MacLeod: Thanks. I think, Yash, you might end up being the last question in the interest of time. So just go ahead. Yashraj Rajani: Yashraj Rajani, UBS. So the first question is, if I just look at some of your competitors, whether it's the European pure plays or some of the U.K. omnichannel players, right, there's a big dichotomy in the performance of you versus them. And I appreciate there's been some legacy issues that you've been dealing with. But now that the legacy issues are behind us, who do you think you can take share from, especially given that some of these players are meaningfully larger than you, right? So that's the first question. And the second question related to that is, Jose, you spoke about trying to train the models and actually models getting better over time. Again, some of your competitors have bigger customer bases than you. Maybe they're a little bit ahead in some of that journey. So do you feel like you're playing a little bit of catch-up on that front? And if so, I mean, how are you making sure that you're getting in line or better than them? Emily MacLeod: I think Jose, if you take those questions. Jose Antonio Calamonte: Yes. So on our competitors, well, this is probably one of the most competitive markets in the planet. And I've said that so many times that that's why it's so fragmented. So we will be taking share from a lot of them, not just from one. It's not that we are going behind one. Our consumers today buy in ASOS. They buy in a lot of these competitors, you have implicitly mentioned. They are buying in other competitors you have not mentioned like secondhand or -- so there is like -- and we are not just going after one. We are not going after the entry price point. We're going after these individuals that they are interested in fashion at a competitive price. I think our current and future consumers are pretty much everywhere. There is not one target. There's not -- we're going to take it from competitor A, B or Z or whatever. We're going to take it probably from most of them. And this is what we're seeing in these new consumers that we are receiving. Actually, almost every consumer buys in more than one place. It's almost impossible to find a consumer that only buys in one place or consumers buy in different places. So it's also changing the share of wallet that they have here and there. On how do we train the models and if we are playing catch-up? That's quite an interesting question. When we talk to companies like Microsoft, clearly, we're not playing catch-up. We're ahead of the curve. We are one of their key partners globally to do that. So -- and it is true having a lot of information is very important. We have 16 million consumers, so we do have a lot of information. But it's not only the information you have, it's the quality of the information you have. And a lot of these competitors might not have the same quality of information. Omnichannel brands have normally less quality of information because -- so the offline interactions are less qualitative in terms of data, I mean. And even some of the online players, they are more worried about the transaction itself, where we're very worried about also the styling behind the transaction. So we have a very, very qualitative type of information about how consumers interact with different styling. And that is incredibly important for the journey we are trying to define, not for a different journey. So I think I'm convinced we're not playing catch-up. If anything, we're ahead of the curve, and we are determined to continue being ahead of the curve. Aaron Izzard: I think if I may, just to build on that. AI for us, we feel we're uniquely positioned to capitalize on AI, not only versus the offline players, but also if you think about the -- what Jose described around outfits and personalization, with this being a really core part of our proposition that we're going to add for consumers, that is different to what others are doing. And the use of AI can really turbocharge that, presenting outfits across tens of thousands of different products that we hold across a multitude of different brands and being able to surface them to the consumer in a really personalized way. I think this really gives us an opportunity for us to capitalize on, and that's how we're thinking about this with our new strategy and how we can utilize AI to turbocharge. Emily MacLeod: That's us at time. Thank you, everyone, for your questions. Jose, I'll just pass over to you. Jose Antonio Calamonte: Just wanted to thank all of you for coming here, especially on a Friday. I know it's not the easiest day to come. So thank you so much. As we both have said, we're incredibly excited about where we are and the prospects. We are very, very excited about the signs we're getting from the market at this beginning of fiscal year '26. And we will continue with this journey to completely finalize our journey to make ASOS the most exciting fashion destination in the planet, and I hope you guys will all witness this soon. So thank you so much, and looking forward to the next interaction with you guys. Thank you. Have a nice weekend.
Operator: Thanks for your patience, and also, welcome to join us for MINISO Group 2025 September Quarter Earnings Results Presentation. [Operator Instructions] We have already announced the 2025 September quarter performance early today, and you can also check our slides on investor relationship website. First of all, we are very happy to have Mr. Ye Guofu, the founder and the CEO, and also Mr. Zhang, our CFO, to join us for the webcast. Before we proceed, please refer to the safe harbor statement in our earnings release, and we are also going to make forward-staking statements. Today, we're going to discuss non-IFRS financial indicators today. And we have already included that into and explained that in the filings we filed to the regulators. And we also have already adjusted it with comparable indicators reported by IFRS. Otherwise noted, all the currencies in this presentation are in RMB. In addition, we also include financial and business slides for this presentation. [Operator Instructions] If you are using Zoom Meeting, you will be able to see the slides on the screen. And you can also check for the slides after the call on our IR website. Now let's welcome Mr. Ye to start the presentation. Guofu Ye: Good day, and welcome to MINISO Group 2025 September Quarter Earnings Results Presentation. This quarter, the group continued to deliver accelerated growth with revenue increased by 28.2%, supporting the high end of our guidance. And you can see multi-key indicators, including same-store sales and adjusted operating profit, either met to exceed our prior guidance, demonstrating the resilience and growth potential of our business model. Today, I'm going to walk you through quarterly performance highlights and share with you some of our insights for strategic initiatives. In September quarter, the total GMV grew by 28%, revenue increased by 28%. Same-store sales being accelerated, reaching mid-single-digit growth. Our 2 flagship brands, MINISO and TOP TOY demonstrating accelerating revenue momentum in Q3. MINISO brand grew by 23%, while TOP TOY delivered exceptional revenue growth of 111%. On the profitability front, the group maintained a stable GP margin of 44.7%, and the GP margin approached to RMB 2.6 billion, grew by 27.6%. This quarter marked a significant milestone as our adjusted operating profit crossed RMB 1 billion threshold for the first time, grew by 40.8%, reaching RMB 1.02 billion. Our adjusted operating margin stood at 17.6%, show sequential improvement from Q2. Coming next, I'm going to walk you through our quarterly performance across MINISO China, MINISO International and TOP TOY. Starting with MINISO domestic operation, revenue grew by 19.3%. The performance is outstanding, whether compared with China's total retail sales of the consumer goods grew by 3.4%, while online retail sales of the physical goods grew by 7.5% of the same period or measured against our previous guidance. What makes me particularly proud is the growth was coming from same-store sales growth, indicating high-quality growth that is more sustainable with lower operational risk, reflecting our continued enhancement of MINISO's core operational capacity. Entering into Q4, same-store growth still remained robust with strong National Day holiday performance, driving low double-digit same-store growth for the entire month of October. This quarter, we achieved a net addition of 102 MINISO stores domestically. Year-to-date 2025, we have accumulated a net increase of 21 stores. Our franchise base has already surpassed 1,100 for the first time. Since the beginning of this year, our franchise network welcomed new partners with diverse breakthrough and resources, enhancing MINISO franchise system, not only in scale, but also in business ecosystem sophistication. MINISO China business has significantly outperformed the broader consumer market, fundamentally driven our enhanced systematic operation capacity, take Q3 happy holiday shopping at MINISO campaign as an example. Based upon the comprehensive data analysis across multiple categories during holidays and also weekend, we forecasted that toy would be the category with greatest performance elasticities. Consequently, from the early product development to inventory planning, we allocated sufficient resources and capacities for toy category, and we also leverage the summer scenarios. For China front, we secured a prime location in top-tier shopping district with peak summer periods in advance of the PoPark stores, where for our regular store, everything from creative display merchandising to visual presentation of the promotion materials was deeply aligned with seasonal atmosphere and the core product highlights, achieving end-to-end customized operations. Compiled with the TNT brand endorsement announcement in August, we ultimately created powerful strategies of the right type channel, right timing, right product and the right marketing, maximizing the growth potential of our summer toy category. Turning to our international markets. In Q3, revenue exceeds RMB 2.3 billion, grew by 28%. Our international MINISO store network expanded at a net 170 stores during the quarter with year-to-date net addition of 306 stores. Our largest international market, United States, delivered revenue growth more than 65%, with same-store sales growth in a low double digit, exceeding our expectation. Our operational initiative in U.S. continued to strengthen and stable our long-term growth and continued to improve new store success rate, brand recognition and also with consumer retention across multiple dimensions. Starting from this year, we have a store expansion committee structure and a clustered store opening model, opening multiple stores at the same time in different locations. This can actually improve the management efficiency, and also, with great brand exposure, attracting great consumer attention. Year-to-date 2025, new member acquisition in U.S. market have grown by 100%. By progressively building bidirectional communication channels with consumer, we enable the companies to more precisely understand the consumer preference. Our membership program not only driven our revenue growth, but also providing critical data insights and consumer touch points for further enhancing repeat purchase rate. Regarding the product assortment, our IP product launch cadence operates like the release of the same, different season and monthly features, providing freshness to the consumer and encouraging the store activities. You can see that for beauty, consumer electronics, food and beverage, mainly served to drive the basket attachment and repeat purchase once consumers are in store. MINISO is committed in creating balanced product portfolio to achieve a more stable store operating model to address diversified consumer needs across different shopping occasions. The stronger result of the MINISO in both China and the U.S. market are giving us tremendous confidence in both international markets. Our experience in both major markets has provided proven systematic insights across 4 disciplines: optimizing store site selection, creating differentiated store formats, achieving precise product channel alignment and orchestrating full funnel market synergies, all of which can help to consolidate operational stability and long-term growth. International markets represent our key opportunities for MINISO's long-term expectation. We will systematically replicate and scale up our validated operational framework to more countries and regions. Every initiative is facing on the long-term sustained profitability, ultimately unlocking tremendous potentials of the global markets. TOP TOY delivered outstanding revenue growth by 111% in Q3, store account expanding a net increase of 40 locations, reaching 307 in total, including 292 in China, 50 outside China. Benefiting from the enhanced product competitiveness, particularly the rapid scaling of our proprietary IP, and it's actually achieved a very good growth, especially our proprietary IP, [indiscernible]. TOP TOY achieved a middle single-digit same-store sales growth in Q3 with significant gross margin optimization. TOP TOY also continued to elevate store presentation, transforming proprietary IP into more immersive experience, continue to contribute to our owned IP and proprietary IP and brands. This quarter, we achieved 2 significant milestones. First of all, our global network store number already surpassed 8,000 milestone. And our brand presence is actually in key global markets from Asia to Europe, from Americas, from established commercial districts to emerging neighborhoods. Our product and service are reaching an ever-expanding consumer base, marking a new chapter for our global expansion. The second milestone was our quarterly revenue crossing RMB 5 billion threshold for the first time, while a single quarter adjusted operating profit also break through RMB 1 billion mark for the first time. Moving forward, we will transition from scale-driven growth to a new development paradigm, emphasizing on both quality and scale, taking confidence and measured steps along the pathway of high-quality development. Achieving high-quality development need strategic directions and sustained execution excellence. For the past quarter, both our channel upgrades and IP metrics strategy have delivered significant breakthroughs. On the channel upgrade front, our inaugural MINISO FRIENDS store that has been inaugurated in high mall in Shenzhen. The FRIENDS format represent a crucial innovation with MINISO's channel upgrades with the following features. First of all, store design and product curation emphasize on IP content presentation, creating unique shopping experience akin and movie release schedules based upon the synchronized IP launch reason. Secondly, leveraging MINISO's comprehensive category coverage and multi-IP metrics product development, MINISO has already become an anchor tenant for selecting shopping malls so that we will be able to enjoy primary location with favorable lease terms and more marketing support from the mall operator. Thirdly, MINISO FRIENDS store positioned at accessible luxury store, designed for mid- to primary shopping center represent a strategic channel segmentation initiative for MINISO Group. Regarding proprietary IP, by November 2025, we have already contracted 16 pop toy artist IPs, building a rich and diversified owned IP portfolio with enriching IP value of our core objective. Our first artist at trendy district has already been launched at Beijing Road Play Grand store in Guangzhou. Through comprehensive scenario-based renovation of the designated area of the store on third floor, we precisely embedded the exclusive bird view of our TOP TOY IPs. The competitive island area generated a sales performance exceeding a typical store's entire monthly sales result in just 2 weeks. Furthermore, we created atmospheric installations and interactive elements that align the IP character personas transforming every space into extension of the IP storytelling. When consumer enter this immersive store environment, they not only experience the characters appeal and narrative depths of our system, but also deepen their IP understanding and emotional connections through the experimental touch point, facilitating meaningful transmission from product purchase to IP affinity, strengthening the emotional bond between consumer and IPs. I believe over the longer run, MINISO's core competitive advantage in category architecture and IP portfolio will become increasingly pronounced. Geopolitical macroeconomic uncertainties represent universal challenges to all companies. We are already well positioned for that. MINISO maintained the industry's most balanced and diversified IP portfolio with IP assets spanning international renowned licensed properties, primary domestic content, proprietary IP across multiple development tracks. Our extensive category cover enable rapid product assortment and also merchandising adjustment based upon the seasonal needs. And more importantly, we also have precise capture emerging trends and end-to-end channel control capacity, allow our operation to be more adaptive to the market change. Looking to the future, MINISO will capitalize on the expansive opportunities with lifestyle consumption sector, driving high-quality performance through continued strategic evolution. That conclude my remarks. I mean, next, I will turn the floor to Eason, who will walk you through our first 3 quarters' financial performance, please. Eason Zhang: Okay. Thank you. Hello, everyone. Welcome to join us for our September quarter earnings release. In front of you is a wonderful scorecard, which is actually showcasing how we leverage flexibilities and high-quality growth to navigate the future development. So first of all, let me help you to review our performance against our guidance. There are 4 guidance we provide you from revenue to SSSG and adjusted operating profit. We hit our profits. And there you can see actually regarding the guidance of the revenue growth. Well, for SSSG, we gave the guidance of a lower single-digit growth, but we made it mid-single digit. But a few points I'd like to share with you. For MINISO China, we made it to a high single-digit growth for SSSG, while at the same time for MINISO International, and we also made a middle single-digit growth. For TOP TOY, it also registered a mid- to high single-digit growth number. It is also worth mentioning that many of our stores in international market are franchised stores. The control is less than the direct operated stores. But even against such a backdrop, we will be able to have a low and positive growth among our 3,000 stores worldwide, while at the same time, you can also see adjusted operating profit also registered a double-digit growth, reaching 50%, where for the adjusted operating profit margin, our previous guidance was a minor improvement month by month. But actually, we made a net profit, 17.86%. And the decrease has already been narrowed down from 2.3 percentage to 2.1 percentage. From a revenue perspective, there are a few things I'd like to draw your attention to. First of all, 28.2% of the growth with RMB 5.8 billion revenue already go beyond our expectation. It's also the first time for the group's revenue to exceed RMB 5 billion. Our Q1 revenue growth was 80.92%, and also Q2, 23.13%, where for Q3, that was 28.2%. And you can also see that we foresee for Q4, the revenue growth would be around 25% to 30%, continue to deliver our commitment for a full year revenue growth by 25%. Well, let me also dive into our operating segments. MINISO Mainland China revenue grew by 90.3%. MINISO International growth was 27.7%, reaching RMB 2.3 billion. TOP TOY revenue surged by 111.4%, reaching RMB 570 million, significantly exceeding our expectation. Breakdown into domestic versus international, group's Mainland China revenue grew by 25%, and international revenue grew by 32.9%. We'll break down to different brands. For MINISO, as a brand with GMV close to RMB 35 billion to RMB 40 billion, and we'll still be able to manage a revenue growth by 23%. While for TOP TOY, the growth was more than 111%, as I mentioned. High-quality growth is inseparable from SSSG. In Q3, SSSG performed good, which can help to drive the same-store growth by a mid-single-digit number, among which in Q3, MINISO Mainland China same-store sales achieved high single-digit growth. Overall revenue growth was approaching 20%. October continued a strong same-store momentum, reaching a low double-digit growth, while for international same-store growth was a low single-digit number. Strategic markets like North America, Europe showing outstanding same-store performance. U.S. and Canada achieved low double-digit same-store growth in Q3, too. While for TOP TOY, same-store sales grew by mid-single-digit number, in line with our expectation. The improvement is because we captured the strategic and high potential product category with multiple sales opportunities. We also optimized the product assortment. We leveraged direct sourcing and international market, enhancing the merchandise dollar capacity, while at the same time, we always focus on product, coordinating with frontline operation, strengthening the refined product assortment management, conducting customized product development and also create some regular best sellers. More importantly, we emphasize on seasonal and holiday opportunities. We organized holiday plus IP-themed pop-up stores to stimulate the sales performance. Our directly operated market are the closest one to our headquarters management radius and also the first place where our strategies and adjustments take effect. The domestic market is our largest, most mature, but also most competitive intense market. Achieving positive same-store growth in such a fierce competition market in China not only validates our effectiveness of the measures we take, but also reflect our rapid market response capacity and strong execution. Through channel and store format differentiation, we continue to explore the boundaries of the same-store efficiency, continue to open up long-term store expansion opportunities. Excellent same-store performance has also emerged in our strategic directly operated market like U.S. Stores are the smallest profit-generating units, just like the sales of the body. Pursuing high-quality growth requires refined optimization of the store model beyond the traditional mall stores. We also actively explore plaza store. We leverage scientific decision-making to be selective for store opening, cluster openings and refined store staffing, continue to optimize profitabilities for the stores, allow the smallest profit unit can fully realize the potential in driving future high-quality growth. We are very happy to see that for our international directed operating stores, including U.S. and Canada, show significant Y-o-Y improvement in operating profit margin in Q3. We plan to first extend our China-U.S. success experience to Southeast Asia market in 2026. We will be in Southeast Asia market for nearly 10 years. Markets like Indonesia contribute substantial profits to company every year. However, alongside the local macroeconomic downturns and the social unrest, we faced certain operating challenges, especially the need for upgrading channel product assortment, organizational and Thailand improvement. The market optimization, we bottomed out this year. It's going to be the key focus of our strategy in 2023, and we are very confident to achieve success in those markets similar to what we accomplished in China in 2025. This quarter, the GP margin was 44.7%, used to be 44.9% same period last year. Looking at the first 9 months of 2025, GP margin was 44.4%, which was 44.1% last year. And I also mentioned our GP margin has climbed from 27% in 2021 to 44% today, increased by 70 percentage points over 4 years. This improvement stemmed from, first of all, continued increased contribution from our international revenue and also upgrades and solid execution of IP strategy. As international-directed operated business continued to expand along with category structured adjustment between quarters, seasonal fluctuations are inevitable. Going forward, we will continue to focus on balancing product price and volume. For IP product, we will persist in product innovation and value for money. And for non-IP products, we will emphasize product profitability and quality to price ratio, achieving better sales performance while maintaining overall GP margin. For this quarter, deducting the equity payment expenses and incentives, our SBC grew by 33.7%, representing 27.6% of the revenue. It is worth noticing SBC, share-based compensation, altogether totaled RMB 176 million, significantly increased compared with the previous period, primarily due to the TOP TOY equity incentives plan. The selling expenses, excluding SBC, grew by 36.5%. The increase was because our international-directed operational store investment, including the labor cost, leasing, depreciation and optimization grew by 40.7% in Q3. Well, you can see in Q1, this number used to be 71.4%, and 56.3% in Q2. So you can see directly operated store, their selling expenses growth has been clearly slowed down, while at the same time, the directly operated store revenue growth was close to 70% higher than the growth rate of the related expenses with significant deceleration because of our continued refined operation and strict expenses management. Well, coming next, let me also touch upon YH. Our investment in YH began to impact our financial statement last quarter. We accounted for these transactions using the equity method. The YH investment affect our net profit by RMB 146 million this quarter, which has been included from the non-IFRS financial metrics. Well, let's also talk about effective tax rate. With IFRS categories, our effective tax rate was 33.9% compared with 24.8% same period last year. 33.9% of the tax rate sounds to be relatively high, but it's not the true tax burden. It's primarily due to the share-based compensation and YH losses, where those items can't be deducted pretax under the tax law, but they actually didn't generate income tax relief, resulting in a higher effective tax rate on our financial statements. These expenses totaled around RMB 320 million. If we're excluding those impacting the nonoperating related items, our adjusted effective tax rate was 22.8%, 1% lower than last year. Let's also talk about profitability. Adjusted operating profit grew by 40.8% and reaching RMB 1.02 billion. Those were actually showcasing our operating quality. Adjusted operating margin was 7.6%, down by 2.1%, but a great improvement compared with Q1 and Q2. The decline in adjusted operating margin was due to the structural changes of the revenue composition. Looking at each of our major business segments, operating profit margin were either flat or improved. For example, international directed operating business maintained a high operating profit margin by a low single-digit number. China franchise business and international agent business have a flat growth, but why we see a 2.1% decline, the key reason is because international-directed operating revenue proportion continued to go up. The business profit margin still facing some gap compared with asset-light franchise and agents business model, causing dilution of the overall profit margin. But you can see as U.S. and Canada already have the directed operating model, the operating profit margin for international-operated -- directly operated business will continue to improve, especially we see low double-digit growth of the U.S. directly operated business going to bless the local profit margin, but we are operating in different countries and regions. We inevitably face profit fluctuations due to the regional economic and social environment. Our team is still young. Capacity needs to be improved, but there is significant room for growth. Q3 adjusted net profit grew by 11.7%, and adjusted EPS grew by 12.7%, adjusted EBITDA grew by 90%. The Y-o-Y also accelerated by quarter-by-quarter, but adjusted EBITDA margin was 23.4%. For the working capital, our inventory turnover remained robust and efficient. As of Q3, MINISO brand inventory turnover was 87 days compared with 104 and 94 days in Q1, Q2. You see our inventory efficiency improved in Q3. And at the same time, as of September 30, our cash reserve was RMB 7.77 billion, remained robust. And our net cash flow from operating activities reached RMB 1.3 billion with a net cash -- net profit to cash ratio 1.7. Capital expenditure was RMB 330 million. Free cash flow was RMB 970 million. In first 9 months of this year, net cash flow from operating activity was RMB 2.01 billion, exceeding adjusted net profit for the same period. Capital expenditure was RMB 770 million. Free cash flow was RMB 1.55 billion, demonstrate our high-quality profitability, efficient working capital management and our stable business, providing fuel for our future high-quality development. Last, but not least, I'd like to walk you through the outlook. Despite pressures and challenges in the micro consumption data, we remain confident achieving full-year guidance, having a 25% full-year revenue growth and RMB 3.65 billion to RMB 3.85 billion in operating profit. We see Q4 revenue grow by 25% to 30%, with China and U.S. same-store sales achieved double-digit growth. For the full year, we expect the China and the U.S. same-store grow by a mid-single-digit number. We expect Q4 operating profit will register double-digit Y-o-Y growth. Operating profit margin will still decline due to the revenue structural changes, but the decline would be modest, close to Q3. North America is about to enter into peak shopping season. China Q4 will maintain rapid growth. Even continued macro weakness in Southeast Asia may bring some impact, but our global business layout will diversify our operating risks. We will continue to talk to the capital market regarding the progress and the expectations. Thank you very much. Thank you. Let's now move into Q&A session. Operator: [Operator Instructions] First of all, let's welcome Michelle to raise a question, please. Michelle Cheng: Congratulations on the company's high-quality performance in September quarter. I have 2 questions. My first question is regarding domestic MINISO business. From the macro perspective, since Q2, despite consumption slowdown, we still see that MINISO's same-store sales and overall revenue growth continue to be accelerated. Particularly, we noticed the company seemed to have accelerated the rollout of the new store format. For example, Chairman Ye mentioned the MINISO FRIENDS as a new format. In your previous interview, Chairman Ye, you also mentioned you are going to renovate 80% of your domestic stores. Can you share with us the current progress of those store renovation, the targets? What about the unit economies? Anything you can share with us? This is actually my first question regarding domestic MINISO stores. And I also have another question regarding international outlook. Just now, Eason walked us through the Q4 outlook. Is it possible for you to elaborate on that because Q4 is always a peak season. Last year, we saw some adjustment. While for this year, enter into Q4 peak season, is there something worth noticing regarding inventory preparations, marketing, store operations? Can you share your work on the next year international strategy planning? Those are the 2 questions I have. Guofu Ye: We are extending the space. We upgrade from the small to large with greater frontage and better display space. The larger stores truly provide consumers with a better experience with more display space, larger, more attractive displays. We want to give more consumers a wonderful shopping experience. Moreover, opening large stores has a higher barrier to entry. Only MINISO's extensive IP portfolio and category place can truly support a large store format. If you don't have enough IP and product category, you won't be able to accommodate large stores. Our 2025 channel optimization achieved initial success, and we have accumulated systematic methodologies and experience. However, the number of the optimized store isn't large yet. In the upcoming years, we will proactively plan and implement store optimization work, hoping that we can optimize more stores next year. The pace of the store renovation would be gradual. We are not going to rush for that. Most importantly, we need to have the right location selection. Many existing stores already have a good profit margin. We will advance our strategy based upon the lease and the new store site selection. Thank you, Michelle. Let me just give a few updates. In the first 3 quarters, we've relocated and expanded and optimized more than 200 stores. The optimized sample store show significant store efficiency improvement, maintain healthy sales per square meter and the rent-to-sale ratio declined by a low single digit. This can help to driving high performance while achieving win-win for both companies and franchisees. Both parties have seen revenue and profit growth from the optimized stores. Store optimization will become a regular part of our channel expansion work. Well, regarding the outlook of the Q4, a few points I'd like to share with you. I think the September ordering conference was very successful with record high ordering amounts. 5 categories each exceed RMB 100 million in orders, and all specialized sections broke historical records. Category were quite evidenced. For IP merchandise, we have a strong creative outlook, where for value for money products, we continue to enhance cost and pricing competitiveness. Well, additionally speaking, our international, localized IP design and category implementation has already been improved. For example, the Mickey Merlion limited edition launched in Singapore in October, an airport store exclusive that perfectly match channel and merchandise. The product has extremely scarcities and differentiation. It actually created a new single store record. Our executive bearer was even asked by tourists at the airport to borrow her passport so that they can purchase more Mickey Merlion product from initial market insights to creative design to logistics support to integrated marketing every step worked closely, demonstrating IP merchandise store operation and marketing capacity integration. This is a very good and replicable IP operation model. This above demonstrated deeper collaborations between IP partners across entire value chain, including channel, product, operation, design. This month, Zootopia film would be released worldwide. And yesterday, Director of the Zotopia was also providing us very good comment on MINISO pop-up store by weaving ourself design product. We remain confident about long-term international opportunities. MINISO's achievements in both China and the U.S. market over the past years give us strong confidence in international market growth potential. The practice in the 2 major markets have provided us with proven systematic insights, optimizing store opening decision mechanism, creating differentiated store model and to be precise to have the product channel matching and full funnel marketing synergy. International markets are MINISO's core potential field for the long-term growth. Those proven, systematic, operational framework will gradually be replicated and extended to more countries and regions with every step centered on long-term sustainable profitability. And ultimately, we will be able to steadily release the tremendous global market opportunities. Operator: Next question, let's welcome Lina from HSBC. Hau-Yee Yan: Can all of you hear me? Operator: Yes, please. Hau-Yee Yan: Eason and Mr. Ye, congratulate on company's IP strategy success. I have a question to you. I know that IP means a lot for your same-store sales growth. There are some pulse-like growth where we know that for many of the investors, we really would like to know how sustained your growth would be when you just do IPO? Your product category are quite similar to Muji. But how are you going to comment on the non-IP product, especially from the existing suppliers? For example, if you're going to benchmark with Muji, Muji also registered a very good growth in China for the past few quarters, I'd like to ask you, how sustainable the growth would be? What are those categories that are going to register sustained growth in the near future? What would be your plan? Guofu Ye: We can see within the consumer conception, the most important and the best one is interest-driven consumption. And you can also see the most promising one is also the interest-driven consumption. Consumers no longer just pursue product functionality contributes, but also value the aesthetic identity, social labels, killing experience and spiritual satisfaction behind the product. That would be the ultimate pursuit for consumers. Going forward, consumer will pay for passion, pay for emotions. This interest-driven, emotionally connected consumption demand has higher stickiness and prime space and also becoming the company's core lever to navigating circles and building differentiated competitiveness. The IP transformation is not abandoning our existing category advantage, but rather IP plus core categories do well drive, allow our 10 years of accumulated experience to unleash greater value. Our supply chain resources covering the home goods, cosmetics, stationeries, [indiscernible], toys and snacks, along with the mature multi-category product development capacity, which are a great way to support our IP strategy implementation. MINISO is a very unique business model worldwide. IP empowerment isn't only about single point best seller, but also the full scenario penetration. Our product development capacity's key is understanding category and better understanding how IP can empower categories rather than printing a logo. For example, since November, MINISO's seasonal product has grown very fast, plush socks, scarves and gloves has captured and converted the traffic brought by IP. Our original key category are the perform [indiscernible] store. Essential categories, including home goods, cosmetics and stationery products, contribute our traffic -- stable traffic and repeated purchase, where IP is a growth catalyst, enhancing product design appeal and the brand pioneer through collaboration and same sale rules. We can also leverage IP popularities to boost the core category sales. The model is quite unique because single IP brands lack multi-category supply chain support, making full scenario coverage difficult. Traditional general merchandise brands lack mature IP development and operation capacity, but our 10 years of accumulated multi-category supply chain plus IP-integrated development capacity allows IP to rapidly penetrate into high-frequency consumption scenario, where key categories can leverage IP to break through the growth bottlenecks. Ultimately, forming a healthy growth structure of having essential category men traffic and category boost to profit. Operator: Let's also welcome Mr. Wei, Xiaopo from Citi. Xiaopo Wei: Can all of you hear me? Yes, great. My first question is quite forward-looking. Just now, I see Eason has already provided the guidance for the Q4 performance. As Eason, you are quite conservative about the guidance, so I think I don't have any doubt on that. But a question I may have is that U.S. business has a strong Q4 seasonality, where Q1 in 2026 will see seasonal declines. In your prepared remarks, you also mentioned you are improving your operational efficiency to buffer the seasonality impact. Is it possible for you to share with us from Q4 2025 to Q1 2026, whether the so-called seasonal decline trend would be similar to last year or narrow down compared with same period of last year? This is my first question. My next question, Mr. Ye, you mentioned about the China IP go for international market. You have already signed 16 artists. Then you're probably going to bring those IP outside China. Mr. Ye, according to your experience, in international market, for Chinese IP go for international business, how long will it take to develop them there? And whether it's going to hurt your profitability? Eason Zhang: Let me just respond to your questions regarding the seasonality of the U.S. business. And Mr. Ye will answer the second question. I think the questions are well raised. For the past 3 to 4 years, especially starting from 2021, and we started to work for direct operated business in U.S. Q1, generally speaking, is a low sales season in U.S. The store sales in low season will be around 10% to 20% lower than peak season in Q4. This is the common practice of the U.S. retail industry, but how we can iron out the seasonalities. One thing is store operation, where another thing is the store opening. You can see that our U.S. store, they do have a very good experience. A key takeaway is that in Q4 of the previous year, you have to make sure your stores being well prepared for presence. In Q4 of this year, we're going to have all the stores ready and not open new stores next year in Q4 in order to make sure that all stores are well in place in the first 3 quarters of every year. For example, in 2026, when I tell you how many stores we're going to have in U.S.? We need to make sure at least half of those promised stores are already been contracted. This is also a common practice in retail industry in U.S. In Q1 of 2026, you see we have a very nice store opening growth to iron out the seasonality on scale, where on the other side, regarding the business operation, we're not going to smooth out or iron out, but we are going to follow the trend because the essence of the retail is to capture and satisfy the consumer needs. For U.S. and the European market, they do have a very strong seasonality and the festival attributes. This is something we can work on. For consumers, they have very different needs in different seasonality. For example, Black Friday is coming. It's the peak season for consumers to spend, and the consumer willingness to consume were peaked. We have already made inventories ready. We have worked on the supply chain, making sure we have enough inventories to take care of the shopping festival needs from the consumer. And you can see in U.S., Q4 is still going to register good growth. We're not going to give up on the golden growth opportunity in Q4 just because of seasonality difference compared with Q1 of next year. We're going to leverage the seasonality dividends, having good marketing, seasonal disciplines as well as strategic inventory building, translating seasonal fluctuations into an exemplifier of our business. This is how we respect the market and also be able to continue to follow the retail development. Well, you can see that MINISO brand Chinese IP overseas will definitely leverage our unique advantage, not letting China IP to go it alone. We're going to leverage our past licensed IP experience and massive IP portfolio for mutual empowerment. For example, on first of this month, MINISO Canada National flagship store has its grand opening. Such a prime store provided best stage for IP going overseas, representing a key milestone for MINISO global IP strategy. The Canada National flagship store open day sales again broke North American new store open sales record. Such successful opening was inseparable from the IP catalyst. The event was featured by [indiscernible] surprise, triggering people to check in and purchase the product. Coordinating with this store opening, our gifted bear family made its overseas debut with very cute and lovely design that filled with the opening atmosphere as a joy for energy. The Chinese IP go for international market is not starting from 0. It was standing on the shooter of the giants to -- for steady growth. We have every confidence leveraging our store resources worldwide and a very successful experience to bring Chinese IP international wide. Operator: Coming next, let's welcome Samuel from UBS, please. Samuel Wang: I have a question also concerning U.S. market. Recently, no matter for the capital market or investors, we find out the U.S. consumer market has been relatively weakened recently and especially the performance of the retail market in U.S. was not looking right. I would like to ask you, what do you see in the U.S. market, especially in October, what would be the SSSG in U.S.? In that way, how you're going to find your own measures? And also, for U.S. market, specifically, how we're going to look into a full-year revenue and profit guidance for U.S. market? Eason Zhang: I'm Eason. Let me just respond to your question. U.S., indeed, we see some of the high-frequency consumption data, especially credit data consumption from the U.S. was quite weak. But it was actually external macro environment pressure that it cannot be avoided. What we can do is to strive to be the best of ours and give our all. I have already mentioned to you the 3 strategies being mentioned. For example, the thing was to take care of the holiday, early preparation, sufficient inventories and good adoptions. Now, we have already been prepared for the decorations ahead of the time, finished creating holiday shopping experience. And the store inventory is more abundant than last year. We expect that the U.S. Q4 revenue growth would be a low double-digit growth, where for Q4 revenue growth would be 50% to 55%. The same-store growth will be low double-digit growth. Well, for Q4, I think the scale growth would be slower than Q3. It's because we are slower than last year for numbers of the stores opened and the cadence, but still, the profit is going to generate a healthy growth. Thank you, Samuel. Operator: Let me also welcome Xu, Xiaofang from Citic. Xiaofang Xu: I have a question regarding your proprietary designer IP. I can surely feel the company investors and the consumers have a high expectation of a proprietary designer IP. Looking to the next 3 years, how the designer and the proprietary design IP may look like? Are you going to have a designer ecosystem organizing the trendy toy communities exhibitions, where you invest in the secondhand market? Guofu Ye: By end of June, we have already signed 9 designer IPs. And by Q3, we signed 16. We are proactively discovering highly potential original toy art IPs globally, working hard to build MINISO trendy toy IP landscape. When there is one IP breaks out, it will definitely show exponential growth. The upper limit for proprietary IP volume is anchored to the trillion level interest to consumption market. Generation Z has already become the key consumption force, close to RMB 260 million of them, and their annual consumption would be more than RMB 5 trillion, and they are happy to pay for emotional value. And -- but at the same time, proprietary IP growth always have the risk backstops. We continue to test market through small batch trial sales data iteration, but adjust our design style and the category based upon the market needs and feedback. Such model allow proprietary IP to grow steadily within a very safe trial and error framework, avoiding traditional IP incubation pain points of high investment, high risk and unpredictable returns. We're going to continue. Where for MINISO, we have a great advantage, full category coverage, omnichannel penetration, global layout, full funnel operation. Our stores themselves are theme park ecosystems. MINISO LAND and MINISO FRIENDS has a checking area with proprietary IP characters, placing IP characters sculptured model in the most prominent areas. We also have audience zones like Shiba signing event. And we also have the dedicated product display areas and interactive activities like the gifted bear family plush [indiscernible] that you can see when you visit MINISO stores. Products are key in IP ecosystem. Good product doesn't consume IP, but actually enhance IP value. Yu Yu second-generation ring [indiscernible] has excellent sales with the product innovation and liability maximizing secondary creation attributes. In marketing, MINISO plush festival gifted bear mascot performed supporting store opening activities, and screens in store checkout areas play cute gifted bear family in cartoon clips in snow form that can help enhance IP exposure and strengthen IP personalities and images. Operator: Coming next, we're going to have Runbo from CICC. Runbo Yang: Maybe we will move to our next analyst first. Let's also welcome Shi, Di from Huatai Securities. Can you hear me? Di Shi: Yes. My question is regarding your China business. I find out your store format is more in retail, including the SPACE, LAND and FRIENDS stores and flagship stores. And can you break down on the appropriate proportion structures of different store types in sequential expansion plans? And for your store renovation and upgraded stores, how it's going to drive your domestic business growth? Guofu Ye: In the near future, we're going to have 2 kinds of the store models, different models are going to have different VE and logo. The first one is the Wonderland and the regular stores for -- we leverage meaningful space, meaningful land and meaningful land to provide people a Wonderland experience. But at the same time, we also have the regular stores, benchmarking the higher tier and the newer tier cities, asking for the prime location, where we're going to make sure it can cover as many as the traffic possible. Looking at the quantities and different store types, more will still be the flagship stores and existing store location optimization expansion, where we have 2 logos for the regular stores. We have 2 store types. When consumers come to our store, when they look at our exterior design, they will surely understand what are those MINISO LAND, FRIENDS and SPACE, what are the regular stores, where at the same time, we can see still -- we're going to continue to work on the flagship store and the store door renovation, where we're also going to leverage our brand priming and bargain power to leverage the best location in the commercial districts and continue to upgrade our channel. We're also going to leverage 8,000 stores to have a good and high-frequency consumer feedback to provide us the market data and continue to empower our channel upgrading and also lay a solid foundation to further improve our product performance. So that's the reason starting from this year on, our store type is going to be more diversified. Well, at the same time, even for the MINISO, we have MINISO SPACE, MINISO LAND and MINISO FRIENDS. And in the near future, we're also going to have the Super MINISO. Well, for regular stores, we do have the regular stores, small stores, car parks and also the train station stores. By so doing, we're going to be more focused on our IP strategy and making sure we really roll out the product for the price to quality product, which will make our store presence more clear to the consumer, which will also create good space for our IP strategy to continue to navigate the market development. Operator: Coming next, we're going to have Runbo from CICC to raise a question. Runbo Yang: Can all of you hear me? Operator: Yes. Runbo Yang: My name is Runbo. Congratulate on the continued optimization of the company. And 2 questions. First of all, I see your domestic business continue to go up with more larger and well-performed stores being demonstrated. What would be your next year business development and your store number forecast? My second question, for outside China, especially outside China, U.S., what would be the retail market you see now? Do you see some pressures? What will be the regional difference -- performance difference? Eason Zhang: I'm Eason. Let me just respond to your question. In China, we have already confirmed, in China, we are going to seek for high-quality growth, inseparable for the store growth, where in China, we have a mid-double-digit or even high-double-digit growth, which would be supported by SSSG improvement. Well, for this year, our internal KPI assessment also introduced SSSG and hoping that we're going to improve our performance in 2026. The SSSG target for 2026 are not being confirmed yet, but we hope we can have the best-in-class SSSG in our industry. Regarding international business, in Q3, the international market that performed weak are the third-party agency markets, especially in Southeast Asia and Latin American markets. There are some macroeconomic seasonalities. For example, the local currency exchange rate fluctuations and also the consumption tax changes. But we are happy to see that from beginning to now, the terminal GMV growth is much better than our shipment GMV growth. In other words, our agency inventories would be quite healthy. They can still travel light in 2026. In some key markets, like Southeast Asia, GMV already been accelerated in Q3 with a double-digit growth. And we also see there are some comparable listed companies in Southeast Asia, say October consumption stay improved, but we're still observing the performance. Thirdly, we will also be proactive in adjusting the product assortment channel. Many of our investors have already joined us for the order meeting with the new heights being achieved. I surely believe those high order would continued to be converted into revenue contribution in the next few quarters. More importantly, we are very confident that our success in U.S. and China proven our business ability and resilience. We have every confidence to that. For overseas market, we do have the direct sales and agency business. Direct sales would be something we can reach first, which can actually showcase our key market sensing capacities, fast response, where agency market, it was somewhat not easy to be well managed, and we are adjusting the assortment and the channel. We have already identified the root cause. Let's leave more time for further execution to improve the performance. Operator: Final question, Anne from Jefferies. Can you hear me? Kin Shun Ling: I have 2 questions to you. Now, you see your equity incentives plan was registered a high number. Eason also mentioned there are some equity incentives from TOP TOY included into Q3 performance. Is it possible for you to share with us regarding equity incentives plan? What are the KPIs inside? And how it may look like in next quarter? Will you continue to have such equity incentives in the next few quarters? My second question for TOP TOY, I think your drafted prospectus has already been filed. What would be your IPO schedule for TOP TOY? What would be the relationship between you and the TOP TOY? I know you may have some related party transactions. And many of the profit and sales being given to TOP TOY. But once TOP TOY has been IPO-ed or spin offed, what will be the relationship between the 2 entities? And how can we protect the interest of the stakeholders of the MINISO? Guofu Ye: For this quarter and the next quarter, the expenditure was relatively high due to the equity incentives plan for TOP TOY. As you have already mentioned that for TOP TOY, its revenue doubled this quarter, significantly exceeding expectation. We believe excellent team in excellent sector combined with incentives, they can release more growth potential. TOP TOY has always been MINISO's fully consolidated subsidiary. So MINISO shareholders were also benefited from TOP TOY's high growth. The IPO plan is advancing now. We will inform the market when any progress being made. Both industry and the TOP TOY brand are in rapid development period. As a leading player, TOP TOY's market share continues expanding from user to category to region. We continue to explore the boundary. TOP TOY also see abundant market opportunities. The only reason for IPO is hoping TOP TOY can become stronger and continue to expand its business, fully capture the broad opportunities in the trendy toy market. Okay. Let me just give one more comment for Anne. Internally, we actually made some long-term discussion. There's no better strategies to advance by having both entities, MINISO and TOP TOY, would be the best strategy. We can leverage MINISO's full category and omnichannel operation and global presence along with TOP TOY as a specialized trendy toy brands. The trendy toy market is growing very fast with explosive growth rate. I believe both business would be able to let our business to be the top one in the dual market. You were worried about SBC expenses. It's going to be RMB 100 million for this quarter and another RMB 100 million for next quarter. It's actually a normal accounting that after we have been IPO-ed. For MINISO, in 2020, after IPO, you can see that SBC and the team equity incentives plan, it's going to be diluted and amortized a few quarters after the IPO, and it's going to have higher IPO in the first few quarters, but going to be smaller in the next few quarters. Operator: Ladies and gentlemen, we conclude the earnings call for September quarter. Thank you very much for your participation. If you have any follow-up questions, please contact our IR team. I wish you a wonderful weekend. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Jonathan Oatley: Good morning, ladies and gentlemen. I'll just start with a few introductions for those of you who don't know us. My name is Joe Oatley. I'm the Chairman. To my immediate left, Frank Doorenbosch, CEO; and to his left, Ian Tichias, CFO. The bit of introduction is, I believe you should be able to submit questions at any time during the presentation, and then we'll come back to them and answer them at the end. I think the key takeaway for me from this set of half year results is, it's really steady progress, a really robust performance, and we've delivered what we said we're going to deliver. In a moment, Frank and Ian will take you through the details, and I don't want to steal their thunder, but there is one thing I wanted to just pick out and highlight. Some 3 years ago, we set off on a journey of transformation under Frank's leadership, and he set some quite stretching and ambitious financial goals for the business on return on sales and return on capital employed. And I'm really proud and delighted that the business is now at a level of performance and achievement where we are meeting those goals. You'll see some more detail on that as we go through. As we're now moving into the next phase of our strategy where we're seeking growth on top of that stable platform that we've now delivered, it's important to remember that we will continue our focus on cost discipline. We'll continue our focus on capital discipline and we'll continue our laser focus on operational effectiveness and operational performance. And those are the underpins for our future success. I think with that, I'll hand over to Frank to take us through the presentation. Frank Doorenbosch: Thank you, Joe. So yes, good morning, and thank you all for joining us. As Joe said, I'm Frank Doorenbosch. I'm the CEO of Carclo. And today, we are presenting our half year results. And besides Joe, I'm also very pleased to say that we have delivered on our projection. So through the agenda, this morning presentation will have 3 parts. First, I will take you through the journey, the transformation we've executed over the past 3 years. Ian Tichias, our CFO, will then walk you through the status, the financial results and what they mean for our balance sheet. And I will close with the future, how we scale this platform further. So let's begin. When I took over the helm at Carclo in 2022, we set out to transform this business from volume to value. Three years on, the transformation is complete. We've rebuilt the portfolio. We strengthened the margins. We improved capital efficiency, and we fortified the balance sheet. This was disciplined, structured and deliberate. So let me show you what we delivered. Before we discuss financials, let me start with something more important, safety. We maintained our incident frequency ratio at 0.6 in the first half, sustaining the significant improvement we achieved in full year '25. There is a saying we use internally. Safety is operational excellence in disguise. When you perfect the art of preventing accidents, you accidentally perfect everything else. This is not just good ethics, it is good business. This culture of operational excellence flows through everything we do in quality, efficiency, margin discipline. You will see that in the numbers. So we delivered on our projections, 4 numbers will tell the complete story. 10.1% return on sales as we transitioned from volume to value; 28.8% return on capital employed to optimize capital deployment; 1.4x leverage, strengthening our balance sheet; and GBP 57.2 million in revenue via disciplined portfolio repositioning. Four metrics, one story from volume to value. So let me put those numbers in context. In '23, we have set medium-term targets that were ambitious, but we knew they were realizable in the business we are, 10% return on sales and 25% return on capital employed. We have now exceeded both 10.1% return on sales and 28.8% return on capital employed. This wasn't luck. It was portfolio discipline and operational focus. And we've done it while reducing leverage from 2.5x in FY '22 to currently 1.4x. Control before growth, that was the plan, and we delivered it. This chart shows the portfolio transformation from FY '22 to today. We stopped the Manufacturing contract, which would deliver insufficient margin when we would have started that into with manufacturing. We've also exited low-margin, capital-intensive business. GBP 13 million of revenue we have choose to walk away from. The overhaul of asset revitalization project is now behind us, and we are now moving to focus ourselves on scalable growth and innovation programs. And in the past 3.5 years, we have grown the chosen CTP Manufacturing Solutions by 4% cumulative growth rate and Specialty by 14%, both on a constant currency basis. The results versus FY '22 when we started. Our portfolio margin has expanded from 4.1% to 10.1% return on sales. Our capital productivity has quadrupled and our balance sheet leverage has improved from 2.5x to 1.4x. The portfolio reset is complete. We now focus our talent, capital and engineering capabilities on highly critical opportunities in regulated markets. So here's what it looked like across our divisions. Our CTP Manufacturing Solutions demonstrate the disciplined portfolio management and strategic resilience. In FY '23, we generated GBP 92 million from our core focused portfolio. The COVID-19 PCR testing boom temporarily inflated FY '23 results. As the market normalized, we've experienced the expected decline through FY '24 to GBP 85 million. However, this masks the real story, our deliberate pivot towards high-value life science and safety and security solutions. Since FY '24, we have delivered consistent growth, reaching GBP 19 million in the trailing 12 months half year '26. This steady upward trajectory reflects the strength of our repositioned portfolio and validates our strategic focus on sustainable, high-value market segments. The business we've built today is more resilient. It's more focused, it's more valuable and positioned for continued growth in markets with strong structural demand. And Specialty, GBP 10 million was delivered with 14% cumulative growth rate in the last 3.5 years, mainly driven by our aerospace manufacturing. The CTP Design & Engineering operates on a project basis, driving natural volatility. FY '24's peak reflected our asset revitalization program, addressing years of underinvestment across our partnerships. With operational excellence restored and margins expanded, we are pivoting to growth and innovation programs, recurring revenue streams built on sustained asset quality. We're staying on top of our maintenance to ensure we will never slip back. The portfolio is optimized for sustainable growth in high reliability precision solutions in restricted regulated markets of life sciences, aerospace and safety and security. Strategic exits are complete, low-margin. Capital-intensive business is eliminated. The result, Carclo has stronger margins, enhanced ROCE and a scalable platform for growth. That's the journey. And now Ian will take over and get you through the numbers in detail. Ian Tichias: Thanks, Frank. It is a pleasure to announce our half year results for the financial year 2026, which we believe demonstrate continued performance in line with our expectations. Starting with the overall group financial performance. On a reported headline basis, revenue has dropped, and that's something I will explain in more detail on the next slide as it has been impacted by some FX headwinds as well as comparing to HY '25, which included revenue from sites impacted by our exit from the non-core activities completed a year ago. Despite this drop in reported revenue, we have grown underlying operating profit from GBP 3.4 million in HY '25 to GBP 5.5 million this year. And alongside that, EBITDA has grown to GBP 8.6 million, which is now 15% of revenue when compared to 11% a year ago and 13% at the last year-end in March. This excellent EBITDA delivery has driven positive cash generation, which after accounting for the expected working capital outflow in the period is still strongly positive at GBP 3.9 million. Net debt now stands at GBP 24.5 million. Now I will cover the detailed movement in net debt later, but key to point out that this is now 3% lower than the same time last year. So moving to look at the revenue profile. The profile demonstrates the benefit of the hard work of previous years as we have tightened the product portfolio and focused on key value drivers across the business. We have absorbed negative FX impact of GBP 1.5 million on revenue, primarily coming from the translation of our U.S. business and the impact in the last 6 or 7 months of the GBP-U.S. dollar rate as well as other currencies from the various markets in which we operate. Within CTP, our focus has been on portfolio refinement and completing strategic customer projects. Accordingly, D&E project revenue has dropped GBP 2.9 million. As we have previously discussed, we have exited non-core primarily short-run business. The final site exit related to this was in the comparative reporting period last year. Accordingly, there is GBP 2.2 million revenue included in last year's numbers. So pleasingly, allowing for this, on a like-for-like basis, our CTP Manufacturing Solutions revenue has grown by 4.5% in constant currency. The Specialty division also continues to thrive and grow, and we report 14% growth in the business, driven primarily by the aerospace sector. As Frank has previously told you, we are delighted to deliver improved margins. This is demonstrated by exceeding the medium-term target we set ourselves a couple of years ago by hitting a return on sales of 10.1%. This has come about through consistent delivery of improved margins over time. For this reporting period, we have continued to improve efficiencies through reduced wastage, materials usage and more efficient power usage. And this focus on a more streamlined value-added portfolio has enabled us to absorb increases in labor costs and some non-repeatable costs. So moving now to look at the divisional breakdown and firstly, with CTP. So as previously described, revenue is down on a reported basis. CTP Manufacturing Solution has increased 4.5% on a like-for-like basis, allowing for the GBP 2.2 million from site closures last year. D&E revenue reduced by 44% to GBP 4 million. And as a result of the portfolio reset, we have had lower customer activity, primarily in the U.S., which has been the key driver. Performance in EMEA. Project activity is strong in EMEA with revenue up 21% compared to the previous year. We have grown operating profit due to the self-help increased efficiencies that I just mentioned. And through enhanced machine utilization, rigorous cost control initiatives, we have steadily improved margins for several reporting periods now, and this trend has continued throughout HY '26. This sees our operating margin in CTP increased from 8.1% -- 8.2%, sorry, to 13.8% and is also up from the 12% in FY '25. So turning now to Specialty. The robust demand in aerospace, coupled with a return to growth for light and motion in this business unit have driven growth of GBP 1 million, which is over 14%. The operational focus and discipline in the business has also increased operating profit margin to over 21%. So now moving to look at our cash generation. Strong EBITDA growth has driven operating cash generation of GBP 3.9 million. This has been partially offset by an anticipated normalization of working capital. At the year-end, we previously talked about working capital being particularly low due to higher-than-normal provisions and accruals, and this has largely been unwound as we anticipated. And accordingly, working capital is now at 7.5% of revenue. This is at the higher end of the range we have previously talked about and should now be at a normalized level. Looking at net debt. This has dropped to GBP 24.5 million on the next slide, please. So this has now dropped to GBP 24.5 million when compared to a year ago. In comparing to the year-end balance of GBP 19.2 million, it has increased, and this is primarily due to the one-off pension deficit recovery payment made in April '25 of GBP 5.1 million. This payment was made as part of the refinancing arrangements we completed in April. Our new facilities with our lending partner, BZ is working very well, and we are very pleased with this arrangement. Moving now to the topic of the pension scheme deficit. At the last results presentation, we discussed how we are being proactive in managing the deficit and acknowledging that the subject of the deficit has previously been somewhat ignored. I think it's important to acknowledge the significance and also the actions we are taking with a proactive approach to reducing the deficit. We are aligned and work collaboratively with the trustees, which is vital to managing the position and reducing the technical provisions deficit. Since March '21, the deficit has reduced from GBP 83 million to GBP 61 million at the end of March '25 and further reduced to around GBP 53 million at the end of September. This has been achieved through a combination of higher investment returns and company contributions. Having a clear and agreed deficit recovery plan is important in derisking cash flow for the company. This chart shows that as we have continued to deliver performance, growing EBITDA, we have also been able to manage the risk more closely, seeing pension administration costs come down and accordingly, the cash cost and risk to the business has reduced. We will continue in our approach to further derisk the company cash flows. So finally from me, in summary, the business is more financially resilient. We have a stronger balance sheet with well-managed working capital and net debt. Delivering higher margins is now a solid trend, supporting good quality of earnings, and we continue to make sure our assets deliver more for the business. Thank you very much. I'll hand back to Frank. Frank Doorenbosch: Thank you, Ian. So you've seen the journey. You've seen the status. Let me now show you how we scale from here. Next slide, please. This pyramid shows our strategic road map. The foundation is complete. You saw the proof in Ian's numbers, financial resilience, operating excellence. And that foundation gives us the platform to move into Phase II, disciplined expansion and Phase III, innovation. From control to growth, that's where we are now. Let me show you the markets we are targeting. We're positioned in 3 high-growth, highly regulated markets. The IVD solutions, so our diagnostic consumables, we partner with 6 of the top 10 IVD OEMs and the market is growing with 5.6% cumulative growth rate between now and 2030. Drug delivery, auto-injectors and inhalers, custom solutions with regulatory excellence, the market is growing at 10.8%, which is the fastest of the 3 and delivering good opportunities for us. In aerospace, for our extreme performance parts, we are the leader in the [ MRO ] cables and wires, and we're adding machining to our portfolio. The market itself grows at 5.6%, with our additional machining portfolio addition will bring us to the high double-digit growth. We've got 3 restricted regulated markets. We've got strong positions and we've got structural tailwinds. And we're focused on where we have competitive advantage. So why do we win in these markets? Three reasons: technology, trust and transformation. Technology. We've got 40-plus years of precision engineering experience. We've got ISO 13485, FDA and AS9100 registered sites and our manufacturing platform now delivers 85% plus overall equipment efficiency. Trust. We partner with key players in all these respective markets. Our average relationship tenure is 15 years plus. And with 98% plus on-time delivery performance, we also there deliver on our commitments. Transformation. We've delivered it. 10.1% RoS, nearly 2.5x FY '22; 28.8% ROCE, 4x '22. And we've approximately invested GBP 14 million in the period FY '22-FY '25 to uplift our organization. So technology validates us. Trust creates stickiness and transformation proves execution. That's our competitive advantage. So we are now investing to widen our competitive moat through proprietary innovation with 3 priorities. The technology platform, for example, the C-Mould, our new modular tooling system, which accelerates time to market for our partners by 40%. We build it once, we deploy it globally. It's scalable capitation and replicatable region to region. In product innovation, working on an inhaler platform, which integrates counter and reusable holder. And on material development, we're managing wettability tuning for fluids. It's platform-led solutions for regulated markets. And digital intelligence. Our platform [ Syncura ], will be a digital layer for packaging and devices, real-time orders ready and traceability. So innovation isn't an idea. It is a system and our begins long before the product. We're building defensible IP that compounds our competitive advantage. So let me bring this together and why we are confident in delivering sustainable profitable growth and ensuring value for all stakeholders. Again, we've achieved the milestones set in 2023. 10% return on sales, target met; 28.8% ROCE, target exceeded. Recent highlights reinforce confidence. Safety culture is embedded with an IRR of 0.6. We've got a 5-year contract renewal from our major customer secured in July. We've got GBP 36 million in financing funding arranged in April. Now we're focused on 3 growth priorities: Life Sciences expansion, advancing our presence where high-precision solutions remain in robust demand. Specialty growth, sustaining the momentum in Aerospace with our Specialty division and further margin enhancement, continuing the journey from volume provider to value solution partner. So yes, we are confident in delivering sustainable profitable growth and ensuring value for all stakeholders. So thank you, and we're happy to take your questions. Jonathan Oatley: Thank you, Frank. I'm slightly disturbed that I don't have any questions showing on my system. Can I just check? Hold on. Let me refresh and see if it comes through. We do have one question coming from Chris. And the question is for the full year -- looks like this one is for you, Ian. Will the full year accounts include distributable reserves? Ian Tichias: Well, I'm not going to be in a position to forecast our numbers for the full year. So it's quite difficult to actually answer that directly. But we are confident in terms of how we are performing at the moment and confident in delivering our full year numbers. Jonathan Oatley: Okay. Another one just coming from Andrew. In previous presentations, you reported on the improving trend in environmental sustainability for the group. Seeing that nothing is included this time, I wonder if you could provide an update? Still with you, Ian. Ian Tichias: Yes, happy to take that. So we do tend to focus on that in our full year results. But I can kind of talk to the fact that we measure our energy intensity ratio, which is a measure of our carbon emissions per GBP 1 million of revenue. That's consistently dropped in the last 3 years. And actually, the reporting period now for HY '26 shows a continuation of that. So we're at 76.4 now, which is actually a 25% reduction from the number of 3 years ago. Jonathan Oatley: I'll just allow another minute or 2 to see if anybody has any further questions. There's nothing else showing on my screen. Ian Tichias: I can probably just add to that, actually. We are also in the process of establishing a governance structure for our ESG and our sustainability targets. And as I said, we'll report more on that full year. Jonathan Oatley: Okay. I think if we have no further questions, Frank, do you want to say a couple of words to wrap up, just to summarize? Frank Doorenbosch: Yes. I'm extremely proud to be -- being part and coaching the journey of this team. We've got a very, very motivated team to change in this organization. We've been able to keep ourselves focused and disciplined. And at the end, people are now focused on the growth. We now restructured in the right way, got the right platform. We've done it in 2.5, 3 years. That was within the plan. We always said medium term to get somewhere. I know people were very skeptical in the beginning, but we said the returns were there now. I think we are return-wise roughly where the market asks us to be. And now it's for us delivering the growth in the future. Jonathan Oatley: Thank you very much. Thank you, everybody, for joining. We hope to see you all in just over 6 months' time when we're doing the full year results. Ian Tichias: Thank you very much. Frank Doorenbosch: Thank you.
Peter Podesser: Good morning, ladies and gentlemen, and thank you for joining us in this call presenting our Q3 and 9-month figures as well as an overview of the business right now. Together with Daniel, we will lead you through all the key figures, but also key facts relevant to the 9-month period right now, but also naturally on to the outlook. And thereafter, we will be happy to answer all your questions. No question, we are looking back to a soft quarter. We're looking back also to a challenging period here in the business. We have to say, as also anticipated as this was one of the key reasons why we saw ourselves obliged to bring down the guidance back in Q3 at the end of July. But naturally, starting with this point, I think we want to give you, let's say, a solid and concrete analysis on this. If we look at the development here in the first 9 months, we see a slower growth than originally planned in core parts of the business. And if we look into the main reasons of deviations, I think we have to start off with the biggest impact on the defense business. In India, we saw a postponement of the follow-on programs here for our EMILY and JENNY deployments -- EMILY and JENNY fuel cell deployments to the Indian Army based on a decision that was basically a repurposing of funds during this current fiscal year. We have spent quite some time in various meetings on site in India. And I think within the last 3 months, we see -- I think we see solid signs and we see, let's say, basis also for a rebound within, let's say, the next fiscal year here for the business in India, maybe not back to immediately the levels of the 2024 business, but at definitely higher levels than we see it in '25. Two additional elements here. We have signed service and repair contracts, comprehensive maintenance contracts now for all the deployments with the Indian Army, which going forward as of Q4, and we have signed them last Friday. So going forward, this is basically also covering more or less local cost and also yield a proper capacity loading here for our operation in India. And we have also started last weekend local methanol filling here as we do it in other parts of the world, North America and Asia as well. So we are also able now to provide local methanol, address also cost concerns from customers there and also see this as a basis also for the rebound. So India, the first element here of deviation this year, definitely, I'd say, volume-wise, the biggest impact. If we look at our organic growth, we also see a growing -- we still see a growing business in the U.S. Overall, in the first 9 months, we see about 28% growth, but we have to say, especially with new customers, we were expecting also based on historical growth rates, a significantly higher growth. The overall economic uncertainties have an impact on decision-making of our customers there. And therefore, we have missed out on the original plan to see growth above 40%. As said, 28% organic in the first 9 months and a corridor that we also expect until the end of the year is per se, a solid growth number, but definitely not what we had planned for and what we expected. The third element, and Daniel will dive into this, yes, we have seen 3 functional currencies, I'd say, devaluating significantly against the euro, U.S. dollar, Canadian dollar as well as the Indian rupee with an impact on sales and earnings, getting into this in a bit. If we look now into, let's say, the reaction on these developments, I think we are seeing first fruits out of, let's say, cost alignment and cost measures that we have implemented right immediately in third quarter. We are seeing, let's say, a normalization, especially on IT and ERP spending and I think also functional cost, you will hear from Daniel is, I think, an alignment on what we implemented. As also mentioned before, we are not talking about here now a significant headcount reduction at all. I think we are in a selective hiring mode here in those areas where we see growth, and we are reallocating also resources to those areas where we see growth, and we are taking capacity out in those areas where we don't see growth. If we now look into the third quarter, we have to -- we are seeing a significant increase especially on the order intake side, which also is the basis for us expecting a strong fourth quarter. We are overall seeing an increase to a book-to-bill ratio of 1.2 compared to about 0.76 in the first half of the year. And combined with, let's say, a product mix also impacted and positively impacted by a higher defense sales ratio in the fourth quarter, we see a positive impact also in the fourth quarter. If we now look also into, let's say, the next steps of implementing our strategy, I think the acquisition of a 15% stake in Oneberry Technologies in Singapore is a key element, on the one hand, for the regional expansion of the business, we are seeing Singapore as the regional hub for the expansion in Southeast Asia. The closing process is in a final phase. And besides the regional expansion, I think we have a unique opportunity here to learn and to step into a business model that is highly attractive and profitable where Oneberry is operating under a security as a service business model for their AI-based unmanned security solutions from border protection to drone defense applications and critical infrastructure protection. Overall, we have an option also to take majority ownership, and we are working actively on this as also a platform for further growth in Asia as of 2026. Furthermore, important to inform you about the U.S. operation. We are on track for the ability to do the local production to ramp up the local production in our facility in Salt Lake City. Strengthening our local-for-local program here at the end helps us to reduce exposure to import tariffs. But over time, naturally also makes us less vulnerable and depending on exchange rate and currency risks by establishing a local supply chain. Our team from the U.S. right now is here in Europe for training. And therefore, we will be ready to have a first pilot series produced still this quarter and ready for production early 2026. So overall, looking at the sales performance, we see a decline of 2.4% as said, not happy with this performance, the reasons for the deviation, the reasons for the decline, the main reasons mentioned here. If we look into, let's say, the order intake, I mentioned this, seeing EUR 34.6 million in the third quarter, we see a significant increase to the previous quarters. So the book-to-bill ratio now is up 1.2% in this quarter, and this also naturally gives us a solid basis here now for the final weeks of the year. If we look at the overall backlog here being around EUR 79 million, that is definitely significantly lower than at the beginning of the year with EUR 104 million, reflecting the weak order intake we had, especially in the first 6 months of the year. Here, I would like to also draw your attention to the fact that we naturally have a part of the business being highly transactional, which means it's kind of a rolling order book that is turned around within the quarter. And we are looking here at a ratio between, let's say, slightly below 40%, up to 50% of the revenue also turned around within a quarter. So we are looking at, let's say, this year, EUR 14 million to EUR 15 million turnaround in the quarter. So -- having this in mind also, you put in perspective the order backlog. If we look at the segments, the big impact here on the revenue and the significant impact here was mainly on the clean energy segment. The biggest segment, clean energy still is accounting for about 69.7%, so almost stable to the year before, but still here, we see a drop in revenue of about, I'd say, 2.5%. I mentioned this, the U.S. and the Indian defense business being the biggest impacting factors. Looking at the end markets there, we still have to see that the Industrial part of the fuel cell business is growing above 10%, 10.8% and the security part in this, that is basically CCTV application, civil security business is running above 15% growth. So there is an intact growth curve, I think, visible. Looking at the Clean Power Management, around 30% of the business, a decline of 2%, strictly leading back to a single project missed in the Canadian oil and gas business of, I'd say, a EUR 2.8 million business here for power products, VFDs with one customer in Canada that was basically in our forecast, but lost to competition. Looking at the clean energy business in Canada, we see also this part on a solid growth curve. With this, I will hand over to Daniel leading you through the financial results here of Q3 as well as the first 9 months. Daniel Saxena: Good morning. Thank you for dialing in. Let me go into the margins a little bit as well as the cost basis. I think as a summary, what we could say is that those negative impacts that we have seen in the first half year have continued. To some extent, they have lowered, but there was still a negative impact. I believe from the cost base, you've seen we are running rather stable in the underlying because costs are rather optimized. But let me go into that quick and highlight certain developments. So when it comes to the overall gross margin in the first 9 months, we've seen the negative effects that we also have seen in the first half year, especially with regards to the segment's clean energy, which is the less favorable product mix with a lower share of the defense revenue. We mentioned that before, that really play an essential role in the unfavorable gross margin development that we've seen since the beginning of the year. But what we also have seen now is that the customs duty that have been introduced slowly negatively impact our gross margin. Like I said, it will be unlikely that we'll be able to avoid the entire customs impact. So we -- it is not that we'll see a huge impact, obviously a slight impact from those custom duties. And then what we also see in the segment clean energy is the less favorable exchange rate with regards to the U.S. dollar and the Canada dollar. So if we compare the average exchange rates of those 2 major currencies, the U.S. dollar in average depreciated by 1%. The -- Canadian dollar in average depreciated by 4%, which has an impact on the gross margin. So the overall group's gross margin 40% in the first 9 months, which is slightly below what we've seen in the 9 months of 2024, while we had a gross margin of 41.7% and it's also moderately below the level of the previous full year margin, which was 41%. Nevertheless, we consider the group's gross margin to be on a level with which we're not entirely satisfied for a good reason. At the beginning of the year, we had higher goals and higher targets. We may not have anticipated entirely the economic turmoil ahead of us at the beginning of the year. We may not have seen entirely the development of the exchange rate, but also the development in India, all of it has an impact on the gross margin, especially with regards to the segment clean energy. It is a heterogeneous development in the gross margin, we've seen that, we have a gross margin expansion in the segment Clean Power Management, where we see the gross margin going up to 29.7% from 26.9%. So that is something that we are happy and content with. The main reason for that, the increase is basically that in both main product line in that segment. So the power management solution, we were able to implement a higher pricing also because I mentioned that in the first half year report call already, also due to our own products that we've been operating, but we've also been able to implement higher prices in the drive motor control products. So if we then look at the EBITDA margin and the key impact on those operating expenses, R&D and G&A, I think there's -- again, there's 3 major topics that we've seen in the first half year, which is the extraordinary cost for exchange rate losses. That is the IT spending for the implementation of SAP as well as making our IT overall landscape more robust. We've seen those costs, or those expenses having come down in the third quarter, but there was still an extraordinary expense in there. And what we've also seen in the third quarter is a lower rate of capitalization of R&D, which is something we've had in the first 6 months and which is also something that will unlikely change because that is pure accounting and that has also impacted EBITDA negatively compared to the first 9 months in the last year. So if we add up those 3 facts and look at the last year, make a like-for-like comparison, those 3 effects together have impacted EBITDA negatively with approximately EUR 5.5 million, which really shows that our cost basis is solid. The earning power is still there. We believe we take those 3 effects away. We know that they're there, but you'll see that we didn't do that bad. Let me dig into the exchange rate losses. First of all, so you've seen we had an income from exchange rate gains of EUR 1.8 million in the first 9 months, which were entirely offset by the exchange rate losses of EUR 5.1 million in the first 9 months. So that comes to a net effect of EUR 3.3 million, which negatively impacted the EBITDA or 3.2% of revenues. So out of these exchange rate losses that we've seen, EUR 4.4 million or 85% is unrealized losses and out of which approximately EUR 4 million are related to intercompany positions, i.e., shareholder loans and intercompany receivables. I mentioned that already in the first half year. So that's why you would not see that in the cash flow statement. Yes, we'll book it, but this unrealized losses for the exchange rate. But still it does impact our EBITDA negatively with 3.2% rather highly. The next position is the extraordinary cost for IT in the G&A expenses. These are costs relating to the SAP implementation. So in the first 9 months, the total cost has been EUR 1.9 million. They have come down notably in -- the spending has come down notably in the third quarter, but it's still over the first 9 months translates into 1.8% negative impact of the revenues on the EBITDA. We also had costs for improving our IT system that amounted to approximately EUR 1.4 million in the first 9 months, which again would then mean a 1.4% negative impact on the EBITDA. Together, if you see the amount that we really spend on IT, and yes, it's necessary, we need to make our system more robust. We need to make a step forward in higher efficiency and automation in our system. So this is not something that we're just doing for doing it. It really means making the major steps in getting our system safer, more secure, more robust, increased efficiency, also increase effectiveness of our operations. While it's a huge investment that we've seen, we'll see further investment in the fourth quarter. We also will see some of those investments still in the next year until we got the system entirely implemented. And then the third impact is the lower rate of capitalized R&D expenses. So the total R&D spending amounted to EUR 8.7 million in the first 9 months of 2025 compared to EUR 7.5 million in the previous year's 9 months. So you see a decent hike in our R&D spending. But what you will also see is that in the previous years, approximately 23% of these costs were capitalized, in the current year, we are capitalizing 30% of the cost. So on a like-for-like basis, this would also translate into a negative impact on the EBITDA on EUR [indiscernible]. To go into this really briefly, so capitalizing R&D expenses is not a choice or not an option, which we do. It is, as I mentioned at the beginning of the call, it is an accounting principle. So projects can be capitalized, certain projects cannot be capitalized. And that's a little bit depending on your R&D focus, but also what you have in the pipeline. Remember, any capitalization going forward means also depreciation, additional cost. So it's not that you're optimizing your cost, you're just pushing those expenses into the future. In any event, it is what it is, but you'll see that our R&D spending as though it has increased, it has not a huge jump that you see in the P&L and the earning power, that's why I said at the beginning, is still at a decent level. So what does it mean for the adjusted EBITDA, for the adjusted EBITDA, it means that we reached EUR 10.81 million, which, of course, is significantly with 56% below what we've seen in the previous year's 9 months. It is, of course, a factor of revenue growth of gross margin and those negative effects in the other operating costs that I just mentioned. Depreciation and amortization, you don't see a big change in there. Depreciation, EUR 5.8 million versus EUR 4.5 million, 40% of the depreciation is IFRS 16 related. So you will not see a huge change in that position going forward either. That brings us to the adjusted EBIT, which is -- came up to EUR 5 million. That represents an adjusted EBIT margin of 4.9%. That's significantly lower from what we've seen in the first 9 years (sic) [ 9 months ] in 2024. Again, we're not entirely happy with that, as you can imagine. Let me finalize with the cash flow and our cash position. Cash freely available at the end of the first 9 months were EUR 40.8 million compared to EUR 60.5 million, which we had at the end of 2024. So it's EUR 20 million lower from what we have seen. The financial debt on the other side also decreased by approximately EUR 1 million to EUR 3.1 million, which gives us a net debt -- sorry, net cash position of EUR 37.6 million, pretty much EUR 20 million below what we've seen at the year-end. Our equity decreased by EUR 1.5 million. That is due to the negative earnings. But remember, the negative earning also those nonrecurring effects with regards to the IFRS 2 and the stock option programs that are reflected. Cash flow, the operating cash flow before the change in net working capital was EUR 10.5 million. That compares to EUR 18 million in the first 9 months of the previous years. So what we see is it is significantly lower, but it's still at a good level with EUR 10.5, so it is 40% -- sorry, what we see then is the net working capital development. The net working capital increased by EUR 21.5 million. That compares to EUR 2.5 million in the last 9 months. So the working capital ratio to last 12 months net sales went up to 40% as of September compared to 25%, what we see at the year-end. So we're really trying hard to manage that working capital. It is really the inventory that we need to look at. It's really looking at the accounts receivable. The largest impact is really the increase in the inventory, which has gone up by EUR 10.3 million. That has changed the days of inventory to 237 compared to 131 at the end of the year. That is an extreme high value, and we are fully aware of that. That is something that we need to manage more actively and bring it down. We are fully aware of that. We have a lot of material sitting in there. It is mostly fuel cell components and material, which we intend to bring down in the next 6 months. So it's nothing that is going to go bad or will become obsolete. It is really material that have been acquired as bought this program. You also see a large impact on the increase of the accounts receivables. They increased by EUR 8.1 million compared to year-end. That translates into a 12-month trailing days of sales outstanding of 114 compared to 90, which we had at the end of the last year. So we see an increase in the sales outstanding. We don't see any bad receivables out there. But this is something also that we are managing actively and intend to bring that number down again towards the 90 days. Then what you also see is that the accounts payables have gone down EUR 2.8 million. That brings the payables outstanding down 52 days from 66 days So then with the tax payments of EUR 1.4 million, you'll see that the operating cash flow after net working capital and tax is becoming very negative with very negative, it means minus EUR 12.4 million, all driven by the net working capital development. Cash flow from investing activities is much, much lower from what we've seen in the last year. We are looking at EUR 2.6 million compared to EUR 6.4 million in the last year. So all those large investments that we have made last year are done and completed. So EUR 2.6 million is at a decent level. It includes, of course, the capitalized R&D. Then you see the cash flow from financing activities of EUR 2.8 million, a large portion of that is related to leases. And if you add those numbers up, you'll see a change in the cash position of EUR 17.9 million, and then we'll still have to add the exchange rate impact on our cash in foreign currency. So overall, cash has reduced, like I said, in summary, mostly net working capital. We've seen the margin decline. Still, I think we are at a good level, but not a level which we are happy or satisfied with, and we are fully aware that we need to keep on working on further implementing measures and structures to optimize especially our cash consumption. With that, I'll return it to Peter. Peter Podesser: Thank you very much, Daniel. So summarizing where we are, I think on the basis of the performance to date, also, we talked about the order backlog and also, let's say, still some, I'd say, challenging macro conditions here. We've done, I think, a concise assessment here on the year-end forecast, and we are expecting the revenue at the lower end of the target corridor that we had out there -- that we have out there as a revised guidance. We see EBITDA adjusted as well as EBIT adjusted in the lower half of the corridor that is out there for EBITDA, the corridor is EUR 13 million to EUR 19 million and for the EBIT, respectively, it is the corridor of EUR 5 million to EUR 11 million. As said, we are expecting to end up in the lower half for both ratios. So looking at this, I think after years of continuous and significant growth and increasing profitability, while you see ourselves here clearly and honestly disappointed with those results here after 9 months. We also have to be self-critical here in terms of some maybe too aggressive and optimistic plannings in some areas, especially of the top line against the macroeconomic also environment that we are operating under. But at the same time, I think we have done a thorough analysis of the situation, we also see the reasons of deviations and we have implemented clear and targeted measures. We've talked about the cost part. I think on the inventory part, yes, the defense part of the business has downsides with, let's say, longer procurement cycles. But the good thing is those products are not turning anywhere that, as Daniel mentioned. So this is naturally the basis here for the improvement also on the cash flow side to get let's say, this out of the door as fast as possible. And that's why you see ourselves here, let's say, this clearly, let's say, a realistic moat, but with all the dedication to get this back to a growth curve. And again, I think for all of us here, we have an organic growth in the business, be it, let's say, our civilian security business, be it the industrial business, we are talking here about double-digit growth here between 11% and 15% and also our U.S. business, significantly above 20%. So the expectation there is to continue on this growth path to return to a growth path in India, as I said, service contracts in place, local methanol filling, all basis also for further, I'd say, satisfying the customers' needs there. And we've been intensively working on OEM programs on the defense part of the business in Germany as well as in NATO states. And naturally, we are expecting an impact of this in the year to come. We are doing, again, our regional expansion with the investment in Singapore. We expect a growth impact out of this. We are seeing our products performing properly well also for new applications like drone charging, and I also mentioned the drone defense activity here in Singapore. So all over, yes, the situation, especially the last 2 quarters are very, let's say, disappointing. We've taken the measures now, and we are looking at a strong year-end and again, a return to growth and improved profitability here based on all the measures that we mentioned together. With this, we close our presentation and would like to open the floor for questions. Thank you very much. Operator: [Operator Instructions] The first question comes from Karsten Von Blumenthal from First Berlin Equity Research. Karsten Von Blumenthal: My first question is regarding Oneberry. You have now a 15% stake. And perhaps you could shed some light on your future activities. You have a 50% option. When and how will you try to get this option? Daniel Saxena: So we have that option to be exercised in the short term. Short term within this year, potentially beginning of next year. That option apparently, as we said, is to increase our holding in Oneberry to a majority for a fixed valuation. So this is something that we intend to do, and we put this option in there in order to exercise it. And of course, we'll have to review certain things with the business. We'll have to complete a bit more on the due diligence side, everything that is such a process and then we will likely exercise that option. Peter Podesser: If I can add here, Karsten, just to, let's say, shed a little more light on, let's say, the business model. At the end, they are engaged in long-term multiyear contracts with the Singaporean government, the pipeline they have and the backlog they have is more than 90% government business there. And this is something that we want to continue to drive, but then also replicate this model to other parts of the region and if possible, also in other parts of the world, a rental business, so security, unmanned security automated based on, let's say, significant also, let's say, AI content to, let's say, recognition parameters here. At the end, with a higher profitability than we see it in our own business. And well, having been partners for quite some years, I think we also have a good trust base there to roll this out to other areas in the region as well as in other parts of the world. Karsten Von Blumenthal: So there's a high likelihood that you will be able to consolidate Oneberry next year when you exercise the option. Could you shed some light on sales and EBIT Oneberry reached, for example, last year in 2024 that we can have an idea what will be the impact on your P&L next year? Peter Podesser: I think we would -- at this point also of the negotiations there, I think it's good to have a ballpark figure here in terms of revenue, we're looking at about EUR 20 million revenue. And as that profitability, I'd say, above our own EBIT and EBITDA level. Daniel Saxena: Consolidation -- well, let's assume that we exercise that option, let's assume that we'll get the control as defined for consolidation, then currently, let's assume that we will close that transaction, then yes, we would consolidate Oneberry from next year on. The numbers we are saying are not in IFRS to be also to make that sure, right? We're talking about Singapore GAAP [indiscernible]. Karsten Von Blumenthal: All right. That is very helpful. Next question, you mentioned the postponement in India, and you said that you expect a rebound in 2026, but not as high as in 2024. Could you roughly tell us how high revenue was in India in 2024? Peter Podesser: Well, the defense revenue in India was around EUR 12 million. And being, let's say -- now, let's say, 60% below last year's revenue, as said, is one of the major impacting factors this year. The fiscal year there ends at the 31st of March, and that's why we are, as we speak now in the assessment of, I think, the right level of -- or the right budgeting level together with our partner on site and will naturally be based on the experience, a cautious assessment for next year, but still we expect a rebound and growth based on what we have learned over the last 3 months out there. Karsten Von Blumenthal: All right. One follow-up question regarding the U.S. You mentioned that you are on track for local production in your facility in Salt Lake City. Could you shed some light on the next milestones you want to reach? So when will production start? How quick do you want to scale it up? Peter Podesser: Pilots, we have our team of the U.S. right now in Europe for training for, I'd say, still the next weeks here. And then we do the first pilot trial still in December so that everything is geared up for 2026 series production. The plan here is to have especially, let's say, our high runners, the EFOY 2800 all produced locally next year. And that's why we are looking, let's say, at a shift here from production from Germany as well as Romania to the U.S., whereas the core elements as the specs still will be mounted here in Brunnthal. So it's pretty the same exercise we did here with India, and we did with Romania in the last, let's say, 12, respectively, 24 months. So we are not reinventing the wheel here. So it's basically copying the process. Karsten Von Blumenthal: Yes, that was certainly facilitated. Could you roughly give us an idea about the value of this shift in terms of revenue for 2026? Peter Podesser: You mean end customer revenue or simply the transacted systems? Karsten Von Blumenthal: No. What -- how much revenue will you generate with the U.S., or you plan to generate with the U.S. production next year roughly, very roughly. Peter Podesser: Well, this will be somewhat above EUR 10 million because still part of the products will be shipped from here as we are not transferring the whole product line over there. We also do refurb of old EFOYs here in the market where we will not shift the entire production of this and therefore, in the first, I would say, 2 years, we will still see a mix dominated by also the old version here that is in the market. And then step by step, I think we will fade this one out and then the entire production for the U.S. consumption of EFOYs is planned to be there. And in addition, naturally, we will also have to see how the defense part of the business evolves. I think -- we were particularly pleased to be invited by the U.S. Army on the occasion of the AUSA, this defense show here a couple of weeks ago to again reengage into a fuel cell development program, and they were particularly happy about the fact that we already had prepared local manufacturing capacity there, which I think is also a big argument for us being a partner for them doing the local production also on defense over time on site in the country. Operator: The next question comes from Michael Kuhn from Deutsche Bank. Michael Kuhn: Three essentially. First of all, you mentioned OEM programs in the defense space into 2026. Is there any possibility to roughly quantify that scope already? Or would that be too early? Second question would be on the contract loss you mentioned in North America, I think, where you lost versus a competitor. Was that a fuel cell competitor? Or was a customer there going for, let's say, a different technical solution? And last question would be on working capital. I think you talked about a 6-month time frame to reduce that. So just to confirm that and maybe get a confirmation on, let's say, that working capital won't dramatically change over the course of the fourth quarter. Peter Podesser: First, OEM programs in defense. I think with, let's say, all the experience we just are undergoing, yes, we are a little hesitant now to come out, let's say, with numbers on those programs that are still work in progress. What we see today is that, I'd say, with a very, let's say, favorable financing environment based on all the political decisions, we also see that still capacity, the capacity on the administrative part of the purchasing or procurement part, but also the capacity in, let's say, some of the OEMs manufacturing capacity is a limiting factor. And we, let's say, therefore, expect all this to happen, let's say, in 2026. Part of it, I would say, on the earlier part of '26. But I'd say the visibility at this point in time is not at the point where I would feel comfortable to, let's say, put numbers out. We are looking at programs in Germany, but we are also looking, as you recall, we have, let's say, this also partnership here with Polaris on where, let's say, our products are under a NATO procurement contract. So we know that this program, the tender has been awarded here to Polaris, but we have not been, let's say, informed about individual numbers here out of the different countries participating. And I think the same thing here now with our German program. We are working on it as soon as we have more clarity, even if this is still before Christmas, we would be, let's say, able to share this. On the contract loss in Canada, we are talking here -- we are not talking about the fuel cell business. So it is, let's say, on the power management side, where we are integrating VFDs where we are integrating equipment also from ABB, and this was a loss based on, let's say, tough pricing here with an oil and gas OEM. At the same time, I think we also see, let's say, that's a competitive market. So it's -- but it's the single reason for, let's say, seeing a deviation from the original plan here. Otherwise, in the, let's say, Canadian oil and gas business, also especially on the EFOY side, we are still on our growth plan. And the third question, I would hand over to Daniel for answer. Daniel Saxena: So with regards to the working capital, yes, there are 2 positions that we're really working on, as you rightly said, the first one will be inventory, bringing inventory down. That, of course, is a function apparently of selling and manufacturing those fuel cells because the largest part of the inventory increase, as I mentioned, is in the German entity and happening in Germany. So that is really our intent to get back to a normalized level, which would be looking at what we had at year-end. One impact that is -- one factor that is negatively impacting our inventory is the platinum pricing. Remember that a large part of our membrane is platinum that has been -- the price has increased significantly in the last 9 months to all-time high, I think the highest thing I've seen for a couple of years. The amount of platinum that we have in our inventory is over EUR 1 million. So of course that and we tend to buy platinum when it's at a low price or relatively low price. And then we intend to buy an amount of platinum that covers us for at least 2 to 3, sometimes 4 quarters. That is really making sure that we can lock in the cost. That will have an impact on our inventory, like I said, right now, we only have EUR 1 million. On the accounts receivable, yes, we intend to bring them down significantly. We expect collections. We don't see any receivable [indiscernible] write-off there. So that is something we expect to improve towards the year-end. I know you made the math with regards to revenue. So what we expect in terms of revenue in the fourth quarter. And currently, the higher revenues at the end of the quarter, the higher the accounts receivable, but everything that we have right now to turn around quickly. Operator: The next question comes from Malte Schaumann from Warburg Research. Malte Schaumann: First one is on the customer behavior. I mean, during the second quarter call, one of the reasons for the weak order intake in the first half of the year, you mentioned that especially new customers kind of hesitated to adopt new technologies, place orders, et cetera. Do you actually have in the recent weeks registered a change in the customer behavior or more or less the same U.S. tariff discussions, et cetera, and still lead to existing uncertainties? Peter Podesser: I think at the end, we see, let's say, with new customers still, let's say, hesitation out there. And I mentioned before also that the U.S. pattern of the business still, yes, seeing, let's say, a growth of significantly above 20% organically is a solid growth, but it's not at what we have seen here, let's say, historically over the last 3 years. And that's why I think we -- with the environment, let's say, not being more stable and continuing as it is in the macro part for the new customer business, we have also factored this into our year-end planning. Existing customers, I think, being -- we published a significant order a couple of weeks ago with one of our largest civilian fuel cell customers here in Europe. We see a consistent repeat business. As mentioned before, the overall CCTV part, civilian security part of the business is also above 15% growth. But the change or the decision-making to, let's say, embark on a new technology here and complementing the existing whatever battery and solar devices with fuel cells definitely is delayed with, let's say, the environment as it is. So therefore, I think we can differentiate this pretty clearly and see this also in, let's say, the customer behavior. Malte Schaumann: Okay. And then maybe kind of an early view next year or your level of confidence that order levels will -- would you expect kind of subdued order levels going into early next year and then hope for a recovery later next year? What's your visibility or your level of confidence then going into 2026, where do you see maybe increasing customer activity and where uncertainties still prevailing kind of reducing the visibility? I mean you have alluded to in some areas, still unstable situation, low visibility. But then on the other hand, you might have kind of gained some confidence in the meantime that, for instance, India will return as a major customer in defense. So maybe you can shed some light on what are your thoughts on maybe how 2026 can [indiscernible]. Peter Podesser: As you can imagine, now we are doing, let's say, a constant analysis on this and let's say, also assess, let's say, the regional part of -- or the different regions of the business and also the different end markets. And looking at where we are right now, I think we see, I'd say, this repeat part of the business on a constant, let's say, growth curve that we also would, let's say, assume as a basis, and we are also doing this in our planning right now because it's budgeting time. We are finalizing our planning rounds right now. So we are expecting, let's say, an organic growth out of this. We are seeing, let's say, signs of, again, improvement again in India, where we have this deviation this year. With this coming back to, let's say, a modest growth part, I think we are in a corridor here of mere organic part that is somewhere around, let's say, low double-digit growth. And we also do, I'd say, this analysis here on our, let's say, what we call this rolling part of the order book that is intra-quarter business transactional, where we have a pretty good view on it. As I said, this is between, let's say, 40% to 50% here that comes in and out within a quarter. So adding this all up, I think -- and then also looking at what we have, let's say, done on the cost side. We're also looking at our product pricing here based on raw materials, platinum being a big factor here. We will have to adjust this, and we are preparing for this. And therefore, I think a growth corridor just organically, as mentioned here of a good 10% is, I think, a solid ratio across everything. This does not include, let's say, a big impact also of when we look at, let's say, a larger defense program. And at the same time, we have just discussed with Karsten also the impact here of a potential majority acquisition of the Singapore business here adding up to, let's say, the planning then in 2026. Also, with the caveat, we have not exercised this option yet. But naturally, we have done this to go through this process and hopefully get to a positive end also here with our partner in Singapore. Malte Schaumann: Okay. Then Oneberry, in the press release, I think you laid out the scenario for potential significant growth in the years ahead. So maybe you can shed some more light on where do you see growth? I think you mentioned EUR 100 million potential revenue contribution. So maybe you can shed some more light on that number? And where does the growth primarily come from? And what should happen that this will materialize in maybe, I don't know what the time frame is 5 years, 5 years plus. So what are your thoughts on that? Peter Podesser: Yes. Oneberry has been very focused and fully entrenched in the Singaporean security architecture also by, let's say, family roots here of the owner of Oneberry. And also, let's say, looking where, let's say, such a family business then stays also in terms of, let's say, further investment into regional expansion, the planning of the owner here, the family owners was not to expand this and roll this out, let's say, into the region. With us being on board, this is a key element, really copying what we have -- what they have built up, integrating also our products into those security services and roll this out. And naturally, it is logical. We have done some business development in Indonesia. We have done in Malaysia and Thailand and in the Philippines. And this is, at the end, the overall business plan that we have already sketched out with them. But naturally, first of all, we need to take the next step and close the transaction and talk about, let's say, the option. And then it is initially a regional play, but we are also seeing large customers in our civilian security business looking for potential rental solutions, and we might also have to -- and be able to, let's say, copy this part or this business model here in other regions. And if we look at the, let's say, potential in, let's say, Asia, this is, let's say, what we have developed together as a scenario with the owner family of Oneberry that is also at the end, a reflection of what we see in terms of demand here in Asia, which at the end, again, is the most populous region. Time frame, yes, as you said, we are talking definitely midterm, and we are talking about a 5-year scenario. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Dr. Peter Podesser for any closing remarks. Peter Podesser: Well, with this, we thank you all for your time and interest. As always, we are at your disposal also for bilateral discussions here with Daniel, myself and also Susan. We are heading through some rough waters here. Stay with us. I think we have a solid plan ahead of us. And we have shown that we are able to, let's say, implement plans apart from naturally, not neglecting the fact that we have seen 2 very tough quarters behind us. Thank you very much.
Eric Beiley, managing director and wealth manager for The Beiley Group at Steward Partners, discusses the volatility in the markets and the macro factors impacting investors. He joins Caroline Hyde on “Bloomberg Tech.
“AI is in a rational bubble,” says Mohamed El-Erian. “It makes sense to overinvest in it, to overspend on it, because the payoff is enormous.
Developments in Japan are creating a risk that investors in the U.S. Treasury market may one day pull the rug out by keeping more of their savings at home.