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Magdalena Komaracka: Good afternoon. Welcome warmly at the PZU Group results for the third quarter 2025 presentation. It will be led by our CEO -- PZU CEO, Bogdan Benczak; and Tomasz Kulik, CFO of PZU Group and Management Board member of other PZU companies. Bogdan Benczak: Good afternoon. I'm extremely pleased to welcome you at the presentation of the PZU Group results after 9 months. That's my lifetime and first-time opportunity to -- for me, to manage this presentation. So please understand my unwanted mistakes. Let me start with the key achievements and plans. As you have already seen in our press release, and in our stock exchange communication after 9 months, we've reached PLN 23.1 billion in sales with the consolidated profit of PLN 5.2 billion, capital position 234% of solvability and 246% of stand-alone solvability and the dividend yield for the dividend paid in October is at around 8%. aROE is at the level above 20%. That's a very good position, sort of a head start for me as the acting CEO of the PZU Group. Let me stress that the growth that you've seen in insurance refers mainly to non-life insurance and in particular, non-motor insurance. I'm extremely happy with this result because this is close to my heart. We've had a major growth in foreign markets where we are present in Lithuania, Latvia, Estonia and Ukraine. We've had growth in Life Insurance segment, especially in Individual Life Insurance segment. And we've managed to substantially improve the results after 3 quarters, our capital position is very strong. It's robust and figures are really, really good. The results after 3 quarters and parameters -- profitability and capital adequacy parameters will allow us to pay an attractive dividend in the next year and about the level of the dividend, well, the details of the dividend, if the trajectory is kept could be discussed the next year after the recommendations and the approval of the Management Board and the Supervisory Board. Income and net profit more than PLN 5.2 billion with a share of PLN 3.6 billion from insurance services and PLN 2.2 billion from investment portfolio. We are proud with the results in insurance service increase of 73%. We do know, however, that the last year was truly exceptional. And we had some additional compensation PLN 222 million paid because of the flooding. I believe it's even more last year, we reported PLN 275 million more than PLN 0.5 billion gross of compensations paid. So the third quarter, PLN 1.5 billion and 127% year-to-year growth in insurance service and 85.8% of combined ratio. This shows our diversification. We've got a pillar of insurance services. We've got a pillar of banking activities, and we are working to consolidate further our health pillar, so PLN 3.6 billion result in insurance service, cess PLN 2.2 billion on investment portfolio and combined ratio, as I said, 85.8%. This is a very good result. And we are also happy to -- with our high operating margin in life insurance and with this, we are able to get to an aROE at 22.1%. After 3 quarters, we have a 2-digit dynamics in non-motor insurance. 2-digit is a success and it's a source of pride for us. We've managed to have a growth in this segment. This is a core activity, 77% extremely important for us, especially that the number of initiatives have been launched and actions campaigns for this segment, and now we see a tangible result of our efforts. Individual Insurance segment has also seen improvement in efficiency in our sales network. We've also launched some new products. And here, we also have a 2-digit dynamics in Individual Protection Insurance segment. This shows that when you focus well and define your priorities, clearly, you can be really effective, and this is our case, and we truly deliver. Health pillar. Again, 2-digit dynamics. We are particularly pleased with a number of results. We do see the room for improvement, but quarter-to-quarter and quarter after quarter, we are able to improve in this pillar. Tomasz will give you some more details how referrals to our network of branches -- own branches have improved. He will tell you what kind of tools are used and what tools are actually the best to improve the referral rate. Indeed, as I said, we see the room for improvement, but we've been consistent, and we've been implementing a recovery program. And as you can see, the results are there. We are also happy to see a 2-digit growth in external customers number in our 2 investment fund companies, TFI. This pillar is on the rise and we look into the future with optimistic perspective. This is yet another source of diversification for our revenues within the group. We've managed to increase the value of assets within the group by PLN 20 billion year-to-year. When you have revenue, you have a better solvability ratios. Our credit rating is a A- and positive outlook granted by Standard & Poor's Global Ratings. They've kept the Polish rating as well. So you see that the situation is stable. Group solvability -- solvency ratio is at 234%. We are above the EU average for European insurers. 81% of our investment portfolio is made of bonds, including 65% represented by sovereign bonds. We are aware that our investment portfolio is conservative, but it produces stable and predictable yield on deposits. One more item effective reinsurance protection. Reinsurance program was launched some years ago. It turned out to be effective when we were struck by catastrophic events on the territory of our country, 45% of our reinsurers have AA rating and the remaining 55% half A rating. I presented briefly the financial results. And now let me move to the priorities of the PZU Group for 2026, 2027. This is a sort of an opening statement as a person appointed the CEO of the group. We have a very strong financial position, thanks to our scale to our profitability and our diversification. We have a solid market share. We are leaders in Non-life Insurance and in Life Insurance segments with 30% and 44% of share, respectively, for both of them. We are growing in terms of scale after 9 months, we have PLN 23 billion in insurance services. We have profitability. We are profitable, and we are better than our competitors in terms of technical profitability, for non-life insurance and technical profitability for life insurance according to the data from the 6 months. We are then positioned among the top European insurers. And let me point out that the PZU Group is a financial conglomerate, but we are diversified. We are #1 in Poland for non-life and life insurances and in top 3 for health. We are 30 among banking, #3 in terms of investment funds. And our Baltic-country companies are leaders in their respective local markets and contribute to our consolidated financial results. I hope I'm not committing a blunder by showing you this chart, but this is a moment when we can be proud of our achievements. I don't know what the cost of PZU is right now. But as we announced our results, the price of shares has skyrocketed 61%. So that has gone down a bit. But since 2024, we were growing by 71% versus 46% of the week 20. So this is very good news and if you have a look at our European peers and their valuation, there is room for growth for us. And this is precisely our ambition, the ambition of the Management Board to improve our position respectively versus our peers. So the group is likely to grow, and it will grow. But we are also aware of some negative trends on the market. That's why we're focusing on opportunities. So this means demographic and social changes and also the fact that the forecast for the Polish economy are positive. We would like to tap into the growth of the Polish GDP and take advantage of it because I think that the economic growth will have a positive impact on the capabilities of customers who will be able to take out more insurance policies and now the demographic and social changes. So the purchase power of society is growing. Therefore, we think that both investments and life insurance will grow and so will be the value of the property to be insured, and this will also mean some benefits for us through the amount of the premium and now the aging society. Let me address that. We think that this means a higher demand for health and protection products, meaning life insurance. There is also a pressure related to the negative market trends, namely the TPL market is changing. It's moving more towards what we call the soft cycle. We are now nearing the soft cycle. But we can see that there is a huge competitive pressure in segments that continue to be profitable like the MOD and non-motor. So this is a trend we have to face because this is a threat. But at the same time, this is an opportunity, namely the fact that intermediaries are growing, 50% of distribution is now done through brokers and multi-agencies and this is a challenge the group has to face. Also, interest rates will be going down, and this will have an effect on the investment result, and this will also affect the contribution of our banking pillar to our consolidated result. And also higher corporate income tax for banks will have an effect on us as well. Now these are our plans, and I would like to highlight some thanks as CEO, namely over the last 2 months, the group has done the following. We have set priorities for our initiatives and strategies. We have assigned responsibility for specific projects to specific people. And also, we have grouped initiatives. This will help us reverse trends in some market segments, but it will also help us stay the leader of the insurance market in Poland and we will be the leader in terms of profitability and the market share because we already got there but we will be also creating new solutions and products in the market. So from my point of view, the most important thing for us is non-life and mass insurance. We have to improve our pricing here and there are also other initiatives leading to an improvement in the effectiveness of our sales network, and I'm referring to our agents who are our edge -- our advantage, and I believe that they will make a contribution to our results. But at the same time, I think that developing our collaboration with multi-agencies would be an interesting opportunity for the group because traditionally speaking, in this segment, the group was not strong and unlike our peers, our competitors, but I think, and I believe that if we make some moves in terms of pricing and tariff setting, if we modify our distribution and develop the right skills and if we have the right tools at the front end, we will be able to increase sales in this channel as well, keeping our profitability at the same time. Also, now let me address the implementation of the new system of claims handling, and this covers both the non-life and the life insurance company. Obviously, the non-life company is a priority here because I can see that in this company, in particular, there is a huge technical -- technological debt, which is something I realized when I came back to the company. And I think that here, there's a lot of room for improvement of our profitability. And now I personally would like to focus on Health. I would like us to carry out the strategy, which would lead us to the results, the target figures that have been provided for in our strategy, and this could be a strong pillar that has a positive effect on our operations. I can see room here for organic growth, greenfields. But also, we have an opportunistic approach here because we are looking for acquisitions. And we are doing this to improve the take-up, the utilization of our health business in our own clinics, facilities and also to address and eliminate the white spots in Poland. And I'm referring to the coverage of the territory of Poland with our health facilities. So speaking about the investment activity, decreasing interest rates are a negative trend. We would like to manage our own portfolio in an effective way. But at the same time, we want to develop product offer for our external customers and partners so that the investment pillar can increase its role -- its share in the PZU Group's revenue. Now speaking about motor insurance, we are relatively happy with this segment because it has a positive contribution to our P&L account, but we would like to grow outside through inward reinsurance. We have proven partners through the MG model and we believe that this will lead us to positive results. Individual life insurance is what we do, new products, activating the sales network to reach our target customers. So we would like to focus on individual continued products and we would like to reach the silver and middle age generations as well. Now group insurance. So traditionally, it's a strong segment for the company. Currently, the margin is very satisfactory. It goes beyond our strategic expectations. But we would like to be more swift here and respond faster to the changing market, and we'd like to gradually transform here to change the group insurance into an employee's benefit made up of the insurance component, health component and also other elements to be used as a benefit for employees. Bancassurance, we are focusing strongly on the collaboration with Pekao SA and Alior, but we are active on the market. We collaborate also with other companies from outside the group. Now international business, we would like to take advantage of the synergy. We've had some successful projects in our foreign companies. But we are also looking into how to make the most of our companies, let's say, in Ukraine for future projects like the recovery of Ukraine. And obviously, hopefully, the war ends as soon as possible so that we can take advantage of the reconstruction. But for the time being, the contribution of our international companies is at the satisfactory levels of the Baltic countries, combined ratio is at the level of the parent company. So we are very happy with that. Now the group is transformation and the growth of the organization. Let me stress one thing. According to current strategy of PZU, the Solvency -- the new Solvency II regime was to take effect. This was the assumption of the strategy according to our estimates. So new regulations and a new way of appraisal of our assets -- banking assets. This would lead to a drop in our liquidity of 190% to this level and we were expecting this. And even at this level, we have a permanent contribution of the same dividend policy of the group. And this is our starting point. We are also undergoing the reorganization of the PZU Group. We have signed memorandum with Pekao SA and now the group, the PZU Group is getting ready for the baseline scenario and this scenario has been described in the term sheet. There are factors we cannot have impact on. I mean by that legislative changes. Without any amendments to the legal framework, we will be unable to do the reorganization and revamping as described in the documents signed with Pekao SA. We are awaiting further steps, but we do see risks that these regulatory changes will come into effect at a later date than the day defined in the term sheet. And we work together with the Pekao SA on how to react and to see if we are going to sign a new memorandum or not. And I think that we will know that in December, once we've known the exact deadlines. But we do stay in close contact with all stakeholders. So that will be for our Copenhagen project. We do follow up the development on the market. And in the media coverage -- what happens in the media coverage, the Minister of State Assets announced that securing state interest in this project is a key priority for him. Within the group, we are preparing the deployment of a new organizational model, the design works are underway, and we stay in close contact with the supervision authority to know if we will have the endorsement, but we do realize that the challenge is huge. When I joined PZU Group, my first -- one of my first task was to stabilize the situation within the organization. We have 2 collective bargainings and we managed -- we had collective bargainings and we managed to close 2 -- to settle 2 disputes, and we are now in a dialogue with social partners. I do hope that by the end of the year, we will be able to find settlements in other disputes. We focus on a transparent and open communication with social partners in these collective bargainings. And I do hope we will be successful. We are preparing for the cultural transition. We want to transform our governance and culture. We want to be more agile, and we want to shift from silo thinking to a tribal thinking. It's a huge challenge ahead. But within the group, together with the other leadership team members, we believe that we are on the right track. For technology. Well, in our previous meeting, we already said that we had a serious technology that within the group. The Management Board and especially [indiscernible] has been working in that. We've designed a plan to replace the key IT systems and we want to have low-code platforms to -- because we want to act swiftly and in an agile way or respond to any market developments. I've already said that we will have some new claims handling processes. We estimate that by the end of the first semester of 2026, we will already have all the analysis at hand and the provider will be selected and that we will be able to trigger the deployment. We've been implementing our corporate social responsibility policy. We want to build a society resilient to ongoing and current challenges. I'm sure you know our campaign champion slowed down. That's a road safety campaign. I'm sure you know the visualization and look at me moustache only in November because we have another health awareness raising campaign. I wear moustache this month because that's how I see my role as a leader -- as the CEO of the leader of the market leader. Its high profitability and yield, but it's also a major key player and a participant of the social life. Just don't forget we have people to live for talk to your family members about health, about prevention, about screening just go do screening tests. And my colleague does not wear moustache. I encourage him to do the same. That will be the overview of our achievement -- efforts behind these achievements and plans for the future, my personal ambitions as the CEO -- acting CEO for now of the PZU. And now I will move to Tomasz, who will give some more detailed brief of our business in the third quarter 2025. Tomasz Kulik: Thank you very much. I try to be brief to get some time for the sum up by segment and to have a question-and-answer session. Let me start with some important factors impacting our results. We will start with non-life insurance. It was flat. However, over the same period we had some major rises on revenues from insurance services. There is a stratification among corporate clients, a drop of 9%, but the revenue grew by 7%. Why? Well, it's long-term business. The long-term business is still in our portfolio. We do provide our services, and that's an element of our exposure, and there is a different format used for the reporting to the supervisory authority. Our competitors would report that as a recent premium, especially that there was no change in coverage over the period, and we could not reprice that part of business. This is an element of our exposure, as I've said. And we had some major rises in corporate and mass segments. Under the previous standard, we had the different measurement premium and that value reflects better what happens on the revenue side. Now motor insurance, continued drop, especially Link4 portfolio mass insurances, a multi-agency nonprofitable channel, there has been a reduction. The channel was not among the top profitable entities last year in 2025 for the whole group and for Link4. In 2025, we focus mainly on profitability and yield where such yield is achievable. And we skip any formats that historically are no longer attractive to us. There has been a slight adjustment, therefore, but just have a look the difference between written premium and revenue on insurance, which are -- the difference is the source of this adjustment. Here, in this segment, you have -- we have 3% -- growth of 3%. That's for health, either [indiscernible] of the existing portfolio or new contracts, new protection, insurances. This is a result of consistent work on the portfolio, and we added some new products, which help us improve our insurance margin. We had an 8% increase in individual health insurances. It was quite high, especially that the last year, the starting point was also quite solid. And we had a major share of investment products, including life and endowment insurance products. Quasi investment products sold through different channels, including through banks. And despite that, we still have a rise of 8% for individual health insurances and regular protection insurance products registered a 20% dynamics. For the segment of Non-life Insurance, we've opened stand-alone products in bancassurance, Alior Bank and education. We've already launched what was announced upon the publication of our strategy. We started to go beyond Poland in active reassurance format. We want to be present in foreign markets outside Poland. We are in the stage of studying these markets, together with our reassurance partners and because the balance sheet is good, we have enough space to take on some more risk. And we want to limit anti-selection at the very start of that journey. So we had a fresh start, that is a strong team. And I do hope that in the incoming quarters, we will be able to give you some more details on revenues in this specific channel. We still focus on building and expanding skills in underwriting and bancassurance. We wanted to improve analytical skills of our teams. Let us move to Life Insurance. We have some additional products, serious diseases, treatment abroad. These are elements that are now covered. We are an aging society, and we have ailment typical of much mature and aging societies. So health insurance is a topic of focus for us. We have an attractive offer with very, very hard premiums, and this offer really resonates among customers, attract a lot of customers. In group insurance, we offer a new product based on the insurance sum and the insurance sum is calculated based on the remuneration level. This is a pilot project. We've been testing that solution, and we have also products in bancassurance. Health area, the CEO has already given you the details. We have had growth in both subscriptions and insurances, 15% year-to-year. And the same applies to medical facilities, whether it's occupational medicine or fee-for-service model, we have to digit it's more than 12% always. We are growing, thanks to our partners. We have partnered medical facilities. We want to be present everywhere and to attract more and more customers. We act as an adviser. We can suggest our own facilities or partner facilities simply to streamline the cost -- the average cost of medical procedures. We also increased the number of online visits, and there is a channeling of patients inflows to our medical facilities, 40% of all patients in the third quarter. Assets under management, whether it's the TFI PZU or our group banks, we have TFI PZU as a leader PLN 3.5 billion, a large share in banks and growing scales of assets in ECS. And now for product. A new fund, private debt fund which is done together with the Bank Pekao SA with joint allocation, both for us, for the bank. It's over PLN 100 million. It's a fund to finance companies as a long corporate debt with the offer is directed at the clients of private banking of Pekao SA and it looks like a good top-up of our offer in terms of the attractiveness of the investment, especially with this type of assets in mind. Now Innovate Poland, which recently was inaugurated by the CEO. So over to the CEO. Bogdan Benczak: Innovate Poland, this is the Poland version of the program and PZU is one of the originators of the project. We are the private company, the joint projects together for the Polish Development Bank and the Polish expansion fund, which are public entities. We have done this to diversify our portfolio and to get extraordinary rates of return. This is also aligned with our strategy, because we've been diversifying our revenue on deposits. Thirdly, we see it as a project where there is a room for synergy with other projects that we have now in the pipeline. We collaborate with the highest number of start-ups in Poland. We have the PZU Ready project, which is for start-ups. So we can see some synergies here and the possibility to fund some of our partners with money from this Innovate Poland fund. Also additionally, thanks to the ideas of the project and some accreditation procedures and certification procedures, we think that this will let us to achieve synergy and speed up the certification and speed up the selection of funds we would like to invest in the future. Thank you. Tomasz Kulik: Now our collaboration with banks -- bancassurance. Here, the sale measured through written premium quarterly reached PLN 600 million. So it's a very important distribution channel. It's growing, thanks to the same groups of products and the growing offer. And this time, stand-alone products have been added to our offer. So we hope that this channel will only continue to grow. And now I would like to walk you through the financial results in Q3 with a breakdown into segments. So first, general results. The highest top line ever in Q3 and the highest result ever for the group. So top line now the growth year-to-year is around 5% with an important contribution of the non-life mass insurance, especially non-motor because here, the growth rate is almost 10%, 8.1% growth, corporate and non-life insurance. Group individually continued insurance are a bit lower, but the baseline was very high, and we will tell you what has happened here in this segment, double digit, 18% of growth in individual protection insurance and life insurance, a very high contribution from our foreign companies. So this actually generated our insurance revenue in this quarter. Now net insurance revenue is the same as the gross amount that the year-to-year, a lot has been happening on the side of the costs, especially if you think about the claims and benefits. Here, you can break it down into 3 areas. So first, no comparability because let me remind you that last year, we were speaking from the point of view of the operations, and we were facing the flood and its consequences on the very next day after the flood and we were already there. So Q3 last year and the reported results was affected by this -- by this mass incident and actually brought the result down by PLN 265 million -- rather PLN 275 million. At the same time, the frequency of claims was lower in motor insurance, which also had an effect on the rate of return and MOD and MTPL in both segments, which is good news. At the same time, the reserves from previous years were overrated mainly because of the reversal of the trends of indexation. And I'm speaking here about PLN 56 million, the overestimate. There was also a drop in the reserve of the [indiscernible] provision. Cost effectiveness is very important for us. This concerns how to reach customers in an effective way, also how much we want to spend on customer service. In both terms, we have increased our effectiveness. So we have increased the effectiveness of our administrative costs, personnel costs and technological cost is offset by other cost categories. So this means an improvement which translates into index which is lower by 30 basis points. The same goes for the cost of acquisition. And also now let me mention something that actually proves the quality of our business, the net contribution and the improvement of the loss component. As you can see, the new loss component and the amortization. Overall, has a positive effect on the result. In all the segments, it's worth over PLN 90 million. So it's very good news especially if you think about what's happening in the Non-life and the Motor Insurance segment. Q3 ends at the level of [ 505 ], a huge change, 170% here year-to-year with strong growth and financial income, PLN 360 million with a growth of 45% year-to-year. This is the final result. And this mostly generated by the increase in the corporate debt and the improvement of the profitability of corporate capital instruments. So the final results for nonbanking amounts to PLN 1.419 billion. The banker segment is flat, 2.2% is a slight adjustment. This is -- this means that the result is PLN 1.9 billion and with very high profitability of equity over 25%. And this is much higher than expected when we published our strategy at the end of last year. Now we have improved cost effectiveness both on the side of life and non-life. And again, this is good news because this has had an effect on the result. And now let's have a look at the segments. So first, let's start with the mass segment. The dynamic in non-motor insurance was a bit different because the growth rate was almost 10% and mostly household insurance, but also PZU [indiscernible] PZU company and offer for SMEs. This is a new approach to the insurance sum with a aggressive pricing. So this led to an important increase compared to Q3 last year. Motor insurance is quite flat, especially if you think about all the things happened with Link4. As we have already mentioned, Link4 needs to focus on bringing back profitability this year, but a slight increase in the acquisition costs. Now quality has improved. Speaking about the expenses and the cost structure in this segment has changed totally. The share of cost in revenue has gone down, but there is also a lower liability for current claims. So there are some massive claims payouts, but also -- that were the last year, not this year, but also there has been an improvement in motor insurance. As I've told you in Q3, we had an improvement in the loss ratio -- loss frequency concerning this product. So a smaller loss component and the amortization of the loss component from last year gave us overall PLN 40 million, which contributed to the result of the SKU and with a positive effect of the overvaluation, overstatement of the reserves from last year. So PLN 715 million. This is the overall result in this segment with the effectiveness ratios improved practically in every area. Now the motor market and how the trends are going to translate into the results in the upcoming quarters. So first of all, the price dynamics in MOD and MTPL. MOD now, it achieved the highest values in December, January and Q1 this year. The growth rate was at the level of 7.6%, with a drop to the level of 1.5 percent point. But still, it's a positive unlike MOD, which is minus 3%, the previous was MTPL. So for MOD, maybe the only positive thing is that maybe we have already hit the bottom and then we'll pick up. But in MOD, well, it still continues to be quite a profitable product at the end of Q2, which is the last publicly available data, it has a 7% of -- almost 7% of profitability. And MTPL now. In Q1, this profitability was quite high and quite surprising. Now we are at the level of 0 given that the price is not growing anymore at the same rate. For MOD, there is no effect of the increase of the value of the cars. This was a phenomenon that was there after the pandemic for some time, but this was the main driver of growth that now has disappeared. This slide is based on the PAS data. So cannot be directly referred to our reporting. Corporate Insurance segment, high dynamics, more than 8%, both for non-motor insurance, it's almost 7% and motor insurance Link4. Well, it's similar to mass segment, the acquisition costs are lower. The costs of acquisition are similar to mass segment structure of expenses has changed more or less 4% drop due to better cost efficiency, and that's an important parameter for the results of this third quarter, much more than the improvement in quality. We just look at net loss. The net loss also had a positive impact on corporate clients. Current liabilities have gone down. We had lower payments and lower liabilities in non-motor insurances. As you see a bunch of factors that help us to get a double growth up to PLN 309 million. It's similar to mass segments. We've seen the improvement in all major product group. Group individual continued insurance. We started with a high base and then we had increases. However, what I would like to stress is a lower allocated premium for future expected claims and benefits. We had a drop of 64% in this loss component. We've had a better alignment and a more conservative approach. We just thought that the loss ratio and mortality could be higher, but not -- it did not happen. We had very positive variations on these components last year. Because we had better alignment for 2025, we've managed to get a better share of CSM. And with that, we got 26% increase year-to-year. It's not only a standard scale up. We've also changed cost and actuarial assumptions regarding insurance liabilities. That is why we have a 1.5% increase in insurance revenues. We had lower payments under individual continued health insurance, and there was a slight increase -- general slight increase in health insurances with positive cost components. And we end Q3 in operating result of PLN 550 million and a profitability of 27%. Mortality. In the 3Q -- well, 3Q is usually a period of seasonally moderate number of deaths and that was the case this year with a slight improvement year-to-year compared to 3Q 2024, we had an improvement of 3.3%. So the number of compensation benefits to death ratio, it remains positive for us compared to the similar period. So it's better by 10%, around 10%. Individual protection insurance. In this segment, you see very high increases 18.1%. We've already mentioned that. It's basically due to 2 products, individual insurance, which profits and individual protection insurance, PLN 17 million and PLN 14 million increases, respectively, for both of them over that period and CSM has grown considerably 21% year-to-year. And this was a result of better cost effectiveness. Because of that, we decided to change the assumptions regarding costs and the share of costs in contracted insurances. These increases come mainly as a result of scale-up of our businesses, and this translates into better operating results, 10% compared to the previous year. So this quarter is closed with PLN 120 million contribution of that segment to the consolidated results. Let me now move to the CSM balance sheet value. It will be recognized in consolidated results. As you can see, we've had some major increases for CSM from existing businesses and new businesses. For existing businesses, we've had some positive impact of rate indexation, rate tarification and there was also a change in assumptions, and that influenced our way of thinking our approach to costs of that service in the future. Let me mention 2 points regarding that change. The change is usually introduced in quarter 4. This year, we've introduced the change in quarter 3 because there has been some earlier dates set for reporting. So we want to be ready for February because we want to change, be more proactive in communication with the market, and we want to report faster. But sometimes, we were unable to get involved in some communication because we had a delayed reporting. That is why some procedures were implemented earlier and among them were the procedure on the update of technical assumptions and for CSM, we got a very positive effect because we got better cost efficiency in the end. As you can see in both segments, there has been a major improvement. Investment results 5.7% in interest. We also see an increase and the same can be said about debt instruments, the same parameter was different a year before. Last year, we wanted to seize the opportunity on the market, and we wanted to extend the portfolio. There was some negative valuation of these instruments. Also last year, we had depreciation write-off on 1 corporate exposure item. And that's why you've seen a major increase year-to-year, there has been an increase for capital instruments, indexing, private equity and health sector, all of them contributed to this class of deposits. We note a positive contribution to investment real estate assets with a level of 5.7% at the end. And I will end with solvency. It's extremely secure. Results are very high, and we can adopt an extremely optimistic outlook for the year to come. As you see and as you hear, third quarter is the time of growth of our own funds with a slight increase in Solvency II requirement. The increase was observed for both insurance business and for banking -- Bancassurance segment. What's our trajectory and what's the state of play. Gross insurance revenue. Here, we need to look for and prospect new sources inward reassurance. And definitely, as the CEO has said, we need to step up our efforts to get our ambitious goal and to deliver what we've defined by the end of 2027. Value-based thinking pays off. And just have a look at our ROE. We are within the range of our strategic goals for both life and non-life insurance, profitability. We have high Solvency II ratio, and we didn't have reorganization. We just have changes as part of the Solvency II regulation. We've known the details for some time. And now we can say that depending on different scenarios, we are quite well prepared. We are a value-based company and that is why we are selected by investors who believe that we will be able to provide high value and high return on dividends so the dividend per share will be really high. So as I've said, we are really prepared for that. That would be the sum up of the results for quarter 3 and our trajectory in the state of play. And now I give the floor to our CEO, and please feel free to ask any questions. Bogdan Benczak: It was very solid, good positive 10 months. That would be my final word. Bogdan Benczak: Yes, I have to speak to the mic. We had very good 10 months. And now I open the question-answer session. I look at the chat, but let us start with people who are physically in the room. Any questions from the audience in the room. So let us start with questions on non-life insurance. Magdalena Komaracka: Autonomous Research. I will translate that into Polish. To what extent was the combined ratio in Poland in 3Q by favorable weather conditions and/or reserve releases in the third quarter. Unknown Executive: Let me phrase it that way. I would like to stress firmly the following thing. Our DNA includes a conservative approach to liabilities, including insurance liabilities. So we will not act unpredictably here. We have reserves. The level of reserves is absolutely adequate to the market situation -- persisting market situation. These reserves are also adequate because they will allow us to cover all insurance liabilities whatever the scenario. So our insurance portfolio is like this. And the economy has an effect on it as well, and this is what has happened in Q3. So the first thing that happened was the following. And this was purely economical. The inflation got down. And this is about modeling results for the capitalized value. And together with the drop in the inflation rate. So there is also a huge correlation between the indexation level decided by the courts and also the trends of the inflation, the CPI or the salaries inflation. So we see some room for a drop in the level of reserves. And at the same time, we will remain as conservative as before because in the upcoming years, probably we won't have double-digit figures as in the previous years. And this is because the inflation rate is on a very good trajectory to reach the inflation rate goals, as mentioned by the Polish National Bank. So PLN 50 million for MTPL. This was 1 of the reserves I'm referring to. The second parameter is the following. Let me remind you -- but years ago, given the case law, whenever there were injured people in a car accident that actually survived but they were in persistent vegetative state, the family had to look after a person -- bedridden people or seriously ill. So we are speaking here about their mental psychological consequences, which led to claims and in 2017, 2018, we created a reserve for that purpose. But we can see that there are fewer and fewer claims, where courts decides the money to be paid. And this was for years, 1998, 2017, so 20 years of liability. And now we are gradually decreasing that reserve, and this also has had an effect to the overestimate of PLN 21 million on the results. So this is what it looks like in the non-life insurance segment and I hope this addresses your question. Magdalena Komaracka: The second question is from HSBC. How does business mix shift from motor to non-motor impact your combined ratio over the next few years? Can this shift to higher-margin non-motor offset pressure from softer market conditions? Unknown Executive: So we made it very clear in our strategy. What we really are focused on is the growth of profitability that's in our DNA. That's why it was our conscious decision to limit situations, which are not very attractive in terms of value generation. We have told you about the Link4 portfolio situation. We also repositioned PZU SA and the effect of which has been and probably will be the increase in the share of the non-motor segment line of business. What we think is still relevant is that the mass and corporate segment with the mixed portfolio, which brings together motor and non-motor insurance. Here, we want to have profitability managed by combined ratio, but at the levels of no more than 90%. This is our target. Hence, the new activities whose purpose is also to make more room for more revenues in a situation of a soft market. Magdalena Komaracka: And now speaking about motor insurance, given the pricing pressures in motor insurance, what levels do you have to sustain your core in the upcoming period? Bogdan Benczak: Well, I think it depends on how the market behaves. Because the claim inflation rate has been going down. So when you think about the average price of compensation and motor insurance, we can't be too optimistic about the levels of this and the fact that they will start at the same level. So frequency might have an effect, and this is precisely what happened in Q3, but the inflation trends will also have an effect. What we see is the following situation. The MOD market remains to be profitable -- remains profitable, and we are a bit more profitable here. But please bear in mind that we are using a different standard and the one that allows us to gather market data. So if the situation continues, probably this will lead to a compression of margins and whether it's 5% because this is very, very stable and the profitability is going down very slowly but steadily. Anyway, it's very difficult to predict. Now we have negative data from 2 quarters. Q2 and Q3, the negative adjustment is minus 2.8%, and we'll see how it continues at the end of the year, because the end of the year is a very interesting time because some are already positioning themselves for the next year, some are still trying to deliver targets from the current year. So it's interesting things to happen. So if we are able to grab this opportunity and position ourselves the right way, we might even benefit from this situation in Q4. And now MTPL. We don't want to grow at any cost in channels where there is no value for us. So maybe as discussed in our strategy, we will continue to grow but slower, but we will be able to generate value for our shareholders or for our customers because we have a very big portfolio and also, I think that we have mentioned pricing and other issues and we're getting better at the offering to our customers. So if nothing happens, we think there will be a slight depreciation of the margin on MTPL, but we still think it's going to be a profitable product but also depends on the market and the situation. Today, the market is not profitable. And there are companies that generate value and there are some that loss value. And we want to be among the former, but it means that it's very hard work, and it's very nuanced in terms of accepting risking and portfolio and tariff settings in the mass insurance are part of PZU's activity and the part of our priorities. Of course, there is the market situation, but also we have a list of activities that help us improve like pricing, claim handling, frauds. So we have to analyze thoroughly what's going on in the market, but there are also things happening inside PZU. Magdalena Komaracka: And there is also 1 more question from [ Trigun ] about the Motor Insurance segment. So what's behind this very significant improvement in the profitability quarter-to-quarter. Unknown Executive: And we have answered this question already. Well, there is 1 more element that also happened in Q2, the amortization versus the new creation of loss component, the amortization is higher and has a positive contribution to the result. Magdalena Komaracka: There is 1 more question, a new one from HSBC. Historically, so -- is this the moment in the market where the pressure allows it to reverse? I mean, become more profitable? So historically speaking, where are we. So is it subsidizing 1 product with another? Unknown Executive: I think that the Polish market changed significantly when the pandemic started. Let me remind you. In 2019, we told you that a new underwriting cycle was beginning, but the pandemic was a game changer. And first, we had gigantic profits. This was largely because there was no traffic and no insurance incidents. But then people started to work half remotely and half in the office in a hybrid way the traffic came back to the street. And you could see that this cycle was very much disrupted by the pandemic, and the cycle took overall 6 -- almost 7 years. So it's difficult to find a similar period in the past. So historically speaking, in a totally different legislative environment, there was a point where both MOD and MTPL products were not profitable, and this was when the regulator, the financial authority started its interventions. And that was 2017 as far as I remember when the new regulations on the price adequacy took effect. The purpose was to curb the situation that had been happening back then. So now it's difficult to imagine a situation or a huge technical losses offset. And everyone is happy. Why? Usually such a model has a very negative effect on the capital position and insurance companies need to guarantee the right capital to cover and to pay insurance liabilities. So the rules have changed a bit here. So after such a long cycle, it's difficult to compare this time to a similar moment in 2015 or '17. And this approach could be also seen in our strategy, but it looks like we are going to move in a much narrower corridor historically speaking, maybe with a pricing cycle or an underwriting cycle. But it's time span is going to be totally different unprecedented. Let me stress one thing. We are far from a negative technical result, far from it. That's not our philosophy. Magdalena Komaracka: We have 2 more questions regarding results and communication, 1 from HSBC and [ Trigun ]. Regarding non-motor insurances, do you see any one-offs. That will be from [ Trigun ]. And from HSBC, weather losses were having in 2024, but would you describe 2025 as a normal year? If not, how much should we normalize for weather? Unknown Executive: Well, let me phrase it this way. Depends what you understand by normal. The flood, we experienced last year. It's not a regular event. And it's recurring event that should be included in the forecast for every year. I believe that technically speaking in non-motor insurance, it's quite okay. We had some frost in the second quarter for PLN 10 million. Apart from that, there were now other massive events, the ones we had last year, like flooding. So again, what is normal? What does it mean normal? We had more violent weather incidents that's for sure and we have some unseen events. For instance, a heavy rainfall during winter. And we believe that these events may have impact on the claims side. But this is a quotation element. The parameters, which influenced the level of risks are also taken into account when the quotation is being produced. Right now, we've changed our way of thinking. We know that we may have clients on -- in the flooding areas. We have flood protection, not far from the Vistula River in Warsaw, and we have big villas. And when we produce quotation for insurance for such large villas, we will do a totally different valuation than the valuation for a small 3-room flat, somewhere in the tenement building. So these elements unprecedented weather events are already piece and parcel of our quotation methodology. So again, normal for us here means positive. This year is positive. Magdalena Komaracka: I still have 1 question about investment -- about holding. So about investments. It's from Autonomous Research. You've mentioned pressure on investment income in insurance and the contribution from banks, given the duration and maturity profile of your fixed income portfolio, what pace of compression should we expect on the fixed income yield in banking? Can lending growth potentially offset pressure on net interest margins? Tomasz Kulik: Let me answer the following way -- give you the following answer. I will take the perspective of the last 12 months because we started efforts in this area in the third quarter of 2024. What happened there then was that we simply wanted to use what happened around us. So in order to extend and in some way freeze our debt portfolio, mainly sovereign bonds portfolio. We simply seized the opportunity of very positive environment and positive external parameters. And there were some positive results last year. We managed that. And we believe that we can benefit from this on -- in the long term. If interest rates go down by 100 -- 100 basis points, we will be between PLN 80 million and PLN 110 million, PLN 120 million corridor. That would be our position right now. We will do our best to offset that corridor, and we can afford that today, considering our capital position right now. So we can increase that level -- slightly increase that level of acceptable risk. And the share of debt -- corporate debt instruments in our investment portfolio. This share is not excessively big. And the CEO said today that the sovereign debt treasury -- debt share in our portfolio corresponds to 65%. So it's 65% of the whole debt portfolio, and we are not representative Europe-wise when compared to other European peers. So we still have some room, but it needs to be meaningful if you have no reasons to rely on out-of-the-box solutions, you won't use out-of-the-box solutions. However, the number of possibilities is limited. This is not a very deep market. The Polish market is not very deep. And we do have some strategies which try to go beyond the Polish market as sort of a change of cap, and we will think about it if there are new drops of interest rates. And this will be aligned with the new organization and with the new -- with our strategy. Magdalena Komaracka: And we have the last question about holding. Could you remind us of the time line to complete the merger with Bank Pekao or reorganization? And could you provide an update on the legislative process that will enable the merger -- the reorganization? Unknown Executive: Well, you should have been closed by the end of the second quarter, it should be closed by the end of the second quarter 2026 according to the time sheet. Legislative process. The draft will be sent to the parliament. We are just ahead of the parliamentary work. And it's too early to answer the question on the shares and the price of shares. Magdalena Komaracka: And brokerage house of Citi Handlowy Bank. I have a very specific question, but I know that the CEO has such a background. I have a question about the presence -- your presence in the Baltic states. There have been some details in the presentation, but what is the cycle? What's the stage of the cycle? And what are the risks? What are the threats? Bogdan Benczak: Well, the market is similar to the Polish market. There are less insurance companies, but the competition is similar. There is a different mix, slightly different mix split by industries. Traditionally, transportation, logistics, furniture and wood industries. These are the traditional industries within the mix. As you probably know, we are facing a major challenge in Lithuania, there has been a 10% tax on revenues from insurance that has been just introduced, 10% of the written premium tax. And we -- just want to know how this tax on the 10% of the written premium will be calculated. We know that the proceeds from the tax will be used to finance the defense spending. And I believe that this may have an impact on the insurance market in Lithuania. There are no implementing acts and some business lines will be exempted. This is the situation in the Lithuanian market. As you probably know, a long time ago, as part of the transaction with RSA acquired Lithuanian Latvian PZU and the branch of [indiscernible] in Estonia. Right now, [indiscernible] is faring extremely well. They are agile. They are the market leader and they represent the sales mix as we do. They have their own network of insurance agents and they also have cooperation with external channels, a strong position of brokers within the network, similar to multi-agencies in Poland, similar price leverages. The mass segment is most developed for medics. For us, it's health insurance, and it's in Lithuania, the same sector is now on the rise in Lithuania and Latvia, the most developed and Lithuania developing. In both cases, we have good profitability. And the reasons for that are similar to the causes in Poland, the difficulties in accessing public health care. In Estonia, the situation is slightly different, public health care services are of high quality, and that's why health insurance is not a widespread product. And there is a high level of digitization, plus need for quick response. So when you get the request for quotation need to react immediately. We are market leader in non-life in Lithuania. We are market leader as a stand-alone company without consolidation, so as a stand-alone company. And we are also a leader in Latvia. And in Estonia, we are #3. As far as I know, for non-life. Our life insurance company in Lithuania has started to show a positive dynamic. So there has been some growth. But undoubtedly, we need to speed up and we are right now thinking how to reposition the company on the market. The Lithuanian company has a branch in Estonia [indiscernible] has a branch in Estonia. Many years ago, we bought a branch actually and Volta is a standalone company headquartered in Riga, combined ratio and written premiums. I don't know if we have data on that. Let me show you the exact slide. And if you add to Ukrainian companies, PLN 2.3 billion of written premium for third quarter alone. So the Baltic countries plus Ukraine. It's integrated, consolidated in 2025. 86.5% of combined ratio, Baltic States and Ukraine and then the conversion of local currencies. I have to check for written premiums. We actually, you got me, you got me with your question. I have to check and get back to you with the details. However, the combined ratio is at 86.5%, and it's similar to PZU's combined ratio, and the product mix is also close to what we have here. Distribution channels. When we bought Estonian branch Bancassurance and City Bank had a major share. Now this share has shrinken and there is a bigger share of broker and agent sales -- broker and agent-mediated sales. So bancassurance still counts, but its share is not that important. Many years ago, I was involved in the acquisition of this business and I can tell you and Tomasz will agree with me probably that all the basic assumptions were delivered with a surplus. So all the companies are agile, and they have a very successful contribution. And now Ukraine. We are now undergoing a very, very deep restructuring of the companies and this year, Q3 has witnessed a strong pickup in terms of sales and the combined ratio is at the level of 94. So there is no reason to be ashamed given the extreme conditions over the circumstances. So we can be actually proud of it. Magdalena Komaracka: Any more questions? No more questions online. Bogdan Benczak: So thank you very much for your attention, and we hope we see you -- we'll see you again in -- after Q4 and we will be informed about the date of the conference in the current report. Magdalena Komaracka: Thank you very much. It has been very stressful, but also a very interesting experience. And please have a look at our website and our awareness campaigns. Thank you.
Ije Nwokorie: Like I said, we've been busy, and I'm proud of what our people have been up to in the first half of the year. So let's get into it. I know you would have seen the statement this morning, so Giles and I will cover 3 things. I'll share a brief introduction, just frame a bit of what we're up to. And then Giles will pull out some of the key themes from our performance in the first half. And then I'll give you an update on the strategy that we introduced to you back in June. So I'm pleased to report, as we saw on the slide that we are on track with the execution of the strategy and are on track with our guidance for the year. I'll go into each one of the 4 levers later on, but I also want to be clear that we still have some challenges that we're addressing, particularly with boots and sandals, and with EMEA direct-to-consumer. Yet overall, we're doing what we said we would do, with good cash generation and cost control, driving good financial progress. And as I will keep telling you, I'm laser focused on execution and the work we've done to date gives me confidence that we will deliver our full year results as planned. Giles will go into more detail now on how we performed in the half. Giles Wilson: Thank you, Ije and good morning, everyone. I'm here today to talk through our first half results, and I'm pleased to report good progress in all our key metrics. But before I go into any detail, I felt it is important to share with you how we are making decisions and how we're running the business. We are focusing on making the right decisions for the long term while making sure we control our costs and our financials in the short term, as evidenced through our cost action plan last year and our significant reduction in our leverage position. This means we have FY '27 and beyond at the front of our minds. We're making those decisions and the actions we are taking. A really good example of this is in our first half year results, has seen been a focus on improving our full price sales and reducing markdown volume, especially in the periods outside more normal promotional events. Therefore, making markdown directly related to those promotional events or as a tactical way to reward existing consumers and drive new customer acquisition. This principle has also guided our approach to U.S. tariff actions and to make sure we make optimal decisions for FY '27 and beyond. We have worked closely with our wholesale and our supply chain partners in timing of those actions. So turning to our key financials. And as I introduced last year, I will focus on constant currency comparison as this reflects the true underlying performance of the business. Just before I go into any detail and to flag at the outset, as you know, at the year-end, we changed the definition of adjusting items to include impairment of financial assets, and the H1 FY '25 has therefore been represented accordingly. So turning to the financials. Our revenue performance shows a small growth year-on-year, up GBP 2.7 million to GBP 327.3 million and crucially, revenue quality was better as we focused on full price sales and a reduction in our markdown sales. The impact of better quality of revenue and focus on our costs can be seen in our profit lines, especially in operating profit which swings by GBP 6.5 million from a loss last year to a GBP 3.4 million profit this year. After accounting for interest, our profit before tax is still a loss in H1, but a significant improvement on H1 last year. And as I'll explain in more detail, this is after accounting for a tariff headwind and demand generation timing headwind as well. Our dividend is declared at 0.85p which, as a reminder, is a formularic for the half of being 1/3 of the prior year full dividend. Finally, I talked to you in June about the focus we've had on reducing net debt, and we've continued to strengthen the balance sheet in H1 with net bank debt down by GBP 33 million. As a reminder, our net bank debt tends to peak around now as we build the inventory ahead of the peak selling period. With our continued focus on profitability and the strengthening of the balance sheet, this sets us up for sustainable success in FY '27 and beyond. So turning to the revenue. This bridge sets out the movement in sales by region and channel year-on-year. Starting with Americas, we see the business now return to growth across both DTC and wholesale. Following our return to growth in DTC in H2 last year, that has continued in the first half of this year with particularly strong performance in our retail stores, offset by our planned reduction in markdown volume in our e-comm channel, delivering an overall GBP 4.8 million year-on-year increase in DTC. Following the focus on reducing inventory levels in our wholesale partners last year, we're now starting to see wholesale partner orders improving, delivering an increase of GBP 2.4 million and we're also seeing further confidence in the spring/summer order book, particularly amongst our larger wholesale customers. Turning to EMEA. As highlighted at the AGM's trading statement, EMEA across DTC has been more challenging. And that, together with our focus on reducing markdown volume saw a reduction year-on-year of GBP 5.9 million in DTC. However, this was generally much better quality revenue. Wholesale in EMEA, as explained at the full year, was stronger year-on-year, and that is together with a more normal wholesale shipments in H1 saw an increase in wholesale revenue. Finally, in APAC, DTC saw continued year-on-year growth with a particular standout performance in South Korea retail and full-price e-comm across the entire region. Again, like other regions, we saw significant reduction in markdown e-com in sales, especially in China and South Korea. And therefore, overall, a GBP 1.2 million increase in DTC and better quality revenue. The wholesale revenue is in line with our expectations with some small changes in shipment dates year-on-year. So overall, our regional and channel performance was in line with our expectations. Though we're disappointed in the overall DTC revenue in EMEA, this was partly due to our own decisions to reduce markdown volume and the well-publicized weak EMEA consumer environment. We are really pleased with the continued DTC growth in Americas, the overall performance in APAC and the overall better performance in our wholesale sales, delivering on our strategic objective to reduce reliance on markdown sales. As we set out in the statement this morning, our gross margin has improved year-on-year, and I felt it was worth explaining a little bit more in detail. As always, there is lots of moving parts in gross margin. However, what this chart shows is the consistent resilience of our gross margin rate. So a slight headwind from our channel mix was fully offset by the average selling price. The average selling price was a combination of much better full price sales, offset slightly with the strongest shoes performance where the average selling price is slightly less. We saw a strong COGS performance with freight saving negotiated by our supply chain teams being one of the biggest component. And it is also worth noting that includes the H1 U.S. tariff impact as well. And I should speak a little bit more about that on the next slide. So turning to underlying EBIT bridge. And as I set out on the first slide, we see adjusted EBIT turn from a loss -- turn a loss back into a profit. increasing by GBP 6.4 million to a GBP 3.4 million profit. And actually, if you add the 2 headwinds of tariffs, the fourth box and the timing of demand generation, the sixth box that is a figure increases to GBP 9 million profit in the period, a year-on-year growth of GBP 12 million. The slide sets out the key moving parts. GBP 5.3 million gross margin increase driven by GBP 5 million from strong average selling price and better cost of goods, particularly freight costs, GBP 3 million from the increase year-on-year in volume offset by a GBP 2.7 million of U.S. tariff costs. We have continued to tightly control our costs. Within the GBP 2 million benefit from non-demand generating OpEx is to benefit of the cost action plan last year, partly offset by inflation. The full impact of more -- year impacts of more stores being opened and paying you all retail bonuses as retail stores performed better. Demand generation OpEx drove a GBP 2.9 million increase driven by the timing of our key stories campaign being in September this year versus October last year. This will vary year-on-year depending on when the right time is to support key campaigns. Year-on-year benefits in depreciation and other items. And finally, GBP 3.1 million of adjusting items which includes the lease impairment reviews following the accounting policy change and the carryover adjusting items from prior year for incentives and our global technology center. Before I move on to the next slide, I just want to come back to tariffs. As we set out in our statement, the focus has been to mitigate the effects of FY '27 and beyond. And we are pleased to say the action we are taking will do that. Those actions are continued tight cost control, flexible product sourcing and targeted adjustment to our U.S. pricing policy. These have started and will now phase in through to the end of the financial year. We have worked these actions thoroughly, both internally and with our customers and suppliers. The intention has always been to think of the longer-term impacts and make sure the actions we take are with that in mind. The net effect of all that work is that we see about half the high single-digit millions tariff headwind in FY '26 being offset this year. And most importantly, the tariff impact for FY '27 and beyond being fully offset. I have cleverly left the page over there, I'm going to get it. It was an important page because I can't remember it. So it's actually a final slide. So finally, turning to cash flow and our net debt. I'm really pleased to continue to report our significant reduction year-on-year in net debt both in terms of net bank debt reducing by GBP 33 million to GBP 154 million and total debt, including leases, reducing by GBP 46 million to GBP 302 million. As a reminder, our business builds up the inventory levels in advance of peak and the September net debt position tends to be the highest in the year. As we go through the peak period, the net debt will start to reduce. It is worth noting that included in our half 1 results is around GBP 4 million of tariff costs in inventory and this will grow to near GBP 10 million at the year-end. The bridge sets out the cash flows from FY '25 year-end position. The first 4 blocks just show underlying operating cash flow -- outflow of GBP 44 million, made up of delivering GBP 37 million of cash inflow from EBITDA, being invested into working capital as we build stock levels and then the spend on lease payments of GBP 28 million and interest and tax payments of GBP 13 million. CapEx accounts for GBP 6 million and our dividends in the year of GBP 8.2 million. Finally, our net debt-to-EBITDA finished at 2.1x, well below our bank covenant of 3x and an improvement year-on-year. We will continue to see those leverage ratios improve as we head towards the year-end. Our guidance remains for net debt of a year of around GBP 200 million, including leases. So to summarize before I hand back to Ije, looking forward into the second half, we are pleased with our performance in the first half, setting ourselves well up for our key peak period. We continue to see positive performance in our U.S. DTC business, and our order books across the business for SS26 are looking healthy. So with that, I shall pass back to Ije. Ije Nwokorie: Thank you, Giles. So let me give you some color on how in the first half, we executed the strategy that we outlined in June. So you'll remember this slide. And after stabilizing the business last year, this is a year of pivoting the business towards the new strategy. The great news, by the way, that underpins this is that the brand is strong. The team is passionately committed, and we are already seeing results from our work. Importantly, the work we've done in this half has also set us up for the second half and particularly these big trading weeks that we have ahead of us in the next few weeks and provided a foundation for growth in the outer years. But we are in this period of pivoting the business. And what's that pivot about? That pivot is about moving from a channel-first mindset that was primarily about building out DTC to much more of a consumer mindset, giving people more ways and more reasons to buy more of our products and making sure the business is in a situation where any one market or channel or product or consumer segment presents an outsized risk to our success. We have a brand that resonates around the world, and it's a privileged traveling around the world and seeing consumers and partners. And our ambition, therefore, is to become the world's most desired premium footwear brand. As you can imagine, it's a motivated ambition and one that the entire team is united around. So in June, we shared our 4 levers for growth. And what are they? They are engaging more consumers, driving more purchase locations, curating market-right distribution and simplifying our operating model, so consumer, product, markets and organization. And we also gave you a set of FY '26 specific objectives in which we're going to use to make sure that we're on track on this and that we advise you to use to also keep an eye on what we're doing. We said in consumer, we would reduce reliance on discounted pairs. We said in product that we would drive those new product families that we've introduced to you, and I'll talk about it a bit later, Zebzag, Buzz, Lowell, they allow us to give the consumer a different way to think about the brand in different purchase locations. In markets, we guided that we would open with capital-light distribution in some new markets. And in organization, we said we will make concrete steps to simplify our operating model. So let me now share the progress we're making in each of these areas. And as you would expect, I'm going to start with the consumer. As I said in FY '26, we are focused on reducing the reliance on discounts and I'm pleased to say that we are making good progress on both wholesale, which we kind of paid particular attention to and DTC. Working closely with our American wholesale partners and under the leadership of Paul Zadoff, our new President in the Americas, we've achieved a good shift from discount in both in the current season, autumn 1 and '25, and in the order book, as we look forward to spring/summer '26. And as Giles said, we're really happy with that growth that we have in that order book in the Americas because that's the first time we've been able to say that in a while. And similarly, in our DTC, the shift is having a clear impact. DTC full price revenue is up 6% year-on-year. The mix of full price to clearance is up 5%. And we have a full 10% up in the percentage of new consumers coming to full price versus discounts. That's particularly important because if you remember, the objective is to attract new to engage more consumers and we're engaging them -- we'll engage more of them at that full price basis, really critical for us. And while our full price to, if you look at that graph on the right, while our full price to discount profile will go up and down in different times of the year. We will continue to make sure that we're offering the consumer the right thing at the right time. And we will continue to manage this as we go through the pivot. So for example, expect in the weeks ahead, we will participate in Black Friday and Cyber and we'll do some discount. We will reward the consumer with that. We will deal with seasonal product that we want to move quickly. But we will do that in very specific seasons and then return to that focus on full price. I would also say that our customer data platform is helping in this effort because it allows us to directly target consumers based on their buying behavior. So now, for instance, when we are targeting a consumer who is -- who has a high propensity to buy full price, we will not be targeting them with a discount -- with a seasonal discount message because we know that they are motivated by that full price offering, and I've got to say this is still -- and I'll talk a bit about CDP later on. This is early days of this work and a lot more to benefit from as we go forward. The push for full price, along with our focus on comforts, on craft, on quality is supporting overall momentum, and you can particularly see this in Americas DTC. America's retail revenue in the first half was up 15.7% driven by increased footfall. The consumer is coming in to really engage with that product we've been putting before them. In Americas e-commerce, while revenue is only marginally up full-price revenue is up 20%, offsetting a significant headwind as we've reduced and we knew we would get this as we reduced clearance revenue. So we'll share more on that reduction in discount revenue across channels, and our work to attract new wearers at full price when we report the full year in May. I do want to emphasize, particularly with the U.S. numbers that we are showing growth on weaker comps, and this is still work in progress. There was more work to do and significantly more growth to go after in that market. So that's consumer. Let's talk about products. On product, we said we will drive more wearing occasions and in this year that we will drive growth in those distinct family products, Zebzag, Lowell and Buzz. So as you saw in the statement, we have had a successful half with shoes. Pairs are up 20% in DTC and 33% overall. And a big part of this success has come from us being able to give the consumer different reasons and different ways to buy. Playing into those product families and the different wearing occasions and, of course, leveraging the individual customer profiles to give them what is really right for that individual. We talked to you at full year about our success with our more style-focused Buzz family. We're pleased that, that momentum has continued, that's that product to the left with the Buzz shoe being the best-performing new shoe of the half. Another product family that we haven't talked to you much about, but if you want to see it in real life, John is wearing a pair today, is the Lowell. The Lowell is more crafted and more elevated than the Buzz. And we introduced that just a year ago. We haven't really backed it with marketing and has already risen to be 1 of the top 5 shoes for us in EMEA. But let me just say, it's not just the new product families, our iconic 1461 Shoe has continued to perform well. In Asia, it is our best selling product. I'll share a bit more about the work we've done in South Korea and a little case study about how this product has done really well there. And maybe a product we don't speak about a lot, but one that's been on the line since 1992 is our Mary Jane and this is the #3 best-selling product in the Americas and a big part of the success we are seeing there. Let me make one important point. I said this at the full year, but this is important to keep making. This ability to give the consumer more choice, we are matching that with a reduction in SKUs. So this is not about the proliferation of SKUs. And in fact, in Autumn/Winter '25, what we're in right now, we have 45% less SKUs than we did in Autumn/Winter '23. This is about disciplined curation of choice for the consumer as opposed to proliferation of products used. We've talked a lot about the Adrian, and I think the Adrian Tassel Loafer and the success of shoes has really been driven a lot by Adrian as Giles mentioned earlier. This is a product that's been aligned since 1980. It is our second biggest selling product. So I present shoes to make the point that the brand is not just strong, it is relevant across more silhouettes than we really leveraged in the past, and consumer groups allow different -- knowing different consumers allows us to play the right product to the right consumer. And we're really focused on making sure that, that curated breadth is put to work for the brand. What I don't want you to think, though, is that boots are not important to us. Boots are important, and this is an area while we have work to do as they -- as we continue that decline in the half, we are committed to boots. And it's worth saying that decline has moderated and has been impacted by, as Giles said earlier, our planned reduction in discounting. Boots matter to us and the 1460 Black Smooth that everybody knows, remains our top selling product, and we're making progress in the category as a whole with an increased percentage in full price mix. That's really important to us year, and we're achieving that in boots as well. I'll also say we're pleased with the performance that we've had in some of those -- again, going back to the product families, some of the newer products that we've introduced to the line. Let me give you some examples here. The Kasey high boots was new to the line last year and is the best -- the third best-selling product in the line in DTC in the half. And so remember, the 1460 Black Smooth is the first, the Adrian Loafer and then it's the Kasey high. The Buzz Hi, the green one you see back there has been built on the success of the Buzz shoe that we've talked about and that we launched in February. The Buzz Hi was the best-selling new product at launch in EMEA DTC this year. And as part of our focus on comfort, this autumn, we introduced the Zebzag Laceless boots. Zebzag is a family that we've built around being lightweight and casual. We've done [ heels ]. We've done sandals. And now we've introduced a really comfort led easy on boot called the Zebzag boot, you probably -- especially if you're in London, you probably saw some activation around this. And while it's too early to quantify commercial success in this, we're really happy with how that's gone and how it's raised comfort as a topic for this brand. And then 2 weeks ago, we brought to market a new innovation that's built off the 1460 boots. [Presentation] Ije Nwokorie: The 1460 Rain Boots is the first fully waterproof Wellington boots, utilizing our signature heat-sealed construction, that's how the bottom is joined to the top. And our Air Cushion sole -- if you've got the right -- if you got a sample size, it's worth putting your feet in this if you haven't yet, it is built for comfort, and we are getting great feedback on that already. It really captures the essence of what Dr. Martens is about comfort, innovation, craftsmanship functionality without losing the bold attitude of DOCS that our consumers love. This is a whole new wear in occasion for the brand, a real proof point of our strategy of increasing wearing occasions. It's an easy sell for existing customers. They love that silhouette, they love, they understand what the brand is about, but it's also a compelling product for new wearers of the brand. It's been fun visiting our stores and talking to consumers about it, people who came with somebody else and I never knew you did this and all of a sudden, they're getting on their feet. We've used our customer data platform to customize marketing messages based on the customer profiles. Some people are built more for style. And so you pitch a style message and from some other people, it's comfort and function, and we're able to do that as well to those people. It ticks all those boxes. And we've brought it to life in a really immersive way. These are some pictures on the screen, for example, a takeover of our store in Brooklyn, which is all merchandised just for the rain. And the wealth of press and social media coverage on this has been absolutely stunning. So we're thrilled how the launch has gone. I expect those of you in festival season from the summer to be wearing a pair of these, and we'll keep updating you on our progress. So now we talked about consumer, we talked about product, let's talk about markets. And the market lever is really about making sure that in each market, we have the right distribution, working in partnership with wholesalers and distributors. To get the right product in front of the right consumer in the places that, that consumer naturally wants to buy. And in FY '26, we've told you we'll focus on opening capital-light models with our partners. And I'm pleased to share now the progress that we've made. Much of this has been announced, but it's worth just encapsulated on one place. In the first half, we've announced new distribution partnerships in LatAm and in the UAE. Latin America agreement is with Crosby, and they will drive our reach in Mexico, Argentina, Paraguay and Chile. And this will include both wholesale and mono-branded Dr. Marten stores run by them. We now have 2 mono-branded stores launched already with Buenos Aires opening in August and Santiago at the start of October. In the UAE, we've partnered with Beside, who will launch and then grow the brand's presence in UAE, initially through wholesale with mono-branded stores planned very soon. And excitingly products that are arriving with that partner just last week. And in the Philippines, where we already have a great partner, we are accelerating that expansion on the back of this strategy. They have already operated 2 stores but they've now opened a third store again in Manilla, that's actually the picture that is here. And there are more planned. I also want to say, even though we've talked about capital-light models, this is not just about the deployment of capital, it's also about working with experienced and trusted local partners who have experience with global brands and who have deep market expertise and operating know-how. Working with them ensures our brand shows up in the right way for those consumers, whilst they'll be in 100% DOCS. And these are the first agreements of many that we will announce in the quarters and years to come. And while that is largely about new markets, it's worth saying the same principle applies to our existing markets. In Italy, we have 14 direct-to-consumer stores and we've been making good headwinds in Italy since we started building that strategy up. Now we're expanding through a combination of, yes, our own DTC, but also these partner stores with the first franchise store opening in Pompei in October 2025 with a great local partner. And we're really pleased with how that's gone. And as you can see from that image, it's a really great Dr. Martens experience. We have more stores planned for the future. We're taking a similar approach in China where we've opened recently in the half, new stores in Chengdu, in Chongqing and in Hangzhou. So this is an exciting growth lever for us. And it's worth saying, these capital-light models are a good example of our ability to create value in partnership with great businesses around the world. As I shared in June, we're excited about the skill, commitment, resources that our partners bring to our brand, whether it's through franchise stores as shared or in deep marketing partnerships with our wholesale partners. The images here is just a spectrum of -- some of the wonderful activations that our partners put out when we launched the Zebzag Laceless boot that I mentioned earlier. I'd highlight Zalando in Germany who really took over the big hub and held the biggest event there to date. And [ La Rinascente ] in Italy, which included the takeover of a metro station in the Milan that you see in the bottom right corner there. These close partnerships, along with the work we've done with them over the years to rightsize inventory are some of the driving reasons behind healthy order books for Spring/Summer '26. And curating this market right distribution with our partners is key to value creation for everybody. And so a few things take up more of my time than this, and we'll keep you posted on how we keep going to it. And so finally, let me talk about the organizational layer, which is lever, which is really about simplifying how we operate and focusing squarely on consumer. And here, we are beginning to reap early benefits of systems that we probably talked to you about in a bit, but that we've now really focused on executing, implementing and embedding the organization in the half and getting our global technology center in India up and running. I'll start with the customer data platform. The customer data platform is making it easier for our marketing teams, really simplify our marketing and commercial teams to reach the right consumer with the right proposition. I think I've given a few examples of that already today. So the focus to date has been on optimizing the consumer journey. That's how the consumer navigates through from social to a site to find the product they are looking for, driving repeat purchases and making sure that we're efficient when we do a discount that we're not cannibalizing full-price sales. And then we've also used it for our product launches, really tailoring the market, such as in the rain boot example that I gave you earlier. So again, early days, part of our business, but you can see how that really simplifies the way our teams can deliver value to each individual consumer. Our supply and demand system, as we told you, went live in the summer as planned and is already delivering greater visibility and accuracy between demand signals on one hand and supply orders on the other hand, you can imagine what that does for the efficiency of the business. For instance, our teams have started utilizing statistical modeling of past sales database on this platform to identify patterns, trends and seasonality, which then are used to predict future demand really on a 2-year rolling basis, that's new capability that really simplifies the way we think about things that and operate. And then finally, while not due to be fully operational until FY '27, our global technology center and actually the image in the background is the global technology center in India, is now up and running. And by bringing engineering in-house, which is what this does for us. We have already become much quicker in delivery and optimized customer journeys, allowing teams, for example, our retail teams to recognize the consumer and offer a more tailored store experience, such as an in-store pickup or a promotion for that individual consumer. So this is a muscle that we will keep pulling how do we simplify the organization, how do we equip our teams to be -- to make it easier for them to really deliver to individual consumers. Because again, that's what the pivot is about being much more consumer first minded. So that's the work we've been doing and the results we're beginning to see. In consumer, we're driving more full price in both wholesale and DTC. In product, we're growing those product families and alongside the icons, they've given our consumers more reasons and more occasions to buy. In markets, we're working closely with partners, whether that's capital-light models or deep market and product partnerships with major wholesale partners. And in organization, we're using technology to simplify how we work and how we serve our consumers better. So to wrap up, let me use one specific market to illustrate how this strategy all comes together as you see you get a picture of it. South Korea is still a small market for us and a proof of how we can grow in new markets. It's also a critical market, South Korea, because as you probably know, it really influences cultural trends around the world. So how does our strategy playing out here? In consumer, we've grown full price with that strategy. We've grown full price 65%, and we're increasing that mix of revenue by 25% in the year -- in the half over half. In product, we've leaned into that market specific demand for the 1461, which is really where that product is in more demand than any other market in the world, and really allowed our team to push that, while also significantly build a new equity around the Lowell shoe. So we know what the -- if you like, the major product is, but we're also able to start creating affinity around a product behind that so that we're not at risk of just one product lastly. The Lowell, as we started doing that is up, up in 90% half one to half one as we've done that. We're building exciting partnerships like this one in the picture shown here, which is with [indiscernible], who built out a major 2-week installation for the 1461 Shoe. And Giles and I were privileged to be in South Korea in the middle of those 2 weeks, and it's just a stunning experience, delivered entirely by our partner. And finally, by simplifying around the consumer, really making the consumer at the top of mind, it's allowed the career team to be liberated and deliver what works for their market. while aligning 100% to our brand. These are great experiences of Dr. Martens, but they're right for the South Korea market. As a result, revenue in South Korea is up 30% year-on-year in the first half. This is a growth market for us, and we're excited to see how the customer focus is helping them connect with more wearers and the learnings we can take from there to apply to other markets. So I hope that gives you a good sense of the progress we're making. We're focused on executing on the levers of our growth. We're seeing early results. But this is work in progress, and there are still key areas to address. We've set ourselves up well to deliver the plans in the second half. And along with our partners, we feel good about our plans for these big trading weeks that are ahead of us. And I have to emphasize there is significant opportunity ahead. That opportunity, as you remember, comes through the headroom that we still have to grow. Just in the 15 -- in our 15 top markets, we are only 0.7% of $180 billion relevant market in just those 15 countries. And we're in many places where the brand is still attractive and desired. And we're going after that. You've already heard us about Mexico in UAE and other places, and in our existing markets as you've seen with the U.S. or South Korea, we're also going after opportunities to grow there. So these early results and the significant headroom give us confidence in our medium-term value creation thesis to grow profitably and faster than our peer set. The operational leverage that delivers high to mid-teens EBIT margin and the underpin -- and the continued underpin of strong cash generation. This will create significant returns for shareholders. And that's why Giles, the team and I are laser-focused on this execution of the strategy. There's a lot of work ahead, yes, but the brand has never been stronger or more relevant and the green shoots are promising. So we're going after it. Thank you. Ije Nwokorie: We will take questions now. We'll take questions in the room first. Please say your name and what organization you're from. And then we'll go to questions via the operator. I think I'm going to get John for us today. John Stevenson: John Stevenson of Peel Hunt. A couple of questions to get us going, please. On the product side, you mentioned sort of areas to focus on and mentioned sandals and boots. Can you talk about what the plans are for next year in terms of how you think you can address sandals and what sort of innovation or how we're going to develop that? Secondly, on EMEA, I don't know if we can have a bit of a sort of dive into the region in terms of trading. I mean, clearly, the U.K. has been challenging. Can you talk about sort of an overview of where the weakness in EMEA is coming from and what your thoughts are from here sort of going into the second half and a very, very quick one. What's the price change agreed for factory pricing for the year ahead? Ije Nwokorie: I will take the first 2, and I'll pass you the questions on pricing. Yes, it's interesting. I have for simplicity loved the boots and sandals together, but I want to be clear that there are 2 different problem statements. And I'm confident about our boots plan. We have more work to do in sandals. I think sandals is a place where we need to drive more innovation, and we really have that work to do ahead of us. And I think that will take us -- to be very honest with you, that will take us a couple of seasons to get that right. But the team are working on it. I told you around innovation that we're working on lightweight. We're working on really making sure that our sandals proposition stands on its own and isn't just on the back of other things. But we're not starting from a standing start. We've had sandals in the line since '80s. Some of our top selling products in the season have actually come from America, if I take an example, we have a sandal called Dunnet Flower, which even 2 weeks ago, was one of the top sellers in America in November, right? And so we have strong sandal offerings, so we have -- we know what works. We now have to do the work to build that out over the next 2, 3 seasons, but it's work in progress -- it's an area of focus. With EMEA, the slight evolution on our analysis since the first quarter is that the U.K. isn't particularly the challenge anymore. That really was the case in the April to June quarter. But since then, actually, we've seen traffic return to stores. And I would say that the EMEA challenge is an EMEA-wide challenge. Of course, there are variances from market to market, but it's really about a consumer who is out shopping, but being a lot more considered. A lot more browsing and research happening. And they're doing 2 things largely. They are either looking for a deal. And so the market is promotionally led, but as we all know, there's only -- there's a bottom that you get in the market will have to fight back from just being promotionally led. But actually, more interestingly, there is also a flight to quality. There's a bit of a trade down from luxury into premium into craft and quality. And there's a bit of a considered purchase, which means I'm not just buying anything, I'm buying, I'm making -- I'm treating this purchase as an investments. I might actually spend a bit more because I'm getting the quality. And we see that come through in our more expensive products. We are actually doing quite well. What is the weekend of bag at EUR 300 -- over EUR 300 or whether it's something like the Kasey boot, which is one of our more expensive boots. So this is a consumer who is considered. There's nothing wrong with that and a brand that has quality, has opportunities. And that's what we're going after. We can, of course, control broader macroeconomic issues and the ways in which the consumer thinks but we feel we have enough levers. We planned into the headwind on discounts. We're not going to over chase that. We'll participate where we need to participate. That will remain a headwind for the rest of the financial year, but we still think we have opportunities to make sure that we are competitive in the market. Giles Wilson: So your factory pricing, looking ahead, I mean, effectively, we don't guide specifically on factory pricing. I'm comfortable where the numbers are. There's nothing there. With the exception of tariffs, it's obviously a cost that we've given you views on. But overall, we have a good relationship with our suppliers, long-term relationships with our suppliers and actually some of the work that we've been doing specifically around tariffs has been working with them about where we source some of our American purchase orders from. So I think we don't normally guide on it, but there's nothing in there that I would be saying this particularly to pull out. Anne Critchlow: It's Anne Critchlow from Berenberg. I've got 2 questions, please. First of all, on the U.S. In terms of the perception of pricing power in the U.S., how confident are you that you can put through these price rises. Do you think they'll strengthen the brand? Or do you think you'll encounter some resistance? And then secondly, on EMEA, how confident are you that you can drive engagement and turn that sales trend around? And how important are the CDP capabilities within that? Ije Nwokorie: I will grab both of those, but add anything if there's anything I miss out. So as I shared, and we've traveled a lot together. We were in a Boston store early in the year. We're not seeing any resistance in America to our higher prices. In fact, we have some anecdotal evidence that the price position in some products -- some specific products might be on the low side, and we have opportunity. It's worth saying we haven't taken price in the market for 3 years, right? And so the market -- we have headroom to go to and still to remain competitive. But we will be surgical about this. This is not a blanket price raise. We will look at individual products. We will understand how their benchmark and understand how the consumer sees them and that's how we will apply pricing. So to your question, do you see any resistance? Never take the consumer for granted, but this is strengthening our premium position to have the right prices at the right... Giles Wilson: I think just worth also adding, we look at price -- those prices on a global basis. So we look about how does that feature in a product, not just in the U.S., but where does it turn up in other countries. So it's part of our pricing policy to look at this. And as Ije said, we haven't taken pricing for 3 years in the U.S. So there's actually -- there's a lot more detail that goes behind that work that goes in, and we're much more confident about where they come through. Ije Nwokorie: In EMEA, I think I'm going to make a similar statement but you never take the consumer for granted. We do think that less clearance will remain a headwind for the rest of the year, but we've planned for that. That's baked into our plans. That's not any new risk. We like the fact that the consumer is in the store. So that gives us the opportunity to make sure that we deliver that value that they're looking for because the footfall in the stores is absolutely fine. And online, we continue to make sure that we are using the CDP to your point, to really manage that experience so that consumer finds the thing, not just that they're looking for, but the thing that is right for them based on their profile. This is trade and work on. And so there are no ground strategies. It's really understanding each consumer. I really understand in each -- literally down to each individual store, but we've got great people in our stores who really know how to trade and we're giving them great product to work with. So we're confident that we'll hit our plans for [ India ]. Kate Calvert: Kate Calvert from Investec. Just 2 for me. First of all, just on the franchise model, apart from Italy, where else in Europe are you thinking of using this model? And are you thinking of using it in the U.S. And my second question on the U.S., you talked about the full year results about the opportunity to elevate the brand and work with more premium wholesale partners. Have you made any progress in autumn/winter on this? Or is this all to come sort of year and beyond? Ije Nwokorie: Yes. Good questions. I'll take both of them. I don't want to get ahead of myself on markets where we will do the franchise model. It's worth saying we have it -- it's a big part of our business in Japan, it's a big part of business in China, a significant part of our business in China and a significant part of our business in Italy. So we have those examples. We will look at it as we look at retail strategy going forward. So I don't want to open or close any markets to it, but those are the 3 places where we are active. And as we deliver on that and as we build that out, we'll share that information with you. We're really happy with what we've been able to do with Nordstrom in the last year and I'm not going to guide on their numbers, but we've had that premiumization and some of the product at the more expensive area, some of the work and the success we've had with the Adrian Loafer has been in partnership with Nordstrom. So that's a really -- that's an example of a premium brand where we've done that. We've also done some really great work just recently with Kit, which is out in the market and a kit is really that sort of that Pinnacle retailer and some of our more refined elevated product, something we call [ Regen ]. These are not huge volumes, but they really position the brand in that Pinnacle space. And so those are 2 examples, and Paul and the team are hard at work building that out. You've got a question there? Let's go. Same rules. Just tell us your name and where you're from and would love to hear your question. Operator: We'll take questions from Alison Lygo from Deutsche Bank. Alison Lygo: Two for me, please. First one is about the U.S. and the profitability there and the operating cost base. Margins in the U.S. has kind of reached flattish now in the first half and expect that to be positive in the second half with the seasonal weighting, but still very much dragging on the group. Just wondering what your sort of outlook for regional margins there is? What you think kind of can be done now? Is this just the case of kind of growing back into the cost base? And then the second one is really on the product that your wholesale partners are buying into. And so you talked about plans to get partners buying into a broader assortment. You've talked about a healthier order book. And I'm wondering if you could add a bit more color around that in terms of the range of products that wholesale partners are now buying into and really how the regions are kind of comparing in terms of whether one is more ahead of the others? Giles Wilson: Yes. So on U.S. margin, I think there's a couple of things we need to just pull apart for the first half. Firstly, obviously, the U.S. margin has got the U.S. tariffs in. So you will have that as a bit of a headwind in the half year and obviously, Ije rightly said the first half is obviously the smaller the half. You'll have noticed that Ije put up on the screen that we saw our retail stores grew 15-plus percent year-on-year. So we're seeing much better performance across our retail stores. And as we set ourselves up into peak, we feel much more confident there. And then thirdly, the growth in the wholesale, I think that's the other key part here. We've obviously had a couple of years where wholesale, particularly in the U.S., was where we came off. And we're sitting here much more confident about our summer spring -- sorry, spring summer even order book as we go forward. So I think it's a bit of both, in all honesty, it's about us growing back into some of the -- into the volume, particularly on the wholesale, getting better return from our retail stores as we're doing. But also, as you're well aware, we have been looking at our store network, and we have closed or provided for stores, and we are doing that. We've been quite clinical now about what each store needs to produce and have actually -- I think, at the half year or the full year, we did actually put a few stores as impaired. So we will expect to see that margin now begin to really improve and get back to the levels that you've seen in the past. Ije Nwokorie: And on the second question, Alison, which is a great question. Thank you. What we're seeing is our wholesale partners are buying into a broader range. But I want to be clear, what's the right range varies from wholesale partner to wholesale partners. What journeys once is going to be very different from Nordstrom ones, and it's going to be very different from -- it's not just once, what's right for their consumer. And so having really built up the strategy and particularly in the U.S., demonstrated that return to growth based on the strategy in DTC. Of course, the wholesale partners are now very interested in a broader range of products. But there isn't a particular regional split on that, that's going to be different from wholesale partner to wholesale partner based on who their consumer base is, who their buyer is, how they sell. But it's a broad spectrum across particularly -- we've seen a huge growth in shoes and the assortment of shoes and across those new range of products. So it's broader than it's been before. You've got those new product families in it. You've got a bit more shoes than in the past, but it's -- that's a general statement. It's going to vary from wholesale partner to wholesale partner. Operator: There are currently no further questions over the phone. And with this, I'd like to hand back over to Ije for closing remarks. Ije Nwokorie: Thank you all very much. I believe the statement is clear, and it's been a pleasure to share with you some of the highlights from the execution of the strategy. The statement remains the same. We're happy with progress to date but there's still work to be done. And when we look at the long-term opportunity, the headwinds in the market, the strength of the brand, the fundamental economics, we're really excited with how we're going to create value for our shareholders in the future. So thank you very much.
Operator: Good day, and thank you for standing by. Welcome to the Valneva 9 Months 2025 Financial Results Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker, Josh Drumm. Please go ahead. Joshua Drumm: Thank you. Hello, and thank you for joining us to discuss Valneva's financial results for the first 9 months of 2025 and corporate update. It's my pleasure to welcome you today. In addition to our press release and analyst presentation, you can find our consolidated financial results for the 9 months ended September 30, 2025, which were published earlier today, available within the Financial Reports section of our Investor website. I'm joined today by Valneva's CEO, Thomas Lingelbach; and our CFO, Peter Buhler, who will provide an overview and update of our business as well as our financial results. There will be an analyst Q&A session at the conclusion of the prepared remarks. Before we begin, I'd like to remind listeners that during this presentation, we will be making forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. You can find additional information about these risks and uncertainties in our periodic filings with the Securities and Exchange Commission and with the French Market Authority, which are listed on our company website. Please note that today's presentation includes information provided as of today, November 20, 2025, and Valneva undertakes no obligation to revise or update forward-looking statements, except as required by applicable securities laws. With that, it's my pleasure to introduce Thomas to begin today's presentation. Thomas Lingelbach: Thank you so much, Josh. Good day, everyone. Welcome to our 9 months call. So before we go into the business highlights, and also, Peter will provide a very detailed financial report, I would like to start off by providing a couple of key financial management highlights. Total revenues reached EUR 127 million at the 9-month time point, which is a substantial growth of almost 9% despite of some headwinds, be it from a geopolitical perspective, but also from an IXCHIQ perspective in particular. And we are very glad that we have been able to deliver on that growth year-to-date. We have also been able to significantly reduce our operating cash burn, which has been one of our key objectives in continuously improving efficiency of our operations. This resulted in a cash position of more than EUR 140 million, which includes also the net proceeds from different ATM transactions, Peter will further detail. And most importantly, we successfully completed our debt refinancing, which, of course, enhances substantially our financial flexibility, and we are very glad that we have found in Pharmakon a new partner to support Valneva in the years to come. Recapping a little bit on the first 9 months key business highlights. Around IXCHIQ, we responded to significant unmet medical needs on the La Réunion and Mayotte, the respective outbreaks. We also responded to a cholera outbreak in Mayotte by supplying doses of DUKORAL. And we again finalized the new IXIARO U.S. Department of Defense contract, all of that supporting our mission in targeting unmet medical needs. On the regulatory and commercial side of things, we secured additional marketing authorizations for IXCHIQ in the U.K. and Brazil, label extensions for adolescents, 12 years of age and older in Europe and Canada. And we announced an exclusive vaccine marketing and distribution agreement for Germany with CSL Seqirus replacing Bavarian Nordic by the end of this year for our established brands, and they already started distributing IXCHIQ in Germany. Of course, on the clinical side, it's all about Lyme right now, and we completed all vaccinations in the VALOR Phase III study according to plan. We also reported further positive safety and immunogenicity data following the third annual booster as part of our Phase III follow-up study, VLA15-221. On IXCHIQ, the vaccine profile got further substantiated with the antibody persistence data, now after 4 years, still showing the 95% 0 response rate after a single shot, which is the key differentiation for this life-attenuated single-shot vaccine. We further reported immune response in adolescents and positive pediatric safety and immunogenicity data. Last, but not least, we also reported positive Phase I results from our second-generation Zika vaccine candidate, VLA1601. Going a little bit into the details of the individual programs, I would like to start off with Lyme. We've been talking a lot about Lyme, and we will be talking a lot about Lyme. The Lyme continues representing a major unmet medical need, enhanced market opportunity, close to 0.5 million cases every year confirmed in the United States, probably now in Europe, the same order of magnitude. Also, there are limited reporting systems available. You remember that we have about 90 million U.S. citizens living in high-risk areas of Lyme disease, and in Europe, more than 200 million in those endemic regions. Most importantly, the health economical benefit for a potential vaccination against Lyme disease is considered extremely favorable. Why? Because you have very severe manifestations in connection with Lyme disease. 10% to 30% of people develop either carditis, neuroborreliosis or arthritis and 5% to 10% persistent symptoms even following treatment with respective antibiotics. By way of reminder around the Phase III study that is currently ongoing, Pfizer reconfirmed that they're going to submit regulatory applications in the U.S. and Europe in 2026. The VALOR study has been executed according to plan. And basically, Pfizer guided for readout in the first half of 2026. And the study, of course, is now going through its follow-up period since the official case counts ended at the end of October. Then, we run the normal process through case adjudications, further testing activities, database cleanings and all of that before the results will be announced in the first half of next year. Most importantly, the time point for which we expect the product to be launched hasn't changed. It is important for us and our Pfizer colleagues that the product can be launched in the autumn of 2027, well ahead of the 2028 tick season. It is important to get really people protected for the tick season 2028. As such, we are very, very much looking forward to the data, which hopefully are going to be positive, and hence, provide a pathway for a vaccine that could really address a huge unmet medical need. Turning to our highly differentiated, single-shot chikungunya vaccine, VLA1553 or IXCHIQ. Where are we at this point in time? Of course, we have, on the regulatory side, still the situation that the product is suspended in the United States. And we are still awaiting further information from FDA, which we haven't received at all at this moment in time. In all the other countries, we are working on the basis of updated Prescribing Information or SmPCs. And we are seeing that the product is being administered, and we are trying to focus substantially on the expansion into LMIC territories and are working with existing and hopefully future partners in this regard. The most imminent point now to consider in this program that is supported by CEPI are our post-marketing effectiveness studies, the Phase IVs, which are about to commence with an observational effectiveness study in Brazil with pragmatic randomized controlled effectiveness safety studies in adolescents and adults, including elderly in various endemic countries, and then, later, a prospective safety cohort study and surveillance in Brazil as well. Of course, I mentioned already, the label extensions and the report on the positive data, which we will further submit and hopefully be granted in the different product labels. We see clearly the product differentiation for IXCHIQ, which, of course, is super important for a potential outbreak disease and for people who are planning multiple trips into areas where there is a high risk of a potential outbreak. Shigella, you may recall that we in-licensed the vaccine through a partnership with LimmaTech, the program called S4V2, is the world's most clinically advanced tetravalent Shigella vaccine candidate. It addresses the 4 most common serotypes of the Shigella bacteria. The program reported earlier positive I/II clinical data in different age groups. In terms of medical need, Shigella represents second leading cause of fatal diarrhea. And here, especially in infants, below 5 years of age, the global market is expected on the one hand side in LMICs, in particular, the target population that I just mentioned, but also it represents significant opportunity for travelers and military. Given the overall medical need, and also, the diarrheal diseases to be seen in the context of antibiotic resistance, the Shigella development or vaccine development against Shigellosis has been identified as a priority by WHO. We have currently a couple of studies ongoing. We have the Phase II in infants, for which we expect results still this year. And we have the Phase IIb controlled human infection model study in adults, where we changed some of the data time points, the clinical design in order to extend the period of immunogenicity, where we had the opportunity to optimize dose and schedule. And we expect the pilot efficacy data next year with immunogenicity data coming in earlier upon success. And please remember that we have intentionally set up the clinical design and the clinical pathway in a way that the program is highly derisked from a capital allocation perspective. So based on positive data, based on our respective go decisions, we will assume full accountability for the program following those 2 studies, which are still sponsored by LimmaTech, yes, or just update on our operational business and R&D, in particular. I would like to hand over to Peter to provide you the financial report for the 9-month period. Peter Buhler: Thank you, Thomas. Product sales reached EUR 119.4 million compared to EUR 112 million in the 9 months of 2024, an increase of 6.2%. Foreign currency fluctuation had an adverse impact of EUR 1.3 million. IXIARO sales reached EUR 74.3 million, increasing 12.5% over prior year. The year-over-year growth was driven by sales to the U.S. Department of Defense as well as increased sales in some European countries. Foreign currency fluctuation adversely impacted IXIARO sales during the first 9 months by EUR 800,000. DUKORAL sales decreased from EUR 22.3 million in the first 9 months of 2024 to EUR 21.5 million in the same period of 2025. Sales were EUR 400,000, adversely impacted by foreign currency fluctuation, mainly resulting from a weakening Canadian dollar and also lower sales to our German partner, as we are transitioning from our current distributor to CSL Seqirus. IXCHIQ's sales reached EUR 7.6 million compared to EUR 1.8 million in the 9 months of 2024. While IXCHIQ sales included the supply of 40,000 doses to combat the major chikungunya outbreak on the French Island of La Réunion, the temporary restriction and U.S. license suspension significantly adversely impacted sales in the Travel segment, leading to an adjustment of our sales guidance. Third-party products decreased by 28.5% year-over-year to EUR 16.1 million. This decrease is a result of the anticipated discontinuation of certain third-party distribution agreements. As mentioned in our previous calls, we expect third-party product sales over time to account for less than 5% of total product sales. Now, moving on to the income statement. Total revenues reached EUR 127 million versus EUR 112.5 million in the first 9 months of 2024. The increase of 9% is driven by higher product sales and an increase in other revenues related to revenue recognition from partnerships. Looking at expenses, cost of goods and services for the 9 months of 2025 reached EUR 71.1 million compared to EUR 71.3 million during the same period last year. The gross margin on commercial products, excluding IXCHIQ, reached 57.2% in the first 6 months of 2025 compared to 48.6% in the prior year. The improvement in gross margin was driven by better manufacturing performance and favorable product mix. IXIARO gross margin reached 63.2% compared to 58.8% in the first 9 months of '24, and DUKORAL generated a gross margin of 52.3% compared to 34.8% in the prior year. Cost of goods related to IXCHIQ amount to EUR 8.6 million and include provisions to recognize lower IXCHIQ demand. Cost of goods also includes EUR 8.2 million of idle capacity costs. Research and development expense increased from EUR 48.6 million in the 9 months of 2024 to EUR 59.7 million in the same period of 2025. That increase is what is driven by costs related to the Shigella vaccine candidate following the R&D collaboration with LimmaTech Biologics and costs related to the IXCHIQ Phase IV post-marketing commitment. Marketing and distribution expense decreased from EUR 35.7 million in the prior year to EUR 28.6 million in the 9 months of 2025. The decrease is related to a planned reduction in advertising and promotion spend related to IXCHIQ following the launch in early 2024. G&A expense reached EUR 29.5 million in the first 9 months of 2025 compared to EUR 32.6 million in the same period of last year. This decrease is a result of a program to increase operational efficiency across the company that we ran at the end of 2024. In the 9 months of 2025, Valneva reported an operating loss of EUR 53.9 million compared to an operating profit of EUR 34.2 million in the prior year. Last year's operating profit was the result of a sale of a Priority Review Voucher for a total net proceed of EUR 90.8 million. Adjusted EBITDA in the first half of 2025 reached a negative EUR 37.7 million compared to a positive impact -- positive EBITDA of EUR 48.6 million, impacted by the sale of the PRV. Before moving to the outlook and guidance, a word on cash. As mentioned by Thomas at the beginning of the call, cash at September 30 was reported at EUR 143.5 million compared to EUR 168.4 million at the end of 2024. The cash at the end of September includes a total of 3 ATM transactions for a value of a total of EUR 26 million net of transaction costs. Cash used in operating activities was reported at EUR 28.4 million compared to EUR 76.7 million in the first 9 months of 2024. Now moving to Slide 19. We confirm our financial guidance for the fiscal year of 2025 with product sales of EUR 155 million to EUR 170 million and total revenues of EUR 165 million to EUR 180 million. We continue to project R&D expense of EUR 80 million to EUR 90 million, and the R&D expenses will partially be offset by grant funding and the anticipated R&D tax credit. As confirmed in the results at the end of September, we expect a significant lower use of cash in operations. Cash will remain a key focus in order to ensure sufficient runway to reach key inflection points. In the midterm, we expect continued growth in our product sales, focused and strategic investments into R&D and continued improvement in gross margin. We continue to expect Valneva to be sustainably profitable post successful approval and commercialization of the Lyme disease vaccine. With this, I hand the call back to Thomas. Thomas Lingelbach: Thank you so much, Peter. At this moment, I would like to turn to our key growth drivers for the remainder of the year, but also most importantly, beyond the end of 2025. We have built Valneva now on a very solid foundation. And Lyme is certainly going to be the single largest growth driver for the company in the years to come and the single largest near-term catalyst for the company and its shareholders, but also for people who may benefit from a vaccination against Lyme disease. The VLA15 success, which is hopefully expected in the first half of next year, may drive the company upon successful approval and commercialization into sustained profitability, driven by substantial milestones and later royalties starting in the latter part of 2027. Of course, for this year, and despite of having adjusted our guidance on product sales, we hope that we will be able to continue our growth trajectory for our established brands, IXIARO and DUKORAL. And we are working hard in gaining and regaining global traction on IXCHIQ, and in particular, leveraging LMIC opportunities and new territories where a product like IXCHIQ with its highly differentiated product profile could be perfectly suited. There is more that Valneva has to offer in its pipeline above and beyond Lyme. Also, Lyme is, of course, very, very dominant and rightly so. We are advancing a number of quite promising internal candidates. We are identifying new opportunities, be it in-house, be it also external potential partnering opportunities with the aim to really build a coherent R&D pipeline with an attractive next Phase III program upon successful VLA15 [ stroke ]/Lyme commercialization, making us really a leading vaccine biotech in the world. As such, we see substantial growth, substantial upside. And with that, I would like to hand back to the operator to take your questions. Operator: [Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Vamil Divan from Guggenheim Partners. Vamil Divan: So maybe just 2 questions. I could wait for the Lyme data, obviously, the big event coming. On IXCHIQ, you mentioned you're waiting to hear from the FDA. Is there any sort of timelines there? Any guidance on when you think you may hear or anything that the FDA is bound by in terms of when they need to respond by? And then, DUKORAL, you mentioned this quarter, there were a couple of factors, I think the currency and then the distributor shift in Germany. Wondering if you can quantify the impact of the second, especially? And just how you think about sort of -- you're talking about growth for that asset going forward? How you sort of see that recovering to growth? Thomas Lingelbach: Okay. So let me start off with the Lyme -- the IXCHIQ question and FDA. So unfortunately, the answer is there is no predefined process because a similar process, meaning a suspension in the same way that it was done for IXCHIQ without WebPAX, et cetera, has not been done to our knowledge before. So actually, there is no precedent. There is also currently not a procedure to our knowledge that needs to be followed from a timing perspective. And as such, we are hoping for a collaborative interaction with the FDA, which, of course, could not have happened due to the government lockdown for quite a while, but we certainly hope that we will be able to embark with the FDA into a dialogue still this year. I'll let Peter answer to your DUKORAL question. Peter Buhler: Yes. So I think I commented on the currency impact during the call. I think with regards to Germany, we have not disclosed the number, and we never disclose numbers on individual countries. What I would say is the third quarter of last year saw a particularly strong quarter for Germany. And basically, as we are now moving to our new distribution partner in Germany, there's just not purchases that are made by the existing one because they're using up, of course, the stock they have before we then will ship products to the new one. So that -- it's basically a technical delay. Now, to your question on looking forward, I mean, we have not yet provided, of course, guidance for 2026, but it's safe to assume that we will continue -- we will expect the continued growth of the DUKORAL brand. Operator: We are now going to proceed with our next question. And the questions come from the line of Maury Raycroft from Jefferies. Maurice Raycroft: Congrats on the progress. For the Lyme Phase III readout, Pfizer has to complete 3 months of safety follow-up after the end of the tick season in October, which implies to us that the readout could come as early as mid-1Q '26, just based on the additional time required for database lock and analysis. If the readout happens later into the second quarter of 2026, would that imply that analyses of the results are just taking longer? Or what are some of the reasons that could push the timing to later in the second quarter? Thomas Lingelbach: Maury, yes, good question. So basically, Pfizer are in control of this process. All I can say is we have seen that Pfizer are taking every single step in a very professional and at most accelerated way. At the same time, they will not take any regulatory risk understandably in the current environment. And therefore, I'm assuming that they will be as early as possible. I cannot see at this point in time any major delays compared to the timelines that you have just alluded to. And, of course, I think my colleagues mentioned this to you during the fireside chat. We are also hoping for as early as possible readout of the topline data. Maurice Raycroft: Got it. Okay. Makes sense. And maybe one other question just for the IXCHIQ VLA suspension. Can you comment on what you proposed in your response to FDA as a remedy? And are there some contingency options that you have to -- that you have in place that could get this back on track in the United States? Thomas Lingelbach: So basically, our response has solely been focused on the real medical evidence. Our response has been focusing on the individual case analysis and case assessments, both by Valneva as well as by others, including other regulatory agencies and has been focusing on our reiteration on a positive health economical benefit, so-called positive risk-benefit ratio as already articulated by CDC and others. And so basically, we have already a Phase IV program ongoing, as you know. And we have a more stringent pharmacovigilance review, ongoing since we saw the SAEs primarily in La Réunion. And this has been the cornerstones in our response and clarification vis-a-vis the FDA. Operator: We are now going to proceed with our next question. The next questions come from the line of Romy O'Connor from VLK. Romy O'Connor: Two, if I may. The first one, with this talk about possibility of VLA15, yes, being maybe earlier than expected, do you think you're going to be able to launch on time then for the 2027 tick season? And on IXCHIQ, I was just wondering how sales are expected to grow going forward from here and what the future drivers are? Thomas Lingelbach: Yes. So first of all, on the timeline for VLA15, so we have Pfizer reconfirmed the regulatory submission timeline for next year. The regulatory submission timeline next year is the very pivotal and important underlying hypothesis for launch in the latter part of 2027 because the program is under accelerated approval pathway, fast track, et cetera. So all of that is important in order to meet the timeline of a launch in the autumn of 2027 because remember, the vaccine needs 3 shots for priming, so this means if you want to have people protected for the Lyme season in 2028, you've got to start vaccinating at the latter part of 2027. Currently, all timelines communicated by Pfizer do support that notion and that timeline. With regards to the IXCHIQ situation, it's, of course, not an easy question to answer because we see -- we continue to see major growth opportunities for IXCHIQ in the travel sector, but also in the countries where the chik virus is endemic given that the single-shot live-attenuated approach has a particular importance for countries where you have recurrent outbreaks. And we are working with many different countries right now in potentially ensuring access of the vaccine in those territories. It's a bit too early to talk about the -- those territory expansion activities and what it will really mean in terms of commercial opportunities. We have 2 existing partners with Butantan for Brazil and South America and the Serum Institute of India for Asia, but there are more countries. There are more territories we are currently in dialogue with. And we are trying everything to accelerate market access in those countries. And how long it will really take to establish vaccination against chikungunya in the world of travel vaccinations has to be seen. I mean, its -- history has told us that it's not easy to predict growth trajectory for travel vaccines. And as such, I think we will hopefully be able to provide further guidance as part of our 2026 outlook in the earlier part of next year. Operator: [Operator Instructions] We are now going to proceed with our next question. And the questions come from the line of [ Theodora Robigl ] from Goldman Sachs. Unknown Analyst: Just one from me. So in today's release, you referred to uncertainty around private and public funding opportunities being a consideration and whether you take your Zika vaccine candidate forward. I was just wondering, is there any more detail you can share with us in terms of factors you're weighing up, some sort of level of funding you need to see to take the candidate forward? Any further details would be appreciated. Thomas Lingelbach: Yes. So we announced already that statement as part of our Zika release that we announced 2 weeks ago. And we only repeated it in today's earnings release. On the one hand side, we are super happy with the data that we have generated. We have shown very good immunogenicity data, and we have shown excellent safety data for a vaccine that would also target pregnant women, for example. At the same time, there is a significant uncertainty around the potential regulatory pathway to licensure because it's an outbreak disease, so a classical placebo-controlled efficacy study would probably not be deemed feasible. At the same time, there are major regulatory headwinds against accelerated approval pathways at this point in time. And the major, I would say, NGOs, but also public health agencies have deprioritized Zika given the epidemiological situation. As such, the return on investment for further development is not an obvious one. And certainly, in the absence of those clarifications, it would not be prudent to invest as Valneva stand-alone in this program going forward. At the same time, if there was a substantial funding provided by respective institutions, public, private, we would be very happy to do it in a similar way, as we developed our chikungunya vaccine, for example, with substantial support by CEPI. At this point in time, again, we keep the options open, but we count also on the understanding here that we need to be mindful of capital allocation and returns of investments even if there was an exciting product candidate or there is an exciting product candidate and certainly an interesting medical opportunity. Operator: [Operator Instructions] We have no further questions at this time. I will now hand back to you for closing remarks. Thomas Lingelbach: Yes. Thank you, everyone, for having taken time today. We are very thankful about your support. And again, we are looking forward to delivering on our expectations for the remainder of the year. And then, most importantly, to the next big and biggest catalyst for Valneva in its history with Lyme data coming in next year. Thanks so much, and have a good remainder of the day. Bye-bye.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 Real Matters earnings conference call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lyne Beauregard, Vice President of Investor Relations and Corporate Communications. Please go ahead. Lyne Fisher: Thank you, operator, and good morning, everyone. Welcome to Real Matters Financial Results Conference Call for the Fourth Quarter and Fiscal Year ended September 30, 2025. With me today are Real Matters' Chief Executive Officer, Brian Lang; Chief Financial Officer, Rodrigo Pinto. This morning, before market opened, we issued a news release announcing our results for the 3 months and fiscal year ended September 30, 2025. The release, accompanying slide presentation as well as the financial statements and MD&A are posted in the Investors section of our website at realmatters.com. During the call, we may make certain forward-looking statements, which reflect the current expectations of management with respect to our business and the industry in which we operate. However, there are a number of risks, uncertainties and other factors that could cause our results to differ materially from our expectations. Please see the slide entitled Cautionary Note regarding forward-looking information in the company slide presentation in more detail. You can also find additional information about these risks in the Risk Factors section of the company's annual information form for the year ended September 30, 2024, which is available on SEDAR+ and in the Investor Relations section of our website. As a reminder, we refer to non-GAAP measures in our slide presentation, including net revenue, net revenue margins, adjusted net income or loss, adjusted net income or loss per diluted share, adjusted EBITDA and adjusted EBITDA margin. Non-GAAP measures are described in our MD&A for the 3 months and fiscal year ended September 30, 2025, where you will also find reconciliations to the nearest IFRS measures. With that, I'll turn the call over to Brian. Brian Lang: Thank you, Lyne, and good morning, everyone, and thank you for joining us. I'll kick things off today by walking you through our thoughts on the full year. Rodrigo will then provide some color on the fourth quarter before I make some brief closing remarks. Our business demonstrated resilience and competitive strength throughout 2025 as we consistently launched new clients expanded market share and maintained strong financial discipline, which allowed us to deliver solid operating leverage. We launched 10 new clients and 1 new channel in U.S. appraisal in Canada, and both these segments continue to generate solid positive adjusted EBITDA. We expanded our U.S. title business by adding 7 some new clients in fiscal 2025, including a second Tier 1 lender, which marked another major milestone in the evolution of our title business. We have not let market headwinds deter us from executing on our strategy and improving our overall competitive position. We continue to outperform while leveraging the performance equity we've built in appraisal to cross-sell and expand our title client portfolio, establishing a solid foundation for a scalable business that will thrive under normalized market conditions. There is considerable upside for our business as pent-up demand continues to build, and the supply of homes on the market edges its way back to pre-pandemic levels. There are currently 51 million mortgages outstanding in the U.S. with over 12 million carrying interest rates above 6%. This is an increase of almost 30% in the refinance pool from last year at this time. A 50 basis point reduction in rate can represent hundreds of dollars in savings per month from many of these households once they refinance their existing mortgage. Given today's more favorable interest rate outlook, these dynamics clearly underscore the opportunity to unlock significant growth in mortgage origination volume. American homeowner equity is at an all-time high with roughly $17.8 trillion in aggregate equity and $11.6 trillion in tappable equity. Homeowners will continue to look for ways to access these funds to finance important life events. Additionally, new households will form as younger generations pursue homeownership as a means of achieving financial security. Our recent consumer mortgage survey indicated that future buyer intent to purchase remains relatively strong with 40% planning to purchase in the next 2 years while 50% of existing mortgage holders plan to refinance when rates ease. Turning to our financial performance for 2025 and we've reported consolidated revenues of $170 million in fiscal 2025, while our U.S. Title and Canadian segments achieved double-digit year-over-year growth in both revenue and net revenue for fiscal 2025. Our U.S. appraisal revenues were lower, mainly due to a purchase market that continues to operate at its lowest level in decades. Consolidated net revenue decreased modestly to $45 million from $46 million in fiscal 2024, and we posted an adjusted EBITDA loss of $3.2 million compared with positive adjusted EBITDA of $1.9 million in fiscal 2024. In U.S. appraisal, revenue was down 7% from fiscal 2024 to $121.8 million principally due to a lower addressable market for purchase mortgage originations. Fiscal 2024 also included significantly higher origination volumes from a temporary reallocation of market share with one of our leading clients, which made 2024 a tough comparable period. We posted U.S. appraisal net revenue margins of 26.3% in fiscal 2025 within our target operating model range of 26% to 28% and the segment recorded positive adjusted EBITDA of $13 million. On the performance front, we wrapped up fiscal 2025 by extending our track record of holding top positions on lender scorecards and we launched 3 new clients in our U.S. appraisal business, including a top 15 mortgage lender. In fiscal 2025, we invested in our U.S. appraisal business as we prepare for the rollout of the new uniform appraisal data initiative, which will modernize appraisal forms across the industry. Our team has been at the forefront of this multiyear industry-wide change working with lenders, regulators and appraisers to ensure we continue to deliver the best performance and fulfill our commitment to providing extraordinary experiences for our clients and their customers. Our platform and ongoing investments in the right technology have solidified our leadership position in the appraisal industry, it's the reason why lenders continue to choose to partner with Solidifi, our brand has never been stronger. This year brought significant progress for our U.S. Title segment. While volume headwinds continue to weigh on the mortgage industry, lenders are investing in capacity ahead of a potential mortgage recovery. This shift, along with our investment in sales helped drive momentum in our U.S. title sales pipeline. We launched 7 new U.S. title clients in fiscal 2025, including a second Tier 1 lender and the largest credit union in the U.S. Thanks to this expanded client base, we closed fiscal 2025 with a daily order run rate in U.S. title that has more than doubled compared to the start of the year. During fiscal 2025, our U.S. Title segment served as a significant driver of top line growth, as revenues were up 21%, principally as a result of a 41% increase in refinance origination revenues. Home equity revenues also increased 28% year-over-year due to net market share gains with existing clients and growth in reverse mortgage transactions. With the change in our revenue mix and increase in volumes, net revenue margins increased by 680 basis points from fiscal 2024 to 53.1% and net revenue was up 39%. We posted an adjusted EBITDA loss of $7.3 million compared with a loss of $6.8 million in the prior year, primarily attributable to higher operating expenses incurred to strengthen our sales capabilities. Outside of this investment in sales, almost each additional dollar of net revenue we earned dropped to the bottom line. Even with the recent increase in our title volume run rate, we still have the capacity to almost double our volumes with the existing cost base outside of variable cost increases. In Canada, revenue was up 12% year-over-year from higher market volumes and net market share gains with new and existing clients. We launched a total of 7 new clients in Canada in fiscal 2025, including the largest direct response home and auto insurance group in the country. Canadian net revenue margins held strong at 18.8% in fiscal 2025, and net revenue was up 11% from fiscal 2024. The Canadian segment generated positive adjusted EBITDA of $4.7 million, an increase of 15% from fiscal 2024. With that, I'll hand it over to Rodrigo to look at the fourth quarter. Rodrigo? Rodrigo Pinto: Thank you, Brian, and good morning, everyone. During fiscal Q4, the average 30-year fixed mortgage rates declined from about 6.67% in early July, roughly 6.3% by the end of September, while the 10-year U.S. treasury yields declined from 4.4% to roughly 4.2%. With the exception of 1 week in September, where the 10-year was closer to 4%, the spread between 30-year mortgage rates and 10-year treasury yields narrowed by about 15 basis points, ending the quarter near 210 basis points signaling easing risk premiums in the housing finance market. The change in interest rates drove some activity in refinance mortgage origination volumes for a short period towards the end of the quarter, similar to what we experienced in fiscal Q4 last year. We continue to believe that we have a large and expanding long-term opportunity ahead of us, and so we remain focused on things we can control, including continuing to exercise discipline when it comes to our expenses, the timing of investment decisions and how we scale based on volumes. We'll do what's necessary to grow our client base and our market share with our clients, managing our operating efficiency to drive operating leverage and margin expansion while maintaining a strong balance sheet. Turning to our fourth quarter financial performance. I'll start with our U.S. Appraisal segment where we recorded revenues of $33.1 million, down 2% from the same period last year. Revenues from purchase mortgage originations declined principally due to a lower addressable market. However, revenues from refinance mortgage originations increased due to higher addressable mortgage origination volume from refinance transactions. As Brian mentioned earlier, the comparable quarter also included higher purchase and refinance volumes from a temporary reallocation of market share from one of our leading clients, which returned to prior levels over the course of fiscal 2025. Home equity revenues were relatively flat and accounted for 27% of the segment's revenues. U.S. appraisal net revenue was $8.4 million for the fourth quarter compared with $9 million in Q4 '24, and net revenue margins decreased by 120 basis points, mostly due to the distribution of transaction volumes as it relates to geographies, clients and product mix. Fourth quarter U.S. appraisal operating expenses decreased 8% year-over-year to $4.5 million. We posted U.S. appraisal adjusted EBITDA of $3.9 million down 4% from the fourth quarter of fiscal 2024. However, adjusted EBITDA margins increased by 110 basis points to 46.3%, compared with the fourth quarter last year as the decrease in net revenue was offset by lower operating expenses. Turning to our U.S. Title segment. Fourth quarter revenues increased 18% year-over-year to $2.9 million and refinance origination revenues were up 17%, principally due to net market share gains with existing and new clients and higher refinance mortgage origination volume. U.S. title net revenue was $1.6 million, up 28% from the fourth quarter last year and net revenue margins increased to 54.2% from 49.8% due to higher refinance origination volumes. U.S. title operating expense were up 16% year-over-year, primarily due to additional hires to accelerate the deployment of new title clients, and we recorded an adjusted EBITDA loss of $1.7 million for the U.S. Title segment compared with a loss of $1.6 million in the fourth quarter of fiscal 2024. If we excluded the investment we made in our title sales capabilities, the vast majority of the incremental net revenue we recorded in the quarter would have flowed to the bottom line. In Canada, fourth quarter revenues increased 6% year-over-year to $10 million due to higher market volumes and net market share gains with new and existing clients for our appraisal services. Insurance inspection revenues were relatively flat. Net revenue was up 5% to $1.9 million and adjusted EBITDA increased to $1.3 million from $1.2 million in the fourth quarter of fiscal 2024. In total, fourth quarter consolidated revenue and net revenue were relatively flat compared to the prior year at $46 million and $12 million, respectively as increased revenues from our U.S. Title and Canada segments were partially offset by a decrease in revenues of our U.S. Appraisal segment. We recorded consolidated adjusted EBITDA of $0.1 million, down from $0.6 million in the fourth quarter of 2024. We ended the year with a very strong balance sheet with no debt and cash of $40 million at September 30, 2025. The decrease in our cash balance from prior quarter was mainly due to timing of collections and change in working capital which we expect to normalize in the first quarter of fiscal 2026. With that, I'll turn it back over to Brian. Brian? Brian Lang: Thank you, Rodrigo. Throughout fiscal 2025, the company continued to execute our strategy by focusing on performance, market share expansion, new client growth and maintaining strong financial discipline. Our U.S. Appraisal and Canadian segments consistently delivered positive adjusted EBITDA in fiscal 2025, reflecting their resilience and operational efficiency amid market headwinds. These segments continue to contribute stable earnings, underscoring the strength of our business model. Additionally, the U.S. Title segment achieved a return to growth during the year. This positive momentum marks a meaningful step forward on our path toward reaching our target operating model. The progress in U.S. title, coupled with continued discipline and execution across our business units position us well for future growth and profitability. Heading into fiscal 2026, we are optimistic about the potential for growth from pent-up demand in an increasingly stable market environment. With more than 12 million mortgages outstanding and interest rates exceeding 6%, the pool of refinance candidates has increased by nearly 30% in the last year alone and with sustained consumer demand for housing and an improved interest rate forecast, market conditions for our business are becoming increasingly positive. We see clear potential to unlock significant growth in mortgage origination volumes. As our business scales and more transaction volumes flow through our platform, we expect to expand our margins and profitability in line with our target operating model. Our team remains focused on increasing market share with our existing clients by optimizing scorecard performance and pursuing new client relationships, especially in U.S. title. Our business was built to thrive in the peaks and to withstand valleys of the cyclical mortgage market, and we look forward to the opportunity that lies ahead. With that, operator, we'd like to open it up for questions now. Operator: [Operator Instructions]. And our first question comes from Stephen Machielsen of BMO Capital Markets. Stephen Machielsen: So in past calls, there's some optimism about the more traditional lenders getting a bit more aggressive in taking share. How is that playing out right now? Are you still optimistic that they're -- they and your clients are going to be taking share from nontraditional lenders? Brian Lang: Stephen, thank you. Appreciate the question. So I think there's a couple of dynamics going on in the market right now, which gives us optimism that a bunch of the larger banks will definitely continue to, I think, make an impression. So the first one is, as you heard us mention, the spreads are definitely coming down. So that, for us, sort of gives the -- that there's going to be impact by the rates coming down, people are seeing more confident in the market. So I think that's sort of piece one. Piece two is we can see when we look at the rates that are posted over the last couple of months, we are definitely seeing a more aggressive position by some of the really big bank lenders in the U.S. So I think both the spread coming down sort of much more normalization of the spread when we take a look forward, I think, has an impact along with the fact that a lot of those Tier 1 big banks are starting to step into the market and get more aggressive on their rates. Stephen Machielsen: Okay. Thanks to the color on that. I just -- in the same vein, now let's talk about your U.S. title pipeline. Do you get the sense that the companies in that pipeline are more or less willing in the current environment to take on a new vendor like yourself? Like I'm just wondering how the temperature has changed over the past 3 to 6 months? Brian Lang: Thanks. Well, I think it sort of linked somewhat to the conversation around spreads. So spreads, I think there's a normalization happening there. So that, for us, says that there's more optimism around the market. So I think that, along with -- we've had another rate cycle like we had last year in September, where we had the rates come down. And so I think last year, that was very helpful for us, Stephen, because I think it unlocked some of the sales potential in the market where lenders started realizing that if rates do move and volumes clock up they're going to need capacity in order to deliver against those. We've had sort of the same reflection of that increase in volume this past September. So we had another bump in volume, it was -- rates came down a chunk and volume did go up. And so I think that, again, reinforced to lenders. That when the rates come down, there is that optimism around the refi pool, which as we mentioned, has grown 30% year-over-year. So we're now up to $12 million above 6%. And I think all of those elements definitely lead into lenders being a lot more confident now than they were 12, 18 months ago on rates at some point coming down, the volume coming back in the market. So we've seen the sales pipeline move. We've seen more activity in the sales pipeline. We've been able to move deals forward with more pace than we did in 2024. And our view is that, that will continue, and we're seeing that happening now as we move into 2026. Stephen Machielsen: All right. Good to hear that you've been able to move some of those deals forward. My final question is more for Rodrigo. It looks like there was a rather large receivables build in the quarter. Is there anything to call out there? And will it be pretty quick unwind? Rodrigo Pinto: Stephen, yes, no, thanks for the question. No, nothing unusual there. That's a regular collections of accounts receivable subsequent to the quarter, I would say, immediately after the quarter, a large collection was made. So no, there's nothing unusual relating to the receivables and cash balance. Operator: And our next question comes from Robert Young of Canaccord Genuity. Robert Young: You noted the volume increase in title with the new Tier 1, like you said it's up 2x year-over-year. How do you think about that increase relative to where your expectations were on the ramp of this Tier 1. And then I'm curious about how you think about the near term, just given the rates ticking up and the fact that title does lag appraisal. So should we expect a slowdown in title similar to what we're seeing in appraisal as the lag -- as we move in that lag or maybe just some thoughts around those items. Brian Lang: Sure. So I think the first area you were talk -- you were asking about was around the ramp-up of our second Tier 1. So I would say that it launched a little later than we would have liked. And so we're actually very happy with the ramp-up. As you know, usually, there's a quarter or so of slow ramp-up as we get going. We definitely have seen this lender ramp up with a good amount of pace. They are also being reasonably aggressive in the market from a rate standpoint. So we're very happy with the volume that's coming in from that Tier 1. Now that only started happening in the very back end of the quarter. So you're going to see some of that revenue come through in Q1. And as I say, I think we're in very good shape. Our plan, of course, is to get them up to the market share that we expect in the next couple of quarters. And so we're very optimistic about the volume ramp with that particular customer. I think also importantly is the look forward on some of the customers in the pipeline. We've got a handful of both another Tier 1. We've got a significant servicer as well as some other top 50s that are currently moving to implementation. So over the next few quarters, we plan to bring all of those customers on, Rob, which I think is a dovetail to the last question around optimism in the pipeline. I think the investment that we've made in sales is definitely paying off. And so I think we're going to see some positive ramp there. On the second question, I think it was around -- I'm not sure whether the question was around the difference in appraisal and title from a purchase and refi standpoint or that this lag piece... Robert Young: And timing, I know title lags, and so given you're seeing the weakness in appraisal, is that something we should expect rolling into title? Rodrigo Pinto: No, Rob. So I'll jump on that one. No, no, not really, Rob. It's -- again, I would say the slowdown in appraisal is more related to the purchase market where it doesn't impact the title side. However, to your point, the change in rates, yes, there's a little lag there, but will be within the quarter, right? The rates didn't fluctuate for such a long period of time that would cross quarters. So within the quarter, you should see similar trend from a refinance perspective for both, but appraisal has the impact of purchase. Robert Young: Okay. And then my second question, this might be a tricky one. But if we look back to last year, we saw a similar sort of a volume bump and then there was a cooling off. And it seems very similar at a high level, to what we're seeing right now. And I was curious if you just sort of maybe unpack it a bit for us to tell us what's different or the same this time around. Brian Lang: Well, we're early in the quarter, Rob. So it's still a little hard to do a very direct comparison. But to your point, we have seen something quite similar, which is when the rates come down, and they didn't come down that far as you know, they came down sort of in the high 5s. We definitely see a good bump in volume. And so from our standpoint, that really underlies the opportunity, which is the rate does not have to come down very far, right? So relative off of the 6.3-ish percent we're at now, when you get down 50 basis points, you start seeing volume moving up. So I think that's what we are expecting. There has been a -- because we're back up at 6.2%, 6.3%. There's a little bit of a reconforming to where we were before September. But when we look longer term at the business, if there is that movement, which we'll have to see going into next year, again, we're going to have to see what happens. What we do know is that there is a lot of focus on this, as you know, in the U.S., around affordability. You've heard all the sort of recent ideas on how we might be able to do that. And the big difference now is there's even a larger pool of refinance candidates than there were last year, it's up 30%. So we're optimistic that pool is bigger. There's -- we see now the movement of the opportunity when the rates come down, and it doesn't have to come down significantly. So I think we could see some real traction in the next few quarters, again, depending on what happens with rates. Robert Young: Okay. And last for last one. Sorry if I missed it, but I'm not sure if you addressed or talked about rocket and its acquisition of Mr. Cooper. I think that happened -- that closed a little faster than expected. And I was curious if you could give us an update on what your outlook is with Rocket and the upside from Redfin and Mr. Cooper. I'll pass the line. Brian Lang: Sure. Yes. So I think it's a positive signal is that the deal did get done fairly quickly. So I think they were targeting end of year, but that's now been closed. So they feel that that's moving. We've been told to expect to see some of the Mr. Cooper origination volume over the next quarter or 2. So we're not exactly sure when we're going to get that, Rob, but good news, there's definitely some volume there. Mr. Cooper, their big volume is in the servicing side of their business. And so again, we need to see some rate movement there for that to start unlocking, but they are one of the biggest, if not the biggest servicer in the U.S. now they've moved into Rocket. So there's definitely going to be a significant opportunity there. Again, that's tied a little bit more to rates. So if we look long term on our relationship with Rocket, we've got a fantastic relationship with them. We've got really strong market share, that over time, that will be a real asset for the business. Operator: Our next question comes from Martin Toner of ATB Capital Markets. Martin Toner: Can you address this question somewhat in Rob's first question, but I think it might be useful for you to talk a little bit about what the doubling of volumes implies for the potential for 2026. Secondary question, how much of appraisal is currently refi? And how much of that strength that we're seeing can be sort of crossover from there? Or is it just all share with customers? Brian Lang: Okay. So let me address the first question, which is around title growth and the impact of title growth in the business. So I think probably, why don't we do a quick look back, Rob. So if we look back at the start of 2025 and then we look at where we ended. We were running about $2 million of revenue per quarter on title. We're now closer to $3 million. So I think we ended, Rodrigo, $2.9 million. So you can see that as we increased over the year and got to our doubling of volume coming in, we were able to significantly increase our overall revenue. So our view is that with the pipeline that I talked about, I think we're looking at definitely doubling that volume again in the next few quarters. And so again, I think you see the same type of dynamics flow through our margins through to the bottom line. So I think we've had good historical, you've seen good growth. We expect that to continue in the upcoming quarters. And so I think you'll see in 2026, strong returns on our appraisal business. And as we mentioned, I mean, one of the big dynamic is because of this incremental capacity that we've got, that you should see a significant amount of that net revenue flow to the bottom line. So that's, I think, how we look at title. On appraisal, the question around proportionality. So right now, about 2/3 of our originations are from the purchase side, and 1/3 of originations is on refinance. So I mean, our view, I think, over time is -- we'll have to see, of course, what happens in the market. Purchase, as you know, has been a real challenge this year. So we're flat to down from a market standpoint. Good news refinance is up. So again, it depends on what happens as we go forward. Of course, refinance is a slightly bigger proportion of our book this year from last year because refinance grew. But depending on how refinance does this upcoming year, we could get -- that could be a higher proportion of the overall book. And just as a reminder, Martin, it doesn't matter for us whether we're getting a purchase or refinance transactions. It all has the same economics around it. So we'll just have to see, again, we're not going to call the market. But I assume that if refinance goes up and purchase sort of stays where it is or only goes up a little bit, then refinance will be a higher proportion of our book. Martin Toner: Awesome. Thank you, Brian. So purchase was -- is up like -- some of the headwinds in purchase like a well-known by everybody. But it's already down, market down over the last, say, 2 years. What's your view on that like that business from here? Can we -- like could we get a turn? Do you think it will be -- 2026 will be a tough year for purchase? Brian Lang: Well, I think the only thing I can really comment on, Martin, is there is a lot of focus on affordability in the U.S. right now. So you've heard all the potential solutions. So outside of the initial view that the rates need to come down and the Fed needs to do something. We've now got 50-year mortgages and portable mortgages. So there's lots of focus on affordability. All of that, by the way, would be beneficial for us. So we have no idea whether any of that can actually move forward. But that focus on trying to get more purchase activity, trying to get more new homeowners into homes. All of that is a potential positive tailwind for the business. I just don't know, I can't call marketing -- Martin, exactly what's going to happen in the market this upcoming year. But we are right now at historic lows in the purchase market. So our view is we should be moving in the right direction this upcoming year, but I can't tell you exactly how that's going to move. Operator: [Operator Instructions]. And our next question comes from Richard Tse of National Bank. Unknown Analyst: This is Amy Lee speaking on behalf of Richard at National. So you mentioned on the growth side, bringing on the second Tier 1 and you have quite a robust pipeline. Two, last quarter, you mentioned on the capacity side, you're running around 30%, seeing yourselves get to about 2x capacity in title instead of maybe 3 to 4x with the potential uptick in volume over the next year, how might we think about any investments you might need to take to handle all this? Robert Young: Sure. Amy, thanks for the question. So yes, the capacity in appraisal still stays at about the 30% that we mentioned before. In title, yes, we doubled our orders. So as we said before, we used -- we had 3 to 4x capacity in title. If you take that double of the orders, we should be -- we are close to 75% to 100% capacity still. So we are close to -- we can double another time the volumes in title, and we feel good about not increasing our costs substantially or at all. But just as a reminder, there's a portion of our cost that is variable that increases with volume as well, right? But yes, that's how we are looking at capacity at this point. Unknown Analyst: Great. And you mentioned briefly, so the current administration, there seems to be a lot happening, a lot of shifting in the regulatory environment, some like perhaps tailwinds with the 40-year fixed mortgages, but also maybe banking deregulations, has any of that flow into an impact into your market? Brian Lang: Unfortunately, not yet, Amy. So we're on standby. But as I say, I mean you actually mentioned some of the big lenders also reaching out and talking about easing regulatory constraints and some of the challenges around that with some very specific potential impacts on rates if they were able to do that. So you've got that whole lobby effort going on from the big lenders. And then to your point, they're now starting to throw out a whole bunch of ideas around affordability. And there's going to be, I assume, continued pressure in the next quarter or 2 around trying to bring down the interest rates, however they think they might be able to do that. So all that focus for us, frankly, is, as I say, it's all generally positive. I don't know, Amy, how much of this will come to fruition in the next quarter or two. But when I think long term about the business, I mean, all of that would be positive. It would drive more purchasing opportunities for the market, as well as if they can get at some of the rate challenges, it would definitely drive up the refinance market. Operator: This concludes the question-and-answer session and also today's conference. Thank you for participating, and you may now disconnect. Brian Lang: Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Valneva 9 Months 2025 Financial Results Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker, Josh Drumm. Please go ahead. Joshua Drumm: Thank you. Hello, and thank you for joining us to discuss Valneva's financial results for the first 9 months of 2025 and corporate update. It's my pleasure to welcome you today. In addition to our press release and analyst presentation, you can find our consolidated financial results for the 9 months ended September 30, 2025, which were published earlier today, available within the Financial Reports section of our Investor website. I'm joined today by Valneva's CEO, Thomas Lingelbach; and our CFO, Peter Buhler, who will provide an overview and update of our business as well as our financial results. There will be an analyst Q&A session at the conclusion of the prepared remarks. Before we begin, I'd like to remind listeners that during this presentation, we will be making forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. You can find additional information about these risks and uncertainties in our periodic filings with the Securities and Exchange Commission and with the French Market Authority, which are listed on our company website. Please note that today's presentation includes information provided as of today, November 20, 2025, and Valneva undertakes no obligation to revise or update forward-looking statements, except as required by applicable securities laws. With that, it's my pleasure to introduce Thomas to begin today's presentation. Thomas Lingelbach: Thank you so much, Josh. Good day, everyone. Welcome to our 9 months call. So before we go into the business highlights, and also, Peter will provide a very detailed financial report, I would like to start off by providing a couple of key financial management highlights. Total revenues reached EUR 127 million at the 9-month time point, which is a substantial growth of almost 9% despite of some headwinds, be it from a geopolitical perspective, but also from an IXCHIQ perspective in particular. And we are very glad that we have been able to deliver on that growth year-to-date. We have also been able to significantly reduce our operating cash burn, which has been one of our key objectives in continuously improving efficiency of our operations. This resulted in a cash position of more than EUR 140 million, which includes also the net proceeds from different ATM transactions, Peter will further detail. And most importantly, we successfully completed our debt refinancing, which, of course, enhances substantially our financial flexibility, and we are very glad that we have found in Pharmakon a new partner to support Valneva in the years to come. Recapping a little bit on the first 9 months key business highlights. Around IXCHIQ, we responded to significant unmet medical needs on the La Réunion and Mayotte, the respective outbreaks. We also responded to a cholera outbreak in Mayotte by supplying doses of DUKORAL. And we again finalized the new IXIARO U.S. Department of Defense contract, all of that supporting our mission in targeting unmet medical needs. On the regulatory and commercial side of things, we secured additional marketing authorizations for IXCHIQ in the U.K. and Brazil, label extensions for adolescents, 12 years of age and older in Europe and Canada. And we announced an exclusive vaccine marketing and distribution agreement for Germany with CSL Seqirus replacing Bavarian Nordic by the end of this year for our established brands, and they already started distributing IXCHIQ in Germany. Of course, on the clinical side, it's all about Lyme right now, and we completed all vaccinations in the VALOR Phase III study according to plan. We also reported further positive safety and immunogenicity data following the third annual booster as part of our Phase III follow-up study, VLA15-221. On IXCHIQ, the vaccine profile got further substantiated with the antibody persistence data, now after 4 years, still showing the 95% 0 response rate after a single shot, which is the key differentiation for this life-attenuated single-shot vaccine. We further reported immune response in adolescents and positive pediatric safety and immunogenicity data. Last, but not least, we also reported positive Phase I results from our second-generation Zika vaccine candidate, VLA1601. Going a little bit into the details of the individual programs, I would like to start off with Lyme. We've been talking a lot about Lyme, and we will be talking a lot about Lyme. The Lyme continues representing a major unmet medical need, enhanced market opportunity, close to 0.5 million cases every year confirmed in the United States, probably now in Europe, the same order of magnitude. Also, there are limited reporting systems available. You remember that we have about 90 million U.S. citizens living in high-risk areas of Lyme disease, and in Europe, more than 200 million in those endemic regions. Most importantly, the health economical benefit for a potential vaccination against Lyme disease is considered extremely favorable. Why? Because you have very severe manifestations in connection with Lyme disease. 10% to 30% of people develop either carditis, neuroborreliosis or arthritis and 5% to 10% persistent symptoms even following treatment with respective antibiotics. By way of reminder around the Phase III study that is currently ongoing, Pfizer reconfirmed that they're going to submit regulatory applications in the U.S. and Europe in 2026. The VALOR study has been executed according to plan. And basically, Pfizer guided for readout in the first half of 2026. And the study, of course, is now going through its follow-up period since the official case counts ended at the end of October. Then, we run the normal process through case adjudications, further testing activities, database cleanings and all of that before the results will be announced in the first half of next year. Most importantly, the time point for which we expect the product to be launched hasn't changed. It is important for us and our Pfizer colleagues that the product can be launched in the autumn of 2027, well ahead of the 2028 tick season. It is important to get really people protected for the tick season 2028. As such, we are very, very much looking forward to the data, which hopefully are going to be positive, and hence, provide a pathway for a vaccine that could really address a huge unmet medical need. Turning to our highly differentiated, single-shot chikungunya vaccine, VLA1553 or IXCHIQ. Where are we at this point in time? Of course, we have, on the regulatory side, still the situation that the product is suspended in the United States. And we are still awaiting further information from FDA, which we haven't received at all at this moment in time. In all the other countries, we are working on the basis of updated Prescribing Information or SmPCs. And we are seeing that the product is being administered, and we are trying to focus substantially on the expansion into LMIC territories and are working with existing and hopefully future partners in this regard. The most imminent point now to consider in this program that is supported by CEPI are our post-marketing effectiveness studies, the Phase IVs, which are about to commence with an observational effectiveness study in Brazil with pragmatic randomized controlled effectiveness safety studies in adolescents and adults, including elderly in various endemic countries, and then, later, a prospective safety cohort study and surveillance in Brazil as well. Of course, I mentioned already, the label extensions and the report on the positive data, which we will further submit and hopefully be granted in the different product labels. We see clearly the product differentiation for IXCHIQ, which, of course, is super important for a potential outbreak disease and for people who are planning multiple trips into areas where there is a high risk of a potential outbreak. Shigella, you may recall that we in-licensed the vaccine through a partnership with LimmaTech, the program called S4V2, is the world's most clinically advanced tetravalent Shigella vaccine candidate. It addresses the 4 most common serotypes of the Shigella bacteria. The program reported earlier positive I/II clinical data in different age groups. In terms of medical need, Shigella represents second leading cause of fatal diarrhea. And here, especially in infants, below 5 years of age, the global market is expected on the one hand side in LMICs, in particular, the target population that I just mentioned, but also it represents significant opportunity for travelers and military. Given the overall medical need, and also, the diarrheal diseases to be seen in the context of antibiotic resistance, the Shigella development or vaccine development against Shigellosis has been identified as a priority by WHO. We have currently a couple of studies ongoing. We have the Phase II in infants, for which we expect results still this year. And we have the Phase IIb controlled human infection model study in adults, where we changed some of the data time points, the clinical design in order to extend the period of immunogenicity, where we had the opportunity to optimize dose and schedule. And we expect the pilot efficacy data next year with immunogenicity data coming in earlier upon success. And please remember that we have intentionally set up the clinical design and the clinical pathway in a way that the program is highly derisked from a capital allocation perspective. So based on positive data, based on our respective go decisions, we will assume full accountability for the program following those 2 studies, which are still sponsored by LimmaTech, yes, or just update on our operational business and R&D, in particular. I would like to hand over to Peter to provide you the financial report for the 9-month period. Peter Buhler: Thank you, Thomas. Product sales reached EUR 119.4 million compared to EUR 112 million in the 9 months of 2024, an increase of 6.2%. Foreign currency fluctuation had an adverse impact of EUR 1.3 million. IXIARO sales reached EUR 74.3 million, increasing 12.5% over prior year. The year-over-year growth was driven by sales to the U.S. Department of Defense as well as increased sales in some European countries. Foreign currency fluctuation adversely impacted IXIARO sales during the first 9 months by EUR 800,000. DUKORAL sales decreased from EUR 22.3 million in the first 9 months of 2024 to EUR 21.5 million in the same period of 2025. Sales were EUR 400,000, adversely impacted by foreign currency fluctuation, mainly resulting from a weakening Canadian dollar and also lower sales to our German partner, as we are transitioning from our current distributor to CSL Seqirus. IXCHIQ's sales reached EUR 7.6 million compared to EUR 1.8 million in the 9 months of 2024. While IXCHIQ sales included the supply of 40,000 doses to combat the major chikungunya outbreak on the French Island of La Réunion, the temporary restriction and U.S. license suspension significantly adversely impacted sales in the Travel segment, leading to an adjustment of our sales guidance. Third-party products decreased by 28.5% year-over-year to EUR 16.1 million. This decrease is a result of the anticipated discontinuation of certain third-party distribution agreements. As mentioned in our previous calls, we expect third-party product sales over time to account for less than 5% of total product sales. Now, moving on to the income statement. Total revenues reached EUR 127 million versus EUR 112.5 million in the first 9 months of 2024. The increase of 9% is driven by higher product sales and an increase in other revenues related to revenue recognition from partnerships. Looking at expenses, cost of goods and services for the 9 months of 2025 reached EUR 71.1 million compared to EUR 71.3 million during the same period last year. The gross margin on commercial products, excluding IXCHIQ, reached 57.2% in the first 6 months of 2025 compared to 48.6% in the prior year. The improvement in gross margin was driven by better manufacturing performance and favorable product mix. IXIARO gross margin reached 63.2% compared to 58.8% in the first 9 months of '24, and DUKORAL generated a gross margin of 52.3% compared to 34.8% in the prior year. Cost of goods related to IXCHIQ amount to EUR 8.6 million and include provisions to recognize lower IXCHIQ demand. Cost of goods also includes EUR 8.2 million of idle capacity costs. Research and development expense increased from EUR 48.6 million in the 9 months of 2024 to EUR 59.7 million in the same period of 2025. That increase is what is driven by costs related to the Shigella vaccine candidate following the R&D collaboration with LimmaTech Biologics and costs related to the IXCHIQ Phase IV post-marketing commitment. Marketing and distribution expense decreased from EUR 35.7 million in the prior year to EUR 28.6 million in the 9 months of 2025. The decrease is related to a planned reduction in advertising and promotion spend related to IXCHIQ following the launch in early 2024. G&A expense reached EUR 29.5 million in the first 9 months of 2025 compared to EUR 32.6 million in the same period of last year. This decrease is a result of a program to increase operational efficiency across the company that we ran at the end of 2024. In the 9 months of 2025, Valneva reported an operating loss of EUR 53.9 million compared to an operating profit of EUR 34.2 million in the prior year. Last year's operating profit was the result of a sale of a Priority Review Voucher for a total net proceed of EUR 90.8 million. Adjusted EBITDA in the first half of 2025 reached a negative EUR 37.7 million compared to a positive impact -- positive EBITDA of EUR 48.6 million, impacted by the sale of the PRV. Before moving to the outlook and guidance, a word on cash. As mentioned by Thomas at the beginning of the call, cash at September 30 was reported at EUR 143.5 million compared to EUR 168.4 million at the end of 2024. The cash at the end of September includes a total of 3 ATM transactions for a value of a total of EUR 26 million net of transaction costs. Cash used in operating activities was reported at EUR 28.4 million compared to EUR 76.7 million in the first 9 months of 2024. Now moving to Slide 19. We confirm our financial guidance for the fiscal year of 2025 with product sales of EUR 155 million to EUR 170 million and total revenues of EUR 165 million to EUR 180 million. We continue to project R&D expense of EUR 80 million to EUR 90 million, and the R&D expenses will partially be offset by grant funding and the anticipated R&D tax credit. As confirmed in the results at the end of September, we expect a significant lower use of cash in operations. Cash will remain a key focus in order to ensure sufficient runway to reach key inflection points. In the midterm, we expect continued growth in our product sales, focused and strategic investments into R&D and continued improvement in gross margin. We continue to expect Valneva to be sustainably profitable post successful approval and commercialization of the Lyme disease vaccine. With this, I hand the call back to Thomas. Thomas Lingelbach: Thank you so much, Peter. At this moment, I would like to turn to our key growth drivers for the remainder of the year, but also most importantly, beyond the end of 2025. We have built Valneva now on a very solid foundation. And Lyme is certainly going to be the single largest growth driver for the company in the years to come and the single largest near-term catalyst for the company and its shareholders, but also for people who may benefit from a vaccination against Lyme disease. The VLA15 success, which is hopefully expected in the first half of next year, may drive the company upon successful approval and commercialization into sustained profitability, driven by substantial milestones and later royalties starting in the latter part of 2027. Of course, for this year, and despite of having adjusted our guidance on product sales, we hope that we will be able to continue our growth trajectory for our established brands, IXIARO and DUKORAL. And we are working hard in gaining and regaining global traction on IXCHIQ, and in particular, leveraging LMIC opportunities and new territories where a product like IXCHIQ with its highly differentiated product profile could be perfectly suited. There is more that Valneva has to offer in its pipeline above and beyond Lyme. Also, Lyme is, of course, very, very dominant and rightly so. We are advancing a number of quite promising internal candidates. We are identifying new opportunities, be it in-house, be it also external potential partnering opportunities with the aim to really build a coherent R&D pipeline with an attractive next Phase III program upon successful VLA15 [ stroke ]/Lyme commercialization, making us really a leading vaccine biotech in the world. As such, we see substantial growth, substantial upside. And with that, I would like to hand back to the operator to take your questions. Operator: [Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Vamil Divan from Guggenheim Partners. Vamil Divan: So maybe just 2 questions. I could wait for the Lyme data, obviously, the big event coming. On IXCHIQ, you mentioned you're waiting to hear from the FDA. Is there any sort of timelines there? Any guidance on when you think you may hear or anything that the FDA is bound by in terms of when they need to respond by? And then, DUKORAL, you mentioned this quarter, there were a couple of factors, I think the currency and then the distributor shift in Germany. Wondering if you can quantify the impact of the second, especially? And just how you think about sort of -- you're talking about growth for that asset going forward? How you sort of see that recovering to growth? Thomas Lingelbach: Okay. So let me start off with the Lyme -- the IXCHIQ question and FDA. So unfortunately, the answer is there is no predefined process because a similar process, meaning a suspension in the same way that it was done for IXCHIQ without WebPAX, et cetera, has not been done to our knowledge before. So actually, there is no precedent. There is also currently not a procedure to our knowledge that needs to be followed from a timing perspective. And as such, we are hoping for a collaborative interaction with the FDA, which, of course, could not have happened due to the government lockdown for quite a while, but we certainly hope that we will be able to embark with the FDA into a dialogue still this year. I'll let Peter answer to your DUKORAL question. Peter Buhler: Yes. So I think I commented on the currency impact during the call. I think with regards to Germany, we have not disclosed the number, and we never disclose numbers on individual countries. What I would say is the third quarter of last year saw a particularly strong quarter for Germany. And basically, as we are now moving to our new distribution partner in Germany, there's just not purchases that are made by the existing one because they're using up, of course, the stock they have before we then will ship products to the new one. So that -- it's basically a technical delay. Now, to your question on looking forward, I mean, we have not yet provided, of course, guidance for 2026, but it's safe to assume that we will continue -- we will expect the continued growth of the DUKORAL brand. Operator: We are now going to proceed with our next question. And the questions come from the line of Maury Raycroft from Jefferies. Maurice Raycroft: Congrats on the progress. For the Lyme Phase III readout, Pfizer has to complete 3 months of safety follow-up after the end of the tick season in October, which implies to us that the readout could come as early as mid-1Q '26, just based on the additional time required for database lock and analysis. If the readout happens later into the second quarter of 2026, would that imply that analyses of the results are just taking longer? Or what are some of the reasons that could push the timing to later in the second quarter? Thomas Lingelbach: Maury, yes, good question. So basically, Pfizer are in control of this process. All I can say is we have seen that Pfizer are taking every single step in a very professional and at most accelerated way. At the same time, they will not take any regulatory risk understandably in the current environment. And therefore, I'm assuming that they will be as early as possible. I cannot see at this point in time any major delays compared to the timelines that you have just alluded to. And, of course, I think my colleagues mentioned this to you during the fireside chat. We are also hoping for as early as possible readout of the topline data. Maurice Raycroft: Got it. Okay. Makes sense. And maybe one other question just for the IXCHIQ VLA suspension. Can you comment on what you proposed in your response to FDA as a remedy? And are there some contingency options that you have to -- that you have in place that could get this back on track in the United States? Thomas Lingelbach: So basically, our response has solely been focused on the real medical evidence. Our response has been focusing on the individual case analysis and case assessments, both by Valneva as well as by others, including other regulatory agencies and has been focusing on our reiteration on a positive health economical benefit, so-called positive risk-benefit ratio as already articulated by CDC and others. And so basically, we have already a Phase IV program ongoing, as you know. And we have a more stringent pharmacovigilance review, ongoing since we saw the SAEs primarily in La Réunion. And this has been the cornerstones in our response and clarification vis-a-vis the FDA. Operator: We are now going to proceed with our next question. The next questions come from the line of Romy O'Connor from VLK. Romy O'Connor: Two, if I may. The first one, with this talk about possibility of VLA15, yes, being maybe earlier than expected, do you think you're going to be able to launch on time then for the 2027 tick season? And on IXCHIQ, I was just wondering how sales are expected to grow going forward from here and what the future drivers are? Thomas Lingelbach: Yes. So first of all, on the timeline for VLA15, so we have Pfizer reconfirmed the regulatory submission timeline for next year. The regulatory submission timeline next year is the very pivotal and important underlying hypothesis for launch in the latter part of 2027 because the program is under accelerated approval pathway, fast track, et cetera. So all of that is important in order to meet the timeline of a launch in the autumn of 2027 because remember, the vaccine needs 3 shots for priming, so this means if you want to have people protected for the Lyme season in 2028, you've got to start vaccinating at the latter part of 2027. Currently, all timelines communicated by Pfizer do support that notion and that timeline. With regards to the IXCHIQ situation, it's, of course, not an easy question to answer because we see -- we continue to see major growth opportunities for IXCHIQ in the travel sector, but also in the countries where the chik virus is endemic given that the single-shot live-attenuated approach has a particular importance for countries where you have recurrent outbreaks. And we are working with many different countries right now in potentially ensuring access of the vaccine in those territories. It's a bit too early to talk about the -- those territory expansion activities and what it will really mean in terms of commercial opportunities. We have 2 existing partners with Butantan for Brazil and South America and the Serum Institute of India for Asia, but there are more countries. There are more territories we are currently in dialogue with. And we are trying everything to accelerate market access in those countries. And how long it will really take to establish vaccination against chikungunya in the world of travel vaccinations has to be seen. I mean, its -- history has told us that it's not easy to predict growth trajectory for travel vaccines. And as such, I think we will hopefully be able to provide further guidance as part of our 2026 outlook in the earlier part of next year. Operator: [Operator Instructions] We are now going to proceed with our next question. And the questions come from the line of [ Theodora Robigl ] from Goldman Sachs. Unknown Analyst: Just one from me. So in today's release, you referred to uncertainty around private and public funding opportunities being a consideration and whether you take your Zika vaccine candidate forward. I was just wondering, is there any more detail you can share with us in terms of factors you're weighing up, some sort of level of funding you need to see to take the candidate forward? Any further details would be appreciated. Thomas Lingelbach: Yes. So we announced already that statement as part of our Zika release that we announced 2 weeks ago. And we only repeated it in today's earnings release. On the one hand side, we are super happy with the data that we have generated. We have shown very good immunogenicity data, and we have shown excellent safety data for a vaccine that would also target pregnant women, for example. At the same time, there is a significant uncertainty around the potential regulatory pathway to licensure because it's an outbreak disease, so a classical placebo-controlled efficacy study would probably not be deemed feasible. At the same time, there are major regulatory headwinds against accelerated approval pathways at this point in time. And the major, I would say, NGOs, but also public health agencies have deprioritized Zika given the epidemiological situation. As such, the return on investment for further development is not an obvious one. And certainly, in the absence of those clarifications, it would not be prudent to invest as Valneva stand-alone in this program going forward. At the same time, if there was a substantial funding provided by respective institutions, public, private, we would be very happy to do it in a similar way, as we developed our chikungunya vaccine, for example, with substantial support by CEPI. At this point in time, again, we keep the options open, but we count also on the understanding here that we need to be mindful of capital allocation and returns of investments even if there was an exciting product candidate or there is an exciting product candidate and certainly an interesting medical opportunity. Operator: [Operator Instructions] We have no further questions at this time. I will now hand back to you for closing remarks. Thomas Lingelbach: Yes. Thank you, everyone, for having taken time today. We are very thankful about your support. And again, we are looking forward to delivering on our expectations for the remainder of the year. And then, most importantly, to the next big and biggest catalyst for Valneva in its history with Lyme data coming in next year. Thanks so much, and have a good remainder of the day. Bye-bye.
Operator: Good day, everyone, and welcome to today's BrightView Earnings Call. [Operator Instructions] Please note, this call may be recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Mr. Chris Stoczko, Vice President of Finance and Investor Relations. Please go ahead, sir. Chris Stoczko: Good morning, and thank you for joining BrightView's Fourth Quarter and Full Year Fiscal 2025 Earnings Call. Dale Asplund, BrightView's President and Chief Executive Officer; and Brett Urban, Chief Financial Officer, are on the call. I will now refer you to Slide 2 of the presentation, which can also be found on our website and contains our safe harbor disclaimer. Our presentation includes forward-looking statements subject to risks and uncertainties. In addition, during the call, we will refer to certain non-GAAP financial measures. Please see our press release and 8-K issued yesterday for a reconciliation of these measures. With that, I will now turn the call over to Dale. Dale Asplund: Thank you, Chris, and good morning, everyone, 2025 was another transformational year here at BrightView. We continue prioritizing our frontline employees by investing in consistent service levels and refreshing our fleet, enabling a best-in-class service experience to our customers each and every day. We have also made progress in expanding our sales force, hiring about 100 new sellers in the year, which positions us to drive top line profitable growth in the near term. We offset the investments by continuing to leverage our size and scale and drive meaningful efficiencies within our business. These initiatives as well as the hard work and dedication of our nearly 19,000 team members resulted in the highest ever adjusted EBITDA and margin. Our unwavering focus on delivering world-class service to our customers continues to yield meaningful momentum in customer retention, improving about 200 basis points from the prior year and about 400 basis points since the beginning of my tenure in October of 2023. I want to thank our team members for their continued efforts to put the customer at the center of everything we do and position ourselves as the service provider of choice. Additionally, as part of our disciplined approach to capital allocation and commitment to driving shareholder value, we have increased our share repurchase authorization from $100 million to $150 million, and we are evaluating the pace at which we will execute. We believe our current valuation is dislocated from the tremendous progress we have made over the past 2 years and the significant opportunities that lie ahead. Our strong balance sheet and growth outlook gives me the confidence to expand the program and return capital to shareholders in a strategic and opportunistic way. As we turn the corner into fiscal 2026, I want to reemphasize my primary focus of delivering sustainable and profitable top line growth in the near and long term. I believe the investments we made and will continue to make such as consistent service levels and expanding our sales force have strengthened the foundation of our business and will position us to inflect top line growth in 2026 as reflected in our guidance, which Brett will touch on in a bit. Our formula remains the same: prioritize our front line, which, in turn, reduces turnover and leads to improved customer retention, all key fundamentals to top line growth and larger, more profitable branches. This, coupled with ramping up our sales force and unlocking our size and scale while strategically allocating capital will position BrightView as a clear investment of choice. Moving to Slide 5. We continue to see sequential improvements in our frontline turnover. Two years ago, this metric was nearly 100% with the bottom quartile of our workforce turning over 4 to 5x per year. This created inconsistent levels of service and required additional costs to hire and onboard new employees. Through continued investments in our employees, we've been able to drive meaningful improvement. The progress we've made continues to deliver cost savings, and we've reinvested into our frontline and will -- as well as more consistent service levels to our customers. This has been the key to solidifying our foundation and will continue to be a priority moving forward as we position BrightView as the employer of choice. Turning to Slide 6. I'd like to highlight the sequential improvement we've made in customer retention over the past 2 years, which is now approximately 83%, a 400 basis point improvement since the start of our transformation 2 years ago. This is a reflection of the exceptional service our employees deliver every day. Although we have seen great improvement, there is even more opportunity across our branch network as best-in-class branches sit at 90-plus percent customer retention. As I said from day 1, becoming the service provider of choice begins with prioritizing our employees and providing best-in-class service. This formula will continue to drive retention improvements across our business and contribute to our growth in 2026 and beyond. Now let's move to Slide 7. As I just outlined, we made significant progress in solidifying the foundation of our business and are making investments to expand our sales force. At our Investor Day in February, we committed to adding approximately 50% to our sales force, equating to about 500 net new hires through 2030. In 2025, we added roughly 100 sellers to the business, and we have been able to fund the investments through continued G&A savings and efficiencies. It's important to note that the hiring of these sellers was more heavily weighted to the back half of the year. In 2026, we will continue to leverage savings in G&A to fund the investment into our sales organization. In the bottom right, you can see that our current 10 year is relatively new, merely a function of ramping our sales force. Training of our new sellers takes time, and we typically see improved productivity after their first year. However, we continue to invest in technology and training to help onboard and speed up the effectiveness of both our new and tenured sellers. As we move forward, expanding our sales force, along with other key growth levers, which I will touch on in the next slide will be key to driving sustainable top line profitable growth. Moving on to Slide 8. In my first 2 years, we've made significant strides in unifying our business, enhancing operational efficiencies, investing for the future and continuing to prioritize our employees and customers, effectively solidifying the foundation of our business. Our development and maintenance teams are working together as a unified one BrightView, focused on cross-selling into future reoccurring maintenance work. Additionally, with our record capital spend last year, was an investment in over 30 new tree trucks, which more landing at branches in 2026. Investments like these will help bolster and expand our service offerings to our customers. Also by leveraging our national presence, we can effectively service large national accounts as a single point of contact provider. These multifaceted levers, along with the investments we are making in our sales force have positioned us to deliver top line profitable growth in 2026 and beyond and deliver value for all our stakeholders. With that, I will now turn the call over to Brett. Brett Urban: Thank you, Dale, and good morning, everyone. I'll start by reiterating Dale's enthusiasm for the progress we've made over the past 2 years as we actively transform this business. Our teams across the country continue to raise the bar, delivering exceptional service, driving operational excellence and strengthening the culture that makes BrightView poised for success. Moving to Slide 10. We delivered another year of record adjusted EBITDA and margin, which was made possible by our streamlined operating structure and unlocking scale advantages as the #1 provider in our industry. Fiscal '25 EBITDA was $352 million at a margin of 13.2%, representing a 260 basis point improvement from fiscal '23. We have made great progress in just 24 months, taking a business with shrinking margins and stagnated EBITDA to a business that has grown EBITDA over $50 million and delivered record margins all while investing at record levels back into the long-term success of the business. Let's now move to Slide 11 to take a look at how we were able to improve profitability in fiscal '25. Adjusted EBITDA was a record $352 million, an increase of $28 million or 8% higher than fiscal '24. Adjusted EBITDA margin of 13.2% was also a record and expanded 150 basis points year-over-year, marking another consecutive year of margin expansion. Operating efficiencies more than offset the revenue flow-through, and we saw the benefits from the record level of investments we made refreshing our fleet, centralizing procurement and continued efficiencies in G&A. As Dale mentioned, we are actively making investments back into expanding our sales organization, which will be one of the keys to sustainable top line growth. Turning now to Slide 12. We've taken substantial overhead costs out of our business, improving SG&A expense as a percentage of revenue by 180 basis points since 2023. Our streamlined operating structure has produced meaningful cost benefits that we are using to reinvest into our employees, client satisfaction and more recently, our sales organization. Going forward, we expect to unlock additional efficiencies by leveraging our size and scale which are built into our long-term plan we presented last fiscal year during Investor Day. Moving to Slide 13. We're encouraged by the progress we've made in our trajectory of land maintenance revenue over the past 2 years by aligning our sales and operating structure, we made sequential improvements in year-over-year revenue through Q2 2025. In Q3, we experienced some macro-related headwinds, but the sequential improvement we saw in Q4 gives us confidence that land revenue growth is on the near-term horizon. As Dale mentioned, we added 100 new sellers in fiscal '25. And going forward, we will continue to invest G&A savings back into our sales team that will ultimately be a driver of profitable top line growth. In fiscal '26, we expect these investments, coupled with our development conversion strategy and enhanced ancillary offerings to deliver land revenue growth. I'll touch further on our fiscal '26 guidance in a few minutes, but I'd first like to turn to Slide 14 to talk about our fleet management strategy, which has generated multifaceted benefits since its introduction. To start, our fleet was severely aged in 2023, given the lack of investment made previously into our core business. This led to a range of issues, including higher repair and maintenance expenses, higher rental expenses, lower residuals, frustrated employees and unsatisfied customers. But over the past 2 years, we've invested over $300 million of capital to refresh our trucks, mowers and other equipment, bringing down the average life of these assets considerably. The age of our core production vehicles has been reduced to just 5 years on average and our core mowers to 1 year. Another focus area for 2026 will be refreshing our fleet of trailers, which are about 11 years old on average. The investments we made have driven significant improvements in repairs, maintenance and equipment rental, all driving incremental margin. Additionally, we found that the refresh fleet has improved employee morale and employee retention as frontline workers are able to service our customers with the confidence of having reliable equipment. In turn, our customers have been more satisfied as evidenced through our improvement in customer retention. In total, our fleet refresh strategy has delivered both financial and operational benefits that we will continue to realize as we invest further in the years ahead. Moving to Slide 15. We remain disciplined in our strategic capital allocation focused on driving long-term shareholder value. Our strong balance sheet continues to support this approach, highlighted by ample liquidity and a favorable debt profile with no long-term maturities until 2029. Net leverage remained at 2.3x. We accelerated our fleet strategy in fiscal '25, and we'll continue to execute this strategy in fiscal '26 as I previously discussed. And as Dale mentioned, we have increased our share repurchase authorization from $100 million to $150 million. We believe there is a significant disconnect in our current valuation versus our earnings potential. The profits and margins we've generated since 2023 have been exceptional. We remain confident in our long-term growth strategy and coupled with our shares trading at an attractive multiple, believe that repurchases represent an accretive and efficient use of capital. The proactive management of our strong balance sheet reinforces our ability to reinvest in the business, support profitable growth and create meaningful long-term value for shareholders. Now let's turn to Slide 16, where we outline our guidance for fiscal '26, which is underpinned by a return to revenue growth in land maintenance and translates to yet another record adjusted EBITDA and continued margin expansion. We expect to deliver revenue in a range of $2.67 billion to $2.73 billion, adjusted EBITDA in the range of $363 million to $377 million and adjusted free cash flow in the range of $100 million to $115 million. The revenue guidance assumes the following: for maintenance land, we expect revenue to increase by 1% to 2% as we begin to realize the benefits of our growing sales force, the continued improvement in customer retention, expanding our ancillary offerings and higher development to maintenance conversions. For development, we expect revenue growth to be in the range of flat to positive 2%, reflecting a combination of a healthy backlog as well as the benefits from cold starts, partially offset by project delays early in the fiscal year. For snow, we are anticipating revenue to be in the range of $190 million to $220 million, reflecting a midpoint at our 5-year average and the shift to more fixed fee contracts. Moving to adjusted EBITDA. We expect margins in the Maintenance segment to expand by 50 to 70 basis points and margins in the Development segment to expand by 20 to 40 basis points. In total, we expect adjusted EBITDA margins to increase by 40 to 60 basis points, reflecting continued momentum in the multiple initiatives we've undertaken to drive profitable growth. Important to note the midpoint of our margin guidance would imply a 310 basis point improvement over the last 3 years, reinforcing our commitment from Investor Day to expanding margins on average 100 basis points per year. Before turning the call back over to Dale, I would like to remind you of the incredible progress we've made in just 24 months and the tremendous opportunity we have ahead as we continue to transform this business for long-term success. Also, I would like to express my gratitude to all of our committed team members. Without their unwavering focus and dedication, none of this would be possible. With that, I'll turn the call back to Dale. Dale Asplund: Thanks, Brett. Before we open the call for questions, I'd like to reemphasize what I've said from day 1, transforming this business would not be possible without the commitment and dedication of our employees. By investing in our people and becoming the employer of choice, we will continue providing world-class service and become a better partner to our customers. This, coupled with the ramp of our sales force, unlocking our size and scale, strategically allocating capital and returning our business to top line growth will make BrightView the investment of choice. With that, operator, you may now open the call for questions. Operator: Certainly. [Operator Instructions] We go first this morning to Tim Mulrooney of William Blair. Benjamin Luke McFadden: This is Luke McFadden on for Tim. So coming out of the third quarter, I think you felt like the worst was largely behind you in terms of tariff-related disruptions in your land maintenance business. I'm curious how performance in some of those more discretionary areas of land maintenance trended as you moved through the fourth quarter and how you're feeling about the setup for land maintenance sitting here today several weeks into the first quarter? Dale Asplund: Yes, great question, Luke. I'll start off and Brett can add. First of all, we sit here today in our branch in San Francisco, a little early, and I've got a little cold, so pardon my voice. But I would tell you that the progress we saw as we went through the quarter showed optimism that discretionary spend of ancillary, we could definitely see return. And probably more positive for me as I stood at the gate yesterday during gate check and watched all the new fleet that Brett just talked about roll out and the cultural change it has on our frontline workers. When we talk to them about the work they're going out to do, the feeling of our customers once again looking to return to those ancillary projects that were delayed when Liberation Day happened was very positive. So look, it's going to be a daily grind. We had last year some 2 named storms that hit us, one at the end of September, one in October. The one at the end of September, as many people remember, was right from the Panhandle of Florida all the way up through the Carolinas. So we're going to have to step over that, but we feel like the progress we saw right through Q4 is an indication of why we said we're going to grow this business as we go through 2026. Now just to remind everybody, these are our seasonal months, the next 6 months or 2 quarters, we could have some noise from the seasonality of the business. But like I used in my opening, I'd like to remind everybody, everything we've done has created a foundation that positions us to grow this business and where we feel when we get to our stronger months for the land revenue business in Q3 and Q4, we will be positioned right where we thought we would be to grow this business in the back half of the year. But we felt good, Luke. We're seeing some positive momentum as we went through the quarter. And most of that, as everybody heard in our Q3 call, was discretionary related. Brett, do you want to add anything? Brett Urban: Yes. I think Dale hit the nail on the head. We're seeing sequential improvement. We saw that in Q4. We do have to step over a couple of named storms that happened last year in Q1. But Q1 and Q2 is not really our busy land season. We do about 1/3 of our land revenue in the first half of the year. And we're doing everything we can now to ramp up our sales force and make investments into the sales force of the company so that we're well positioned as -- especially as we get into our busy season in the back half of the year. Benjamin Luke McFadden: That's really helpful color. And as my follow-up, I wanted to dig in a bit more on some of these investments you're making on the selling side. Maybe just how should we think about the productivity ramp on some of those new sales hires? I know you gave some context around the numbers in your prepared remarks, but maybe how that ramp fits in the context of your segment level organic growth outlook that you provided for 2026? Dale Asplund: Yes. Let me try to break it into thirds at a high level. And obviously, there's exceptions for everything. But usually the first 6 months of new sellers, they're learning the business, they're trying to get their arms around, and they're very, very limited on productivity. They're out making relationships. You could think of getting work to bid on. The second 6 months, traditionally, they see a little more of a ramping. And once they get over a year, we see them get closer to what our seasoned sales reps would say -- would sell. And once they get over 18 months, we feel like they're in that normal stride of, call it, $1.5 million a year is what we target for our seasoned sellers. So they take time, Luke. It takes us a little bit. We added a lot this year, and we feel great. And I will say this, they are paying dividends as I see us starting to get new business as we even enter 2026, and we will continue to make investments through 2026 that will add cost to the P&L that we've forecasted in our EBITDA number. We think we'll add a similar number of resources as we work through '26. Brett, do you want to add... Brett Urban: Yes, I would just add, Luke, the transformation of this business under Dale's leadership in such a short period of time has been nothing short of exceptional. And as you look at our trend over the last 2 years from a profitability standpoint and EBITDA and a quality of earnings standpoint and margin and you look at what we're able to produce to the balance sheet with cash to invest in the business, that's the beauty of where we are standing right now. That's why we're so excited. We have the ability to invest in the business. And you can see in our EBITDA bridge in '25, we invested about $7 million into the sales force, really starting in the April through June quarter. But we're going to continue to invest in the sales force is now the foundation of the business, as you see in some of the KPIs that we presented is solidified and significantly improved from just 24 short months ago. Our employee retention has improved significantly, and our customer retention has improved significantly. So now that, that foundation is set, that's why we're putting the gas pedal down right now so hard on adding to the sales force. And Dale talked to the timing of that and ramping those sellers up. It does take time, but we have the ability and the fortunate situation where we continue to grow earnings and have cash to invest back into the business. Operator: We'll go next now to Bob Labick at CJS Securities. Bob Labick: So I wanted to start with some other KPIs. Obviously, you've really done quite well. And you have the continuing progress on prioritizing your employees. There's a couple of blue, I guess, circles, a lot of green checks on that slide as well. Where can this go, I guess, is the question? How far are you along the road map of improving employee retention? And how much more progress is there to make? And how can this -- at what point does this continue to influence or stop influencing your customer retention rate? Where -- link those 2 together, but really with the employee retention goals and where can it go? Dale Asplund: Yes. Look, we've made progress and the blue checks that we're still working on to make it -- make us a better employer for our frontline workers. We're going to keep looking at new opportunities, Bob. Those aren't the final steps. Our goal is to make sure by far, our #1 most important asset that touches our customers every day feels that they work for the best landscape company in the industry. We have improved that line. From the day I arrived, I said we have to do a better job of prioritizing those employees. We have improved that statistic over 3,000 basis points since the end of 2022, which is an absolute amazing statistic when you think about it. I think, Bob, there's another, call it, 2,000 to 3,000 basis points that we can get to get to a more normalized level for that type of high churn workforce. But those people are so critical in driving our overall customer retention that we just have to keep thinking of new ways to make sure that they understand their importance. And that starts with yesterday, me standing at the gate, handing out doughnuts and coffee and thanking them for what they do. And it makes me feel good when they thank me for the new vehicle they have. So I fully believe, Bob, they are the key to keep driving that customer retention. And I feel like we're only halfway-ish on our journey of what we can accomplish with frontline turnover. Bob Labick: Okay. That's great. And then you talked, I think, about the $300 million of investment in fleet earlier on the call. Can you talk about how the new tax bill influences the rate of investment that you're going after? And how many more years of -- will it take to get to kind of a normalized range for your capital investment? Because obviously, you're getting rid of fully depreciated assets. At some point, you'll get something back for those assets as you get further down through your road map. Brett Urban: Absolutely, Bob. This is Brett. I'll take that one. So yes, we were, again, excited that we have the opportunity to invest in our fleet, invest in our people, as Dale just mentioned. So yes, you did see us in 2025, we benefited from the One Big Beautiful Bill where we did not pay any federal taxes. And we took that money for cash savings and accelerated our fleet refresh, as you can see in the capital we spent in 2025. So we're excited we're able to do that. We have our mowers in a spot now where it's exactly where we want to be for the long term, an average of 1-year old mowers, which is fantastic. We have our trucks right around 5 years old, our core production trucks. We probably have 1 more year to go to continue to refresh our trucks to bring that age down just a little bit further. And then in 2026 and even into 2027, we're going to really invest in refreshing our trailers, which we have about 4,500 trailers across the fleet. So we started a little bit of that at the end of '25, but you can see in our CapEx guide still heavier than normal, I guess, in 2026. And then when we get into 2027 and really in 2028, we'll start to get back into that 3.5% range of revenue for capital. But the beauty of it is with our debt structure the way it is and our ample liquidity, we're able to invest back in the fleet. And Dale said it, in about 1 minute, we're going to start seeing trucks roll out of the yard we're sitting in here in San Francisco and spending time with the crews and spending time with the managers here on site. I mean the team on the ground could not be happier with some of the investments we're making into their offices, into their trucks that they drive in every day, into the fleet of mowers, the reliability they have to service their customers. So that's really where we're seeing this pay off. Operator: We'll go next now to Andy Wittmann with Baird. Andrew J. Wittmann: I guess I wanted to build on the last question on capital. I mean -- so I just heard '26 is going to be obviously [ 6.4% ] of revenue. It sounds like next year is going to be above the 3.5%. What's the delta? You guys talked not that long ago about maybe '26 being a normalized year. Where was the CapEx bill higher than you expected? Was that just inflation and tariffs? Or is it just kind of a new look at the fleet from kind of where you were at Analyst Day? Brett Urban: Yes. Andy, it's a great question. Look, I think I'll start by saying we are fortunate to have our balance sheet in a position now to continue to invest in the business and refresh our fleet. And as you look at employee retention and that metric continuing to get better, you look at customer retention, that metric continuing to get better. That's directly related to some of the fleet investments we're making so that we can service our customers with the reliability that they deserve. And then secondly, as you think about the investment moving forward, yes, we're going to spend a little bit more this year because we want to get through kind of the refresh of our fleet. Previous to 2024, we spent a lot of cash in the company, but very little of that cash was on our core business, right? You guys know the story around M&A, et cetera. So we're now investing cash back into our core business. So we're going to continue to do that. Now you think about the P&L side of the equation, our repair, maintenance and rental expense, which was listed in our deck here is about $59 million a few years ago. We saw about a 15% reduction over the last 24 months, down about $51 million. We expect to see a reduction here in '26 and '27. And that number we said during Investor Day, we could probably get half into the P&L as savings, and we expect to see more of that come through '26 and '27 as we move forward. Dale Asplund: Yes. Andy, let me add a little color to that. I think the word that I would use is today, we have flexibility that we didn't have 24 months ago. We have the ability, if we see some reason to slow down capital, our fleet is at a level today that we could operate and customers would still see us as a great provider. We're going to continue to move that to the level that we want it to be, where we think that repair and maintenance will be at our opportunistic level. But right now, we do have flexibility. 2 years ago, we didn't have that, Andy. When I arrived, we needed fleet refreshments. We needed to invest money. We were already keeping fleet way too long. Today, I feel like we have flexibility, and that's the key. Andrew J. Wittmann: Okay. And then just, I guess, operationally, kind of a 2-part question probably for you, Dale. So there was a comment in the prepared remarks about new technology and training for sellers. I was just hoping maybe you could expand on that, how the tools that they're going to have in '26 are different from what's happened in the past. And then, Brett, you also mentioned in your comments, there's kind of the next round of efficiencies that are going to be able to fund some of those investments. And -- but maybe if you could help us get a tangible sense of that, maybe some examples of things that you plan to do that you haven't yet done that are going to afford you that opportunity. Dale Asplund: Yes. So I'll start with the training side. In the back half of '25, we brought in a new leader at our corporate level to drive training across our organizations and her primary first focus is on our sales organization. We have a lot of content, Andy, that we've digitized that we're now putting out there that our employees can access via their phone. They can access it via a computer or they can get printed materials if they want. We have to continue to invest in those materials, especially as we grow that sales force. And then as you heard in my prepared remarks, we continue to invest in ancillary services. As an example, the tree trucks we added, we have to make sure that every one of our branches have the ability to give tree service access to our customers. And that takes making sure our sales reps understand what that service provider is and make sure that we have professionals that can work with our customers to get them the proper quotes and then we can do the work safely and efficiently. So it's a lot of information gathering. And when you have a dispersed sales force, we have to have an easy way to make sure they can get to the content. Because what we found, Andy, when we look at it, our quickest sales rep to get up to speed to be able to produce are the ones that access that materials not just the day they join, but when they access it multiple times, and they use it as a reference. So making it visible, making it at the touch of a button is critical. Brett Urban: Yes, I would just add from an EBITDA standpoint, Andy, we are going to unlock more efficiencies in the business. We've seen significant efficiencies in our fleet strategy paying dividends. We've seen efficiencies and scale advantages by centralizing our procurement function. As you can see on Page 11 of our deck that we presented and the beauty of it is we are continuing to create that size and scale advantage as the #1 player in the industry, so we can reinvest back in the business. And we're reinvesting in our employees. As you see that, we're reinvesting in our fleet, as you talked about a minute ago. We're also reinvesting in technology. We're launching and digitizing how we -- as one example, in our field service management system, how we digitize and route our crews and we expect to add efficiency in the system by digitizing that, having it on your phone, being able to route and make adjustments throughout the day to add more service to customers as we go forward. So there's technology investments as well that's going to add to that efficiency. Operator: We'll go next now to Jeffrey Stevenson at Loop Capital. Jeffrey Stevenson: So Brett, following up on your point about the field service management system. Can you talk about the time line of the broad rollout across your branches for that? And whether you have any benefits from this baked into your second half guidance this year? Dale Asplund: Yes. Great question, Jeff. I'll start with that one because it's a project I'm very close to. And for those of you who visited our branches, we underinvested in the past in the use of technology. And with labor being 40% of our cost, there was no greater area than the management of our frontline crews. We did it far too manually with whiteboards. We have implemented a tool that integrates into our CRM system, so we know what jobs to service every day. We have rolled that system out in every one of my geographical regions for a couple of branches in a couple of different markets to make sure that it was efficient and added value to the branches. We tweaked it. We've gone back and started rolling it out to the masses across the whole company. We will be complete with that sometime after the new year, call it, in the first quarter of the new year or our second fiscal quarter, which is the time we want to do it in a lot of our markets where we have a little bit less land revenue, and that's the major focus is on our maintenance business. But yes, Jeff, we are very excited about what it can do for us, what we have built into our forecast and what we tell people as we roll that tool out, that is not a savings tool. That is a capacity creation tool for us. We want our employees to be more efficient doing the work that they do every day. And when we're growing this business in the back half of the year, we want to make sure we get the flow through on that incremental revenue as we work into 2027. That's the goal of field service. It's not a savings tool. It's a capacity creation tool, so we can do more work with our existing team as we grow this business. Brett Urban: I would just add, Jeff, that's why we sound so excited on this side of the conversation because we've created the ability in just a short 24 months to make sure we can continue to invest in the business. The amount of EBITDA that we've generated over $50 million since Dale has started in his chair as CEO, that we're able to use to reinvest into the business, the cash that we have on the balance sheet, we're able to use to reinvest in the business. And you hear some of it from ramping up our sales force, but technology is absolutely a big piece, and we're going to continue to invest in the business. And that's why I think we're so excited on this side of the table because we have the ability to invest and continue to invest in the business. Jeffrey Stevenson: Got it. No, that's very helpful. And then I was wondering if you could provide an update on the large project delays in your development business and how current segment backlogs have trended over the last 90 days? And then following up on that, how should we think about the time line of your development cold start initiative and whether you expect any benefits from this program in fiscal '26? Dale Asplund: Yes. Great question, Jeff. I mean the development business is a business that we see cyclicality in it. And the markets that did great in the back half of '25 were kind of the soft markets in the back half of '24. And the markets that did real well in 2024 were a little softer in '25. In fact, if you really look at that business, even though Q4 looked a little soft, we did the same in Q4 2025 as we did in Q4 2023. So a little bit of -- it's a comp issue of how well we were able to complete jobs last year in Q4. I think on the cold start side, if you think about where we're at, we mentioned we're going to do 10 cold starts. We have 5 of them that we're starting to try to get open the door now at existing real estate and starting to make productivity as we work through '26 in that area. We expect another 5 to be somewhere in the process within the end of 2026, hopefully, with leaders, with sales reps in those markets. The key of opening those development cold starts, it allows us to service a broader base of jobs without trying to service big jobs in all markets from one branch. So Denver is a great market for us that we have a very large branch, but they're doing jobs all over the state of Colorado. We need another branch that can do work so that the Denver group can focus on just the Denver market. So we made great progress, Jeff. We think that's why we feel confident. We're going to return that business to growth this year. And long term, by having more branches and more markets, our branches will go after more work within each market, not just the big jobs going chasing across the whole geographic area they can cover. So I hope that answers it. Brett Urban: Yes. And I would definitely say if you look at kind of the trajectory of the development business, they've grown significantly, Jeff, over the last few years, credit to the development teams and the branches we operate in. And that business has grown $60 million in '23. They grew $50 million in 2024, took a small step backwards here really towards the tail end due to some of that macro. But we're definitely coming down the other end of the bell curve. And if you look at kind of where Q4 came in at an 8% reduction in revenue quarter-over-quarter, Dale mentioned last Q4 was really impressive growth. But we're definitely coming down the other end of the bell curve. We expect it to be a little bit choppy here in the first half of the year, but that's just as those delays work its way through the system, and we're starting to see that free up here a little bit. And definitely, this business will be back to growing and growing at a nice pace here in the second half of the year. Dale Asplund: One other part of your question, Jeff, you asked about project delays. Let me just add this week for Pittsburgh Airport, which has been a very big project for us, actually switched to the new terminal. We're not done with our work there, but we're proud of the work that we did do. But where you see those things accelerate where we did have the delays, Jeff, we have other projects that haven't even started yet that we were counting on in Q3 and Q4. So there's always going to be give and take. There's a lot of noise out there, but there's plenty of work for our guys to go get. So we're motivating our development team. Let's get some new branches open. Let's all get more salespeople out there. Let's go get more work, because there's plenty of work for that team and the quality they do is second to none. So we're in great shape as we enter this year. We guided to 0% to 2% increase as we work through 2026 again. But great questions. Operator: We'll go next now to Greg Palm of Craig-Hallum. Greg Palm: Maybe just dovetailing on the last question. I don't know if we can spend a minute on labor and any impacts from sort of the changing immigration policy. But have you seen any direct or maybe indirect impacts there? And I guess if the industry is seeing some impact, at some point, are you able to use this to your advantage to maybe accelerate share gains if some of your competitors are having issues? Dale Asplund: Yes. Great question, Greg. Let me try to take that. So I believe that investing in our frontline people drives long-term customer retention and the quality of service that we deliver. But if I went back 2 years ago and I thought the challenges in the end labor markets due to immigration, we're going to be as hard as they are today. I would have made those same investments because today, the employees we have feel like BrightView cares more about them than ever. So I would tell you, as I talk to my operations team, what in the past was reactionary behavior every time somebody came to try to take one of our employees, our employees have seen the benefits, and we cover that on the trend that we showed of the improvement in turnover. Things that we put in this past year like PTO have been a huge benefit for our employees that when we get rain days or when there's a sick day they need to take. So I would tell you, Greg, we are so well positioned with where we're at. And yes, I do believe some of what we're seeing with our new sales that we're starting to see every month is because other providers are struggling to provide the level of service because of limited availability. As everybody knows, we e-verify our employees. We are very proud of that to make sure we can provide a good company to work for, for proper documented employees in the United States, and we don't have a fear about all the noise that's going around in some of these markets with some of the immigration challenges, but we feel great. And we think it's going to be a tailwind, not just where we felt so far, but as we work through '26, Greg. Greg Palm: Okay. I appreciate that color. And Dale, as you think about '26 and this sort of focus on growth. What do you -- what are the biggest near-term levers versus some of the stuff that I don't know, might trickle in a little bit and be more impactful in future years? Dale Asplund: Yes. Look, it's -- we talked about at our Investor Day talking about how we're going to get growth between now and 2030. It's the same levers, Greg. I am so proud of how far we've come on customer retention. We were up 400 basis points, granted from 79% to 83%. We are not done with that. Maybe the 200 basis points we've seen over the last couple of years, maybe it slows down a little, but there's somewhere between 100 and 200 basis points each year over the next several years. We have moved, this is the key, the underperforming branches. When we were at our Investor Day last February, 20% of our branches had customer retention below 70%. As of the end of the year, only 10% of our branches were below 70%. That's still roughly 20 branches that is below 70% that we have to improve. What we said and what we know, when branches are in the mid-80s, they are growing. We also have a litany of ancillary services. I talked about adding 30 tree trucks. We have a lot more tree trucks on order because what I want to do is be a full service provider to our customers. There's other ancillary work that we're working with our branches to go get. Today, a lot of the flowers and mulch and install work we do is with our existing customer base, we can do it for anybody, and our branches are starting to get more creative to go out and bid on work outside of their existing contract work to get more ancillary. So look, we have a lot of levers to pull here. That's why we're confident to say we're going to grow in 2026. Yes, we're always going to have a little noise. It's time for us to really put the foot down and get the accelerator going because this is our time for growth. So I hope that gives you an idea. I think adding sales resources, keep that customer retention, drive ancillary and let's go. I'm sick of talking about things in the past that create noise like a storm. We should be able to step over that stuff without any problem as we grow this business to mid-single digits annually. Operator: [Operator Instructions] We'll go next now to Stephanie Moore with Jefferies. Harold Antor: This is Harold Antor on for Stephanie Moore. I guess just one question for me. Capital allocation, you talked about your fleet investments. Just wanted to get any sense for your views on M&A. How that -- how have those conversations gone through the quarter? What are multiples looking at? Anything there would be helpful. Dale Asplund: Yes. Look, let's -- we'll take the topic of M&A. In a way, I think what I kicked off with and what Brett talked about, increasing our share repo to me, kind of sends a signal. If we're going to buy a quality company, those companies are trading at 8 to 10x very easily, Harold. Our company is drastically undervalued, trading around 7x. And with our new EBITDA guide, we're actually below 7x. So I'm going to take advantage. In fact, the word that I would use, our Board didn't approve the share -- increase in our share repo program. My Board encouraged it. They were supportive to say, we have come so far, not just in the financials that Brett covered, but in the culture. The fleet that we have today, 24 months later is a drastic change in our business. Our business is completely different than what it was 2 years ago. And today to be able to buy it at depressed levels, we're going to take all that cash right now until our stock trades at a more normalized level, and we're going to buy back our own stock. Is there a pipeline in M&A? Absolutely. Will we maybe look at something on the ancillary side such as tree businesses, aquatic businesses? If I find the right one, yes, but we're not going to chase deals. Our Board is supportive of what we're doing here in the short term with the dislocation in the stock price, and we're going to take advantage and accelerate that program. So opportunities are there, but to get the companies that deserve to be part of BrightView, the multiples are well above what we are willing to buy right now considering our stock price. Operator: We'll go next now to Toni Kaplan of Morgan Stanley. Yehuda Silverman: This is Yehuda Silverman on for Toni Kaplan. Just had a quick question on the snow side. So you mentioned that you're working towards getting to a customer contract base that's more fixed than variable. Heading into the upcoming snow season and looking into 2026, can you talk about the improvement in that area so far? And how this shift is expected to impact the business compared to a more variable heavy tactic? Dale Asplund: Yes. Look, I mean there's always markets, Yehuda, that is going to be very hard to switch to fix, take the Carolinas or Atlanta, where we saw some weather last year. So those will always be variable. But I would tell you, we focused on 2 things with our snow business. First, trying to get the majority of the customers that do land with us that need snow services to use us and limit us just providing snow removal services. We want to make sure we offer a full year service to our customer. And then go away from that riskier time and material, we've definitely seen an increase, which gave us the confidence to guide to that $180 million to $210 million or $205 million midpoint of -- or $220 million, I'm sorry, the $205 million midpoint that we guided to. We feel like we're in a great spot, and we continue to push. Here's what I would tell you. This is why I can't really give you the exact number. In many markets, it hasn't snowed yet. And some people don't like to refresh those snow deals until the flakes start to fly. So we've got a lot of paper out there that people will finally commit to. Once they know the storms are coming. We saw a little weather across the Midwest, but we have opportunities yet across Colorado and the Northeast where we've yet to see weather. But our strategy is working. We feel like we're making it a much more predictable business. And we feel like as we go through '26, once again, there's going to be no excuses because of snow. We told you guys what we believe is there. We think we can deliver on that. And if we can't deliver on it, it's not going to be a reason that we lower EBITDA. So we're committed to delivering this business and the forecast we put out there. And if snow is a little softer, we still think we can deliver the bottom line. Operator: We'll go next now to George Tong of Goldman Sachs. Keen Fai Tong: In your landscape maintenance business, can you provide some additional color on how your [ contract ] has performed relative to ancillary, especially the per occurrence side of contracted revenues? Dale Asplund: Yes. Great question, George. I think we feel great about where we're at with our book of business. When I look every day at where we're at for the month of adding and losing because I track it every day, and I send it to my direct reports, and they'll tell you, I can run the reports now. So it's great data for me to look at, and I track that contract because it should be very, very, very predictable. I would tell you, I think some of the areas where we saw some of that discretionary per occurrence were areas we saw some of that snow like the Carolinas, like Georgia, we feel like a lot of that noise is behind us. We feel good about what we're feeling with contract revenue and expect that to continue to be a tailwind for us as we go through 2026. Ancillary, like I started the conversation off with, we've come a long way. And it's not just what we're seeing in the numbers. It's really what the people in the branches are saying. I'm out here in San Francisco, and I had one of the local branch managers come to me yesterday that gave me great news that he has signed 2 deals, and I said that's great, keep going. Let's keep the team motivated and keep going, get it and let me know what I can get you from fleet or personnel to make sure you can keep getting that work. So I would tell you, we've come a long way. Yes, there's still some noise, but 2026 is our year to growth. Contract revenue will be up. Ancillary, we firmly believe will be up, and the investments we made in additional ancillary type assets like the tree will help us even drive that work. So we're positioned well, George. Great question. I would tell you, contract, where we felt some of that discretionary per occurrence, that's behind us now. We feel great as we enter 2026. Operator: And gentlemen, we have no further questions this morning. Mr. Asplund, I'd like to turn things back to you, sir, for any closing comments. Dale Asplund: Thank you, operator. Guys, as I complete my second year with BrightView, I want to take a moment to thank all of our employees on the incredible progress we've made together. Over the past 2 years, we've strengthened our culture, sharpened our execution and advanced our transformation. Together, we built a more efficient, stronger and significantly better foundational business to service our customers. My focus now is squarely on delivering consistent, profitable top line growth both in '26 and for years to come. So once again, operator, I want to thank everybody for joining us today. Thank you for your interest in BrightView. We look forward to giving you our progress as we work through 2026, which is a year we are very, very excited about. And the team, as we just left our annual meeting feels like there's so much upside based on the foundation we've built. So thank you, operator, and we'll talk to everybody in February. Operator: Thank you, Mr. Asplund, and thank you, Mr. Urban. Again, ladies and gentlemen, that will conclude today's BrightView earnings conference call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.
Andrew Coombs: Good morning, everybody, and welcome to today's presentation of Sirius Real Estate's Interim Results for the Period Ending September 2025. My name is Andrew Coombs. I'm the Chief Executive Officer of the Sirius Group, and I'm joined this morning by Chris Bowman, who is the Group Chief Financial Officer of Sirius Real Estate. Together, we will take you through this morning's presentation. As you all know, we are an on-balance sheet, best-in-class owner and operator of mixed-use light industrial business parks on the edge of key towns in Germany and the United Kingdom. Please remember that Sirius operates in both the German and the U.K. markets under the brand of Sirius in Germany and BizSpace in the U.K. The group currently operates over EUR 3 billion of property, 90% of which is wholly owned by the group. This consists of 160 sites in total, 77 in the U.K., 76 in Germany and 7 sites within the Titanium joint venture in Germany. Let's now turn to Page 4 and look at the highlights for the period. The Sirius Group is a rigorous, well-run and very importantly, growing organization. We have proved the resilience and the reliability of the business model during COVID, during the gas crisis in Germany and most recently, through a period of rising interest rates in Europe and the U.K., during which we have successfully protected valuations in spite of yield expansion. In that time, we have continuously, without exception, grown our revenues. We have continually, without exception, increased our dividend payments. And as I said, we have made sure that the value of our properties goes up, not down. In the period to September '25, we successfully grew like-for-like rent roll by more than 5%. And as a result of the acquisitions in the period, we have grown the total rent roll by more than 15%. We have done this by maintaining occupancy in Germany and increasing it by just over 1% in the U.K. And we've increased like-for-like pricing in both markets by more than 4%. As a result of this, we are announcing a dividend of EUR 0.0318, which at per share level is a year-on-year increase of 4%. So let me now ask you to turn to Page 5, and Chris will take us through the income statement. Chris Bowman: Thank you, Andrew. Good morning, everybody. As Andrew said, over the next 4 pages, I will run through some of the highlights of the P&L and also the balance sheet, just picking out some of the key items. So on Page 5, just starting at the top, very pleased that the -- that increasing like-for-like rent roll of 5.2% has underpinned growth in rental income of 7.7% for the first half versus the first half last year. So you can see there, we've achieved EUR 112.6 million of rental income. That has translated to a 4.9% increase in net operating income. As I've mentioned in the past, as we have acquired assets, we're in acquisition mode, very active acquisition mode. As we've acquired assets, some of those assets tend to have higher service charge leakage than in our existing core portfolio. So there is a small drag, which we turn around relatively quickly on service charge costs that you can see there. That is obviously upside for the future to come through. Looking down at EBITDA, you can see of that 7.7% top line, we've achieved 9.7% increase in EBITDA. So very pleased to achieve some operating leverage there. As we grow the asset base, and we grow the income base, we are keeping a very tight control of our costs and to then improve our margins. Specifically within that corporate costs and overheads dropping from 24.8% to 22.7%. We have been very careful from a headcount perspective and found efficiencies. We've also tightened up and had various initiatives internally to improve our cash collection that has allowed us to be tighter on provisioning and again, has provided upside there. Moving on. I'm going to be -- unfortunately, I'm going to continue to talk about headwinds of finance cost, unfortunately, for the next 2 or 3 years. We do have the finance cost headwind that we continue to outrun. So you can see there our net finance expense goes from EUR 6.3 million to EUR 9.4 million, and -- but still, we more than have outrun that with the growth in -- at the EBITDA level to achieve an FFO, up 6.6% of EUR 64.7 million. As I think those of you know us already, FFO is what we -- is our core target in the business. It's the cash flow, it's the profitability of the business that we really focus on. We are an operationally focused business. We are not trying to guess the property markets or play valuation yields. We're focused on providing profits -- growing profits to provide growing dividends. So very pleased to achieve that 6.6% increase in FFO. I've included the detail all the way down to profit after tax on this page because there are three items that I think need further explanation. One, headwind, and two, tailwinds. So within the foreign exchange, you can see there EUR 14.3 million, there is a EUR 14.2 million of that is what is classed as a realized FX loss, which relates to sterling cash balances, which we held at the beginning of the period in anticipation of that cash being placed into U.K. assets -- U.K. investments. So it was a very busy first half for acquisitions. We acquired over EUR 200 million worth of property in the U.K. We held the appropriate level of cash in sterling to do that. When that cash converted from the cash line into the investment properties line, it was mark-to-market at the FX at that moment. So it is -- unfortunately, it does all flow all the way through EPRA earnings. So you'll see it, but it is a one-off, and I'll happily take questions further on that. On the upside, we have EUR 14.4 million of valuation gain. So that is purely for the first half. I would expect to achieve better than that in the second half. But again, that's with virtually no yield contraction. We'll come on and talk about later. That's really valuing the increase in rent roll that we've achieved. And then further down the page, you can see the profit after tax is materially up 56.8% at EUR 87 million. And part of the fiscal stimulus that Germany is -- has enacted is the reduction in the corporation tax rate from 15% to 10%. That goes down by 1% a year from 2028. What that means is that our deferred tax liabilities on the gains in our property portfolio reduce. So you can see there's a EUR 29.8 million reduction in deferred tax liabilities that flows through the P&L and hence drives that profit after tax number up. Going over the page to Page 6, just reflecting that on a per share basis. We have the EUR 98 million of NOI converts to EUR 0.0652 per share. These numbers all still have the impact of the additional shares that came into the share count from July '24 equity raise. So prior year, there was a weighted average number of shares, now this is on the full number of shares that is outstanding. And the interest and current tax equates together to EUR 10.8 million. That's a EUR 0.72 cost line gets us to the EUR 0.043 of FFO. Below the FFO line, really the thing I would flag is that EUR 14.2 million foreign currency translation that then has an impact on the adjusted earnings and EPRA earnings, but as I say, is noncash. If you look at our cash flow statement, our operating cash flow broadly correlates with the FFO. We have paid out in dividend EUR 0.0318 or proposing to pay out EUR 0.0318, as Andrew said, up 4%. That equates to a 74% payout ratio for the first half. That will start to transition down going forward, and we will settle around 70% payout ratio in the next 3 to 4 years as we go through the financing windows. On to Page 7, just looking at the balance sheet. At the top line, you can see that our investment properties have increased by EUR 300 million. So within that, you have the EUR 295 million of acquisitions that we actually completed on in the period. You've got EUR 14.4 million of valuation gain across the group and then a disposal of some smaller sites in the U.K. is the balance. The cash balance has come down to EUR 424.9 million, of which EUR 389 million is ours, excluding the deposits of tenants. The EUR 179.9 million movement is net of the bond tax that we did in the period of EUR 105 million. And then on the bottom half of the balance sheet, really, the only thing to flag there is that the debt outstanding is at EUR 1.416 billion. Bear in mind that we have the repayment of the June '26 bond coming up for EUR 400 million, hence, why the cash balances are relatively inflated and also the debt balance is relatively inflated as well, but those two net each other off. Just a reminder, we also put in place EUR 150 million RCF during the period, which provides that liquidity to repay that debt. Looking down NAV, reported NAV is up 0.8%, benefiting from that valuation gain. Adjusted NAV is down 0.9%, roughly EUR 0.011. Again, there is a foreign exchange unrealized currency translation there of EUR 29 million, which in simple terms is just converting our U.K. assets into our reporting currency of euros. Bear in mind that if you then convert the entire NAV back to sterling, our sterling is up on a sterling base -- our NAV is up. On to Page 8, just quickly just running through the waterfall of NAV from EPRA at each end from March to September. I think EPRA NAV going from EUR 117.6, we target ourselves on adjusted NAV, EUR 118.89. As I say, the EUR 0.02 headwind is the unrealized FX of EUR 29 million. We achieved EUR 27.5 million recurring profit after tax in Germany. We had EUR 17.7 million upside in valuation in the German portfolio as well as then EUR 19 million of profit after tax in the U.K., which is EUR 1.27, a small valuation loss after CapEx of EUR 2.2 million in the U.K. Net of the dividend gets you back down to EUR 117.84. So really, the delta in there, the movement is the FX, which without the FX, we would have been up in NAV terms. I'll hand over to Andrew on Page 9. Andrew Coombs: So Page 9 deals with the organic growth in Germany. And just before I delve into the numbers, let me give you a little bit of the narrative because if I cast my mind back to the beginning of the period, the first quarter of this financial year, so April starting quarter, it's easy to forget that the German government had only just taken power in April of this year. And I think it's probably fair to say that the new government was still establishing itself and certainly hadn't gained any momentum at that point. And we certainly felt that in the trading. The first quarter of this year in Germany was a tough quarter. We made our numbers, but the effort and the workload that we had to put in to achieve that was certainly much greater than it normally is. We saw the momentum start to establish itself in the second quarter. And I'm pleased to tell you the 6 weeks following the end of the period, we very much feel that, that momentum is gathering pace. I would describe Germany, at the moment, is in a transitionary phase. And it's quite confusing because when you look at numbers like the numbers on German manufacturing, you don't see any substantial increase at this point in time. Lots of people, therefore, turn around and say, what's happening in Germany and are things good in Germany. What we see on the ground is we see reorganization. So we see factories stopping production. We see things being reorganized. And they're typically being reorganized towards defense. But the problem right now is that you have to stop producing what you produce in your factory in order to strip it out and prepare the production lines to produce defense-related items. And that's what I mean by a transitionary phase. And that's why the production numbers are going down. But what is happening is the preparation is being laid for -- in a couple of quarters' time, those production lines to be up and running and operating not just one shift as we often see here in the U.K., but typically a continental shift pattern of three shifts every 24 hours, at least six days a week. So what we believe is that Germany is preparing to substantially increase its output. We've seen this before in previous years. We've seen it where they've used in the past, furlough or kurzarbeit as they call it in Germany, where suddenly what happens is the economy appears to flip. Some have called it in the past, the German economic miracle. It's no miracle at all. It's Germans preparing before they flip the switch. That is exactly what we see happening in Germany at the moment. And in that period, what we were able to do is we were able to grow the like-for-like rent roll by EUR 7.2 million, so 5.3%. We were also able to increase the overall annualized rent roll by 12%. But the difference between that 5.3% and the 12% is, of course, acquisitions. We were able to increase pricing by 4.7%. Would you believe it? That's a little bit more than we wanted to do. We are in an occupancy-led strategy here. What that means is that we want to control our pricing to about 4% and get the rest of the effect out of increase in occupancy. When you've got a workforce who've been used to putting prices up, not only do you have to get your processes and your systems to do the right thing, you've got to get people to do what is the opposite of what we've been asking them to do for years, which is put prices up by less. And actually, in that regard, we slightly failed because our occupancy remained constant and price, we were aiming for 4%, price nearly hit 5%. You can see that in doing that, what we did is we had to lower our move-in rate, and what we achieved was a move-in rate that was just marginally higher than the move-out rate. So move-in at EUR 7.66 versus move-out at EUR 7.52. But all of that was successful in lifting the underlying like-for-like rate per square meter in the portfolio as a whole from EUR 7.38 per square meter per month to EUR 7.73 per square meter per month. So a delicate balance largely due to the first quarter, but successful in as much as we continue to push rate up in the portfolio. And in doing so, we've been able to make sure that we at least maintain our occupancies. We go across the page, and we look at that rent roll movement, you can see the EUR 7.2 million is reflected in the difference between EUR 135.3 million and EUR 142.5 million. What we faced was EUR 19.5 million of move-outs and the way in which we compensated for that was really the EUR 6.2 million of CapEx-assisted move-ins together with the EUR 14.1 million like-for-like move-ins. Those two gave us a total of EUR 20.3 million, so EUR 800,000 above the move-out effect. And then the uplifts, the pricing at 4.7% gave us 6.4%, and that 6.4% together with the 0.8% gets you to the 7.2%. But really, the exciting thing is those acquisitions in the right-hand column. And bear in mind, the last EUR 40 million of acquisitions in Germany that completed only last week, not included in these numbers. But what you've got is you've got over EUR 9 million of second half effect to come from those acquisitions. That EUR 9 million will build closer to EUR 10 million. So that's a EUR 20 million annualized effect that's going to bake through into next year's numbers. Now half of it will get eradicated by increased interest rate, and Chris will talk about that. But we've got sufficient acquisitive growth here to be able to deal with the increased interest and still have EUR 10 million of FFO growth. Put on top of that, the 5% organic growth. And I hope what you can see is rather than using interest rate increases as an excuse to go backwards, what we've been able to do through careful planning and careful execution over the last 18 months is put ourselves in a position where we can outgrow next year's problem. If I go across to the following page, we can talk about valuations. So the first thing that I would draw your attention to is on the right-hand side above the total assets black headline, net yield shift of 1 bp. That shift is the yield coming in, not going out. Why the valuers would have bought us in by 1 bp, I cannot imagine, but I would suggest it is a signal. And the signal is clearly that the direction of travel is that the yield is shifting in, in Germany, not out. Clearly, it's made very little, if any, difference because we started in March '25 with a valuation of EUR 1.890 billion, and we get to September '25 on EUR 1.921 billion, clearly, a EUR 31 million shift there. That EUR 31 million shift comes from EUR 2.3 million of additional rent roll valued at a gross yield of 7.4%. And what you can see in the bottom right-hand corner of this page is you can see after the acquisitions that we're talking about have been made, the yield at a gross level goes up slightly and the capital value per square meter goes down. That is because we are buying vacancy. That is because we are buying lesser quality rent roll because that is exactly our runway to put our machine across the top of it and improve it. So the reason that you are seeing that gross yield go out is because of the opportunity that we're buying and the belief that we can do something with that opportunity by putting it over our platform. If I go across to the inquiry stats, what we can see here is the number of sales, the number of customers we have acquired is 3% down. The sales volume that we've acquired compared to same period last year is 2.5% down. However, what we are pleased about is sales conversion is at 14.6%, up from 12.8% and close to our long chased target of 15% sales conversion. We are at last beginning to hit those numbers on a regular basis. What this shows is it shows the pain in quarter 1 of the first half, and it shows our ability to work the platform harder in the form of sales conversion in order to make what we've got count and drop more frequently to the bottom line. So this reflects the first quarter, but it also reflects the strength of the platform to deal with issues as and when they arise. If we go across to some of the acquisitions, I'm not going to go through every single one because they've been covered previously in lots of different announcements. But I draw your attention to Dresden. Dresden is, we think, one of Germany's best kept secrets. Silicon Saxony, where there is the most incredible amount of inward and foreign investment going in. Tim Lecky and I were in Dresden a few weeks ago. What did we count something like 17 cranes on the horizon and not 17 static cranes, 17 working cranes within the eye line in Silicon Saxony building things. Lubeck. Lubeck is in the area that benefits from the biggest infrastructure spend that is currently going on in Germany. And if we go across the page, we see Dresden again, no surprise. And we see Feldkirchen on the right, just outside Munich. This is an asset where 1/3 of the rent roll is a defense supplier, a defense supplier who specializes in the manufacture and development of optical devices, most notably night vision technologies for the military. If I go across to Page 15, let me hand across or hand over to Chris. Chris Bowman: Thanks, Andrew. And so just on Page 15, I just thought it would be good to update everyone on the current status of the portfolio and also on the next 2 pages on CapEx as well. Really, Page 15, I think, is the kind of secret sauce in Sirius for the growth of Sirius. That is how do we take the Sirius platform, put it to work on our property portfolio and take assets which have value creation opportunity and capitalize on that value. How do we create that value for shareholders? Now we break down our portfolio into the 2 buckets of value-add and mature. You can see there that the -- roughly speaking, it's 1/3 mature, 2/3 value add. And really, the value-add piece is the piece where we go to work on these assets to essentially try and mature them to try and put them into the mature bucket. And what -- why do we do that? We do that because of the opportunity to drive value. So you can see the average yield -- gross yield is 6.8% on our mature assets, 7.9% on our value add. Importantly, the gap between net and gross yield, the leakage on service charge is 90 bps on value add versus 30 bps on mature and also how the valuers then value that greater income and better performance. On average, we are at EUR 1,277 capital value per square meter in the mature versus EUR 868 in the value add. You can see what we have to achieve to get from one to the other in terms of occupancy, on average, 78.9% versus 94% and also the upside from rate. So by improving our assets that have this opportunity in them, we get many benefits, not only additional rent roll, but how -- but also then better net operating income because better management in terms of property expenses. We get valued better by the valuers. And obviously, we've achieved higher rate as we improve the quality of the site as well. It becomes an ever-improving cycle essentially on those assets as we improve them. Now we have overall 336,000 square meters of vacancy to power the growth in the business. On average, we typically look to improve roughly 100,000 square meters a year. That links into our CapEx plans each year. And so you have at least a 3-year runway of growth in the business. And obviously, as we're acquisitive at the moment, we are continually replenishing that opportunity. Over the page, just looking at where we are really putting capital to work to help on that journey from value-add to mature. In the first half, we have invested EUR 18.6 million in our CapEx programs, roughly split 2/3 Germany, 1/3 U.K. The value-add CapEx is that piece of the pie that really generates the high returns. We put a minimum 30% return on investment. So that's cash return on what we spend. So we're looking for a 3-year payback on incremental rental income from all of our value-add CapEx spend. You can see again, it's split roughly 2/3 Germany, 1/3 U.K. On the right-hand side, you can see some of the pictures of where we've actually put that capital to work. Bottom right, Vantage Point, when the range -- when we moved the range out of Vantage Point, essentially, there was three large halls left for us to tackle. We have already refurbished one of those halls. We put EUR 1.5 million of CapEx into that hall, and we have let it to Big Doug, which was an existing tenant on the site. I think for those of you who have been to Vantage Point, I remember we visited them before they were moving into the new space. Pleased to say they have now moved in. And the effect of that EUR 1.5 million spend allowed us to achieve double the rate on that space that it previously was achieving. New builds, we are in a cycle here where we have just finished the new builds at Gartenfeld. So on the top right there, you can see 1 of the 3 halls we built at Gartenfeld. So just EUR 800,000 went into just final completion of that hall. We've rented all three of those halls at Gartenfeld at far better rates than we expected. And then from a works perspective, just under EUR 10 million spend on works. So we keep a very, very tight lid on our -- that's essentially the maintenance CapEx. That's often the likes of renewing lifts, for instance, that type of spend. But within there, there is EUR 2 million of spend on ESG, which is principally PV solar in Germany as well as EUR 2 million in the U.K., which relates to EPCs and our continuing drive towards C and B. Over the page, Page 17, just to -- I've rolled this forward essentially. So I'm looking back over the last three years, what is our spend, and how are we performing. We have put 293,000 square meters of vacancy. We have put CapEx into value-add CapEx. That equates to EUR 31 million of spend, on average, EUR 106 per square meter. So this is not what I'd describe as kind of high-risk CapEx. We're not -- as a norm, we're not completely rebuilding or knocking down space. We are typically refurbishing space. The most complicated it tends to get is subdivision and the fire safety regulations that come with that. But it's very much low-risk and low-cost refurbishment. We've achieved EUR 12.7 million of rent improvement of that. So -- and at the moment, the occupancy is 74%. That continues to build as the CapEx we've spent in the most recent period, some of that space continues to be let up. And we're achieving rates of EUR 4.91, which gives us a return on investment of 41% cash return. Just conscious of time, move on to Slide 18. As I say, new builds, we have just come to the end of the A, B and C halls at Gartenfeld, and I would highlight that we've achieved a yield on cost there of 9% on a site which is valued at 5.5%. So obviously, as that income is valued at 5.5%, we've achieved 21% IRR on those developments, which is on surplus land at Gartenfeld. In the pipeline, there is an additional EUR 25 million of projects. That's spread across. There's a site in Dresden -- there's two sites in Dresden where we have opportunity for development. And there is also another space at Gartenfeld as well where there is further development. I'll hand back to Andrew to talk about U.K. Andrew Coombs: Okay. I've got switching to U.K. mode now and think about the U.K. picture, which is a different picture from the picture I described in Germany. So let's start firstly with the annualized rent roll. The annualized rent roll, which obviously benefited from acquisitions. Many of you have seen Hartlebury, was up 21%. 5.1% of that comes from the like-for-like rent roll. And as you can see, what happened here was we were more successful in convincing our sales force to be able to lower price and in doing so, raise occupancy by 1.2%. However, you've got a slightly different situation here with your move-ins and your move-outs. We actually dipped below the move-out rate on the move-ins, but we were still successful in that equation in terms of lifting the like-for-like underlying rate in the portfolio by 4.1%, namely from 14.38p (sic) [ GBP 14.38 ] per square foot to GBP 14.97. How did we do that? Well, we did that with our expansion initiatives. As you can see, what happened is we had 344,000 square foot move out, 302,000 move in. But what we were also able to do is to work the existing base of customers to get some of them to take more space and some of them to take more products. So we've had to work very hard here in the U.K. in order to be able to get that 1% of occupancy and also to be able to not just maintain, but increase price by at least 4%. That 4% is important because we know inflation in the U.K. isn't as much as 4% at the moment, but it could be soon. And we don't want to be caught out by that. We don't want to be trying to catch the inflation. We want to make sure that we are in a process in the U.K., where we're always ahead of inflation in terms of the way in which we manage that rent roll of customers. So rate per square foot is up by 4.1%. Move-outs are at GBP 18.44, which is 57p or 3% lower than the move-outs. That's had about a 1% overall effect because your new business affects about 1/3 of your total. It's your renewals that affect typically the other 2/3. And what we're seeing in the U.K. in contrast to Germany is we're seeing the U.K. get harder. Germany is getting easier. U.K. is getting harder. We are not panicking about that. We believe that the platform in the U.K. is now well enough developed and strong enough to be able to overcome that market effect, and that's exactly what you're seeing in the figures on this page in front of you now. If we look at the way it's built, you can see GBP 59.3 million rent roll moves in September '25 to GBP 60.4 million. You can see that the move-outs and move-ins that the move-outs are not quite covered by the move-ins. But look, that pricing uplift of GBP 3.8 million becomes so, so important because that's what gives you the final edge. And then if you look at acquisitions, GBP 14.4 million coming from acquisitions. As you know, in the last 6 months, the acquisitions have been slightly more weighted to the U.K. than Germany. That will change now going forward. We are going to be looking at a predominantly German-only effort, at least until May, June of next year. If we have a look at what that looks like in a valuation perspective, net yield shift of 4 bps. Well, that's going out, not coming in. So again, the 4 bps don't really make much difference, but the signal from the values is that -- in the U.K. yields continue to widen. If we look at the bottom right-hand corner and you see the assets being included not just on a like-for-like basis, but the acquisitions that have been made in the period, you see the opposite to what I described in Germany. You see a gross yield coming in to 12.3%. At March 25, it was 14.1%. And you see the net yield coming in from 9.5% to 8.8%. That is reflective of the quality of assets we've been buying in the U.K. When you think about Hartlebury, when you think about Vantage, when you think about Chalcroft, I could go on. We have consistently been buying higher quality assets than the assets we inherited when we bought the business. They typically have longer lease lengths. That's not long lease lengths. That's longer lease lengths. So what we're doing in the acquisition program that we've conducted thus far in the U.K. that we are going to be pausing on until at least June of next year. What we've done is actively gone out to increase the overall quality of the portfolio, and that's reflected by what you see in the bottom right-hand corner. If we go across the page, what we can see in the U.K. is we've been able to attract more inquiries. A little bit deceiving there because we're not passive. It's not like we just sit there and say, what does the market give us in inquiries. We have worked much, much harder to acquire more inquiries that we've -- then been able to convert into sales. Please don't look at these numbers and think U.K. market is going up, because this lead flow reflects what is happening when you just passively sit there and try and collect whatever the market gives you. These numbers are misleading if you read them like this. We have had to work a lot harder to increase that inquiry flow in the U.K. If we go across to the acquisitions, I've talked about Hartlebury in the middle here. Bedford on the left-hand side, interesting enough, 1/3 of the rent roll in Bedford is underpinned by a company that manufactures parts for ejector seats for the defense industry. In fact, they make parts for the ejector seats in the F-35, Typhoon Eurofighter. So when you see these orders being announced by U.K. defense industry, that factory is one of the beneficiary of those orders. Chalcroft, I'm delighted to tell you that we've had very strong interest from a major supermarket. So Chalcroft next door to it has got hundreds of new houses currently being built. And we're in advanced discussions with a major supermarket to develop on the front land of that site, one of the big four supermarkets to serve that residential area. So call that a stroke of luck, call it whatever you like, but that's going to be quite good for us. Let me hand over to Chris. Chris Bowman: So I don't intend to -- just on Page 24, I won't go through these line by line, but I think the highlights, obviously, on -- in aggregate, we have acquired an 8.1% gross yield. You've seen earlier that our existing portfolio is valued around 7.4, 7.5, and in aggregate, we have acquired EUR 338 million, of which EUR 295 million completed in the period. Feldkirchen just at the bottom there in November, completed last week. So that is also now on balance sheet. I think if you look at timing, then just to reiterate Andrew's point earlier, the majority of these acquisitions actually completed towards the end of the first half. So really, that annualized rental income of EUR 25.8 million has yet to actually flow through into the P&L, but there is significant growth to come through, which is in the tank for future periods. On the disposals, Pfungstadt, we have notarized the recycling of that asset, EUR 30 million in Germany, that completes at the end of this financial year, so at the end of March for EUR 30 million. Just to head off, I'm sure I got a question on Tyseley, why have we sold an asset in Tyseley at 16.6% gross yield. There was also significant maintenance cost there and getting straight to the point, it needed a new roof, which would have been an additional EUR 3 million spend. So from a business planning perspective, it made sense to realize that asset at this time. And it's also linked to the continued consolidation of the U.K. portfolio. We're just looking to exit some of the non-core smaller assets, and you'll continue to see us do that. Page 25. Andrew Coombs: Okay, folks. So just before I introduce Page 5 (sic) [ Page 25, ] let me remind you that we are currently within our stated mission to get to EUR 150 million. And according to consensus, we should get there at the end of the '28 year. We obviously want to do it earlier, but we should get there at the end of the '28 year. Now if you look at this page on the left-hand side, it picks stuff up at the end of the financial year last year, so March '25, when we did EUR 123 million of FFO. As you know, consensus is that we'll do north of EUR 133 million this year, and we are trading in line with those expectations. So when you come out of this year at EUR 133 million, looking at doing something beginning with EUR 140 million next year, you then need to start thinking beyond your EUR 150 million goal. There is no point in a long-term business like property or wait until you get there and then go, let's pause, congratulate ourselves, start again after we've had a holiday and a bit of a break because you lose the momentum. You've got to start thinking far enough ahead about what you do now that determines your result in 3 years' time. Think about it, we buy a property now. And in some cases, it becomes -- you really get into the value add next year. But in a lot of cases, it takes 2 or 3 years to get into that sweet spot of value creation. And therefore, unless you're thinking about it now, you're not going to be there in 3 years' time. So it should be no surprise that now that we are in the EUR 133 million a year, moving into the EUR 140 million-something a year, that what we do is we start to plan beyond the EUR 150 million. And this is not just for shareholders. This is internally in the company. We are having meetings with people, and we're saying, what's next? Are we properly resourced? Do we have the right sites? So what you're seeing for the first time on this page is you're seeing us publicly talk about the next leg of the journey. Now beyond the EUR 150 million, the ambition will be EUR 200 million. But the first leg of the journey from EUR 150 million to EUR 200 million will be the leg to EUR 175 million, and that's what you see laid out here. And one of the things that you should take great comfort from is if you look at that pillar that says EUR 40 million, well, half of that is already done. Half of that has been executed, closed off, in the bag, in our control. What we need to focus on is the other half of it. And this EUR 175 million, when we get to this EUR 175 million, this should be driving a dividend at roughly a 70% payout ratio, a dividend that's somewhere in the region of about EUR 0.075. So at the moment, we're heading towards EUR 0.064. This EUR 175 million takes you to EUR 0.075. Now it does matter the detail of how you get there. But at the moment, it kind of doesn't because at the moment, it's about the aspiration. It's about the mindset. It's about the shape of your thinking to be pushing towards that EUR 175 million, to be able to realize the value creation and the value benefits that come from that. And that's why we're laying it out in public because we've already started to talk about it internally and plan for it. But what you should take some comfort from is the mindset of this company is to grow. And in spite of the headwinds that Chris has spoken about, those headwinds are not a reason for us to stop. They are a reason for us to accelerate. They are a reason for us to expand our thinking because if we're going to achieve the growth trajectory that we're used to, we need to think beyond the problem of the finance headwinds, which I hope we've demonstrated thus far, we are capable of overcoming. Let me turn to the next page and let Chris take you through financing. Chris Bowman: So yes, just on Page 26, just on financing, just as a reminder, on the balance sheet, we have EUR 1.21 billion of unsecured borrowings. That is in 3 bonds. So June '26, EUR 400 million comes due. That is essentially refinanced. We have the cash plus RCF to be able to repay that, and we have that cash earmarked for that. So that is done. November '28, we have EUR 465 million outstanding at a 1.75%. That is our last refinancing of what I call legacy debt. It's been great. It's been fantastic, but we need to take that journey back up to market. So EUR 465 million comes due in November '28. I would guide you now to we will refinance that in autumn of '27. And that is factored into all of our forecasting, et cetera, to still outrun that, still grow FFO and get through that journey. January '32, we have EUR 350 million outstanding at 4%. That was a bond we issued in January this year for which we had around EUR 2 billion of demand. So we've got great support from the debt capital markets. And obviously, we also tapped the '28 bond in the summer for EUR 105 million. Again, great support for that issuance. We do remain below a benchmark issuer. So we're having investment-grade rating that was reaffirmed by Fitch. But in the bond markets, over EUR 500 million gets you to benchmark issuer size. The reason I flagged that is because at the point that we become a benchmark issuer, you should expect our marginal cost to start coming in a little bit as well as we essentially become an issuer that investors need to look at as we go into those indices. On the secured side, EUR 232 million with Berlin Hyp and Deutsche pbb that is secured out to 2030 on a portfolio of German assets at 4.25%. Net LTV is up at 38.3% at the period end, reflecting the acquisition activity during the period. Interest cover over 4.5x. Net debt- to-EBITDA 6.7x, well below 8x where we target. As I say, we also signed a EUR 150 million RCF in the period with BNP, HSBC and ABN AMRO. There is an accordion feature in there to be able to increase it by another EUR 100 million. I have verbal indications of wanting to do that from banks. So we are in a strong position liquidity-wise. And as well, as I said, we have a bond tap in the period. Page 27. I'll just summarize before handing over to Andrew to conclude. So I think what have we seen in this period, we've seen fantastic strong organic growth as well as acquisitive growth that is in the tank, which has partly come through in the period, but will really start to accelerate our performance in the second half and beyond. So 6.6% FFO growth, underpinned by that 5.2% like-for-like rent roll, but the 15.2% increase in total rent roll gives you the marker as to where we are heading. U.K. and Germany, both performing well as discussed. And acquisitions, we've touched on. We've increased the dividend by 4%. That is ahead of expectations. I think the market was only expecting between 1% and 2%. I think you should take that as a sign of confidence from Andrew and I and also our Board in the future performance of this company. We want to continue to focus on generating cash flow, which we reward shareholders with through dividends. So I'd guide you to that kind of level of increase going forward as well. We're in a strong position on the balance sheet side, EUR 389 million of unrestricted cash plus the RCF that's undrawn, 38% LTV, and we've touched on the bond and RCF earlier. I'll hand over to Andrew on 28. Andrew Coombs: Okay. So really, the sort of second and third point here are all about the 5% growth. I just want to sort of cover something that I think is quite important because the group continues to trade in line with management expectations for the full year, but the cynics around the table might possibly look at the 5.2% like-for-like growth and compare it to the same period last year at 5.5% and think actually, it's less than it was this time last year. And of course, factually, you'd be absolutely correct. I wouldn't draw a great deal from that at all because when we say that we're trading in line with expectations, we mean we're trading in line with expectations. And I would draw your attention to the half year in 2022, where in the first half of the year, we achieved 2.4% like-for-like growth. But what actually happened when we looked at the full year is we came out at nearly 6.5%. What we always do is try and make sure that our problems are stacked into the first half. If we have a lease that is a big move-out that's due to go on March 31st, we'll try and push it years before it happens into April. When we're signing something new, if we know that it's a high proportion of a site, we will tend to make sure that the lease can only terminate in the first half of the year. We deliberately try and stack our problems into the first half to get a better and accelerating run in the second half. And if you look historically at our performance in H2 versus H1, you will see time and time again that our momentum accelerates in the second half. We would plan to be somewhere in between that 6% to 7% like-for-like for the year, probably somewhere around the midrange of that. Please do not think that because we're 5.2% this year and 5.5% last year, that there is some kind of slowing effect here. That is not what we are seeing, particularly given the momentum that we're anticipating in Germany. We accept things are going to get more difficult in the U.K., but we believe that will be balanced out in Germany. And please let's not forget that what we have done here in this last 6 months is not just gone out and acquired EUR 340 million of property, but we have continued to operate the company and do so well with a decent set of numbers. So one has not distracted the other. We have demonstrated the ability of the portfolio to do both and to do both well. And what I'd like to finish on is the 10-year track record of performance and growth where this company is concerned, and particularly at the top, the dividend, where we are now paying our 24th consecutive increase in dividend. And as Andrew Jones would say, dividend aristocracy is, I think, 25 years of progressively increasing dividend. We are now reaching the halfway point on that journey. Thank you very much. Happy to answer any questions people may have. Timothy Leckie: Tim Leckie, Panmure Liberum. Just two questions. I think one for Andrew, one for Chris. Andrew, the 15% sales conversion from inquiries, what's behind that? Is 15% the number you -- is that a final point, or do we push on? What is your thinking there? And then after that, for Chris, you mentioned the margin improvement once you hit the EUR 500 million. Could you just perhaps remind us where you see your current spread, and what the improvement might be at that higher volume? Andrew Coombs: So when we consistently get to 15%, yes, we definitely will push higher. When I started this company, sales conversion was less than 3%. And when we started to target over 10%, there was almost rebellion because people said it's impossible. We're now touching 15%. And once we get above 15%, that target will increase. How have we done that? Well, we've done that by working out the component parts that make up sales conversion. And despite it not being broken, taking them apart, dismantling them and looking at every individual piece and working out how we can do it better. And specifically, the piece that we are doing better that is improving our sales conversion is self-storage. And what we have worked out, and I'm not suggesting that we worked out a better way of selling self-storage and self-storage specialists, not at all. But we have worked out a better way of doing it than we've been doing it in the past. And that is beginning to have a material difference on the overall sales conversion of everything we sell. Chris Bowman: Chris here, on the margin, if I just take 5 years -- 5-year money, for instance, in the bond market, we are -- because we are sub-benchmark and the margin has tended to move around a little bit in the range of 160 to 190, and it's been particularly volatile over the last week or 2, given macro. I think the opportunity for us once we're into benchmark is to be at least probably 10 basis points tighter, but also less volatile. So -- and we will, I would expect, start to come in towards the lower end of that margin range. So that's the margin over 5-year swaps. Thomas Musson: It's Tom Musson at Berenberg. Yes, just again, a question on conversion as it relates to the U.K. business, which I think is slightly under 9%. Have you got the same 15% conversion target for the U.K. as well? And is sort of achieving that a realistic prospect over time, or are there perhaps any sort of structural differences between the platforms, and how they operate in the two different geographies? And then the second question, now that the U.K. business is larger and so FX becomes more of a consideration, would you consider using hedging instruments going forward? Andrew Coombs: I take the first part if you take the second. So firstly, the U.K. business has a 10% target. We didn't get to 15% from 3% in Germany by saying the target is 15%. We got there in incremental steps, and we broke the journey down. And we're into the journey to 10% with the U.K. business. The U.K. market is a different market from the German market. The U.K. market is more intermediated. And from that perspective, getting control of initial inquiry is more competitive than it is in Germany. But interestingly enough, the U.K. inquiry market is changing, and it's changing faster than it's changing in Germany. And it's changing specifically and faster because of the use of AI. So what other operators may or may not realize is 25% of the property-based Google traffic of 12 months ago is now going through AI. And what that means is that a broker's life, particularly a web broker, is much, much harder. What that means is whereas web brokers used to spend time talking to customers, customers are spending much less time talking to brokers and more time talking to AI. And when I say talking, I mean talking. Instead of typing and tapping into a screen, people are talking to their phones and the AI mechanisms are bringing back the kind of conversation that normally would have happened in a call center broker-type environment. So that whole thing in the U.K. is shifting. The only piece that isn't shifting is pay-per-click, PPC, because AI is not touching PPC at the moment because it's not tried to monetize itself. And what you really need to be doing if you are a smart operator that wants to keep control of your inquiry flow is you need to start understanding this because this is now moving, and it's changing the passage of an inquiry, particularly inquiries for flexible space, an inquiry that instead of going through a web broker is going through, not in every case, but in 1 in 4 cases, going through AI. And you've got to work out how you deal with that because that is going to change the marketplace. So of course, we're concerned about getting to 10%, et cetera. But actually, in the U.K., what we're more concerned about is how we continue to capture inquiries because prospective inquiries of a certain size are now more interested in talking to an AI machine than they are talking to a broker or a call center. Still predominantly the broker and the call center has control, but that control is tipping out of the brokers' and the providers' interest and towards what I call mechanical AI systems. And we're going to need to know how to compete with that. So that will come to Germany, but it hasn't started to touch that market properly yet. You can see it much more clearly in the U.K. market. And that's why I say, don't be confused about the fact that our inquiry numbers are going up. Our inquiry numbers are going up, not because we're sitting there, our inquiry numbers are going up because we're going out and working other channels and doing things whereby we can take control earlier on rather than watch AI steal the bread from our table. Chris? Chris Bowman: Okay. I've spent a lot of time on investigating hedging and my conclusion is that it's brought with danger. So -- and it's a drug which once we -- if we got into, it will be very hard to come off. So I think to manufacture hedging, be it buy forward euros, let's, for instance, say, buy forward the entire U.K. portfolio to fix the value at the end of the financial year, for instance, and at that point, I would have to realize at the end of the financial year, a gain or loss on the portfolio on that forward, and I'd have to almost certainly roll that hedge, and there'll be a significant cost to putting that hedge in place. And ultimately, we are a business exposed to two markets. So I'd be trying to manufacture the exposure to the U.K. out of the balance sheet when in reality, we are exposed to two different markets. So going and putting in place some sort of derivatives to try and manage hedging, I've seen lots of CFOs get into all sorts of trouble trying to go down that road. And I don't want to be sitting here talking about the mark-to-market of derivative instruments every time I come and talk to you. So we have a shareholder base, which is spread across euro, sterling, rand, and I'm sure some are dollar-denominated as well. So investors who invest in us, I largely leave it to them to deal with hedging. Now the only structural piece of hedging that could, at some point, make sense is simply to put sterling debt into the balance sheet. So match the debt with the asset base. And I completely understand that challenge and that question. There's two points I'd say. Number one, in euro terms, we are still maturing on the balance sheet as an issuer in the debt capital market. So there is still upside in terms of the cost of our euro-denominated debt versus in sterling, we are certainly subscale to go into the debt capital markets for debt. So we will be forced down the secured lending route, which obviously creates much less flexibility from a balance sheet perspective. And obviously, the difference in cost between euro and sterling, I'm sure, has probably blown out even further in the last few days, but was 200 basis points. Let's say, it's between 200 and 250 basis points. There is a funding benefit to us through the FFO, and we are ultimately cash flow focused from an FFO perspective. And what I'd also say is then when you look at the portfolio, we're split, I think, 71%, 29% at the moment between Germany, U.K. With the acquisition activity that we expect going forward, which we expect to be more German focused, that balance will start to push more towards Germany again. So we will continue to be very much a minority exposed to the U.K. So I think my answer is no. I'm not going to get down the kind of manufacturing hedging. At some point in the future, it will make sense to put sterling leverage in, but we're on a journey at the moment. And I know it's difficult at the moment given the FX effects that you see on the balance sheet that -- to sort of have a knee-jerk reaction and say, "Oh, we must hedge." I think that's brought with danger. We're not going to go there. Matthew Saperia: It's Matt Saperia from Peel Hunt. I'm also going to ask one question to each of you, if I can. Andrew, I think on Slide 9, you talked about the 4.7% like-for-like rate growth as a failure and -- as much as it was above the 4% that you were targeting. Are you going to ask your colleagues to do things differently going forward, or are you still happy for them to push rate ahead of what you might be targeting when it comes to new demand? Andrew Coombs: Well, specifically, what we are saying more in the U.K. than in Germany is we need to increase our sales volume. And if we have to reduce price within certain parameters and corridors to do so, that's what we must do. And what we're seeing is we're seeing a lot of people sort of nod to that, but then kind of still favor price over occupancy. And therein lies our challenge because I think as things tighten in the U.K., what we're seeing is we're seeing tenants look for smaller spaces than they normally would. And what that means is we have to win more customers than we normally would to maintain and increase our occupancy. And to do that, you either have to get more inquiries and/or you have to improve your sales conversion. And one of, not the only thing, but one of the ways you improve sales conversion is loosen on price a little. Now all of that is in a very controlled environment, where we make sure that people can't lower the price so much that we start to bring the average rate per square meter or square foot in the U.K. of the portfolio down. But whereas we used to be in a very nice world where you just said, as long as you sell higher than they move out, it all works. Now you're having to operate in a corridor whereby you do sometimes have to sell at lower than the move-out rate, and you better make absolutely sure that you can make up for that in your renewals and expansions. Otherwise, you're going to start ticking the average rate per square meter of your portfolio down. So this is quite a delicate area. And in the U.K. rather than Germany, this is going to get kind of more detailed going forward. And some of that is because the average size that people in the U.K. are inquiring about is getting smaller. So what you have to do is work the platform harder to get more customers. So this is not a sort of -- you set it and leave it for 6 months, this is daily management. We have a professional sales force that's properly trained in specific methods with specific processes and systems that are managed on a daily basis, and we're continually pushing buttons and pulling levers where this is concerned. It's quite intense. Matthew Saperia: And Chris, on Slide 18, you talked about a EUR 25 million potential future new build program. Chris Bowman: Yes. Matthew Saperia: Two parts. One is sort of what time frame are you talking about? And the second part, I'm assuming that's not exhaustive across the whole portfolio. There must be... Chris Bowman: No, no, no. So that's specifically four opportunities, that is one at Gartenfeld, two at Klipphausen and one at Dresden site, MicroPolis. The Gartenfeld opportunity new build is likely to tangibly start in the new year. The Dresden MicroPolis site is probably going to depend on -- not necessarily a firm pre-let, but at least some very strong indication. And the Klipphausen site, I think we've talked about Klipphausen in the past, it's been a sort of poster child for us of success, and we have development land around the existing site, which we acquired at the time of original acquisition, and there is opportunity to build additional production holes there. Net-net, I think I'd guide you to the EUR 25 million of opportunities, you're probably looking at EUR 10 million per year actually coming through. So it is a separate bucket to our business as usual CapEx. It's capital that has to compete with acquisitions for use essentially. Sarim Chaudhry: Sarim Chaudhry from Jefferies. Just a quick one. I think this is for Chris. On the divi, you got mid-70s payout and then you doing medium-term guidance of 70%. I think previously when we've spoken, that was going to be in the mid-60s. So what's that change? Chris Bowman: So we absolutely still have the aim to be at 65% payout ratio of FFO. And the model being 65% payout ratio plus the CapEx broadly equates to FFO as a whole. So we are, therefore, self-sustaining as a business. Actually, we are getting tighter and tighter on CapEx. So actually, we do have a little bit of headroom from CapEx versus dividend there. But we also flexed the payout ratio between 65% and 75% off the back of the fund raise, the equity fund raise last year and prior year to reflect the short-term dilution to FFO per share as we put the capital to work. So at the moment, you're essentially at kind of max. You're about 74% payout ratio. You should see that come down even at the end of the year, and you should see it come down and settle around 70%. What I'd also then say is that I think we are so confident and the Board is so confident about the growth prospects of the business going forward that we're also mindful that we're having to go through the financing headwinds as well over the next 3 years. So we are flexing within that 65% to 75% and saying that we want to settle around 70%, and we'll get there over the next 18 months, and we're happy, comfortable staying there through out to FY '29. On that chart, you saw the waterfall to get from EUR 123 million to our new target of EUR 175 million. The additional interest expense of EUR 34 million is all of the additional interest expense. So that is the journey of refinancing done. And in fact, there is an additional small amount of additional debt in there as well. So that is -- there is no more kind of headwinds to come beyond that essentially. And then obviously, once that journey is done, the results will be free to really outperform. Andrew Coombs: So can I just pick up on that because there's nothing new in this. We have always, for over a decade, operated in that 65% to 75%. We've always made sure that when we are facing things like deployment of capital, other types of headwinds that we flex up to 75%, knowing that we can come back down to 65% again. We're doing exactly the same. The difference is what we are saying is that we recognize that we are unlikely to get back down to the 65% until such time as we've overcome that interest rate challenge. And that ultimately won't be until the year ending March '29 because in December '28, we have another low interest bond to overcome. So realistically, we're going to be in that 70% to 75% corridor until we overcome that second bond. But once we do, the growth profile of this business will no longer have the headwinds. So therefore, you will really see the top come off it, and we'll then be able to return back to 65% in a very -- whereas to try and do it in this period, we think that that's unnecessarily kind of ambitious in terms of getting back to that 65%. So we're operating in the same way as we've operated for a very, very long time. We're just trying to give guidance to say, in the past, we've got down to 65% like really quickly. Because of these successive headwinds, we are probably going to be in that 70% to 75% bracket until we get to '29 and then we can put it back down to 65%. Still a very well-covered dividend. Maxwell Nimmo: Just a quick follow-up question. I think you talked -- sorry, it's Max Nimmo at Deutsche Numis. You talked a bit about the U.K. previously and saying we kind of just need to wait until we get through the budget. But it sounds like from what you're saying now that it's actually a bit more of a longer-term structural issue that's harder -- and so investment in this market is unlikely to be until, I think you said, next summer and that... Andrew Coombs: Let me tell you why that's changed. That's changed as a result of Thursday of last week. It's changed because what we can all see now is the leadership of the current government is under threat. And I don't care if they all came out and said, we've made friends, and we're all going to live happily ever after and not stab each other in the back. I won't believe it until I see the results of the May elections next year. And that roughly coincides with the announcement of our end of year results. So I'm not saying that we might not make the odd exception for a very small amount of money if it was something to do with defense or self-storage in the U.K. But unless it's in like a really exciting vertical for an amazing price, as far as I'm concerned, we are paused in the U.K. now until we understand the political outcome until at least the middle of next year. Clear? Maxwell Nimmo: Very clear, year. Andrew Coombs: Folks, thank you very much indeed.
Operator: Good morning, and welcome to Shoe Carnival's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded and is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. Management's remarks today may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. Forward-looking statements should also be considered in conjunction with the discussion of risk factors including in the company's SEC filings and today's earnings press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements discussed on today's conference call or contained in today's press release to reflect future events or developments. I will now turn the call over to Mr. Mark Worden, President and CEO of Shoe Carnival for opening remarks. Mr. Worden, you may begin. Mark Worden: Good morning, everyone, and thank you for joining us today. With me are Kerry Jackson, our Chief Financial Officer; and Tanya Gordon, our Chief Merchandising Officer. This is a pivotal moment for our company. Last week, we announced that our Board of Directors unanimously approved changing our corporate name to Shoe Station Group, Inc., subject to approval of the name changed by our shareholders at our annual meeting to be held in June 2026. That decision reflects our Board's conviction about where this company is headed. We're building a stronger, more focused and more profitable company. Today, I'll walk you through our third quarter performance, update you on where we are in executing the strategy and provide context for fiscal 2026 and 2027. Let's start with the quarter. We delivered a strong third quarter. EPS of $0.53 and net sales of $297.2 million, both exceeded consensus expectations. Gross profit margin expanded 160 basis points to 37.6%, driven by disciplined pricing and our continued shift toward the higher-income Shoe Station customer. We achieved positive comparable sales during August back-to-school with margin expansion. That's significant, given the promotional intensity across family footwear retail and the continued pressure on lower income households. Athletics represented 51% of total sales in the quarter and delivered low single-digit growth overall. At Shoe Station specifically, our focus on premium brands and higher transaction values drove double-digit athletic growth in both Q3 and year-to-date. Our nonathletic categories represented 43% of Q3 total sales with a mid-single-digit comp decline overall. Similar to prior quarters, Shoe Station outperformed in every major category versus Shoe Carnival. The story beneath these numbers is what matters most. Our two banners delivered very different results in the third quarter. Shoe Station net sales grew 5.3%. Shoe Station product margins expanded 260 basis points. Meanwhile, Shoe Carnival net sales declined 5.2%, reflecting continued pressure on lower-income households earning under $40,000 annually. That's a 10.5 percentage point performance gap between our two banners. This divergence isn't new. We've been discussing it for quarters. What's different now is the scale of the gap and our conviction that it will persist. Shoe Station's core customer, median household income, $60,000 to $100,000, is choosing premium product, seeking elevated service and responding to our brand positioning. The traditional Shoe Carnival customer is under economic pressure and the competitive response in that segment is driving margins down across the industry. This quarter, we maintained pricing discipline instead of propping up traffic from a lower-income customer, a segment we are strategically shifting away from. As a result, Carnival also expanded product margin. We are not chasing unprofitable sales. Third quarter EPS included a $0.22 impact from planned rebanner investments. Year-to-date, that's $0.58 per share. These are planned investments to convert underperforming locations into the Shoe Station format that's demonstrably winning. We expect to recover these investments within 2 to 3 years following each store's conversion. Let me give you the numbers on our progress. We completed 101 store rebanners during fiscal 2025. We now operate 428 stores, 144 Shoe Station locations and 284 Shoe Carnival locations. This evolution started with test and learn, moved to scaling across the Southeast and is now a full chain rollout. We acquired Shoe Station in December 2021 with 21 stores. We started this fiscal year with Station representing just 10% of our fleet. Today, Station is 34% of the total store fleet. By back-to-school 2026, it will be 51%. That 51% threshold is the inflection point when Shoe Station becomes the majority of this business and we expect to return to comparable sales growth. Based on what we have learned through 101 store conversions this year, we now expect that well over 90% of our fleet will operate a Shoe Station before the end of fiscal 2028. The remaining locations will be evaluated for rebannering, outlet repositioning or closure. Why consolidate to one brand? Running two distinct banners with different customer targets, different merchandising strategies and different operating models is inefficient. Every quarter this year, the sales performance gap between Shoe Station and Shoe Carnival has exceeded 10 percentage points. We're leaving value on the table by maintaining dual infrastructure when one banner is clearly winning. What makes Shoe Station different comes down to three things: the customer. Station serves the American median income household, $60,000 to $100,000, stable everyday workers, value-conscious but not price-driven. Carnival serves a value-focused customer facing economic pressure. The product approach. Station offers premium brand access, higher transaction values and strong full price selling. Carnival focuses on opening price points and a promotional model. The experience. Station is modern and approachable, low-profile merchandising, easy to shop, service-oriented. Carnival is high energy, treasure hunt promotional intensity. Both models work for their customers, but consumer preferences are shifting toward best brands, premium product and quality over lowest price. That's the Shoe Station customer. Consolidating to one brand creates significant structural advantages. By the end of fiscal 2027, we expect $20 million in annual cost savings and operating efficiencies. We expect comparable sales growth to resume as Shoe Station becomes the dominant banner. And we're executing this on a foundation of financial strength. We're debt-free with over $100 million in cash and securities, funding this entire program from operating cash flow just as we've funded operations and growth for 20 consecutive years. We're building one team, one infrastructure, one P&L. Now turning to inventory and the value we're unlocking. We bought [ HEVI ] this year to derisk tariff volatility. It worked. We delivered positive comps during back-to-school. We're fully loaded for fall, holiday and spring. Now we plan to sell through this extra tariff-related inventory and move to the next phase. By the end of fiscal 2027, we'll free up $100 million in working capital. This isn't about cutting corners. It's a fundamentally different operating model. Shoe Station unlocks this capital through superior merchandising. Station presents product clearly, curated, organized, easy to browse and shop. Station generates higher transaction values, which means we need fewer units to deliver strong sales performance. The Carnival model is stack it high and let it fly, requiring deep inventory to maintain towering displays and promotional volume. Shoe Station delivers a superior customer experience with less inventory per store. Better merchandising drives better turns, better margins and capital efficiency. That's $100 million we plan to deploy toward growth. Let me walk you through what's ahead in the key milestones. Fiscal 2026 is our inflection year. We're converting 70 stores to reach the critical 51% Shoe Station threshold by back-to-school. That's the milestone when Station becomes the majority of this business and the dominant driver of our results. First half of 2026 will see similar dynamics to 2025 as we work through rebanner conversions. Second half, we crossed 51% and expect to return to comparable sales growth. This requires P&L investment in fiscal 2026. One brand synergies begin, but the full benefit comes towards the end of fiscal 2027. The end of fiscal 2027 is when the full picture comes together. We expect $20 million in cost savings, $100 million freed from inventory reduction, comparable sales growth restored and EPS expanding. Bottom line, we're investing through 2025, all of 2026 and into 2027. We see modest gains beginning in 2027 and meaningful acceleration in 2028. Kerry will give you more specifics on fiscal 2026 and 2027. Let me bring this together. The performance gap tells the story. Shoe Station outperformed Shoe Carnival by more than 10 percentage points this quarter. Station margins expanded 260 basis points. The industry is declining, but we're growing where the consumer is headed, premium brands, better experience, customers who value quality. We're executing this from a position of strength, debt-free, over $100 million in cash and securities, 20 consecutive years of self-funding our growth. We have the financial flexibility to invest through this transformation and build for the long term. When our Board approved changing the corporate name to Shoe Station Group, it wasn't about branding, it was about conviction, conviction that this strategy is right for long-term value creation and building a stronger company. This isn't a rebrand, it's a repositioning of this entire company around what's winning. I'll now turn the call over to Kerry for the detailed financials, our fiscal 2025 outlook and perspective on '26 and 2027. After Kerry remarks, I'll have brief closing comments before we open for questions. Kerry? W. Jackson: Thank you, Mark, and good morning, everyone. Let me start with the quarter performance, then walk you through our outlook and the financial framework for fiscal 2026 and 2027. Net sales totaled $297.2 million, down 3.2% versus $306.9 million last year. Comparable store sales declined 2.7%, including approximately 0.5 percentage point of headwind from the 56 stores rebannered during the quarter. The banner divergence Mark described is the critical story. Shoe Station net sales grew 5.3% with mid-single-digit comparable sales growth. Shoe Carnival net sales declined 5.2% with mid-single-digit comparable sales decline. Rogan's generated $21 million in net sales, consistent with our integration plan. Three category highlights worth noting. First, men's and women's athletics, 35% of our business, delivered breakeven comps overall, but Shoe Station's athletic business grew high teens. Second, kids footwear, 22% of Q3 sales, delivered low double-digit athletic growth at Station. Overall, for the company, kids was down low singles for the quarter due to weakness in kids nonathletic footwear. Third, the boot season started modestly, but we were well positioned with inventory depth as we move into the heart of the season. Rounding out the categories, men's and women's nonathletic categories both declined mid-single digits compared to Q3 last year. Athletics across our men's, women's and kids categories was 51% of our business in the quarter, up from 49% in Q3 last year and was key to our overall comp positive results in back-to-school August. Shoe Station's athletic sales have strong comparable store growth every quarter this year as our premium brands continue to resonate with higher-income consumers that the Shoe Station banner attracts. Non-athletics was 43% of our total sales in Q3, down 1% from last year, again, reflecting the strong athletic cycle we are in. Gross profit margin expanded 160 basis points to 37.6%, exceeding the high end of our guidance. Merchandise margins increased 190 basis points, driven by disciplined pricing, favorable mix shift towards Shoe Stations higher-income consumers and our strategic inventory investments. This more than offset 30 basis points of deleverage in our buying, distribution and occupancy costs. SG&A was $93.2 million or 31.3% of sales compared to $85.9 million or 28% of sales last year. The 3.3 percentage point increase breaks down as follows: 2.5 points reflects banner reinvestments, including store closing costs, new store construction depreciation and customer acquisition costs. The remaining 0.8 points is the deleveraging on lower sales. The rebanner P&L investment in Q3 was approximately $8 million. Year-to-date, we've invested $20 million in operating income or $0.58 per share towards this transformation. Net income for Q3 was $14.6 million or $0.53 per diluted share compared to $19.2 million or $0.70 per share last year. This year-over-year decrease of $0.17 primarily reflects our rebanner investments, which we estimate impacted Q3 by $0.22 per share. In the quarter, our EPS otherwise grew by $0.05. The 2- to 3-year payback of these rebanner investments we've consistently discussed remains on track. Shoe Station's net sales were up 3.8% year-to-date compared to Shoe Carnival's net sales down 8.5%. Said differently, year-to-date through Q3, Shoe Station's net sales growth has outperformed Shoe Carnival by 12.3 percentage points. These results support the One Banner strategy time line Mark just outlined and our view of the long-term profit potential from doing so. Our balance sheet continues to strengthen. We ended the quarter with over $107 million in cash, cash equivalents and marketable securities, up 18.2% versus last year, and we remain debt-free with $100 million of available credit. Based on strong Q3 results and continued rebanner momentum, we updated our full year outlook. We are reaffirming our net sales guidance and continue to expect net sales of $1.12 billion to $1.15 billion. We are raising the EPS guidance range to $1.80 to $2.10, increasing the low end by $0.10. We continue to expect gross profit margin of 36.5% to 37.5% and now expect SG&A in the range of $350 million to $355 million, down $5 million from previous guidance. For Q4 specifically, we are forecasting net sales of $240 million to $270 million, ranging from down 7% to up 2% compared to Q4 last year, with the midpoint down 3%, consistent with Q3 trends. Our Q4 net sales range is wider than typical, given macroeconomic volatility, consumer behavior in nonevent periods and fourth quarter weather uncertainty. We expect Q4 EPS in the range consistent with consensus prior to our earnings release in a range of $0.25 to $0.30. Q4 EPS in that range targets full year EPS at the lower end of our annual outlook. The higher end of our outlook assumes stronger holiday selling and improvement in lower-income consumer spending. Regarding our One Banner strategy, we have rebannered 101 stores in fiscal 2025, including 56 in Q3 and 1 additional store after quarter end. We anticipate no further rebanners this year. The Rogan's acquisition is now fully integrated into Shoe Station. And beginning in Q4, we'll report Rogan's results as a part of the Shoe Station banner. Year-to-date rebanner CapEx is approximately $31 million with minimal additional CapEx expected for the remainder of the year. Full year P&L investment remains on track at approximately $25 million. For Q4, we expect rebanner investments of $0.10 to $0.12 per share, bringing the full-year impact to $0.68 to $0.70 per share. Looking ahead to our fiscal 2026 and 2027 framework, while we're not providing detailed fiscal 2026 guidance today, that will come in March, we can provide transparency on what to expect. As Mark has clearly identified, it's critical for our financial success to reach the milestone of 51% of our stores banner at Shoe Station, our inflection point. To achieve that goal, fiscal 2026 will be a year of continued investment. We believe that next year's investments will lead to a return to sales and earnings growth in fiscal 2027 and further accelerating in fiscal 2028 as we complete the rebannering program. Let me detail our future expectations for sales, SG&A and inventory reductions. Sales trends will mirror what we've seen in fiscal 2025. The first half will be challenging as Shoe Carnival's mid- to high single-digit declines more than offset stations growth. The inflection comes in the second half when station crosses 51% of the fleet. We expect flat to very low single-digit growth in the back half. Overall, for fiscal 2026, we expect net sales and comparable sales will be down, but improved compared to the 6% year-to-date declines we have seen so far this year. With respect to SG&A for fiscal 2026, we expect rebanner investments to range from $25 million to $30 million for the entire year. Given the timing of the rebanners in fiscal 2026, we do expect costs in fiscal 2026 to be more front-loaded. In addition, we continue to recognize costs associated with stores rebannered in fiscal 2025 as we continue to educate customers in those markets and as CapEx investments made in fiscal 2025 are depreciated. As a result, we currently see significant SG&A investment in Q1 and Q2 of fiscal 2026 compared to 2025. And we expect those headwinds to moderate post back-to-school as fiscal 2025 costs become comparable and the $20 million of expected synergies and efficiencies from implementation of the One banner strategy begin to be realized. Overall, we do not expect SG&A to decline in fiscal 2026 compared to fiscal 2025 and may increase. Given the impacts on sales and SG&A, we expect fiscal 2026 EPS to be lower than fiscal 2025 with more significant decreases in Q1 and Q2 compared to the prior year. Now for more insight on expected inventory reductions driven by the One Banner strategy. We expect higher inventory for the remainder of fiscal 2025 and for inventory at the end of fiscal '25 to be flat to up from the Q3 balance, inclusive of additional buys in Q4 to support launching new athletic assortments and styles next year. The level of inventory we are carrying this year has been intentional given the tariff backdrop and the opportunistic buy of seasonal merchandise and in-demand product. These opportunistic purchases were key to our 160 basis point gross profit margin increase in Q3 and 270 basis increase in Q2. We expect our inventory position will also drive a margin increase in Q4 of over 100 basis points. We expect tariff-related increases in our inventory to moderate in fiscal 2026, assuming there is more tariff certainty. As Mark stated, we are planning for more dramatic shifts in inventory as Shoe Station becomes our dominant banner, which is expected to free up $100 million of cash through inventory reduction over the next 2 years. This inventory reduction comes from Shoe Station's fundamentally different operating model, which requires 20% to 25% less inventory per store compared to Carnival's model. When we get to 51% of our stores operating the Shoe Station model, we expect a $50 million to $60 million reduction by the end of fiscal 2026. As we transition the inventory model, we expect some near-term gross margin pressure from selling through legacy Carnival inventory, partially offset by the lower-cost opportunistic purchases we made in fiscal 2025. This inventory reduction will more than fully fund our rebanner capital needs over the course of the year, maintaining our debt-free position at year-end. We expect rebanner capital expenditures between $25 million and $35 million to be concentrated in Q1 and Q2, while inventory reductions may be more gradual and more focused on the back half of the year. The payoff comes in fiscal 2027 and accelerates into fiscal 2028. By the end of fiscal 2027, we expect to see the full $20 million in annual cost savings from reduced dual-brand complexity, the full $100 million in working capital freed from inventory reduction, a return to annual comparable sales growth and EPS growth resumes in fiscal 2027 and expand significantly in fiscal 2028. We'll provide more specific fiscal 2026 and 2027 guidance in our March earnings call. With that, I'll turn the call back to Mark for closing remarks before we open the call for questions. Mark Worden: Before we open for questions, let me put this quarter and this transformation in context. We're not at the beginning of this journey. We're at the acceleration point. Shoe Station was 10% of our company when we started this fiscal year. Today, it's 34%. 8 months from now, it will be 51%, the inflection point where this business returns to comparable sales growth. Now we're scaling Shoe Station across the fleet. This transformation unlocks significant value, $20 million in annual cost savings by the end of fiscal 2027, $100 million in working capital freed from inventory reductions. We're building a company positioned for sustained growth while funding this entire transformation from a debt-free balance sheet with over $100 million in cash. The performance gap between our two banners continues. Station outperformed Carnival by more than 10 percentage points every quarter this year. Station margins are 260 basis points higher than Q3 last year. Consumer preferences are shifting toward premium brands and quality over price. We're aligning our entire company with where the market is headed. Our Board's approval to change the corporate name to Shoe Station Group reflects conviction about this path. We're investing through fiscal 2025, 2026 and into 2027 to capture gains that begin in 2027 and accelerate into 2028. This isn't a rebrand, it's a repositioning of this entire company around what's winning. Now I'd like to open up the call for questions. Operator: [Operator Instructions] Your first question comes from the line of Mitch Kummetz with Seaport Research. Mitchel Kummetz: Welcome back, Kerry. You guys provided a lot of color around the rebannering and kind of the cadence of those impacts. I was hoping you might be able to boil it down a little bit more. So I think you said that for this year, the drag on earnings is $0.68 to $0.70. Can you say what the additional drag will be next year? And then help us kind of think through what happens in 2027 and '28. How much of that you get back in '27? And by '28, will all of that kind of flow back to the P&L? And I've got a few follow-ups. W. Jackson: Well, what we said -- Mitch, thank you for the welcome back. I appreciate it. It's good to be back with my friends. We said $25 million to $30 million in rebanner expenses are expected next year to kind of help you understand what those are going to be. And we said they're going to be front-loaded because we're going to be doing approximately 70 stores in the rebanner of those stores next year. The effect of that, we will continue to have rebanner costs as we have store closing costs, the depreciation on the investments of the CapEx in the stores, along with customer acquisition costs will continue as we go through those multiple years. However, an important point on that is that when we look at each store individually and the time frame that we make those investments, we're seeing -- we're expecting to get those monies back in a 2- to 3-year time frame in the profitability of those stores post conversion. Mitchel Kummetz: And when I think about -- so just from like a core earnings standpoint, like pro forma earnings, if I were to try to adjust out some of these rebannering expenses, is it fair to say that you'll -- like 2026, you'll see stronger earnings growth than 2025, like if I strip these things out? I mean I kind of get there just because it sounds like you'll perform better from a comp standpoint. So I think that would go a long way towards better earnings growth next year on the kind of -- in terms of the growth rate this year versus -- or I'm sorry, next year versus this year? W. Jackson: No. Let me unpack a little bit of what I said. What we want -- next year, we're going to be an investment year. So in the first half of the year, what we're saying is Shoe Carnival is still going to be the dominant brand. We expect it to be down mid-single digits in sales, and that's going to override any gains we get out of Shoe Station. So we expect sales to be down in the first half. Now once at back-to-school, once we hit that 51% threshold where Shoe Station is the dominant brand, we expect to see a flat to slight positive sales gain in the second half. Having said that, we also expect that as we transitioned our stores, we might see some margin pressure longer term in the second half of the year from the rebanners as we have less Shoe Carnival stores to transition the inventory to. And so in '25, we had significant amount. So when we converted a store, if we had remaining Shoe Carnival stores, we could transfer those products to other stores. As we have fewer of the stores available, we may see some margin pressure on clearing out the non-go-forward Shoe Carnival inventory. We also expect to see significant pressure, particularly in Q1 and Q2 on our SG&A line because of the rebanner expenses. And we expect that SG&A next year will be flat to possibly up. So while we're not in a position to give full guidance as we will in March on '26 numbers, you can see that, that will be a down earnings year when you take into account lower sales, a little margin pressure from clearance and then flat to up SG&A. Mitchel Kummetz: Got it. I was just trying to think about it in terms of stripping out some of these sort of extraneous events. But a couple of last ones for me. One, I think it was mentioned that boots started slowly. I think that was more of a Q3 comment. Have you seen any improvement in the boot business early in the fourth quarter? And kind of what is your outlook there? And then I have one last one. Tanya Gordon: Yes. Mitch, it's Tanya. And yes, boots did start a little bit slow. But as we got our inventory in, again, just based on some delayed deliveries as we moved into October, we saw nice double-digit increases. So bodes well as we move into fourth quarter, and we really saw it balanced across all categories. So tall shaft boots, booties, combat looks and fur doing very well. Mitchel Kummetz: Okay. That's helpful. And then last one for you, Mark. On the Shoe Station side, you talked about how it's a higher-income consumer and more premium brand access and more service-oriented stores. I'm curious, is there an opportunity to further elevate the assortment there? Like Tanya just mentioned the [ fur ] business. I mean you guys -- you sell Ugg in athletic -- I'm sorry, [ HOKA ] in athletic, but you don't sell Ugg. Can you get Ugg? Or even across your athletic business, you sell VL courts, but not Sambas or you sell court visions, not Air Force 1. I mean as Shoe Station becomes a bigger player in the industry, is there an opportunity to get even more elevated product versus just the elevation that you see going from a Carnival to a station, but is there more elevation opportunity within Station going forward? Mark Worden: Mitch, absolutely. We believe that maybe the most exciting part of the Shoe Station model and the key reason of why we're proceeding publicly now with our move to the Shoe Station Group is so that Tanya and I can be working transparently long term with our partners to build out those new assortments and new brand launches and more premium topics. And so now we're having those great fully multiyear discussions with the best of the best brands in the world. And we're getting very enthusiastic partnership meetings of where we could go together. I think it's that core element of serving the middle-income American household, that working everyday American consumer that values all of the activities that get life done. So absolutely. And Tanya's team is doing a great job. We'll see new assortments, new styles coming in Q1. Operator: Your next question comes from the line of Sam Poser with Williams Trading. Samuel Poser: So I just would like to dig into the comp that you talked about for Shoe Station. So as I understand it, at the end of the third quarter last year, I believe there were 42 Shoe Station stores. And today, there are 144. Is that correct? W. Jackson: The 144 is correct. I'll have to double check -- the 42 is approximately right. Samuel Poser: What was the comp -- so the comp that you're comparing to is the comp versus Shoe Carnival. So the question I have is what were the comp on those 42 stores like on like-for-like Shoe Station last year, Shoe Station this year store? I know it's not a big picture, but that is the cleanest view of how an existing Shoe Station store a year ago is compared to existing Shoe Station store today. W. Jackson: Well, Sam, we're not going to break down the banners into smaller components. We've been breaking down the rebanner stores to help you understand what happens when they transition from one to another. But we've got enough critical mass that in future quarters, we're going to talk about the banners exclusively in the total numbers because they tell the right story right there that they tell you the information you need to know to understand what's the underlying fundamentals of the business. We think the exciting part of the business is the overall brand. And in all honesty, within the full banner, there's a range of outcomes, but the range of outcomes comes down to be a very positive number, particularly when you look at the Shoe Carnival on a like-for-like, you're seeing that they're continuing to decline, but we're seeing the increases. Now I hate to try to parse out the various pieces of it just for the fact that it will -- the noise may take away from the real story. Samuel Poser: Okay. And then the inventory decrease, you talked a little bit about this on the call to bring the inventory down 50 million to 60 million next year and the margin. So within getting the inventory down 50 million to 60 million next year and then another 40 million to 50 million in '27, there's different ways to do it. There's -- you can return goods to vendors. You can take -- you can have lower margins, which would then increase your COGS, and you can bring in less product. How should we think about the breakdown of that? You talked a little bit about -- and how much gross margin and how much gross margin pressure should we anticipate in fiscal '26 in that what you brought up about not being able to shuffle inventory around as there are less Carnival stores? Mark Worden: Sam, it's Mark. Let me take that first and team can build on it. I think aside from the new assortments will be opened up to a Shoe Station, the structural change to how we service the customer is the area I'm probably most excited about. And when we think of the Carnival store, as [ Alex ] describe it, they're towering displays that promotional products above person's arm length unless you're Shaquille O'Neal. Shoe Station has a very structural difference that our vision and where we're progressing towards a curated product, lower profile, accessible, the customer can see and easily navigate. And by nature of that significant change of where we're heading, we have in that 20% to 25% reduction of units on hand in the stores when we get to bright, that endpoint. Now that gets us along with selling through the tariff inventory at accretive margins, that gets us the $100 million reduction that Tanya and I and Kerry are talking about. We're going to get there quickly, but we need to do it in conjunction with our partners through those means you just mentioned, Sam. So all of those things are going to occur that you just said. The most strategic of it will be, as Tanya and I work through our buys from back-to-school of this year forward. We'll be buying with intentionality to meet where Station is and where the rest of the company is going now that we're not in test and learn. Now Kerry touched on a point that's super important, and we're not going to hold on to Carnival product that's stranded past the season. So as we get past boot season, for example, this year, we're having a good start, as Tanya said, we've got the right product. But if you get to the end of boot season, we're going to clear it. We're not going to carry it if it's not a go-forward in the Shoe Station, that will have some margin pressure. It's the right thing to do. We're not going to hang on to that for a year, and we've got the financial balance sheet to clear that out. So there will be some margin pressure as we liquidate non-go-forward Shoe Carnival product from boot season, for example. For the 51% of the stores that will be Shoe Station by back-to-school, there will be non-go-forward brand styles and assortments. And same thing, we'll be liquidating that. I think we'll be able to do a much better job as we get into our formal guidance in March to unpack the specificity of that. But our intent today is to let the stakeholders understand that's where we're heading, significant structural advantage, clearance of the tariff-related product at full strong accretive margins and then liquidation of non-go-forward products because you and I have talked many times, Sam, why on earth would you want to carry that forward? We don't. So there will be some pressure. I don't know, Kerry, if you have any [ builds ], or Tanya? W. Jackson: I agree with you, Mark, that right now, we need to get through the inventory further along. We'll know in March better how those stores, what their position of their inventories are on the stores we're going to be rebannering and therefore, the potential for the inventory that might be clearance. At this stage, it's too early. We need to see some sales through of those products. Samuel Poser: Okay. And just to follow up. I mean, so I'm backing in, and again, I know it's not a clean number, but receipts of this year of around -- to get to slightly above, I'm a little bit higher, but call it, $770 million of receipts this year versus down from last year a bit. But next year, to get to where you want to get to on my numbers means that your total receipts, even with margins off a little bit, would probably have to be down in the -- inventory receipts probably in the range of $100 million. Is that -- am I thinking about that properly? That's probably a better Tanya question, but am I thinking about that properly? W. Jackson: Well, let me start out with that, and then Tanya can build on it. The idea -- you got to remember that we have pre-bought goods for the spring season. So the opportunistic buys and the tariff product, we're going to carry that type of product into the season of the spring. So therefore, we have front-loaded those purchases, so there will be a reduction in the overall. So directionally, you're right about purchases. Tanya Gordon: Yes. And just to build on that, Sam, based on the pre-tariff goods that we're bringing in, those are sitting in our current inventory today. And then based on our go-forward model, rebanner to Shoe Station, our pairs have to come down. Our pairs are coming down in that model, and our AURs are going up. So the new model, our pairs have to come down significantly. So that's what's going to get us back to the inventory levels that we need to be at. Samuel Poser: Okay. And then -- but that -- but when you front-load a lot of spring products and you're buying it well ahead of time to do it, I mean, the consumer wants what the consumer wants, and you're buying a lot of that stuff probably earlier and at discounts that may not be -- you might not be able to realize the margin. So how -- I mean when we think about reducing -- I guess, let me just break it out. When you say you're going to get conceptually to down 50 million to 60 million next year, what percent of that is less receipts? What percent of that do you foresee as RTVs? And what percent of that do you think is just going to be higher cost of goods, lower gross margin? I mean how do you think about that conceptually? Mark Worden: Sam, it's me again. Sam, it's Mark. You're not thinking about it wrong in general terms. We're not ready to provide firm guidance, but thinking about receipts coming down next year in a range around $100 million is not the wrong way to think about it right now. We'll get tighter at Q1, but I don't want to dance it. You're thinking about it similar to how we're thinking about it. We'll get tighter as we fine-tune some of those elements we've talked about. But spot on. Our model requires less receipts. Samuel Poser: And then lastly, if -- one of the things is that if you're -- the comps at Shoe Carnival have remained tough and are difficult and you're anticipating that they will remain that way. Why not just -- if the consumer is not showing up right now, one, why not get more aggressive while the ducks are flying during holiday to just get really clean, especially in the 70 or so stores you're not going to -- that are going to convert with that product that won't go forward in the stores? Which I'm gathering it's about -- would I be right in like the 50% range that -- between brands and styles that are the same or different for that matter between Shoe Carnival and Shoe Station, be it from Nike, Skechers, Adidas and so on, while like with the Birkenstock, you carry some of the same product, but you got the big buckle Shoe Station that doesn't go to Carnival, but then that will go into Carnival? So -- but there's a good deal of it, still a big chunk of product that won't go forward. So how aggressive are you being? And then in the plan to possibly create clearance stores, why not start to do that earlier to give yourself an out, so you can turn some of these Carnival stores into clearance stores ahead of time to help yourself out of -- through liquidation? Mark Worden: Those are three great questions. This is Mark again. Let me answer them all. The first, it's not wrong to think 40% to 60% of the Carnival inventory does not go forward into Shoe Station. There's variability, but the range you're talking about is the right way to think about it. Second, the 70 stores that are Shoe Carnival today and will be Shoe Stations, that product that does not go forward will be liquidated aggressively. Totally agree with your point, it will be gone. And that's what we're alluding to. You said it better than we may have communicated it. That's what we're alluding to when we say there will be margin pressure. In the past, when it was test and learn, it was easy to reallocate 10 stores. And then it was still easy to do it when it's 25. Now that it's not test and learn and it's a full corporation rollout, now we need to clear that product out because it makes no sense to move it around. We'll be doing that for those 70 stores, full stop. Sorry, you might have had a third or fourth point, but hopefully, that answers your question, Sam. Operator: Your next question comes from the line of Jim Chartier with Monness, Crespi, Hardt. James Chartier: You previously talked about getting to 80% of stores rebannered by March of 2027. Is that still the plan? Or is that pushed back? Mark Worden: Jim, it's Mark. What I tried to say in the speech today is we will be well over 90% before we finish 2028, and we will surpass the critical point of 51% this summer. We're not putting any intermediary dates in there because we think it's far more important that we focus on delivering that experience, that inventory transformation we've just talked about and unlocking the $20 million of synergies. As we get closer, we're going to learn a lot more, and we can provide better guidance on those intermediary dates of '27 as we get much closer. We're going to stay really focused on the tight 2026. Here's what we know. We're doing 70, we'll get to 51, and we turn that pivotal quarter this year. We'll do more in '27, but we want to lock into 2028 versus an intermediary date. Now that's not test and learn, and it's a full company rollout. James Chartier: Okay. Makes sense. And then on the $20 million of savings, how much of that do you expect flows to the bottom line versus might go towards reinvestment? And then, how should we think about the timing of those savings? Mark Worden: Yes. As we get into 2028, we think it flows. We may choose to invest more in brand building for the corporation or other activities. But when you look at SG&A this year versus SG&A that year, excluding advertising expense, I would see it would flow in 2028. Now Kerry did a nice job saying it's not going to manifest in 2026 because there's other investment costs here. But Kerry can build on that, if you like. W. Jackson: That's the key right there. So 2026 is an investment year. We're going to be rebannering significant stores, and we'll just be starting to get the benefit of that $20 million in 2026, but it might mitigate some of the rebanner costs, but it's not going to offset them, like Mark said, that once the rebanner costs are diminished in '28 and we have that full benefit of that $20 million savings, that's when we can start to realize it. Operator: That concludes our Q&A session. I would now like to turn the call back over to Mark Worden for closing remarks. Mark Worden: Thank you all for joining us today. As we said, it's a pivotal moment for the company as we move towards Shoe Station Group becoming our new corporate name, pending shareholder approval next summer, the majority of our fleet next summer, and we progress towards one brand unlocking significant value. I want to thank you all so much for your time and wish each of you and your families a happy Thanksgiving and holiday season ahead. I hope to see you in the markets or a Shoe Station store between now and then. Take care. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Ije Nwokorie: Like I said, we've been busy, and I'm proud of what our people have been up to in the first half of the year. So let's get into it. I know you would have seen the statement this morning, so Giles and I will cover 3 things. I'll share a brief introduction, just frame a bit of what we're up to. And then Giles will pull out some of the key themes from our performance in the first half. And then I'll give you an update on the strategy that we introduced to you back in June. So I'm pleased to report, as we saw on the slide that we are on track with the execution of the strategy and are on track with our guidance for the year. I'll go into each one of the 4 levers later on, but I also want to be clear that we still have some challenges that we're addressing, particularly with boots and sandals, and with EMEA direct-to-consumer. Yet overall, we're doing what we said we would do, with good cash generation and cost control, driving good financial progress. And as I will keep telling you, I'm laser focused on execution and the work we've done to date gives me confidence that we will deliver our full year results as planned. Giles will go into more detail now on how we performed in the half. Giles Wilson: Thank you, Ije and good morning, everyone. I'm here today to talk through our first half results, and I'm pleased to report good progress in all our key metrics. But before I go into any detail, I felt it is important to share with you how we are making decisions and how we're running the business. We are focusing on making the right decisions for the long term while making sure we control our costs and our financials in the short term, as evidenced through our cost action plan last year and our significant reduction in our leverage position. This means we have FY '27 and beyond at the front of our minds. We're making those decisions and the actions we are taking. A really good example of this is in our first half year results, has seen been a focus on improving our full price sales and reducing markdown volume, especially in the periods outside more normal promotional events. Therefore, making markdown directly related to those promotional events or as a tactical way to reward existing consumers and drive new customer acquisition. This principle has also guided our approach to U.S. tariff actions and to make sure we make optimal decisions for FY '27 and beyond. We have worked closely with our wholesale and our supply chain partners in timing of those actions. So turning to our key financials. And as I introduced last year, I will focus on constant currency comparison as this reflects the true underlying performance of the business. Just before I go into any detail and to flag at the outset, as you know, at the year-end, we changed the definition of adjusting items to include impairment of financial assets, and the H1 FY '25 has therefore been represented accordingly. So turning to the financials. Our revenue performance shows a small growth year-on-year, up GBP 2.7 million to GBP 327.3 million and crucially, revenue quality was better as we focused on full price sales and a reduction in our markdown sales. The impact of better quality of revenue and focus on our costs can be seen in our profit lines, especially in operating profit which swings by GBP 6.5 million from a loss last year to a GBP 3.4 million profit this year. After accounting for interest, our profit before tax is still a loss in H1, but a significant improvement on H1 last year. And as I'll explain in more detail, this is after accounting for a tariff headwind and demand generation timing headwind as well. Our dividend is declared at 0.85p which, as a reminder, is a formularic for the half of being 1/3 of the prior year full dividend. Finally, I talked to you in June about the focus we've had on reducing net debt, and we've continued to strengthen the balance sheet in H1 with net bank debt down by GBP 33 million. As a reminder, our net bank debt tends to peak around now as we build the inventory ahead of the peak selling period. With our continued focus on profitability and the strengthening of the balance sheet, this sets us up for sustainable success in FY '27 and beyond. So turning to the revenue. This bridge sets out the movement in sales by region and channel year-on-year. Starting with Americas, we see the business now return to growth across both DTC and wholesale. Following our return to growth in DTC in H2 last year, that has continued in the first half of this year with particularly strong performance in our retail stores, offset by our planned reduction in markdown volume in our e-comm channel, delivering an overall GBP 4.8 million year-on-year increase in DTC. Following the focus on reducing inventory levels in our wholesale partners last year, we're now starting to see wholesale partner orders improving, delivering an increase of GBP 2.4 million and we're also seeing further confidence in the spring/summer order book, particularly amongst our larger wholesale customers. Turning to EMEA. As highlighted at the AGM's trading statement, EMEA across DTC has been more challenging. And that, together with our focus on reducing markdown volume saw a reduction year-on-year of GBP 5.9 million in DTC. However, this was generally much better quality revenue. Wholesale in EMEA, as explained at the full year, was stronger year-on-year, and that is together with a more normal wholesale shipments in H1 saw an increase in wholesale revenue. Finally, in APAC, DTC saw continued year-on-year growth with a particular standout performance in South Korea retail and full-price e-comm across the entire region. Again, like other regions, we saw significant reduction in markdown e-com in sales, especially in China and South Korea. And therefore, overall, a GBP 1.2 million increase in DTC and better quality revenue. The wholesale revenue is in line with our expectations with some small changes in shipment dates year-on-year. So overall, our regional and channel performance was in line with our expectations. Though we're disappointed in the overall DTC revenue in EMEA, this was partly due to our own decisions to reduce markdown volume and the well-publicized weak EMEA consumer environment. We are really pleased with the continued DTC growth in Americas, the overall performance in APAC and the overall better performance in our wholesale sales, delivering on our strategic objective to reduce reliance on markdown sales. As we set out in the statement this morning, our gross margin has improved year-on-year, and I felt it was worth explaining a little bit more in detail. As always, there is lots of moving parts in gross margin. However, what this chart shows is the consistent resilience of our gross margin rate. So a slight headwind from our channel mix was fully offset by the average selling price. The average selling price was a combination of much better full price sales, offset slightly with the strongest shoes performance where the average selling price is slightly less. We saw a strong COGS performance with freight saving negotiated by our supply chain teams being one of the biggest component. And it is also worth noting that includes the H1 U.S. tariff impact as well. And I should speak a little bit more about that on the next slide. So turning to underlying EBIT bridge. And as I set out on the first slide, we see adjusted EBIT turn from a loss -- turn a loss back into a profit. increasing by GBP 6.4 million to a GBP 3.4 million profit. And actually, if you add the 2 headwinds of tariffs, the fourth box and the timing of demand generation, the sixth box that is a figure increases to GBP 9 million profit in the period, a year-on-year growth of GBP 12 million. The slide sets out the key moving parts. GBP 5.3 million gross margin increase driven by GBP 5 million from strong average selling price and better cost of goods, particularly freight costs, GBP 3 million from the increase year-on-year in volume offset by a GBP 2.7 million of U.S. tariff costs. We have continued to tightly control our costs. Within the GBP 2 million benefit from non-demand generating OpEx is to benefit of the cost action plan last year, partly offset by inflation. The full impact of more -- year impacts of more stores being opened and paying you all retail bonuses as retail stores performed better. Demand generation OpEx drove a GBP 2.9 million increase driven by the timing of our key stories campaign being in September this year versus October last year. This will vary year-on-year depending on when the right time is to support key campaigns. Year-on-year benefits in depreciation and other items. And finally, GBP 3.1 million of adjusting items which includes the lease impairment reviews following the accounting policy change and the carryover adjusting items from prior year for incentives and our global technology center. Before I move on to the next slide, I just want to come back to tariffs. As we set out in our statement, the focus has been to mitigate the effects of FY '27 and beyond. And we are pleased to say the action we are taking will do that. Those actions are continued tight cost control, flexible product sourcing and targeted adjustment to our U.S. pricing policy. These have started and will now phase in through to the end of the financial year. We have worked these actions thoroughly, both internally and with our customers and suppliers. The intention has always been to think of the longer-term impacts and make sure the actions we take are with that in mind. The net effect of all that work is that we see about half the high single-digit millions tariff headwind in FY '26 being offset this year. And most importantly, the tariff impact for FY '27 and beyond being fully offset. I have cleverly left the page over there, I'm going to get it. It was an important page because I can't remember it. So it's actually a final slide. So finally, turning to cash flow and our net debt. I'm really pleased to continue to report our significant reduction year-on-year in net debt both in terms of net bank debt reducing by GBP 33 million to GBP 154 million and total debt, including leases, reducing by GBP 46 million to GBP 302 million. As a reminder, our business builds up the inventory levels in advance of peak and the September net debt position tends to be the highest in the year. As we go through the peak period, the net debt will start to reduce. It is worth noting that included in our half 1 results is around GBP 4 million of tariff costs in inventory and this will grow to near GBP 10 million at the year-end. The bridge sets out the cash flows from FY '25 year-end position. The first 4 blocks just show underlying operating cash flow -- outflow of GBP 44 million, made up of delivering GBP 37 million of cash inflow from EBITDA, being invested into working capital as we build stock levels and then the spend on lease payments of GBP 28 million and interest and tax payments of GBP 13 million. CapEx accounts for GBP 6 million and our dividends in the year of GBP 8.2 million. Finally, our net debt-to-EBITDA finished at 2.1x, well below our bank covenant of 3x and an improvement year-on-year. We will continue to see those leverage ratios improve as we head towards the year-end. Our guidance remains for net debt of a year of around GBP 200 million, including leases. So to summarize before I hand back to Ije, looking forward into the second half, we are pleased with our performance in the first half, setting ourselves well up for our key peak period. We continue to see positive performance in our U.S. DTC business, and our order books across the business for SS26 are looking healthy. So with that, I shall pass back to Ije. Ije Nwokorie: Thank you, Giles. So let me give you some color on how in the first half, we executed the strategy that we outlined in June. So you'll remember this slide. And after stabilizing the business last year, this is a year of pivoting the business towards the new strategy. The great news, by the way, that underpins this is that the brand is strong. The team is passionately committed, and we are already seeing results from our work. Importantly, the work we've done in this half has also set us up for the second half and particularly these big trading weeks that we have ahead of us in the next few weeks and provided a foundation for growth in the outer years. But we are in this period of pivoting the business. And what's that pivot about? That pivot is about moving from a channel-first mindset that was primarily about building out DTC to much more of a consumer mindset, giving people more ways and more reasons to buy more of our products and making sure the business is in a situation where any one market or channel or product or consumer segment presents an outsized risk to our success. We have a brand that resonates around the world, and it's a privileged traveling around the world and seeing consumers and partners. And our ambition, therefore, is to become the world's most desired premium footwear brand. As you can imagine, it's a motivated ambition and one that the entire team is united around. So in June, we shared our 4 levers for growth. And what are they? They are engaging more consumers, driving more purchase locations, curating market-right distribution and simplifying our operating model, so consumer, product, markets and organization. And we also gave you a set of FY '26 specific objectives in which we're going to use to make sure that we're on track on this and that we advise you to use to also keep an eye on what we're doing. We said in consumer, we would reduce reliance on discounted pairs. We said in product that we would drive those new product families that we've introduced to you, and I'll talk about it a bit later, Zebzag, Buzz, Lowell, they allow us to give the consumer a different way to think about the brand in different purchase locations. In markets, we guided that we would open with capital-light distribution in some new markets. And in organization, we said we will make concrete steps to simplify our operating model. So let me now share the progress we're making in each of these areas. And as you would expect, I'm going to start with the consumer. As I said in FY '26, we are focused on reducing the reliance on discounts and I'm pleased to say that we are making good progress on both wholesale, which we kind of paid particular attention to and DTC. Working closely with our American wholesale partners and under the leadership of Paul Zadoff, our new President in the Americas, we've achieved a good shift from discount in both in the current season, autumn 1 and '25, and in the order book, as we look forward to spring/summer '26. And as Giles said, we're really happy with that growth that we have in that order book in the Americas because that's the first time we've been able to say that in a while. And similarly, in our DTC, the shift is having a clear impact. DTC full price revenue is up 6% year-on-year. The mix of full price to clearance is up 5%. And we have a full 10% up in the percentage of new consumers coming to full price versus discounts. That's particularly important because if you remember, the objective is to attract new to engage more consumers and we're engaging them -- we'll engage more of them at that full price basis, really critical for us. And while our full price to, if you look at that graph on the right, while our full price to discount profile will go up and down in different times of the year. We will continue to make sure that we're offering the consumer the right thing at the right time. And we will continue to manage this as we go through the pivot. So for example, expect in the weeks ahead, we will participate in Black Friday and Cyber and we'll do some discount. We will reward the consumer with that. We will deal with seasonal product that we want to move quickly. But we will do that in very specific seasons and then return to that focus on full price. I would also say that our customer data platform is helping in this effort because it allows us to directly target consumers based on their buying behavior. So now, for instance, when we are targeting a consumer who is -- who has a high propensity to buy full price, we will not be targeting them with a discount -- with a seasonal discount message because we know that they are motivated by that full price offering, and I've got to say this is still -- and I'll talk a bit about CDP later on. This is early days of this work and a lot more to benefit from as we go forward. The push for full price, along with our focus on comforts, on craft, on quality is supporting overall momentum, and you can particularly see this in Americas DTC. America's retail revenue in the first half was up 15.7% driven by increased footfall. The consumer is coming in to really engage with that product we've been putting before them. In Americas e-commerce, while revenue is only marginally up full-price revenue is up 20%, offsetting a significant headwind as we've reduced and we knew we would get this as we reduced clearance revenue. So we'll share more on that reduction in discount revenue across channels, and our work to attract new wearers at full price when we report the full year in May. I do want to emphasize, particularly with the U.S. numbers that we are showing growth on weaker comps, and this is still work in progress. There was more work to do and significantly more growth to go after in that market. So that's consumer. Let's talk about products. On product, we said we will drive more wearing occasions and in this year that we will drive growth in those distinct family products, Zebzag, Lowell and Buzz. So as you saw in the statement, we have had a successful half with shoes. Pairs are up 20% in DTC and 33% overall. And a big part of this success has come from us being able to give the consumer different reasons and different ways to buy. Playing into those product families and the different wearing occasions and, of course, leveraging the individual customer profiles to give them what is really right for that individual. We talked to you at full year about our success with our more style-focused Buzz family. We're pleased that, that momentum has continued, that's that product to the left with the Buzz shoe being the best-performing new shoe of the half. Another product family that we haven't talked to you much about, but if you want to see it in real life, John is wearing a pair today, is the Lowell. The Lowell is more crafted and more elevated than the Buzz. And we introduced that just a year ago. We haven't really backed it with marketing and has already risen to be 1 of the top 5 shoes for us in EMEA. But let me just say, it's not just the new product families, our iconic 1461 Shoe has continued to perform well. In Asia, it is our best selling product. I'll share a bit more about the work we've done in South Korea and a little case study about how this product has done really well there. And maybe a product we don't speak about a lot, but one that's been on the line since 1992 is our Mary Jane and this is the #3 best-selling product in the Americas and a big part of the success we are seeing there. Let me make one important point. I said this at the full year, but this is important to keep making. This ability to give the consumer more choice, we are matching that with a reduction in SKUs. So this is not about the proliferation of SKUs. And in fact, in Autumn/Winter '25, what we're in right now, we have 45% less SKUs than we did in Autumn/Winter '23. This is about disciplined curation of choice for the consumer as opposed to proliferation of products used. We've talked a lot about the Adrian, and I think the Adrian Tassel Loafer and the success of shoes has really been driven a lot by Adrian as Giles mentioned earlier. This is a product that's been aligned since 1980. It is our second biggest selling product. So I present shoes to make the point that the brand is not just strong, it is relevant across more silhouettes than we really leveraged in the past, and consumer groups allow different -- knowing different consumers allows us to play the right product to the right consumer. And we're really focused on making sure that, that curated breadth is put to work for the brand. What I don't want you to think, though, is that boots are not important to us. Boots are important, and this is an area while we have work to do as they -- as we continue that decline in the half, we are committed to boots. And it's worth saying that decline has moderated and has been impacted by, as Giles said earlier, our planned reduction in discounting. Boots matter to us and the 1460 Black Smooth that everybody knows, remains our top selling product, and we're making progress in the category as a whole with an increased percentage in full price mix. That's really important to us year, and we're achieving that in boots as well. I'll also say we're pleased with the performance that we've had in some of those -- again, going back to the product families, some of the newer products that we've introduced to the line. Let me give you some examples here. The Kasey high boots was new to the line last year and is the best -- the third best-selling product in the line in DTC in the half. And so remember, the 1460 Black Smooth is the first, the Adrian Loafer and then it's the Kasey high. The Buzz Hi, the green one you see back there has been built on the success of the Buzz shoe that we've talked about and that we launched in February. The Buzz Hi was the best-selling new product at launch in EMEA DTC this year. And as part of our focus on comfort, this autumn, we introduced the Zebzag Laceless boots. Zebzag is a family that we've built around being lightweight and casual. We've done [ heels ]. We've done sandals. And now we've introduced a really comfort led easy on boot called the Zebzag boot, you probably -- especially if you're in London, you probably saw some activation around this. And while it's too early to quantify commercial success in this, we're really happy with how that's gone and how it's raised comfort as a topic for this brand. And then 2 weeks ago, we brought to market a new innovation that's built off the 1460 boots. [Presentation] Ije Nwokorie: The 1460 Rain Boots is the first fully waterproof Wellington boots, utilizing our signature heat-sealed construction, that's how the bottom is joined to the top. And our Air Cushion sole -- if you've got the right -- if you got a sample size, it's worth putting your feet in this if you haven't yet, it is built for comfort, and we are getting great feedback on that already. It really captures the essence of what Dr. Martens is about comfort, innovation, craftsmanship functionality without losing the bold attitude of DOCS that our consumers love. This is a whole new wear in occasion for the brand, a real proof point of our strategy of increasing wearing occasions. It's an easy sell for existing customers. They love that silhouette, they love, they understand what the brand is about, but it's also a compelling product for new wearers of the brand. It's been fun visiting our stores and talking to consumers about it, people who came with somebody else and I never knew you did this and all of a sudden, they're getting on their feet. We've used our customer data platform to customize marketing messages based on the customer profiles. Some people are built more for style. And so you pitch a style message and from some other people, it's comfort and function, and we're able to do that as well to those people. It ticks all those boxes. And we've brought it to life in a really immersive way. These are some pictures on the screen, for example, a takeover of our store in Brooklyn, which is all merchandised just for the rain. And the wealth of press and social media coverage on this has been absolutely stunning. So we're thrilled how the launch has gone. I expect those of you in festival season from the summer to be wearing a pair of these, and we'll keep updating you on our progress. So now we talked about consumer, we talked about product, let's talk about markets. And the market lever is really about making sure that in each market, we have the right distribution, working in partnership with wholesalers and distributors. To get the right product in front of the right consumer in the places that, that consumer naturally wants to buy. And in FY '26, we've told you we'll focus on opening capital-light models with our partners. And I'm pleased to share now the progress that we've made. Much of this has been announced, but it's worth just encapsulated on one place. In the first half, we've announced new distribution partnerships in LatAm and in the UAE. Latin America agreement is with Crosby, and they will drive our reach in Mexico, Argentina, Paraguay and Chile. And this will include both wholesale and mono-branded Dr. Marten stores run by them. We now have 2 mono-branded stores launched already with Buenos Aires opening in August and Santiago at the start of October. In the UAE, we've partnered with Beside, who will launch and then grow the brand's presence in UAE, initially through wholesale with mono-branded stores planned very soon. And excitingly products that are arriving with that partner just last week. And in the Philippines, where we already have a great partner, we are accelerating that expansion on the back of this strategy. They have already operated 2 stores but they've now opened a third store again in Manilla, that's actually the picture that is here. And there are more planned. I also want to say, even though we've talked about capital-light models, this is not just about the deployment of capital, it's also about working with experienced and trusted local partners who have experience with global brands and who have deep market expertise and operating know-how. Working with them ensures our brand shows up in the right way for those consumers, whilst they'll be in 100% DOCS. And these are the first agreements of many that we will announce in the quarters and years to come. And while that is largely about new markets, it's worth saying the same principle applies to our existing markets. In Italy, we have 14 direct-to-consumer stores and we've been making good headwinds in Italy since we started building that strategy up. Now we're expanding through a combination of, yes, our own DTC, but also these partner stores with the first franchise store opening in Pompei in October 2025 with a great local partner. And we're really pleased with how that's gone. And as you can see from that image, it's a really great Dr. Martens experience. We have more stores planned for the future. We're taking a similar approach in China where we've opened recently in the half, new stores in Chengdu, in Chongqing and in Hangzhou. So this is an exciting growth lever for us. And it's worth saying, these capital-light models are a good example of our ability to create value in partnership with great businesses around the world. As I shared in June, we're excited about the skill, commitment, resources that our partners bring to our brand, whether it's through franchise stores as shared or in deep marketing partnerships with our wholesale partners. The images here is just a spectrum of -- some of the wonderful activations that our partners put out when we launched the Zebzag Laceless boot that I mentioned earlier. I'd highlight Zalando in Germany who really took over the big hub and held the biggest event there to date. And [ La Rinascente ] in Italy, which included the takeover of a metro station in the Milan that you see in the bottom right corner there. These close partnerships, along with the work we've done with them over the years to rightsize inventory are some of the driving reasons behind healthy order books for Spring/Summer '26. And curating this market right distribution with our partners is key to value creation for everybody. And so a few things take up more of my time than this, and we'll keep you posted on how we keep going to it. And so finally, let me talk about the organizational layer, which is lever, which is really about simplifying how we operate and focusing squarely on consumer. And here, we are beginning to reap early benefits of systems that we probably talked to you about in a bit, but that we've now really focused on executing, implementing and embedding the organization in the half and getting our global technology center in India up and running. I'll start with the customer data platform. The customer data platform is making it easier for our marketing teams, really simplify our marketing and commercial teams to reach the right consumer with the right proposition. I think I've given a few examples of that already today. So the focus to date has been on optimizing the consumer journey. That's how the consumer navigates through from social to a site to find the product they are looking for, driving repeat purchases and making sure that we're efficient when we do a discount that we're not cannibalizing full-price sales. And then we've also used it for our product launches, really tailoring the market, such as in the rain boot example that I gave you earlier. So again, early days, part of our business, but you can see how that really simplifies the way our teams can deliver value to each individual consumer. Our supply and demand system, as we told you, went live in the summer as planned and is already delivering greater visibility and accuracy between demand signals on one hand and supply orders on the other hand, you can imagine what that does for the efficiency of the business. For instance, our teams have started utilizing statistical modeling of past sales database on this platform to identify patterns, trends and seasonality, which then are used to predict future demand really on a 2-year rolling basis, that's new capability that really simplifies the way we think about things that and operate. And then finally, while not due to be fully operational until FY '27, our global technology center and actually the image in the background is the global technology center in India, is now up and running. And by bringing engineering in-house, which is what this does for us. We have already become much quicker in delivery and optimized customer journeys, allowing teams, for example, our retail teams to recognize the consumer and offer a more tailored store experience, such as an in-store pickup or a promotion for that individual consumer. So this is a muscle that we will keep pulling how do we simplify the organization, how do we equip our teams to be -- to make it easier for them to really deliver to individual consumers. Because again, that's what the pivot is about being much more consumer first minded. So that's the work we've been doing and the results we're beginning to see. In consumer, we're driving more full price in both wholesale and DTC. In product, we're growing those product families and alongside the icons, they've given our consumers more reasons and more occasions to buy. In markets, we're working closely with partners, whether that's capital-light models or deep market and product partnerships with major wholesale partners. And in organization, we're using technology to simplify how we work and how we serve our consumers better. So to wrap up, let me use one specific market to illustrate how this strategy all comes together as you see you get a picture of it. South Korea is still a small market for us and a proof of how we can grow in new markets. It's also a critical market, South Korea, because as you probably know, it really influences cultural trends around the world. So how does our strategy playing out here? In consumer, we've grown full price with that strategy. We've grown full price 65%, and we're increasing that mix of revenue by 25% in the year -- in the half over half. In product, we've leaned into that market specific demand for the 1461, which is really where that product is in more demand than any other market in the world, and really allowed our team to push that, while also significantly build a new equity around the Lowell shoe. So we know what the -- if you like, the major product is, but we're also able to start creating affinity around a product behind that so that we're not at risk of just one product lastly. The Lowell, as we started doing that is up, up in 90% half one to half one as we've done that. We're building exciting partnerships like this one in the picture shown here, which is with [indiscernible], who built out a major 2-week installation for the 1461 Shoe. And Giles and I were privileged to be in South Korea in the middle of those 2 weeks, and it's just a stunning experience, delivered entirely by our partner. And finally, by simplifying around the consumer, really making the consumer at the top of mind, it's allowed the career team to be liberated and deliver what works for their market. while aligning 100% to our brand. These are great experiences of Dr. Martens, but they're right for the South Korea market. As a result, revenue in South Korea is up 30% year-on-year in the first half. This is a growth market for us, and we're excited to see how the customer focus is helping them connect with more wearers and the learnings we can take from there to apply to other markets. So I hope that gives you a good sense of the progress we're making. We're focused on executing on the levers of our growth. We're seeing early results. But this is work in progress, and there are still key areas to address. We've set ourselves up well to deliver the plans in the second half. And along with our partners, we feel good about our plans for these big trading weeks that are ahead of us. And I have to emphasize there is significant opportunity ahead. That opportunity, as you remember, comes through the headroom that we still have to grow. Just in the 15 -- in our 15 top markets, we are only 0.7% of $180 billion relevant market in just those 15 countries. And we're in many places where the brand is still attractive and desired. And we're going after that. You've already heard us about Mexico in UAE and other places, and in our existing markets as you've seen with the U.S. or South Korea, we're also going after opportunities to grow there. So these early results and the significant headroom give us confidence in our medium-term value creation thesis to grow profitably and faster than our peer set. The operational leverage that delivers high to mid-teens EBIT margin and the underpin -- and the continued underpin of strong cash generation. This will create significant returns for shareholders. And that's why Giles, the team and I are laser-focused on this execution of the strategy. There's a lot of work ahead, yes, but the brand has never been stronger or more relevant and the green shoots are promising. So we're going after it. Thank you. Ije Nwokorie: We will take questions now. We'll take questions in the room first. Please say your name and what organization you're from. And then we'll go to questions via the operator. I think I'm going to get John for us today. John Stevenson: John Stevenson of Peel Hunt. A couple of questions to get us going, please. On the product side, you mentioned sort of areas to focus on and mentioned sandals and boots. Can you talk about what the plans are for next year in terms of how you think you can address sandals and what sort of innovation or how we're going to develop that? Secondly, on EMEA, I don't know if we can have a bit of a sort of dive into the region in terms of trading. I mean, clearly, the U.K. has been challenging. Can you talk about sort of an overview of where the weakness in EMEA is coming from and what your thoughts are from here sort of going into the second half and a very, very quick one. What's the price change agreed for factory pricing for the year ahead? Ije Nwokorie: I will take the first 2, and I'll pass you the questions on pricing. Yes, it's interesting. I have for simplicity loved the boots and sandals together, but I want to be clear that there are 2 different problem statements. And I'm confident about our boots plan. We have more work to do in sandals. I think sandals is a place where we need to drive more innovation, and we really have that work to do ahead of us. And I think that will take us -- to be very honest with you, that will take us a couple of seasons to get that right. But the team are working on it. I told you around innovation that we're working on lightweight. We're working on really making sure that our sandals proposition stands on its own and isn't just on the back of other things. But we're not starting from a standing start. We've had sandals in the line since '80s. Some of our top selling products in the season have actually come from America, if I take an example, we have a sandal called Dunnet Flower, which even 2 weeks ago, was one of the top sellers in America in November, right? And so we have strong sandal offerings, so we have -- we know what works. We now have to do the work to build that out over the next 2, 3 seasons, but it's work in progress -- it's an area of focus. With EMEA, the slight evolution on our analysis since the first quarter is that the U.K. isn't particularly the challenge anymore. That really was the case in the April to June quarter. But since then, actually, we've seen traffic return to stores. And I would say that the EMEA challenge is an EMEA-wide challenge. Of course, there are variances from market to market, but it's really about a consumer who is out shopping, but being a lot more considered. A lot more browsing and research happening. And they're doing 2 things largely. They are either looking for a deal. And so the market is promotionally led, but as we all know, there's only -- there's a bottom that you get in the market will have to fight back from just being promotionally led. But actually, more interestingly, there is also a flight to quality. There's a bit of a trade down from luxury into premium into craft and quality. And there's a bit of a considered purchase, which means I'm not just buying anything, I'm buying, I'm making -- I'm treating this purchase as an investments. I might actually spend a bit more because I'm getting the quality. And we see that come through in our more expensive products. We are actually doing quite well. What is the weekend of bag at EUR 300 -- over EUR 300 or whether it's something like the Kasey boot, which is one of our more expensive boots. So this is a consumer who is considered. There's nothing wrong with that and a brand that has quality, has opportunities. And that's what we're going after. We can, of course, control broader macroeconomic issues and the ways in which the consumer thinks but we feel we have enough levers. We planned into the headwind on discounts. We're not going to over chase that. We'll participate where we need to participate. That will remain a headwind for the rest of the financial year, but we still think we have opportunities to make sure that we are competitive in the market. Giles Wilson: So your factory pricing, looking ahead, I mean, effectively, we don't guide specifically on factory pricing. I'm comfortable where the numbers are. There's nothing there. With the exception of tariffs, it's obviously a cost that we've given you views on. But overall, we have a good relationship with our suppliers, long-term relationships with our suppliers and actually some of the work that we've been doing specifically around tariffs has been working with them about where we source some of our American purchase orders from. So I think we don't normally guide on it, but there's nothing in there that I would be saying this particularly to pull out. Anne Critchlow: It's Anne Critchlow from Berenberg. I've got 2 questions, please. First of all, on the U.S. In terms of the perception of pricing power in the U.S., how confident are you that you can put through these price rises. Do you think they'll strengthen the brand? Or do you think you'll encounter some resistance? And then secondly, on EMEA, how confident are you that you can drive engagement and turn that sales trend around? And how important are the CDP capabilities within that? Ije Nwokorie: I will grab both of those, but add anything if there's anything I miss out. So as I shared, and we've traveled a lot together. We were in a Boston store early in the year. We're not seeing any resistance in America to our higher prices. In fact, we have some anecdotal evidence that the price position in some products -- some specific products might be on the low side, and we have opportunity. It's worth saying we haven't taken price in the market for 3 years, right? And so the market -- we have headroom to go to and still to remain competitive. But we will be surgical about this. This is not a blanket price raise. We will look at individual products. We will understand how their benchmark and understand how the consumer sees them and that's how we will apply pricing. So to your question, do you see any resistance? Never take the consumer for granted, but this is strengthening our premium position to have the right prices at the right... Giles Wilson: I think just worth also adding, we look at price -- those prices on a global basis. So we look about how does that feature in a product, not just in the U.S., but where does it turn up in other countries. So it's part of our pricing policy to look at this. And as Ije said, we haven't taken pricing for 3 years in the U.S. So there's actually -- there's a lot more detail that goes behind that work that goes in, and we're much more confident about where they come through. Ije Nwokorie: In EMEA, I think I'm going to make a similar statement but you never take the consumer for granted. We do think that less clearance will remain a headwind for the rest of the year, but we've planned for that. That's baked into our plans. That's not any new risk. We like the fact that the consumer is in the store. So that gives us the opportunity to make sure that we deliver that value that they're looking for because the footfall in the stores is absolutely fine. And online, we continue to make sure that we are using the CDP to your point, to really manage that experience so that consumer finds the thing, not just that they're looking for, but the thing that is right for them based on their profile. This is trade and work on. And so there are no ground strategies. It's really understanding each consumer. I really understand in each -- literally down to each individual store, but we've got great people in our stores who really know how to trade and we're giving them great product to work with. So we're confident that we'll hit our plans for [ India ]. Kate Calvert: Kate Calvert from Investec. Just 2 for me. First of all, just on the franchise model, apart from Italy, where else in Europe are you thinking of using this model? And are you thinking of using it in the U.S. And my second question on the U.S., you talked about the full year results about the opportunity to elevate the brand and work with more premium wholesale partners. Have you made any progress in autumn/winter on this? Or is this all to come sort of year and beyond? Ije Nwokorie: Yes. Good questions. I'll take both of them. I don't want to get ahead of myself on markets where we will do the franchise model. It's worth saying we have it -- it's a big part of our business in Japan, it's a big part of business in China, a significant part of our business in China and a significant part of our business in Italy. So we have those examples. We will look at it as we look at retail strategy going forward. So I don't want to open or close any markets to it, but those are the 3 places where we are active. And as we deliver on that and as we build that out, we'll share that information with you. We're really happy with what we've been able to do with Nordstrom in the last year and I'm not going to guide on their numbers, but we've had that premiumization and some of the product at the more expensive area, some of the work and the success we've had with the Adrian Loafer has been in partnership with Nordstrom. So that's a really -- that's an example of a premium brand where we've done that. We've also done some really great work just recently with Kit, which is out in the market and a kit is really that sort of that Pinnacle retailer and some of our more refined elevated product, something we call [ Regen ]. These are not huge volumes, but they really position the brand in that Pinnacle space. And so those are 2 examples, and Paul and the team are hard at work building that out. You've got a question there? Let's go. Same rules. Just tell us your name and where you're from and would love to hear your question. Operator: We'll take questions from Alison Lygo from Deutsche Bank. Alison Lygo: Two for me, please. First one is about the U.S. and the profitability there and the operating cost base. Margins in the U.S. has kind of reached flattish now in the first half and expect that to be positive in the second half with the seasonal weighting, but still very much dragging on the group. Just wondering what your sort of outlook for regional margins there is? What you think kind of can be done now? Is this just the case of kind of growing back into the cost base? And then the second one is really on the product that your wholesale partners are buying into. And so you talked about plans to get partners buying into a broader assortment. You've talked about a healthier order book. And I'm wondering if you could add a bit more color around that in terms of the range of products that wholesale partners are now buying into and really how the regions are kind of comparing in terms of whether one is more ahead of the others? Giles Wilson: Yes. So on U.S. margin, I think there's a couple of things we need to just pull apart for the first half. Firstly, obviously, the U.S. margin has got the U.S. tariffs in. So you will have that as a bit of a headwind in the half year and obviously, Ije rightly said the first half is obviously the smaller the half. You'll have noticed that Ije put up on the screen that we saw our retail stores grew 15-plus percent year-on-year. So we're seeing much better performance across our retail stores. And as we set ourselves up into peak, we feel much more confident there. And then thirdly, the growth in the wholesale, I think that's the other key part here. We've obviously had a couple of years where wholesale, particularly in the U.S., was where we came off. And we're sitting here much more confident about our summer spring -- sorry, spring summer even order book as we go forward. So I think it's a bit of both, in all honesty, it's about us growing back into some of the -- into the volume, particularly on the wholesale, getting better return from our retail stores as we're doing. But also, as you're well aware, we have been looking at our store network, and we have closed or provided for stores, and we are doing that. We've been quite clinical now about what each store needs to produce and have actually -- I think, at the half year or the full year, we did actually put a few stores as impaired. So we will expect to see that margin now begin to really improve and get back to the levels that you've seen in the past. Ije Nwokorie: And on the second question, Alison, which is a great question. Thank you. What we're seeing is our wholesale partners are buying into a broader range. But I want to be clear, what's the right range varies from wholesale partner to wholesale partners. What journeys once is going to be very different from Nordstrom ones, and it's going to be very different from -- it's not just once, what's right for their consumer. And so having really built up the strategy and particularly in the U.S., demonstrated that return to growth based on the strategy in DTC. Of course, the wholesale partners are now very interested in a broader range of products. But there isn't a particular regional split on that, that's going to be different from wholesale partner to wholesale partner based on who their consumer base is, who their buyer is, how they sell. But it's a broad spectrum across particularly -- we've seen a huge growth in shoes and the assortment of shoes and across those new range of products. So it's broader than it's been before. You've got those new product families in it. You've got a bit more shoes than in the past, but it's -- that's a general statement. It's going to vary from wholesale partner to wholesale partner. Operator: There are currently no further questions over the phone. And with this, I'd like to hand back over to Ije for closing remarks. Ije Nwokorie: Thank you all very much. I believe the statement is clear, and it's been a pleasure to share with you some of the highlights from the execution of the strategy. The statement remains the same. We're happy with progress to date but there's still work to be done. And when we look at the long-term opportunity, the headwinds in the market, the strength of the brand, the fundamental economics, we're really excited with how we're going to create value for our shareholders in the future. So thank you very much.
Operator: Good morning. My name is Melissa, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Bath & Body Works, Inc. Third Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. During the question and answer portion, you may ask a question from the phone by pressing star one. I'll now turn the call over to Luke Long, Vice President of Investor Relations. Luke, you may begin. Luke Long: Good morning, and welcome to Bath & Body Works, Inc. third quarter 2025 Earnings Conference Call. Joining me on the call today are Daniel Heaf, Chief Executive Officer, and Eva C. Boratto, Chief Financial Officer. In addition to this call and this morning's press release, we have posted a slide presentation on our website that summarizes the information in these prepared remarks and provides some related facts and figures regarding our operating performance and guidance. As a reminder, some of the comments today may include forward-looking statements related to future events and expectations. For factors that could cause the actual results to differ materially from these forward-looking statements, please refer to the risk factors in Bath & Body Works, Inc. 2024 Form 10-Ks. Today's call also contains certain non-GAAP financial measures. Please refer to this morning's press release and supplemental materials for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measure. With that, I'll turn the call over to Daniel. Daniel Heaf: Thank you, Luke, and good morning. Let me begin by acknowledging that our third quarter results and our lower expectations for the fourth quarter don't live up to the expectations we all have for this brand. I joined Bath & Body Works, Inc. to accelerate growth, and I remain confident in our ability to do so. Today, I will set up a clear diagnosis for what's been challenging our performance and the actions we are already taking to address it. While the consumer environment is tougher, this is no excuse. As we continue to underperform the sector, we're focused on addressing the issues within our control to return to growth. Our transformation started the week I joined with our no-regret move, and the whole company is working with the utmost urgency. But this will take time. 2026 will be a year of investing behind our brand to strengthen our fundamentals and position our business for sustainable long-term growth. Before I outline what must change, let me ground you in what endures: the competitive advantages that give us the right to win. We are a market leader in attractive growing consumer categories. We are an iconic American brand recognized worldwide. We have a vault of beloved fragrance franchises with each of our top five franchises generating over $100 million in annual revenue, and our largest fragrance generating over $250 million yearly. We operate more than 2,400 stores around the world, employ a community of exceptional associates, have 40 million active loyalty members, and benefit from a fast, largely domestic supply chain. Our business model generates strong margins and high free cash flow conversion. Despite these strengths and the revenue growth in recent quarters, I concluded that swift and decisive action is needed to build the engine to drive sustainable long-term growth. From my first day, we have refocused on putting the consumer at the center of everything we do and listening closely to their feedback and insights. This has guided a disciplined end-to-end review of every aspect of our business: product, brand, digital, stores, operations, and talent. The plan we are announcing today and the actions we are taking and the strategic investments that we are making are the result of that comprehensive review, not a reaction to a single quarter. Let me first give you the diagnosis in four clear points. Firstly, we pursued adjacency to attract new consumers, but that strategy has not delivered the growth we expected, and it reduced focus in investing in our core categories. Secondly, collaborations that should have been used to drive excitement, energy, and equity into our brand have been used to carry quarters. Thirdly, as these strategies and other tactics have not delivered growth, we have relied on deeper and more frequent promotions. Great value and exciting deals have been part of our brand, and that will not change. However, over-reliance on promotion delivers diminishing returns and erodes brand equity, and that is what has happened here. While all these efforts appeal to our existing consumers, they did not grow our customer base, and we have not attracted a younger consumer. Finally, our organization has become slow and inefficient. Unnecessary complexity has reduced our speed, dampened our innovation, and we prioritized efforts that were not targeted to acquiring a new and younger consumer. Unlocking the next phase of growth requires decisive action. We are investing in new talent, focusing our teams on the highest value work, and moving at the speed of the consumer while optimizing expenses to fuel innovation and long-term performance. Our strategy is guided by what we have seen working in the marketplace. Over the years, consumers have evolved. They seek greater efficacy, ingredient-led products, modern packaging, emotive storytelling, and elevated multi-channel experiences. Our competitors have risen to meet those needs. We have not. In some cases, as with our formulations, we have invested in these attributes, but we have not communicated them consistently and effectively. Today, we are announcing a holistic growth plan to revitalize Bath & Body Works, Inc. across brands, product, and the marketplace, designed to drive value for our stakeholders. We are reclaiming our legacy as an innovative brand rooted in nature and benefits and leading the world in scent and self-care. This plan, the consumer-first formula, focuses our investment behind our four largest revenue-driving opportunities. These strategic priorities have already been communicated across the organization, and work is well underway. The first pillar of our plan is to create disruptive and innovative products that serve the needs of today's consumer. Desire will be designed. We will develop products in our core category to deliver luxury scents with benefits created to be accessible to everybody. Thoughtfully sourced and ingredient-led, refocusing on what made Bath & Body Works, Inc. distinct. In 2026, we will reinvest in our core categories. We are returning to best-in-class product leadership in body care, home fragrance, and soaps and sanitizers. Two, consumer muses. Designed with deep consumer insights guide our every decision. Jen, who demands bold fragrance, fun, seasonality, and value. And Zoe, who craves clean products with elevated scent and design at an accessible price point. These two muses keep us true to today's consumer while providing opportunities to engage new and younger consumers. We are making changes to better serve these muses, embedding consumer insights at the start of product development, accelerating new franchise development, and leveraging rapid testing to inform our innovations. Consumers will start to see these new products in 2026. From body care to home fragrance, we are introducing new forms, vessels, and formulas in our core categories that will drive growth and elevate the overall experience. To sharpen our focus and make our in-store experience less overwhelming, we will cut our assortment and reduce complexity, concentrating on fewer, more on-trend product priorities. Starting in the first half of next year, you will see thoughtful edits to our assortment and selective category exits such as hair and men's grooming as we refocus on the core. The second pillar of our strategy is to reignite our brand and reclaim cultural relevance. In 2026, we will market fewer, bolder, more targeted product moments with stronger creator advocacy and a more aspirational positioning. You can already see early proof points of this strategy in our touch of gold collection. We are recruiting a network of influencers to ignite social buzz while communicating credible science-based claims that differentiate our products from our competitors. We will make big bigger by elevating and amplifying two iconic Bath & Body Works, Inc. New consumers will discover and love these fragrances when we treat them with the reverence they deserve, elevate, and market them properly. We will deliver more impactful visual experiences in all our channels and across social platforms. The third pillar of our strategy is winning in the marketplace. Discovery should feel effortless. We will make it simpler for a new and young consumer to find us, love us, and buy us wherever they shop. We will elevate our owned retail channels and thoughtfully expand our distribution to new channels, positioning ourselves directly in the path of our consumer. As part of this, we will continue to enhance our app and website to increase engagement, to make product discovery easier, to deliver richer brand and product stories, and to reduce purchase friction. This work is already well underway. For example, our mobile homepage has undergone a refresh, and in early 2026, we will invest in a permanently lower and more competitive free shipping threshold. We will also expand thoughtfully into marketplaces and select wholesale channels, with Amazon expected to go live in 2026. In anticipation of an Amazon launch, we are curbing brand-dilutive gray market selling by restricting bulk purchases from resellers online and in-store. Amazon will enable us to reach new consumers and reengage loved ones, and we will launch with a curated assortment of evergreen hero products and, over time, introduce products designed to acquire new consumers. Our brand-operated channels will always carry the widest assortment and offer the most immersive brand storytelling. And to encourage new consumers to enter our operated stores, we will pilot updated merchandising, improved navigation, and refreshed retail marketing in 2026. Our final pillar is operating with speed and efficiency. We expect to fund investments through better execution, timing inventory, shortening cycle times, and implementing a multi-year cost savings program. Consistent with the focus of the Consumer First Formula, this initiative prioritizes high-value consumer-focused activities funded through value engineering and sourcing optimization. We have planned to deliver $250 million in cost savings over the next two years, with over half identified for 2026. These savings will be reinvested into revenue-generating activity in product and brand. A transformational plan requires transformational leadership, and we are putting the right leaders in the right roles with clear accountability. Earlier this month, we welcomed Mally Bernstein as our Chief Commercial Officer, overseeing the full marketplace across stores, digital, and wholesale channels. She brings extensive multi-channel retail experience within our sector, backed by a proven track record of impressive results. We're equally thrilled to welcome Varonis Gabai as our product and merchandising advisor. Her creative vision, strategic insight, and global experience in beauty will add invaluable perspective to our transformation. In addition, we also now have in place new leaders across digital, wholesale, and human resources, and we will continue to invest in talent to support the execution of our plan. As a result of our no-regret moves that I outlined six months ago, some of our strategic actions are already visible to the consumer, but it will take time before we see the benefits in our financial performance. I believe that we have the foundation, the plan, and the focus to deliver sustainable growth and shareholder value. We are acting with urgency and clarity, putting the consumer at the center of every decision. I am confident in Bath & Body Works, Inc.'s future and the immense opportunity we have in front of us. And now I'll hand over to Eva. Eva C. Boratto: Thank you, and good morning, everyone. As Daniel emphasized, our path forward is anchored to the four pillars of our consumer-first formula: creating disruptive and innovative products, reigniting our brand, winning in the marketplace, and operating with speed and efficiency. To attract a new and younger consumer to the brand and unlock our next era of growth, we will invest behind our strategy as we also drive diligent cost discipline to fund the actions we're taking. Our team is already hard at work unlocking the targeted $250 million of additional cost savings over the next two years. While we are moving with pace, this strategy will take time to impact our financial performance. Now turning to the financials, I'll begin with a summary of the third quarter. I'll then provide an update on our Q4 guidance. As Daniel noted, the Q3 results didn't live up to the expectations we have for this brand. In Q3, we delivered net sales of $1.6 billion, down 1% to the prior year, and adjusted earnings per diluted share of $0.35, both below our expectations. Relative to our expectations, the Villains collection did not generate the consumer excitement, traffic, or sales that we expected. Our start to holiday in late October has been very challenging. I'll provide more color on that shortly. Versus prior year, all of our core categories declined low single digits. This underscores the need to focus investment in our core categories. In U.S. and Canadian stores, net sales totaled $1.2 billion, flat versus the prior year. Direct net sales were $299 million, a decrease of 7% compared to last year. When adjusted for Buy Online Pickup in Store, which is reported as store sales, digital net sales were down 1%, a sequential improvement from Q2 performance. While we continue to make progress on our app and mobile web enhancements, there is substantial work ahead to develop a best-in-class experience. International net sales were $73 million in the third quarter, an increase of 6% and in line with our expectations. International system-wide retail sales grew 16% in the quarter, a continued acceleration as the business has stabilized since the effects of the war in the Middle East. Our third quarter gross profit rate of 41.3% was below our expectations and decreased 220 basis points compared to the prior year, driven by a 260 basis point decrease in merch margin. Our merch margin was negatively impacted by approximately $35 million or roughly 200 basis points from tariffs. We increased our promotional activity to clear seasonal product as we ended the quarter with clean inventory. The merch margin decline was partially offset by D and O, driving 40 basis points of leverage, which benefited from the exit of a third-party fulfillment center in Q1. SG&A as a percentage of net sales was 31.2%, representing 120 basis points deleverage compared to the prior year. The deleverage was driven by soft sales performance, investments in new stores, and higher healthcare costs. In response to weaker sales, we acted quickly to flex costs down, such as store payroll and incentive compensation, which partially offset the deleverage. Bringing it all together, third quarter operating income was $161 million, down 26% to last year. Turning to real estate, our portfolio remains healthy with 59% of our fleet in off-mall locations. In the third quarter, we opened 40 new North American stores, primarily in off-mall locations, and permanently closed 10 stores, primarily in mall. Internationally, our partners opened 10 new stores and closed three stores during the quarter, and we ended the quarter with 544 stores. Our international store expansion plans for 2025 remain on track with at least 30 planned net new store openings. Moving to our Q4 guidance, the trends we experienced at the end of the third quarter have continued into the first few weeks of Q4, with sales to date down high single digits. Macro consumer sentiment is weighing heavily on our consumers' purchase intent. Recent data shows consumer confidence continued to decline due to a number of factors, including concerns about job loss and affordability. This dynamic negatively affected our start to the holiday season and our largest quarter. This impact is compounded by a highly competitive retail marketplace. Our research indicates that our customers are waiting for deeper discounts before making purchases. In this volatile environment, we are providing cautious guidance that assumes these early Q4 trends persist through the season. While we are taking action to strengthen our performance, with that as context, we expect Q4 sales to be down high single digits versus last year and gross profit rate to be approximately 44.5%, which includes the impacts of tariffs and higher promotional levels, which we believe are required to compete effectively. We expect our SG&A rate to be approximately 24%, reflecting top-line declines partially offset by disciplined cost management. We are aggressively managing cost while working closely with our teams to ensure that any reductions do not compromise the consumer experience. Moving down the P&L, we expect interest expense and other of approximately $60 million and a tax rate of approximately 25% and weighted average diluted shares outstanding of approximately 204 million. Considering these inputs, we are forecasting fourth quarter earnings per diluted share of at least $1.70. At this point, we believe this guidance represents a floor for Q4 performance, and we are working with urgency to improve upon it. For the full year, we are lowering our net sales guidance from 1.5% to 2.7% growth to a decline of low single digits and are lowering our adjusted earnings per diluted share guidance range from $3.35 to $3.60 to at least $2.87. You can find additional details of our guidance in our slide presentation. Now for an update on capital allocation. We are planning for capital expenditures of approximately $240 million during the year, down from previous guidance as we prioritized highest return projects. In the third quarter, capital expenditures totaled $81 million, bringing the year-to-date total to $174 million. Our full-year free cash flow expectation is now approximately $650 million, reflecting our current performance trend partially offset by our ongoing inventory management actions and reduction to capital expenditures. In Q3, we returned $41 million to shareholders through dividends and repurchased 3 million shares of common stock for $87 million at an average price of $29.25 per share. Year-to-date, we have returned $126 million to shareholders through dividends, and we have repurchased 11.5 million shares of common stock for $343 million. In closing, we are focused and moving with urgency against the actions we must take to return our brand to growth. On our Q4 earnings call, we will update you on our 2026 outlook and the strategic KPIs to measure our continued progress. I'd like to extend my gratitude to our teams across the company for their hard work. Let's now open it up for Q&A. Operator: Thank you. You may press 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. To allow for as many questions as possible, I ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Ike Boruchow with Wells Fargo. Ike Boruchow: Hey, good morning, Daniel, Eva, Luke. I guess, Daniel, my question would be, can you help us understand bigger picture kinda what changed between when you first joined the company? I believe you kinda talked to an expectation to accelerate growth while expanding margins. Obviously, today's expectations for Q4 revenue to be down, margins to compress goes against that. You maybe just walk us through what exactly has changed, what you've learned since you've been there? Exactly how should we be thinking about what Q4 guidance kind of means to next year would also be helpful. Thank you. Daniel Heaf: Good morning, Ike, and thank you for the question. So let me start by reemphasizing that the third quarter results and the lower expectations for the fourth quarter don't live up to the expectations that we all have for this brand. The brand is not fulfilling its potential. I joined to accelerate growth, and I remain confident that we will do so. Directly to your question, what's changed, if we unpack our Q3 performance, we declined in each of our core categories, and that really the diagnostic I gave in our opening remarks. That focus on adjacencies has resulted in underinvestment in our core and not keeping pace with our consumer. But again, you know, this strategic reset is the result of months of detailed analysis in every part of our business. It isn't a reactive reaction to the quarter. If we look across the last few years, and you guys all know this, while we've been able to drive some growth in some quarters, we've lagged the market. We lagged the beauty and fragrance sector, and the growth that we've delivered was not durable. I've talked about that, you know, since I arrived, and now is the time to address that. We've laid out the diagnosis clearly. We've laid out a very clear plan on how we're going to put the consumer back at the center, reignite the brand, begin creating innovative, coveted, disruptive products in our core categories again. And those four pillars of our strategy have already been communicated to the whole company. Work is well underway. And what gives me confidence, honestly, in this plan is that this is a pattern I've seen many times in my career and many other places, many other companies, and this is really about going back to what made this company so great but evolving to meet the needs of today's consumer. We will deliver coveted product. We will deliver elevated experience, but that change isn't gonna happen overnight. Now to the next, what this means for Q4, an excellent question, and the macro is a significant factor in our Q4 guide. Eva, can I hand to you for some more color on that? Eva C. Boratto: Sure. Good morning, Ike. So I guess I said in my prepared remarks, right, the outlook we're providing for Q4 reflects what we believe is the floor. Right? We saw material changes in trends by the macro coming into the quarter. We've seen some modest improvement since the government reopened, and we're further taking actions to improve that. That said, our underlying core performance was weak, as Daniel said. If you looked at our Q3, we were down 1%. But if you were to normalize for the expansion of the fall sale extension, we were probably down closer to 3%. So if I look forward to 2026, our current view is that we do not expect to deliver growth for the full year. These initiatives that we've laid out today will become visible to consumers throughout the year, but realistically, we don't expect it to impact the business in any meaningful way until the second half of the year. Digital is the fastest growing space in beauty. We know those enhancements are underway. As Daniel said, evolving our core product, which is critical to attract that new customer, that will start to become visible in the second half of the year. So we are here. We are working with urgency, driving the changes we need to drive that durable growth, and we'll have more details on our Q4 earnings call. Operator: Thanks so much. Thank you. Our next question comes from the line of Matthew Boss with JPMorgan. Please proceed with your question. Matthew Boss: Great. Thanks. So Daniel, maybe to pick up on that. So on the new strategy, so the last two years, the company's talked positively about adjacencies and collaborations. But now that strategy is wrong, and the focus is on the core to drive durable growth. So could you provide maybe some of the key KPIs that you're watching to gain confidence in this new strategy? And you cited the change won't happen overnight, I mean, what do you see as a reasonable timeline for stabilization? Daniel Heaf: Great. Thank you, Matt, for the question. So, first, I'm going to say that this strategy has been communicated to the whole company. Work is, as Eva said, underway. Teams are working feverishly against those four priorities, but let me show some progress that is already evident. Firstly, let's take a look at talent in a very short amount of time. We've added tremendous talent to our team where we saw gaps and where we saw a need to improve our executional ability, we've moved with speed. A couple of moves I'd highlight, we've brought in Varonis Gabai. She obviously brings global beauty experience, creative vision, and has worked at iconic brands across Estee Lauder and L'Oreal. Craig Smith, in digital, two decades of building digital transformation at Burberry, Apple, LVMH, Dan Kudrow, unrivaled wholesale experience for more than thirty years at brands like L'Oreal and BIC, and as you'll have seen in the press release last week, Mally Bernstein, a transformational retail leader who has a track record in driving incredible results across beauty and omnichannel businesses. So where we saw gaps, we've already addressed that. Next, when you think about the things that we talked about on the call that we expect to be delivering in the short term, winning in the marketplace, we know we need to be more convenient to consumers. We know that we need to be in their path, and you'll see us launch on Amazon early next year. And I mean, we already know that we're doing somewhere between $60 to $80 million of gray market sales in that channel that is brand dilutive and product dilutive. So launching there is an incredible sales opportunity, but also an opportunity to reignite the brand, that second pillar of our strategy. And then from day one, you know, we have recognized the digital opportunity, and we are moving with pace there. We relaunched our app. We relaunched the website. We have new product photography coming in on roughly about 500 of our current SKUs, elevated claims, and messaging. But we know we have got so much further to go. We are working with pace, but the opportunity there is enormous. If we think about just the penetration of digital sales. So, Eva and I were talking about this just last week. In soaps and sanitizers, the percentage of e-commerce sales in that category is about 40% to 45%. Our current e-commerce penetration is 20%. That just represents the incredible opportunity that we have to drive growth and acquire new customers in the digital channel. Now when it comes to metrics, of course, there's all the normal metrics that we're going to be tracking and delivering revenue, operating income, EPS. But where I'm really focused is in total active consumers and growth in our core categories. Underneath that, of course, we are measuring the retail equation. And if you think about digital in the most recent quarter since we've made some of the modest changes already, we're seeing an increase in traffic. We're seeing an increase in dwell time. So these are good leading indicators for the progress that we are making. Eva C. Boratto: And, Daniel, if I could just add, Matt, to your question about stabilization, I'll just say again, we don't expect growth in the full year next year, but we certainly expect business to improve as we progress throughout the year. And in the second half of the year is where more of our consumer-first plan initiatives will come to fruition with new product with, you know, further time under our belt in terms of digital. And we'll continue to update you as we progress on this plan. Matthew Boss: Helpful color. Best of luck. Luke Long: Thank you. Operator: Our next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Lorraine Hutchinson: Thank you. Good morning. Daniel, it's that the underlying business is worse than you thought when you first joined. And it will take time to return to growth. Does your plan require more investment than you had originally thought? And how should we think about margins in 2026 as we balance these investments with cost cuts? Daniel Heaf: Lorraine, yeah, you know, the reason we did such a comprehensive diagnostic across the business, it was about discovering and laying out exactly what is holding this incredible brand back, and, you know, it's clear to me that the core is weaker, and some of that was masked by promotions and collabs and anniversarying some of those adjacent product launches. So 2026 will be absolutely about investing behind our brand and our product, investing in the things that the consumer sees, strengthen our fundamentals, and position this brand for long-term sustainable growth. Now, as Eva mentioned in her opening remarks, the teams are already hard at work in unlocking $250 million of additional savings to help fund these investments, and we have, and before I arrived, this team has a strong track record in looking for efficiencies to fund investments. They've done that successfully over the last few years, and yeah, of course, you know, until we see that top-line growth, which, you know, we are pursuing with vigor, we will be pressurized by deleverage. Operator: Thank you. Our next question comes from the line of Alex Straton with Morgan Stanley. Alex Straton: Great. Thanks so much. Maybe just on the cost savings program, that $250 million in the next couple of years. Can you just go through where exactly you're trimming and how they're from the cost reduction that was pursued under Gina? And then does all that get reinvested so we're sort of in the same margin place? Or just help us with how we should think about SG&A and how it should grow in relation to sales over time as we're thinking about the out-year margin trajectory? Eva C. Boratto: Sure. Alex, this is Eva. So we're really proud of the savings that we've over the past couple of years, delivering about $300 million in savings. We're targeting, our goal is another $250 million, as Daniel said. As I think about where that will come from, continued activities like value engineering opportunities. We have further opportunities in sourcing optimization. Also, logistics operations. Daniel spoke about SKU simplification. That simplification will bring cost reductions over time, and we'll continue to optimize our overall operations to drive cost savings. As we prioritize focusing on high-value consumer focus areas. You know, we're working hard to fuel and fund the investments that are over the next couple of years. I would think about the savings that we're driving are offsetting the investments and are not flowing to the bottom line. In the shorter term, there could be some mismatches that investments outpace savings. We'll have more details. There. Our focus is to make the right investments to drive the go durable growth and do that in a responsible way. Operator: Thanks a lot. Good luck. Luke Long: Thank you. Eva C. Boratto: Thank you. Our next question comes from the line of Paul Lejuez with Citi. Kelly Crago: Hi, this is Kelly on for Paul. Thanks for taking our question. I just first, I got a two-parter here. One on the Amazon partnership. If you could just elaborate on the product that's gonna be in that channel versus the store, and if that makes you, you know, the expanded distribution, whether that makes you rethink your store growth and your store base. And then secondly, on free cash flows, you know, still very strong free cash flow year despite weakness in the business. Any color on how we think about free cash flow for 2026? Any kind of floor you could provide there would be great. Thanks. Daniel Heaf: Thanks so much, Kelly. Let me just go, I'll start by just touching on the Amazon partnership. Obviously, that's part of our third strategy, win in the marketplace, and that is about being in the path of the consumer. As I said, in answer to an earlier question, we know our consumer is already there. We are doing millions of dollars of sales in that channel. We're going to start with a small assortment. It's really gonna be some of our evergreen product, and we're really going to make sure that we get that absolutely right, that we test and learn, that we build the right PDP, the right ratings, and the reviews, that we're offering the right fulfillment services before we start to thoughtfully expand that assortment with new products that will be targeted at acquiring a new consumer. But we're feeling very optimistic about that component of our strategy. And maybe, Eva, if I hand over to you on the free cash flow. Eva C. Boratto: Thanks, Kelly, for the question. I'll just reiterate, we are a strong cash-generating business. And overall, our capital allocation priorities remain the same. Investing in the business, and you've heard us say, that those investments will increase next year to support our transformation. Maintain a strong balance sheet, and return cash to shareholders, which we've done over the last three years returning $1.5 billion. We are headed into our biggest quarter of the year. So as I think about cash for next year and projections for next year, we'll come back to you in February on that, but we remain focused on continuing to focus on working capital and driving cash out of the business. Luke Long: Thank you. Operator: Our next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Mark Altschwager: As you pivot back to the core categories, can you talk about the innovation pipeline over the next twelve to eighteen months and how you're thinking about the balance between legacy franchises and then some of the ingredient-led or demands for the younger consumers you're targeting? Daniel Heaf: Yes. Thanks, Mark. So let me start by saying that in our core categories, we remain the market leader. It is without question where we have the greatest right to win, and we started this work for our strategy in designing those two consumer muses. It is not about leaving our current customer behind and reaching for a new consumer. It is about serving both. If you think about Jen, she is probably more atypically the kind of customer that we have today. And we believe that we can elevate our product proposition and continue to attract more of those customers as well as reaching for a new younger consumer, the Zoe, if you like. And what she requires is, as you say, more ingredient-led, cleaner, stylishly or more sophisticated design in packaging. And that is where our investment is headed. So, you know, without question, we have underinvested in our core. Let's take a look at our packaging. Some of our core forms, I don't think have been restaged for a decade. Right? That will change. We are already building a very strong pipeline of innovative new concepts, and we expect them to come to life in the back half of the year. And I'm excited about what I'm seeing from the product design and merchandising team. Eva C. Boratto: And Daniel, if I could just add, in addition to the innovation, we are taking immediate actions on the innovation front. And we've changed, and we're involving consumer testing much earlier in the process to ensure as we shape this innovation to attract that new consumer, we are hitting the mark. As Daniel said earlier, we're making choices to exit categories that haven't been successful for us, that increase complexity, such as men's grooming and hair, and we'll continue to work to optimize our portfolio as well. Daniel Heaf: Yeah. And Mark, I just wanna follow-up on your question. You know, you talked about the new products, and you also talked about let's call it the core or the carryover product. Which in some ways I think hints at what we have to do. As I said in my opening remarks, we have these fragrances. It's been one of the big things that was upside on what I thought when I arrived. Some of those biggest fragrances are doing over $250 million a year annually, and they sit on a shelf in the less hand side of our store, and they operate somewhat like an annuity. Customers come in and they buy them. But we haven't treated them with the reverence and with the marketing they expect. So part of that second pillar of our strategy is reigniting our brand, and part of that is about showing the reverence for those iconic franchises, those iconic fragrances, building a world around them, taking them out to new consumers in alternative distribution channels. I'm sure that future Zoes and future Jens are going to love some of the products that we already have, and it's just about making the big bigger. Mark Altschwager: Thank you. Quick follow-up for Eva. Just the earnings reset here, leverage ratio is edging higher. How comfortable are you with the leverage ratio medium term and just any shift we should think about and how you're balancing buybacks with potential debt reduction? Thank you. Eva C. Boratto: Sure. We've made tremendous progress over the last couple of years, bringing the leverage ratio to our target two and a half times level. This challenging period will put pressure on that. We will, you should expect we will pay our debt down that comes due in January 2027, and we'll work vigilantly to bring our balance sheet to the position that we want to. And as I said earlier, our capital allocation priorities are the same. Operator: Our next question comes from the line of Adrienne Yih with Barclays. Adrienne Yih: Daniel, thank you so much for the detail. This is really refreshing to hear this strategy and the movement of the business. But in doing so, I guess, can you help us understand the timing of the exit of the non-go-forward categories? Is that sort of like a Q1 thing? I'm sure those hangover inventory. What's the best method of exiting those categories without kinda further putting kind of brand pressure, right, as you kind of exit those? And then within the non-core categories, you know, we had talked about SKU rationalization, and, obviously, you're talking about focusing on fewer of the things that mean something. So how many of the kind of alternative scents and kind of that newness that you bring to, you know, the seasonal scents will now go away to help focus. Thank you. Daniel Heaf: Okay. Thank you so much for the question. Let me just underscore that everything that we do at this company is subject to rigorous testing. That is something that we have instigated, as Eva said, as part of our product development process, and that is true the way we think about our assortments. So we're not pursuing a SKU rationalization target for the sake of having a target. We're pursuing it because the customer tells us that our proposition in-store is too overwhelming and confusing. So this is the outcome that we want is to be able to entice new consumers into our stores and onto our digital platform. They can find what they want easily and fall in love with what they like easily. So I think about it less as a number to hit and a set of categories to exit than I do about reaching a consumer outcome. That said, we'll begin to rationalize our SKUs and begin to exit these categories in spring, so in the first quarter of next year. And we will ramp that up with testing and as we move through the balance of '26. But it's really test, learn, and make sure that we are bringing the new products to market, that we're elevating, as I said, some of those new, some of those core franchises that are already large so that there were filling the gap. It's less about, I would say, hitting the number. Eva C. Boratto: And, Adrienne, your question on hangover of inventory. As you know, we have two seasonal, two semiannual sale periods that we're able to use to clear inventory. The company has a long history of successfully doing that. Despite the pressures in Q3, we were able to exit Q3 with clean inventory as we used that fall sale period. So we'll be really thoughtful on our inventory management and our decisions around timing and when to exit. Adrienne Yih: Okay. Helpful. And then, Eva, just a little bit of help on the exit categories. What's the aggregate dollar amount that they contributed in 2025? And how should we think about the wraparound tariff pressure into 1Q? Thank you. Eva C. Boratto: Okay. So I'll take the tariffs first. Overall, the tariffs I would think about on a full-year basis, it's basically comparable to 2025. In 2025, we had about a 100 basis point of impact to the year. Expect that to be pretty comparable in 2026. Now the timing of that first half will have a bit more of a headwind given when tariffs started, with the reverse impact in the second half. In terms of the dollars of the exited categories, we'll have more to say as we build toward 2026. We don't expect that to be a meaningful drag. They're not, you know, the problem is those adjacencies haven't grown in the way that we had expected, and they are not significant, the ones that we are starting to take out. So we're looking at every merchant does. SKUs that are not contributing that much and SKUs that are not productive, and that's where we're starting in that long tail. Luke Long: Thank you. Operator: Our next question comes from the line of Jonah Kim with TD Cowen. Please proceed with your question. Jonah Kim: Thank you for taking my question. Daniel, just on the competitive dynamics within the presence and body mix category, I know a lot of new entrants have entered the category in the last few years. How are you assessing the competitive dynamics there? And then you also mentioned shortening lead times. Which category needs more work in your view? Thank you so much. Daniel Heaf: Right. So, yeah, we operate in a very competitive sector. I love the sector. It still continues to grow. It's a young sector with youth and innovation at its heart, and I think that obviously we operate as the market leader in these categories. We have a right to win. We're building on a solid base. For me, some of the problems that we have in our product are what I would call perception problems. We have fantastic formulations that are clean, but we have not communicated those benefits consistently and effectively. So, we know in our product testing with consumers and some of the blind that we do that we far outperform some of those competitors that are often talked about, but we don't market it correctly. We don't put it in elevated packaging. And as a result, the consumer doesn't see us as having the attributes that they need. And then in some of the areas that we're looking at, we will launch new forms and new vessels and those types of things and new formulations. And those sort of things take longer than just chasing into demand, which is what our supply chain is really good at. But together, the teams at Bath & Body Works, Inc. and our fragrance house partners and our manufacturing partners, we are all working day and night to make sure that we are bringing this new innovation to market, and we're looking forward to starting that journey in 2026. Eva C. Boratto: And, Daniel, if I could just add one thing? As you look at these categories that we're in, that we're all excited about and are growing categories, growth in digital is outpacing, for sure, the market. So the strategies that we're talking about today and the investments we're making in our own digital experience as well as alternative distribution and our presence on Amazon, we think are key elements to capturing and bringing that new consumer in as well. Daniel Heaf: And part of that, we've talked about being in the path of the consumer, and that, of course, is what drives everything in this business now, putting the consumer at the center. But, you know, I'm looking forward to competing with those competitors on that playing field. Right? We have left Amazon wide open for competitors to play. That is changing. We have left other wholesale partners wide open for those competitors to play. That is going to change also. So to me, I'm looking forward to putting our product front and center, telling bold and emotive stories, and winning in the full marketplace. Jonah Kim: Got it. Thank you. Operator: Our next question comes from the line of Jay Sole with UBS. Please proceed with your question. Jay Sole: Daniel, I wanted to just follow-up on that last question. Is there a tension at all between entering Amazon and potentially other mass market channels and sort of maintaining an iconic brand image? And if so, how do you feel about navigating that? Daniel Heaf: No. I think about it not as either or. I think you look at some of the world's luxury brands, and they're on Amazon. And I think it's as much as a sales opportunity as I think it's a brand opportunity. I can't wait to tell an elevated story about this brand in third-party channels, and in particular, the largest shop in the world on Amazon. Why would I believe to do to change product perception? Will be in all channels. Particularly on social channels, actually, and that work, that what I call brand reignition work and brand reigniting work, is well underway. And by that, I mean, have seen visuals. We have seen photography, we have seen tone of voice. And everybody who's seen it is blown away by it. Customer testing just this week and our consumers, both current and future, love the direction that we are taking this brand. Jay Sole: I understand. And maybe if I can just on that. I mean, what about just the concern that, you know, entering Amazon will cannibalize traffic into the stores? And, you know, obviously, create a separate issue. Daniel Heaf: Well, our product is already on Amazon. We're doing $60 to $80 million roughly in sales on that product to the of our product from gray market on Amazon today. So just going there and making it a brand accretive experience, making it a profit accretive experience is the first thing that we look to do. And actually, I think that telling the story of our brands across digital channels will drive traffic in stores. And then finally, we have a very wide assortment, maybe too wide an assortment in places, and so we have an opportunity to use that assortment thoughtfully across multiple channels to drive differentiated propositions to acquire different types of customers. And so I think that this strategy is wholly accretive. Operator: Thank you. Our next question comes from the line of Olivia Tong with Raymond James. Please proceed with your question. Olivia Tong: Great. Thanks. Good morning. Really helpful diagnosis of the areas of improvement. And I know Amazon was something you've been hinting at for some time, so I'm sure you're excited to get going on that. A couple of questions with that. Can you talk about the sales expectations and the margin profile of launching on Amazon? You obviously mentioned the $60 to $80 million in sales already. Clearly, your hope is to go above that, but just trying to think about the arc of building on that and then the margin as well, whether that you expect that to be similar margins, dilutive, accretive, that would be helpful. On the exit of the categories, the ancillary categories that you launched into a couple of years ago, could you help us understand a little bit of the decision making as to why not continuing to run the business? Of course, it's a distraction, but it is offering some sales. And a lot of the heavy lifting, more importantly, has already been done. And I would imagine that, you know, that's something that could work in other channels. And then, Eva, one for you is just around how we should think about the cash flow progression next year. You talked about earnings, but would love to hear your views in terms of the working capital in particular given logic and continuing channels, clearing out the old inventory, how you think about the arc in working capital. Thank you so much for those questions. Daniel Heaf: Great. So, I'll start on Amazon and then move to adjacencies, then I'll hand to Eva for cash flow. On Amazon, we're very excited about the opportunity, as I'm sure you can hear. We believe it's the right thing to do for our consumer, and it sits squarely in our third pillar of our strategy. The plan is to go slow to go fast. Right? We're gonna launch with a tight assortment. We're gonna make sure that we are optimizing those pages for the Amazon consumer, that we're providing the right level of product description, that we're providing the right level of PDP, that we build up a really incredible bank of ratings and reviews. And as we start to gain success in that channel, we will build out the assortment over time. But as I said in my opening remarks, our owned channels will remain the widest expression of our assortment and the purest expression of our brand. So we'll be very careful to make sure that we're using that channel to attract a new consumer or a lapsed consumer, and we're not just taking the assortment, handing it over to a different channel, and expecting, you know, and taking a margin hit as a result of doing that. So go slow in the first half to speed up as we move sequentially through the year. And then when it comes to adjacencies, you know, I wanna just clarify what I said. We are no longer going to invest in adjacencies. We are going to invest in our core. We have told you of two categories that we plan to exit in hair and men's grooming. We haven't, at this point, signaled that we are exiting whole adjacencies. But we, you know, I actually agree with your question. What is the most thoughtful way to use the money that has been used, that has been spent in these areas to potentially build this business over time, but it won't be something that we're continuing to invest in formulas, in packaging, and in other ways. We've got to get back to the core. We aren't simply just abandoning those adjacencies. We intend to maximize the sales opportunity from those. Eva C. Boratto: Yeah. And on your cash flow progression for next year, as a reminder, and I'm sure you know this, Olivia, right? We generate all of our cash in the Q4 period. We typically like to start the year with about $500 million of cash to fund the business through the first nine months, in inventory throughout the year. We're building our plans for 2026 now. As I spoke about, there will be greater investments related to this transformation. That could put a little bit more pressure on that first nine months of next year. But we'll manage our cash effectively throughout the year. On the margins for our adjacencies in Amazon in particular, it's our goal to have a comparable margin structure over time. We're gonna test and learn our way into this, as Daniel said. Luke Long: Thank you. Operator: Final question this morning comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question. Dana Telsey: Hi. Good morning, everyone, and good to hear of the plan. As you think of the loyalty customers, which I think number 39 million the last time we heard, how do you break them down through the transformation strategy that you put in place and the diligence you've done, what are you seeing about that consumer? What are you learning? Who's coming? Who's going? Any updates there? Daniel Heaf: Yeah. Thanks. I'll start, and maybe, Eva, you can follow-up a little bit more detail. So as I've always said, our loyalty program and that loyal consumer that we have today is a competitive advantage, and we're gonna continue to build on it. In fact, I think in the recent 14 million loyalty customers. So it is a competitive advantage. We're going to continue to leverage it to drive sales, to drive building the basket of our existing consumers. Eva, maybe if I can give you ask you for a little bit more detail. Eva C. Boratto: Sure. Sure. I think that loyalty customer, we've continued to drive the strongest retention rate. With our changes in our loyalty program, we've seen an increase in reward redemption. That brings along with it an incremental spend. We're seeing good visits, good spend across all of our deciles. And the team, the marketing team, the loyalty team really continues to focus on how can we continue to engage and excite those very valuable loyalty members that drive 80% of our sales. Dana Telsey: Got it. And then with the reset going on, collaborations have been a big focus over the past few years. With the refocus on the core, how do you see the opportunity for collaborations? How do you maximize the strength of the product with the opportunity to enhance with sales or margins with collaborations? Daniel Heaf: Right. I appreciate the question. So, I can clarify what our collaboration strategy is. So make no mistake, we love collaboration. Right? They are a way to drive energy, equity, and excitement and buzz into the brand. And we actually have lined up for the next fiscal, some really, really exciting collaborations. But strategically, collaborations should be used to drive energy into the brand and energy into some of those franchises and collections. Energy that builds everyday luxuries, energy that builds White Barn, energy that builds the seasonal collection like fall, not necessarily something that sort of stands alone and is there to carry the quarter. You know, we don't wanna get into positions where a collaboration like Villains was something that was the difference between where we guided our Q3 and where we ended our Q3. We want to use them more tactfully, more thoughtfully to drive long-term brand equity into our brand, into our franchises, and into some of those iconic fragrances that I've referenced in today's call. Operator: Thank you. Ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to Mr. Heaf for any final comments. Daniel Heaf: Well, thank you, everybody, for joining us this morning. Thank you very much for your thoughtful questions, and just let me restate, I came to Bath & Body Works, Inc. to accelerate growth, and I remain absolutely confident in our ability to do so. Work to restoring our brand and achieving sustainable growth, as you've heard on today's call, is already well underway, but it will take time and focus. We've aligned our teams to the vision and the strategy, creating disruptive and innovative products, reigniting our brand, winning in the marketplace, and operating with speed and efficiency. To attract a new and younger consumer to the brand and unlock what I know will be the next era of growth for this brand. You've heard today that we are driving early progress across those priorities, and we look forward to sharing more updates in the quarters ahead. I want to say a special thank you to our associates and our store teams for delivering joy this holiday season. We have the platform. We have the plan. And we absolutely have the team to win. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Non-GAAP results during this conference call and in our earnings snapshot slides have provided schedules reconciling these results to our GAAP results in our earnings press release. All of these materials are posted on our website. Also, please note that all revenue figures and comparisons discussed today will be presented in constant currency unless otherwise noted. All forward statements are made as of today, and we disclaim any duty to update such statements. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs, and projections will result or be achieved. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties, and other factors that can cause actual results to differ materially from our expectations. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our filings with the SEC. And with that, I'll turn it over to Robert. Robert Kyncl: Thanks, Kareem, and hello, everyone. If you hopped on the call early, you just got a taste of the range of our artist roster. From the massive breakout track from Somber to the latest chart toppers from Cardi B and Twenty One Pilots, to the resurgent Goo Goo Dolls' 1998 hit "Iris," which currently sits in the global top 15 on Spotify. It's an incredibly exciting time to be at Warner Music Group Corp. Against the backdrop of a rapidly changing landscape, we've improved our market share and delivered profitable growth all while realigning our company to capitalize on the tremendous set of opportunities we have ahead. Our growth plan continues to bear fruit; we've seen steady global market share gains over the past year. In the United States, we're up 0.6 percentage points over the prior year quarter according to Luminate. Globally, our share of the Spotify top 200 has jumped by around six percentage points versus fiscal 2024. And for the entire quarter, we had the number two market check. Importantly, carrying this momentum into fiscal 2026 as we continue to execute on our strategy. I'll dig into this in more depth but first, let's cover our Q4 highlights. I'm pleased to say we've seen acceleration on the top and bottom lines, driven by impressive performance across the company. Total revenue grew 13% and on an adjusted basis recorded music subscription streaming increased 8.4%. These results prove that our strategy is working. Let me paint you a picture from just a year ago when both the industry and Warner Music Group Corp. were in a much different place. A year ago, Warner Music Group Corp. was facing market share pressure. Today, we've laser-focused our resources and investment on the highest return areas of our core music business. This has led to market share gains that have translated into strong measurable improvement in our financial performance. A year ago, the music industry was navigating the transition from just volume-driven streaming growth to growth that is driven by volume and wholesale price increases. Today, our new agreements with key DSP partners better reflect music's ever-growing value and provide greater certainty around our economics. A year ago, our operational structure wasn't optimized to navigate a more globalized and digital environment. Today, we focus and simplified our organization to deliver greater intensity and impact. I'm pleased with the progress that we've made and I'm truly grateful to our leadership team, our operators across the globe, and our amazing artists and songwriters for pushing Warner Music Group Corp. to new heights. All of these actions have better positioned us to execute quickly and effectively on the opportunities we see ahead, and to maximize the value we deliver to artists, songwriters, fans, and shareholders. Let's turn to the impressive run of hits we've been seeing with our new releases as well as our catalog successes. On new releases, in September alone, we had back-to-back number one albums in two of the world's biggest music markets. Thanks to Cardi B and Twenty One Pilots in the United States and Ed Sheeran and Biffy Clyro in the UK. On the international front, we had number ones in China, India, Finland, Italy, and Spain. And on Billboard's Latin Airplay chart. And in a terrific vote of confidence, our legendary superstar Madonna has returned to where it all began for her, Warner Records, with a new album coming in 2026. Kareem Chin: The performance of our global catalog division in Q4 showcased our ability to revitalize our timeless legacy. Robert Kyncl: Making it relevant to a range of new audiences. A major highlight was the release of the 1973 album by Fleetwood Mac's "Tusk" featuring Lindsey Buckingham. A targeted marketing campaign capitalized on fan demand sending it to number 11 on the main Billboard album chart and number six in the UK. A remarkable achievement for an album more than a half-century old. Warner Chappell continued its resurgence with our songwriters contributing to seven of Luminate's mid-year top 10 most streamed songs in the world. And in the United States. And multi-Grammy winner Amy Allen held the top spot on the Billboard Hot 100 songwriters chart for nine weeks in 2025. These Q4 success stories capped off a year of achievements. During fiscal 2025, our recording artists sat atop the Billboard Global 200 for twenty-two weeks. That's a 42% share of the number one spot on the chart. With Atlantic, Warner Records, and Warner Chappell hotter than ever, we're delivering success across geographies and genres. Next, I'd like to cover our focus on increasing the value of Streaming's growth formula is made up of three components: market share, global subscriber growth, and wholesale price. Against the backdrop of healthy subscriber growth and a market share improvement, we've also made progress on wholesale price. Since the beginning of 2025, we've signed renewals with four of the largest DSPs. All of these deals have wholesale price increases, providing certainty around economics setting up monetization models for the future use cases. A critical component of ensuring we grow the value of music is addressing the promise as well as the potential risks of generative AI. First, we need to acknowledge the reality that generative AI technology has arrived and it is not going away. So we need to be proactive and lean into the future. The music industry is no stranger to disruption. From the invention of the phonograph, to the Napster era, to the rise of the day streaming ecosystem, the introduction of new technologies over many decades has posed both challenges and opportunities. AI represents another defining moment and as always, our focus remains on protecting the rights of our artists and songwriters, while simultaneously growing new revenue streams on our behalf. With this in mind, we've developed a set of principles that will govern how we engage with AI platforms. We will only make agreements with partners who commit to licensed models, while securing economic terms that properly reflect the value of music. Crucially, our artists and songwriters will have a choice to opt in to any use of their name, image, likeness, or voice in new AI-generated songs. We believe that the combined power of our music with innovative technology drives greater engagement and interactivity for fans, and will result in significant incremental revenue over time. I'm pleased to say we've already done deals with partners like Oudio, Stability AI, and Clay, that are consistent with these principles that I just outlined. Our ability to sign three deals with three new companies in quick succession highlights the attractiveness of the music business, and the opportunity to create value through new technology. These agreements enable us to get ahead of the game ensuring that our artists and participate fairly in the AI revolution. As I mentioned earlier, we've taken major steps to optimize our organization to drive efficiency and effectiveness. All while reaccelerating growth and gaining market share. Among our recent changes, are some moves designed to foster closer collaboration. We've directly aligned Atlantic and Warner Records in the UK with their counterparts in the US. Creating a more seamless transatlantic approach to breaking artists globally. In Italy, we organized our operations into two frontline labels, Atlantic and Warner Records, mirroring the label structure in the US and the UK. We've also unified our Australasia and Southeast Asia businesses to create bigger opportunities in this region. Additionally, we streamlined operations and strengthened the impact for artists in Central Europe, by merging Benelux with Germany, Switzerland, and Austria. On the tech front, we've continued to modernize our infrastructure including strengthening our global digital supply chain to position the company for further scale and growth. We've implemented tools to help artists and songwriters make faster, smarter data-driven decisions about their careers, as well as tools for employees to be better informed and more effective. Our emerging stars are building the catalogs of tomorrow laying the foundation for future stability. While our recent superstar releases have set us up well for 2026. In Q1, we have highly anticipated new albums from Fred Again, FKA Twigs, Not For Radio, Ayanna Kamura, and Robert Plant, along with deluxe album additions from Ed Sheeran, Cardi B, and Pink Panthers. We also have new singles from Charlie XCX, Charlie Puth, Jisoo, Hilary Duff, Tiesto, Alex Warren, David Guetta, and Teddy Swims, and many, many more. We're proud of the progress we've made in 2025 and I look forward to carrying this momentum into 2026 and beyond. And now I'll pass it over to Armin. Armin Zerza: Thank you, Robert, and good morning, everyone. First, I'd like to thank our teams around the world for the tremendous work they have been doing to accelerate top and bottom line growth while we organize our company for the future. As Robert mentioned, Q4 has been a quarter of acceleration as we delivered record high quarterly revenue as well as our highest year-over-year growth in nearly two years. This reflects steady progress on market share, with notable improvement in the second half of the fiscal year. In quarter four, total revenue growth of 13% reflects double-digit growth across recorded music and music publishing. This was highlighted by a sequential improvement recorded music streaming and 64% growth in artist services SWMX led merch campaigns for Oasis, and My Chemical Romance. These projects demonstrate our capabilities to support our artists capitalize on the opportunities grow revenue streams beyond core music. More on that to come. Recorded music subscription streaming grew 8.4%, underpinned by global subscriber growth and supported by a strong market and charge share performance. As a reminder, calendar year 2026, will start to see the impact of wholesale price increases from our new DSP deals. Which should provide incremental tailwinds. Ad support streaming grew 3% on an adjusted basis by the performance of our music, and the timing of certain DSP payments. Music publishing grew 13% driven by double-digit growth across performance mechanical, and sync. Adjusted OIBDA rose by 12% and our margins declined slightly due to revenue mix. As a significant growth in artist service revenue carries a lower margin profile. For full year 2025, we delivered total revenue and adjusted OIBDA growth of 8% on an adjusted basis reflecting our impressive recovery from the first half. This was spot added by high single-digit recorded music subscription streaming growth. Also achieved operating cash flow conversion of 47% we increased our A and R investments. We remain committed to delivering our target conversion range of 50% to 60% over the long term. As of September 30, we had a cash balance of $532 million, total debt of $4.4 billion, and net debt of $3.8 billion. Our weighted average cost of debt was 4.1%, and our nearest maturity date remains 2028. With our strategy in place, a clear road map to deliver higher, more consistent growth, and drive shareholder value, we are extremely excited about the opportunities ahead. We're operationalizing the strategic pillars that Robert laid out, through several key priorities and initiatives. Which I shared on our last earnings call. I'd like to provide an update on our progress. Robert Kyncl: First, Armin Zerza: On investing into core music to accelerate growth, we're making progress across geographies and vintages. Recall, we prioritized investments in markets with the most attractive return profiles. As a result, we are now growing market share in every key region. Including the US, the largest music market of the world. Additionally, our balanced approach to driving performance across vintages, has resulted in higher new release market share than by Atlantic, as well as a jump in global catalog share. As Robert mentioned, this has improved our Spotify top 200 share by six percentage points. In addition to these investments in our core, we see tremendous opportunity to accelerate growth in distribution and direct to consumer. We have a large and growing distribution business today, And under new leadership, we have been building or acquiring new capabilities to accelerate profitable growth in 2026. We also see tremendous opportunities to capitalize on the passionate demand from fans all over the world for physical music direct to consumer offerings. Areas adjacent to our core music business. More on this in upcoming quarters. Second, on our commitment to driving efficiency to free up more capital to invest, and enhance our margins, we are on track to deliver against our reorganization and related cost savings program of $200 million in annualized savings in 2026 increasing to $300 million in 2027. Third, we committed to driving incremental growth and value creation through accretive M&A. We have developed a robust deal pipeline, and look forward to sharing updates in the near future. These efforts will be turbocharged in a capital efficient manner through our joint venture with Bain, but also through organic investments as we improve free cash flow. Finally, our focus on thoughtful capital allocation is delivering. As the investments we are making in the highest repertoire markets which include the US, UK, Mexico, China and Japan, are delivering share growth. In addition, we're improving capital spend efficiency And with the bulk of our major tech investments behind us, we should see an improvement in our free cash flow starting in 2026. Looking forward, we see an attractive formula for us to drive shareholder value and are excited to be operating in a healthy industry with an immense set of opportunities. Macro factors that underpin our outlook include robust global subscriber growth, a rising wholesale price environment, underpinned by contracts that better reflect music's increasing value, new premium offerings from DSPs, and AI emerging as an incremental top and bottom line opportunity for the music industry and our artists and songwriters. We are poised to capitalize on this environment with a strategy will see us intensify our investments to deliver more consistent higher growth improve margin and drive shareholder value. For 2026, we expect to see strong top line growth which we look to bolster through focused organic investments initiatives in our core music business and high impact accretive M&A. As well as contribution from adjacent areas such as distribution, and direct to consumer offerings. In addition, we will drive bottom line growth via operating leverage and our cost savings plan. Which will contribute 150 to 200 basis points of adjusted OIBDA margin improvement. We expect savings to increase sequentially as we progress through the year. And finally, we see tremendous potential in new incremental growth areas particularly in AI licensing deals which we plan to discuss in future calls. In conclusion, we are proud of how we rebounded from a challenging first half in 2025 to deliver solid top and bottom line growth in the second half. With strong momentum as we head into 2026. We look forward to providing regular updates as we meet our milestones. With that, take your questions. Kareem Chin: Thank you. Operator: Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Kutgun Maral with Evercore ISI. Your line is open. Kutgun Maral: Great. Good morning and thanks for taking the question. There's a lot to unpack, but one area that I'd love to get your updated outlook on is with rights monetization, especially in the context of rising music engagement across platforms? We've seen the pace of innovation and product rollouts across the DSPs accelerate meaningfully everyone from the streaming services to artists to even a ticketing platforms like Ticketmaster is exploring new ways to leverage AI. All with the goal of driving deeper engagement. That said, there's an ongoing debate between those who see the labels as uniquely positioned to benefit from these innovations and those who believe that the labels will remain maybe more passive beneficiaries and therefore not necessarily see upside. So Robert, you've already touched on parts of this, but as you've gone through the latest round of DSP renewals, clearly continue to engage with other partners across the ecosystem, how are you thinking about Warner Music Group Corp.'s role in capturing incremental value this next chapter of industry growth? Thank you. Robert Kyncl: Thank you. I will start with the word incremental that you just mentioned. We see this as an incremental sorry. We see this as an incremental opportunity for not just for Warner Music Group Corp., but for the music industry as a whole. Armin Zerza: Secondly, Robert Kyncl: We are determined and have decided that we're the drivers, not the passengers, of this incremental opportunity. The reason for that is the space is moving lightning fast. There's a great demand for IP. There's a great demand for stardom. And companies like ours who are working to represent both of those need to drive this change. That's exactly what we decided to do. I posted a blog post last night in case not all of you got a chance to read it, please do. It's listed on our website. It outlines our principles under which we focus and and guide our deal making in the age of AI. There are three simple principles. We'll do agreements with partners commit licensed models. We'll do it on economic terms that properly reflect the value of music, what I mean by that is that our deal terms are tied to usage and revenue growth. And importantly, that artists and songwriters have the opportunity and right to opt in for any any new songs that implicate their name. Image. Likeness, and voice. We see this as an incremental opportunity because the past has shown us that changes like this create one. If you go back twenty, twenty-five years, with the democratizational distribution, It has unlocked unlimited shelf space. Which has unlocked deep personalization of music for users, which has unlocked growth and volume of people signing up for subscription services. Enjoying them. And it has unlocked tremendous value in catalogs and music IP overall for all of us. It has been a net positive force that has that has created a lot of value. See AI as the the the marketization of creation. And we we believe that it brings what we've lacked. Which is interactivity which is generally correlated with value creation. If you look at across all kinds of media industries, Armin Zerza: The more Robert Kyncl: Forward you are with your content, you focused on it and watching it or whether you're interacting with your hands and your fingers, or whether you go in person and engage, the value per hour goes up. That's why we're focused on it. That's why I believe this is a tremendous incremental opportunity for us. And, and we are going to be in the driver's seat. In terms of our approach, in addition to our three principles. Our strategy is simple. We have three l's. Legislate, litigate, and license. And you you're familiar with our legislation efforts like the no pics app, that we're working on in DC. On the litigation front. We're also familiar with various lawsuits which have been out there. But we use those first two in order to achieve the third, which is license, because that is the most powerful lever chart the path for the future for our artists and songwriters. To drive the incremental value and to make sure that we have our fair and correlated share of the usage and revenue driving. So we're really excited about this. Company is energized. And Armin Zerza: Yeah, Robert Kyncl: Onward. Kutgun Maral: Very helpful. Thank you. Operator: The next question comes from Benjamin Black with Deutsche Bank. Your line is open. Benjamin Black: Great. Good morning. Thank you for taking my questions. Two for Armin. Armin, could you talk about the building blocks behind your expectation for top line growth in 2026? Maybe dig into how you're thinking about paid streaming growth, just given the broader expectation for wholesale or per sub minimum increases beginning in calendar 2026? And then secondly, on margins, cost savings aside, how much margin expansion do you expect to deliver organically next year? And I mean, what's your longer-term margin target? Perhaps talk us through the puts and takes in achieving that as you look to drive incremental revenue growth in lower margin areas like distribution and DTC? Thank you very much. Armin Zerza: Well, first of all, Ben, Robert Kyncl: We are, first, very, very happy with the results we delivered Armin Zerza: In the last two quarters, not just the last quarter. And as it relates to streaming, we believe that we results are pretty much reflective of what we should expect in the '26. Now to your question on additional growth building blocks, starting in calendar year '27, sorry, '26. There are a few that I'd like to mention. The first one is that in addition to their market share momentum that we have seen in global subscriber growth, we will, of course, benefit from the contractual wholesale price increases that we have agreed now with several top ESPs. As Robert mentioned, we have actually agreements now with four of the five top ESPs in 2026. Start to to start to increase wholesale price prices starting in calendar year '26. Second area is that in addition to the investments that we have been doing on high ROI markets and projects, we have a very robust pipeline of accretive M&A that will start to materialize in 2026. Including on many projects that we have been working on, throughout joint venture with Bain. The third area is that we are working or have been working on expanding adjacent areas. One area I'd like to mention is distribution. You know, we have a new leader there, and we've done a lot of work to better understand how we can accelerate growth in this area. We do not feel confident that we can accelerate growth in that area starting in Colombia at '26. And last but not least, there are many upside opportunities that are not included in our guide, like premium offerings from DSPs. And, obviously, AI is an opportunity as Robert just discussed. Finally, from a leadership perspective, we are very confident that we have now leadership in place across the company that will help us deliver and accelerate growth. Now to your margin question, Ben, we have a very strong program to improve margin over time. The first program we are implementing is a big strategic reorganization. And as you have seen, why we're doing this over a reorganization, we're actually accelerating growth. That program will deliver $100 million of savings in fiscal year twenty-six and up to $300 million in fiscal year twenty-seven. So we're actually very, very comfortable with our guide of margin expansion of hundred and fifty two twelve basis points next fiscal year. In addition to that, we will improve margin through operating leverage. There are a few areas which we are leveraging. The first one is as we accelerate our high margin streaming business, margin will improve The second one is through our work on on accretive M&A, especially catalog M&A, which is higher margin accretive businesses will improve margin. And last but not least, is repricing with float. Through the margin. So net, we're really, really confident in our margin building book, not just from cost savings perspective, but also overall from our organic perspective. In fact, in the mid to long term, we are targeting margins in the mid to high 20s. And you shouldn't be surprised about that when you look at our EBITDA margins in fiscal year twenty twenty-five. Closed '25 with an EBITDA margin of about 25%. As you know, EBITDA includes our normalized cost savings, We're now basically delivering over the next couple of years. And so you should expect over time that our adjusted OIBDA will approach our adjusted EBITDA margins in the mid-20s, and then we'll start build on that to continue to grow margin. Benjamin Black: Thank you. Very, very helpful. Operator: The next question comes from Peter Supino with Wolfe Research. Your line is open. Peter Lawler Supino: Good morning. I wondered if you would talk about your successful market share gains over the last year Maybe discuss what you're doing differently Benjamin Black: And if you could provide any context on how each of your flagship Peter Lawler Supino: Frontline labels are performing. Thank you. Sure. Thank you. So first, Robert Kyncl: I'm just pleased to say and keep on reiterating that our strategy is working. It's great for it to show up in the results and and see the progress that we're making You know, our market share hasn't grown just in one or two places. It's really been broad based. Across both our flagship labels as well as all of our regions. In the US, we've increased by 0.6% The U. S. Year on year in Q4 twenty twenty-five. This is according to Eliminate. And we had similar improvement around the world in EMEA, LatAm, and APAC. And then and plus six percentage points on Spotify top 200 in fiscal twenty-five And notably, we've occupied the number two spot for nearly half the year there. Which is incredible. So it it is really great to see the the company firing on all cylinders creatively. As well as financially. And, it really has come come down to a lot of focus on artist development, which obviously has been there. You know, for for a long time. It's it's in our DNA, and we continue to lean lean into it. But we also focus on our distribution business, focus on our catalog, We've had a lot of success in terms of revitalizing our catalogs, seeing excess of Buckingham Mix, which was originally released in 1973. Being 11 on Billboard Album chart and six in The US, it's incredible to see the power of IP and what it is that we can do with it. In terms of our returning artists, Cardi B and Twenty One Pilots being number one our albums in The US, and Ed Sheeran and Biffy Claro in The UK. And, obviously, with know, I mentioned our our development stories with Alex Warren you know, spending ten weeks on number one. At number one on Billboard Hot 100 and Global 200 and Somber. Number one on Spotify Global Chart, and set there for three set in the top three for over ten weeks. So it's it's just broad based. Know, artist opened, returning artists, catalogs, all regions. All divisions. So it's just been lot of work that really started to hit together. And and we just we have really focused on our operations, making sure that we're making the right decisions. Around capital allocation. And and that we have strong pipelines both for our artist releases as well as for M&A, as Armen mentioned. So our playbook is working and our investment as our investment is a key priority in markets, and it's really bearing fruit. Operator: The next question comes from Michael Morris with Guggenheim Securities. Your line is open. Michael C. Morris: Thank you. Thanks for the details and for taking my questions. Wanted to follow-up on some of the growth components that you highlighted as we look into 2026 and beyond. Benjamin Black: First, on your M&A plans, Armen, you alluded to M&A as a potential accelerant to growth in the coming year. And can you share more detail on what we can look forward to and how much of an incremental growth driver this can be for you? And then also you just mentioned distribution as a strategic focus area. And a potential driver of growth as early as 2026 as well. So can you expand on this a bit? What changed about your strategy if anything? And what gives you confidence that this can be a bigger contributor to growth in the coming year? Thanks. Armin Zerza: Thank you. So on the M&A side, we have a very strong pipeline in place. Which as I mentioned, we expect to start the materialize starting in calendar year '26. As you probably know, we are focused on a few, large opportunities. Where we, as a publisher, can add value in a way that creates value not just for artists and songwriters, but also in a way that delivers a strong return for us. The key focus simply is our capital of business. Or couple of businesses out there in the market. Why? Because they are highly accretive and therefore deliver top and bottom line growth. We'll do this in a very capital efficient way, as we mentioned before by our joint venture with Bain. Which will provide us with more than more than a billion dollars of funding. And it's obviously a key neighborhood accelerate growth in this area. Now from a status perspective, we've been working very well with Bain as a partner. We are very pleased with the progress that we have been making So we'll hear from us soon starting in 2026 about some of those acquisitions, which gives us confidence that this can accelerate growth, in addition to the other billing box I discussed before. From a distribution perspective, distribution is a significant part of our industry. And very often a source of new talent. And in fact, we haven't talked too much about this, but actually have a large growing and profitable distribution business today. And as we have announced before, we have recently appointed a new leader with Alejandro as you know, has been leading our Latin America business for many years. And as you probably know, this business is heavily distribution focused, yet Alejandro and his team grew this business double digit. And, frankly, at attractive margins for a long time now. So really encouraged by what he has done with his business, and, therefore, he is the perfect leader for distribution business. We spent a lot of time with him to better what we need to win in this marketplace. Not just in Latin America and in The US, but also globally. And we have spent quite some time now to build capabilities that allow us to provide better customer service on the one hand, but also to integrate clients faster and more efficiently so we can grow this business profitably. So we're now at a point where we are really, really confident with that we can accelerate growth on this business. Particularly starting in 2026. Now having said all of this, you know, as I talked before many times, we're looking at our from a portfolio planning perspective. So we do this in a way that grows our business on the one hand, but also enhances margin. So net, both these strategies are really for our portfolio strategy to accelerate growth and enhance marketing over time. Michael C. Morris: Thank you. Appreciate it. Operator: The next question comes from Douglas Creutz with TD Cowen. Your line is open. Douglas Lippl Creutz: Hey, thank you. Robert, I know one of your priorities has been to make sure that company is investing in the right technologies to position for future growth. And Benjamin Black: Wondered if you could share some color on how those investments are contributing Douglas Lippl Creutz: To the growth outlook you laid out today? And then also Benjamin Black: Whether some of those priorities might be changing given the rapidly evolving landscape? Thank you. Robert Kyncl: Sure. Douglas Lippl Creutz: You. Robert Kyncl: Yeah. The priorities are not changing. They remain the same. We're focused on you know, as you think about our business, it's a large scale business with lots of SKUs lots of albums, lots of songs, lots of artists. And and they have to be managed across large number of DSPs. And so we're in a high volume business. And it requires infrastructure solid, strong infrastructure that is scalable. And so we focused on that strengthened our digital supply chain. Sped up our songwriter payments, more transparent accounting, In publishing, we stabilized and upgraded our core systems, which would include royalty processing and sync licensing systems. And we're nearly fully live with our financial transformation initiative, which unlocks whole host of benefits and a better and more insightful p and l. More transparent for artists and songwriters, etcetera. So so we've really focused a lot on core infrastructure. So that can accelerate the business handle the volume Armen mentioned, you know, the deal pipelines that we have. Whether it's organic ones or M&A. All of that requires infrastructure. So we've been focusing on that, preparing the company for growth. And and that will continue. And we've made a lot of progress in that area, so that's why we feel confident about our acceleration. Armin Zerza: I just wanna add to that. Obviously, this also helps us scale many of our services globally. There's a key enabler also for the cost savings program. We're implementing that discussed last time. Operator: The next question comes from Cameron Manson Perron with Morgan Stanley. Your line is open. Cameron Manson Perron: Thank you and good morning. You highlighted having deals with four of the top Benjamin Black: Five DSPs and having secured kind of wholesale rate increases across all of those platforms. I'm wondering, Robert, you've talked in the past about kind of the benefits of variability in licensing terms across platform partners and that being positive with regard to facilitating experimentation. Is that still would you say that's still the case across the new platforms that you've locked in deals with? Or have we reached kind of more of a a standardized type of deal structure at this point in time? Thanks. Robert Kyncl: Sorry. Can I just clarify your question? Are you talk you were talking about existing DSPs or new platform? Douglas Lippl Creutz: Like, DSPs existing, the four of the five larger existing ones? Robert Kyncl: Right. And the and the question is on sorry. I couldn't really fully understand the question. I really just trying to Cameron Manson Perron: Yeah. Really just trying to clarify you know, in the past, you've talked about the benefits of having kind of variation in your DSP deals. I'm wondering if that's still the case or if there is more standardization kind in conjunction with locking in wholesale rate increases. Robert Kyncl: Got it. Thank you, sir. Thank you for the clarification. Look. We generally, when you when you begin you have different partners. Which are different objectives, and you strike slightly different deals. As time goes by, businesses grow, things standardize more. So do the deal terms. Obviously, different platforms are slightly different. Some have free funnels. Some don't, etcetera. So that kind of variability. However, we strive for a fair marketplace where people where our partners pay the same prices for the content that we license to them. So consistency is very important for us. And making sure that no partner feels disadvantaged versus another one. And that we have a very healthy competition on fair and square term. So there's much more standardization in place. It was in the in the past. Cameron Manson Perron: Got it. And then if I could follow-up on the market share gains that you've hadn't been able to deliver on this year. How do you think with regard to the savings initiatives, like how do you balance those two in terms of trying to deliver on your savings initiatives, but and reinvesting to continue to drive market share gains in the future? Thanks. Armin Zerza: Yeah. Maybe I can take that. We we are we are very focused on ensuring that we actually invest more in our core repertoire markets and key genres. As well as in the most promising projects So from a savings perspective, we are not cutting our spending on the front line as we call it. So we're actually increasing in in our investments. Savings are mostly reflective of us becoming more efficient on the back office side. Robert mentioned technology as a key enabler. So I'll give you a few example. In finance, we have just introduced SAP. We're obviously dealing with millions of transactions. This will enable us to become more efficient as a finance organization. In marketing, as we kind of organize our data, we are leveraging more and more the you know, standard dataset we have to drive marketing efficiencies. Making, you know, we're now introducing AI. We actually have introduced the deal office globally and working with an AI company to help us optimize our deal making. So think about the savings really coming from becoming more operationally efficient as a company and back office savings. Which we leverage to invest more in the most promising markets more in the most promising artists, more in the most promising genres. And that's really how we balance this. Cameron Manson Perron: Got it. That's helpful. Thank you. Operator: The next question comes from Ian Moore with Bernstein. Your line is open. Ian Moore: Hi, thank you. Benjamin Black: So looking through the AI licensing announcements that have come out in the past, you know, couple weeks, looks like these, these services kind of point to different Ian Moore: Very different parts of the value chain. Benjamin Black: We got some professional grade production tools in there, some more like list Ian Moore: Discovery platforms. Benjamin Black: I was wondering how you could you know, if you could maybe bucket the commercial opportunity Ian Moore: You see across, like, the spectrum of, of new services that you're licensing to? Thank you. Douglas Lippl Creutz: Sure. Robert Kyncl: So first, I'd like to say it's it's a it's a very energizing moment. In the industry. When you see so many new companies popping up attracting venture capital. You know, we have not had this in the last to fifteen years. All of the players, they have been established in the first decade, really. And now there's a crop of new companies new investment, new excitement, new talent, just tremendous momentum. So we decided that we are going to seize this opportunity not going to be a passenger. We're going to be the driver. Because it is important to get in early. Set the terms, define the future for us rather than let other people define it for us. That means that this will cut across all the different segments that you highlighted. There may be professional content. There may be user content. There's all kinds of consumption, creation, It's it's certainly a lot of work for our teams, but it's it's very exciting and energizing. And the opportunity that we see is one of interactivity. Interactivity is something that drives value It's been proven over and over, whether it's in the video gaming industry, even going to a concert is interactive. You know, the revenue per hour is always higher. Somebody is looking at something with their eyes and using their fingers and their hands, create something. So the value gets created and and we'll capture it. And what happens is also that there's a very, very high correlation between interactivity and iconic familiarity. It thrives on it. What does that mean? It means that stars will get bigger. That will be they'll benefit from this trend. And that iconic IP. Benefit from this trend. So we're focusing on all of the elements here we want to make sure that that we capture this incremental and expensive opportunity. And I I think of it a bit more like user generated content early on on YouTube. That started, and it was seen as a threat. And in fact, it has actually developed in something that was very, very positive. And commercially successful. For all parties involved. So very excited about this, and we're open for business. Kareem Chin: Thank you. Operator: Your next question comes from Kannan Venkateswar with Barclays. Your line is open. Kannan Venkateswar: Thank you. Benjamin Black: Robert, maybe just Kannan Venkateswar: Following up on that point and maybe Richard Scott Greenfield: Presenting a little bit of a pushback to see what your reaction would be. But why isn't AI a threat to an equal measure? That you know, obviously, your content can be used yours and other label content can be used to to create new forms of content or at least the models can be trained on it. And over the longer time horizon, that could completely bypass you know, content creators theoretically. And that's obviously a big debate. So I would love to get your reaction on that. Then more on the financials. I mean, if you look at the guidance for next year in terms of margin expansion, I think the growth in EBITDA that's implied by that is roughly equal to or most of the growth seems to be coming from the cost cuts. And so in terms of operating leverage, would be great to understand, I mean, underlying trends excluding things like M&A for instance, or cost savings? How you guys are trending? If you could just get some more details, that would be Thank you. Robert Kyncl: Sounds good. I'll take the first part and Armin will take the second. So of course, with every change, every technolog technology could technology change, there's always a threat and an opportunity. The market position of distribution was a threat. Everybody was predicting our demise. And, you know, sidestepping the the major music companies And, obviously, opposite has proven to be true over time. And we believe the same happens here. Of course, we look at the threat, that this could pose in terms of dilution, etcetera. But at the same time, need to focus on how do we actually turn this into an advantage for all of us and drive the value of the industry. And the value that we provide. It's also important to to know that and I've said this many times before. The value of the large music companies and the contribution that we have to the inter industry. Is rising. Not declining. With all of these challenges, is becoming a much more of a big business to big business interaction. It is very hard for individual creators to deal with large technology companies. That is much better for these matters to be handled by large music companies, large IT companies who have the capabilities know how, technology, the scale, to ensure the right outcomes. So we view this as this is our role. This is our role is to shape the industry. And make sure that it benefits artists and songwriters. As well as us and our shareholder. Richard Scott Greenfield: Armen? Armin Zerza: On the margin, I think it's important to note that our guide is, of course, after investments we make into the business. It's really a net margin guide. The guide is also mostly focused on two areas. One is the cost savings program that we deliver, two is the organic margin growth that we planted River and definitely three drivers that will help us do that. One is as we start to accelerate our streaming business, that is a higher margin business that is actually margin growth already for us. Two, PSM price increases will go to the bottom line and will help us improve margin. And three, there are certain inner value areas. So think about this as a net margin guide. But the biggest organic drivers for us will be one, streaming growth, and two, the PSM price increases that we'll see. Richard Scott Greenfield: Thank you. Operator: That is all the time we have for questions. I will turn the call to Robert Kyncl for closing remarks. Robert Kyncl: So thank you. Thank you for your attention today. Just wanna reiterate that evident from our results that our strategy is working. It's a labor of quite a few years of work. Both on the technology front on the investment front, on artist development, administration. It's really all divisions at the company. Have been, firing on all cylinders. And it's great to to see it all come together. Through a sustained growth, mark market share expansion, Richard Scott Greenfield: And Robert Kyncl: On top of it now us accelerating and seizing the opportunity to shape the AI future. And create new incremental business that will be set up the right way for the future to capture the right possibilities both creative and economic for artists and songwriters. And our shareholders. Thank you so much for being here. Talk to you in Kareem Chin: Ninety days. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Thank you for standing by. Ladies and gentlemen, welcome to the Diana Shipping Inc. Conference Call on the Third Quarter 2025 Financial Results. We are joined by the company's Chief Executive Officer, Ms. Semiramis Paliou. At this time, all participants are in a listen-only mode, followed by a Q&A session. Please note that this conference is being recorded. We now turn the floor over to Ms. Semiramis Paliou. Please go ahead. Semiramis Paliou: Good morning, ladies and gentlemen, and welcome to Diana Shipping Inc. Third Quarter 2025 Financial Results Conference Call. I'm Semiramis Paliou, the CEO of the company, and it's my pleasure to present alongside our team, Mr. Anastasios C. Margaronis, Director and President, Mr. Ioannis G. Zafirakis, Director, Co-CFO, and Chief Strategy Officer, Mr. Dave Vander Linden, Director, and Ms. Maria Dede, Co-CFO. Before we begin, I'd like to remind everyone to review the forward-looking statement on Page four of the accompanying presentation. The dry bulk market posted a solid performance in Q3. Cake once again has performed especially towards the end of the quarter. Yet after a lackluster first half of the year, we finally saw some tailwinds in the Panamax Sector. The main reason for this was the fact that China imported no soybeans from the U.S. in September, which marked the first time since November 2018 that shipments fell to zero. This impact was somewhat offset by the fact that South American shipments surged from a year earlier, therefore increasing sun miles and providing upward pressure on the Panamax sector. Overall, bulk carrier markets picked up after a softer half 2025 due to a record September for Chinese imports, reaching 200 million metric tons. Subsequently, Q3 achieved record Chinese imports of nearly 580 million metric tons. The quarter also saw continuing war-related activity in both the Red Sea and the Black Sea. This situation remains volatile, and avoidance of the area is likely to continue. Because of the Capesize resilience and the improvement in the smaller sizes, we were able to secure several charters across all segments in the fleet at higher levels than previously and again at a considerable premium over the spot market. Turning to Slide five, let's review our company's snapshot as of today. Diana Shipping Inc., founded in 1972 and listed on the New York Stock Exchange since 2005, operates a fleet of 36 dry bulk vessels, one of which is mortgage-free. Our fleet has an average age of just under five years and a total deadweight capacity of approximately 4.1 million tons. We anticipate the delivery of two methanol dual-fuel newbuilding Kamsarmax dry bulk vessels at the end of 2027 and early 2028, respectively. Fleet utilization reached 99.5% for 2025, highlighting our effective vessel management strategy. As of September, we employed nine individuals at sea and ashore. Financially, our net debt stands at 54% of market value, supported by $140 million in cash reserves as of quarter-end and total secured revenues of approximately €150 million as of November 12. Moving on to slide six, let's go over the key highlights from the second quarter and recent developments. In June, continuing the renewal and modernization of our fleet, we announced the sale of motor vessel Selena for a purchase price of approximately $11.8 million before commissions. She was delivered to her new owners in July 2025. In September, we signed a term loan facility with the Bank of Greece, secured by five vessels, and drew down $55 million. In September, we released the company's 2024 ESG report, highlighting our ESG strategy and commitment to sustainable practice. You can find a copy of that on our website. As of September 29, 2025, we have acquired 14.9% of Genco Shipping and Trading Limited issued and outstanding common shares. As of November 12, 2025, we have secured $25.4 million of contracted revenues for 87% of the remaining ownership days of the year 2025 and have secured $118 million of contracted revenues for 50% of the ownership days of the year 2026. Finally, we are pleased to declare a quarterly cash dividend of $0.01 per common share with respect to 2025, totaling approximately $1.16 million. Maria Dede: Slide seven summarizes our recent chartering activity. Semiramis Paliou: From July 1, 2025, until November 12, 2025, we have secured time charters for 14 vessels. Six Ultramax vessels at an average daily rate of $13,800 for an average of 333 days. Maria Dede: For Panamax, Kamsarmax, and post- Semiramis Paliou: vessels at an average daily rate of $12,900 for an average of 331 days. And for Capes and Newcastle MAX vessels, at an average of $24,500 for an average of 380 days. Slide eight highlights our disciplined chartering strategy. We focus on staggered medium to long-term charters to avoid clustered maturities, ensuring earnings visibility and resilience against market downturns. This disciplined chartering strategy has secured €149 million in contracted revenues, resulting in an average time charter rate of $16,200 per day with an average contract duration of one year and 1.17 years. For the rest of 2025, only 13% of days remain unfixed. Now, I'll pass the floor to our Co-CFO, Maria Dede, for a more detailed financial analysis. Thanks, Semiramis. Good morning and welcome to our call. I will begin with an overview of our financial performance for the third quarter and the nine-month period ended September 30, 2025, followed by a discussion of our capital structure, breakeven analysis, and dividend. We start with the financial highlights for 2025. Time charter revenues were $51.9 million, slightly lower than €57.5 million in the same quarter last year. This decline reflects the sale of two vessels earlier this year and one vessel in September 2024. Adjusted EBITDA was $20.3 million compared to $23.7 million in the third quarter last year, consistent with the smaller fleet. Net income, however, nearly doubled to $7.2 million from $3.7 million in 2024. This was driven by lower expenses and the €10.6 million gain from the valuation of our investment in Genco, partly offset by a loss in Ocean. Diluted earnings per common share were €0.05, up from zero point in 2024. On the balance sheet, cash decreased to €133.9 million as of September 30, 2025, from $207.2 million as of December 31, 2024. This reduction reflects cash deployed in strategic investments during this nine-month period, including €103.5 million paid for the acquisition of 14.93% ownership interest in Genco, €23 million invested in share repurchases of our common stock, and $12 million invested in Greenwood and Ecogast, two of our equity method investments. Maria Dede: To strengthen liquidity, we sold two of our older vessels in the Semiramis Paliou: fleet, generating approximately $23 million and drew down €55 million under a new loan facility with National Bank Greece. By optimizing capital through vessel sales and the new loans, we strengthened liquidity while fine-tuning our fleet for efficiency. As a result, long-term debt increased slightly to €651.1 million as of September 30, 2025, from $637.5 million at year-end 2024. Operationally, this quarter was smooth with no surprises and with results reflecting the smaller phase. During the quarter, we operated an average of 36.2 vessels compared to 38.7 vessels in the same quarter last year following the sale of Houston in September 2024, Armenia in March, and Celina in July 2025. This reduction affected ownership available and operating days. Time charter equivalent averaged $15,178 a day, a 1% decrease compared to $15,103 per day in the third quarter last year due to softer charter rates. Fleet utilization remained strong at 99.4%. Special operating expense for the quarter decreased by 6% to $20 million compared to $21.2 million in the third quarter last year due to the smaller fleet size. On a per-share basis, daily operating expenses rose 1% to $6,014 compared to $5,906.04 last year, mainly due to higher crew costs. For the nine months ended September 30, 2025, Time Charter revenues dropped by 6% to $161.5 million from $171.1 million for the same period last year. Net income fell to €14.7 million compared to €3 million in the same period last year, an increase driven by non-operating gains compared to losses in the same period last year, and the absence of debt extinguishment losses seen in 2024. Time charter equivalent improved to $15,173 per day compared to $15,162 per day in the same period last year. Debt utilization remained high at 99.5%. Daily operating expenses for the nine-month period rose slightly to $5,941 compared to $5,910 for the same period last year, again due to higher crew costs. The average rate of our fleet is approximately twelve years. The next slide, you can see our debt structure and amortization schedule. We have maintained a disciplined approach to leverage. Our debt structure includes both fixed and variable rate instruments with projected loan balances declining steadily through 2032. Our $175 million senior unsecured bonds and other loan maturities coming due in '29 and beyond will be addressed well in advance to ensure liquidity stability and minimize refinancing rates. In the next slide, we compare our free cash flow breakeven to EBIT against estimated revenues for the remainder of 2025 and 2026. As of September 30, 2025, our cash flow breakeven rate stood at $16,800 per day. For the remainder of 2025, potential revenues include the estimated revenues for the unfixed days based on FSAA could reach $29.1 million at an estimated average time charter rate of $18,900 per day. For 2026, potential revenues could reach $224.7 million at an average time charter rate of $17,102 per day. While projected revenues for 2025 may not recover breakeven, the outlook for 2026 looks positive, supporting a return to cash flow profitability. This slide highlights dividend distributions. Since 2021, the company has consistently delivered quarterly dividends in both cash and shares. In line with this policy, we declared a dividend of 1% or $0.01 per share for 2025, bringing cumulative dividends spent since 2021 to $2.69 per common share. In summary, despite a small fleet, we delivered strong profitability, optimized our capital structure, and maintained high operational efficiency. Our liquidity actions and proactive debt management provide resilience and flexibility for future opportunities. I will now hand over to Anastasios C. Margaronis, who will provide an overview of the dry bulk market. Operator: Thank you, Maria, and welcome to the participants of this latest Anastasios C. Margaronis: quarterly earnings call of Diana Shipping Inc. Starting with the geopolitical and trade development in bulk shipments. The bulk carrier market has weathered well the continuous announcements of new tariffs as well as several changes in the U.S. tariff regime with its trading partners. As of November 18, the twelve-month time charter rate for a typical case without scrubbers stood at around $24,000 a day. The equivalent rate for the Kamsarmax was $15,600 per day. For the Ultramax, about $15,900 per day. All these rates were up on the levels we saw at the beginning of the year and from three months ago. On November 19, the BCI was $2,300.0636 and the Baltic Panamax Index at $18.95. In the meantime, the five PC route weighted time charter average for Capes stood at $30,154 per day, while the Panamax five TC route averaged rates stood at $17,057 per day. As a result, sentiment remains high and some newbuilding orders are already appearing across the size sector, most of them for ships with deliveries from 2028 onwards. As mentioned by Clarkson, the recently announced U.S.-China trade war truce includes the U.S. pledge to reduce tariffs on imports from China from 30% to 20%. The resumption of China's purchases of U.S. soybeans, the rollback of China's export restrictions on rare earth, and most notably the suspension for a year of the introduction of the USDR sport fees and the reciprocal port fees for some U.S.-linked vessels entering China. According to Comodo Research, the purchase of U.S. soybeans by China represents a supporting factor for midsized bulkers for the rest of the year and into 2026. Exports to China will be much stronger over the next few months, and this will be a very helpful tailwind for the dry bulk carrier market. This is according to Clarksons, even though China had earlier this year sourced soybeans for purchase to replace U.S. produce from Brazil, which involved a longer lading voyage than from the U.S. Lower volumes, though, were shipped, can be partly explained by the fact that China has been relying on the drawing down of elevated domestic stocks. In the next slide, we look at the macroeconomic development and consideration. Economies around the world are showing signs of relatively steady growth going forward. Latest growth forecasts provided by the IMF and the OECD predict growth in Chinese GDP at around 4.8% this year and 4.2% in 2026. The equivalent figures for India are 6.6% and 6.2%. For the U.S., 2% for this year and 2.1% for 2026. For the Euro area, 1.2% this year and about the same for next year. For the world, the figure stands at 3.2% for this year and 3.1% in 2026. Let's look at the main commodities now that are being shipped in bulk. Global steel production, according to Braemar, is down by 1.2% year to date at 1,373 million metric tons. This has been having its effect on demand for metallurgical coal and iron ore. Chinese steel product exports are increasing strongly by over 5% year on year so far, which could help partially explain the continued demand by China for iron ore. Braemar reports that it is heavy engineering and ambitious investment in energy and industrial parks driven by AI that will probably support steady demand in China going forward as opposed to traditional construction demand on real estate and infrastructure projects. So for iron ore, Clarksons predict a slight increase of about 1% per annum in total imports at 1,621 million tonnes for 2026. The C1-two iron ore project in Guinea has exports starting this month, and volumes are expected to build up from this year to '28. Long haul exports to China should support pan mild demand. However, Clarksons reminds us that uncertainty remains around how the iron ore market will absorb the new volume. Operator: Going forward. Anastasios C. Margaronis: For coal, we have coking coal shipments which are expected to remain more or less flat in 2026 and 2027, with support coming mainly from Indian demand as domestic coking coal reserves deplete and feed production keeps increasing. Thermal coal shipments are expected to go down by between 31% in 2026 and 2027, respectively. Coal imports to China have continued to go down about 10% so far this year, with demand being partially satisfied by imports from Mongolia and produce from domestic mines. Indian imports are projected to drop by 6% in 2025 due to increased domestic production. In the medium term, demand will pick up as new thermal energy capacity outpaces domestic mining output. For grain exports, according to 2% in 2025, and by about the same in 2026 to reach 566 million. Brazilian grain exports and increased soybean exports from the U.S. should keep supporting this trend hopefully well into 2027. As regards the minor bulk trade, according to Clarksons, these trades are expected to grow by about 4% this year and by a further 2% year on year in 2026 at €2,400 million every sum. Approximately similar growth rates are expected for 2027 depending on key macroeconomic trends and geopolitical tension. Maria Dede: Bauxite, cement, Anastasios C. Margaronis: seed products, and forest products are expected to be the main commodities shipped in large volumes going forward. Turning to the next slide. On talent supply. According to Clarksons, the bulk carrier fleet is forecast to grow by 3.1% this year and by 3.4% in 2026. For Capes, the projected tonnage increase is only 1.4% in 2025 and 2.2% in 2026. For Panamaxes, the fleet projected increase is 3.5% this year and 4.6% in 2026. According to Braemar, the bulk carrier fleet order book stands at 106.2 million deadweight tons, which represents 10.9% of the existing fleet. This total is made up of €37.8 million deadweight of Capes, which is about 9.3% of the fleet, 38.2 million deadweight of Panamax Kamsarmaxes, about 14.1% of the fleet, and €28.4 million deadweight in Handymaxes, which are about 11.2% of the fleet. For Capes, the order book is certainly manageable going forward, and so it is for Handymax. The Panamax fleet, where the order book is higher, includes, however, 467 ships based from 2005 and earlier. On the recycling side, according to Clarkson, the recycling market has been dominated for most of the year by low activity and cautious sentiment. Softening steel prices, particularly in India, have dampened the appetite for tonnage by major scrap buyers. The average price for a handysize bulkhead offered for demolition has dropped to around $400 per lifetime display. The forecast for dry bulk carrier demolition sales this year is about 4.6 million deadweight tons, for 5.3 million in 2026, and about $7 million in 2027 when various regulations and aging of large sections of the bulk carrier fleet take their toll. The average age of dry bulk demolition candidates has gone up from 25.2 years in 2015 to 29.3 years in '25. Turning to asset prices now. As Heartland Shipping Services pointed out, the combination of less ordering this year and more potential output at yards may have implied a crash in new building prices. This has not occurred. New building prices have softened during the last quarter by just 1%, and by between 34% year on year across the tariff with eight new buildings being voted at around $73 million. Capesize Max is at around $36.25 million, and Ultramax is for 2020 delivery at around $33.5 million. Secondhand bulk prices have crept up during the last quarter. The price of refinery has moved up by about 4% to $65 million, and Newcastle MAX at around $72 million, and Capesize MAXs of the same vintage have also gone up by 4% to €33 million, while Ultramax prices have increased to $32 million. Finally, let's look at the outlook for our industry. According to Clarkson, 2025 should prove to be a slightly softer year for bulk carrier earnings than 2024, with the fleet projected to grow by 3% and demand by not much more than 1%. But Clarksons also point out that dry bulk trends have firmed in recent months amid a rebound in the coal trade and strong iron ore, bauxite, and grain export volume. In a nutshell, dry bulk demand trends have firmed in recent months. Looking out to 2026, Clarkson's sees a base case outlook of another moderate year for bulk carrier earnings, possibly like 2025. Dry bulk trade is currently projected to grow by about 2% in ton miles, slightly below fleet growth of about 3%. Markets could be balanced with support from special surveys and falling vessel speed. The Capesize market is expected to outperform the smaller segment. Looking further ahead, projections are much less reliable, even though the supply-demand numbers for 2027 are similar to those in 2026. Factors such as Chinese demand trends, the impact of environmental policy, Red Sea danger zone development, and demolition trends will continue to influence the supply-demand balance going forward. During the last slide, Slide 18, we can have a quick look at factors which are, according to analysts, going to affect the market on the positive and the negative side. On the positive side, we have strong South American grain exports and increased soybean exports from the U.S. to China, we have a gradual resolution of reciprocal tariffs between the U.S. and its trading partners, Red Sea rerouting expected to continue for the rest of the year and well into 2026, strong steel product exports by China, and the commencement of iron ore shipments from Simandou in Guinea. On the negative side, though, we have worldwide lower steel production at Southside India, bulk carrier fleet growth outpacing demand for both this year and next, let's all indicate sector. Increase in wind, nuclear, and solar power production, particularly in China, anticipated long-term reduction in coal imports by China, positive failure in trade talks between the U.S. and the trading partners leading to higher tariffs and trade disruption. On this note, I will pass the call to our CEO, Semiramis Paliou, for some important takeaway points from this earnings call. Thank you. Semiramis Paliou: Thank you, Anastasios. And before concluding today's presentation, I'd like to highlight our ongoing ESG initiatives Diana Shipping Inc. is committed to promoting eco-friendly technologies and modernizing our fleet, transparently sharing emission data to ensure accountability, building on partnerships and collaborations to advance our sustainability goals, and developing an equitable, diverse, and inclusive program while continuously investing in our people. In summary, moving on to slide 20, Diana Shipping Inc. stands on a strong foundation built on over years of industry experience and twenty years on the New York Stock Exchange. It is a seasoned management team adept at addressing industry challenges, has a strong shareholder relationship and a disciplined strategic approach, a solid balance sheet with a strong cash position and a countercyclical mindset, and an ongoing fleet modernization effort, a focus on rewarding our shareholders when possible, and a strong ESG strategy. With that, thank you for joining us today. We now look forward to addressing your questions during the Q&A session. Operator: We will now begin the question and answer session. Then one if you're using a speakerphone. The first question comes from Christopher Barth with Arctic Securities. Please go ahead. Christopher Barth: Hello, good afternoon, and thank you for the presentation. How should we think about your quite significant stake in Genco now? Is there any Ioannis G. Zafirakis: sort of dialogue with the Board? You previously mentioned that the holding is of strategic character, but I mean, they tightened the poison pill with the 15% threshold now. So sort of how does that impact your thoughts on sort of further dialogue here? And if you are just sort of opting for a passive stake, would you consider a Board seat? Ioannis G. Zafirakis: Hi, Christopher. This is Ioannis Zafirakis speaking. As we have said in the past, our position in Genco has strategic value. Nevertheless, we are observing at the moment, and we are examining our various options on Ioannis G. Zafirakis: what we'll do Maria Dede: and how to do it. Ioannis G. Zafirakis: We are not in contact with the current management of Genco. And we are observing the development. Christopher Barth: Thank you very much, Ioannis. And just a second question for me, if that's okay. Can you just comment a bit around the recent development in Ocean Tau? Do you still have a holding there? And what's the percent if that's the case? Ioannis G. Zafirakis: Diana Shipping Inc.'s interest in Ocean Farm is very minimal after the latest raising of equity that they did, the one before the sovereign one. And it is certainly not material at this stage. So there is nothing to comment. Christopher Barth: Okay. Thank you very much. That's it from me. Operator: This concludes our question and answer session. I would like to turn the conference back over to Ms. Semiramis Paliou for any closing remarks. Semiramis Paliou: Thank you for joining us for Diana's third quarter 2025 financial results. We look forward to presenting to you again in the next quarter. Maria Dede: Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to Nano-X Imaging Ltd.'s Third Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please note today's conference is being recorded. I will now hand the conference over to your speaker host, Mike Cavanaugh, of Investor Relations. Please go ahead. Mike Cavanaugh: Good morning, and welcome to the Nano-X Imaging Ltd. Third Quarter 2025 Investor Call. Earlier today, Nano-X Imaging Ltd. released financial results for the quarter ending September 30, 2025. The release is currently available on the Investors section of the company's website. With me today are Erez Meltzer, Chief Executive and Acting Chairman, and Ran Daniel, Chief Financial Officer. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements regarding the company's financial results, research and development, manufacturing and commercialization activities, regulatory process and clinical activities, and other matters. These statements are subject to risks, uncertainties, and assumptions that are based on management's current expectations as of today and may not be updated in the future. Therefore, these statements should not be relied upon as representing the company's views as of any subsequent date. Factors that may cause such a difference include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-GAAP to GAAP measures is provided with our press release, with the primary differences being non-GAAP net loss attributable to ordinary shares, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, and non-GAAP gross loss per share. With that, I would now like to turn the call over to Erez Meltzer. Good morning, everyone. And thank you for joining Nano-X Imaging Ltd.'s Third Quarter 2025 Earnings Call. Erez Meltzer: While many companies talk about global expansion, Nano-X Imaging Ltd. is delivering on it. It is important for us to share not only where we stand today, but also the path we are shaping for 2026 as we work to fulfill our mission and strengthen Nano-X Imaging Ltd. as a leading company in the medical imaging industry. We are building a comprehensive medical imaging portfolio focused on increasing revenues and accelerating our path to profitability. Our strategy includes reinforcing our position in the Medical AI Sector, deepening our foothold in the US healthcare system, and driving meaningful change in the standard of care for medical imaging. We are entering into our second execution phase. We plan to further expand the ARC deployments and pipeline, grow our AI presence through the acquisition of Vaso Healthcare IT that is being contemplated, and explore further opportunities in imaging equipment with potential acquisitions and collaborations. While not every element is fully within our control, we believe it is the right time to share our growth roadmap for 2026. We are guiding for more than $35 million in revenues. Coming back to 2025, the third quarter brought progress across the organization, including our technology expansion, market scaling, AI infrastructure, and operational efficiency. Today, I am excited to share with you the progress we are making across our strategic three pillars where we are demonstrating real momentum in moving from innovation to commercial scale with measurable results. Our first pillar focuses on technology expansion and market scaling, where we see momentum in our commercial deployment efforts. Nano-X ARC is now entering a growth phase in the retail imaging segment, expanding access to advanced imaging in community and outpatient settings where patients need it most. We recently signed two new agreements in The Czech Republic and in France. That represents an important milestone in Nano-X Imaging Ltd.'s European strategy and follows recent distribution agreements in Greece and Romania, demonstrating the rising demand for Nano-X Imaging Ltd.'s ecosystem and strengthening its presence across Europe. We are progressing toward our goal of 100 systems worldwide in various stages for clinical demo and commercial purposes by the end of 2025. A number of systems are pending regulatory approval and site preparations. As we scale our current ARC deployment, we are simultaneously working on unlocking even greater market potential through regulatory advancement. In the US, we continue to work with the FDA to remove the adjective use limitation, which will allow us to market the Nano-X ARC as a standalone modality. Building on both our deployment momentum and anticipated regulatory progress, we are preparing to launch our next-generation platform that will further accelerate market penetration. The new Nano-X ArcX system, which is to be unveiled at the RSNA annual meeting in less than two weeks, will extend our commercial reach even further with its smaller footprint and simplified installation process. Importantly, it has the flexibility to support additional clinical indications in the future. This enhanced platform is designed specifically to meet the diverse needs of our growing customer base and expand our addressable market significantly. I would like to highlight another example of how we are working to expand the market for Nano-X ARC. The Nano-X ARC x is AI-ready, which means it is compatible with future AI solutions that are currently under development to interpret the ARC images. Ultimately, the clinical output will be an AI-enhanced 3D digital tomosynthesis series with annotated pulmonary nodules, which may be an innovative new tool in the arsenal of lung cancer detection. Our second pillar, AI infrastructure, and integration represent the technological heart of our strategy, connecting all the pieces of our ecosystem and driving new revenue opportunities. Artificial intelligence is part of our core value proposition, transforming us from a hardware company into a comprehensive imaging platform. In a key move to advance our AI business, we recently reached an agreement to acquire Vaso Healthcare IT or VHC IT, a wholly-owned subsidiary of Vaso Corporation, which provides best-of-breed healthcare IT solutions from various technology partners. Specifically, imaging information technology solutions, which support imaging workflow for providers. Nano-X Imaging Ltd. and VHC IT together create a powerful synergy that connects Nano-X Imaging Ltd.'s FDA-cleared imaging AI solution with VHC IT's deep expertise in IT integration, implementation, and customer operation. This will potentially help us deliver improved customer service to our growing US customer base. This acquisition will align with our ongoing progress on multiple fronts as we expand our network and collaborations with prominent organizations such as Cedars-Sinai, 3DR, Covera Health, and others. More details are included in my remarks below. Now for an update on our third strategic pillar, which focuses on operational efficiency and sustainable growth. We are building a leaner, more focused organization to support long-term success. Our workers' compensation and retail imaging initiatives continue to grow, creating scan-based revenue opportunities that strengthen our financial foundation. Additionally, we are strengthening our production capabilities through our partnership with Fabrinet, preparing to manufacture hundreds of systems. In parallel, we continue to enhance our tube manufacturing infrastructure as well. Nano-X Imaging Ltd. remains dedicated to accelerating the development of a highly efficient manufacturing operation. Let's now review the progress we made during the quarter in our US deployment progress, which demonstrates the strong commercial traction we are building across multiple channels. Currently, we have a growing number of ARC systems actively scanning, showing consistent utilization and clinical adaptation. One of the most active sites is an imaging center in California. During the third quarter, it achieved above-average scanning levels, and the feedback from them has been very positive. Our installation plan provides us with a solid foundation for revenue generation and market presence. Another example is our recent collaboration with Kaiser University, where the Nano-X ARC has been integrated into their radiological technology graduate program. This flagship training and demonstration site is already actively scanning, giving future imaging professionals hands-on experience with Nano-X ARC early in their careers. The full engagement of our business partners and the upcoming retail infrastructure reinforces our confidence in the next year's guidance. I also want to let you know that Nano-X Imaging Ltd. will have a strong presence at the Radiology Society of North America, or in short RSNA, annual meeting which begins on November 30 in Chicago. There we will provide more detailed insights into our commercial progress and future strategy. We welcome you to visit our booth if you are attending the event. In a recently announced partnership, we entered into a distribution agreement with X-ray, a leading Czech distributor of medical imaging systems, to introduce Nano-X Imaging Ltd.'s advanced imaging solution to healthcare providers across The Czech Republic. Under the terms of this agreement, X-ray will lead the market sale and service of Nano-X Imaging Ltd.'s Medical Imaging Solution, the Nano-X ARC. Founded in 2013, X-ray is recognized as the number one supplier of digital radiography systems in The Czech Republic, with installations in more than half of the country's 200 healthcare facilities, and nationwide sales and service coverage. Additionally, this week, we signed off a distribution agreement in France with Alphea France SARL, part of Altair Group, one of Europe's largest independent providers of managed medical technology services. As part of the agreement, Altea France will lead the introduction, distribution, installation, and service of Nano-X Imaging Ltd.'s Medical Imaging solution, the Nano-X ARC, across France's public and private healthcare sector. We have stated before that our initial foray into many European countries will be best served by commercial partnerships such as this. And rest assured, we are working on others. These partnerships are just some of the steps we took in the third quarter to better position us to scale globally and redefine the standard of care through innovation that makes imaging more accessible and efficient. As we scale our current ARC deployment, we are simultaneously working to unlock even greater market potential through regulatory investment. In the US, the company has submitted the TAP 2D software module to the FDA through the 510(k) program. TAP 2D is a 2D view image output for the Nano-X ARC systems, a practical tool for radiologists to enhance their diagnostic confidence as they become more experienced evaluating digital tomosynthesis images. TAP 2D, once cleared, will be part of a wider vision held by Nano-X Imaging Ltd. to alleviate adjunctive use limitations in the future. For perspective, use limitations do not apply for the CE Mark, Nano-X ARC in the European market. This remains one of our top priorities, and we believe that removing the adjunctive use limitation will be a critical milestone that may unlock significant new market opportunities for the Nano-X ARC platform. This regulatory advancement represents a potential key catalyst for accelerated adoption across healthcare systems. Outside of the US, our regulatory efforts continue, but it is worth noting that these efforts will not be as streamlined as those in the US, where FDA clearances allow distribution in the entire country. The rest of the world by nature is very fragmented, and we are working with many different countries which have their own processes and regulations. In some instances, regulatory progress is slower than we would like. Nevertheless, we have not stopped pushing ahead with our regulatory efforts, which continue to be of paramount importance to Nano-X Imaging Ltd. Now I would like to discuss some of the extensive clinical work we are undertaking that supports all of our commercial efforts by generating robust data supporting the use of our solution across multiple clinical applications. Mike Cavanaugh: I'm happy to report the Erez Meltzer: Cedars-Sinai Medical Center is joining the trial of Nano-X Imaging Ltd.'s AI for a new AI model for aortic valve calcification measurement solution that is under development. The solution is intended to quantify the level of aortic valve calcium, which is an important measure of risk for aortic valve disease. We are very pleased to be partnering with Cedars-Sinai, one of the nation's premier medical institutions. We also have begun a collaboration with MDS Wellness, an independent provider of wellness screening programs located in Michigan, with whom we are engaging in clinical trials to further assess the clinical value of Nano-X ARC in the context of lung cancer detection, management, and screening. Last month, we attended the Early Lung Cancer Action Program's (ECLIP) 40th conference in New York, focused on lung cancer screening and early detection. Among several presentations about the advantages of digital tomosynthesis in lung cancer screening, Dr. Lauren Stannenbaum delivered an inspiring talk about how he believes that Nano-X ARC can be utilized in lung cancer screening and disease management protocols. Outside the US, we are excited about a recent collaboration with All Up Imagery, which is a group of independent radiologists who practice at several sites in Île-de-France, utilizing high-performance technical facilities. Through this collaboration, the Nano-X ARC system has been deployed at Hôpital Privé Jacques Cartier, one of the leading private hospital groups in the Paris Metropolitan Area, for a clinical trial designed to further assess the value of the Nano-X ARC in supporting lung cancer detection, management, and screening. This collaboration advances our clinical evaluation effort in the second-largest country in the EU. The data derived from this trial is intended to demonstrate the ARC's potential to improve patient outcomes through early screening for lung cancer, which is the deadliest cancer worldwide. Mike Cavanaugh: We continue to engage with research partners globally Erez Meltzer: to execute a comprehensive clinical evidence generation strategy. I mentioned we will have a large presence at RSNA this year, and I encourage you to visit our booth. All details regarding our participation were published last week. As I mentioned in my opening remarks, we are acquiring Vaso Healthcare IT or VHC IT, a wholly-owned subsidiary of Vaso Corporation, which provides best-of-breed healthcare IT solutions from various technology partners. Specifically, imaging information technology solutions, which support imaging workflow for providers. Nano-X Imaging Ltd. and VHC IT together create a powerful synergy that connects Nano-X Imaging Ltd.'s FDA-cleared imaging AI solutions with VHC IT's deep expertise in IT integration, implementation, and customer operation. Under the terms of the proposed transaction, Nano-X Imaging Ltd. will acquire VHC IT for a total consideration of $800,000, consisting of a $200,000 cash payment at closing and up to $600,000 in performance-based earn-out payments over a period of up to two years, contingent upon revenue retention targets with respect to existing customers. This transaction is intended to accelerate the deployment of Nano-X Imaging Ltd.'s AI solutions across US healthcare facilities and is expected to be executed and completed within a couple of weeks. Given the rapidly evolving nature of medical imaging technology, it is a challenge to keep up with these changes and informatics. And Vaso Healthcare IT serves as a trusted adviser to address and solve these issues. We expect this partnership to accelerate the commercialization of Nano-X Imaging Ltd.'s AI solutions and help generate scalable recurring revenues. Key synergies include cross-leveraging our organizational shared expertise, active accounts, sales funnels, and product offerings. We believe this acquisition immediately expands the value we deliver to customers and shareholders. We recently entered a commercial partnership with 3DR Labs, one of the largest and most trusted providers of 3D medical imaging cross-processing services in the US. 3DR Labs offers Nano-X Imaging Ltd.'s FDA-cleared imaging solution to its network of more than 1,800 hospitals and imaging centers across the US. The partnership enables 3DR Labs to market Nano-X Imaging Ltd.'s AI software solution to its client-based network of more than 1,800 hospitals and imaging centers across the US. The agreement positions Nano-X Imaging Ltd.'s AI technology to support initiatives to drive early disease detection and improve clinical outcomes at scale across the United States. We are also expanding direct-to-clinician Nano-X Imaging Ltd.'s AI solutions and launching new AI applications that have the potential to improve diagnostic accuracy, early detection, and patient management. I'm happy to report that we have closed our first deal under this new direct-to-clinician business model. This approach enables AI at the clinic level, equipping clinicians with value-added tools on-site and eliminating the need to send patients to other locations for CT scans. I am particularly excited about our current lineup of advanced AI solutions that analyze routine medical CT scans for any clinical indications to help identify patients with asymptomatic or undetected findings correlated with chronic conditions in cardiac, liver, and bone, promoting preventive care management where AI assists clinicians in generating numerical indications for further decision support. We are in the process of developing more innovations to add to our offering, and I look forward to announcing new AI developments as they become available. In other AI-related news, we have successfully expanded our existing agreement with Covera Health. This new agreement builds upon our initial collaboration, which focused on retrospective analysis to identify care gaps and support their platform. Our expanded agreement now includes prospective use cases such as opportunistic screening for improved care outcomes. We've also expanded our AI footprint to India, having recently signed a distribution agreement with an Indian commercial partner, and we're already running two pilot projects with several more in the pipeline. A key element of the third pillar is the creation of a sustainable and efficient supply chain to ensure we can meet anticipated future demand. With that in mind, we continue to engage with third-party manufacturers and suppliers for the commercial production of our digital X-ray tubes and other components for use in the Nano-X ARC. Based on, among other things, cost-effectiveness, etcetera. We are currently developing glass-based digital X-ray tubes for use in the Nano-X ARC. As previously disclosed, we are working with third parties such as CEI and Varex to build tubes and a system-on-a-chip maker located in Switzerland for our chips. Our work with our manufacturing partners is a key component of the third pillar of future success. We will continue close collaboration with our technology suppliers to secure the supply of components needed as our ARC deployment continues. As of today's call, we have fabricated enough emitters and begun scaling tube production to support the initial launch of our next-generation Nano-X ArcX. Specifically, with Varex, we are well underway with reforming all the necessary tubes and ARC-level testing to add them as an approved supplier early next year. We have additionally taken Mike Cavanaugh: receipt from them Erez Meltzer: of multiple MDX multi-source demonstrations to advance our testing and the development of stationary digital tomosynthesis and stationary CT-type solutions. Varex's NBX or multibeam X-ray combines the precision of traditional X-ray with the detailed insight of CT imaging and enables faster, higher-quality scans with reduced radiation exposure, offering clearer images and better patient outcomes. Varex personnel will visit our lab in Israel soon to support these efforts. We're also working in partnership with a novel imaging technology company to explore the utilization of our emitter with their specialty detectors. These efforts toward low-dose single-exposure dual-energy capabilities significantly enhance visualization for medical, security, and inspection applications. On the OEM business development front, in response to requests from the security materials analysis and high-resolution inspection market, we are in the process of fabricating several novel emitter layouts, each with unique functionality to specifically address pain points or add requested capabilities as compared to their current offering. We've also recently delivered two of our developer kits. One is to a leading US academic institute for medical solution development for medical application development, and another to one of the largest global providers of industrial X-ray NPT inspection sources developing their next-generation system. Regarding our project with Oak Ridge National Laboratory, we are now working towards material acquisition and fabrication of the second-generation prototype to be utilized in their novel and compact mobile X-ray technology development. As previously reported, we have entered into a multiyear volume supply agreement with Fabrinet, a leading global electronics manufacturing services provider, to support the scalable manufacturing of Nano-X ARC systems. We believe this collaboration will drive down our manufacturing costs over time, which will, in turn, support our mission to expand access to innovative, affordable imaging technology worldwide. Looking ahead, Nano-X Imaging Ltd. is dedicated to accelerating the development of a highly efficient and scalable manufacturing infrastructure. We will always be looking for ways to extract more efficiencies and may include future strategic collaborations. As we look ahead, we would like to provide our investors with some financial guidance for the coming year. Given our current business trajectory, sales funnel, new partnerships, and the Vaso acquisition, we expect to generate a minimum of $35 million in revenue in 2026. Furthermore, we project the AI business segment, with the addition of VHC IT, will achieve EBITDA breakeven on a quarterly basis sometime in 2026. We expect Nano-X Imaging Ltd. as a whole to reach EBITDA breakeven on a quarterly basis in 2027. These projections reflect our beliefs in an achievable path to sustainable profitability driven by our expanding commercial deployments and recurring revenue streams. We are executing a clear and consistent strategy across all three pillars, moving forward with confidence while systematically expanding our market presence and strengthening our foundation for long-term success. With that, I would like to hand the call to Ran Daniel for a review of our financials. Ran, over to you. Thank you, Erez. We reported a GAAP net loss Ran Daniel: for 2025 of $13.7 million, which is the reported period, compared with a net loss of $13.6 million in 2024, which is the comparable period. Revenue for the reported period was $3.4 million, and gross loss was $2.9 million on a GAAP basis. Revenue for the comparable period was $3 million, and gross loss was $2.8 million on a GAAP basis. The increase of $400,000 in revenue stems from an increase of $600,000 in our revenue from our teleradiology services, a decrease of $300,000 in our revenue from our AI solutions, and an increase of $100,000 in our revenue from the sale and deployment of its imaging systems and OEM services. Non-GAAP gross loss for the reported period was $300,000 as compared to a gross loss of $200,000 in the comparable period, which represents a gross loss margin of approximately 8% on a non-GAAP basis for the reported period, as compared to a gross loss margin of 6% on a non-GAAP basis in the comparable period. Revenue from the teleradiology services for the reported period was $3.1 million, with a gross profit of $100,000 on a GAAP basis, as compared to revenue of $2.6 million with a gross profit of $300,000 on a GAAP basis in the comparable period, which represents a gross profit margin of approximately 25% on a GAAP basis for the reported period as compared to 13% on a GAAP basis in the comparable period. Non-GAAP gross profit of the company's teleradiology services for the reported period was $1.3 million as compared to $900,000 in the comparable period, which represents a gross profit margin of approximately 43% on a non-GAAP basis for the reported period as compared to 35% on a non-GAAP basis in the comparable period. The increase in the company's revenue and gross profit margins in the teleradiology services was mainly attributable to customer retention, increased rate, and increased volume of the company's reading services during the weekends and weekdays. During the reported period, the company generated revenue through the sale and deployment of its imaging systems and OEM services, which amounted to $175,000 for the reported period, with a gross loss of $1.7 million on a GAAP basis and a non-GAAP basis, compared to revenue of $29,000 with a gross loss of $1.5 million on a GAAP basis and a non-GAAP basis in the comparable period. The company's revenue from its AI solution for the reported period was $100,000 with a gross loss of $1.9 million on a GAAP basis, compared to revenue of $400,000 with a gross loss of $1.6 million in the comparable period. Non-GAAP gross profit of the company's AI solution for the reported period was $75,000, compared to a gross profit of $370,000 in the comparable period. Research and development expenses net for the reported period were $4.6 million compared to $4.7 million in the comparable period, which represents a decrease of $100,000. The decrease was mainly due to a decrease of $400,000 in share-based compensation and $500,000 in expenses related to our development activities, which were mitigated by an increase of $500,000 in salaries and wages and a decrease of $300,000 in grants received. Sales and marketing expenses for the reported period were $1.5 million compared to $900,000 in the comparable period, which represents an increase of $600,000 mainly due to an increase of $500,000 in salaries and wages, $500,000 in marketing activities with connection to the commercialization in the US market, which was mitigated by a decrease of $100,000 in share-based compensation. General and administrative expenses for the reported period were $5.3 million compared to $5.7 million in the comparable period. The decrease of $400,000 was mainly due to a decrease of $600,000 in share-based compensation, a decrease of $200,000 in the company's legal expenses, and a decrease of $200,000 in MVNO insurance expenses, which were mitigated by an increase of $500,000 in salaries and wages and recruiting fees. Erez Meltzer: Non-GAAP net loss Ran Daniel: attributable to ordinary shares for the reported period was $9.9 million, compared to $8.7 million in the comparable period. The increase of $1.2 million in the non-GAAP net loss attributable to ordinary shares was mainly due to an increase of $100,000 in the non-GAAP gross loss and an increase of $1.1 million in the non-GAAP operating expenses. Turning to our balance sheet. As of September 30, 2025, we had cash, cash equivalents, and marketable securities of approximately $55.5 million and $3.2 million in short-term loans from a bank. We ended the quarter with property and equipment net of $46.7 million. As of September 30, 2025, and December 31, 2024, we had approximately 65.4 million and 63.8 million shares outstanding, respectively. With that, I will hand the call back over to Erez. Thank you, Ran. The 2025 was transformative for Nano-X Imaging Ltd. Erez Meltzer: As we evolved from a hardware company into a comprehensive imaging platform. With our acquisition of Vaso Healthcare IT, new partnerships with 3DR Labs, Altea, and X-ray, and the upcoming launch of our AI-ready ArcX system at RSNA, we are building the infrastructure for sustainable recurring revenue streams that will define our future growth. Together, with our recent collaboration in Greece, Romania, The Czech Republic, and France, we are strengthening our European footprint. In parallel, our collaborations with Cedars-Sinai and our ongoing clinical trials in France continue to advance the clinical validation of our technology and contribute to the global momentum behind our platform. Through our three strategic pillars, we are executing a comprehensive commercial strategy that combines innovative technology with robust clinical evidence generation and systematic market deployment. Although some elements are beyond our direct control, we believe this is the right moment to present our growth roadmap, and for 2026, we are guiding to revenues of over $35 million. Our purpose remains unchanged: to redefine medical imaging by uniting innovation, intelligence, and accessibility, creating meaningful impact for patients, clinicians, and healthcare systems worldwide. The momentum we are building across our commercial deployments and clinical evidence generation positions us well for continued growth and market leadership. Thank you for your continued support. Operator, please open the call for questions. Operator, just before the question, Erez. One comment regarding what actually was said that last night, we have actually closed the Vaso Healthcare IT acquisition. So actually, it's done. With that, you can go ahead and open for the Q and A. Operator: Thank you. And wait for your name to be announced. To withdraw your question, simply press 11 again. Please stand by while we compile the Q&A roster. Now, the first question is coming from the line of Ross Osborn with Cantor Fitzgerald. Your line is now open. Ross Osborn: Hi. Good morning. Thanks for taking our questions. Congrats on the progress. So starting with the quarter, would you walk through how many systems were in the field and performing scans that resulted in your revenue of $175,000? Erez Meltzer: A few dozens out of all together. A few of them are being installed as we speak. And a few will be installed in the next few weeks. And as mentioned, we are counting on the expansion of the retail, expansion of the business partners, the expansion of the salespeople that are closing deals right now. We have a few, as mentioned, some of them are waiting for regulatory approvals for physics approval, for site preparation, but altogether, this is gonna move. Ross Osborn: Okay. Yeah. Sorry if I wasn't clear. Looking back during the March, so your reported revenue, how did you generate $125,000? Not for the rest of this year, but during the quarter. Ran Daniel: It was a combination of revenue from scans and our OEM services. I assume that we are regarding the paragraph in the script and the PR that describes the revenue from deployed systems and OEM services. Correct? Ross Osborn: Yes. So just curious how many systems were deployed. So I'll refer you to this paragraph, and I don't think in general, it's saying that the answer is changing. With regards to the system. Erez Meltzer: Okay. Ross Osborn: And then looking to the balance of 2025 and meeting 100 units in various stages of deployment. You know, what types of agreements should we be thinking about in terms of those being at least versus capital sales? Erez Meltzer: Most. I would say the majority of the majority are ancestors. Ross Osborn: Okay. Thanks for taking the question. But we still see increased activities in the CapEx arena. Okay? So we do expect to have some CapEx over here. Erez Meltzer: And the retail. Got it. Ross Osborn: I'll jump back in queue. Thank you. Erez Meltzer: No problem. Take your help. Operator: Thank you. Our next question is coming from the line of Jeffrey Cohen with Ladenburg Thalmann. Your line is now open. Jeffrey Cohen: Oh, hi, Erez and Ran. Thanks for taking our questions, and nice to see the company at Medica this week. So a few from our end. It seems like we got a good sense of the top line from where you're talking about for the balance of this year and certainly for 2026 with the many partnerships and Ran Daniel: Jeff, I'm sorry. Can you raise your voice, please? Because you are a little bit far away from the Sorry. Could you talk about how OpEx could look over the next four to six quarters as you talk about Destiny Buch: achieving these, 2026 targets. Versus currently? Erez Meltzer: You generally say, what you would expect to see is that Ran Daniel: our investment in the deployment efforts, namely the sales and marketing expenses, will increase, of course. Because we need to invest in all the activities that are related to the deployment of the systems and the sales. On the other end, you should see more tamed R&D expenses. As the focus is going towards commercialization and less on development activities. And we are trying our best to be more, as you know, to be as efficient as we can be, and you should see the same level of G&A. With some fluctuations. Destiny Buch: Okay. Got it. Ran Daniel: Could you talk about Don't forget that the major portion of our G&A expenses are related to us being a public company. And know, sometimes those expenses increase. Destiny Buch: Got it. Could you talk about Vaso? I saw in the press release, is a mention of approximately 100 customers. Could you talk about what types of customers that they currently have? And the opportunity for those customers into the Nano-X Imaging Ltd. family. So Erez Meltzer: the 100 customers of Vaso are all of them are medical-related. Mike Cavanaugh: They are actually serving hospitals Erez Meltzer: Imaging Centers, Across The United States. From our point of view, we have a lot of cross-selling that can be achieved. They can of the Vaso acquisition the the the majority of the I would say the main purpose will be to serve the operational and the customer base the the growing customer base of of Nano-X Imaging Ltd. AI. But the more we go into, into the the details what we see right now, what's in the PMI and the post-merger integration, that they will be able to expand our sales force to the ARC systems to those institutions. To expand the services of the IT services that they are providing because many of the of those customers are modality-related Mike Cavanaugh: customers. Erez Meltzer: In addition, what we see is that customers a few of the customers already mentioned an interest that USA Rod, the pillar radiology business, will be provided by our teleradiology services. And in addition, the teleradiology the the the those customers are are saying that they can actually refer a few of their customers to teleradiology services to be obtained. The I would say that this will actually strengthen our IT and software, which is one of the major pillars of our growth. And and and we definitely can see their network and their customer base as a as a way to grow our business. Our existing business. Got it. And one more, if I may. Destiny Buch: I did hear you mentioned breakeven 2027 EBITDA levels. But just prior to that, you mentioned something about '26 Could you reiterate that? Erez Meltzer: Yeah. We mentioned this is already the second time that we say that what we are aiming that on a run route basis on '26 where the AI business will be breakeven In fact, this was even before before Vaso acquisition. So right now, Ran Daniel: we believe probably that it will accelerate the Erez Meltzer: probability of this to be breakeven sometimes at at the end of the 2026. And the other thing that we said that the ARC hardware business will will shoot for a breakeven and in 2027. This is something that we already mentioned in the past. And what you can see right now based on the wide and the the what what you see here is the that we are making progress in all the fronts. In technology and the regulation and the commercialization of the business, And we strongly believe that the retail business, the business partners, and our facility with with the actually enable us to be there. Ron, would you like to add anything? Ran Daniel: Yes. Let me fine-tune it. What we have said in the past that, the AI business will be breakeven on a quarterly breakeven during sometimes during 2026, didn't specify any quarter. We do we do emphasize that the growth of the AI division by their expansions of their B2B2B to B to C model, enter into new geographics, and, of course, with the acquisition of Vaso, which expands their operations and the potential for growth and achieving the quarterly breakeven on the one on the quarterly run rate. And while we also have said that we expect that sometimes to during 2027, we may be breakeven in the ARC division. All in total, it will bring us sometime in 2027. We may be break breakeven on a wide company range. Just to be more accurate. Destiny Buch: Okay. That's perfect. Thank you for taking our questions. Erez Meltzer: No problem. Thank you, sir. Ran Daniel: Hopefully, you enjoy the Medica. Erez Meltzer: Conference. Yeah. Operator: Thank you. Next question coming from the line of Scott Henry with HEP. Your line is now open. Scott Henry: Thank you, and good morning or afternoon depending on your location. I want to talk a little bit about the 2026 number. $35 million, that's a pretty big number. So my question is, how should you think about the cadence of the year? Do you expect that to start in Q1 and ramp up? Or should we think about that in the second part? And then as well, do you have any preorders or or any just trying to gauge your confidence in that number. Thank you. Erez Meltzer: So first of all, I would start with the second comment. Most of what we say we are based on not most, but I would say major part, are based on on preorder And the Operator: and the the outcome of what Erez Meltzer: we are doing right now, the the the those three elements, the the business partners, the retail which is a major part, and the and the sales force that we currently have. Not to mention the the new position. Ran Daniel: Second, Erez Meltzer: I would say that it will start slowly from Q1 and ramp up over the quarters and and achieve the the the number at the fourth quarter. If I have to say something about mathematics, I would say that's probably the line will be kind of an exponential one. And not the linear. Okay. Scott Henry: Great. Thank you for that color. And and in terms of levers, Ran Daniel: Just to add a follow-up question is that we do we do see some more activities there. I'm I'm going to refer to the ad of just what we said in the in the last questions for Jeffrey. Of Jeffrey. Don't forget that the current census and your estimates are based without the Vaso position. So when you add the Vaso positions, you're already going up you have to account for the $4 million in revenues that approximately that Vaso have. So other than this, the the growth may come probably organic. And email. Scott Henry: Okay. It I think, Ron, did you say that Vaso would Jason Kolbert: contribute $4 million in revenues? You broke up. You broke up the Erez Meltzer: Yes. Approximately. Jason Kolbert: Okay. And as far as the levers, in 2026, what about teleradiology? It reported a strong growth rate in the third quarter. Is that growth increasing? I mean historically, it's been kind of a 10% grower Are you looking for kind of a breakout in that category? Certainly, it was strong in Q3. Erez Meltzer: The answer is, if if you look at the at the numbers that, we gave as guidance, The numbers are not based on on a major quantum leap growth the teleradiology. We We hope that it will grow, but based on the indication that we gave it's based on the sort of the existing plus-minus numbers. The all the growth will come from the other business that we have, namely the ARC business and the, especially the deployment of the ARC X and especially the hopefully, the elimination of the adjunct device of the FDA and the other business that we said, and the AI business that that we're talking. I think that OEM also will grow slowly and we will see a major growth from 2027. Based on the indication that we currently have. From our existing customers and potential customers of the OEM business. Okay. Scott Henry: Yeah. The first Both and both will be the AI and the R. Ran Daniel: K, and the hardware and the product. Jason Kolbert: Okay. Great. Thank you for taking the and I look forward to seeing you down at the RSNA conference. Ran Daniel: See you there. See you. Erez Meltzer: Thank you very much. Operator: Thank you. And that's the end of our Q&A session. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. And you may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Allot's third quarter 2025 results conference call. All participants are at present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact Allot Investors Relations team at EK Global Investor Relations at +1 212378040 or view it in the News section of the company's site at www.allot.com. I would like now to hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin please? Kenny Green: Good day to all of you, welcome to Allot's conference call to discuss its financial results for the quarter. I would like to thank Allot's management for hosting this conference call. All participants are present. Following the formal presentation, instructions will be given for the question and answer session. As a reminder, this conference call is being recorded. If you have not received the company's press release, please check the company's website at www.allot.com. With me today on the line are Eyal Harari, CEO, and Liat Nahum, CFO. Following Eyal's prepared remarks, we will open the call for the question and answer session. Both Eyal and Liat will be available to answer those questions. You can all find the highlights of the quarter, including the financial highlights and metrics, in today's earnings press release. Before we start, I'd like to point out the following safe harbor statement. This conference call may contain projections or other forward-looking statements regarding future events or the future performance of the company. Those statements are early predictions, and Allot cannot guarantee that they will, in fact, occur. Allot does not assume any obligation to update that information. Actual events or results may differ materially from those projected, including as a result of changing market trends, delays in the launch of services by Allot's customers, reduced demand, and the competitive nature of the security services industry, as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission. Also, the financial results in this call will be presented mainly on a non-GAAP basis. Allot believes that these non-GAAP financial measures provide more consistent and comparable measures to help investors understand Allot's operating performance. For all the data, please refer to the financial tables published in the results press release issued earlier today, which also include the GAAP to non-GAAP reconciliation tables. And with that, I would now like to hand the call over to Eyal Harari, CEO of Allot. Eyal, please go ahead. Eyal Harari: Thank you, Ken. We are pleased with our excellent third quarter 2025 results. We reported double-digit year-over-year revenue growth for the first time in multiple years. Continued strong CCaaS momentum and our highest level of operating profitability in over a decade. We saw strength across all parts of our business, both in cybersecurity as well as network intelligence solutions. Revenue for the quarter was $26.4 million, up 14% year over year. Our profitability has likewise expanded strongly, and we reported solid operating profit in the quarter versus a loss last year. Our Cybersecurity as a Service growth engine continued with its excellent performance. As of September 2025, our CCaaS ARR was up 60% year over year, which demonstrates very strong traction for our service among end customers. As each quarter passes, CCaaS is becoming an ever more important part of the revenue pie, and it made up 28% of our revenues for the quarter. We ended the quarter with over $80 million in cash and no debt. Allot is back to a very strong financial position with the resources to further execute on our growth strategy. Overall, our results demonstrate that we are executing exceptionally well on our cybersecurity-first strategy and renewed go-to-market focus. Looking at some of the trends within the business, I first want to discuss our biggest growth engine. We are seeing increased traction among major telcos for cybersecurity as a service solutions. As we progress, we are starting to see the fruits of our long-term investments in this solution. The recent customer launches of our cybersecurity service are going very well. We are actively supporting our customer launches and offering gaining traction with their end customers, driving our strong sales momentum. During the quarter, we gained our first customer for our newly released Ofnet Secure solution. Ofnet Secure will allow the extending of network-based cybersecurity protection beyond the operator's infrastructure to subscribers using any network or Wi-Fi connection. It allows operators to better seamless always-on security experience that travels with the user without requiring complex installations or device-level configuration. For the operator, Ofnet Secure strengthens their customer loyalty, increases subscription-based revenue opportunities, and reinforces the role as a trusted provider of digital security backed by Allot Technology. The pipeline of new potential business continues to increase. Our CCaaS offering is gaining traction not only with new CSPs and telcos but also among the end customers of our existing partners. The positive momentum is allowing us to show accelerated growth and is providing us with strong forward visibility. As you can see, we are working hard to successfully bring new CCaaS customers to Allot. Our smart product network intelligence continued to perform well and was also a contributor to our growth in the quarter. We are winning new customers, which are driving higher revenues, stronger backlog, improved visibility, and we have a robust pipeline. Today, our smart product is being sold as part of our Unified Cybersecurity First platform. This integrated solution, with best-in-class technology and innovation, is enabling us to generate increased demand. We are actively executing on the various projects we have recently won, including new Terra three deployments and upgrades, where we are working closely with the customers to roll out the platform. We are investing to bring new capabilities and functionality to maintain our technology leadership, and our recent enhancement around visibility is creating new opportunities for us. Overall, our efforts to grow the business and product line continue to progress well, and the backlog that we have built over the past few months provides us with solid visibility heading into next year. In summary, we are very pleased with our third quarter 2025 results, driven by strong performance across all parts of our business, namely accelerating CCaaS traction and increased Network Intelligence solution sales. Looking ahead, we have good visibility. Our backlog is strong, and our pipeline continues to be broad with many opportunities. I am increasingly optimistic about our long-term future, and I am excited to continue progressing on our cybersecurity-first strategy. Given the continued accelerated CCaaS growth, our solid visibility, and high level of backlog, we are increasing our guidance. We expect 2025 year-end CCaaS ARR to show an exceptionally strong year-over-year growth surpassing 60%. We are also raising our full-year 2025 revenue guidance to between $100 and $103 million. As we move into 2026, Allot is exceptionally well-positioned for the year ahead, and we see ourselves at the inflection point of a longer-term trend of ongoing profitable growth. And now I would like to hand it over to our CFO, Liat Nahum, for the financial summary. Liat, please go ahead. Liat Nahum: Thanks, Eyal. Revenue in the third quarter was $26.4 million, up 14% year over year. Revenue from our growth engine CCaaS was $7.3 million in the quarter, up 60% year over year and comprising 28% of our revenue in the quarter. Our CCaaS annual recurring revenue, ARR, as of September 2025 was $27.6 million. Our revenue increase was driven by growth in both our CCaaS and our Smart products. From a geographic perspective, I want to point out that in the third quarter, we had an increased level of Americas sales, in line with our strategy to increase business in this region. Specifically, we recognized revenue on a relatively large smart order, and on the CCaaS front, we experienced a growing contribution from the U.S. Finally, I want to point out that recurring revenue continued to grow as a percentage of our overall revenues, standing at 63% in Q3 2025 versus 58% in Q3 2024. I will now discuss the non-GAAP financial measures. For all our financial results, including the GAAP financial measures, and the various other breakdowns of our revenues, please refer to the table in our results press release. Non-GAAP gross margin in the quarter was 72.2% compared with 71.7% in the third quarter of last year. Non-GAAP operating expenses were $15.4 million compared with $15.6 million in the third quarter of last year. During the quarter, we received a grant of approximately $1 million for research and development funding. This grant was also received in the third quarter of last year. We reported non-GAAP operating income of $3.7 million compared with $1.1 million in Q3 2024. The growth in revenue and improved gross margin on a similar operating expense base led to significant growth in our operating income. Allot had 497 full-time employees as of 09/30/2025. In terms of non-GAAP net income, we reported $4.6 million in the quarter, or a profit of $0.1 per diluted share, as compared with $1.3 million or $0.03 per diluted share in the third quarter of last year. During the quarter, we completed a $46 million follow-on share offering, of which $40 million in gross proceeds were received during the second quarter and the remaining $6 million in gross proceeds received this quarter. Our shares issued and outstanding as of September were 48.4 million shares. We reported $4 million positive operating cash flow in the third quarter, representing the third quarter in a row that we are generating positive operating cash flow. We added over $10 million to our cash balance, and we are well-positioned to drive profitable growth. Cash, bank deposits, and investments as of September 30, 2025, totaled $81 million versus $59 million as of 12/31/2024. Allot has no debt. That ends my summary. Eyal and I are now happy to take your questions. Operator: Thank you, ladies and gentlemen. At this time, we will begin the question and answer session. If you have a question, please press 1. If you wish to cancel your request, please press 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Nihal Chokshi from Northland Capital Markets. Please go ahead. Nihal Chokshi: Good morning. Congratulations on a good quarter. You mentioned that you are seeing increased traction with the major telecom customer. Can you outline whether or not that's coming from higher attach rates or is that coming from more bundles potentially now bundled at the default base premium bundle here? Eyal Harari: Thank you, Nihal. So overall, we are seeing good progress with all of our new customer launches. I think we are seeing positive trends both on attach rates as well as we have good progress with the new services we launched with our customers. This quarter, we updated on a mass mobile in Panama that launched our CCaaS service and expanded our customer base. Overall, we are seeing good results with all of our customers that drove this very significant growth on both CCaaS revenue and ARR and supported our highest revenue growth for the company in a while. Nihal Chokshi: Okay. Great. You also mentioned that you secured your first customer for Ofnet Secure. Can you give a little bit more detail on what is the customer profile of this first customer here? Eyal Harari: So we have Ofnet Secure as a product we launched a few quarters ago with an aim to enhance our security protection for our end customers not only when they are connected to the operational network but also when they are leaving the network and using other ways to connect to their services. With the new product starting to build pipeline, we are in multiple sales opportunities with both new and existing customers that are looking to enhance their service with this option. I do not want to go too much into the specifics of this first launch, but I would say that the main value for these specific customers is that they really want their customers to be protected 24/7, and they wanted to combine our unique network security with the off-net so no matter where the customer is connected, they are always using our cybersecurity services, and they do not have to mitigate the risk or minimize the risk of being under security threats. Nihal Chokshi: Is it fair to say that this is a customer of materiality to Allot? Eyal Harari: We appreciate the customer and its event for that. I do not want to go into specifics. As I said, it is the first customer that we already had this service, but we have additional multiple opportunities with both new and existing customers that are looking to further enhance our cybersecurity service with Ofnet. Nihal Chokshi: Okay. Great. My final question is that in the past quarters, you have commented on a strong smart pipeline. Do you continue to see that? Eyal Harari: Yes. We announced earlier in the year that we won several multimillion-dollar deals as well as very large deals we announced, I believe, in July or August. We still see a strong pipeline with opportunities both with existing customers looking to further expand their platforms. We see good demand for the Terra three new product, which is a very high-capacity service gateway solution. We have a good mix of new and existing customers in the pipeline. So overall, as commented earlier by Liat, we see in this quarter strong results not only from the CCaaS but also from the smart product line. We are hoping for this trend to continue. Nihal Chokshi: Great. Thank you very much. Operator: Thank you, Nihal. The next question is from Jonathan Ho from William Blair. Please go ahead. Jonathan Ho: Hi, good morning and congratulations on the strong results. Starting with CCaaS, can you maybe unpack for us a little bit more what the drivers of the growth were? How much of this growth is maybe coming from newer contracts that are now coming online versus adoption and growth in existing contracts? Eyal Harari: Thank you, Jonathan. So our main growth is coming from the last year's contracts we announced in the last few quarters that onboarded, launched our service, and continue to onboard new and additional customers. Overall, we are very pleased with the results of most of our strategic accounts that are continuing to add new subscriptions and supporting the service. We announced this quarter about one new launch, mass mobile in Panama. Some of the new projects and activities are going to support our longer-term growth. But when we look at short-term quarterly changes, this is mainly by new customers joining on the services we already launched. Jonathan Ho: Got it. And in terms of your network intelligence offerings, can you talk a little bit about the competitive landscape and pricing environment? It looks like this has inflected back to growth, but I just wanted to understand sort of the sustainability of that growth opportunity. Eyal Harari: Our networking technologies are part of our core assets. We have a very large and significant installed base of customers. Overall, the competitive landscape is less, I would say, easier these days due to some of the changes in the dynamics. We see that overall telco CapEx spend is still tight, and the telecom industry is still challenging, but we believe we have unique technology, and with the Terra three product that is very unique, we are able to get the best price performance in the market and by that get a really competitive edge. I believe that in the next few quarters, there is definitely a potential to continue to grow well with this product. This still continues to be a significant part of our plans. While in parallel, as you could also see, the CCaaS starts to be very meaningful. We passed more than 25% of our business from the cybersecurity, and if we continue with this pace, we are going to about 30% of our business with the cybersecurity CCaaS service. This positions us very well to continue the growth next year. Jonathan Ho: Got it. And maybe one last one for me. Can you talk a little bit about the drivers of growth in some of your larger CCaaS contracts and whether some of the ad campaigns that were launched that were pretty public have had an impact in terms of adoption? Any way to measure that or anything that you've taken away from a learning perspective? Thank you. Eyal Harari: So, Jonathan, we are seeing four drivers for our CCaaS growth. One is obviously when we have new customers that are expanding our TAM into new subscriber bases. This is what we are busy with our expanded go-to-market team that is going after new accounts. On accounts that we already work with, usually we start with certain services. But we are continuing with our customer success teams to further offer additional services. For example, start with a mobile network, we are offering the fixed security. In some areas, we are doing the business customers. We are looking into the consumer and vice versa. So every account definitely does not stop once. It has a lot of potential to do more. So the services that are already launched, we are working closely with our marketing team and our consultants that bring best practices on what is the best way to go to market for our partners to reach their customers. We are trying to help them with marketing materials, marketing campaigns, and really more on a consultancy supporting mode. We are really relying on their go-to-market efforts. Typically, new services once launched are peaking between after two to three years. We see strong double-digit attach rates in many of our customers. This is why this growth is usually sustainable along this time. Lastly, we are looking to further upsell and cross-sell some new innovations, new products. We are very pleased that our latest release of the off-net is now part of the portfolio. This is helping us to get more revenue from the same customers that are already attached to the cybersecurity service. We are continuing to work on additional innovations and bring more value to our customers to further help them to protect their customers. So all of those are working together. Some are more longer-term growth, some of them are more shorter-term growth. Because we are investing in all those in parallel, we are seeing very good results in the 60% range year over year, which we are very pleased with. Jonathan Ho: Excellent. Thank you. Eyal Harari: Thank you, Jonathan. Operator: The next question is from Matthew Ryan Calitri of Needham and Company. Please go ahead. Matthew Ryan Calitri: Hey guys, this is Matt Calitri over at Needham. Thanks for taking our questions. On the CCaaS side, how is Verizon-like penetration trending versus expectations? Are you seeing fairly linear scaling here, or is it more of an exponential path? Eyal Harari: So we cannot refer to specific customers. But as commented before, we are overall very pleased with our progress with all of our customer base. We see the results in the quarterly numbers. As you saw, we raised our expectations to surpass 60% on a yearly level. Overall, we are very happy with the progress. Matthew Ryan Calitri: Okay. That makes sense. And then a cleanup here. When you said CCaaS revenue going to about 30% of the business, was that expectation like by the end of the year? Liat Nahum: Yes. So if we continue the current trend, then as we gave already guidelines for the remaining of the year to reach 60% and above year over year, then this is indeed the expectation. Yes. Matthew Ryan Calitri: Okay, great. And then last one for me. On the product revenue strength you are seeing, how is Terra three playing a role in customer conversations? And what kind of color can you give there as far as new opportunities that's opening up and how other segments are changing there? Thank you. Eyal Harari: So we do see a good mix in our pipeline of new opportunities as well as discussions with our existing customers. Overall, we are putting a lot of focus on our customer success and making sure we are helping to support our customers' business goals. A lot of the growth and a lot of the potential we see is already within a very impressive installed base. We have some of the best carriers in the world that are working with us both on the smart and secure product lines. We are trying to continue and improve and delight our customers to maximize the business value they get from our solution. Overall, in the telco industry, this is the best way to provide longer-term sustainable growth. We also see every quarter additional new customers that are adding to the potential. As we mentioned in the previous comments, we saw part of the quarters new logos joining in both product lines, and we are trying to keep the investment on hunting and going after new accounts. We are maintaining a healthy mix in our pipeline between the two. Matthew Ryan Calitri: Great. Thank you. Eyal Harari: Thank you, Matt. Operator: There are no further questions at this time. So that ends our question and answer session. In the next few hours, this call will be made available on Allot's IR website. I would like to thank everyone for joining this call today and especially to Allot's management for hosting this call. And with that, we end our call. Have a good day.
Operator: Good morning. Welcome to ODDITY's Third Quarter 2025 Earnings Conference Call. Today's call is being recorded. We have allotted time for prepared remarks and Q&A. At this time, I would like to turn the conference over to Maria Lycouris, Investor Relations for ODDITY. Thank you. You may begin. Maria Lycouris: Thank you, operator. I'm joined by Oran Holtzman, ODDITY's Co-Founder and CEO; and Lindsay Drucker Mann, ODDITY's Global CFO. Niv Price, ODDITY's CTO, will also be available for the question-and-answer session. As a reminder, management's remarks on this call that do not concern past events are forward-looking statements. These may include predictions, expectations or estimates, including statements about ODDITY's business strategy, market opportunity, future financial performance and potential long-term success. Forward-looking statements involve risks and uncertainties, and actual results could differ materially due to a variety of factors. These factors are described under forward-looking statements in our earnings press release issued yesterday and in our most recent annual report on Form 20-F filed with the Securities and Exchange Commission on February 25, 2025. We do not undertake any obligation to update forward-looking statements, which speak only as of today. Finally, during this call, we will discuss certain non-GAAP financial measures, which we believe are useful supplemental measures for understanding our business. Additional information about these non-GAAP financial measures, including their definitions are included in our earnings press release, which we issued yesterday. I will now hand the call over to Oran. Oran Holtzman: Thanks, everyone, for joining us today. We delivered an outstanding third quarter with strong financial performance while achieving major milestones in our growth initiatives, including new brands, new markets, ODDITY LABS and tech innovation. Even in a challenging industry backdrop, ODDITY continues to deliver on its near-term financial commitments while building our future growth engines. Our financial performance once again exceeds our targets as we have done every quarter for the last 10 quarters as a public company across revenue, profit and earnings, including 24% revenue growth and 24% growth in adjusted diluted earnings per share year-over-year despite category challenges. We are also once again raising our full year guidance. We achieved a huge milestone this week with the official launch of METHODIQ, the third brand in the ODDITY platform. METHODIQ is our most ambitious endeavor. Our long-term goal for METHODIQ is not just to launch another great brand and a telehealth platform, but to transform a broken medical care system using the best treatment and the highest standards of care available to everyone. Our objective is to address medical issues with customized high efficacy treatment without the need of going to a doctor's office or getting lost in a drugstore. Achieving our planned time line for METHODIQ is a great accomplishment and speaks to what makes ODDITY and our culture so strong. This is 4 years of heavy R&D in the making, supported by 2 acquisitions, including Voyage81 and Revela developed with what we believe is an unprecedented scale of over 20,000 real user trials for our product line. METHODIQ is starting in dermatology, but our long-term goal is to expand into new medical domains in the future, and these are in development as we speak. Our launch into dermatology takes on a massive problem. Industry data shows that nearly 50 million Americans suffer from acne, nearly 30 million from hyperpigmentation and more than 30 million from eczema, and many of them are unsatisfied with the current options on the market. Drugstore products lack efficacy and personalization, going to a dermatologist is a high friction and the standard of care for these conditions has declined. At the same time, dermatologists will tell you that issues like acne are curable. You only need to ensure that the person has the right products and that they stay compliant. To tackle this big challenge, we built an ambitious and complex brand. METHODIQ is expected to feature a huge line of 28 prescription and nonprescription products, which combine for more than 100 unique treatment combinations or precision personalization. We have aimed to optimize these products to balance between maximizing efficacy and minimizing side effects at the same time to provide the best-in-class beauty experience using the same standards for things like texture and scent that we have at IL MAKIAGE and SpoiledChild, while beating top benchmark competitors in their category based on internal data. Our launch portfolio spans oral topical supplements and medical grade makeup that conceals whiteheads. Within the first 6 months of launch, we will be live in the market with 4 METHODIQ products formulated with ODDITY LABS molecules that are proprietary to us, addressing a range of skin conditions that include dark spots, papular scarring, eczema and skin filament. METHODIQ suites of vision tools was developed alongside our team of dermatologists to analyze visible skin features like breakouts and pigmentation to help our doctors' networks understand its user conditions. These vision models were built drawing on more than 1 million image of real individual with no facial skin condition, which we believe is the largest image data set of its kind and was curated from over 13 million facial images in ODDITY's database. Users are delivered continuous care through METHODIQ's first-of-its-kind tracking app for weekly check-ins where our vision technology quantifies progress and gives update to the clinician, ensuring compliance and success. We soft launched METHODIQ in Q3 and went live with our formal launch earlier this week, exactly as planned. This launch includes a major media campaign showcasing METHODIQ's distinctive brand voice and inspires consumers to commit to the care. We are running a large-scale out-of-home takeover in New York City and a massive TikTok activation partnering with the biggest medical and skin influencers to create brand awareness and to build trust. This is the biggest TikTok activation in ODDITY's history. And as we have said, dermatology is just the beginning. We are working on additional medical domains for expansion, and we expect to have more to announce for METHODIQ's in the future. Turning to IL MAKIAGE. Q3 were once again strong. IL MAKIAGE revenue grew double digit online. The brand remains on track to achieve our target of $1 billion revenue by 2028. We continue to show healthy expansion in international. At the ODDITY level, international revenue increased around 40% year-over-year in the first 9 months of 2025. We have successfully scaled in existing markets like U.K. and Australia, while conducting larger scale tests in new markets like France, Italy and Spain. We see huge opportunity in international markets and plan to further scale those across the board in 2026. Skin remains a standout growth area and is on track to be around 40% of IL MAKIAGE brand revenue this year. Successful product innovation has been a key driver of skin, and we expect this will continue in 2026 with our solid lineup of new product launches. Turning to SpoiledChild, which is having a strong year. We now expect the brand to cross $225 million of revenue in 2025. We are excited about our innovation lineup for 2026, including new product tests. Moving to ODDITY LABS, where our very hard work over the last 2 years is starting to bear fruit. We have made significant improvement over the last year to our systems, infrastructure and teams, which we believe will translate into strong commercial discoveries. The near-term commercial impact for ODDITY LABS is increasing. We plan to have at least 8 products with labs molecule on the market in 2026 for our existing brands, including 4 products for METHODIQ and 4 for IL MAKIAGE and SpoiledChild. Beyond these 8, we have additional products planned for our brand launch, lastly on tech product innovation, which is the backbone of our business and an area of continuous investment. Artificial intelligence has been a centerpiece of our tech platform since we first launched in 2018. Advances in large language models and generative AI, together with our large and growing proprietary data sets allow us to push the frontier of how we can use machine learning to drive direct-to-consumer. We have a range of initiatives in development on this front, including commerce agents that drive conversion and satisfaction, integrating these state-of-the-art models into our advertising creative and other customer-facing initiatives. With that, I will hand it over to Lindsay. Lindsay Mann: Thanks, Oran. Turning to our third quarter financial results, which I'll refer to on an adjusted basis. You can find the full reconciliation to GAAP in our press release. Q3 was another good quarter for us, setting us up for a record-breaking full year results in 2025. ODDITY's strong financial results continue to stand out relative to our competitors. This outperformance has been driven by the strength of our direct-to-consumer model and exposure to what we see as the key durable growth vectors in the industry, which are the consumer shift online and the migration towards high-efficacy products. We grew revenue by 24% in the third quarter to $148 million, exceeding our guidance for revenue growth of between 21% and 23%. The strength was driven by double-digit online growth at both IL MAKIAGE and SpoiledChild. Net revenue was driven by an increase in orders, while average order value declined around 1%. Average order value was impacted by mix, including faster growth in international markets, which carry lower AOV. Repeat increased as a percentage of sales year-over-year, and our 12-month net revenue repeat cohort trends remained strong at north of 100%. Gross margins of 71.6% expanded 170 basis points versus the prior year and exceeded our guidance of 68%. We did experience some gross margin impact from the flow-through of higher tariffs during the period, but this was offset in part by cost efficiencies and favorable mix relative to our plan. We continue to expect tariff headwinds will remain manageable for the balance of 2025 and into 2026. And while we have the flexibility to take pricing as needed, we have no specific price increases planned to offset tariff-related inflation. We delivered adjusted EBITDA of $29 million in the quarter, above our guidance of $26 million to $28 million. We continue to invest in our long-term growth engines, including our METHODIQ brand launch and other future brands, ODDITY LABS and our tech platform. We had higher-than-planned media costs in the quarter and have seen the media backdrop improve as we progressed into the fourth quarter. We delivered adjusted diluted earnings per share of $0.40 compared to our guidance of $0.33 to $0.36. Adjusted diluted earnings per share exclude approximately $9 million of share-based compensation expense. We delivered strong free cash flow of $90 million for the first 9 months of the year. This included around $16 million of outflows related to inventory as we built inventory from METHODIQ and modified our inventory shipment timing for tariff planning purposes. We ended the quarter with $793 million of cash, cash equivalents and investments on our balance sheet with an additional $200 million available on our undrawn credit facilities. Turning to our outlook for 2025. After a strong first 9 months, we're on track for another record-breaking fiscal year and are once again raising full year guidance. We now expect full year 2025 net revenue will be between $806 million and $809 million, representing between 24% and 25% year-over-year growth. We expect gross margin will be approximately 72.5%. We expect adjusted EBITDA will be between $161 million and $163 million, and we expect adjusted diluted earnings per share will be between $2.10 and $2.12, assuming no share buybacks in 2025. This full year outlook includes our expectation that revenue in the fourth quarter will increase between 21% and 23% year-over-year. You can find more details on our Q4 outlook in our press release. With that, I'll turn the call back to the operator for questions. Operator: [Operator Instructions] Our first question is from Dara Mohsenian with Morgan Stanley. Dara Mohsenian: So Oran, on the base business, can you just help us unpack the 40% year-to-date growth you mentioned in international markets? Obviously, that's been a greater focus for you guys year-to-date. What have been the key geographic drivers of growth there from a country standpoint? And then just as you look out to 2026, you mentioned further scaling the international business. Is that around further country penetration? Is it SpoiledChild expansion? Just the key expansion or white space opportunities as you look going forward? Oran Holtzman: Sure. So the first 9 months, just to put things in perspective, still 83% of revenue came from the U.S. So although international grew 40%, it is still tiny comparing to the U.S. while for others, as you know, international is approximately 2/3 of their business. For us, it's still 17%. Our plan is to continue to responsibly grow across the board in international markets. But as we said in our remarks, it's a huge revenue and profit opportunity for us, and we see that it's strategically important for us. We scale international when we think it makes sense. We don't run and spend in user acquisition just because we want to grow international or because we see softness in the U.S. The opposite. Where we see opportunity, this is where we push and we get more revenue. This year, we grew 40%, but like the objective is not just to grow the international market. And in terms of countries today, existing countries, Canada, U.K., Germany, Australia, Israel and France. New geographies are Italy, Spain, Netherlands, Ireland and Sweden and Denmark. Markets that we are adding as testing are Japan, Mexico, Korea, Belgium and a few others. But this year, only 2% of revenue came from new countries and the 15% came from existing countries. So basically, the majority of the growth came from countries that we already were active in. Dara Mohsenian: That's very helpful. And then just one on METHODIQ. Just high level, any thoughts after you've done some testing there on how much ability the platform has to bring in new customers to the ODDITY franchise and perhaps over time, indirectly drive beauty sales and cross-sell? And just as you see initial interest in the platform, how much of that is coming from your existing consumer base versus a new consumer base? Oran Holtzman: Every new country is completely new because we don't have users there. So that's why it's -- in terms of cost, it costs more because like we don't have any existing users. Lindsay Mann: Oran, his question is on METHODIQ. The question is on METHODIQ, right there. Oran Holtzman: Sorry, I couldn't hear you. Yes, sorry. In terms of METHODIQ, yes, of course, like SpoiledChild, when we started, the majority of revenue came from IL MAKIAGE, and we expect that a decent percentage will come from IL MAKIAGE and SpoiledChild for METHODIQ. Of course, we are also doing user acquisition because we want to expand our user base. So it will be mixed. Over time, of course, when the brand grows, then we will have more acquisition, but we are doing both. Operator: Our next question is from Anna Lizzul with Bank of America. Anna Lizzul: On METHODIQ, just wondering in terms of how we should be thinking about this brand for '26. Just wondering if you can continue to elaborate on how you're thinking about new customer acquisition for METHODIQ. Just how can we think about it incrementally versus SpoiledChild and IL MAKIAGE? And just in terms of the investments that you're making, we previously expected, I guess, a larger headwind on the second half in SG&A and the guidance for Q4 implies that this might not be as bad as we previously expected. So was wondering if you can comment on this also for the beginning of '26 in the context of the new brand launch. Oran Holtzman: I will start with high level. Our expectation from METHODIQ Brand 3 is to scale faster than SpoiledChild, which was one of the best D2C launches of all time. And our expectation here is to see even bigger numbers. In terms of contribution due to the fact that it's like relatively small, like SpoiledChild did $25 million in year 1. And even if we do a bit more, still comparing to our next year revenue goal is still tiny. So Lindsay, if you want to touch regarding contribution for both top line and bottom line and METHODIQ. Lindsay Mann: Yes. No, that's right. We haven't given -- we're not ready to give any specific plans for 2026 for METHODIQ. But of course, as we look long term, we're extremely bullish about the brand. This is a telehealth platform that is really reimagined what medical care would look like if it was built entirely around the customer. Oran talked about the world-class treatments we've put together, highest standards of care, truly personalized to the individual and broadly available to everyone available online. We're starting in dermatology. That's a focus for us right now, a market that we understand really well because we've got around half of our IL MAKIAGE and SpoiledChild users on the ODDITY platform that tell us they have issues like acne and dark spots and eczema. And so it's a nice place for us to begin, as we said with the earlier question. And there's truly nothing like it on the market. So we're very, very bullish, but we are in very early stages. We had our soft launch on time in the third quarter. We just launched formally this week. A lot of very strong early signals, but still lots of work for us to do before we figure out our plans in terms of timing of scaling, et cetera, but we're really excited. As far as the SG&A implied guidance for Q4 versus prior, I guess what I would say is, historically, we like to guide to revenue and EBITDA. And then from a gross margin perspective, we always give the team a lot of flexibility. So we try to guide conservatively that allow them to kind of chase whatever products from a DC margin perspective, that's gross margin after media spend. That's how we evaluate the business. We want them to have lots of flexibility to go after the right DC margin or other products that from a strategy perspective, we're focused on. So gross margin is not an internal focus metric. And as a result for our guidance, we try to walk you guys to a place where we feel really comfortable we can deliver, and we've historically delivered a bit better, but we're always managing towards that revenue and EBITDA figure. So I wouldn't read too much into that. We still have some nice investment planned for all of our growth initiatives, including METHODIQ in the fourth quarter, and we talked about the growth investments in the first half of 2026 on our prior call. Operator: Our next question is from Youssef Squali with Truist Securities. Youssef Squali: I have 2, maybe just starting with one, Oran. We've seen a pretty mixed bag of earnings from various consumer-oriented companies this earnings season. I think you alluded to that a little bit in your prepared remarks. Can you maybe speak to your views about the health of the U.S. consumer right now and some of the things that you guys are doing in particular, just to help ODDITY buck that trend? And I have another question. Oran Holtzman: Sure. Yes, like we see what you guys see regarding softness from like from the outside. But internally, as you can see based on our results, revenue is still like according to plan, even better. Margin was strong. This is despite the fact that we see like higher acquisition costs. And the main reason that we can offset it is just like the massive repeat that we have. And when I try to think about the way like to think or to answer regarding softness, the first thing that I look at is obviously acquisition, but the second part is repeat. So yes, acquisition is higher, but repeat is getting way higher every quarter. And therefore, we are not impacted. Youssef Squali: Okay. Okay. That's great to hear. And then Lindsay, I know you're not guiding quite yet to 2026. But is the growth algo for 2026 any different from what we've expected or what we've heard from you guys up until this point, which is committing to basically 20% top line, about 20% adjusted EBITDA margins. And maybe within that, maybe just talk about the marketing efficiency in the business that you're seeing. Lindsay Mann: Yes, we're not ready to give 2026 specific guidance. We'll give that when we issue our Q4 earnings results, but there's no change to our algorithm of 20% revenue growth and 20% adjusted EBITDA margin. And you heard Oran reiterate in his remarks earlier that the other sort of medium-term guidance that we've given for IL MAKIAGE to deliver $1 billion by 2028, there's no change to that either. So business continues to be on a very healthy footing. As far as media efficiency goes, you heard Oran comment, we did have some higher acquisition costs. In my remarks, I mentioned the environment has actually improved for us as we've gotten into the fourth quarter. Overall, SG&A in the third quarter was up around 30%, and that's including some of the increased spending initiatives that we have, for example, for METHODIQ, ODDITY LABS, et cetera. So it's been very manageable for us, and we're feeling really good as we head into Q4. Operator: Our next question is from Andrew Boone with Citizens. Andrew Boone: Lindsay, as we think about METHODIQ being added to the model, is there anything that we should keep in mind in terms of the different financial profile, whether that be different AOVs, whether that be different margin profiles? Is there anything we should be considering as we think about the next 3 years and layering in that brand? And then on ODDITY LABS, it's great to see molecules start to contribute to the portfolio in 2026. Can you guys just help us understand what the expectation is of proprietary molecules? It feels like a step function change in terms of what you guys can bring to market. How do we think about that? And then what's the path beyond those 8 initial products? How do we think beyond this first step? Lindsay Mann: Oran, you want me to start? Oran Holtzman: Yes, please. Lindsay Mann: So in terms of financial profile for METHODIQ, over the long term, we see this brand in a very similar framework that we think about with both IL MAKIAGE and SpoiledChild, and those are brands that will support long-term compounding 20% revenue growth and 20% adjusted EBITDA margin. So very healthy unit economics that we see for the category in general and that we think METHODIQ will deliver, especially as it relates to repeat and other KPIs that build into LTV. I think for the prescription product, in particular, we will have lower gross margins, especially at first. We'll be -- we're always quite inefficient on the gross margin side when we launch a business. But in the case of prescription for METHODIQ, because you have the third-party physician network and also the compounding pharmacies, those are extra costs for us. The business we expect will be mostly not prescription, but you do have some of the prescription cost input that will impact on the gross margin side. However, we think you're going to have a really nice repeat business there that drives healthy DC margin. Probably too early to say much else, but we look forward to sharing a bit more as we progress post launch in 2026. As it relates to ODDITY LABS, maybe I'll start and Oran, if you want to add additionally. As you guys know, in 2024, we made a strategic pivot with Labs where we decided to extend our development time lines in order to focus on delivering molecules that had much higher efficacy and far superior performance characteristics than what was on the market today. And so we knew that would delay some of the timing of certain launches, but we thought it was a really smart trade-off to make because we believe that we could produce things that were way better. And now you're starting to see the fruits of that labor. So as we said, we expect in '26 that just for our existing brands, we'll have 8 products on the market, including 4 for METHODIQ. I would describe the METHODIQ brands products as some of them extremely innovative, addressing very important needs for the consumer. So we're really, really excited about that. And we have even additional -- we have a lot in the pipeline, including some molecules that we expect will be delivered with Brand 4 and more beyond. So I would just say super happy to see how the level of improvement that we got out of the work that we put into ODDITY LABS. Oran Holtzman: I would just add that like when we started labs, we built it -- we started and we built it again. It was hard because the first time that we've done something like it. And the fact that you see so many products and so many molecules coming to market this year just shows like that what we've done was the right thing, and there is a real progress in labs. So we expect to see the same pace and even higher in the next few years. The fact that both METHODIQ and our IL MAKIAGE and SpoiledChild brands are going to get molecules this year is very encouraging. And again, just shows like the strength and the progress that we've done, which is significant in the past 1.5 years. Operator: Our next question is from Cory Carpenter with JPMorgan. Cory Carpenter: I have 2, Lindsay, probably both for you. Just hoping you could expand on the comments around the media environment and higher acquisition costs now going a little lower. And anything in particular to call out on the search channel? And then capital allocation, you have a healthy cash balance. You have not purchased shares since the convert earlier this year. So maybe if you could just refresh us on your capital allocation priorities. Lindsay Mann: Sure. On the media side, media costs, as we've said before, they tend to get more expensive every year, but we are able to offset them really effectively with higher repeat and also other unlocks across our KPIs, including conversion and other things that we focus on. So this has allowed us to deliver a very healthy, sustained profitable business and repeat is running at around, call it, 2/3 of our overall business. And we were really -- are really pleased to see that the -- I discussed the net revenue repeat cohorts, like the 12-month cohorts and the cohorts that we examine are all continue to be really, really strong. So we think you're still seeing a healthy consumer environment and a solid environment for us to continue to deliver. As far as our cash position goes, we're in a very strong position, almost $800 million of cash equivalents and investments on our balance sheet today. We post the convertible earlier this year, we view this as really efficient, patient capital for us that we have flexibility to do what we want with. So we, of course, have the opportunity to deploy it for buybacks. We have the opportunity to deploy it for M&A, and we feel like we're in a really strong position where we can be patient and selective about what we use it for. Operator: Our next question is from Ryan MacDonald with Needham & Company. Ryan MacDonald: Congrats on a great quarter. As you look at the international success into the test market, can you talk about how replicable like the data model in terms of targeting subscribers and new users and then sort of identifying maybe more local or geographic differences in terms of what their needs product-wise might be just as you continue to scale that international efforts? And then is your intent to immediately go international with METHODIQ right away? Or are you going to take sort of a more measured sort of region-by-region approach like you've done with other brands in the past? Oran Holtzman: Sure. So first of all, regarding METHODIQ, we thought only U.S. It's complex enough without international. So by the way, SpoiledChild was the same for the past -- for the first almost 3 years, we didn't even test international. So we plan to do the same with METHODIQ. I'm not sure it's going to be 3 years, but I don't think it's going to be way less than that. Regarding international and what we -- exactly what you said, that's the reason why we do tests. And when I said test, like we open market with a localized website and starting to put -- to spend media against new users in those countries and to ship products based on that, we see satisfaction, we see repeat, we see unit economics, then we decide if this market is suitable for us or not. And that's how we -- that's what we have done for the past 2.5 years. Operator: Our next question is from Scott Schoenhaus with KeyBanc Capital Markets. Scott Schoenhaus: METHODIQ here. Lindsay, you mentioned the majority of revenues were going to be -- volumes are coming from the nonprescription side versus prescription. Are the molecules, those 4 molecules also going to be for nonprescription versus prescription? And then as a follow-up, on the prescription side, the physician network that you've built, there's clearly a shortage of dermatologists. And so this is an asset. How are you thinking about deploying technology to leverage more dermatologists on your network for patients? Lindsay Mann: Thanks, Scott. So the 4 products are not prescription. They're a combination of OTC and cosmetic. And again, we're really excited to have them out there, but those are not prescription products. And in fact, for ODDITY LABS, we're not -- for the most part, and certainly, in the near to medium term, you won't see anything that's prescription coming from ODDITY LABS that will all be either OTC or cosmetic. In terms of our physician network, we are currently plugged into third parties to help us with that. We have not brought that in-house, but we have the opportunity to do so for cost efficiency reasons down the road if we decide to do it. We -- the networks we're using now, we're using all physicians at the moment, not all dermatologists, but all board-certified physicians. And we can, of course, scale that to NPs and other medical care practitioners down the road. There's the opportunity for that, but we're starting with all physicians as we build that and learn. And I think from a technology standpoint, it's really us building capabilities that allow the network of clinicians to get the strongest signals possible to help inform treatment decisions based on the inputs that we take, basically, when you're going through the METHODIQ intake and onboarding funnel, we're picking up on the contextual real pathways and real signals that -- the same thing that you would look for if you were in an office, right? So you're looking at questions about demographics, hormonality, history and that kind of stuff. Meanwhile, the vision tools are picking up signals like number of lesions, intensity and those kinds of signals that are really helpful for a clinician when making a decision about treatment outcomes. So that's a really important part of our technology and then also just integrating our records directly with the provider systems that help the -- operate the clinician interface and help them to integrate with our tools. And then I think finally, like within the METHODIQ app, the ability to get feedback, progress tracking and to chat directly with your clinician to help drive things like confidence and most importantly, compliance and success, those are enormous ways we're using technology to drive the outcomes that we want. Operator: Our next question is from Bonnie Herzog with Goldman Sachs. Bonnie Herzog: I just have a question on IL MAKIAGE and SpoiledChild. Growth in the U.S. remains strong double digits for these brands, but it has moderated year-to-date versus last year. So could you talk about what's driving this? And if the low 20% growth in the U.S. for these 2 brands is doable over the next few years? Or should we expect a continued slowdown? I guess I'm asking especially for IL MAKIAGE. Also, could you touch on repeat rates for the brands and if these rates are also moderating? Oran Holtzman: I will start by saying... Lindsay Mann: Go ahead. Oran Holtzman: Yes, I would just start by saying that as I mentioned before, we manage growth across brands and geographies. So like I don't wake up tomorrow and say, today, I need to see 25% IL MAKIAGE in the U.S. We see we look more broader and we maximize the potential based on what we see in real time. So if Germany is working better at a specific day, this is where we push more and vice versa with SpoiledChild. Lindsay, do you want to touch repeat? Lindsay Mann: Yes. I mean just to add on that, like we are driving growth at the ODDITY level and our growth targets we're managing growth towards 20%. We don't want to grow faster than that. And so ever since our IPO, we have been very clear and explicit about our plans to sustain 20% compounded durable growth. And that's exactly what we've been delivering on, and we're managing it at the ODDITY level, and we'll pull different levers within the different brands. Specific to IL MAKIAGE, our target is to get to $1 billion by 2028, and we've always talked about international being an important piece of that. And so you're seeing us flex on the international part now. At the same time, we want to make sure we're feeding SpoiledChild and now we have a third baby to give oxygen to. So we're managing it as a portfolio in order to deliver an overall ODDITY level growth. I think in terms of repeat, no, repeats continue to be very, very strong. Operator: Our next question is from Georgia Anderson with Evercore ISI. Georgia Anderson: I was wondering if you could talk a little bit about the TAM for METHODIQ. Are you guys kind of defining this as all chronic skin sufferers in the U.S. or globally? Or is it a narrow cohort, acne or eczema patients are willing to pay out of pocket? And then just kind of in terms of measuring success of the brand, do you have any milestones or KPIs that would give you confidence that METHODIQ is scaling towards its full TAM? Oran Holtzman: Lindsay, I'll start with the KPIs and you'll talk about TAM. Lindsay Mann: Yes. Oran Holtzman: So like we soft launched in September, official launch this week. So of course, very early. But based on what we see early, the demand is there. The KPIs that we look at now are user acquisition, repeat, up downloads, open rates, weekly check-ins. And like when we see that those KPIs as we envision they are, then we will start scaling. Lindsay Mann: In terms of the TAM, the right way we think to look at this is number of people rather than dollar size. And the reason for that is because it's such a high friction market and one that hasn't been run well that we think if you actually can unleash some technology that leads to better outcomes and easier outcomes for people to access, you're going to see the overall market grow. And for these chronic skin conditions like acne and hyperpigmentation and eczema, I mean, your solutions are, number one, go to a dermatologist. Oran talked about 2/3 of U.S. counties don't even have a dermatologist. Your average wait times are over a month. People spend hours commuting to from plus sitting in the waiting room and waiting for a doctor's office. So it's a real pain in the neck, and it's not a great experience. So it's something people avoid. And then your alternative of going to the drugstore, bouncing around with low efficacy products that don't really work, it's overall stifled the total potential size of the market. We think that by really opening up this much better user experience, highest standards of care, world-class treatments made available easily to everybody online, you're actually going to see the overall market size grow. And that's why we're unleashing we think it's like probably the biggest wave of innovation to dermatology in decades and maybe ever. So we're really excited about it. And then if you look at just the number of the people, which is what we think is the right way to look at it in America, you've got 50 million Americans, around 50 million with acne, around 30 million with dark spots/hyperpigmentation, around 30 million with eczema. And just on our platform alone, we see the deep prevalence of these issues. A lot of people are buying foundation from IL MAKIAGE already to cover them up. So it's a natural place now that we have new tools and an effective way to address it for us to expand into. Operator: Our next question is from Lauren Lieberman with Barclays. Lauren Lieberman: I was just curious to talk a little bit about launch plans for METHODIQ and sort of learnings maybe from spoils because you did -- I recall that you did billboards for spoils. I see that you're doing it from METHODIQ. You talked about it being sort of the biggest -- I think you said biggest TikTok activation. So just curious about how you made decisions around the non-online portions of the launch and for how long you expect to have these kind of big TikTok activations going on because it's something right, you get lots of attention if days, but how should we think about that ongoing TikTok activation to get the brand's awareness up? Oran Holtzman: Sure. So it's the third brand that we are launching, and we've done the same more or less with all 3 offline activation out of the gate for IL MAKIAGE, SpoiledChild and now in New York, we have the same with METHODIQ. Regarding TikTok, it's the biggest campaign that we've done so far. And we started now, and we plan to continue until end of Q1. Operator: Our next question is from Brian Tanquilut with Jefferies. Brian Tanquilut: Congrats on the quarter. Maybe I'll follow up on Bonnie's question from earlier. As I think through the makeup of the growth rate for the quarter, very strong growth, obviously. How should we be thinking about volume versus pricing versus mix in that growth rate for the different product lines? Lindsay Mann: The biggest driver of the vast majority of our revenue is driven just purely by orders. AOV was down around 1%, so essentially flat and order growth historically and in the future will be the dominant driver of our revenue growth. Brian Tanquilut: Understand. And if I may ask a follow-up, my follow-up question would just be, as we think about METHODIQ, is this going to be primarily a compounded drug product offering? Or is there a noncompounded version here? And how should we be thinking about like margin differentials between the 2, if that was the case? Lindsay Mann: So the business today is a combination of nonprescription and prescription. Like we said, we think the prescription will be the smaller part of the business. And within the prescription, we're contemplating compounded products today with potential in the future, of course, to evolve, but that's the business model now. Operator: We have reached the end of our question-and-answer session. I would like to turn the conference back over to Oran for closing remarks. Oran Holtzman: Thank you very much for joining us today. See you next quarter, guys. Bye-bye. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Greetings, and welcome to the Fiscal 2025 Fourth Quarter and Year End Earnings Conference Call. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, James Francis, Vice President of Investor Relations. Good morning and thanks for joining us. James Francis: With me today is Bruce Caswell, President and CEO, David Mutryn, CFO, and Jessica Batt, Vice President of Investor Relations. I'd like to remind everyone that a number of statements being made today will be forward-looking in nature. Please remember that such statements are only predictions. Actual events and results may differ materially as a result of risks we face, including those discussed in Item 1A of our most recent Forms 10-Q and 10-Ks. I encourage you to review the information contained in our recent filings with the SEC and our earnings press release. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances except as required by law. Today's presentation also contains non-GAAP financial information. For a reconciliation of the non-GAAP measures presented, please see the company's most recent Forms 10-Q and 10-Ks. And with that, I'll hand the call over to Bruce. Bruce Caswell: Thanks, James, and good morning. I'll begin by recapping fiscal year 2025, which was notable not only for the financial results but for our team's ability to remain focused on serving our customers amidst a period of significant change in the government services sector. I'll then cover our priorities for fiscal year 2026, aligned with our strategic vision and current and anticipated future market conditions, including investments that are designed to prepare Maximus, Inc. for what we believe are meaningful growth and market expansion opportunities. Investments in AI capabilities are an important priority and reflect our evolution as a technology-driven partner to governments. Fiscal year 2025 was a year of significant achievement for Maximus, marked by success across multiple domains. We entered the year with strong visibility into the underlying portfolio of the business both in terms of revenue and backlog and certain programs returning to more steady-state levels following post-pandemic upticks. We guided with prudent judgment given the changing political environment. In what emerged as a markedly different approach by the current administration, following the transition, we carefully navigated an uncertain environment that brought new priorities and opportunities that developed as the year progressed. Looking back at where we started, I'm pleased to report that revenue and profitability came in higher than projected, reflecting both the strength of our core operations and the disciplined execution of our strategy throughout the year. The organic growth rate of the consolidated business was 3.9%, with 12.1% organic growth and the Outside The U.S. Segment delivering 4.1% organic growth. This outcome is attributable to the dedication of our teams across the enterprise in delivering on customer priorities. Equally important, our contractual relationships remained stable and secure throughout the year, with cancellations or impacts at just 1.5% of fiscal year 2025 revenue, a figure that is unchanged from our prior earnings call. This underscores the essential nature of the services we provide and the trust our customers place in us to support their mission and deliver outcomes that matter in a dynamic operating environment. Even as policy and technology continue to evolve, we believe that maintaining and expanding these long-term commitments is a testament to the value we deliver and the quality and reliability of our services. Taken together, the strong fiscal year 2025 financial results, the durability of our customer relationships, and the strategic investments we are making give us confidence in our future as a tech-enabled mission-critical partner to government. We are proud of what we accomplished and we are energized by the momentum we're carrying into fiscal 2026. Our focus remains on delivering consistent performance, maintaining trusted partnerships, and utilizing our increased customer presence and evolving capabilities for future growth. Looking ahead, I want to share three strategic priorities on which we are executing during fiscal 2026 that we believe are favorably positioning the business for opportunities to accelerate growth in fiscal year 2027 and beyond. These priorities include first, expanding in U.S. Federal markets; second, policy-driven initiatives mainly around the One Big Beautiful Bill Act actionable in our U.S. Services segment; and third, deployment of AI and related tech-enabled automation. Our commitment to advancing this third priority is driving an important transformation across Maximus. From how we execute internal functions and support our employees to the delivery of our performance-based contracts and also to the expansion of our technology-based solutions for governments. I'll note that these and other investments were made possible by our earlier focus on what we called Maximus Forward, an organization-wide commitment to rethinking critical business functions and their cost. Starting with our U.S. Federal business, our commitment to delivering even greater value to our customers is unwavering. We also believe the investments we made through both inorganic and organic means have expanded capacity, enhanced our competitiveness, and created platforms that we believe can provide durable organic growth. In prior quarters, I've spoken about our efforts to strengthen our infrastructure. For example, rapidly achieving CMMC level two certification and capabilities through what we call mission threads that tie directly to the pipeline we are prosecuting over the next several years. We believe our foundation for sustained growth is robust, and that we are aligned with and in many cases ahead of the evolving needs of our customers. We are confident in the opportunities ahead and our ability to continue to create long-term value for shareholders. Our federal leaders and teams are aligned strategically to civilian, health, and defense and national security markets. I'll speak briefly to each. We are recognized for having a distinguished portfolio of civilian work, delivering essential services for student loan management, the IRS, and the SEC as examples. We occupy a vital corridor of the civilian space and have deliberately aligned to bipartisan priorities that are fundamental to the government's role of supporting its citizens. We continue to see opportunities to deliver on the administration's priorities for modernized, accountable, and cost-effective citizen services while recognizing how budget priorities are increasing the importance of blending deep program expertise with commercial innovation. Many modernization needs remain unaddressed and we believe that Maximus is well-positioned to address these priorities. With an earned reputation in the delivery of performance-based contracts and tech modernization, we are regularly engaged as trusted advisors. Leveraging our investment in solution architects, we are favorably positioned for the opportunities we are tracking. To our knowledge, Maximus is the only public company in our sector that has formally documented its mix of contracts that are performance-based, which stands at 54.4% for fiscal year 2025. We believe this distinction reinforces our leadership in driving accountable and measurable results. I've commented previously that the timing of procurements is less certain in the civilian pipeline than we've historically experienced, which highlights the importance of supporting our customers and delivering our current programs with a continued emphasis on quality and efficiency. Additionally, we've noted our investment in further differentiating Maximus as a leader in enabling the citizen experience or CX of the future. Our total experience management or TXM solution, which I've mentioned on prior calls, is a FedRAMP secure, modular, flexible, scalable, and configurable platform that helps enable federal agencies to deliver smarter citizen-centric services. AI-infused and packaged and sold as a cloud-based service, which is rapidly becoming the preferred procurement method of government agencies. We believe that TXM is well-positioned to replace end-of-life on-premise systems. I'm proud of what our team has developed, as evidenced by a recent demo where TXM was said to be one of the most advanced and integrated demonstrations of AI in a CX platform for government yet experienced by the customer. We believe TXM is a strong fit for the pipeline of contact center consolidations we see in the market. On to the health market, which we define as including defense and non-defense related programs and opportunities. After setting a deliberate course in this market with the 2021 acquisition of Veterans Valuation Services, we are pleased to see synergy pipeline opportunities for new customers coming to bid and Maximus well-positioned with what we believe are competitive solutions. Compared to the civilian pipeline, I'm encouraged by the procurement tempo of health opportunities, with key procurement milestones largely on track. Given current conditions and the nature of the programs we're bidding, we anticipate that outcomes could be consequential for fiscal 2027 and beyond. In the defense and national security area, our strategic pursuit of certain opportunities has been affirmed by the highly credible wins with new customers we've seen seeking a change from traditional providers. Let me share one example. Most recently, Maximus was awarded a new Joint Cyber Command and Control Readiness contract by the United States Air Force Lifecycle Management Centers Cryptologic and Cyber Systems Division. This award, with a potential value of $86 million, marks our second major engagement with the Air Force under this program and represents meaningful expansion of our technology services portfolio within the defense sector. Through this contract, Maximus will lead engineering analysis, software modification, maintenance, and enhancement as well as the maturation of existing architecture and infrastructure. The period of performance includes a base year, four one-year option periods, and an optional six-month extension. We believe this award reflects the depth of our technology expertise and delivery capability, underscoring our ability to support the Air Force's defense readiness mission. It highlights our capabilities in software engineering, development, and modernization, and reinforces our position as a trusted partner in advancing mission outcomes. Our highly skilled technology professionals will deliver modeling and application analysis to help enable mission execution, further strengthening our role in supporting national security objectives. I'm proud of the progress we've made overcoming barriers that make expanding in this business area challenging. We believe that recent directives emphasizing speed, outcomes, access to commercial tech, and streamlining contracting fit our strategic offerings well. In support of this strategy, expanding our participation in other transaction authorities or OTAs, which the Department of War increasingly favors as a faster and more flexible acquisition path. David Mutryn: Collectively, we believe these actions suggest an evolution in contracting that will accommodate newer entrants like Maximus and support longer-term defense national security policy objectives. In further support of this strategy, we've formed and are investing in our first Cooperative Research and Development Agreement or CRADA, providing a mechanism for developing, maturing, and retaining Maximus intellectual property through collaboration with the Department of War. This agreement supports hosting of recurring hackathon events, capability demonstrations, and technology experiments in a Maximus operated sensitive compartmented information facility, or SCIF. This CRADA positions Maximus closer to the men and women in uniform that conduct global operations for the department and positions Maximus at the center of advanced research and development. These activities align directly with the department's evolving acquisition strategies for rapid prototyping, IT, and modernization. Recent commentary from department leadership has signaled the desire for greater investment by the industry. While this may present challenges for some competitors, Maximus is actively demonstrating on contract innovation as part of our technology forward strategy. More than four months on, the landscape around the One Big Beautiful Bill Act remains largely unchanged, but the priorities it established continue to be front and center for our state customers within our U.S. Services segment. The legislation creates meaningful opportunities for Maximus in both Medicaid and SNAP. And we remain actively engaged with clients to prepare for the requirements ahead. On Medicaid, administration continues its focus on managing federal spend, with new rules requiring twice-yearly eligibility determinations for the expansion population and codifying work requirements beginning in early 2027. States must review and adjust their processes to comply, and our U.S. Services team is working closely with clients to ensure readiness. As we noted previously, we believe Maximus is well-positioned as a conflict-free partner to support these compliance efforts, having done so for similar requirements in TANF and SNAP for almost thirty years. While the Medicaid changes are significant, states' foremost priority at the moment based on active discussions is around SNAP. The budget implications of the new payment accuracy requirements are far greater as states with higher payment error rates will be required to absorb more of the program's expense. This shift is driving strong interest in technology-led solutions that can improve efficiency and payment accuracy. As I mentioned on the last call, Maximus already has an expanded role with a longstanding state customer, and we expect SNAP to remain a focal point of engagement given potential state budget implications. Although the policy environment has not materially shifted since our last call, these initiatives continue to be priorities for our customers. In our view, we are the right partner to help states navigate the changes, mitigate risk, and deliver high-quality outcomes across both SNAP and Medicaid. I'll close my discussion of strategic priorities with AI, where Maximus is proud to be a leader for government customers in this unprecedented era, demonstrating the art of the possible and transforming public service delivery. Our role is not only to provide solutions but to show what is achievable when innovation is combined with decades of deep program knowledge, policy experience, and operational data. By embedding AI directly into our business processes, we are enabling customers to benefit from advanced automation, AI-powered quality monitoring, and real-time insights. These capabilities are helping agencies operate more efficiently, make better decisions, and deliver improved outcomes for the people they serve. We have already successfully deployed AI-driven tools across enterprise programs where these solutions have accelerated service delivery, strengthened compliance, and enhanced customer satisfaction. In addition to our AI-powered TXM solution I mentioned earlier, we are also serving as customer zero for our own large-scale deployments of AI solutions in ITSM, or service management, and HR help desk support, as well as knowledge management. This first-to-deploy experience provides us with deep insights, enabling our solutions to be tested, refined, and proven before being extended to our customers. Maximus' AI guiding principles form a robust framework for responsible innovation, grounded in ethical governance, human-centric design, and mission-aligned outcomes. Our governance structure is designed to ensure that our innovation is both responsible and sustainable. Looking ahead, we have approximately 30 AI-related deployments either planned or in process across Maximus. These initiatives vary in scale from small pilots to large enterprise implementations, with further full deployments expected in fiscal 2026. This pipeline reflects both the demand for AI-enabled solutions and our commitment to investing in the future of government services. Let me turn now to our award metrics and pipeline. For fiscal year 2025, signed awards total $4.7 billion of total contract value. Further, at September 30, there were $331 million worth of contracts that have been awarded but not yet signed. These awards translate into a book-to-bill of approximately 0.9 times for the trailing twelve-month period and reflect ongoing progress toward increasing this metric, a previously stated goal of ours. As a reminder, we continue to view book-to-bill as a relevant forward indicator to pipeline conversion over the broader horizon, but not the sole determinant of the business' ability to grow organically. Also, in periods of lower than normal rebid activity, as we've experienced recently, the TTM book-to-bill is expected to be below 1.0. Then in periods of greater rebid activity and given our larger contract lengths and values, the metric tends to show outsized performance. It's worth noting that the improvement to TTM book-to-bill of 0.9 was driven by more dramatic quarterly sequential improvement. The quarter ended September 30 book-to-bill was 1.0 times compared to 0.3 times for the June 30 quarter, a marked improvement in the pipeline conversion of both recurring and new work. Our pipeline at September 30 was $51.3 billion compared to $44.7 billion reported in 2025. The September 30 pipeline is comprised of approximately $3.4 billion in proposals pending, $1.4 billion in proposals in preparation, and $46.6 billion in opportunities tracking. Of our total pipeline of sales opportunities, approximately 64% represents new work. Additionally, 66% of the $51.3 billion total pipeline is attributable to our U.S. Federal Services segment. Notably, in this latest pipeline view, U.S. Services segment opportunities tied to the One Big Beautiful Bill Act remain in the development stage, with potential revenue in fiscal 2027, and therefore are not yet captured in the pipeline. And with that, I'll turn the call over to David. Thanks, Bruce, and good morning. David Mutryn: I'd like to recap our strong fiscal year 2025 with a few financial highlights and then walk through results in our typical fashion. I'll close with formal fiscal year 2026 guidance and commentary. First, I'm proud of the team's strong execution to enable finishing fiscal year 2025 right on the mark for revenue, which totaled $5.43 billion. This equates to organic growth of 3.9% over the prior year. From an earnings standpoint, the full-year adjusted EBITDA margin was 12.9% and adjusted earnings per share were $7.36. The fourth quarter included a higher level of severance charges related to ongoing cost management efforts. Second, the fourth quarter was also notable for its strong cash flows as we anticipated, enabling us to deliver $366 million of free cash flow for the full fiscal year 2025. Third, from a capital allocation standpoint, we stayed focused on debt pay down and opportunistic share repurchases. At September 30, our net leverage was 1.5 times. Looking back across the full fiscal year, we repurchased approximately $457 million worth of shares, including $151 million in the fourth quarter. Finally, our official guidance for 2026 aligns with the early color we provided in August. The midpoint of $5.325 billion of revenue reflects our current view of volume dynamics on some of our variable work that I will discuss in more detail. Meanwhile, the $8.1 midpoint of adjusted EPS guidance reflects ongoing margin expansion and 10% growth over fiscal 2025. Continued adoption of technology and careful cost management are key enablers on the bottom line outlook. While the recent share repurchase activity further benefited diluted EPS by lowering the weighted average shares outstanding. Last, the midpoint of our free cash flow guidance is $475 million, representing about 30% year-over-year growth. Those are the key highlights, so let's turn to total company results. For the full fiscal year 2025, revenue increased 2.4% to $5.43 billion. As I mentioned, organic revenue growth was 3.9% and aligned with our long-term target of sustainable mid-single-digit organic growth. The U.S. Federal Services segment drove the growth thanks to several programs in the clinical and natural disaster support domains, experiencing high demand for our services. Our profitability improved to deliver a 12.9% adjusted EBITDA margin for the full fiscal 2025 as compared to 11.6% for the prior year. This was attributable to the higher demand in the U.S. Federal Service segment coupled with technology and cost initiatives. Fiscal 2025 adjusted EPS was $7.36 as compared to $6.11 for the prior year, representing a healthy 20% increase. While most of it was improved profitability, as evidenced by the higher adjusted EBITDA margin, a portion of the year-over-year improvement stemmed from the share repurchase activity this year. I would like to make a note about our just completed fourth quarter earnings. During the quarter, we took deliberate action to yield cost savings in future periods, which included severance charges totaling approximately $16 million. These were booked within the two domestic segments and had a more pronounced effect on the operating margins of the U.S. Services segment. Let's go to segment results. Starting with the U.S. Federal Services segment, revenue increased 12.1% over the prior fiscal year to $3.07 billion. All growth was organic and driven by a combination of expected and unexpected volume growth across several programs, primarily in the clinical domain. In addition, this segment includes contracts to rapidly stand up support in the wake of natural disasters, which generated higher revenue than a typical year. The higher volumes in both areas extended across several quarters this year and by the fourth quarter had settled back to more typical levels. The operating income margin for U.S. Federal Services was 15.3% in fiscal 2025 as compared to 12.2% in the prior year. The same demand that drove the segment's top line also benefited the margin since incremental volumes often provide operating leverage. Another reason for the margin expansion is greater implementation of technology initiatives that increase the productivity of staff on the programs. For the U.S. Services segment, revenue decreased to $1.76 billion as compared to the prior year revenue of $1.91 billion. As we've noted on recent quarterly calls, across fiscal year 2024, we were successful with helping our state customers process unprecedented engagements tied to the Medicaid unwinding exercise. This was essentially the last of the pandemic-related impacts to the segment. By this year, fiscal 2025, the effort was complete and Medicaid engagements reflected both normal course assistance to states and a more typical Medicaid population. The U.S. Services operating income margin was 9.7% as compared to 12.9% in the prior year. As a reminder, last year's margin benefited from the overperformance and we anticipated that it would not reoccur. Also, the segment's margin in the fourth quarter of this fiscal year was impacted by a meaningful portion of the $16 million total company severance costs that I referenced earlier. We expect this cost management effort to lift full fiscal 2026 margins in this segment. For the Outside The U.S. Segment, revenue decreased year over year to $600 million due to divestitures of multiple employment services businesses in prior periods. The related decrease in revenue was partially offset by positive organic growth totaling 4.1% and a small currency benefit. The operating income margin for the Outside The U.S. Segment was 3.7% as compared to 1.2% in the prior year. We have stated previously that we intend for the segment to reliably deliver in the 3% to 7% margin range and over time move up in that range and closer to the profitability of the domestic segment. We are pleased with progress so far. Beyond that, we continue to see a healthy pipeline of opportunities to deliver higher value services, which could support margin improvement. Turning to cash flow items. As expected, we had strong collections in the fourth quarter. Fiscal year 2025 cash flows from operating activities totaled $429 million and free cash flow was $366 million. The fourth quarter alone had free cash flows of $642 million. Our days sales outstanding or DSO improved substantially from the third quarter's ninety-six days landing at sixty-two days at 09/30/2025. We ended fiscal year 2025 with gross debt of $1.35 billion and we had unrestricted cash and cash equivalents of $222 million. At September 30, our debt ratio was 1.5 times. As a reminder, this ratio is our debt net of allowed cash to consolidated EBITDA for the last twelve months as calculated in accordance with our credit agreement. We achieved our goal of ending the year comfortably below two times and one quarter ago at June 30 the ratio was 2.1. The improvement came from expedited pay down after catching up collections on two contracts that had created a temporarily higher DSO in prior quarters. During fiscal year 2025, we repurchased approximately 5.8 million shares totaling about $457 million, which was enabled by two Board of Directors authorization announcements. Following an additional $31 million of repurchase subsequent to year-end, we have approximately $250 million remaining as of today on the current $400 million authorization granted by the Board of Directors in September. Moving to capital allocation, our framework for priorities is unchanged. We first make organic investments, most of which flow through the income statement. We also maintain a $0.30 per share quarterly dividend that we intend to grow over time with earnings. Following these, we prioritize strategic acquisitions intended to accelerate organic growth. We also repurchase our shares opportunistically depending on current market conditions. As we move further into fiscal year 2026, we continue to evaluate suitable M&A targets, which could bring new or enhanced capabilities and new or expanded customer sets or a combination of both. We will maintain our disciplined approach to evaluation of deals and we intend to stay within our two to three times target debt ratio range. Given our high annual cash conversion and current 1.5 times debt ratio, we believe that there is ample capacity for a transaction of varying sizes ranging from more of a tuck-in style deal to a larger deal proportional to our balance sheet capacity. If we do not conduct a transaction in fiscal year 2026, and do not complete any further share repurchases, we anticipate a debt ratio of roughly 1.0 times at 09/30/2026. Let's go to official guidance. For fiscal year 2026, revenue is projected to be between $5.225 billion and $5.425 billion with a midpoint of $5.325 billion. Adjusted EBITDA margin is estimated to be approximately 13.7% and adjusted EPS is projected to be between $7.95 and $8.25 per share, giving a midpoint of $8.1. Free cash flow for fiscal year 2026 is projected to be between $450 million and $500 million. This guidance is aligned with the early thinking we provided on the Q3 earnings call where we acknowledged that fiscal year 2026, particularly revenue, had wide-ranging scenarios. Fortunately, this year is coming into sharper focus as we typically expect at this point. With the revenue guidance reflecting how a portion of the excess volumes in fiscal 2025 are not anticipated to recur in fiscal 2026 along with seasonal natural disaster support that is inherently difficult to forecast. Those components are responsible for a year-over-year revenue headwind of approximately 3%, which we expect to partially offset with 1% of organic growth netting to a 2% year-over-year delta at the midpoint of guidance. We acknowledge that in prior periods, we have benefited from higher volumes that increased guidance multiple times but the circumstances causing them were not forecastable at the start of the fiscal year. For example, once into fiscal 2025, there emerged a clear and stated priority to reduce backlogs across multiple programs. By the fourth quarter, the temporary extra work requested by our government customers for us to collectively meet those priorities had moderated. Another positive development on our top-line forecast is that some of the risks we had contemplated in the early color on the Q3 call, such as possible budget constraints from customers, are not believed to be as large a threat to fiscal year 2026. We also see opportunities tied to new work that if awarded in fiscal year 2026, could contribute to the year but given the difficulty in predicting the timing, we expect would be a more meaningful driver of revenue in fiscal year 2027 and beyond. We believe that we remain on target with our goal to achieve a mid-single-digit organic growth rate over the longer term. Of note, the compound annual growth rate from fiscal year 2023 to the midpoint of fiscal 2026 guidance is 4% on an organic basis, which is not impacted by excess volumes we experienced in both fiscal years 2024 and 2025. Turning to the bottom line, since the early color in August, our adjusted EBITDA margin expectation has improved to 13.7% for formal guidance. The projected improvement stems from numerous areas such as the U.S. Federal Services segment where the benefits of our technology initiatives combined with stable volumes are resulting in opportunities to increase profitability. This applies to our clinical work and our tech-enabled customer service programs where small efficiency improvements can result in meaningful cost avoidance. Notably, the margin guidance exceeds the company's target range of 10% to 13% that I stated at this point last year. Our intent is to leave this range intact and target the high end for the periods following fiscal 2026 to account for the prospect of a higher share of new work in the business. Often new programs at Maximus begin at a lower margin and improve over time, with the profile depending on the nature and pricing structure of the work. Walking down to the EPS level, the $8.1 adjusted earnings per share midpoint reflects both the improved profitability and the denominator benefit from the share repurchase activity throughout fiscal year 2025. It's worth noting the three-year compound annual growth rate using the adjusted EPS guidance is 28%, demonstrating not only the post-pandemic recovery but our ability to gain significant earnings improvement through pursuit of higher value work and disciplined management of the business. A quick word on estimated segment operating margins for the full year fiscal 2026. We expect the U.S. Federal Services margin to range between 15.5% and 16%. We expect our U.S. Services segment margin to be in the 10% to 11% range. And for Outside The U.S., we estimate a margin between 3% and 5%. For the free cash flow guidance, the midpoint of $475 million represents year-over-year growth of 30%. We typically have a negative free cash flow in Q1, a result of seasonality and timing of certain payments. We are expecting a temporary delay of payments from some customers, including expected lingering impacts from the recently concluded government shutdown, which would further impact Q1. We then anticipate strong cash flows across the remainder of the fiscal year, effectively catching up from the expected low first quarter. Other assumptions around fiscal year 2026 include an estimated $81 million of intangibles amortization expense, and $58 million of depreciation and amortization tied to PP&E and capitalized software. Interest expense is estimated to be about $69 million. Finally, the full-year effective income tax rate should be around 25% and weighted average shares should be about 55.5 million on a full-year basis. I'll conclude by reiterating our belief in a favorable outlook for Maximus beyond the formal guidance we have laid out today. Underpinning this is our strong visibility to our portfolio of programs, ongoing attention to cost management, and focus on delivering operational excellence increasingly with more automation. Our proposal activity continues to build notably in the U.S. Federal Services segment, which successful conversion could have positive implications for fiscal year 2027 and beyond. On the state side, we believe that the business is poised to respond to fast-evolving needs of customers required to be more diligent in their administration of Medicaid and SNAP. We currently anticipate that fiscal year 2026 will be defined by shaping efforts with actual work and associated revenue coming to bear beginning in fiscal year 2027. And with that, we'll open the line for Q&A. Operator? Operator: Thank you. We'll now be conducting a question and answer session. Our questions are coming from Charlie Strauzer with CJS Securities. Please proceed with your questions. Charlie Strauzer: Hi, this is Will on for Charlie. Congrats on the strong quarter. Bruce Caswell: Thanks, Will. Good morning. Charlie Strauzer: Morning. Looking at the guidance, the EBITDA margin is for 26% a lot stronger than we expected. Can you give some more color on what's driving that expansion even with the expectation for flat revenue? Is it related to mix shift or all productivity and efficiency initiatives? Thank you. Bruce Caswell: David is going to start out with that and I may add some color commentary. Thanks. David Mutryn: Yes, if you look at the margin guidance we laid out for each of the segments, all three are actually slightly higher than where they finished fiscal year 2025. For U.S. Services, it's worth pointing out, as I did in the prepared remarks, that the portion of severance that they incurred in the fourth quarter hurt their margin in that quarter and the related savings are supporting the guide for 2026 there. I think the theme across all three segments really is the continued deployment of technology and automation as well as cost management. And on the cost management front, you may notice on the P&L total company SG&A, if you consider that there was $40 million of divestiture charges in the first year in 2025, the rest of SG&A is essentially flat from 2024 to 2025 despite the revenue growth. So we're very focused on continuing to stay competitive on the cost side. And then maybe one other detail I'll point out that related to the EBITDA and also the cash flow for that matter is that a number of capitalized software projects that have been driving CapEx the past couple of years are now operational and therefore amortizing. So you can see in our in the various FY 2026 guidance metrics a higher forecast for D&A and a lower forecast for CapEx. Charlie Strauzer: That is super helpful. Thank you. And then looking at the revenue guidance, can you add any more color detail around growth by segment? David Mutryn: Sure. Yes. Without maybe going all the way to specific guidance by segment, I'll point out that both U.S. Federal and U.S. Services may see mild contraction. We expect a little bit more erosion on the U.S. Federal side given their overperformance in 2025. And what I had called out on the call specifically was clinical work and disaster response work for context there. The clinical work is in both U.S. Federal and U.S. Services. And the disaster response is on the federal side. Bruce Caswell: So federal has a little bit more of what we called out as headwinds, but also the strongest pipeline in the near term as well. So those are kind of the commentary between the segments. Charlie Strauzer: Thank you. And then switching gears a little bit. How are you thinking about the effects of the government shutdown on your results both in Q1 and the full year? Bruce Caswell: Sure. It's Bruce. I'll take that. We really don't anticipate any negative impacts on our delivery on our contract portfolio in Q1 FY 2026. Nearly all of our programs were deemed essential services by the government. And in some cases, some of those programs had received sufficient funding prior to the shutdown through other legislative vehicles like the IRA, for example. And my top comment there would be that this really reflects the very deliberate strategy of the company over the years to develop a very durable contract portfolio that fares well in these types of situations. So to put a little more color on it, I believe that across our base of nearly 40,000 employees, we were very fortunate to have fewer than a dozen that were impacted by funding curtailments in the portfolio. And we, of course, kept those staff on salary and employed and gave them an opportunity to do some refresher training and some upskilling training and so forth during that period. Of course, now certain departments and agencies could be impacted going forward because the CR presently only extends funding for those through January 30. So like others in our sector, we're going to continue to monitor that. But prior shutdowns, including the most recent one, are any indication, we all remain optimistic that any impact for us would be minimal. I did want to note that the Department of Veterans Affairs and the USDA, which includes SNAP funding, both have full-year funding in place already. Therefore, they'd be unaffected by any potential further shutdown, potentially in January. So it's also our understanding as we come into this that funding for essential entitlement programs like Medicaid would continue for an additional thirty days after January 30. So should any subsequent partial government shutdown come to pass? So David, anything you'd add further to that? David Mutryn: Yes, just on the a little commentary on the cash flow front. As I mentioned in the prepared remarks, we've seen some payment delays from a portion of our federal customers. So I'll point out, also we have we've had several federal customers continue to pay us through the month of October. So the month of October was really in fairly good shape considering that the government was shut down the whole month. But nonetheless, we do expect currently that December 31 will have an elevated DSO. Bruce Caswell: Hope that helps. Further questions, Will? Charlie Strauzer: That helps. And then along those lines, you guys collected a lot of receivables in Q4 and leverage is down to 1.5 turns. So what are your priorities for allocating that capital in the short term? And you briefly talked about M&A. Could you add some color on the type of things that you're looking for? Bruce Caswell: Sure. Happy to do that. Fundamentally, well, our criteria that we apply remain the same as they've been for some time, meaning that we'll be disciplined in deploying capital to combine with high-quality companies that can create new growth platforms for Maximus. That's the fundamental. We've been fairly explicit with our investors in the marketplace noting that our priority in the near term is growth in the U.S. Federal market. And within that, we do have a bias toward the defense and national security space. Our research suggests that the CAGR in that area over the next several years is north of about 9%. We also believe from our research that the overall services marketplace and software spend in the defense community is well in excess of $150 billion and we believe the addressable component for Maximus to be nearly $50 billion. So an excellent market and one that's growing and one candidly that we've now established, our ability to win in on an organic basis. So if we think about how we would further accelerate our growth potential as a business, there are three categories, if you will, that we've been considering. The first is access to customer relationships, because qualified past performance is just so important in this market to win in this market. And in some cases, there would be contract vehicles that we could potentially gain access to through a combination with another company. The second category is technical capabilities to augment what we are already bringing to bear in the marketplace through the mission threads and the accelerator work that I mentioned in my prepared remarks. And the third is business systems capabilities. While some of those can be and certifications, if you will, while some of those can be achieved organically like the CMMC level two certification that we've mentioned, others like having a certified purchasing procurement system, the faster path to those is sometimes through a combination or an acquisition. So from that perspective, in terms of criteria, that's what we'd be focusing on in terms of priorities. But I'll let David add to that in terms of any other metrics or criteria he'd like to share. David Mutryn: Sure. Maybe I'll just add, we certainly consider other uses of capital, including repurchases, which as you've seen, we've done a fair amount over the past year, especially in this environment. But I do want to emphasize that our primary reason for M&A is to unlock organic growth potential, which we believe can deliver significant value over the longer term. So that's really what we look for is revenue synergies and organic growth acceleration. Charlie Strauzer: That is helpful. Thank you. I think just one more for me. Thanks for the update on the opportunities related to Big Beautiful Bill. What phase of the opportunity would you say we are in right now and what are you actively working on with states? And then can you provide any detail on the timing of RFPs coming out from the states? Bruce Caswell: Sure. I'm happy to do that. So as I mentioned in the prepared remarks, there's been no real update from a policy perspective and not surprisingly, no regulatory updates either. Our understanding is that if we're going to see implementing regulations, for example, related to work requirements, those wouldn't be coming out until this summer. States are working with imperfect information, but in our view, they're in a situation where they can plan out an awful lot of what it's going to take to be compliant with these requirements, think about the impacts on their business process and on their state systems and how they're going to go about engaging the beneficiaries. And of course, for Medicaid, are the beneficiaries in the expansion population. That's estimated to be about 21 million people on a national basis. So there's a lot of pre-planning that can be done. And in fact, there have been articles out there saying from notable consultants saying if states started planning, they're already behind. The update for this quarter, based on our engagement in the marketplace, and it makes sense when we think about the timeline, is that SNAP is being taken very seriously. And why is that? The SNAP payment error rate issue as it's addressed in the bill can lead to a significant financial lift for states who don't bring their error rates down below 6%. The federal payments related to SNAP will be affected in federal fiscal year 2028. So beginning in October 2027, those payments could be affecting. Those payments payment impacts can take two forms. The first is on the benefit component of the SNAP funding and the second is on the federal administrative component, which would drop from 50% to 25%. The assessment of the error rates that will affect that payment impact in October '27 is based on federal fiscal year '25, or '26. So work has to begin ASAP to start addressing those error rates so that the measurement period, within that measurement period, states can bring them into alignment and be able to avoid, in many cases, hundreds of millions of dollars of lost federal benefit and administrative cost reimbursement. So we're out there very much engaging with our customers, doing demonstrations, having conversations about what we believe from our research and are the main causes of error rates in the SNAP payment process. And I think I've mentioned on a prior call, if not, I'll mention it now. From our analysis, we believe that we've got the ability to help states address about 90% of the causes of error. How do we do that? It's a combination of our historical program knowledge and business process expertise and interpretation of how policy can be implemented in an operational environment more effectively. Sometimes, quite frankly, that's as simple as improving training. One of the sources of error, just as a brief anecdote, is sometimes a caseworker might enter semimonthly income as if it were biweekly. Or the opposite. And candidly, I think a lot of people out there, including myself, would struggle to immediately define what the difference is. So with that said, technology can play a big part in this and we've developed AI-driven tools that can help states go through their database and their systems of record and identify likely sources of error in their cases. And then put plans in place to address that, both for existing cases to improve the error rates there, but also for new incoming cases that come into the system. I mentioned in my prepared remarks too that we have thirty years of experience already helping state customers with the federal regulations pertaining to work requirements. And I wanted to amplify that just a little bit. And interestingly, folks may not be aware that there have been really a work requirement component to the SNAP program and the TANF program for many years. In the SNAP program, it's known as FSET, which is the Food Stamp Employment and Training Program, whereby able-bodied adults without dependents or referred to in Washington policies speak as ABODS have to meet certain work requirements. TANF's requirements actually go back to their legislative heritage to the early 1990s. I think probably the welfare reform bill under Bill Clinton known as PERWARA. In both cases, those programs have requirements for beneficiaries to demonstrate and states to demonstrate compliance of the beneficiaries in a far more complicated way than other programs classically have like unemployment insurance, where it's really just a brief self-attestation. We've built technology and deployed technology to enable our customers to meet those complex federal requirements over the course of decades. So we feel like the similarity between that requirement and what we'd expect to see in the Medicaid work requirements is substantial and should position us well to address those needs. To close, we're cautiously optimistic that this increased urgency around SNAP will lead to procurement activity already. For example, I'm familiar with one state that's put a request for information out to the vendor community asking for how they would assist in addressing the SNAP payment error rates. RFIs usually lead to RFPs that then lead to awards and engagement. And I've been very bullish on this market because many states have, as we've been referring to, bought and paid for infrastructure with Maximus, already established where we, every day, engage many of the beneficiaries who are going to be impacted by these programs, both in Medicaid and SNAP because there is shared eligibility often among this population between those two programs. So Will, that is, I'm sorry to go on to quite a bit there, but this is an area we're obviously quite passionate about. I would say in summary, we think it's the most significant expansion opportunity for our U.S. Services business that we've seen since the Affordable Care Act. Charlie Strauzer: There you go. Thank you very much. Operator: Okay. Thanks, Will. Operator, back to you. Thank you so much, everyone. This does conclude today's question and answer session. And with that, we will bring the call to a close. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.