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Operator: Good day, everyone, and welcome to Guardian Pharmacy's Third Quarter Earnings Call. [Operator Instructions] I will now hand the call over to Ashley Stockton. Ashley Stockton: Good afternoon. Thank you for participating in today's conference call. This is Ashley Stockton, Senior Director of Investor Relations for Guardian Pharmacy Services. I'm joined on today's call by Fred Burke, President and Chief Executive Officer; and David Morris, Chief Financial Officer. After the close today, Guardian posted its financial results for the quarter ended September 30, 2025. A copy of the press release is available on the company's Investor Relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release as well as in our quarterly report on Form 10-Q to be filed with the SEC, including the specific risk factors and uncertainties discussed in our SEC filings. We do not undertake any duty to update any forward-looking statements, which speak only as of the date they are made. On today's call, we will also use certain non-GAAP financial measures when discussing the company's financial performance and condition. You can find additional information on these non-GAAP measures and reconciliations to their most directly comparable GAAP financial measures in today's press release, which again is available on our Investor Relations website. And now I will turn it over to Fred for commentary on the quarter. Fred Burke: Thank you, Ashley, and good afternoon, everyone. Thank you for joining us as we review another strong quarter for Guardian. Before diving into the details, I want to take a brief moment to reflect on how far we come. This quarter marks an important milestone, our first full year as a publicly traded company. A little over a year ago, we stood on the floor of the New York Stock Exchange to ring the bell, not as the culmination of a journey but as the beginning of a new chapter in the 20-plus year life of our company. When we went public, we made a commitment to continue to execute with discipline, grow with purpose and carry forward the entrepreneurial spirit that has always defined Guardian, all while earning the trust of our new shareholders along the way. I believe that thus far, we've delivered on that promise, and I'm very proud of what our team has achieved. As I look ahead, I'm even more energized by the opportunities in front of us to continue building a company that provides exceptional service to our communities and the residents they serve, creates value for our partners and deliver sustainable long-term growth for our shareholders. With that foundation in mind, let's turn to our third quarter performance, which marked another period of strong double-digit growth across revenue, resident count and adjusted EBITDA, which yielded adjusted EPS of $0.25. Revenue grew 20% to $377 million, a top 13% resident growth driven both organically and through acquisitions. Adjusted EBITDA grew 19% to $27 million, with margins holding steady at 7.2%, including the continued dilutive impact from recent greenfields and acquired pharmacies. Given the strength of the quarter, we are raising full year revenue and adjusted EBITDA guidance, which David will go over in detail later in the call. Now turning to the policy environment. The unintended consequences of an Inflation Reduction Act remain an issue for our industry as a whole. Consistent with our long-standing approach, we're working closely with our peers and trade group to advocate for legislative and policy solutions that address these impacts and support the long-term stability of our sector. But at the same time, we've continued to take proactive steps with our payers. Those initiatives are taking shape and combined with other strategic actions across the business, we are growing ever more confident in our ability to offset the anticipated EBITDA headwind, even as reported revenue growth is expected to remain relatively flat in 2026. Our philosophy on addressing policy issues remain simple, control what we can and navigate thoughtfully around what we cannot. It's becoming increasingly clear how important the right people and scale are to executing successfully through these challenges, and that same mindset, disciplined, proactive and grounded in leadership extends across our organization. To that end, our pharmacy entrepreneurs fuel our growth with ingenuity and commitment to the clients we serve and the specialized teams supporting them strengthen our platform every day from purchasing the PBM contracting to data analytics, to name a few. Most of our pharmacy leaders have been with Guardian for more than a decade, some going on too. Prior to joining, they were highly skilled clinicians who built successful independent pharmacies from the ground up entrepreneurs in their own right. They recognize the opportunity to combine their local expertise and community relationships with the strength of Guardian's national platform and scale, unlocking new levels of performance and profitability within their pharmacies. Many have since built on that success launching greenfield locations in adjacent markets. Guardian has continued to invest in these professionals, helping them deepen their business acumen. Today, they are exceptional operators who embody a rare combination of clinical expertise, entrepreneurial drive and business-minded execution. That blend is central to our model and underscores why selecting the right local leadership teams is so critical, and why we remain highly selective and targeted in our acquisitions. Collectively, our operators have helped propel us to be the clear leader in serving assisted living facilities. While our national market share is 13%, we have a much stronger presence in the markets where we operate. In fact, 37 of our pharmacies have 20%-plus market share with 12 pharmacies operating at over 40%. Additionally, we now serve nearly 204,000 residents, the vast majority in ALF. Looking ahead, we expect to benefit from powerful demographic tailwinds as the aging population grows, while continuing to gain share through new facility partnerships, higher resident adoption and greenfield expansion with the help of our existing operators. At the same time, at the corporate level, we'll continue to pursue targeted acquisitions such as the recent additions in Oregon and Washington, which put us on the map in the Pacific Northwest and answered demand from our national customer partners. Integration with both pharmacies is tracking as expected with both teams already onboarding facilities operated by our national customer partners. Over time, we expect this geographic area to become an important growth contributor. On the heels of these acquisitions, our pipeline continues to be very attractive and active. Furthermore, as the assisted living facility market continues to consolidate, we believe Guardian scale, sophistication and partnership-driven model positions us as the provider of choice. Looking back, we've accomplished a lot in the last year. We've expanded our pharmacy footprint, delivered consistent financial performance, strengthened our balance sheet and deepened relationships with a broader investor base. Internally, we've enhanced our infrastructure and continue to navigate policy-related headwinds. Together, these accomplishments give us confidence as we enter our second year as a public company, stronger and better positioned for the opportunities ahead. Our priorities remain clear: drive organic growth through new customer facility wins, higher adoption and greenfield expansions, expand our network through disciplined acquisitions aligned with our culture and vision, enhance profitability by integrating new pharmacies, implementing our technology advantages and leveraging procurement, reimbursement and logistics efficiencies and lastly, navigate policy changes thoughtfully with confidence and discipline, advocating for fair outcomes while managing risks proactively. These are the same levers that have propelled Guardian's growth for over 2 decades, but today, enhanced by greater scale, visibility and financial flexibility. So on that note, happy birthday Guardian. We're still early in our journey as a public company, but our foundation is strong, our strategy is clear and our momentum is real. With that, I'll turn the call over to David Morris, our CFO, who will take you through the quarter's financial results and outlook in more detail. David Morris: Thank you, Fred, and good afternoon. Before I begin with a review of our 3Q results, I wanted to quickly mention the recent shelf S-3 filing and lockup agreement we announced in mid-October. Having been a public company for a year now, we recently became eligible to file an S-3 Registration Statement. As such, we filed an S-3 Shelf Registration for up to an aggregate 6 million shares, which has since become effective to provide flexibility to efficiently access the public markets if and when needed and subject to market conditions. In conjunction with that filing, we also announced that we work with our pre-IPO shareholders to lock up approximately 93% of the shares until June 30, 2026. There are no immediate or specific plans to offer securities pursuant to the shelf registration. We view the shelf as a tool for financial flexibility rather than a near-term catalyst, and we will continue to take a disciplined, long-term approach to capital markets activity. Turning to the financial results. I'm pleased to announce another strong quarter for Guardian with adjusted EPS of $0.25. Revenue grew 20% to $377.4 million, reflecting mid-double-digit organic revenue growth. Total resident count ended the quarter at 203,766, up 13% versus a year ago. Upside in revenue this quarter came from several areas. First, a higher percentage of new residents joined early in the period, providing a full quarter benefit. Second, plant optimization efforts continue to perform well, improving coverage for residents while reducing co-pays. Third, vaccine activity was strong as many communities launched their clinics earlier in the season. And finally, acquisitions contributed meaningfully with a full quarter of revenue from Washington and 2 months of contribution from Oregon. This pharmacy is a great strategic fit for Guardian, bringing on board an experienced leadership team with a strong reputation for service excellence. Alongside our operations in Washington, this expansion gives us a solid foothold in a new growth region, the Pacific Northwest. Gross profit increased to $74.7 million, posting a 19.8% margin. Adjusted SG&A was 13.7% as a percentage of revenue. Adjusted EBITDA rose 19% to $27.3 million, which included pubco costs of $1.3 million that we didn't have in the prior year. Adjusted EBITDA margins held steady with the second quarter at 7.2% and was down roughly 10 basis points year-over-year, reflecting the dilutive impact of recent acquisitions and greenfield startups along with pubco costs that weren't included in last year's results. Underlying core margins continue to expand as we see stronger profitability from pharmacies that are now maturing within our network. Our 4- to 5-year locations are performing at or above our consolidated adjusted EBITDA margin and our 2- to 3-year locations are tracking steadily toward that same level. As I've mentioned before, our most recent acquisitions, those made in the last 2 years, are still dilutive. Without them, margins will be closer to 8%. Given the upside in the quarter, acquisitions year-to-date and the overall momentum of the business, we are raising our 2025 guidance. Revenue is now expected to be in the range of $1.43 billion to $1.45 billion, up from our prior range of $1.39 billion to $1.41 billion. We are also raising our adjusted EBITDA guidance to $104 million to $106 million, up from the previous $100 million to $102 million range. The midpoint of this range represents solid 16% growth year-over-year. A couple of reminders for Q4. Starting with SG&A, we expect it to trend slightly lower as a percent of sales in the fourth quarter consistent, but the seasonal revenue lift we typically see from vaccine activity this time of year. Stock-based compensation is expected to decline meaningfully in Q4 to approximately $1.1 million as we sunset the pre-IPO equity program-related expense. Finally, reported income tax expense was elevated at 42% this quarter, which is higher than the previous quarter, primarily due to nonrecurring income tax expense associated with the corporate reorganization and related to the IPO from 2024. We expect the fourth quarter tax rate to be in the high 20s and step down to the mid-20s in 2026. Turning to the balance sheet. We ended the quarter with $36 million in cash, an increase of $18 million, even after funding our Oregon acquisition. This performance highlights the strength of our cash generation, with the cash conversion continue to track above 60%. We remain in a very strong financial position with no debt outstanding under our credit facility and ample liquidity to fund ongoing strategic growth, including M&A with internally generated cash flow. Our acquisition pipeline remains very active, and we continue to take a disciplined approach, prioritizing the right local operator in markets that enhance our regional density and national scale. In closing, on our first anniversary as a public company, I want to echo Fred's thanks to all of our employees and shareholders. We're proud of the momentum we've built, and we are confident in our ability to continue executing on our strategic growth plan. Guardian was built pharmacy by pharmacy, relationship by relationship and that's exactly how we'll continue to grow, anchored in local leadership powered by our national scale and with an unwavering commitment to service. Ashley Stockton: Operator, we'll now open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of John Ransom from Raymond James. John Ransom: So just a question about the fourth quarter. How would you compare the contribution of the vaccine program this year to last year? I think this is what the third year you've done it and I'm sure you learn a little something every year. But the backdrop is interesting because there's a little less vaccine uptake among the greater world, especially COVID. But I'm just curious kind of what you're seeing with your population, how the uptake looks and just how the program overall compares to what you did last year, which was also very successful? Fred Burke: John, Fred here. Did I hear you say, third quarter or fourth quarter? John Ransom: Fourth quarter. So in your implied guidance, what's going on with your vaccine program this year compared to last year? Fred Burke: It's steady as we go. You did mention an interesting anomaly that we wondered about, which is the CDC guidance potentially could have caused fewer people to want to be vaccinated, particularly COVID. We are not seeing that. It's steady as we go. However, I will comment that we started the clinic season with a stronger September this year than last. So some of the total perhaps has been pulled forward into Q3. John Ransom: Okay. And as we think about resident count, it looks like you're only missing one month of an acquisition. So this resident count is a pretty good placeholder for 4Q with a little bit of one month of that one acquisition. Fred Burke: That's correct. Generally, we measure residents served as of the end of the quarter. So the acquisitions that were completed recently are included in the Q3 number. And so recognize that we do see fluctuations quarter-to-quarter, particularly in Q4 as some loved ones are reluctant to move their mother or father into assisted living in certainly the November, December period. So I would expect to see steady as we go in Q4 on resident count. John Ransom: And just last for me. I know you hit on the IRA issue and the conversations with the PBMs. Using the baseball analogy, how close are you to wrapping up these negotiations and kind of putting a bow on this issue? Fred Burke: John, as you know, these are very sensitive discussions, literally covered by NDAs. So I don't want to comment on specifics with respect to the PBM negotiations other than to reiterate what I said before, which is they're taking shape, and we're growing ever more confident in our ability to offset the headwind. John Ransom: And Fred, we've talked about this before, but is there any more -- it's always interesting to me like some industries, the payers are more willing to give providers some bogeys that would result in upside to their -- and as we know, you're paying a dispensing fee and you paid a spread. But is there any more indication that they might be -- especially with all the issues going on with Part D and more Part D plans embedded in MA and sensitivity around Part D losses, is there any more chopping of wood -- that's a bad expression, but is there any more kind of fulsome discussion around, "Hey, look guys, why don't we throw in an upside kicker for X or Y?" Or is it still just kind of mechanically the same in terms of just dispensing fee and spread? Fred Burke: Well, we, at Guardian, as having mentioned before, are very willing to think about value-based models because we're very comfortable in the value that we are providing to their insured lives. But it's evolving. There's not a major shift, but each is interested in exploring this idea as are we. So we're working our way towards that, but it's an evolution. John Ransom: So the normal glacial pace of health care is still -- we'll think about it next year. Fred Burke: One Georgia boy to another, we'll keep chopping that wood. Operator: Your next question comes from the line of David MacDonald from Truist. David MacDonald: Just a couple of additional ones. One, can you guys spend just a quick minute on some of the areas where, from a margin standpoint, if I just look at the amount of acquisition activity that you've had and just kind of the impact in terms of margins as those come on, any couple of key areas that you would flag in terms of where you've done better to continue to maintain those flattish margins despite the meaningful M&A activity? David Morris: David, it's David. We've talked about the various cohorts that I mentioned in the comments, our 4- or 5-year cohorts are performing well ahead of our overall margins and the 2- or 3-year cohorts are coming along as well. And we have a substantial investment we've made in the last 18 to 24 months in 11 locations, probably greater than 10% of our overall revenue that are a drag on our overall EBITDA margin. So it takes on average 4 years to get these businesses up to performing where they need to be and some are performing quicker and better and some take longer. So I think it's pretty much steady as she goes. And we're pleased with all the various businesses and where they are in the various cohorts. So it's pretty much steady as she goes. David MacDonald: Okay. And then just one other quick follow-up in that same vein, when you think about the pipeline, it sounds like there's still a fair number of opportunities sitting in front of you. How do you think about pacing, I guess, on 2 fronts. One, just the margin impact as they come on, but also, number two, just are there any kind of operational bottlenecks internally in terms of how many of these things you want to take on at the same time? David Morris: Yes. I think we've talked about in the last 24 months, things have been accelerated specifically with the large Heartland acquisition at 4 locations. So I'm not sure we can set expectations to continue at that level. But the pipeline is robust. And as I said, very active, and we see '26, '27 us continuing our similar type approach. We have many contiguous startups that we're looking at as well as an active pipeline. So no real bottlenecks that would impact us being able to continue to execute much as we have this past year. Operator: Your next question comes from the line of Raj Kumar from Stephens. Raj Kumar: Maybe just kind of touching on the implied 4Q here. It seems like the dilutive impact to margins is slightly accelerating. So maybe just kind of want to get your thoughts on if that's conservatism or kind of anything to call out on that front? David Morris: Raj, it's David. I think our adjusted EBITDA margins were forecast to remain relatively steady. And the biggest impact there would be the investment that we've made over the last 12 to 18 months, depressing overall margins. I think the Q4 will tick up slightly because of the seasonality with the vaccine clinics. Raj Kumar: Got it. And then maybe just as a follow-up. I appreciate the commentary on the mature pharmacy kind of margin. Maybe just kind of thinking about what the ceiling or the kind of theoretical ceiling is there from a margin perspective? And kind of also thinking about one of your mature pharmacies, what kind of the available expansion capacities to those pharmacies as we think about that helping out in this overall high single-digit organic revenue growth framework they kind of laid out long term? David Morris: We've talked about the impact that our investment in the contiguous start-ups and acquisitions has on overall margin, it's plus or minus 80 basis points. And where can the business be, say, in 24, 36 months or even longer? We hope to continue to optimize these acquisitions, that's going to enhance our overall margin. We're going to leverage the platform that we've built, not only in each pharmacy where we're not to full market share but also leverage our support infrastructure. So 8% higher, we're going to be working on that every day, every quarter. But hopefully, we'll see things continue to improve. Operator: [Operator Instructions] Your next question is a follow-up from John Ransom from Raymond James. John Ransom: Just going back to the fun topic of Medicare Part D, as you no doubt know, there's a lot of turmoil in the market. There's fewer stand-alone Part D plans. There's more MA-PD plans. And I just wonder how does Guardian look at that? And your plan optimizer tool, are you seeing more switching within your residents? Is it creating more kind of churning behind the scenes? Or is it not something that's risen to the level of something that you've noticed? Fred Burke: I'll start on that one, John. It's very early in the process because the details were late in coming this year. So the big effort is underway as we speak, and we'll know more as we move through the next few weeks. John Ransom: Okay. And do you -- I'm sorry, do you have a general preference for stand-alone versus MA-PD or do you care? Fred Burke: We're relatively agnostic. We want to help the residents find the best plan for their particular situation in their drug regimen. John Ransom: Okay. And if you all noticed anything kind of different. I was just looking at some numbers that suggest some small moves. But has there been any change to point out in terms of the mix of brand versus generics or the mix within brand? And I know you're not real levered to expensive biosimilars. But is there anything to call out in the average drug consumption this year versus last year? And does that -- is that bigger than a breadbox for you? Fred Burke: We've mentioned in previous communications that we see increasing levels of acuity, which manifests itself with greater utilization of some of these brands, and that has continued. It's -- I would call it just steadily -- a steady growth in acuity. Obviously, that is also greatly impacted by resident mix this being a market where our residents are turning over. So it can fluctuate quarter-to-quarter, year-to-year depending on that. But in general, these residents that we serve have a high acuity level. John Ransom: And the fact that the whole Part D deductible and out-of-pocket max has changed, are you noticing that in a shift to the plans being more in the hook in the fourth quarter? Are you seeing any kind of change versus last year when that wasn't the case? Fred Burke: We have not, and I'm surprised at that. Perhaps, it may take more than 1 year. Operator: Thank you very much. There are no further questions at this time. This concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Operator: Ladies and gentlemen, greetings, and welcome to the Chegg, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tracey Ford, Vice President of Investor Relations. Thank you. Please go ahead. Tracey Ford: Good afternoon. Thank you for joining Chegg's Third Quarter 2025 Conference Call. On today's call are Dan Rosensweig, President and CEO; and David Longo, Chief Financial Officer. A copy of our earnings press release, along with our investor presentation is available on our Investor Relations website, investor.chegg.com. A replay of this call will also be available on our website. We routinely post information on our website and intend to make important announcements on our media center website at chegg.com/mediacenter. We encourage you to make use of these resources. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements. In particular, we refer you to the cautionary language included in today's earnings release and the risk factors described in Chegg's annual report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 24, 2025, as well as our other filings with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release and on the investor slide deck found on our IR website, investor.chegg.com. We also recommend you review the investor data sheet, which is also posted on our IR website. Now I will turn the call over to Dan. Daniel Rosensweig: Thank you, Tracey. Hello, and thank you, everyone, for joining Chegg's Third Quarter 2025 Earnings Call. Despite our current challenges, I'm honored to return as the CEO and Executive Chairman of Chegg. The Board and I believe the company is undervalued and see a significant opportunity to rebuild and reinvent Chegg and return it to a growing company with strong adjusted EBITDA margins and cash flow. We split the company into 2 units: Our growth business, Chegg Skilling, which we expect to have sustainable double-digit growth and our legacy academic services, which will focus on generating cash. This new structure gives us the cash and the assets we need to rebuild, and I firmly believe we will create significant long-term value for our shareholders. It's clear that the rise of AI and the subsequent negative impact on traditional sources of traffic have disrupted almost every direct-to-consumer industry. We are dealing with these realities head on. Two weeks ago, we took decisive action restructuring the company to enable our academic services to operate more efficiently and generate significantly more cash flow while repositioning Chegg Skilling to become a larger, more profitable B2B SaaS business. This was hard because of the impact on a large number of employees, but it was necessary and a positive decision for the future of Chegg. Our clarity of purpose and lower cost structure is energizing and gives us the ability to invest in our skilling business, which is experiencing tailwinds and already generating double-digit growth. We're now in the right categories with the right business model and are beginning to see momentum from our efforts. The impact of AI has resulted in a large number of companies needing to reskill their employees, especially around AI. The skilling market is already large, more than $40 billion today and has turned its attention to workforce, AI and language learning. We start from a position of strength. We have 2 valuable Skilling assets. The first is language learning with Busuu and the second in skills with Chegg Skills. Busuu is helping the true language learner differentiated by its focus on speaking, not just translation. Shape skills already has a strong catalog of courses on in-demand topics, which will only get stronger. We are combining them, investing in them and over time, will expand with additional assets. We plan to report them as a single unit called Chegg Skilling for external revenue reporting so you can track our progress and our growth. In that spirit, Chegg Skilling is ending 2025 with strong momentum, expecting a 14% year-over-year growth and a full year revenue of $70 million. Looking ahead, we expect the business to continue to grow at double-digit pace. I've spent 42 years in the technology industry, and the one constant has been that platform changes bring both incredible disruption and opportunity. We reinvented Chegg and created a bigger, more valuable company, and we can do it again. We started as a textbook rental company, transformed it into an education technology company that helped tens of millions of students succeed. Our next chapter, Chegg Skilling, is in a very large and growing market. We have the ability to use our skilling assets and our balance sheet to build a great company, and we are excited about the opportunities ahead. I'm confident that Chegg will evolve and thrive, and I'm grateful for the opportunity to lead our team through the next chapter. With that, I'll turn it over to David. David Longo: Thank you, Dan, and good afternoon. Today, I will be presenting our financial performance for the third quarter of 2025, along with the company's outlook for the fourth quarter. We delivered a good third quarter, surpassing our revenue expectations and outperforming our adjusted EBITDA guidance by $5 million as a direct result of our cost cutting and restructurings. With our strategic shift toward the large and growing skilling market, we are now well positioned to enter the next phase of our growth. In the third quarter, total revenue was $78 million, a decrease of 42% year-over-year. Reduced traffic impacted our business in 2 key ways: First, it led to fewer subscribers and less subscription revenue; and second, within our skills and other, it led to fewer sessions, which significantly reduced advertising revenue. As Dan mentioned earlier, going forward, we will break out our skilling business, which only includes Busuu and Chegg Skills so you can track our progress. Moving on to expenses. Non-GAAP operating expenses were $49 million in the quarter, a reduction of approximately $41 million or 46% year-over-year, driven by the execution of our restructurings. Our third quarter adjusted EBITDA was $13 million, representing a margin of 17%. To position ourselves for future growth, we overhauled our cost structure to be more efficient and allow us to invest in future growth. To put this in context, in 2024, our total non-GAAP expenses were $536 million and we are on track to reduce them to under $250 million by 2026. Our investments in AI have enabled us to continue to reduce our CapEx, which was $6 million in Q3, down 63% year-over-year. We anticipate full year 2025 CapEx of approximately $27 million with a targeted further reduction of approximately 60% in 2026, while still delivering a high-quality experience that our students expect from us. Free cash flow for the third quarter was negative $900,000, which was primarily impacted by a onetime $7.5 million settlement payment to the FTC and $5.5 million in severance payments related to our restructuring. Our company will continue to generate strong cash flow, although it will be temporarily affected by $15 million to $19 million in cash expenditures for employee transition and severance costs associated with our recently announced restructuring. These payments will occur over the fourth and first quarters. Considering this, we are still on a path to generate meaningful free cash flow in 2026. Looking at the balance sheet, we concluded the quarter with cash and investments of $112 million and a net cash balance of $49 million. Looking ahead and using our new revenue breakout, for Q4, we expect $18 million of revenue from our skilling business, which represents an increase of 14% year-over-year. Total revenue between $70 million and $72 million, gross margin to be in the range of 57% to 58% and adjusted EBITDA between $10 million and $11 million. In closing, the path has been difficult, but the outcome will be positive. We are now a more lean and efficient company with a skilling business that is expected to grow 14% in Q4. We believe we are turning the corner and are on a path to future growth and profitability. We look forward to sharing more detail on our February earnings call, including greater visibility into our multiyear growth plan for skilling and how we intend to drive additional value in the years ahead. With that, I will turn the call over to the operator for your questions. Operator: [Operator Instructions] Our first question comes from the line of Eric Sheridan with Goldman Sachs. Eric Sheridan: Maybe 2 quick ones, if I could. In terms of skilling, can you talk through a little bit of what you see as the strategic product priorities to execute on the skilling side to capture the market opportunity? And across the legacy business and skilling, how should we think about the mix of resource allocation across those efforts looking forward? Daniel Rosensweig: I was on mute. So I apologize for that because I haven't been on the call for a while. So I appreciate the question. And very simply, all of our growth resources are going to go into the skilling business. So we -- when we made the decision to restructure the company, so this is not a layoff. This is a complete restructure. We essentially put the company into 2 businesses or 2 units. One is the legacy business, which historically had been the majority of the company, and that was Chegg Study. Given the realities of AI and given the realities of the Google traffic situation, we've turned our attention to the bigger and growing market and more sustainable market for us, which is the skilling market, which is made up of B2B now versus B2C. When we originally had the businesses, they were B2C. So we've made that transformation. And they're growing, as you saw, released as we said, about 14% year-over-year in Q4. That's our expectation. So we're excited about the fact that they're already growing. Those businesses are going to focus on frontline workers, which is the deal that we already have with Guild. They're going to focus on language learning, which is what Busuu traditionally has done. Believe it or not, even though AI is going to affect translation and instant translation and those things, corporations still want their people to learn how to actually speak the languages. And so we are seeing really great progress in our B2B side of the Busuu business. And then job-related skills mostly around AI today, which are extraordinarily popular. So our resources -- we have the necessary resources because we have the necessary cash now by removing almost 400 people from the company. And our expectation is that our capital investments will be used to grow the growth businesses and come at the expense of what traditionally was Chegg. Operator: Our next question comes from Devin Au with KeyBanc Capital. Devin Au: Just first one, just a follow-up from the last set of questions. On the legacy academic business, what kind of support or like services are you going to continue providing for that unit? And I have a follow-up. Daniel Rosensweig: Yes. So that business, it's very interesting because as we invested early in AI because of what we saw the situation was becoming and also because the technology allows us to do things more efficiently. We built an incredible service, which we believe is the #1 service. The issue for us is that our Google traffic dropped by 50%. And so we weren't seeing the necessary traffic to come in. And as you know, we've launched a lawsuit against them for that. But the quality of the product is unquestioned. So believe it or not, 90% of all the questions that we get are already in Chegg's database. So we're able to make this transition on the resources and still have the quality product that we had before. So we're actually fine in that context. So we expect that business to generate cash for hopefully several years. Most companies -- most businesses have tails longer than we expect. I mean I just -- I marveled at the fact that AOL just sold for $1.4 billion to Bending Spoons based on its historical model and no one's heard of it in 10 years. So our desire is to run that business as long as we can. We have the necessary resources on it. But the resources are mostly the database, the technology and the network that we built over the years. We still have over 130 million questions that are already in the database. So it's really in a good position to generate cash, but our expectation is of future growth, they just -- we cannot compete with the situation that Google has caused and the fact that OpenAI is what it is. So we put the business into a bigger $40 billion growing market and transition that business over the last 2 years from what was historically a B2C business or a D2C business, I should say, to now almost exclusively B2B, which is a better business, a more stable business, more secure business, less likely to be impacted negatively by the trends in the market. And already seeing some success on that by being able to acknowledge that we're going to grow more than double digits in the quarter and then expectedly for next year. So things -- this has been a long process. It's been a painful process. It's affected a lot of people negatively. It's obviously affected our shareholders. But we finally feel like we've hit the bottom because we have a business that's growing that is $70 million. Our expectation is for 2025, and we expect it to grow double digits next year, and we're rebuilding the company with those resources. Devin Au: Understood. I appreciate the context there, Dan. Maybe just a quick follow-up. I know you touched on this a little bit. It seems like the Busuu business, the B2B side is doing well. Maybe if you could just kind of give us a little bit more color on the initiatives you're looking to make, some of the near-term product road map or milestones you're looking to reach in that business and kind of what's giving you the confidence that you can grow that business sustainably double digit? Daniel Rosensweig: Yes. It's a great question. And part of the reason I was willing to come back is because I feel confident in that. So Busuu, for those who just haven't had a chance to know much about the business, is predominantly in Europe. And we'll also be moving into Latin America. So one of the initiatives will be Latin America as an example. The big initiative over the last 2 years was repackaging our learning mechanisms, not for the D2C, but for the B2B, what do businesses want. And then, of course, leveraging AI. But in our case, the #1 thing that people want is conversation. They want a conversational way to be able to learn the language and discuss it and be gated on it. AI actually, with voice, it's scary, but it gives us a heck of a chance to be able to do that. So what we'll be looking at is a number of businesses that sign up, number of seats that we have, but engagement with those that choose to use it inside the companies because the more they engage, the more seats we'll have at those companies. So it won't be -- the things we'll be looking at over the next year, 2 years, 3 years will not be surprising. It will be the number of businesses that we sign up, the number of seats in those businesses, the retention that we have within those businesses, and that gives us the confidence to keep moving forward. So Busuu has been around for 15 years. This is a very significant change for it. It started originally trying to compete in a world of Duolingo. And we made the decision that, that was not a market that we should compete in, and we went B2B, and it's actually now working in our favor. It's exciting. But the milestones on the product will be how does AI help you develop the language skills better your pronunciation better, feel like that you're actually working with a human being on the other side. Those are the things that people seem to use when they learn best when they need to learn the language as opposed to just want to get a couple of phrases. Operator: Our next question comes from the line of Ryan MacDonald with Needham & Company. Ryan MacDonald: Dan, welcome back. Maybe on the skilling business, can you talk about -- you mentioned Guild already is obviously that's been a good channel for that business as you look to grow it. Can you talk about other sort of investments or other potential channels you're kind of looking at or evaluating as you sort of build the go-to-market motion here? And how much do you think is going to be sort of direct sales versus sort of additional channels? And where does sort of internal sales capacity stand at right now for those initiatives? Daniel Rosensweig: Yes, a great question, and it's early on in that question. So here's where we are in our current thinking, which is we launched through Guild, and that has been incredibly successful, and we're grateful for that partnership. But obviously, nobody wants to be dependent on a singular channel. And so we are working very hard to be able to offer noncompetitive products to Guild in other channels. And I think as you track that part of the business, you'll probably hear over the course of the year, new partnerships. So think of it as all new distribution channels where they have the customer, we have the content and there are marketplaces for that and there are channels for that. And those channels are in the U.S. and they're in Europe. So we think that's where we're starting, which is what we know, which is how to put great content in places where people want that content. The second thing is we are building slowly a B2B sales force. And that B2B sales force is focusing on opening more of those channels. But also one of the unfortunate realities of Chegg's existence was universities did not historically want to work with Chegg because of Chegg. Now that, that part of the business is going away, there's a lot of people who understand the quality of our content, the quality of the way we execute, the value that it has for the students. And so we will be building new channels eventually direct to institutions. It's just going to start slow. So I don't want you to think in '26, we're going to announce a lot of universities because we're not. We are going to start with the other distribution channels similar to Guild that already have built-in audiences inside of corporations. But we have been contacted by a number of universities who now -- who know the quality of our work. If you actually look at the success that we've had inside of Guild, I think we have amongst the highest retention rate and completion rate. And those things are examples of just how good our quality is. So those are the things that we are working on, but we're going to take it slow because we want to grow the business at double-digit growth. We want the businesses to become profitable. We want them to have sustainable growth. And we have a road map over the course of '26 that we're really excited about by adding more content, adding more channels and starting with new partnerships. Ryan MacDonald: Helpful there. And then maybe just as a follow-up. So I think you mentioned -- I think it was in David's sort of prepared remarks that you saw a little bit slower than -- or lower-than-expected advertising revenue within the sort of Skills and Other segment as a result of the reduced traffic. I guess, how should we think about how much of a headwind traffic can be in the skilling business moving forward? And maybe some of the initiatives you're undertaking to whether it's investing in new marketing channels to sort of drive that top of the funnel in the business to sort of offset some of the declines from just core Google, if you will? Daniel Rosensweig: Yes. So actually, it's a really great question, and I'm glad you asked it because we should clarify this absolutely, which is Skilling and other, it's not that we're removing the other from Skilling. So the other were things like advertising. And those ads didn't appear in the Skills. Those ads appeared in Chegg Study, they appeared in Chegg Math and Chegg Writing. And that's where the traffic has declined, and that's where the ad sessions have gone away. You will see no headwinds in skilling other than things that we don't expect or might pop up. But those businesses are about growth now. So -- and those businesses -- the headwind that they have faced is over the last couple of years is a lack of investment because of what we were dealing with on the core side of the business. And it's not easy to reposition a business at all ever, but in the public markets, it's even more difficult. And so we've had to balance our debt, our cash, our initiatives and reposition those businesses to B2B, and we now feel like they're in a position to do that, and we're actually pretty excited about it. Operator: Ladies and gentlemen, at this time, there are no further questions. The conference of Chegg, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines. Thank you. Daniel Rosensweig: Thanks, everybody.
Operator: Good afternoon. My name is Chloe and I will be your conference operator today. At this time, I would like to welcome everyone to the WhiteHorse Finance Third Quarter 2024 Earnings Conference Call. Our hosts for today's call are Stuart Aronson, Chief Executive Officer; and Joyson Thomas, Chief Financial Officer. Today's call is being recorded and will be made available for replay beginning at 4:00 p.m. Eastern Time. The replay dial-in number is (402) 220-2572, no passcode required. [Operator Instructions] It is now my pleasure to turn the floor over to Robert Brinberg of Rose & Company. Please go ahead. Robert Brinberg: Thank you, Chloe and thank you, everyone, for joining us today to discuss WhiteHorse Finance's Third Quarter 2025 Earnings Results. Before we begin, I'd like to remind everyone that certain statements, which are not based on historical facts made during this call, including any statements relating to financial guidance, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Because these forward-looking statements involve known and unknown risks and uncertainties, these are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. WhiteHorse Finance assumes no obligation or responsibility to update any forward-looking statements. Today's speakers may refer to material from the WhiteHorse Finance Third Quarter 2025 earnings presentation, which was posted on our website this morning. With that, allow me to introduce WhiteHorse Finance's CEO, Stuart Aronson. Stuart, you may begin. Stuart Aronson: Thank you, Rob and good afternoon, everybody. Thank you for joining us today. As you're aware, we issued our earnings this morning before market opened and I hope you've had a chance to review our results for the period ending September 30, 2025, which can also be found on our website. On today's call, I will begin by addressing our third quarter results and current market conditions. Joyson Thomas, our Chief Financial Officer, will then discuss our performance in greater detail, after which we will open the floor for questions. Our results for the third quarter of 2025 were disappointing and reflect the onset of interest rate cuts, continued pressure on market spreads as well as the impact of material markdowns on some credits that we have previously discussed. Q3 GAAP net investment income and core NII was $6.1 million or $0.263 per share compared with Q2 GAAP and core NII of $6.6 million or $0.282 per share. NAV per share at the end of Q3 was $11.41, representing approximately a 3.6% decrease from the prior quarter. In addition to the approximate $0.12 shortfall in NII coverage of our Q3 base distribution, NAV per share was also impacted by net realized and unrealized losses in our portfolio totaling $6.7 million or approximately $0.29 per share, which I'll discuss later on the call. As a result of these earnings and current market conditions I have 3 important announcements. First, given the current earnings power of the BDC as well as our expectations for lower interest rates and continued spread compression in challenging market conditions, our Board of Directors has taken the prudent measure to reset our quarterly base distribution to $0.25 per share. This adjusted distribution rate represents an implied 8.8% annualized yield based on the company's ending NAV per share as of the end of the third quarter. This was a difficult but necessary decision. Ultimately, we believe the reset puts us in a better position to earn our base distribution going forward, given management's expected earnings power of the BDC, future base rate movements as well as current market conditions. We will continue our distribution policy framework that was previously announced during our Q1 2023 earnings call on May 9, 2023, where the company intends to distribute its base distribution as well as make potential supplemental distributions above the base level in the future pursuant to this distribution policy. To the extent our nonaccrual and other troubled situations in our portfolio result in recoveries or if current market conditions improve and/or base rates increase and any of these factors lead to additional earnings, we will be prepared to share those incremental earnings with investors in the form of supplemental or special distributions. Joyson will provide a refresher on how our supplemental distribution policy gets calculated when he speaks in a little while. Second, on the big topics, as a result of recent disappointing results and as a part of our ongoing commitment to align interest of the adviser with those of our shareholders, the adviser has voluntarily agreed to reduce the incentive fee on net investment income from its stated annual rate of 20% to 17.5% for the next 2 fiscal quarters ending December 31, 2025 and March 31, 2026, respectively. This temporary 2.5 point reduction in our income-based incentive fee will provide additional financial support for our quarterly distributions to shareholders. The adviser may extend this voluntary reduction. However, the duration and extent of future reductions are uncertain and will be subject to ongoing discussions with the Board. Finally, given the discount of the company's stock price relative to its book value, the Board has approved a share buyback program of up to $15 million. Under the share repurchase program, the company may but is not obligated to repurchase its outstanding common stock in the open market from time to time at the then current market prices at the discretion of WhiteHorse Finance's management team. The company's current share price level implies a discount to its current book value of more than 40%, which we believe will result in very accretive share repurchases. Turning now to portfolio activity. We had gross deployments of $19.3 million in Q3, which was more than offset by elevated repayments and sales of $50.5 million, resulting in net repayments of $31.2 million. Gross capital deployments consisted of 2 new originations totaling $14.3 million and the remaining amounts were deployed to fund 2 add-ons to existing investments. In addition, there was $0.5 million in net fundings made on revolver commitments. Our new originations in Q3 included 1 nonsponsor and 1 sponsor deal at an average under -- an average leverage of approximately 3.5x EBITDA. All of our Q3 deals were first lien loans at an average spread of 612 basis points. Total repayments and sales were driven by complete or partial realizations in 5 portfolio positions, including BBQGuys, Lab Logistics, Power Plant Services, Coastal TV and Ross-Simon. At the end of Q3, 99.2% of our debt portfolio is first lien, senior secured and our portfolio ownership mix was approximately 65% sponsor and 35% nonsponsor. The weighted average effective yield on our income-producing debt investments decreased to 11.6% as of the end of Q3 compared to 11.9% in Q2, mainly due to lower spreads and lower base rates. The weighted average effective yield on our overall portfolio also decreased slightly to 9.5% at the end of Q3 compared to approximately 9.8% at the end of Q2. During the quarter, the BDC transferred 1 new deal and 4 existing investments to the STRS JV. At the end of Q3, the STRS JV portfolio had an aggregate fair value of $341.5 million and an average effective yield of 10.3% compared with 10.6% from Q2. We continue to successfully utilize the STRS JV and believe WhiteHorse Finance's equity investment in the JV continues to provide attractive returns for our shareholders. After net repayments and JV transfer activity as well as the net realized and unrealized losses recognized during the quarter, total investments decreased from the prior quarter by $60.9 million to $568.4 million. This compares to our portfolio's fair value of $629.3 million at the end of Q2. During the quarter, we recognized $1.8 million in net realized losses and approximately $4.9 million of net unrealized losses for an aggregate total of $6.7 million in net realized and unrealized losses in Q3. Our mark-to-market losses were primarily driven by write-downs in Alvaria, which was formerly known as Aspect Software and in Camarillo Fitness, also formerly known as Honors Holdings. Alvaria has continued to underperform and has struggled to service its existing debt levels. At the end of the third quarter, we marked down our position in Alvaria by approximately $1.7 million based on our expectations of a multi-tiered restructuring to occur in Q4. Subsequent to the quarter end, a lender group, including WhiteHorse, completed a restructuring of the transaction in which we extinguished our existing debt position for cash and equity consideration equal to approximately the aggregate fair value we marked to as of the end of September 30. Camarillo Fitness, which is the largest franchisee of Orangetheory Fitness, also continues to underperform. At the end of the third quarter, we marked down our position by approximately $4.4 million in the aggregate. We're making every effort to optimize Camarillo to be well positioned for new year sign-up period, which could give the business a boost in performance. As a partial offset to the markdowns this quarter, we were able to provide an incremental add-on to motivational marketing subsequent to the end of the quarter to help effectuate the merging of that portfolio company with another portfolio company. As part of the add-on, the sponsor contributed a fresh amount of additional equity cushion behind the debt. And as a result, that has taken leverage of motivational marketing down significantly and led to a slight markup of approximately $0.7 million on that asset. The BDC also recognized $2.1 million in realized losses, which was partially offset by a reversal of approximately $1.7 million in previously recorded unrealized losses from the restructuring of MSI Information Systems. With the restructuring of MSI, the restructured debt investments returned back to accrual status as we expected it would. Nonaccrual investments now represent 2.7% of the debt portfolio at fair value, an improvement compared with 4.9% of the debt portfolio in the prior quarter. Other deals on nonaccrual are likely to remain that way for some period of time. We are continuing to actively work on getting deals off nonaccrual, leveraging the expertise of our 5-person dedicated WhiteHorse restructuring team and the resources of H.I.G. Capital. Aside from the credits on nonaccrual, our portfolio is performing quite well. Turning to the lending market. M&A activity has not picked up as much as the investment banks and private equity shops had hoped for, although there has been a steady trickle of improvement. There is still plenty of capital available to serve the reduced supply of new financings in the market and the environment remains extremely competitive, particularly for companies that are noncyclical and do not have meaningful international sale exposure -- sales exposure. Lenders in the sponsor markets are being very aggressive, while the nonsponsor markets continue to be less competitive. In the mid-market, pricing for sponsor deals is pretty solidly in the SOFR [ 450 to 500 ] range as competition has compressed spreads and OID is typically 1 point to 1.5 points. Lower mid-market sponsor deals are pricing in the [ 475 to 575 ] spread over SOFR, at least a range of that. Leverage multiples are between 4 and 6x and partial PIK features are being used selectively to make cash flows work on upper mid-cap and large-cap deals. The nonsponsor market remains much less competitive and has a significant pricing premium compared to the sponsor market. We are generally seeing nonsponsor deals pricing at SOFR plus [ 600 ] and above. OID is still generally 2 points or higher compared to sponsor deals. Leverage levels on nonsponsor deals have been consistently lower and then more stable than the sponsor-backed deals. To put the attractiveness of the nonsponsor market in context, our nonsponsor mandates are still levered only 3 to 5.5x and the highest deal we have priced recently is at SOFR [ 650 ] plus a warrant. We continue to focus significant resources on the nonsponsor market where there are better risk returns in many cases and much less competition than what we are seeing, especially in the on-the-run sponsor market. We currently have 22 originators covering 13 regional markets. Given market conditions, these originators are primarily focused on sourcing off-the-run sponsor deals and nonsponsor deals as we look for value and good risk return in a market where there is limited deal flow and a lot of aggressiveness. Subsequent to quarter end, the BDC has closed on 1 new deal and 1 add-on investment totaling $16.2 million and had 1 full repayment totaling $22.2 million. Following the net deployment activity to date in Q4, the BDC's remaining capacity is approximately $40 million and pro forma for several transactions that we anticipate to close in Q4 of 2025, the BDC's capacity for new assets is approximately $20 million. At the end of the third quarter, the STRS JV's remaining capacity was approximately $20 million and pro forma for recently mandated deals to eventually be transferred in the JV's capacity is fully deployed. Our pipeline remains lower than normal for this time of year. We currently have 6 new mandates and are working on 3 add-ons to existing deals. Our 6 mandates comprise -- are comprised of 2 nonsponsor deals and 4 sponsor deals. While there can be no assurances that any of these deals will close, all of these credits would fit into the BDC or our JV, should we elect to transact. All of the nonsponsor mandates have pricing of [ 600 ] over SOFR or better and would be targeted to go into the BDC's balance sheet. Several of these mandates are large and will help us with asset balances in the BDC. The sponsor mandates have pricing of [ 425 to 550 ] over SOFR. With that, I'll turn the call over to Joyson for additional performance details and a review of our portfolio composition. Joyson? Joyson Thomas: Thanks, Stuart and thanks, everyone, for joining today's call. During the quarter, we recorded GAAP net investment income and core NII of $6.1 million or $0.263 per share. This compares with Q2 GAAP NII and core NII of $6.6 million or $0.282 per share as well as our previously declared third quarter base distribution of $0.385 per share. Q3 fee income was only approximately $0.1 million and was lower than historical quarters due to lower amendment and prepayment fee activity. For the quarter, we reported a net decrease in net assets resulting from operations of $0.6 million. Our risk ratings during the quarter showed that approximately 81.8% of our portfolio positions either carried a 1 or 2 rating, an increase from 76.8% reported in the prior quarter. Upgrades during the quarter included positions in Motivational Marketing and EducationDynamics, which were both upgraded to a 2 and positions in Telestream, which was upgraded to a 3. As a reminder, a 1 rating indicates that a company has seen its risk of loss reduced relative to initial expectations and a 2 rating indicates that the company is performing according to such initial expectations. Regarding the JV specifically, we continue to grow our investment. As Stuart mentioned earlier in the call, we transferred 1 new deal and 4 existing investments during the third quarter to the STRS JV, totaling $24.2 million. As of September 30, 2025, the JV's portfolio held positions in 43 portfolio companies with an aggregate fair value of $341.5 million compared to 43 portfolio companies with an aggregate fair value of $330.2 million as of June 30, 2025. Leverage for the JV at the end of Q3 was approximately 1.24x compared with 1.16x at the end of the prior quarter. The investment in the JV continues to be accretive for the BDC's earnings, generating a mid-teens return on equity. During Q3, income recognized from our JV investment aggregated to approximately $3.6 million, a slight increase from the $3.4 million reported in Q2. As we have noted in prior calls, the yield on our investment in the JV may fluctuate period-over-period as a result of a number of factors, including the timing and amount of additional capital investments, the changes in asset yields in the underlying portfolio as well as the overall credit performance of the JV's investment portfolio. Turning to our balance sheet. We had cash resources of approximately $45.9 million at the end of Q3, including $36.4 million of restricted cash and $100 million of undrawn capacity under our revolving credit facility. Following elevated repayments during the quarter, we repaid in full the $40 million of unsecured notes paying 5.375% interest that were due to mature on October 20. As of September 30, 2025, the company's asset coverage ratio for borrowed amounts as defined by the 1940 Act was 180.7%, which was above the minimum asset coverage ratio of 150%. Our Q3 net effective debt-to-equity ratio after adjusting for cash on hand was approximately 1.07x compared with 1.22x from the prior quarter. Before I conclude and open up the call to questions, I'd like to discuss our distribution policy. This morning, we announced that our Board declared a fourth quarter base distribution of $0.25 per share. To supplement Stuart's earlier comments, I note the company still has the ability under our existing distribution framework to issue supplemental distributions. Each quarter, the Board will utilize this framework to determine if a supplemental distribution should be made in addition to the regular base quarterly distribution. The framework the Board will use to determine the supplemental distribution, if any, will be calculated as the lesser of: one, 50% of the quarter's earnings that is in excess of the quarterly base distribution; and two, an amount that results in no more than a $0.15 per share decline in NAV over the current quarter and preceding quarter. Earnings for the purpose of measuring the excess over the quarter's base distribution is net investment income. The NAV decline measurement is inclusive of the supplemental distribution calculated and to be clear, is measured over the 2 most recently completed quarters. We believe this formulaic supplemental distribution framework allows us to maximize distributions to our shareholders while preserving the stability of our NAV, a factor that we do believe to be an important driver of shareholder economics over time. The upcoming $0.25 distribution will be payable on January 5, 2026, to stockholders of record as of December 22, 2025. As we've said previously, we will continue to evaluate our quarterly distribution, both in the near and medium term based on the core earnings power of our portfolio in addition to other relevant factors that may warrant consideration. In addition to our quarterly distribution, we elected to declare a special distribution of $0.035 per share for stockholders of record as of October 31, 2025. The distribution will be payable on December 10, 2025. This distribution was related to undistributed taxable income that was earned last year, which would have otherwise been taxable. With that, I'll now turn the call over to the operator for your questions. Operator? Operator: [Operator Instructions] And we will take our first question from Melissa Wedel with JPMorgan. Melissa Wedel: I wanted to start with the dividend and understand how you're approaching it with the announcement for the 4Q level of $0.25 a share. Should we be thinking about that as the new base level? Or is this going to be something that will fluctuate a little bit more quarter-to-quarter outside of the supplemental component? Stuart Aronson: Melissa, we took a look at where interest rates are, what interest rates are supposed to do in the future. Where deployments are, what the current market spreads are and the earnings power of the BDC given some losses on accounts that we've taken, both realized and unrealized losses. And we came up with a sensitivity analysis that caused us to work with the Board to set a new base dividend that should be a long-term dividend if our projections as to market conditions and interest rates are correct. And we set that at a level that we believe we can earn on a quarterly basis reliably even if interest rates do continue to decline in alignment with the current yield curve. Melissa Wedel: Okay. Appreciate that. And then as a follow-up, wanted to touch on the fee waiver. I'm curious about, I guess, 2 aspects of it, the level going to 17.5% from 20% and the 2 quarters for 4Q and 1Q that, that will apply to. I guess the question behind both is why that level and why that time frame? Is there a longer-term consideration the Board is taking under advisement? Stuart Aronson: Thank you, Melissa. The Board and the manager discussed what we should do vis-a-vis providing some cushion to the earnings capability of the BDC and it was agreed that we would waive the 2.5% amount for -- or forgive the 2.5% amount for the next 2 quarters. And then based on the performance of the BDC going forward, the Board and the manager will discuss whether additional forgiveness is warranted and appropriate. So 2 quarters are done. And going forward, it will be based on discussions between the Board and the manager and linked to the results of the BDC. Operator: And we'll take our next question from Robert Dodd with Raymond James. Robert Dodd: On looking at the BDC and the JV, to your comments, Stuart, it sounds like you're about to be really close to full capacity in terms of investments, what -- unless obviously, there's recoveries from some of these stressed assets. So I appreciate all the color you gave us on the situation at some of these businesses. But can you give us any more thoughts on like -- and obviously, some of these turnarounds, they don't happen quick, to your point, Camarillo, maybe it gets through Q1 and there's a rebound in activity. But what are your long-term realistic expectations about fair value recovery from these troubled assets? Because obviously, that's one of the tools that would potentially be reinvestable, maybe revamp the dividend, maybe give the BDC a bit more capacity. Any thoughts on what you can tell us on the real prospects there? Stuart Aronson: Yes. Robert, the deals that are on nonaccrual right now, as I indicated in the prepared remarks, are likely to remain on nonaccrual for at least the next 12 to 24 months. In a number of cases, we have taken over the management of those companies and our 5-person restructuring team works cooperatively with H.I.G. private equity operating professionals to make sure that we're getting optimal management teams into those companies, cutting costs where appropriate and driving growth strategies. But the turnaround of those credits for the most part, is a multiyear effort. In certain circumstances, as it regards to credit like Playmonster, we have taken it, and that was a credit where there was fraud originally and we found out that the EBITDA of the company was actually pretty strongly negative. We have turned that company around and the EBITDA is now positive. We believe we have a good management team and we're hoping for improved results, not only this year but heading into next year. So that would be a good example of an account that's heading in the right direction. But in order for us to get to a markup and a cash realization, we need to continue to turn that account around more than has already occurred so far. And the same is true for credits like [indiscernible], which we're still working on. and a couple of the other credits in the portfolio. So in all the cases, except for Aspect Software and Camarillo, we're seeing stabilization to improvement in the performance of the company. But we do think it's going to be a significant period of time, again, at least 12 to 24 months before those assets that are on a nonaccrual come back on to accrual. Robert Dodd: Got it. On the -- can you give us any color on like the track record of performance sponsor versus nonsponsor? To your point, the sponsor deals carry meaningfully higher spreads, lower leverage. But obviously, if something does go wrong, it's kind of on you to fix it rather than the sponsor to work through the process. So can you give us any kind of -- I mean, the returns are higher but what's the track record of -- the income returns are higher, the track record of outcomes between the 2 different deployment strategies? Stuart Aronson: Robert, in general, the leverage on the nonsponsor deals is anywhere from 1 turn to 1.5 turns lower than on the sponsor deals. Our track record historically has been that we see fewer defaults, sorry, fewer payment defaults on the nonsponsor deals. During COVID, we had a number of sponsor deals that went into payment default and needed equity support but we did not have any nonsponsor deals that went into payment default during that COVID period. We've had 1 nonsponsor deal that has resulted in a significant loss. That was American Crafts, which is now fully resolved. But as I think through the nonaccruals and maybe Joyson, I'll ask you to double check me on this. But I believe all of the nonaccrual accounts at this point are actually deals that were sponsored deals and none of them currently are nonsponsored deals, which speaks to the relative strength of what we do in the nonsponsor market. And Joyson, am I right on that? Are any of the nonaccrual deals, nonsponsor deals? Joyson Thomas: Stuart, I think if we're including maybe non-income-producing restructured assets, Lift Brands might be one that we considered -- I forgot whether it's a sponsor, or nonsponsor deal. Stuart Aronson: No, no, no. Lyft Brands was a sponsor deal. That was a deal that during COVID, the private equity firm injected a significant amount of equity into turning around the company. Joyson Thomas: Let me double check on the others and I'll come back on that. But I think that is correct and the only other one I could think of is potentially Sklar, again, another non-income-producing or a portion of the equity, which is non-income producing. Stuart Aronson: But I believe Sklar, which is nonsponsor, is on accrual [indiscernible]. Joyson Thomas: If that condition is nonaccrual. Correct. Stuart Aronson: Yes. So Sklar is also a company that we had to take control of. We have dramatically improved the performance of that credit since taking control of it. That is a credit that if it hits its projected numbers for next year based on new customers that have been signed up and additional EBITDA we expect to be earning, that is a credit. Again, it's on accrual right now. The debt is paying interest in cash but we own the equity and there is potential for an equity gain upon the sale of that credit next year if we are able to hit our projected numbers. Robert Dodd: Got it. Appreciate. Just one more, if I can. On the pricing, to your point, I mean, in the -- even in the lower middle market for sponsor deals, pricing is pretty tight by historic standards. I mean, is that just -- I mean, I say just, is that a consequence of more competition in terms of large market competitors coming down because there's not enough activity at that end of the market? Or is it just -- it's your same long-term competitors just getting much more aggressive? Stuart Aronson: It's a really good question, Robert. The mid-market spread compression is a result in many cases of large market players not having enough volume and coming into the mid-market and creating additional supply of capital. And so in the mid-market, we're typically seeing pricing of [ 450 to 500 ]. And I would say that has definitely been impacted by the larger players coming down market. In the lower mid-market, we're not really seeing the larger players but there have been a number of new organizations that have been formed that don't have a track record of relationships in the industry. And some of those shops are trying to buy market share by discounting price and/or doing higher leverage on deals. So the lower mid-market, where, frankly, there are hundreds of private equity firms operating, is a much more variable market where we are seeing pricing anywhere from [ 475 up to 575 ] depending on how much competition there is on any given deal and given on the complexity of the credit. But I do not believe that lower mid-market spreads have been significantly impacted by the large shops. And again, when I talk lower mid-market, I'm talking about EBITDA below $30 million. Operator: [Operator Instructions] And we will take our next question from Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: And it really revisits the incentive fee reduction. Once we're beyond first quarter '26, if the EPS continues to underperform, what's the, I guess, state of mind or head space in terms of lowering that incentive fee or continuing it? Stuart Aronson: So the Board of Directors has provided us a perspective that the forgiveness of the incentive fee or the temporary reduction of the incentive fee is aligned with trying to make sure that we are earning the dividend. And so if there is underperformance in terms of core dividend earnings, I would expect that the Board would take a view that they would seek additional forgiveness or additional waiver of that 2.5% for additional quarters. But 6 months is a significant amount of time in the market and we all need to see what is going on with M&A volume, spreads in the marketplace and core interest rates in terms of what the Fed is doing to have a better sense of what earnings will be out 3 or 4 quarters or more from now. Christopher Nolan: Understood. And I guess on the share repurchases, if I were to read your comments earlier, it seems like deal flow seems to be slow. Should we read into that, that the company will be aggressive on share repurchases? Stuart Aronson: Chris, we're trading at a very significant discount to NAV, even off of the reduced NAV that I showed you today of $11.41, buying back shares at levels anywhere around today's price is highly accretive for shareholders, both in terms of NII and NAV. And given limitations in how many shares we can purchase in any given day or week, we felt a $15 million allocation made a lot of sense to recapture shareholder value if the shares did not materially trade higher. So we, as a manager, are going to try to act in the interest of the shareholders and repurchase shares so long as there is a material benefit to the shareholders in doing so. Operator: And it does appear there are no further questions at this time. This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful afternoon. Stuart Aronson: Thank you.
Jostein Løvås: Good morning, and welcome to DNO's Third Quarter 2025 Earnings Call. My name is Jostein LøvÃ¥s, and I'm the Communication Manager here at DNO. Present with me in Oslo on this morning -- in this morning are Executive Chairman, Bijan Mossavar-Rahmani; Managing Director, Chris Spencer; and outgoing CFO, Haakon Sandborg. At first, Bijan will give an introduction. It will be followed by a presentation of the results. And after the presentation, we will open up for questions in our usual Q&A session. And as always, shareholders first, but analysts are also welcome to ask questions. [Press-held ] will be dealt with afterwards. [Operator Instructions] With that, I leave the stage to Bijan. Bijan Mossavar-Rahmani: Jostein, thank you, and good morning, everyone. It's a pleasure to be back with you in all of these quarterly earnings calls or presentations. And we've had a very strong quarter, and we're going to be very pleased to report on it. And again, as Jostein mentioned, answer as best we can any questions that you have. Before I start, I'd like to introduce to you Haakon. Haakon needs no introduction to many of you who followed the company. He has been the company's Chief Financial Officer for the past 24 years. He is, I think, not the oldest DNO employee, but the one who's been here the longest. And he knows the company's history. He knows the company -- he's seen the company through many period ups and downs, the number of transformations over the past I think it's now 53 years of the company approaching 54. So as you know, as many of you may know that DNO has been Norway's oldest oil company, the first to be formed, the first to go on the Oslo Stock Exchange. And through much of that history, all of it and much of it, Haakon has been a major player in the company. We are -- he's decided to step down from his role. And it's been a privilege for all of us, myself, especially, to have worked with him in that role. I've learned a lot from Haakon, a lot about the history of the company, and he's been a very valuable colleague to me and a leader, one of the leaders of DNO throughout the period that I've been here and prior to my coming here as well. So we are sorry to see him go. We wish him well. He's probably best known outside of DNO for his -- as the person who initiated, led our very successful run on bond markets. That's not all he's done here. He's been involved on the stock side as well, the stock markets and shareholders and analysts, but he's perhaps best known for his stellar record of 21 successful bond raises over this period of time and he mentioned to me that he has raised through these bond raises over these periods, $5 billion, which is quite a large number for a company of our size. So thank you again, Haakon, for all of us. We wish you well, but I know Haakon wanted to have an opportunity to say goodbye to many of you who he's worked and stayed in touch. So I give the floor to Haakon to say those words to you. Haakon Sandborg: Yes. Thank you. Thank you, Bijan. Thank you for those very kind words. Everything in life has its time. And I think now it's a good time for me to retire from DNO after 24 years in the company. It's also at the age of 67, it's also a good time to do something else and go on to new chapters in life is my thinking. And looking back, it's been a great journey in many ways. And I'm very proud of all the growth we have achieved and the market value that we have built in the company during these years. And I now wish all our -- all my colleagues and all our investors the best of luck and continued success and progress staying with DNO. And I'm very happy to hand over to our new CFO, Birgitte, now taking over after me. And I know she will be doing a very good job. So again, thank you, everybody, and best of luck. Thank you very much. Bijan Mossavar-Rahmani: To continue, I would like to introduce Birgitte to you. We've already posted a notice about this transition. But I'll say a word about Birgitte. And of course, she will deal with the finance part of our presentation this morning and also moving forward. Birgitte Wendelbo Johansen has come to us from the shipping sector in Norway, the company Reach Subsea, where she was the Chief Financial Officer, and we had a long search process, a deep search and we're able to persuade her to join the company, and she's hit the ground running. And we look forward to many, many years, maybe 24 years here at Vienna. I look forward to that Chris and the rest of us. So welcome to the company. We had a very, very strong quarter in many respects. And my colleagues will have a chance to go into detail on those and I'll be available to add some color and answer questions. But I'm very proud of the performance of our teams, both in Kurdistan and in the North Sea. In Kurdistan, we've continued to ramp up production. When we last met a quarter ago, we were coming out of the period of damage to our surface facilities in Kurdistan, particular Peshkabir field, but we were able to ramp up production pretty quickly from 0 to I think we had -- we hit 55,000 barrels a day between Tawke and Peshkabir fields in our last quarterly presentation. And I indicated to our team, I was in Kurdistan, I said we're going to have our quarterly presentation. I want to have 55 -- hit the 55,000 barrels a day figure. We're going to announce that when we meet in Oslo, and they jumped to the challenge, and we were able to do that. For this quarter, we challenged them again. I said when I had the presentation on the 6th of November in Oslo. I want to be able to announce that we've hit 80,000 barrels a day of production, so up from 55,000, which is up from 0 and 80,000 was where we were before the drone strikes and the damage to the fields. And I'm very pleased to say that we've -- that team has hit the 80,000 barrel a day figure, and Chris will go through the details as some more specifics about that. So I'm very, very proud of that team, and they do a terrific job. What DNO does and has done in Kurdistan, no other company has even come close. And we're very proud of that record and proud of the performance of that team. In the North Sea, we also have a fantastic team. We've announced today as part of our release, and then we'll go into the detail on the slides about how our team in the North Sea now is similarly getting off the sofa and developing -- being to develop the extensive discoveries that the company has made in the Norwegian continental shelf. And again, Chris will go into some details on our joint efforts with a like-minded company, Aker BP with respect to one of our discoveries, the Kjøttkake discovery. And we're very pleased. And again, we expect to bring that field on production to develop it in record time. We don't do it as fast in Norway as we do in Kurdistan for many reasons. Most importantly, in Kurdistan, we're onshore and the lead times are much smaller than they are with an offshore project, but we hope to be also do in Norway, what we've done uniquely well in Kurdistan. I expect our next quarter will be even stronger than this quarter and that it will reflect some of the recent developments. And I look forward to meeting again with you for our first quarter -- fourth quarter 2025 presentation in 2016 (Sic) . But before then, I'll turn first to Chris to go over our operational performance this past quarter with a bit of a look ahead as well. Christopher Spencer: Thank you, Bijan, and good morning from Oslo. So we now have our transformational quarter on the back of our transformational acquisition. So we were highly expected following the hugely important acquisition of Sval Energi back in -- which completed in June. And this is the first quarter that you see the full effect of that acquisition and that runs through all of the numbers that I'll be covering and really will be coming into on the financials. And of course, immediate visual impact on the production. We are now up to 115,000 barrels of oil today during Q3 and actually, Q3 will be a relatively weak quarter on the production front, both in the North Sea due to the summer maintenance season, but also in the Kurdistan region because of the -- we were recovering from the Kurdish attacks as Bijan has described. Similarly, the revenue follows the production, obviously, and even more so for us because the Sval acquisition, of course, is in the North Sea, where we have full exposure to global oil and gas pricing. We got back into the black with a $20 million profit. And then operationally, we continue to have successfully drilled it. And as we'll go into in some detail, we are now making great strides in terms of monetizing discovered barrels at a record pace in the North Sea. Happily, all of this allows us to continue making our shareholder distributions the way we've been doing for some years now and the increased -- increase in the quarterly dividend payment that we announced last quarter is maintained. If we go to the next slide then. please, I think that -- I hope that this slide sets the tone for many quarters ahead in our North Sea. We talked about this on the back of the acquisition of Sval, that we're taking a huge step up in the North Sea, and we are determined to not only maintain but grow our production in the North Sea over the next few years. And we will be doing that by continuing to explore and we've got 3 wells running at the moment and importantly, accelerating the development of discoveries into production. At the same time, we're going to be high grading and optimizing the portfolio we have and that is -- a great example of that in the bullet points here where we've done a nice swap transaction with Aker BP. Both companies are very happy with it. For us, we are strengthening in our core area around the Norne FPSO up in the Norwegian Sea and increasing our share of the Verdande field, which is tied back to Norne. Both of the projects that are coming on in the [ Andvare ] and Verdande are up in that area. And so the Norne area is going to have 8000 barrels of oil equivalent contribution just from those 2 projects by the year-end. In exchange, of course, we handed over some assets. And again, it really is a tieback to Alvheim. So that's a core area for Aker BP, non-core for us. So a nice rationalization for both companies. Lastly, here are the final pieces of the financing on the back of the Sval transaction being put in place. We were very pleased to announce the gas offtake agreement we had with associated financing last quarter, and we are copying that now on the oil side. Not quite, the ink isn't quite dry on the signatures here. So we can't give full details, but we're confident these will be in place very shortly. and well ahead of the 1st of January date when those sales will commence. And again, there's the prefinancing on sales similar to the gas arrangement at very attractive interest rates way below the type of interest rates you see on our bonds. So we will have once these 2 deals are completed, facilities of over $900 million on the prefinancing associated with oil and gas -- oil liquids and gas sales in the North Sea. If we move to the next slide, then this obviously is a key component now of our engine room for value creation in the North Sea. So we're going to continue to discover resources and then we are going to bring them on very rapidly. As Bijan mentioned over the past few months in the North Sea, we need to find like-minded partners or like-minded companies to be able to do this together. It's -- and we're very pleased to be collaborating very closely with Aker BP here to make Kjøttkake very fast in Norwegian continental shelf terms development going from discovery in Q1 of this year to production starting in Q1 of 2028, which is obviously 3 years. And that compares to 6 years or so as the average for subsea tiebacks that have been brought on stream so far this decade according to the data we have. So that underlines the acceleration that we are going to achieve together with Aker BP and Sval here. And indeed, the operator of the host that we'll be getting tied into, which is [indiscernible]. So we're very excited for that, and we are determined that this won't be a one-off. We will be discovering hydrocarbons, working with license partners to develop this sort of speed. And as we move forward, we're aiming to improve this further. We see internationally that, that is possible. and we're setting the bar very high for ourselves. For investors, why should you care? It's not just fun to accelerate developments, but obviously, in terms of the net present value on the original investment in exploration, it's quite transformational on the return on capital invested when you can reduce the time from discovery to production by 50%. And that, of course, is the value proposition behind the whole exercise. Next slide please. This is in the front end of that funnel. We've had an exciting exploration program this year. This, of course, is reflecting both the portfolios of DMO and Sval as they were as we enter 2025. And we've got results for 3 wells coming up very, very soon. And we have an exciting program ahead of us next year. In fact, we have a luxury problem of probably too many opportunities next year that we are working to high grade. Next slide. Turning to Kurdistan and Bijan touched on it, but we've been ramping up production here and -- the Q3 numbers are still, of course, impacted by the terrible experience we went through in mid-July, where we were hit by drones and that caused damage to critical processing equipment at the Peshkabir field, having rushed ourselves down over a couple of weeks, put in place new security protocols to protect our staff and so forth. The team got back to what they do best, and that is overcome challenges in an amazingly speedy fashion. And so within 3 months of the attack, we had replaced the damaged processing equipment by repurposing some redundant equipment we had over at the Tawke field and got back up to 75,000 barrels earlier this month. Well, actually, sorry, mid-October. And then as Bijan has announced this morning, they've pushed it even further, and we're back to the 80,000 mark as we speak. Of course, the big event in the quarter for Kurdistan oil and gas business in general was finally the reopening of the export pipeline through Türkiye to Ceyhan. That was after 2.5 year closure during which the entire industry, as you know, has been selling locally. from our side, we've been -- as we've been talking about quarter after quarter, we've not been drilling in Kurdistan to properly manage our reservoirs, and we need to get back to drilling and increase the production again. And so that means we are moving into a period of higher investment again in the Tawke PSC. And for us, therefore, the certainty of payment is even more important than it has been in the past. And that has pushed us to lean on continuing to sell our oil to local buyers. The other element with respect to restarting exports that was not addressed in the agreements with other companies have signed up to is also the significant debt that the Kurdistan regional government still has outstanding with us, and we continue to look for ways to resolve that with the KRG. So we're very pleased that exports have restarted. We're also very pleased to have the certainty of payment that we have with our arrangements. And on the back of that, we will be ramping up our investment, and we set another hairy target for our team. We're going to get to 100,000 barrels -- back to 100,000 barrels gross through restarting drilling on the Tawke PSC and as Bijan commented in September, we may look back a year from now and feel we have left a little bit of money on the table with respect to exports, but the value creation from getting back to drilling and pushing the reproduction up will exceed that in our view. With that, I've done my operational update, and I will hand over for the first time to Birgitte for the quick run through of the financials. Over to you, Birgitte. Thank you. Birgitte Johansen: Thank you very much, Chris, and good morning to everyone. As Chris and Bijan mentioned, we present a strong quarter where we now see the full effects from the Sval acquisition, which was completed in mid-June this year. So let's jump right into the financials and the details. Starting with the income statement. The strong contribution from Sval Energi, now included in DNO's North Sea business units is clearly visible. Revenue was $547 million, up 112% from the last quarter. As much as 92% of the group's revenue in the third quarter came from the North Sea business compared to 65% in 3Q '24. Our operating expenses have increased following the inclusion of Sval, which is natural, and operating profit ended at $222 million, up more than 100% from the last quarter. Net profit in 3Q back in black, as Chris mentioned, at USD 20 million. Next slide, please. So let's move to -- let's move to the cash flow. Yes. Thank you, Jostein. The high revenues led to a near threefold increase in cash flow from operations to a high level of $407 million in Q3, up from $135 million in Q2. This Q3 cash flow includes $53 million in positive working capital changes. Stronger earnings in the North Sea also means higher taxes, and we paid 2 tax installments in Norway, totaling $53 million in Q3. As you may recall, we indicated last quarter cash taxes of around $150 million in the second half of '25. The cash tax will increase in the fourth quarter. We again had substantial investments at $225 million in Q3, consisting of $183 million in CapEx, mainly for North Sea development projects and also $34 million in exploration expenditures. We also spent $10 million on decom in this quarter. Net finance outflow of $386 million primarily covers repayment of $300 million bank bridge loan that was part of our acquisition financing for Sval Energi. We also paid a dividend of $36 million in Q3, as you know. So with the investments of $225 million and $300 million in debt repayment, our cash balances were reduced by $257 million to $531 million at the end of 3Q. But again, the key takeaway here is the very substantial increase in our operational cash flow from the first full quarter with the Sval assets in operation. Next slide, please. Now as discussed in DNO's Q2 presentation, our balance sheet and capital structure were substantially changed through the Sval acquisition and related financing transactions. Compared with the Q3 last year, we now have quite diversified funding sources with a good combination of long-term bonds and short- and medium-term offtake financing. The size of the balance sheet, thereby increased by close to 70% in Q2, primarily through higher property, plant and equipment values as PP&E was up by 135% in the second quarter, as you can see on the slide. For Q3, the PP&E value remains fairly stable from Q2 as expected. Similarly, we went from a net cash position in Q1 to a net debt of $860 million in Q2, whereas we now show a reduction in the net debt in the third quarter. The key driver for the reduced net debt is close to $100 million in free cash flow, partly offset by the dividends paid. Total equity increased with the $400 million hybrid bond that we placed in Q2, and this metric also remained stable in Q3. All in all, it's a very strong quarter from DNO, no surprises or special items. So by that, I hand the word back to you, Jostein, for the Q&A session. Jostein Løvås: Thank you, Birgitte. That was a good run through, and we'll take questions now. Nikolas is with us, Nikolas Stefanou. Nikolas Stefanou: Congrats on the very strong quarter. And congratulations for a long and rewarding career with the company. And thank you for the engagement with the sell side this year. So I want to wish you all the best in your next step in life. So I've got 3 questions to ask, please. The first one is about Kurdistan. And the other one in kind of like broader on the balance sheet. So in Kurdistan, if you're ramping up production, drilling was there, but then you sell them locally and someone else is making this kind of like crazy sort of like margins on the exports. I'm just wondering what is the incentive from the KRG to make a deal with you in order to -- in first for you to kind of like sell the crude directly. So that's kind of like the first question. And if you can talk about how the negotiations there are going, that will be good. And then on the Sval assets and in general, the North Sea kind of like outlook, you've got these assets for a few months now, would you be able to give us maybe a production target for '26 and 2027 in the North Sea? And then finally, on the balance sheet, you have been quite conservative in the past few years. I mean, obviously, that was because of Kurdistan. Now that you have repositioned the business in the North Sea, how do you think about the balance sheet going forward? And more specifically, is there an optimal level of debt or leverage you guys target. Bijan Mossavar-Rahmani: Let me try to answer the question on Kurdistan. I'm not sure I fully understood it. You mentioned something about crazy margins and some other things. I'm not quite sure I understood it or I understand what you understand we've done. What we decided to do was to continue selling our entitlement crude to the buyer -- who have been the buyers who have been buying our crude at the same prices more or less as prior to the exports. The amount that we receive, again, is the same under the same mechanism when we are prepaid, we're paid in advance by these buyers and we deliver the oil to them. In the past, these buyers have sold the oil into the local market. We're not -- we don't follow exactly who that oil is sold to and on what basis, but we continue -- we had an existing contract with them, and we elected to continue that -- those arrangements. Our buyers have made their own arrangements as they had done previously to sell that oil. But this time, they've sold the oil onward into the pipeline that oil as we understand it, is exported with all the other oil from Kurdistan, whether it's produced by the other IOCs or other, what terms they have set into place with Kurdistan, we don't know. All we know is we continue to be paid in advance and at the price that's known to us, it's predictable. There are no delays. There's no calculation of price by an outside consultant. There are no issues we have about delay in payments and where those payments come from. We decided that we were better placed, continue to receive money in advance at predictable and set prices that we would be under the terms of the export that other companies have elected. This is important to us because we -- this allowed us and allows us now to make these very, very substantial investments, including the drilling of 8 wells next year, which will start right away. We've signed up a contract for a drilling rig. We're going to be deploying our own rig. And as Chris says, we believe that the investments we're making and the increased production that we will get from these investments will more than offset any money that we might end up leaving on the table. It's possible. We know that there is a formula. Everyone knows that there's a mechanism that the companies get paid, hopefully, by December it's $16 a barrel, less I think an estimated average $2 in transportation fees, that's $14 to then be supplemented at some point next year by additional monies to be calculated based on an outside consultant retained by the Iraqi government coming in and saying what the contractual number should be based on some other principles, fairness or otherwise that we're not privy to. It's possible that as we participated in this, we would eventually receive more than we're receiving now. We have announced what we're getting. We're getting paid per barrel, payment of -- low $30 a barrel for every barrel that we are putting selling based on our entitlement, which is now roughly, I think, 20,000 barrels a day with our share, we get paid in advance, and we are happy with that arrangement. Now perhaps if we participated in the export pipeline project, this number would have been higher. That's quite possible. And as we said last quarter and as Chris again said, we may end up looking back, see that we left some money on the table. Maybe we will have left some money on the table and maybe we won't have left money on the table. We don't know. But we thought that the predictable receipt of money would allow us to ramp up production. As I said, we've now ramped it up based on this thinking from 0 when we were -- just after we were hit by the drones to 55,000 3 months ago to 80,000 now and to 100,000 at some point next year. I think this is best for us. It's best for Kurdistan. It's best for Iraq since they're selling the oil. I think it's a win-win-win situation. If we find that the -- as we've ramped up production, that the terms and conditions and payments for the export arrangements are attractive that they continue beyond the end of this year. My understanding is that these arrangements were done until the end of this year and don't have to continue. There's an election in Iraq. There will be elections in Kurdistan. There'll be changes perhaps to conditions, we'll see. If we find that those terms are attractive to us, we will participate in exports. If we find that the current arrangements give us predictability, we will stay with our current arrangements. And hopefully, we'll be able to ramp up our prices. Already, our prices for our sales -- local sales as we call them, in November are higher than they were in October when we started, and we expect those prices will continue to rise. So we're happy with it, this arrangement, and we're happy to be drilling again. We're happy to be producing larger volumes. As I've said, DNO is great at this. And we have great fields, we have great people, and we're able to deploy $1 and get more value for it than other companies have. So we're very pleased with the way things are progressing. We hope exports will continue. We wish everyone well as part of the exports team and their success will eventually be our success as we'll participate in exports and some other arrangements that we might make ourselves. But in the meantime, we are investing in Kurdistan. We're the only company doing drilling and planning to drill as many wells as we are. And that's what we've always been. We've been the largest producer, the fastest mover. We've said this before -- sometime before the end of this year, we will produce our 500 million of barrel of oil from Tawke's license. That's a great achievement for us. It's been great for Kurdistan. And it's a record we want to improve on. And I think we're set well to do that. On the issue of what our North Sea production is going to be, I'll ask Chris to refer to that, but we haven't given that sort of longer-term guidance because our situation changes as much as it does. Historically, that's been the case in Kurdistan, but even the North Sea, a year ago, who would have thought that our production in the North Sea would quadruple, which it has for a small acquisition. And we shared with you our plans to fast track production. We've shared with you our record of discoveries, which has been quite significant. And you know from us, what we've been saying for quite some time and again repeat it today that we're going to fast track the monetization of our discoveries by bringing them into production quicker. So you can do some back of the envelope calculations. We are still on the lookout as we've been for some time for additional acquisition of additional production. We will ramp up production from our own discoveries, and we have long pipeline discoveries, but we'll be on the lookout to do swaps and as we've announced again and to acquire bolt-on acquisitions, smaller ones, we've been doing some of those in the past that we reported and maybe more significant acquisition as well. Our ambitions for the North Sea are as large as our ambitions have been for Kurdistan. That I can say with some confidence. But Chris, would you like to? Christopher Spencer: I think that's a good summary. We think that we have mentioned in our material this quarter that -- and as I said in my remarks that Q3 was impacted by the summer maintenance season and so forth, and we indicated an exit rate in the North Sea of 90,000 barrels of oil equivalent per day roughly. And that gives obviously a good sense, we feel of the scale of the business we have there. We've put -- and we've made similar comments in several presentations since we completed the acquisition. So yes, we feel we've given a good indication of what you can expect from the North Sea business. And then with the comments that Bijan has made and mine earlier, we're trying to help the market understand how we are planning to generate a lot of value out of this new portfolio that we have. We've used the term repeatedly, but the 2 portfolios went together like a hand in glove with the production strong portfolio of Sval combining with the exploration and development strong portfolio of D&O. And that's -- again, I think Kjøttkake is just the first example of that, where Sval have an increased -- a much stronger presence in the hosts and potential pieces of infrastructure that could be relevant for Kjøttkake development. We made the discovery, and that is going to be on stream in early 2028. This is something, as I mentioned earlier, we are going to be working hard to replicate. And not forgetting in the backbone that will maintain production as well is the type of legacy assets we have in the [indiscernible] area, which came with Sval is everyone who follows the Norwegian Continental Shelf activist just goes on and on, that type of asset, Martin Linge, the broader asset from the D&O portfolio, these also will provide a tremendous core of long-term production to which we're adding this machine of explore, develop and to create value for the shareholders. So I hope that gives you enough color on what we're aiming to achieve in the North Sea. Bijan Mossavar-Rahmani: On your other question about our balance sheet, let me say the following. Yes, you're right. We've been conservative. And we will continue to be conservative. We're not going to bet the company on anything. Part of that's been driven, as you said, by Kurdistan because of the movements up and down in payments in the past and other challenges. But that wasn't just about Kurdistan. It's not just about being conservative. The Kurdistan part is being prudent. I think generally, we're conservative in how we think about the business. But we've also been opportunistic. We built out large cash reserves, and we're looking for an acquisition several years ago, and we're able to deploy those cash -- additional cash through the acquisition of Faroe. We then started building up again our cash position, looking for another larger opportunity, and we used it in part to finance the acquisition of Sval. Right now, as we reported, we have something in excess of $500 million in cash on the balance sheet. We have $900 million in total availability of prefinancing. We've drawn down, I think, $340 million of that. Again, as part of the small transaction, the repayment of our debt, which Birgitte discussed, that we have another significant amount of money available to us if and when we need it, either for an acquisition or for some other purpose. So we build up these cash reserves. We'd like to always have a significant amount of cash on the balance sheet both because of the ups and downs of the market and the price of oil goes up and down, and we want to be prudent and in a position to continue to pay dividends to our shareholders. We continue to service our bond debt, which we've done now for 22 years and quite successfully. We're proud of that record. And our investors on the equity side or the debt side are really important to us, our credibility and our wish to perform is really important. So in that sense, too, we're conservative. Not all companies have these sort of targets of continuing to pay dividends and continue to service the debt we do. And for that, we need to have enough cash on the bank and be prudent and be conservative. And we're proud of that, but we do build up cash and we do look for opportunities. And we'll grab those when we can. We don't have a specific sort of target figure other than whatever is prudent and conservative and opportunistic, we will -- that will drive our thinking and our... Jostein Løvås: Next one up is another analyst, Teodor Sveen-Nilsen. Teodor Nilsen: A few questions from me. First, on Tawke, congrats on reaching the 80,000 barrels per day target. Regarding the 100,000 barrels per day, how should we think around timing of that and also potentially the duration that should we like expect from 100,000 barrels per day flat out for entire 2026? Or should we factor in a lower average production for next year? Second question, that is just following up on the export potential. As far as I understand, you now sell at local prices in Kurdistan, how does your route to export prices look like? Is it only a deal around the receivables so, that is between us now and you getting international oil prices? Or are there any other outstanding issues? And my third question is for guidance 2025. In your second quarter report, you gave some guidance on operational spend and CapEx for the Norwegian portfolio. I didn't see that in the Q3 report, can you just confirm that, that guidance is still valid? Bijan Mossavar-Rahmani: Thank you. I was amused when you and your back and forth about unmuting who's ever unmuted Teodor [indiscernible] but thank you for your question. You always have interesting and important questions. The easiest one is on 100,000 barrel target. For us to get from 80,000 to 100,000, that's about 5,000 additional barrels a quarter. That's not difficult for us. We were over 100,000 barrels a day, if you recall, before the pipeline was shut 2.5 years ago. So we know how to get there. As you know that in the 2.5 years or so that we weren't drilling any new wells, we were still able to maintain production by tweaking the wells and by doing workovers. And we really -- our tracked production team as we learned so much about the Tawke field and about the wells and how to with minimum amounts of spend and effort to keep those wells flowing. And this is really quite spectacular because as we've discussed many times in the past, these fields typically, these reservoirs have a 15%, 20% decline rate. How we were able to stop that decline rate without drilling any new wells is, again, an amazing achievement, but it speaks to the 20 years or so of DNO working in that field and learning how to optimize it. So with that base knowledge and understanding and they've already -- during this period, they've located other wells they want to drill at other locations, some of them are production wells, some of them are a bit of a step out and 1 or 2 of them have an exploration component that's quite exciting. And we're going to drill into those in 2026. When we're going to hit 100,000 a day, the target we set for them is towards the end of the next year, but they've surprised us pleasantly every time we set targets for them, they've achieved those targets and achieved in record time. So I wouldn't be surprised if we once again beat those targets. But let's give them a chance to do what they do very well as they get going. And as I said, we're bringing a rig back in again, and that's going to drill the deeper wells. Our own Sindy rig, which has been doing all the work over in the last couple of years, we'll focus on some of the shallower targets that we have and those are even shallower horizon in the target Tawke field. So we'll get to 100,000, we'll get to 100,000, we'll set new targets and see if we can achieve that. It will get harder over time. But if we can drill 1 or 2 of these exploration wells and are successful, we can have a step-up in production from the two fields. But to give us a chance to do it and our history is a good predictor of our future, certainly in the Southeast. On exports, how would we participate in exports, if it looks like the payments are greater than we can get in the local market. That's a good question. There are several avenues to that, that we were considering. We can sell our entitlement oil to whoever we want to sell it to for our new production sharing contracts. It was helpful for everyone for us to have this 3-way arrangement between ourselves, our local buyers and Kurdistan and Iraq for our oil to be sold under arrangements we were comfortable with, but find its way into the pipeline. And again, that DNO is 80,000 barrels a day, a very substantial part of the total production of Kurdistan. And without it, the pipeline project wouldn't have worked. So we didn't want to block the export project. That's an important project for many stakeholders. But we just want to make sure we were getting paid $30 or low 30s before we put the oil into the pipeline, then be paid maybe $14 -- $12, $14, maybe sometime in December to be topped off maybe sometime in the future or reduced maybe sometime in the future, depending on what an outside consultant would decide would be a fair price or a price that was somehow acceptable to other companies. That uncertainty, we didn't want to live with. And we believe that by, again, selling in the low 30s and getting paid in advance, we can invest and get more production and more revenue to offset any money we leave on the table, but there are several ways to get there. And because we're not signed up into the larger project, we have our rights under our PSC to sell the oil to wherever is the best buyer from our point of view in terms of pricing and payment terms of that oil. And we had said and all the companies that said that we would not participate in exports unless the arrears was resolved, we've kept to that. Our arrears are important for the other companies, maybe the arrears were less that we know there were less, our areas were the greatest. And we said consistently that we will not participate in that export project until our arrears were addressed. So we get comfort that we would receive those arrears. We have different mechanisms to achieve that and none that have been finalized that we can announce now. But we will get our arrears back one way or the other as happened in the previous time we built up even much larger arrears during the ISIS period, maybe you remember that period well. For us, they've always been good for all of the contracts eventually. We understand sometimes other squeezes, we work with them, but we expect one way or another and there are different ways of doing this. So we will get the arrears paid. And at some point, we hope to participate in exports. If not in the next few months, the export agreements between Iraq and Turkey end -- expire in July. We don't know what -- how that pipeline will be used by whom and under what terms and conditions. But things will change in July. And we haven't been participating in the export stream directly now. Perhaps from July, there will be other opportunities for us to participate in a different way in an export project and we're comfortable with that decision. And we have the cash to drill wells to raise production. So all that is, I think, on track as far as D&O is concerned. Jostein Løvås: It's okay and how time flies when you're having fun, we're approaching the 1-hour mark and unless there are any more questions from the audience, I think we'll wrap it up. And thanks for listening in, and see you around soon. Bijan Mossavar-Rahmani: Thank you. Birgitte Johansen: Thank you.
Mohamed Shameel Joosub: Good afternoon, and good morning to those joining the call in the U.S. Welcome to the highlights call for our 6 months ended 30th of September 2025. I'm joined by our Group's CFO, Raisibe Morathi, as well as our Head of Investor Relations, JP Davids. We trust that you enjoyed our video presentation that we screened before this call. The video is available on our website and covers our purpose-led strategy, Core Vision 2030 and the performance against our strategic ambitions. For those not able to watch our presentation, I will take you through some key highlights from this period. We will then move into a Q&A session. We had a great start to the financial year, delivering ahead of our double-digit EBITDA growth target while also reporting excellent return metrics. Revenue of ZAR 81.6 billion was 10.9% and was supported by an excellent commercial performance. Customers are up 8.6% to 223 million with our Vision 2030 target of 260 million customers well within our sights. Our financial business is also rapidly progressing towards our target of 120 million customers by 2030. We reached 94 million financial service customers in the period, up 13.1%. We see financial services as a key differentiator for our customers and our investment case. Financial services now makes up around 25% of our profit before tax. Our Vision 2030 double-digit growth ambition is supported by product and geographical diversification. We operate across 8 markets in Africa, but manage the business in 4 segments, starting in the North with Egypt, which reported another stellar performance of results. Critically, as the country's macro conditions have stabilized, we are now converting the local currency growth into stellar rand and euro growth. For example, Egypt contributed ZAR 7.8 billion to the group's operating profit, up 66.5% on a rand basis. This growth is broad-based across consumer and mobile business, fixed and Vodafone Cash. Shifting a little further south to Safaricom. As an associate, Safaricom contributed ZAR 2.1 billion to operating profit, increasing 65.3%. Safaricom's result was supported by an excellent performance in Kenya with EBITDA margins of 57.3%, up 2.2 percentage points and lower losses in Ethiopia. Kenya delivered another excellent top line performance with another standout performance from M-Pesa, which was up 14% on a very large base. Our 4 markets that make up the international business more than doubling operating profit to ZAR 2.1 billion. This result reflected double-digit service revenue growth in the DRC, Lesotho and Tanzania. The operating leverage of these assets was also evident in the period with EBITDA margins recovering to 33.9% from 28.2% in the prior period. Finally, to South Africa, which remains the largest component of operating profit at ZAR 8.8 billion, while we delivered growth in consumer contract, Vodacom business and beyond mobile services, it still proved to be a challenging period for South Africa. Pressure on prepaid and a once-off cost weighed on the results. We target EBITDA growth in the second half, but expect prepaid to remain challenging in the near term. We intend to balance price discipline with an appropriate response to competitive noise in prepaid. Before I shift back to the group metrics, we separately announced last week that the long-standing Please Call Me matter had been settled by the parties out of court. The settlement cost was recorded in these results. Both parties are glad that finality has been reached in this regard. At a group level, the strong growth across the 3 segments delivered net profit to equity holders of ZAR 9.1 billion with headline earnings per share of ZAR 4.67, up 32.3%. Our headline earnings included some one-off impacts in the current and prior year periods. If we iron these out of the results, the underlying growth was in the mid-20s. We're also pleased to report a healthy balance sheet and return metrics. Return on capital employed increased 3.8 percentage points to 26.3%. With returns in mind, we have a policy of paying at least 75% of headline earnings as a dividend. For the interim period, the Board declared a dividend of ZAR 3.30 per share, up 15.8%. As a reminder, in the prior period, the Board adjusted the payout ratio to 86% to account for the phasing of Ethiopia losses, which is skewed to the first half. The payout ratio was set to 71% in the second half to balance this out. Starting from performance to purpose, which is at the heart of Vodacom, our video sets out the progress we are making on our 3 purpose pillars of empowering people, protecting the planet and maintaining trust. We have well-established Euro projects and new initiatives that drive each of these pillars. In the period, we launched the marquee program to empower 1 million Egyptian rural women over the next 3 years. This program was created in association with Egypt's Micro, Small and Medium Enterprises Development Agency, CARE Egypt Foundation and Samsung. It is designed to foster digital and financial inclusion by equipping rural women with skills and tools to utilize Vodafone Cash services and engage in digital education. Before we move to Q&A, I will make some comments on our outlook. We remain well on track with our medium-term targets with a clear focus on double-digit service revenue and EBITDA growth. For the remainder of financial year 2026, we anticipate an improved performance from South Africa with strong EBITDA growth from Egypt and international business consistent with our double-digit target. We expect capital expenditures to step up in the second half, having spent ZAR 9.4 billion in the past 6 months. We plan to spend ZAR 23 billion across the markets in the current financial year. That concludes my review. Raisibe and I are now ready to answer any questions you may have. JP Davids: Thank you, Shameel. There are quite a few questions on South Africa to get us going, and we will start with the top line questions and then move into EBITDA and other variables. So we've got Ganesh from Barclays. We've also got Jonathan Kennedy-Good of Prescient, and Maddy, all asking questions around prepaid. In short, can we give a little bit of commentary on what played out in the quarter? Maybe some color on some of the ARPU trends we saw in the quarter and how we're thinking about these trends into the coming quarters? So what is the second quarter telling us about 3Q and 4Q to come? Mohamed Shameel Joosub: Okay. Thank you, JP. So I think on prepaid, a couple of things. So firstly, we are seeing the consumer much more under pressure than we've previously seen. So that's the one part. We're seeing consumer wallet impacted by gambling. So we think that's also affecting the consumer wallet. That said, we've also seen some competitive pressures in the half and especially in the second quarter. And as a result of -- and what we've had to do is to make sure that we stay competitive. So we've not lost any customers. We've managed to hold on to our customers. ARPU has broadly remained stable. Q1 was ZAR 58 per sub ARPU and Q2 was ZAR 57 per sub. So the ARPU has kind of remained stable. But of course, there was a much more negative result in the -- minus 2.9% in the second quarter contributing to a minus 1.6% over the half. So what we've done to stay competitive is a few folds. So firstly, making sure that the inflow continues to be strong in terms of customers and balancing out any churn. So I think from a customer base perspective, the base is growing, not declining. So that's the first point on prepaid specifically. The second thing is, we've had to improve some of the offers that we're putting out there to make sure that we're also staying competitive against some of the competitive offers that have emerged. We have some competitors. So the weakness is coming more in voice than it's coming in data. And that's because one of our competitors is throwing in voice or a lot of voice into offers. So we're having to counter that as well in some of our offers. What we're pushing for is more transparent offers. So we've used a lot of private pricing previously. So we're moving towards more transparent pricing, especially you'll see it in our LTE bundles as well, but also trying to push more longer-term bundles so that we can try and gain having grown the segment of shorter-term bundles, we're now trying to get customers more into longer-term bundles so we can get more of the committed spend, especially where a customer is using more than one SIM. Some actions have been taken proactively and some -- especially to give an example, in the fixed wireless space, what we've seen is a very good growth in terms of net adds, gaining of market share. So we've seen -- because historically, we were always under-indexed in that space. And someone like Telkom had a lot more stability in revenues because they had a bigger FWA base. What we've now done is to make sure that we're growing that. So we're seeing 4, 5 points increase in market share from last year to this year. And so that's picking up quite nicely. So we'll continue to grow that segment as well. JP Davids: Hopefully, that also deals with [Siphelele's] question from Matrix around competitive dynamics in prepaid and Jono had a similar question around SA prepaid. But remaining on South African prepaid, Maddy had a question around the regulatory setup in South Africa. Do you ever see a scenario where South Africa follows markets like Egypt, Tanzania with price floors? Mohamed Shameel Joosub: I think it's certainly something worth considering and the industry collectively have agreed to approach government in terms of having that discussions. And the reason for that is that it's actually creating a lot more stability. And what we're seeing is that the fragmentation in the markets is actually -- is leading to a situation, especially in a lot of the developed markets where you're seeing it's curbing investment back into the networks, into fiber and so on. So the in-market consolidation, price flows or price regulation has actually proven to be very healthy. So we are, of course, trying to have this more markets on the pricing. Today, we have Egypt and Tanzania, and we're currently busy with the DRC and Mozambique where the regulators are actively considering and have done studies and they have come out with the results. So that -- so we're looking at implementation there. In South Africa, still early days in terms of the discussions, but certainly something that we'll keep trying for. JP Davids: Sticking with the top line in South Africa, Maddy and a couple of others just had a question around the postpaid trends in the quarter. It looked like a little bit of a slowdown quarter-on-quarter. Any cause for concern there? Or does the outlook remain broadly unchanged for postpaid? Mohamed Shameel Joosub: I think broadly postpaid is growing around 5%. There's some deferrals from last year this year that create a little bit of noise in the half yearly results. But I think the underlying trend is around about 5% on contract, and that will remain stable this year, the previous year and probably into next year as well. JP Davids: Shifting to South Africa's EBITDA and perhaps also EBITDA margin. I think there's sort of 8 different questions being asked of the same nature, but in slightly different ways, which is, can we help try and understand -- the participants on the call understand what 1H would have looked like without the one-off cost in it? And if we are unable to do that, perhaps provide some color into the second half of the year around what South African EBITDA growth or margins could look like? Raisibe Morathi: So as the settlement arrangement is highly confidential. Unfortunately, we're not able to give you the normalized view, excluding that. But I think just looking at where we landed at EBITDA minus 5.3%, it is quite clear that it's not a number that is shattering. I think we have put that behind us. And the forward look is that we expect our EBITDA growth to somewhat normalize in the second half of the year and to end the EBITDA margin, which is printing somewhere between 36% and 37%, which is back to the trend that we had outside of this settlement that we have put up behind us now. And in terms of where that is going to come from, was cautious that the prepaid trend has been quite tough. So a lot of initiatives that Shameel spoke about in terms of improving the trend in the prepaid revenue, but also continue with the journey on our costs. So our cost program is still fairly robust. And that is covering a range of things from the sharing agenda to really managing our day-to-day headcount costs and all of those everyday costs. And we do believe that our efficiencies will still come through to support the normalization in the second half. JP Davids: Thank you, Raisibe. Just before we leave South Africa, we switch track a little bit. I think Nadim just has a follow-up on prepaid. It's Nadim from Standard Bank. Just asking a slightly more specific question around the SA prepaid menu. Are you in the process of transforming the South African prepaid menu to adjust for the current market context? I guess picking up on your discussion around transparency, et cetera. So maybe just another minute or 2 on that. And what he's trying to see is, are you trying to drive any specific type of behavioral shift that you'd like to see in the customer? Mohamed Shameel Joosub: Yes, I think it's a couple of fold. One is that making sure there's more transparent offers versus, let's call it, basically private pricing. So more making sure that all customers can see all the offers, keeping a lot of the offers static is the one part because you have a percentage of the base that is not private pricing engaged. So you lose out on that part of the customer base who doesn't see it. So that's the one part. And then, of course, creating more competitive structural offers that stretches the customer into weekly, bimonthly and monthly offers so that you can actually get more longevity out of the customer. You'll also see we've launched things like spend-and-get. If you spend a certain amount, ZAR 120 with us, we give you free funeral cover as an example. So that caters for the customers' need because that same customer would be buying funeral cover and normally telco. So if they spend ZAR 120 with us for the month, and they can buy whatever packages they want to, then that will unlock free funeral cover. And that's already existing in digital channels with VodaPay and is actually picking up quite nicely in terms of take-up. JP Davids: There are a few questions on the call around the estimate for the settlement for the Please Call Me matter. Just to reiterate what Raisibe said, that's a confidential agreement, and we will not be disclosing that number. Shifting gear to the fiber landscape. We've got a couple of questions there. [indiscernible] from there is asking around HeroTel and Fibertime scaling very quickly with their coverage in townships where around 1/3 of the population stays in South Africa. What are our plans for township in rural areas when it comes to fiber connectivity? So that's the first question on fiber. The second question on fiber comes from Funeka from Nedbank asking just around the sustainable return on investment on the Maziv deal. So over what period do you expect that you'll generate that sustainable return on investment? Mohamed Shameel Joosub: So on the -- on fiber generally, so remember, Fibertime and those solutions are out there. But remember, HeroTel is part of the Maziv transaction. So remember, Maziv have acquired HeroTel with the final piece still at the competition authorities, but they already own 49% that's part of the deal. So that is already part of the Maziv deal and of course, you add that capability there as well. So you've got the secondary towns, you've got the townships and you've got the rural areas that are all covered by the rollout of fiber. And I think the models are very clear. So we, of course, are cognizant of the Fibertime, what they're doing as well. And we're doing similar kind of things in Kenya. So we're also seeing a lot of success in connecting multi-dwelling units, I would say, at an even lower price per home connected in Kenya. So in fact, we were just in an earlier call with staff showing them the benefits and the uptake of that service. So we'll use the learnings from across our markets to roll out in South Africa, but also into the other markets as we look to build FiberCos in each of our markets. Raisibe Morathi: So in terms of the return on investment, so similar approach that we follow with all M&A that we would target the return to exceed our cost of capital, which, in this case, is roughly about 15%. So -- and we expect that to take place in the medium term. So we're quite comfortable that the value add of this investment, both quantitatively and qualitatively is quite strong. JP Davids: Shifting out of South Africa for a bit. Just one question on international before we move on to Egypt. And the question on international is really around the margins in the first half from Rohit at Citi. He's just asking what is the driver of that improvement in the first half? And is this level of margin sustainable going forward, that being close to -- sorry, 34% EBITDA margin? Raisibe Morathi: So yes, it is sustainable. We're quite pleased to see an improvement in our international business, noting that the prior year was also impacted by the one-offs in DRC, which we are over that. We are now moving along. And DRC was always a very strong top line growth. And that list of items that we dealt with last year, it is a business that we continue to see some prospects for growth. We've also called out Tanzania, which has really done very well, supported by a stable macro environment and also a pricing environment that has a price loss. So the momentum that we're seeing in Tanzania continues. And we're also doing a network replacement, which is really positioning us very well to be more 4G ready in more sites. So quite exciting. We're seeing a very nice recovery in Mozambique, where -- from the election disruptions to pricing disruptions, that we had in the past. So whilst we are still in negotiations to see whether or not the price growth can be implemented and implemented the correct way this time around. But nevertheless, we are seeing some operational momentum where there's less and less of a negative growth. And now we actually ended with a quarter that is a positive growth, so really contributing and of course, with [indiscernible] also quite stable. So the sustainability of margin in IB absolutely, and we do think that there's even room for improvement of that margin going forward. JP Davids: Moving to Egypt. I'll pick up Funeka's question from Nedbank because it's relayed by quite a few people just around the EBITDA margin in Egypt at around 46%, 47%, excluding sort of lumps and bumps in the half year. Is this a sustainable medium-term margin? And related to that, what is driving that margin upside in both Egypt and IB? Is it operational leverage? Is it cost cutting? What's behind that? Raisibe Morathi: So there is strong growth top line. Egypt still grew in the 40s in terms of the service revenue. Of course, we had a price increase of 30% in the last quarter last year. So as we left that, the last quarter of this financial year, we will probably dip into the 30s, but still robust growth driven by operational momentum and basically all the different components in the business being financial services, CBU, enterprise and all of that really do very, very well and with a very strong CVM offerings. So the margin of 47%, that is a bit of an outperform where we expect that margin is sustainable at around mid-40s, 45% and thereabouts. But of course, if we can achieve more than that, we'll absolutely be happy. But I do think that expectations at 47% is probably a little bit too high at this point in time. And particularly as we are expecting that the revenue growth will normalize as we lap the price increase. \And I've already covered the IB environment. And maybe just one more point on IB is that before the challenges that we experienced in Mozambique, Mozambique was running at an EBITDA margin of 40%. So there's still a lot of room for Mozambique to improve. So all of that and all those dynamics, we believe that they do position us for sustainable EBITDA margins in those 2. JP Davids: A quick follow-up there for Shameel. Rohit, just asking what is the scope for another price increase in Egypt next year? Mohamed Shameel Joosub: Yes. So I think I don't think we should pencil in automatic price increases. I think really the devaluation or if there's a devaluation, then I think one can then approach government for a price increase. So -- but I think given the price floors that we have in that market, you're going to have strong conversion, traffic up, rate steady and you'll still have a consistent conversion of that into revenue. So I mean, in the half, traffic was up 22%. So you've still got very strong traffic growth, and therefore, you've got strong ARPU growth. In terms of price increases, we also have a mechanism where we do have what I call natural price increases each year where we give customers more for more, and that's part of our modus operandi in Egypt, and that also contributes positively to our growth. And what we are seeing is that you'll see us having put a little bit more CapEx or more CapEx into Egypt this year because we are seeing that revenue monetize very quickly, especially as we're rolling out more 5G sites, and that's also helping to monetize very quickly. So the average payback in Egypt being less than a year, so if we put up a new tower. So we are, from a capital allocation perspective, also carefully managing where we allocate capital. JP Davids: There are a couple of questions on financial services. I'll start with the high-level ones, and then I'll get into the more specific ones. So at a high level, Jono is asking around our appetite to list the financial services business, noting that a couple of our peers appear to be doing that at the moment. And then Jonathan from Prescient is trying to get more color around the micro lending landscape. And he's trying to get a sense of how these micro loans such as Fuliza, if they can be perhaps detrimental to voice and data spend? Or is it, I guess, a net-net positive for the customer where you extend these micro loans? Mohamed Shameel Joosub: Okay. So maybe a couple of things. So on the financial services side, I think really, really strong growth across all our markets, $477 billion of transactions, up 13%. The way I like to think about it is our take rate is about 0.4, 0.5 per transaction. You can see ZAR 8 billion from Vodacom, ZAR 12.2 billion from Safaricom during the period. So that's annualizing at about a $2.2 billion a year or over ZAR 40 billion of revenue coming from fintech. Now what we're trying to position is we're not looking to separately list the financial service businesses because we do see it intricately linked to our value proposition that we're providing to the customer. In fact, we see it more closely linked and then coupling that with loyalty going forward. What we are looking at, and that's why we're giving so much color on it is that the positioning for us is that we have something very different to offer from a normal telco. And with a 25% contribution coming through, to profit coming through from the fintech side. What we're also doing is we're building centers of excellence and then using that to basically push through the group. So an example would be in South Africa, we have a very big insurance business and a lot of capabilities and platforms that we built. So now we're using that as a center of excellence to expand into more markets with Kenya and Tanzania being the 2 markets that we'll focus on. So we're not trying to do everything at once. We're also going -- making sure we can pick up on it. And then on the reverse, what we're doing is on international money transfer, we'll do it the other way around. We'll take it to Egypt, we'll take it to South Africa. We'll take it to Ethiopia and so on. And the same with -- we're seeing a lot of benefits coming through now starting with investments, and it's starting to scale very quickly. In terms of your question on lending, there's no balance sheet risk on it. We do about $11 billion of loans now, but it's all -- the balance sheet risk is taken by the lending institution, and we take a good margin on it. And depending on the type of product, the margins are higher or lower. So we have -- so example would be overdraft style products have a very, very high margin. In terms of is it contributing or detracting from airtime? These services have been running for many, many years now. And actually, it hasn't impacted airtime at all. I mean take a market like Kenya, the market is still growing very, very strongly, but our fintech services is sitting at 44% of revenue. So actually, it's beneficial to airtime, not necessarily. So you would have an airtime advance or in some of the M-Pesa markets, you could even take a loan, then buy airtime. So we see it as actually being complementary as opposed to detracting from the revenue. Remember, you're not paying for the services through airtime, you're paying for it from your wallet. JP Davids: There is a specific question on financial services from Nadim and just really building on that answer you've given, Shameel, which is what are the focus areas for Egypt over the next sort of 12 to 24 months in terms of that financial services ecosystem. Mohamed Shameel Joosub: I think there's quite a few. And if we take from the learnings from the other markets, Egypt is still very much still P2P. So that's person-to-person payments and money transfer. So I think growing out the payments ecosystem, growing out the merchants ecosystem, bringing in the lending part, bringing in insurance, bringing in international money transfer. So there's a whole host of services, virtual cards, all of these type of things. There's still a myriad of different products that we can still grow in Egypt. But I think what's very positive in Egypt is that the base also continues to grow because of the amount of people that are unbanked. And what's happened is that's why we've got such a large market share in the wallet. The wallets become the trusted part. So remember, there was also a trust element of people keeping their money, let's say, not in banks and so on. And now they're becoming more and more confident in that context. So that's why we're seeing this big growth that we've seen over the last couple of years. JP Davids: We have a few group questions, and then we'll come back to South Africa. So first one is from David at New Street Research. Just wanted a little bit more color around that CapEx step-up in the second half of the year. Where do you intend to deploy more CapEx in the second half? Perhaps the next one for Raisibe is. It's just a clarification from Maddy. He asked, was the settlement factored into the EPS base when considering dividend per share. So just wanted to know, did we adjust for that, yes or no? And then perhaps again back to Shameel, Maddi just asking around whether there's any sort of M&A action to anticipate from our side? Where are we focused from an M&A perspective at the moment? Mohamed Shameel Joosub: Okay. So look, I think from a CapEx perspective, of course, I mean, the obvious one, if you spend ZAR 4 billion in South Africa, we have to spend close to ZAR 12 billion. So there's ZAR 8 billion of the additional spend going towards -- to South Africa specifically. So that's the one. And then there's more CapEx that we've allocated to both IB and Egypt for the remaining part of the year to make sure that we can continue to take advantage of the growth that we're seeing, specifically in Tanzania, DRC and Egypt. Raisibe Morathi: So in terms of whether the settlement is coming all the way through to EPS, that is correct. And we did not make any adjustment in terms of considering the dividend. Mohamed Shameel Joosub: So from an M&A perspective, I mean, we -- I'd say, look, the big thing for us is, of course, to finally get the approvals on this massive transaction that the cash flow and so on so that we can start to unlock the benefits of that transaction and the benefits to society in general in South Africa as quickly as possible. So a little bit frustrating, to be honest. Hopefully, it will be sorted out in the next week or 2, but a little bit frustrating that it's taking so long given that we've already had conditional approval on the transaction from ICASA. That's the one. And then further M&A opportunities a little bit -- so it will be -- a lot of it will be centered around basically more JVs and these type of things around fiber and where the opportunities lie, where there's an opportunity to do -- what we want to do is to do rural coverage and fiber in all markets and also data centers. So where there's an opportunity to partner, we will partner. So that's the one part. But these are small-sized investments. Then, of course, the rest is a little bit, of course, if there's any opportunities for in-market consolidation, certainly something that we would consider. Yes, and we're kind of keeping our powder dry in case some opportunities present themselves. JP Davids: Okay. There are going to be a few more, I guess, specific questions now across the portfolio. Let's come back to South Africa. So Preshendran has 2, Preshendran from 361. He asked firstly around gambling in South Africa. Is the gambling data traffic zero rated? Or is it paid by the gambling houses? And how do these vouchers work, for example, the ones that are available on Vodapay? Perhaps related or unrelated to that, he's just asking around the growth in financial services for Vodacom South Africa. What is driving Vodacom Financial Services revenue growth at the moment? Mohamed Shameel Joosub: Okay. So firstly, on gambling. So the platforms, if they are 0 rated, basically is done through what we would call reverse build data. So we're certainly not zero rating any gambling parts because there's nothing enough for us to do it. But you can buy reverse build data and then zero rate it. And so some of the gambling houses are doing that, and they are zero rating data across networks, but they're paying for it. Secondly, on vouchers, essentially, all we do is we sell vouchers. So we sell food vouchers, we sell fuel vouchers. We sell clothing vouchers, we sell gambling vouchers. So that's all in the Vodapay store, if you like. And yes, we have seen a good tick up of that as well. And so clearly, people are buying gambling vouchers. But frankly speaking, if they don't buy from us, they're buying from someone else. So -- and part of the -- let's call it, the super app is having these services available. In terms of financial services in South Africa, so you're seeing very strong growth coming through in terms of the insurance business. So insurance business is growing in the teens. So that's been a very strong growth for us. and it's picking up quite nicely, and we're looking at how can we take the expertise that we've built and actually take it to the international markets. And then we're still seeing a good tick up on the payment services. And then, of course, on VodaPay in terms of things like airtime that we're selling directly, the -- we've more than tripled the amount of airtime we're selling directly versus what we were selling before. So more than 10% of our airtime coming directly through our channels. And by combining the apps, we've actually seen an uplift in terms of the amount of transactions that we're doing, and that's picked up quite nicely. JP Davids: Jo has a specific question on Airtime Advance in South Africa, which I will take. He's asking what proportion of financial services revenue is from Airtime Advance. It's not a specific number we give out, but it is well less than half of the number. But unfortunately, not going to get much more out of us than that. David from New Street, wanted to follow up on the competition levels in South Africa, particularly the prepaid space and after the quarter. So what are we seeing into, I guess, what we call our sort of summer campaign or summer season? Mohamed Shameel Joosub: Yes. So I think -- so a couple of things on the summer season. I think, of course, for us, we'll be betting against a very strong comp from last year because we had an excellent [indiscernible] but of course, it's always a good period for us as we go into the summer period, and we look for an uplift from Q2 to -- from Q3 to over Q2. So that's an important part for us. What we have done is basically put out some compelling offers going into the summer period, dealing with some of the competitive stuff that we've seen and so on. And I think part of it, of course, is also some competitors overreacting and throwing a lot of voice [ and naturally the ] decline actually in prepaid is more coming from the voice side than it's coming from the data side. And that's because some competitors have thrown in a lot of voice into offers and then we've had to compensate for that by improving the offers on our side. So there's a bit of that playing out into the market. And and it's not the MVNOs. So that's the issue that we have there. But I think as we're going into the summer period, making sure we're competitive at the point of sale in terms of devices, inflow, the offers itself, utilizing the loyalty, driving people towards our app, but also our loyalty programs and so on is very much part of the summer promotion. JP Davids: We have one last question on the webcast at the moment. So I'll pick it up. The last question as it currently stands is from Anup at Moon Capital. He wanted to chat about tower mergers in Egypt. Is there a possibility of tower mergers in Egypt? Just your thoughts around if there's anything there to be interested in and whether we would take part in any sort of tower plays in that market? Mohamed Shameel Joosub: To be honest, nothing on the cards at this stage and nothing that we're considering or even looking at in terms of tower mergers. Is there possibilities? Sure, depending on who wants to sell their towers. And would -- is it something that we would consider? I think it would depend on what is it offer and effectively what the benefits are for us because we have got a high level of sharing in that market. So one would have to look at it on its merit and see if there's any synergies, opportunities in terms of whose towers and what does it look like at this stage, there isn't really any towercos in the market. There was talk of IHS being licensed a couple of years ago, but actually it didn't amount too much or nothing really happened. But other than that, there's no towercos. It's all owned by the towercos. JP Davids: My call for more questions prompted more questions, which is great news. So -- the first one of these comes from Matrix, a follow-up question. He wanted a bit more color on our thoughts around the MVNO space in South Africa. And his specific question is, what is our thought around what this market share could look like for the MVNOs in, I guess, in the medium to longer term? So how much market share do we think MVNOs could take? Perhaps just staying with South Africa, let's ask a second one at the same time. Jono has a follow-up from Absa. Is there any sense of how long this increased competitive environment in South Africa could go on for? -- do we get a sense that this is a couple of quarters? Or is this something we're anticipating drags into FY '27? And thank you, Jono, for acknowledging that's perhaps an unfair question. Mohamed Shameel Joosub: Yes. So firstly, on the MVNO space, and I think always important to remember, MVNOs buy from MNOs. And in this case, an MVNO is buying from an MVNO who's buying from a telco. So effectively, or if you want to call Cell C and MVNO, if you like. But what we're seeing is that we haven't really seen any change in the customer bases or in the revenue lines as it relates -- as it goes into the Cell C numbers or even into the MTN numbers where more of the MVNOs are sitting. So there hasn't really been any change in market shares in that context. So that's point number one. Point number two is always remember you're buying from someone, so you have to mark up that service. I think with the competitive parts that you're seeing at the moment, that changes the game a lot in terms of also the -- let's call it, you'll see some of our competitive offers that are out there for summer, some of the offers that are coming from MTN, of course, from Telkom and so on. So I think that reduces. So whether you like it or not, you've actually reduced the competitive gap, if I can put it that way, between you and what the MVNOs could potentially do. Also, I think when you come up with more transparent offers, you're also reducing that gap further because you're putting out to all your customers the same price point. whereas on CVM, you maybe have 60%, 65% of your base. So 35% of your base weren't CVM engaged. Now they're seeing the office straight up. Those are the kind of transitions that were happening. And I think that will make the MVNO case, how should I say, interesting, more difficult. You can choose the adjective that you want to for it. But I think that's really the way I see the MVNO part. And of course, I think where there's a loyalty play, I think that's a different part. And I always say, if the banks want to give the telcos money, then the telco should take it. So that's different. I think like what you're seeing, would say, [indiscernible] consistent base last 12 years, giving to some of the high-value customers, better offers, that type of thing or offers, I wouldn't say better offers, but offers. Those type of things, I think are sustainable, but they're also being funded and they're being funded out of somebody else's wallet. But if it's a pure price game, I think when the competitive dynamics, as you're seeing at the moment, we don't sit by and leave it. So we will take the negative, but we also make sure that we respond. Do I think it bottoms out? Yes, I think it does. But honestly, it's not an exact sign, so we'll have to see. But I think what we've seen historically is you go through a few quarters of this and then you gain stability. JP Davids: So, noco has a follow-up question on voice revenue. It's not clear whether it's in the context of South Africa or the group. So perhaps we can just provide a lens on both. Just how do we think about voice and voice revenue, the outlook for voice and voice revenue going forward? Mohamed Shameel Joosub: So I think if you look at the group in total, basically, voice now consists of 16.6% of the group's revenue. And that was flattish, so minus 0.2% during the half. So you can see that structurally is becoming less as the other sides are growing much faster. So it's becoming less and less of an issue. I think voice will have its challenges. Some markets, of course, voice is still in growth. example, Egypt, the DRC, Tanzania and so on. And then you have some markets where like South Africa, where voice is actually in decline, driven by things like OTT voice, but also driven by where competition have just thrown in like what we've recently seen to improve their competitive part, they've just thrown in voice. Of course, MVNOs by that. So you'll know what I'm talking about one of the big players throwing in voice sadly, and that's what's caused some of the weakness in voice for all of us. JP Davids: Adrian from PSG Wealth had a question on what we think the value Optasia brings to telco operators just generally. I guess this would obviously be in the context of Optasia's recent listing. Mohamed Shameel Joosub: Yes. Look, I think, of course, they've been a partner of ours for a long time. They add value on the Airtime Advance part and so on. And we've made sure that we've -- let's just say that we have a good deal, let's put it that way, on the one side. And then on the other side, as they increase their new products and offerings, of course, we would look to scale some of that into our markets. So an example would be the offering overdraft products in the DRC. So -- and we're partnering with them there. So as some of these products come to market, we will consider it. Of course, it's different to Airtime Advance because you're also then competing with some of the banks, the likes of KCB and Access Bank and so on in these different markets. So we look at it on a market-by-market basis. And if the margins are better and if it opens up a bigger base for us, then we consider it. JP Davids: Then what looks like our last question for the moment from Robert at Deutsche Bank. He references some press reports about a breakup at Safaricom by the government a little while ago. Any update on that? And would you move to increase your stake in that eventuality? Mohamed Shameel Joosub: So there's no discussions about breaking up Safaricom. I can categorically say that as I'm on the Board, so is Raisibe. So there's nothing being envisaged in that respect. In terms of increasing stakes, we look at in any market where our partners want to sell, we would consider it. And of course, we'd expect that they would talk to us as we've been partners for a very long time. So in all our markets. So I think in that context, if there is a want to sell, I'm sure they'll talk to us. JP Davids: Thank you, Shameel. Thank you, Rose. We are done with the Q&A. Shameel, did you want to quickly wrap up? Mohamed Shameel Joosub: Yes. Maybe just to say thank you to everybody, and we'll see you on the road shows. But if they have any questions, please reach out to JP. Of course, I think for us, this was an important half because it's the first proof point down to EBITDA and earnings of the 2030 strategy and very happy that as someone put it today, I saw one of the headlines best results in the last 10 years, and I think that's probably accurate. We -- it's the highest earnings growth we've had probably longer than that, in fact, but very, very pleased with the outcome. Also very pleased with the underlying growth. And I think for me, the strategy that we've put together, both from a geographical diversification perspective, is paying dividends, but also from a product diversification with the fintech and fiber and IoT also playing out quite nicely into the numbers. So nice to see that the strategy is now bearing fruit because you lay the foundations and then you start to see the benefits a year or 2 after that you laid those foundations. So really strong in that respect. So looking forward to a good second half. Thank you.
Operator: Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Ms. Siting Li, IR Director of the company. Please go ahead, Siting. Siting Li: Thank you, operator. Good evening, and good morning, everyone. Welcome to KE Holdings or Beike's Third Quarter 2025 Earnings Conference Call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website, investors.ke.com. On today's call, we have Mr. Stanley Peng, our Co-Founder, Chairman and Chief Executive Officer; and Mr. Tao Xu, our Executive Director and Chief Financial Officer. Mr. Xu will provide an overview of our business updates and financial performance. Then Mr. Peng will share more on our strategic developments and innovative initiatives. Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Please also note that Beike's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to the company's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this conference call are in RMB. Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information and estimates. For today's call, the management will use English as the main language. Please note that the Chinese translation is for convenience purpose only. In the case of any discrepancy, management's statements in their original language will prevail. With that, I will now turn the call over to our CFO, Mr. Tao Xu. Please go ahead. Tao Xu: Thank you, Siting, and thank you, everyone, for joining our third quarter 2025 Earnings Conference Call. In Q3, under the strategy of balancing scale and efficiency, we further optimized our business structure, enhanced operational and middle and back office efficiency through AI technology and achieved city level profitability in both our home renovation and rental business before deducting headquarter expenses. The combined contribution profit to company's total gross profit reached a record high. The costs and expenses of our core business segments were further optimized. We also significantly enhanced the execution of shareholder returns with the single quarter share repurchase spending reaching its highest level in past 2 years. Regarding our overall financial performance in Q3, our total GTV was RMB 736.7 billion, remaining flat year-over-year. Total revenues reached RMB 23.1 billion, up 2.1% year-over-year. Gross margin declined by 1.3 percentage points year-over-year to 21.4%. GAAP net income was RMB 747 million, down 36.1% year-over-year. Non-GAAP net income was RMB 1.29 billion, down 27.8% year-over-year. With that overview, I'd like to provide some details on operational and financial performance for each segment. Looking at our housing transaction services, we have been continuously enhancing the productivity and operational performance through the application of AI and other technologies as well as in-depth operational optimization. For our existing home transaction services, we upgraded our AI tool, [indiscernible]. As of end of the third quarter this year, high-quality business opportunities identified though [indiscernible] account for only single-digit percentage of total potential lease, yet contribute over 50% of transaction volume on our platform. On the housing supply side, we launched innovations such as agent specialization module, which agents are sent to specially manage home listing or serve the buyer based on their expertise as well as innovative services, including home staging and open house events. These efforts have enhanced the buyer conversion and the marketing and the sell-through efficiency of the home listings. For our new home transaction services, we have also continuously iterate our AI agent [indiscernible] system for intelligent operations and marketing as well as AI assistant [indiscernible]. In terms of the financial performance, revenue from its in-home transactions reached RMB 6 billion in Q3, down 3.6% year-over-year and down 10.8% quarter-over-quarter. GTV was RMB 505.6 billion, up 5.8% year-over-year and down 13.3% quarter-over-quarter. The GTV growth outpaced revenue on a yearly basis, mainly due to a higher GTV contribution from its in-home transaction facilitated by connected agents for which revenues are recorded on a net basis. While revenue performance outpaced the GTV quarter-over-quarter, mainly due to the structural shift as the revenue contribution from the rental brokerage services increased amid seasonal fluctuations, which have a relatively high take rate. The contribution margin of existing home business was 39% in Q3, a decline of 2 percentage points year-over-year, primarily due to the relatively stable fixed labor cost amid the revenue decline. Sequentially, the contribution margin declined by 1 percentage point due to the decline in revenue exceeding the fixed labor costs. Our new home GTV reached RMB 196.3 billion in Q3, down 13.7% year-over-year and 23.1% quarter-over-quarter. Revenue from the new home transactions was RMB 6.6 billion in Q3, decreasing by 14.1% year-over-year and 23% quarter-over-quarter. Revenue performance was in line with GTV performance both year-over-year and quarter-over-quarter, reflecting our steady monetization capability in new home business. The contribution margin from new home transaction services was 24.1%, down by 0.7 percentage points year-over-year due to an increase in variable costs resulting from our agent benefit improvement last year. On a quarterly basis, the new home contribution margin fell by 0.3 percentage points, largely due to higher variable costs and a smaller decline in fixed labor cost compared with the revenue. For our home renovation and furniture services, we continued to strengthen our core capability to support the long-term sustainable growth. On the product side, we successfully replicated our productized showroom model in multiple cities. On the supply chain side, we expanded our centralized procurement categories and adopt localized sourcing standards and selection process, further reducing the overall unit purchase price to enhance delivery quality with focus on improving construction quality, standardizing on-site management, laying the foundation for a unified system to exercise construction site quality. In terms of the financial performance, revenue from our home renovation and furniture business was RMB 4.3 billion, remaining relatively flat year-over-year. Contribution margin for the segment reached 32%, up 0.8 percentage points year-over-year, primarily driven by the reduced procurement costs resulting from a larger proportion of centralized purchasing and decreased labor cost resulting from enhanced order dispatching efficiency. Sequentially, the contribution margin remained relatively stable. For our home rental service business, on product front, our new 09 products have been launched in 10 cities, offering property owners diversified service options. For unit sales and occupation, our improved operational efficiency through AI-powered housing condition assessment and intelligent pricing while further promoting our quality-based traffic allocation rules to achieve faster housing turnover. In Q3, the conversion ratio of Carefree rent business opportunities to rental deals increased by more than 2 percentage points year-over-year. In terms of the operational management, we enhanced the productivity for the property managers and other personnel through further refinement of the role specialization of labor, the integration of operational process and the empowerment of AI technology. Regarding financial performance, revenue from our home rental services reached a record high of RMB 5.7 billion in Q3, up 45.3% year-over-year, driven by rapid growth in the number of rental units under management. At the end of Q3, we had over 660,000 rental units under management compared with over 370,000 in the same period of 2024. The contribution margin for home rental services was 8.7%, up 4.3 percentage points year-over-year and 0.3 percentage points quarter-over-quarter, largely driven by improved gross margin from our Carefree rent business. As we continue to refine the business model, we have adopted a net revenue recognition approach based on service fees for the certain newly signed properties in line with the nature of the underlying service contracts. In Q3, our revenue from emerging and other services decreased by 18.7% year-over-year and 8.4% quarter-over-quarter to RMB 396 million. Now moving to the other financial metrics in Q3, including other costs and expenses, profitability and cash flow. Our store costs reached RMB 663 million in Q3, decreasing by 5.8% year-over-year and 13% quarter-over-quarter, mainly due to the lower store rental costs. Gross profit dropped by 3.9% year-over-year to RMB 4.9 billion. Gross margin was 21.4%, down 1.3 percentage points year-over-year. The decline was mainly due to the structural impact from a lower revenue proportion of existing home and the new home business, which had relatively high contribution margins as well as the decrease in contribution margin from the existing home business. This was partially offset by the increase in contribution margin from the home rental services. Gross margin declined by 0.5 percentage points quarter-over-quarter in Q3, mainly due to the structural impact as the revenue contribution of new home transaction service declined. In Q3, our GAAP operating expenses totaled RMB 4.3 billion, down 1.8% year-over-year and 6.7% quarter-over-quarter. Notably, G&A expenses were RMB 1.9 billion, relatively flat year-on-year and down by 10.3% quarter-over-quarter, primarily attributable to the decreased bad debt provisions and reduced share-based compensation expenses. Sales and marketing expenses were RMB 1.7 billion, down 10.7% year-over-year, mainly due to the lower personnel expense and reduced advertising and promotion expenses under the efficiency enhancement strategy. On a quarterly basis, the sales and marketing expenses were down 9%, mainly driven by a reduction in labor-related costs. Our R&D expenses were RMB 648 million, up 13.2% year-over-year and 2.3% sequentially, largely driven by higher personnel expenses. In terms of the profitability, GAAP income from operations totaled RMB 608 million in Q3, down 16.4% year-over-year and 42.6% quarter-over-quarter. GAAP operating margin was 2.6%, dropping by 0.6 percentage points from Q3 2024 and 1.4 percentage points quarter-over-quarter. The non-GAAP income from operations totaled RMB 1.17 billion, decreasing 14% year-over-year and 27% quarter-over-quarter. Non-GAAP operating margin was 5.1%, down 1 percentage point from Q3 2024, mainly due to the decline in gross margin. Non-GAAP operating margin was down 1.1 percentage points from the previous quarter, mainly due to the increase in operating expenses ratio sequentially. GAAP net income totaled RMB 747 million in Q3, down 36.1% year-over-year and 42.8% quarter-over-quarter. Non-GAAP net income was RMB 1.29 billion, falling 27.8% year-over-year and 29.4% quarter-over-quarter. Moving to our cash flow and the balance sheet. We generated net operating cash inflow of RMB 851 million in Q3. New home DSO remained at a healthy level with 54 days in Q3. In addition to spending approximately USD 281 million in share repurchase during Q3, our total cash liquidity, excluding customer deposits payable remained at around RMB 70 billion. facing the short-term business challenges brought by external fluctuation and internal strategic transformation, we support and reward our shareholders through consistently active share repurchase to improve the efficiency of the capital operations. From the first to third quarter of this year, we spent USD 139 million, USD 254 million and USD 281 million on share repurchase, respectively, with a cumulative amount of approximately USD 675 million in this year, up 15.7% year-over-year. As of the end of Q3, the number of repurchased shares account for about 3% of the company's total issued shares at the end of 2024. Since the launch of our share repurchase program in September 2022, we had repurchased around USD 2.3 billion worth of shares as of the end of September this year, accounting for about 11.5% of our total issued shares before the program began. We have made progress in Q3 this year in proactively optimizing our business structure, strengthening technology empowerment and enhancing shareholder return. Our forward-looking layout of the home renovation and furniture services and home rental services have both achieved profitability at the city level before deducting headquarter expenses in third quarter. The AI capabilities have shown initial results in driving the business development and improving the work efficiency of the service provider and the middle and back office personnel. We are also fulfilling our shareholder return commitment with greater intensity, repurchasing USD 281 million in a single quarter, increasing 38.3% year-over-year as the industry enters a new stage of high-quality development while taking initiatives in building a residential service ecosystem. With our combination of technological innovation, anticyclical business portfolio and highly efficient and well-structured operating system, we are well positioned to deliver great value to both customers and investors. Thank you. Next, I would like to turn the call to our Chairman and CEO, Stanley. Yongdong Peng: Thank you, Tao. For sharing our business and financial developments for the third quarter, we are strategically shifting our growth engine from scale to efficiency. Today, I'd like to highlight some innovative initiatives we have rolled out across businesses to advance this shift. First, in terms of our core business transaction services, externally, we see new demand from both buyers and sellers under the new norm for China housing market. Home sellers expect stronger marketing capabilities from us. Buyers are counting on us for customer-oriented insights to support their decision-making in areas such as timing, asset planning and listing comparisons. These trends place new requirements on our traditional agent skill model and agents who are great at supporting both buyers and sellers are extremely rare. Since midyear, we have been working to restructure our capabilities across both buyer and seller agents. In Shanghai, we piloted a seller and buyer agent specialization mechanism to enhance our marketing and operating excellence on the home sellers agent side first. The mechanism redefines organizational roles, commission structures and performance initiatives and offer supporting tech products. This in turn allowed buyer-side agents to prioritize quality listings and improve transaction conversion. The underlying logic is that high-quality home listings by engineers not ready made. They require skilled agents to mass market analytics, pricing, property staging, owner engagement and decision-making, precision marketing; second, inventory quality drives customer acquisition. Superior listings inherently attract more serious buyers, driving transaction speed and our brand reputation, which in turn attracts better talent to join us. Therefore, we did several things to implement this. First, we adjusted our organizational structure and incentive mechanisms. We shifted some senior agents into hybrid roles that combine management and home seller focused responsibilities, giving them the authorities to form and lead their own teams dedicated to listing management. Under the ACN commission allocation mechanism, we raised the selling agent share from 40% to over 50%. We are maximizing incentives for top-performing agents to focus on marketing high-quality home listings. This group of home seller focused agents can earn around 25% more than before, assuming our market share remains stable. To mitigate potential pressure on buyers' agents, we reduced the mandatory [indiscernible] commission split, raised the minimum commission for selling agents and offered extra incentives for selling high score listings. Second, we provided agents with systematic [indiscernible] and digitalized products to help them manage listings. In the past, homeowners relationship management, listing presentation and marketing relied on agents' personnel experience that made it hard to replicate and scale. We have built an AI-powered listing score system that captures and codifies the know-how required in 6 key areas: Home listing maintenance completeness; homeowner engagement depth; property condition, for example, renovation recency; listing cross-channel marketing performance; AI-powered pricing competitiveness; buyers' interest, for example, the listings online, offline viewings. These metrics have agents clearly understand what defines a high-quality listing and how to better present and market homes. Homebuyer agents can also focus on selling high score listings to drive better sales conversions. In terms of results, in September, high score listings accounted for more than 75% of transactions. Our average market coverage in Shanghai hit record high in Q3, increased 1.2 percentage points year-over-year and 2.6 percentage points quarter-over-quarter. The experience of homeowners looking to sell quickly also improved. Many homeowners reached out to us proactively to learn how to raise their listing scores. Buyers also naturally prefer high scoring listings, creating a positive cycle that benefits everyone involved. The home seller/buyer side agent specialization in Shanghai is an important initiative designed to meet the changing needs of our customers and marks a milestone in our shift from scale to efficiency. We will continue to track its progress and explore new initiatives on the homebuyers agent side. In addition, we tried innovative approaches to make our new business more efficient. For example, in our home rental business, Q2 marked the first time we excluded headquarter costs from breakeven at the city level and Q3 is expected to contribute over CNY 100 million in profits. Carefree rent, our decentralized long-term rental business, housing businesses inherently faces challenges, including relatively low average selling prices, nonstandardized products and services, extensive service coverage and high maintenance costs, traditionally requiring heavy manpower and variable cost investment for scaling and operating. This sector has struggled with economics of scale industry-wide with no established best practices yet. As newcomers, we embraced this as an opportunity to build an AI-native operation from inception, enabling parallel development of business capabilities, frontline operations and AI intelligence. Through our organizational restructuring, process optimization and AI strategy and products, we are pioneering an AI [indiscernible] efficiency, economically sustainable model. Early results demonstrate significant improvements, offering valuable insights for our other platform business. I'll walk you through 3 major AI-driven breakthroughs across different dimensions. First, AI has been fully integrated into our rental services business, enabling end-to-end intelligent decision-making and business operations. For rental unit sign-ups, AI now powers critical processes, including property lead identification, personnel management and deployment, property evaluation, pricing strategies and homeowner communication. For example, previously, personnel management and operational relied heavily on the various level with supervisors deciding which agent will be responsible for which area. Now through AI-driven grid management supported by our unique dynamic domain data and modeling capabilities, AI can make data-driven determinations. It evaluates factors such as the number and quality of property leads, local supply and demand relationships and personnel capabilities models. Based on this data set, it determines the optimal personnel assignments, regional coverage and organizational structure. AI can simulate up to 90,000 design scenarios per minute, automatically generating the most efficient staffing and operational strategies. This has greatly improved how we allocate our service personnel deployment, configuration and operational scope. We also use AI to guide and execute our core business strategies and that is helping us move forward fully intelligent operations. For rental unit sign-up, we rolled out AI-powered rental unit sign-up assistant that uses real-time data and algorithms to predict market demand, property inventory and price trends. It generates automated sign-up strategies and dynamic pricing recommendations, delivering tailored plans for each property through adaptive decision models as market conditions change, such as customer demand, property inventory and pricing. AI can guide our operations team to make timely adjustments. For example, when there is an oversupply of 3 bedroom units in a certain area, the system automatically triggers price controls and sign-up restrictions. When unit types are in short supply, AI reactivates dormant property leads. Our upcoming AI cloud bot will also automatically contact homeowners of these reactivated properties. In Ningbo, where we began pilot operations in August, our workforce decreased by 10%, while new rental sign-up units grew up 10% even in the off-peak season. For rental unit leasing, our AI inventory management system frequently monitors inventory and checks over managing high-risk or low maintenance properties. It dynamically adjusts pricing and targeted discounts while optimizing traffic to speed up leasing. In Q3, these capabilities accelerated the lease-out of 350,000 units across 11 cities with 90% price adjustment adoption. These efforts generated over RMB 100 million in nationwide cost savings. Second, we use AI and technology to solve the industry's long-standing problems with nonstandardization, enable high-quality, scalable growth. The home rental industry has several characteristics. Home listings are scattered and each home has different and complex internal conditions, making the products nonstandard. Service providers are many and their levels vary. So the workforce is also nonstandard. Market price fluctuates and traditional pricing relies on frontline staff's on-site judgment leading to nonstandard pricing. Operational processes are mostly offline and complex, making sales strategies and service execution nonstandard as well. There are the traditional constraints of the industry, but with the progress of AI, we see changes to achieve both standardization and personalization at the same time. At the property quality and risk assessment stage, we have achieved human AI integration with AI now leading the entire unit sign-up workflows. Our AI property evaluation assistant uses visual recognition and multimodel analysis to intelligently capture indoor features, assess property conditions and evaluate potential risks. It also incorporates market data to generate intelligent AI-driven pricing recommendations. Beyond analyzing photos, the system can interpret property attributes holistically, helping address challenges such as consistent product standards, varying personnel capabilities and pricing accuracy. In the homeowner communication phase, we launched the AI negotiation assistant. This tool packages AI-driven property assessment, dynamic pricing and competitive market data into tailored home sign-up strategies and negotiation scripts, helping our service providers communicate and negotiate with homeowners more effectively. This provides a more professional and friendly experience for our clients, equipping new service providers with the tools they need to grow quickly and learn how to address nonstandard sales issues. We piloted this future in Ningbo and unit sign-up productivity rose by over 10 percentage points in Q3 compared with Q2, ranking #1 nationwide. Third, we achieved a leap in efficiency by adopting different AI applications. During the sign-up stage, our AI reviews system has replaced manual reviews, enabling fully automated risk control. As of September, the AI review function cover 11 cities, processing each case in just 20 seconds on average, making a 60-fold efficiency gain, saving more than 33,000 work hours and intercepting more than 16,000 risky properties. In the leasing stage, we use AI to power content lead marketing, expanding lead generation while reducing labor needs. AI intelligently analyzes and identifies high-quality leads, enhancing leasing efficiency. The AI-driven operational system in our home rental services has enabled us to see the possibility of scalable, yet personalized services for previous fragmented nonstandardized demand, demonstrating the potential for traditional industries to overcome these economics of scale through technological innovation. We now integrate AI across our entire home rental services process and are replicating the system across 13 key cities. Only through continuous innovation can we navigate industry cycle. By implementing home buyer/seller agent specialization and AI-driven home rental operations. We have forged a new path that re-engineers workflows through technology and fuels scale through efficiency. Moving forward, we will deepen AI integration across business scenarios to advance both service providers' capabilities and consumer experiences. As China's housing service industry undergoes this next evolution, we are afforded a historical opportunity to further its transformation guided by our commitment to technology power, high-quality growth and its potential to unlock infinity possibilities for modern living services. This concludes my prepared remarks for today. Operator, we are now ready to take questions. Operator: [Operator Instructions] Your first question comes from John Lam with UBS. John Lam: [Foreign Language] So let me translate my questions. So for the new home business, in the past, the company has been achieving or outperforming the market in terms of the alpha. But it seems that the magnitude of the alpha has been diminishing. May I know what's the reason why? And also, how should investors look at the company new home business growth potential? Tao Xu: [Foreign Language] Although the near-term performance of our new home transaction business has been affected by the market volatility, we remain confident in its ability to outperform the market in the long run. China's new home market has gradually matured in the past 2 years with supply side risks steadily easing. Against this backdrop, we have shifted from a cautious approach to a more growth-driven strategy. Our new home transaction business has significantly outperformed the broader market in the past few quarters until this second quarter with a higher brokerage penetration in the industry, our broader housing transaction service network and more collaborative projects. In this Q3, our year-over-year growth narrowed relatively to the market, mainly due to the several factors. First, customers on our platform often look at both new and existing home before making a purchase decision. Recently, the prices of existing homes have been considerably more attractive than the prices of comparable of new homes, leading both first-time buyers and the home upgrader to choose existing homes. Second, this is a base effect. The platform's new home transaction had a relatively higher base in last Q3 as many policy-driven new home subscriptions in Q2 were transacted in Q3, causing a timing mismatching with the market data. Third, of course, it is important to note that in recent years, our new home business has grown rapidly from a lower base as we made significant gains in brokerage penetration. The scale of our collaborative projects and our sales through network and capabilities, we estimate the brokerage channel penetration ratio in the new home market has grown to over 50% this year from approximately 30% a few years ago. In cities we operate in, the coverage of our collaborative project has expanded to over 70% from roughly 39% in 2023. To achieve further growth in a higher base, we have several key opportunities. First, we plan to expand into more cities and broaden our target market. Second, broker channel penetration in China still lags behind developed markets, leaving ample room for growth. Third, we leverage refined operation management to enhance the service capability for the new home customers and sales efficiency as well as improve our coverage and sell-through capability for high-end products. Now let's take a closer look at the details. First, we are piloting lighter product offerings to tap in some lower-tier cities through what we call B+ products. Our platform business still has over 150 feature and country-level market now yet to be covered. Building on our commitment to authentic listings, the B+ pilot equips local brokerage stores and agents in more cities with system capability, traffic support and commercialization tools. This lighter operational approach enables more flexible collaboration on home listings and sales and new home sales with our channel partners. As of September 2025, our B+ business has been piloted in 4 cities, and we plan to expand to over 30 cities by end of the year, unlocking additional market opportunities. Second, we see room to grow our sales opportunity with collaborative projects. On to customer end, we will optimize content development and operational strategy for our new home business to reach more buyers and increase conversion rates. On to customer end, we will iterate our partnership models under product offerings to developers. Third, both supply and demand in new home market are increasingly shifting towards the home upgrade projects. On supply side, we will more precisely identify these projects and boost their exposure to both agents and customers. We then match suitable agents to these upgraded projects and direct more customer traffic to them, creating a closed loop among homes, agents and customers. This approach will also help agents strengthen their sales capability for upgrade products and narrow the price gap between the platform average new home unit and the broader market. Thank you. Operator: Your next question comes from Griffin Chan with Citi. Griffin Chan: [Foreign Language] Yes, I'm going to translate my question. So this is Griffin from Citi Property Team. So how did the leasing service business managed to turn last year losses into the operating profit by third quarter this year? And what opportunity remains further improvement going forward? Tao Xu: Yes. Thank you, Griffin. The profitability of our home rental services improved significantly this year. Excluding headquarter locations, city level operating profit breakeven in Q2 and become profitable in fiscal Q3. First, we benefited from economies of scale from rapid growth in both SKU and revenue. The total number of managed units exceeding 660,000 by end of Q3, up 75% year-over-year. Revenue from our home rental service business reached RMB 5.7 billion in Q3, up 45.3% year-over-year. The contribution profit from our home rental services also rose significantly to nearly 500 million in Q3, up 186% year-over-year with contribution margin of 8.7%, up 4.3 percentage points year-over-year. On one hand, the light asset model of our Carefree rent business has given us a higher margin, lower risk rental structure. Starting in Q3, the revenue from newly added rental units and renewed existing unit under Carefree rent has been accounted on a net basis. In Q3, rental units under the net revenue accounting method made up 25% of the total units under management, up 10 percentage points quarter-over-quarter, contributing approximately RMB 470 million in revenue. This structural shift drove RMB 130 million increase in Carefree rent's Q3 contribution profit and lifted its contribution margin by 3 percentage points. At the same time, 2025 has been a year of improving operational efficiency. Streamlined and highly efficient operation have driven the reduction in several cost ratio, adding about RMB 170 million to contribution profit and increasing contribution margin by roughly 1.5 percentage points. Excluding rental costs recognized on a gross basis, the main cost of Carefree rent are labor cost, channel cost, post-rental installation and default costs. The improvement was mainly driven by the optimized operation labor cost. In Q3, the average monthly number of units managed per property manager exceeded 130 compared with over 90 in the same period last year. In the first 3 quarters of this year, average monthly efficiency in unit sales and occupancy rose by approximately 10% and 28% year-over-year, respectively. The default cost ratio declined by 0.1 percentage points, benefiting from our strong leasing capability. In Q3, initial leasing success rate improved by 0.9 percentage points year-over-year. So far this year, contribution profit from our Home Rental Business segment has grown much faster than operating expenses. These expenses mainly comprise headquarter and city level staff compensation and R&D with a quite low expense ratio. A series of operating management tools have consistently improved the productivity of our middle and back office personnel. The average number of units under management by each middle and back office personnel rose by 7.5% year-over-year, while the overall operating expense ratio declined year-over-year. In the coming years, there is a significant room to continuously improve the contribution margin in our Carefree rent business. The key drivers will be the continuous growth potential of the rental unit scale of the Carefree rent and the ongoing improvement of our operational efficiency. From a per UE optimization perspective, we are diversifying our channels for renting out our property to reach broader tenant demographics, increasing the share of our in-house rental occupancy team and reducing reliance on the concentrated broker channels. This is expected to lower the per unit channel cost ratio. In addition, labor costs remain a large part of per unit UE and there is still room for further reduction of the cost ratio. We see the potential to nearly double the number of units managed per property manager, moving towards to an average over 200 units per person. Furthermore, we will keep exploring and expanding diverse value-added services with the home rental ecosystem. We will continue to invest in AI and online digital capability within our home rental service, while other operating expenses should stay relatively stable. As the business continues to scale and we further optimize per unit UE, we expect our home rental service to maintain a strong operating leverage in the year ahead. Thank you. Operator: Your next question comes from Jiong Shao with Barclays. Jiong Shao: Thank you very much for taking my questions. My question is around your renovation business. You have done very well in cities like Beijing and Shanghai. And I was just wondering, for you to do well in those cities, is that because you have high market share with your Lianjia brand in those cities? And what sort of -- do you think that's a key reason? And do you think for cities outside Shanghai and Beijing, how would you kind of motivate your agents to cross-sell or to sell the renovation business when you don't have such a high market share? Tao Xu: Thank you, Shao Jiong. First of all, it is important to note that the home renovation market in second and third-tier cities represent a critical long-term growth driver for our future home renovation business, carrying irreplaceable strategic value. From a market fundamental perspective, compared to the first-tier cities, the cost of purchasing a similar size of property is much lower in small cities. Based on the latest data from our platform, the average price of existing home in Beijing and Shanghai is around RMB 4 million versus just over RMB 1 million in other cities. This price gap presents a meaningful opportunity as customers in second and third-tier cities can allocate a relatively larger budget for the home renovation. In 2024, we recorded approximately 1 million existing home transactions outside Beijing and Shanghai. In these cities, home renovation contract orders generated through our agent network only accounted for around 30% of overall home renovation contract orders. Our conversion rate from existing home transaction to home renovation contract in these cities were just less than 5% compared to over 20% and 10% in Beijing and Shanghai, respectively. Our strategic rationale is clear. Larger scale expansion into additional cities will only picking once the home renovation business underlying operational capability are mature. And the model has been fully proven in the core cities. Therefore, our resources are highly concentrated in core cities at this moment, and we have not yet made a big effort to drive traffic for our home renovation business through non-Lianjia agent channel in the second and third-tier cities so far. This approach is to ensure that every step of our growth is solid and sustainable. Meanwhile, we put in place a multidimensional systematic operational framework to engage with and motivate non-Lianjia agents. It includes 3 components. First, we aim to deepen our operation team's understanding and expertise in home renovations. Our operation teams have also shared knowledge and a proven operational capability to connect the store owners and agents, fostering an ecosystem marked by professional collaboration and shared competency. Second, we rolled out innovative incentive program to build an online brand promotion metrics. By offering incentives such as bigger coins, we encourage more connected store agents to visit our offline home renovation stores and showcase our service through the short video, which then will also upload to the leading social media platforms such as Douyin. Since launch of this program in the late April of this year, more than 30,000 agents in over 30 cities have uploaded over 50,000 short videos. This has cultivated a positive environment of full participation and widespread promotion. Lastly, on top of improving agent capability, we are leveraging AI to boost the contract conversion efficiency. Using AI, we access key attributes of the property within the store owners coverage area such as property age, layout, condition and quantitative scores. This allows us to accurately identify high-scoring homes with a higher likelihood of generating home renovation business. Feedback from the pilot cities has been extremely positive. While high-scoring homes constitute only low single digit of the total home renovation lease, they contribute to over 20% of preliminary home renovation contracts, underscoring AI's value in boosting our operational efficiency. In Q3 this year, our home renovation leads from non-Lianjia agent channels achieved year-over-year growth and the lead to contract conversion rate increased compared with last year's average. In the short term, our approach for the home renovation business remains relatively conservative. In the long run, once our home renovation service meet our established high standards across customer experience, product competitiveness and the delivery quality; we will initiate a more proactive traffic diversion strategy through non-Lianjia agent channels in the cities outside Beijing and Shanghai. Operator: Our next question comes from Timothy Zhao with Goldman Sachs. Timothy Zhao: My question is about your cost and expenses. Could you further elaborate what are the measures for the company to control costs and any effect or outcome that you have seen so far? And what we should expect from this cost and expenses line going forward? Tao Xu: Yes. Thank you, Timothy. Under the strategic guidance of operational efficiency enhancement, all businesses have ultimately implemented a series of optimization measures and achieved the phased results. Now I'd like to elaborate on the cost reduction, achievements of each business line and overall operating expenses in the third quarter of 2025. For our existing home transaction services, we continue to boost the productivity of our Lianjia team and organizational optimization has driven a notable decline in labor cost. Organizational optimization has directly led to a cost reduction with fixed labor costs in Q3 decreasing by more than 20% compared with the peak in Q4 last year. And the labor efficiency has been continuously improving. For new home transaction services, we have both streamlined fixed labor costs and the variable cost structure through streamlining the organizational structure of new home operation team. We have achieved a reduction of more than 40% relatively in relevant fixed labor cost compared to the peak in Q4 last year. On the variable cost side, the gross profit margin per project has been steadily increased by focusing sales strategy to maximize unit sales per single housing project. The commission speed of non-Lianjia channels has decreased by more than 1 percentage point from the peak in Q1 this year. For our home renovation and furniture business, we have effectively lowered the material cost through supply chain integration. By streamlining partner brand selection and SKU counts, we have achieved significant cost savings in procurement. Our centralized purchasing category has expanded from 4 as of Q2 to 13 as of Q3, covering core categories such as wooden doors, flooring and towels. The procurement unit price of some products has decreased by over 20%. The effectiveness of the cost optimization has been reflected in the financial report with the proportion of material-related costs as a percentage of revenue in Q3 decreasing by about 1 percentage point compared to last year's average. For our home rental services, cost reduction has been driven by both technological empowerment and the business model refinement. We have improved the efficiency of the rental housing channel management through AI empowerment and the task specialization of the service providers. The proportion of operating labor cost to revenue in Q3 decreased by around 1 percentage point year-over-year. For store cost, we have reduced fixed expenses through the refined management and closed underperforming stores. The number of actively [indiscernible] stores has been decreased from around 5,600 as of Q4 last year to less than 5,200 at the end of Q3, a decrease of around 8%. Meanwhile, we have actively promoted the rent negotiation with existing industrial owners and achieved average rent reduction of over 10%. Regarding the control of the operating expenses and R&D investments, for G&A expenses, we have achieved efficient cost control through the organizational optimization. On a non-GAAP basis, the G&A expenses of the home renovation business have decreased by more than CNY 100 million compared to the peak in Q3 last year. This was mainly due to the adjustment of the organizational structure. The headquarter's G&A has also been optimized based on the market conditions. For sales and marketing expenses, both marketing spending optimization and the improvement of the labor efficiency have been implemented. On a non-GAAP basis, the sales and marketing expenses of the housing transaction business have decreased by around RMB 90 million compared to the peak in Q3 last year, mainly through the optimization of the advertising and the marketing placements. The related advertising and promotion expenses have declined by more than 20% compared to the peak in Q3 last year. The sales and marketing expenses for home renovation business have decreased more significantly by more than RMB 100 million compared to the peak in Q3 last year. The core driving factors, including AI technology enhancing the operational efficiency of the containers and other front-end staff as well as organizational optimization that improved the workforce structure. For R&D expenses, on the non-GAAP basis, the expenses in Q3 increased by around RMB 79 million year-over-year as the scale of R&D team has expanded steadily. As of Q3, there were more than 2,300 R&D-related personnel, an increase of more than 100 compared with Q3 last year, among which the number of AI-related R&D personnel exceed 600, doubling compared to the same period last year. R&D resources continue to be tilted towards the core areas with R&D investment related to AI in Q3 exceeding RMB 150 million, nearly doubling compared to the same period last year. Our operational efficiency enhancement strategy has a clear execution path. We firmly believe that with the market environment stabilized, our continuous operation optimization will fully release the operating leverage effort. Operator: We are now approaching the end of the conference call. I will now turn the call over to your speaker today, Ms. Siting Li, for closing remarks. Siting Li: Thank you once again for joining us today. If you have any further questions, please feel free to contact Beike's Investor Relations team through the contact information provided on our website. This concludes today's call, and we look forward to speaking with you again next quarter. Thank you, and goodbye.
Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Tower Semiconductor Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. I would now like to hand the conference over to your speaker today, Ms. Noit Levy, Senior Vice President of Investor Relations and Human Resources. Please go ahead, madam. Noit Levi-Karoubi: Thank you. Good day, and thank you, everyone, for joining us. Welcome to Tower Semiconductor's Third Quarter 2025 Financial Results Conference Call. With us today are Mr. Russell Ellwanger, our CEO; Dr. Marco Racanelli, our President; and Mr. Oren Shirazi, our CFO. Before we begin, please note that certain statements made during this call may be forward-looking and are subject to risks and uncertainties that could cause actual results to differ materially. These risks are detailed in our SEC filings, Form 20-F and 6-K as well as filings with the Israeli Securities Authority, all available on our website. Tower assumes no obligation to update forward-looking statements. Our third quarter 2025 results are prepared in accordance with U.S. GAAP. Some data presented may include non-GAAP financial measures as defined under SEC Regulation G. Reconciliations to GAAP figures and full explanations are provided in today's press release and financial tables. For your reference, the supporting slide deck is available on our website and integrated into this webcast. With that, I'd like to turn the call over to our CEO, Mr. Russell Ellwanger. Russell? Russell Ellwanger: Hello, everyone. Thank you for joining this earnings call. We are in the best position, growing our core technologies, Power Management, CMOS Image Sensors, 65-nanometer RF Mobile, each of which demonstrating year-over-year revenue growth, providing an excellent foundation on top of which the extreme AI-driven data center demand for our silicon photonics and silicon germanium RF platforms is driving unprecedented company growth. We ended our third quarter with revenue at $396 million, resulting in net profit of $54 million. We guide our fourth quarter to be a revenue record of $440 million, plus/minus 5%, fulfilling our beginning of year target of quarter-over-quarter growth throughout the year with strong acceleration in the second half. This underscores the increasing demand momentum we see in our served markets and is as well the result of further manufacturing capabilities, namely the very first step of a large ramp, having repurposed with added capacity for factories towards new and/or stronger silicon photonics and silicon germanium capabilities. The fourth quarter guidance indeed demonstrates the burgeoning trajectory we are on. In the following minutes, we will present the successes that we share with our customers, driving top and bottom line growth over the years to come. Now to review our third quarter of 2025 revenue breakdown and discuss the key trends, please see Slide 4 as reference. Our RF infrastructure business continues to deliver exceptional growth, increasing its contribution to corporate revenue from $67 million or 18% of corporate revenue in the third quarter of last year to $107 million or 27% for the third quarter of this year. For the full year, we expect this business to grow by 75% with silicon photonics more than doubling from the 2024 $105 million. This significant expansion reflects the strong customer adoption of our advanced technologies and validates our strategic investments in these markets. The momentum we are seeing positions RF infrastructure, silicon photonics and silicon germanium platforms as a key pillar for our long-term growth, fortified and propelled by deep partnerships-based innovations with the foremost industry titans. Our silicon photonics business grew in the third quarter to $52 million, approximately 70% growth as compared to the third quarter of 2024. Market demand for silicon photonics continues to surge, driven by a stronger-than-anticipated ramp in 1.6T products on top of the robust 400G and 800G demand. We have expanded capacity with our advanced SiPho platforms in Fab 9, San Antonio, having shipped revenue wafers in the third quarter and expecting multiple thousands to be shipped in the fourth quarter of this year. We are in advanced stages of qualifications in Fab 2, Israel, expecting our first production shipments in the first quarter of 2026. In 300-millimeter, we have started wafer production for the innovative receipt products we announced last quarter and anticipate revenue contribution from 300-millimeter silicon photonics to start in the fourth quarter of this year. Our capacity growth is fully aligned with and spoken to by our customer demand outlook. Silicon photonics continues to increase market share over EML solutions given its significant cost advantage. SiPho typically requires half the number of lasers as an equivalent EML product with performance benefits, especially seen at 1.6T. As such, we anticipate this market share shift to be permanent. Hence, we are, at this point, going to add additional CapEx to address an even increased surging demand. Looking at next-generation 3.2T data rates, which will require a doubling of speed for each lane from the current 200 gigabit per second to 400 gigabit per second, we have multiple programs with industry leaders to both extend silicon capability, but we are also pursuing integrating indium phosphide modulators for our previous announcements with OpenLight and as well are investigating other material systems to ensure that our customer partnerships are not just ready, but leading the transition to next-generation requirements for 3.2T and 6.4T. In the past quarter, in partnership with Xscape Photonics and NVIDIA back start-up, we delivered the industry's first optically pumped on-chip multi-wavelength laser platform for AI data center fabrics. This innovation further expands our participation in the laser market, particularly for co-packaged optics applications, a significant adjacent opportunity, leveraging our high-volume SiPho platforms. We showcased these advancements along with others at a highly successful Tower Technical Symposium event in China with approximately 300 attendees, where eOptoLink delivered the keynote addressing Tower's role in supporting phenomenal market growth. Later this month, we anticipate another great TGS event in Santa Clara with Broadcom's President, Charlie Kawwas, delivering the invited customer keynote. Looking at silicon germanium, Silicon germanium transimpedance amplifiers and laser drivers are essential components for optical transceivers. The growth in SiGe demand is a function of data center build-outs, be it SiPho or EML-based solutions with an additional accelerator, the adoption of linear pluggable optics. Due to the elimination of the DSP in the LPO module, LPO requires both the driver for transmit and the TIA for receive to have an added function of continuous time linear equalizer, which significantly adds to the silicon area of each of the TIA and drivers, hence, nicely increasing the amount of silicon needed per unit. Multiple SiGe customers have begun material LPO production volumes, indicating a clear upward trend in this market. We started silicon germanium production in Fab 2 of our most advanced SiGe platforms and are seeing eager adoption by these customers, driving meaningful additional contributions to SiGe capacity and shipments projected to ramp throughout 2026 and delivering high volumes thereafter. In addition to infrastructure, we have secured a new silicon germanium wall noise amplifier designed for a Tier 1 handset customer with an initial ramp in Q4 '25 and then proceeding through 2026 and beyond, adding a significant new growth opportunity to our existing leading market share in optical transceivers as discussed, itself being a high-growth market. Moving to RF Mobile. It represented about 26% of our Q3 '25 corporate revenue. RFSOI has shown steady quarter-over-quarter demand increases with our more advanced 65-nanometer 300-millimeter platform at higher than 20% increase second half 2025 over second half 2024. We released this quarter an updated RFSOI technology that not only provides double-digit better Ron-Coff relative to our competitors as measured by multiple Tier 1 customers, but also reduces layer count by 15%, improving our customers and our margins, hence, enhancing our market share. This technology also allows customers the freedom to make a trade-off between the better Ron-Coff to enable a smaller die size or to have higher power handling. And as such, we are seeing strong customer traction, providing much confidence in multiyear growth. This quarter, we made important advancements in our sensor and displays technologies, which represented 14% of our third quarter corporate revenue and expected to show mid-teens full year-over-year growth. We received our first production PO for Q1 '26 shipments for OLED display backplane silicon and continue to enhance this offering, having added high-speed logic and high-speed SRAM capabilities, enabling support for 120-hertz refresh rates, critical for next generations of VR and MR applications. Medical and photography sensor revenue remained stable, while the majority of our growth and strongest position is in machine vision, where we supply the second largest player in this market in addition to other key customers. Power management represented 17% of our third quarter corporate revenue. Our power business has performed well, targeting a year-over-year growth of 15% with disproportionately higher growth for advanced 300-millimeter platforms, one driver of which being the strong ramp of the handset envelope tracker [indiscernible] volume expected to continue through the next multiyears. Targeting the growing market of data center power, we have recently demonstrated 16-volt operating voltage devices with more than 40% lower Rdson than prior technology and as well introduce new elements to our 1.2, 3.3 volt 65-nanometer BCD flow, improving power conversion efficiency aligned to our key customer needs. The wireless charger IC market is growing rapidly and demanding higher voltage LDMOS. To that end, working closely with lead customers, we have provided a 40-volt extension to our 300-millimeter BCD process. Specific to automotive and battery management applications, we have multiple engagements for a differentiated 140-volt reserve flow allowing higher voltages without the need for the added high expense of SOI substrates. We've continued to add to the competitiveness of this platform, greatly reducing the cell size through added features and optimized architecture. Moving to utilization. At years begin, we announced a repurposing of several of our factories, predominantly towards higher capacities for RF infrastructure, namely silicon germanium and silicon photonics. To upgrade -- to update on the progress, qualification and initial ramps are going well with hundreds of silicon germanium wafers shipped in Q2 and thousands in Q3 from Fab 9 in San Antonio. We met our first internal milestone of customer SiPho shipments in Q3 from San Antonio with several thousands planned to ship in Q4. Fab 2, Migdal Haemek, Israel is on track to ship our first and meaningful number of silicon germanium wafers in Q4 '25 and silicon photonic wafers in Q1 '26. Additionally, we expect to see our first production revenue for SiPho at 300-millimeter in Fab 7 in this present quarter, Q4. Therefore, while we are in the final qualifications and initial ramp of the repurposed fabs and added capacity, our third quarter utilization levels, Fab 2 in Israel operated at about 65% utilization. Fab 3 maintained our model full utilization of 85% with growing activities for SiPho capacity. Fab 5 was at 75% utilization. Fab 7, 300-millimeter was fully utilized, well above our 85% utilization model. Fab 9 was at 60% utilization. In summary, what a position to be in with all our core technologies demonstrating year-over-year revenue growth, the right technologies growing with the right customers. On top of this, our long-term silicon germanium leadership for optical transceivers, coupled with correct market insights, namely believing in the benefits of silicon photonics, having begun 8 years ago with the right partner and adding those who have become the most momentous adopters of this technology has enabled us by far to be in the lead position for silicon photonics manufacturing and development. This has proven timely to meet the soaring demands of data center technology road map and build-out. A present and future pathway for unprecedented growth for Tower. In close collaboration with our customers, we have advanced both capacity increases and technology road map deliverables real time, addressing the rocketing requirements for AI infrastructure. Specific to demand-driven capacity expansions, we target 2025 silicon photonics revenue to be above $220 million, up from $105 million in 2024 and very importantly, at a Q4 '25 annualized revenue run rate exceeding $320 million. The $320 million SiPho run rate is enabled by the very first steps in qualification and ramp of the previously announced $350 million investment. We have begun an additional investment of $300 million for further substantial SiPho capacity expansion, and next-generation capabilities in Fab 3, Fab 9, Fab 2 and Fab 7, this investment targeted to achieve full volume in wafer starts in the second half of 2026. The total capacity is fully aligned to and directly requested by our customers. The resulting capacity should increase our SiPho shipments by over 3x against our targeted fourth quarter '25 qualified utilized capacity. With that, I'd like to turn the call to our CFO, Mr. Oren Shirazi. Oren, please. Oren Shirazi: Hello, everyone. Earlier today, we released our quarterly financial results and balance sheet. For the third quarter of 2025, we reported revenue of $396 million, reflecting a year-over-year revenue increase of 7% and a quarter-over-quarter revenue increase of 6%. Gross profit for the first quarter was $93 million, 16% higher compared to $80 million in the second quarter, and operating profit was $51 million, 27% higher sequentially compared to $40 million in the second quarter. Net profit for the quarter was $54 million, 15% higher compared to net profit of $47 million in the second quarter and earnings per share were $0.48 basic and $0.47 diluted as compared to $0.42 basic and $0.41 diluted earnings per share reported for the second quarter. Newport Beach fab lease extension. As mentioned in today's press release, to address the continuous and growing SiPho and SiGe demand and given the full utilization of our Newport Beach fab, we are extending the Newport Beach fab lease by up to an additional 3.5 years beyond its previous 2027 term. An upfront lease payment of $105 million will be recorded as cash used for operating activities in our Q4 '25 statement of cash flows with corresponding impact on our balance sheet cash amount, while the resulted P&L impact would be, as announced earlier today, $6 million per quarter to be recorded over a 5-year period as required by GAAP in the COGS line. Hedging, I would like now to describe our currency hedging activities. In relation to the Japanese yen, since the majority of TPSCo's revenues is denominated in yen and the vast majority of TPSCo's costs are in yen, we have a natural hedge over most of our Japanese business and operations. To mitigate part of the remaining yen exposure, we are executing zero-cost cylinder transactions to hedge the currency fluctuations. Hence, while the yen rate against the dollar may fluctuate, there is limited impact on our margin. In relation to the Israeli shekel currency, while we have no revenues in this currency, since a portion of our cost in Israel is denominated in shekel currency, we also hedge a large portion of such currency risk by engaging 0 cost cylinder transactions to mitigate this exposure. Hence, while the shekel rate against the dollar may fluctuate, the impact on our margins is limited. Moving to our balance sheet and future cash and cash -- CapEx and cash plans. As I noted earlier, our balance sheet remains very strong as evidenced by the following indicators and financial ratios. As of the end of September 2025, our assets totaled over $3 billion, primarily comprised of $1.4 billion in fixed assets net, mainly comprised of fab machinery and $1.8 billion of current assets. Current assets ratio is very strong at about 7x, while shareholders' equity reached a record of $2.8 billion at the end of September 2025. Our strong financial position allows us to invest in strategic opportunities that support our corporate vision as follows: for our high-margin SiPho and SiGe business, we previously announced plans to invest $350 million to expand our capacity in our 8-inch fabs in Israel and Texas and in our 12-inch Uozu fab in Japan. This CapEx includes a large portion of capability CapEx for advanced development and high-end RF technology-related projects. 50% of this amount has been paid to date, while the remaining 50% are expected to be paid in the coming year. In addition, as we announced earlier today, we have decided to allocate an additional $300 million investment for capacity, growth and next-generation capabilities, mainly for machinery for additional SiPho and SiGe capacity growth for our 8-inch fab and for our 12-inch fab. This would put total SiPho and SiGe capacity and capabilities related CapEx plan at an aggregate of $650 million. All of these investments are fully reflected in our previously presented strategic and financial model. Under this model, we are targeting $2.7 billion in annual revenues at full loading of our existing fab and qualified capacity, including the previously stated capacity expansion plan, $560 million in annual operating profit and $500 million in annual net profit. That concludes my prepared remarks. Now I'd like to turn the call back to the operator so we can take your questions. Operator: [Operator Instructions] And we're going to take the first question and it comes from the line of Cody Acree from Investment Bank. Cody Acree: Congrats on the progress. Oren, if I can just get a quick clarification. You said that the incremental $300 million was already considered in your $2.77 billion total revenue expectations long term. Is that right? Oren Shirazi: Yes, yes. It may mean that we will achieve this target earlier than somebody previously expected. But yes, it is included. Cody Acree: Okay. So if no incremental upside, then what's the accelerated pace do you expect? I guess, what's the give and take of that extra CapEx? Oren Shirazi: Acceleration of achievement towards the $500 million net profit run rate, which, as you know, we are still not there. So we will accelerate the achievement. And of course, the accelerated achievement will enable higher profit sooner. Cody Acree: Okay. Great. And then maybe, Russell, can you just talk about some of the applications that you see driving the aggressive growth you're seeing in RF infrastructure? Russell Ellwanger: Yes. The biggest and strongest is just really the need for build-out, specifically, I think, AI-driven, but it continues for high volumes of 400 gigabit per second, very high volume of 800 gigabit per second in multiple formulations of it, both DR8 and 2xFR4s. And then as stated, a very high volume right now going into 1.6 gigabit where we're seeing somewhere about 30% of all of our starts being dedicated to that platform presently. So it's really just for the continual build-out of data center and a big movement right now going into the 1.6 G. Operator: Now we'll go and take our next question -- and it comes from the line of Tavy Rosner from Barclays. Tavy Rosner: Congratulations on the strong results. I wanted to ask 2 quick ones on the silicon photonics, please. You mentioned the leading position of Tower. So who do you see as your main competitors these days? And given the supply-demand imbalance at the moment, are you able or considering to raise prices? Russell Ellwanger: Abel is -- probably the answer to that would be yes. But considering no, we're very close with our customers. We understand what their needs are. We have long-term road maps, and we're not opportunistic if you would look at it that way of because demand is very, very tight to gouge somebody for an extra couple of wafers. I think that's the surest way to losing goodwill and partnership. What we are seeing, however, is extremely strong demand. And having stated that, that's the reason for after having invested $350 million, which is -- we're seeing the first signs of that ramp right now to increase another $300 million of investment. I had stated that we're targeting a Q4 SiPho revenue shipment run rate of over $320 million. And against the qualified capacity that we're shipping the Q4 against, we're increasing that by over 3x in start capability within the next 4 quarters, expecting to have that entire 3x plus available for starts in the second half of 2026. So that's quite a bit, if you were to say 3x of a $320 million run rate, that's quite a substantial growth in SiPho that we're projecting for ourselves. So having come from, what, plus/minus $28 million '23 to $105 million in '24. So this year, we're targeting over $220 million for the full year with a $320 million plus run rate in Q4, but bringing that to well above $900 million by target. And that target is really spoken to by customers. That's not field of dreams, if you build it, they will come. That's customers saying, please build it, we need the capacity. And so I think we sit very strong with our relationships with SiPho. Now also I stated that in the script that we're doing quite a bit on capability, not just for present 1.6T generation, but to make sure that our customers are in a leading position for the capabilities needed for 3.2T or for 6.4T, specifically the needs for a faster capable modulator of a 400G. And those activities are very real time. So we're investing real time on increasing capacity, which is really being demanded by the industry. And fortunately, as stated, we are by far in the leading position on manufacturing, but believe also to be in the leading position as far as developing next-generation platforms with the leaders so that we're both prepared well before the demand actually arises. Did that answer your question, I hope? Tavy Rosner: Yes. Just [indiscernible] the first part, do you see any changes in competitive dynamics? Anyone else deploying capital in that field to try and take some share away from you guys? Russell Ellwanger: I believe that most people would like to take share from us. It's a good growth market with good strong customers. The point is really to the question that you asked, to be opportunistic on pricing would be probably a good invitation for our customers to say, hey, we don't want to be a long-term partner, go look for someone else that you can leverage us with pricing on, and they don't have to do that. We're working very closely with our customers to be reasonable and to have win-wins on both sides. So -- but yes, I'm sure that there's others that are trying to eat into where we're at. It's very difficult, though, for somebody to break into our position right now. Fortunately, and really for this call, have with us Marco Racanelli, the RF activities report directly under him. I don't know, Marco, if you had any color you wanted to add to that. Marco Racanelli: Yes. I think on the pricing discussion, as you say, we're not taking advantage of the situation just because capacity is tight in the industry today. But we are adding value in our advanced platforms. And so in that regard, we do price higher technologies that deliver more value to customers. So in that aspect, over time, we do anticipate some price improvement as customers migrate to these more advanced technologies. And I will say as well that SiPho is already very accretive in margin. So it's -- we do get paid for the value that we add, and that's how things should be based. We stated very strongly that SiPho has a very strong benefit for our customers against EML. So for our customers to be using our platforms now, and if you look at a halving of lasers, it's a big deal. You have as well at this point then for the 1.6T, the use of a silicon modulator that's inside of the PIC itself versus needing an indium phosphide modulator that costs much more money and quite a bit of 3.5 area. So there's value in the platforms. And obviously, we both share in whatever value is created. Operator: And it comes from the line of Richard Shannon from Craig-Hallum Capital Group. Richard Shannon: Congrats on some very nice numbers here. Let me start off with a few questions here on silicon photonics. Russell, you made an interesting comment that I probably didn't transcribe in my own notes here very well, but you mentioned something about the shift to silicon photonics is permanent. Can you explain what you mean by that, please? Russell Ellwanger: What we stated in the script, it's very cost conducive against EML. It takes half the lasers. So if you look at twofold, the cost of 3.5 and also the capacity constraint of 3.5, that's both a big benefit to be able to use silicon photonics at the 400, 800, 1.6T and potentially, depending on development, even at 3.2T, going to SiPho, you have a silicon modulator, which is also very cost conducive against needing to have a 3.5 modulator. So yes, by stating that there's a cost benefit that certainly drives long-term stickiness. But in addition to the cost benefit, there's performance benefit as well. And when you combine cost and performance, that's really an absolute winning combination for market share stickiness, right? Richard Shannon: Okay. My second question is looking at 1.6 here. Obviously, we're seeing module makers talk about some nice ramps you're starting next year. What kind of mix do you expect to have of 1.6 versus slower speeds in your business, I don't know, next year or in a particular point? Just trying to get a sense of how fast this is scaling versus the older slower technologies. Russell Ellwanger: Right now, the 1.6 is close to 1/3 of our starts. So that gives you a feel for where we're at right now, and that's up from almost nothing at the beginning of the year, but a very quick ramp movement to the 1.6T. I would expect that it will go to over 50% within the first multiple quarters of the next year. Richard Shannon: Okay. That is helpful. My last question on silicon photonics here is following up on your comments as well as one of the questions here about reaching 3x. I think it was a capacity comment in silicon photonics from the run rate of this current fourth quarter. What kind of time frame do you expect to be able to get to your full utilization level on that? It sounds like you could be this year -- or excuse me, in '26, but I just want to get your sense of what you're expecting there. Russell Ellwanger: The demand is there or will be there by customer forecast. By planning, we should be fully installed within the first half of '26 and having all the tools up and running, being able to hit the full start capability within the second half. So the shipment level really depends at what point in the second half we do the wafer starts. You're typically be looking at somewhere of a 3- to 4-month cycle between the starts and the shipment, given whatever the PO -- the size of the POs are. So we certainly would foresee seeing a portion of this increased capacity coming into revenue within the second half of '26. But take into account that the first ramp that we're doing has not been realized yet either. So the previous $350 million investment is right now in its first stages of ramping. So within the first half and predominantly in the second quarter, we should see a very big pickup in our silicon photonics shipments revenue, and that should continue in the third and fourth quarter. Will we hit the full 3x or 3-plus x shipment capacity in 2026, that I really don't know. The demand is there. It's a question -- and I do believe that we'll start the full amount within the second half of the year. The shipment could drag on into Q1, plus/minus, but I think we'll see -- we should see a good amount of it. I mean that's why we're doing the investment. And certainly, that's why we're accelerating it. Richard Shannon: Okay. Perfect. One last question for me, I'll jump out of line. Oren, can you talk about kind of gross margin fall through in the next few quarters, obviously, knowing that silicon photonics is a margin-accretive business for you, and it sounds like that will be your major driver here. How do we think about this going forward here? And I want to get a sense of also when additional depreciation builds in here to think about that going forward? Oren Shirazi: Yes. So I think currently, the gross profit in Q3 was 24%, $93 million over $396 million, that's the actual number. And it should be better. As you see our long-term financial model and which has higher percentages. And usually, we speak about incremental margin of 50%. And of course, because of the cycle, it will be higher nicely, and it will be offset by 2 elements. One is the Newport Beach lease amount that we said that we will pay additional $6 million -- not additional, we will pay a total of $6 million. And the second is what you mentioned here correctly, the depreciation from the additional CapEx. The total additional CapEx is $600 million over 15 years. So it's about $10 million a quarter. But some of that already started. So it's a gradual ramp towards the $10 million. Operator: Now we're going to take our next question and it comes from the line of Mehdi Hosseini from SIG. Mehdi Hosseini: A couple of follow-ups, and I apologize, I joined the call late. I apologize if I'm repeating some of the questions already covered. Russell, when you look at the opportunities associated with transceiver, are you also baking in increased content? In other words, I'm under assumption that most of the opportunity is currently on the transmit side and whether receive side of transmitter would also give you opportunity to increase content. Russell Ellwanger: Certainly, to increase volumes. But had stated that really a very nice immediate upside was a pretty advanced platform that's shipping at 300-millimeter receive SiPho in the fourth quarter. And we'll go into some several formulations beyond what we're doing in the fourth quarter in 2026. So yes, the receive is incremental served market that right now, most -- well, everything we're doing other than this first 300-millimeter activities is for transmit. So very good question. Mehdi Hosseini: Is there any way we could kind of think about how this SiPho capacity increase by 3x would be split into increased content versus units of transceiver shipped to the end market? Russell Ellwanger: I'm not really sure exactly what you mean by increased content, but it's units being used in transceivers. So -- and at the 1.6 -- I'm sorry, go ahead. Mehdi Hosseini: Right, right. As you increase the mix of receive and transmit within the same transmitter, how much of that is baked into capacity increase of 3 times -- or 3x? Russell Ellwanger: Right now, the increase of 3x is including very little received. It's most all transmit. Mehdi Hosseini: So would you need to increase capacity again as your customers migrate to receive SiGe with SiPho? Russell Ellwanger: Yes, and we'd be really thrilled to do so. We have platforms that are doing it. I mean it's not that we're not proactive against it. It's that right now, the transmit demand is so high. But yes, receive, but receive really comes into very strong capabilities with DEMuX, and that's a big area that we're focused on. Mehdi Hosseini: Okay. Just a quick follow-up. In the longer term, where are we with packaging? I think a couple of quarters ago, you highlighted doing R&D, so you would extend your addressable market to include some packaging. Is there an update you can share with us? Russell Ellwanger: We have an activity with a leading packaging house focused on formulating a CPO, a full CPO. We certainly have other activities around NPO, big activities with through silicon via that's required for NPO and potentially for CPO as well. So we're making progresses there. It's not that there's a lot of CPO being used right now. It's not, but we're making good progresses. We also have other activities driving additional really strong capabilities. We're talking multiple generations down the road, but a really big program focused on 51.2T to have a very, very advanced modulation that would possibly be required within a PIC structure for whatever CPO would be used. Mehdi Hosseini: Okay. And these opportunities are more -- if they materialize into revenue more later this decade, it would take a couple of years for commercialization, right? Russell Ellwanger: I think it's a couple of years before CPO is strongly commercialized period, independent of Tower. Operator: And the question comes from the line of Lisa Thompson from Zacks Investment Research. Lisa Thompson: I was wondering if you could talk a little bit about 3.2T. It seems like the technology may not be able to go from 1.6 to 3.2. Can you tell us kind of where they are specifically with trying to solve that problem? And is there still a risk that an entire new technology might be needed? Russell Ellwanger: I don't think an entire new technology will be needed. There are certain issues even around the DSP that's being worked on. But no, I don't think a new technology. From our standpoint, the thing that's really required is the modulation, as mentioned at 400G. And as stated in the script, we're working on 3 different pathways depending on customers' needs and desires to do the 400G modulator. So from the pure modulation standpoint, I think we're addressing it very strongly with very good progresses from the entire transceiver, the build-out or CPO, I mean those are other issues, but I don't think that they're not attackable or solvable. So I don't think that 3.2T will be held up. Lisa Thompson: Okay. And let me just clarify, is the revenues from SiPho totally gated by capacity? I mean is the demand there if you can build it? Russell Ellwanger: Yes. Lisa Thompson: Okay. And then one small question. When are you going to start reporting Agrate utilization? Is that way far off? Russell Ellwanger: It needn't be. We could start reporting it any time. We just haven't. We're in the midst of the first ramp there. So -- but we could start reporting it. There's no reason that we wouldn't. Operator: And now we're going to take our last question for today. And it comes from the line of Richard Shannon from Craig-Hallum Capital Group. Richard Shannon: Great. Let me ask one more question here. Russell, kind of big picture, looking across your business with the obvious angle also inclusive of silicon photonics. How do you think about 300-millimeter? You obviously have some through a couple of joint ventures or whatever the right term is there with Intel and ST and then have some capacity in Japan here. But how do you think about acquiring more of that? It seems very important for you to have here and obviously, very important for silicon photonics. It's clearly a big growth driver here. Is this something where you can find more partnerships like you have with the 2 partners you've already announced in the past? Or do you see greenfield? Or how do you intend to address that? Russell Ellwanger: Richard, it's an excellent question, and it's one that we're focused on. No, I don't think that we'll be addressing it through partnerships such as what we have with ST or what we have with Intel, we'd be addressing it somewhat organically should we go forward there. But I think it's an excellent preface to be excited for our Q4 release, and we'll be talking more to it at that point. Operator: That does conclude our Q&A session. I would now like to turn the call to Mr. Russell Ellwanger for any closing remarks. Russell Ellwanger: Well, truly, thank you for continued interest in Tower. Thank you for the support of Tower. Certainly appreciate the questions that were asked as well during the call. Really, we're very excited to update you over the coming quarters as this more than 3x capacity that we talk about for the SiPho, SiGe growth as that comes online and to update you about the other progresses and activities. Again, very good question, a question about how this CapEx investment impacts the financial model, where Oren mentioned about it bringing in the time line of reaching certain revenue levels, and it's accelerating the time line at -- due to the SiPho was mentioned accretive margins, doing it at a somewhat different financial model. So we're very excited to update on all of these things. And as we get ready and prepare and give the end of year comments, which is always a summary of the year and an outlook of what we're doing in the coming years, I think there's many exciting things that we'll be talking about with you about the direction of the company and how all of these accretive actions really turn out to be a very strong benefit and a strong ROI. If we look at what we're doing with SiPho as far as CapEx, the really nice thing with the SiPho and the CapEx is that it's truly from the time that you start shipping wafers, you're dealing with a half year ROI on the CapEx that you put into the tools. So that's not from the time of ordering the CapEx, but from the time of actually being qualified and shipping wafers and doing that ramp, ROIs are very, very quick. So as Oren had stated, knowing that we're doing a very big expansion, knowing that, that expansion is spoken to by customers requesting the capacities and seeing the quick turn with this market on an ROI, you can see then how the timing of revenue is really greatly accelerated. And hope to give -- well, not hope, we will be giving much color on that as we give the end of year and the forward-looking statements when we release Q4. So again, very looking forward to going over that with you, an extremely exciting time for the company, extremely exciting, I think, for our customers and for us in the midst of customer partnerships with people that trust us and that look for us for their solution and for growing their own businesses. Very excited to host our 2025 Technical Global Symposium in Santa Clara next week, be November 18, open for all customers, very happy that you would be coming and listening to us. As stated, Dr. Charlie Kawwas from Broadcom will be giving the customer invited talk there. It should be extremely interesting. I've heard him speak at times before and a great speaker with a tremendous amount of knowledge and capability. Dr. Racanelli will be giving an in-depth overview. It sounds like contradictory, but an in-depth overview of all our technologies. And I'll give the introductory talk, really talking about the culture of Tower, where we're going and what is the basis of what I believe to be one-of-a-kind customer partnerships. Now in addition to this technical symposium, on December 10, we'll be participating at the 23rd Barclays Annual Global Technology Conference in San Francisco; on January 13 and 14 at the 28th Annual Needham Growth Conference in New York. And of course, any of you as investors or analysts that wish to have additional calls with the company, please contact Noit or [indiscernible] and very happy to accommodate those according to your needs and desires. So with that, I'll end the call. And again, thank you. A very exciting time. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Hello. This is the Chorus Call conference operator. Thank you for standing by. Welcome to Boston Pizza's Third Quarter 2025 Conference Call. [Operator Instructions] The conference is being recorded on November 10, 2025. [Operator Instructions] At this time, I would like to turn the conference over to Michael Harbinson, Chief Financial Officer. Please go ahead. Michael Harbinson: Thank you, and welcome to the call, everyone. Today, we'll be discussing the 2025 Third Quarter Results for both Boston Pizza Royalties Income Fund, or the Fund, and for Boston Pizza International, or BPI. For complete details on our financial results, please see our third quarter materials filed earlier today on SEDAR+ or visit the Fund's website at bpincomefund.com. Should you require additional information after the call, you can reach out to our Investor Relations e-mail address at investorrelations@bostonpizza.com. The Fund is a limited purpose open-ended trust established under the laws of British Columbia to acquire indirectly certain trademarks and trade names used by BPI in its Boston Pizza Restaurants in Canada. BPI pays royalty income and distribution income to the Fund based on franchise revenues of Royalty Pool restaurants. For a complete description of the Fund and its business, please see the annual information form dated March 28, 2025, which was filed on SEDAR+. Before I turn the call over to Jordan Holm, President of BPI, I would like to note that certain information in the following discussion may constitute forward-looking information. For a more complete definition of forward-looking information and the associated risks, please refer to the Fund's management discussion and analysis issued earlier today. Forward-looking information is provided as of the date of this call, and except as required by law, we assume no obligation to update or revise forward-looking information to reflect new events or circumstances. And with that, I will now turn the call over to Jordan. Jordan? Jordan Holm: Thank you, Michael, and welcome, everyone, to Boston Pizza's Third Quarter Investor Conference Call. Today, I'll be discussing our Third Quarter Results and share a brief outlook. Michael will summarize our key financial highlights. And as usual, we'll leave time for your questions at the end of today's call. Boston Pizza delivered its third consecutive quarter of record franchise sales, continuing the strong performance seen throughout the year. These results show that our current promotions remain effective in driving guest engagement and that our takeout and delivery business continues to contribute meaningfully to sales. The Fund posted franchise sales from restaurants in the Royalty Pool of $248.9 million for the quarter and $731.9 million year-to-date, representing increases of 4.3% and 4.9%, respectively, versus the same periods 1 year ago. Same-restaurant sales was 4.1% for the quarter and 5.0% year-to-date. Same-restaurant sales for the quarter and year-to-date was principally due to the continued momentum in takeout and delivery, effective promotional initiatives and favorable comparisons to a softer performance in the same period in the prior year. From a marketing standpoint, the third quarter of 2025 included a summer promotion in partnership with Live Nation, launching a national giveaway of over 400 concert tickets alongside a refreshed main menu. Our popular Kids Cards promotion made a return in the third quarter as well with families receiving a card for 5 free kids meals in exchange for a $5 donation to the Boston Pizza Foundation. This promotion raised over $1 million in total for local charities. Near the end of the quarter, the Kids Eat Free promotion engaged families further by offering one free kids meal per child with each qualifying purchase. With the transition into the fall season, we introduced a holiday-inspired menu alongside a game day menu for football fans, offering new eats and drinks designed to spark inspiration for the holiday and for football enthusiasts. Our ongoing lunch and late-night promotions will also continue into the fourth quarter with guests responding positively to all areas of our promotions. In terms of restaurant development, 16 Boston Pizza restaurants were renovated during the quarter and 31 restaurants were renovated year-to-date. We have several exciting initiatives underway for the fourth quarter of 2025 to maintain strong sales growth and guest engagement, which I'll share later in the call. But first, let's hear from Michael about the Fund's financial performance. Michael? Michael Harbinson: Thank you, Jordan. The Fund posted royalty income of $10 million for the quarter and $29.3 million year-to-date compared to $9.5 million and $27.9 million, respectively, for the same periods 1 year ago. The Fund posted distribution income of $3.3 million for the quarter and $9.6 million year-to-date compared to $3.1 million and $9.2 million, respectively, for the same periods 1 year ago. Royalty Income and distribution income for the quarter and year-to-date were based on 372 Boston Pizza Restaurants in the Royalty Pool that reported franchise sales of $248.9 million for the quarter and $731.9 million year-to-date. For the same periods in 2024, Royalty Income and distribution income were based on the Royalty Pool of 372 Boston Pizza Restaurants reporting franchise sales of $238.6 million and $697.4 million, respectively. The Fund's net and comprehensive income was $10.4 million for the quarter compared to $9.4 million for the third quarter of 2024. The $1 million increase in the Fund's net and comprehensive income for the quarter compared to the third quarter of 2024 was primarily due to a $0.6 million increase in Royalty Income and distribution income, a $0.3 million increase in fair value gain and a $0.3 million decrease in income tax expense, partially offset by a $0.2 million increase in net interest expense. The Fund's net and comprehensive income was $31.1 million year-to-date compared to $25.3 million year-to-date in 2024. The $5.8 million increase in the Fund's net and comprehensive income year-to-date compared to the same period in prior year was primarily due to a $5.1 million increase in fair value gain, a $1.8 million increase in Royalty and Distribution Income and a $0.1 million decrease in administrative expenses, all partially offset by a $1.2 million increase in income taxes expense. The Fund's cash flows generated from operating activities for the quarter was $10.6 million compared to $10 million in the third quarter of 2024. The increase of $0.6 million was primarily due to an increase in Royalty and Distribution Income of $0.6 million and an increase in changes in working capital of $0.1 million, partially offset by an increase in income taxes paid of $0.1 million. Cash flows generated from operating activities year-to-date was $29.8 million compared to $28.7 million in the same period in 2024. The increase of $1.1 million was primarily due to an increase in Royalty Income and distribution income of $1.8 million, a decrease in administrative expenses of $0.1 million, partially offset by an increase in income taxes paid of $0.5 million and a decrease in changes in working capital of $0.3 million. While net and comprehensive income or loss and cash flows from operating activities are both measures under IFRS accounting standards, or IFRS, the Fund is of the view that net income or loss and cash flows from operating activities do not provide the most meaningful measurement of the Fund's ability to pay distributions. Net income contains noncash items that do not affect the Fund's cash flow, whereas cash flow from operating activities is not inclusive of all of the Fund's required cash outflows and is therefore not indicative of the cash available for distributions to unitholders. Noncash items include the fair value adjustments on the investment in Boston Pizza Canada Limited Partnership, the Class B unit liability, interest rate swaps and changes in deferred income taxes. Consequently, the Fund reports the non-IFRS metrics of distributable cash and payout ratio to provide the investors with, in the Fund's opinion, more meaningful information regarding the Fund's ability to pay distributions to unitholders. The Fund generated distributable cash of $8.5 million for the quarter compared to $8.1 million for the same period in prior year. The increase in distributable cash of $0.4 million or 4.9% was primarily due to an increase in cash flows generated from operating activities of $0.6 million, partially offset by higher Class B unit entitlement of $0.1 million and higher interest paid on debt of $0.1 million. The Fund generated distributable cash of $23.8 million year-to-date compared to $22.9 million for the same period in 2024. The increase in distributable cash of $0.9 million or 3.8% was primarily due to an increase in cash flows generated from operating activities by $1.1 million, partially offset by higher Class B unit entitlement of $0.1 million and higher interest paid on debt of $0.1 million. The Fund generated distributable cash per unit of $0.40 for the quarter and $1.118 year-to-date compared to $0.381 and $1.077, respectively, for the same periods in 2024. The increase in distributable cash per unit of $0.019 or 5% for the quarter and $0.041 or 3.8% year-to-date was primarily attributable to the increase in distributable cash outlined above. The Fund's payout ratio for the quarter was 88.8% compared to 88.9% in the third quarter of 2024. The decrease in the Fund's payout ratio for the quarter was due to distributable cash increasing by $0.4 million or 4.9%, partially offset by distributions paid increasing by $0.3 million or 4.7%. Year-to-date, the Fund's payout ratio was 93.5% compared to 93.8% year-to-date in 2024. The decrease in the Fund's payout ratio year-to-date was due to distributable cash increasing by $0.9 million or 3.8%, partially offset by distributions paid increasing by $0.7 million or 3.4%. On a trailing 12-month basis, the payout ratio was 99.4% as at September 30, 2025. On November 7, 2025, the trustees of the Fund approved a cash distribution for the period of October 1, 2025 to October 31, 2025, of $0.12 per unit, which will be paid on November 28, 2025, to unitholders of record at the close of business on November 21, 2025. The trustees' objective in setting a monthly distribution amount is that it be sustainable. The trustees will continue to closely monitor the Fund's available cash balances given the fluctuating economic outlook. And with that, I will turn the call back over to Jordan for more on the outlook. Jordan? Jordan Holm: Thank you, Michael. With the end of 2025 in sight, the fourth quarter has been off to a strong start with the launch of the game day menu to align with the football season, offering great value drinks and food on each game day. This promotion was coupled with a weekly giveaway with prizes such as free food and football merchandise, alongside extensive marketing campaigns targeting at boosting engagement with football fans. This promotion will run through the regular football season, offering guests an exciting viewing experience with a chance to win great prizes. In addition, our 2025 holiday campaign launched last week, showcasing an array of new favorites and innovative dishes that inspire holiday cheer. The holiday menu features delectable options like Stuffed Crust Mozza Sticks, Crispy Chicken Vodka Penne, Garlic Shrimp Mac & Cheese, Prosciutto & Mushroom Pizza, Fa-la-la-la Lava Cake and new holiday drinks such as the Frosty Hawaiian, Espresso and Mistletoe Martinis and Mrs. Claws Fishbowl. Our third quarter franchise sales have remained strong by offering guests value, quality and convenience through both on-premise and off-premise channels. We have a proven track record of adapting to evolving economic conditions and overcoming operational challenges, while remaining focused on proactively driving sales and deepening guest loyalty and protecting the profitability of Boston Pizza restaurants. Combined with a strong national presence and trusted brand, Boston Pizza is well positioned for sustained growth throughout 2025 and beyond. With that, I'd like to begin the question-and-answer session. Over to you, operator. Operator: [Operator Instructions] Our first question today is from Ed McCauley with [indiscernible]. Unknown Executive: Could you please comment on sales during the World Series. I assume that this is after the quarter end, but you would have had very good attendance during this exciting World Series. Michael Harbinson: Yes. Thank you, Ed. Appreciate the question. And you're right. Most of the benefit of the strong post-season run that the Blue Jays went on did happen after the end of the Q3 period. But as an official partner of the Toronto Blue Jays and as their official sports bar, we definitely saw a benefit in terms of guest visitation and also off-premise and online ordering in line with the game days, both for the Yankees Series, the Mariners Series and of course, the World Series against the Dodgers, 2 of those series going to the seventh game, which really brings fans out to share those experiences together. So a great call out in terms of a contributor to the fourth quarter results so far. And definitely, we're a proud Canadian company. It was great to see a Canadian team take it as far as they could. We would have liked a different ending, but all other parts of that experience were wonderful for baseball fans and for Boston Pizza Restaurants. So thank you for that question. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Jordan Holm for any closing remarks. Jordan Holm: Thank you, operator. And since there are no further questions, we'd like to thank you for taking the time to join us today and invite you to celebrate the holiday season at your local Boston Pizza. We also look forward to speaking with you all again at our fourth quarter conference call in February 2026. So thank you, everyone, and enjoy the rest of your day. Michael Harbinson: Thanks everyone. Operator: This brings to an end today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Welcome, everyone, to Barrick's Third Quarter 2025 Results Presentation. [Operator Instructions] As a reminder this event is being recorded and a replay will be available on Barrick's website later today. I will now turn the call over to Cleveland Rueckert, Head of Investor Relations. Please go ahead. Cleveland Rueckert: Thank you, Mariana, and good morning, everyone. We hope you've had an opportunity to review the press release we issued before the markets opened this morning. This presentation deck is also now available to download on our website. Presenting our results today are Mark Hill, Interim CEO and Group COO; and Graham Shuttleworth, Senior EVP and CFO. Other members of Barrick's management team will be available after our prepared remarks for Q&A. Before we begin, please note that we will be making forward-looking statements. This slide includes a summary of the significant risks and factors that could affect Barrick's future performance and our ability to deliver on these forward-looking statements. This material is also available on our website. I will now hand it over to Mark. Mark Hill: Okay. Thanks, Cleve. And I appreciate everyone joining us this morning. So as Cleve pointed out, I'm the interim CEO and Group COO, and since taking on these roles, I've met with the teams and visited most of our key sites to review performance and assess what we can do differently at Barrick, putting a stronger emphasis on safety and operational performance. The quality of our assets is undeniable. So we're undertaking a review of our operations from the bottom up to ensure we have the right teams and processes in place to safely, most importantly, and consistently deliver value going forward. We're about halfway through that review, and we'll provide more details at our full year results in February. So since assuming this interim CEO responsibility, it's become increasingly clear to me that the most significant opportunity is at our gold assets in North America, particularly through improved performance at NGM, coupled with our gold discovery at Fourmile. So turning to our performance in Q3. We posted strong operational and financial results, and we logged several company records included adjusted earnings per share and cash flow. So production increased from last quarter and cost drop, which combined with a higher gold price drove a significant increase in our free cash flow. We increased our base dividend by 25%. Dividends and buybacks combined in the quarter were a record quarterly cash return to shareholders. Asset sales support an expanded USD 1.5 billion buyback program. And on top of all this, our updated PEA confirms that Fourmile is arguably this century's most significant gold discovery. So despite this very strong quarter for business, it was unfortunately overshadowed by 3 fatalities: one at Goldrush, one at Bulyanhulu and one at Kibali. That was a result of an incident that we reported in Q2 this year. So firstly, I would like to extend our sincere condolences to the families and the loved ones of our 3 colleagues. And secondly, I want to highlight to everyone that we are conducting full investigation into these instruments so that we can put systems in place to guarantee everyone goes home safely every day, which is my commitment. Obviously, safety needs to be the #1 focus at Barrick. We are reviewing our safety culture and structures to ensure we embed the right principles at all levels of the organization to achieve our goal of zero harm. So looking at the business performance in the quarter. Gold production increased 4% over Q2, primarily driven by higher grades at Kibali, higher throughput at Cortez and Turquoise Ridge and a record high throughput at Pueblo Viejo. We expect continued quarterly growth in Q4 in line with our 2025 plan for a steady production increase throughout the year. Higher production volume helped drive our gold cost metrics per ounce lower across the board, despite the pressure on our cash costs from royalties associated with the higher gold prices. Higher volumes on lower costs translated into a 25% quarter-on-quarter increase in our attributable gold EBITDA demonstrating significant operating leverage from a 5% increase in the gold price. Copper was -- Copper production was slightly down from Q2 on the back of a September shutdown in Lumwana, which was in line with our preventative maintenance programs. We expect both gold and copper to deliver with their respective production guidance range for the year and on cost guidance after adjusting for the royalty impact from the higher gold prices. Now I'm going to hand it over to Graham to discuss our financial highlights. Thanks, Graham. Graham Shuttleworth: Thanks, Mark, and good morning to everyone. Barrick's third quarter financial performance was exceptionally strong setting company records for operating cash flow, free cash flow and adjusted net earnings. We continue to fund our growth projects with disciplined budgets resulting in cash flow more than tripling from quarter 2. We again ended the quarter in a net cash position, supporting an additional performance dividend, an increase in our base quarterly dividend and a significant increase in our share repurchases. Looking at how our performance has trended this year, the combination of a higher gold price, production volume growth and lower unit costs per ounce delivered higher margins and a 20% quarter-over-quarter increase in Barrick's attributable EBITDA. This translated to a 274% increase in free cash flow enabling us to repurchase $598 million of our stock, and we increased our base dividend by 25%. I'll discuss capital allocation more in a moment. As Mark highlighted, quarter 3 was a company record for cash returns to shareholders. We ended the quarter in a net cash position. And at today's gold price, we expect quarter 4 will be even better. This is all before the Hemlo and Tongon asset sales, which we expect to close before the end of the year. Looking at our capital allocation framework, so far in 2025, we've generated $5 billion in operating cash flow. We've reinvested more than $2 billion back into the business. We paid $596 million in dividends, and we exhausted our $1 billion repurchase Authorization. Barrick has 3 capital allocation priorities above and beyond our long-term operating plan. First, we maintain a strong balance sheet keeping us in control of our destiny through commodity price cycles. We target zero to modest net debt. Second, we invest in accretive growth with a disciplined focus on cash generation and sustained value creation. And third, we return excess cash to shareholders, balancing dividends and buybacks depending on our share price and valuation. Given the confidence in our business, we are increasing our base quarterly dividend by 25% to $12.5 per share. For the quarter, the Board has approved a $17.5 per share quarterly dividend, consisting of the higher base dividend and including a further $0.05 per share performance dividend. Additionally, given strength in operating cash flow and the cash from noncore asset sales expected in the fourth quarter, the Board has authorized a $500 million increase to our existing share repurchase program which we expect to execute on further in quarter 4. Let me now turn the call back over to Mark for more detail on our regional performance in the quarter. Mark Hill: Okay. Thanks, Graham. So starting with North America, Barrick's value foundation, gold production increased 4% from Q2 driven by improved performance at Cortez and Turquoise Ridge. Cortez saw a significant increase in leach pad production in line with the mine plan. Turquoise Ridge production was driven by increased throughput at the Sage autoclave following the maintenance we undertook in the first half of the year. At Carlin, roaster throughput was negatively impacted by some unplanned downtime at the end of the quarter. Importantly, all NGM sites reported lower unit cost per ounce and North America's attributable EBITDA increased 19% from Q2. So NGM is our most important asset and is a foundation of Barrick, contributing more than half of our attributable reduction. It is on track to achieve full year production guidance and is central to delivering value to our shareholders. So as most of you will know, we believe Fourmile is one of the most significant gold discoveries this century. We currently have 16 drill rigs on the site, and we're on track to double the existing resource this year. We've also increased Fourmile's exploration budget by a little over $10 million for the remainder of 2025. This slide highlights the opportunity. The zone circled in red is our existing resource. The black dotted area is what we expect to convert to resources this year. And the region in green and beyond is all the upside. So looking ahead, we expect to have 20 drill rigs on the project next year, and we plan to commence the Bullion Hill decline development towards the end of 2026. This will allow us to proceed with the feasibility study. On the back of the recent drill results, we updated our Fourmile PEA in September and highlights a rare combination of grade, scale and exploration upside. So advancing this project is obviously a key priority for the North America region and team, but also for Barrick as a whole. So turning to Latin America and Asia Pacific region. Gold production was in line compared with Q2 as planned. Veladero is performing well against its targets with a typical winter seasonal decline, offsetting the record quarterly throughput at Pueblo Viejo. PV performed well in Q3 with processing throughput up 7% quarter-on-quarter, achieving record high throughput in Q3 with the highest quarterly production since 2022. Our focus is now squarely on in driving improved recoveries going forward. So all assets in the region are on track to meet their guidance for the year, including PV's. Moving to Africa, Middle East, gold production showed the largest quarter-on-quarter increase of all the regions, rising 8% from Q2. On the back of a 15% increase at Kibali, higher open pit mining volumes and grades, uplifted Kibali's processing grade as that operation heads into its expected strong Q4 delivery. Production at North Mara is up 3% from Q2 as both the underground and open pit exceeded expectations, and Bulyanhulu was flat. Regional costs were down across the board, resulting in an impressive 65% quarter-on-quarter increase in attributable EBITDA. So turning to copper. Production declined slightly from Q2 due to a plant shutdown in line with the plan we shared for Lumwana in September. We expect Q4 copper production to be similar to Q2, delivering annual results for our copper business within guidance. So as we've discussed throughout this call, Barrick is in good position to deliver on our plans for the year. Shown here, gold production is tracking in the bottom half of its guidance range and copper production is tracking to the midpoint. Also note that the gold production guidance includes Tongon and Hemlo, and we expect to have these sales to conclude before the year-end. Also, after adjusting for the year-to-date higher gold price, our total cash cost in AISC are also tracking within guidance. As you can see, copper costs are already within guidance, and we're expecting Lumwana to report a strong finish to the year. So before I close, I just want to emphasize that our near-term focus is on safety and operational performance. We will adjust things internally as necessary to create value for our shareholders and deliver on our guidance. This company has a strong portfolio of assets with Nevada at its core. Nevada continues to drive more than half of our production from a low -- sorry, deliver more than half of our production from a low-risk jurisdiction. We have long resource lives and continued opportunity to replace reserves we might. We have some of the best growth projects in the world currently in execution. We have a strong balance sheet that's returning excess capital to the shareholders and funding our growth. And we have an excellent global team of people who are empowered to deliver on our strategy. As we progress on our operational review, it is confirming to me that the value creation opportunity across the portfolio, especially the potential for North American gold assets in Nevada and Dominican Republic. As I've said, Nevada is a core of our company as it continued to deliver more than 50% of our production with an extraordinary opportunity for growth at Fourmile. We will be unwavering in our focus to drive value creation in Nevada. So thank you, everyone, for your attention. I'll now hand it back to the moderator for the Q&A session. Operator: [Operator Instructions] Our first question comes from Fahad Tariq at Jefferies. Fahad Tariq: On the bottom-up operational review at Nevada Gold Mines specifically, can you just give us maybe a framework for what you're looking at or what the team is looking at? And specifically, what is incremental versus the recapitalization efforts that have already been completed, including the new fleet, investment -- reinvestment in the roasters, autoclaves and so on. A lot of work has already been done. So maybe just provide what's incremental in this review. Mark Hill: Okay. Thanks for the question. So look, the operational review is obviously -- we're trying to stabilize and meet more consistent with our delivery through NGM. So we've gone back and we're building those plans up right from the base again. And it's going to incorporate, obviously, the mining, the mining efficiencies, utilization. But it's also going to, more importantly, include our maintenance approach, our planned maintenance. And the expected outcome of is that we don't have these unexpected surprises like we had at Carlin this quarter. So we're just trying to stabilize the operations and make sure we have everything in place so that we can deliver quarter-on-quarter. Fahad Tariq: Okay. And then maybe as a follow-up, just on the maintenance point. So in the MD&A, it mentions at Carlin, there was excessive scaling in the gold quarry roaster. Is that something that was not captured in the first half maintenance? I believe both roasters had their annual shutdowns in the first half or did the buildup happen after that? Mark Hill: Okay. Look, Henri, maybe you're better positioned to answer that, please? Henri Gonin: Yes, Mark. I'm Henri Gonin at NGM. That buildup of the scaling happened after the shutdown at Gold Quarry and it was unforeseen, but it's been taken care of now. Operator: Our next question comes from Matthew Murphy at BMO Capital Markets. Matthew Murphy: Mark, congrats on the interim CEO role. Also interested in this operational review, how should we think about what the output of this review might be? Like does this include a review of medium-term guidance? And can you be in a position in a few months to have a different view on that? Mark Hill: Okay. Thanks, Matthew. Well, look, the review is obviously, like I said, so that we can be more confident and we get more predictable outcomes from quarter-to-quarter. And that will obviously feed into the budget next year, and we're not expecting any major changes on that at the moment. But it is just to try and understand where there is opportunities. So even down to the things where we say we have replaced reserves every year, but this review will also include looking at maybe stepping out and drilling and seeing if there's other opportunities that we can find within the portfolio around our current assets rather than just replacing reserves. So maybe a longer-term goal, but also something we'd be looking at. But the primary focus is to get the planned maintenance in place so that we can make sure we just consistently deliver on our quarterly guidance. Matthew Murphy: Okay. And then one other follow-up. I noticed in the MD&A that some resequencing of Reko Diq CapEx and just interested in what's happening there and when you might close the project financing? Mark Hill: Okay. Let me hand over to Graham for that, Matthew. Graham Shuttleworth: Matt, we alluded to this even last quarter, but really, it's just a product of the work that we've been doing with Fluor who came on board middle of the year as our EPCM contractor, and they've been looking at the specific timing of when we place orders, and therefore, the follow-on impact of that is just on cash flow. So really, what we've done is we've rescheduled some of the cash flow that we were expecting in '25, and we've shifted it across '26 and '27. So it's -- there's no impact on the overall project schedule or the total capital schedule. It remains consistent. It's just a timing issue as we move forward. In terms of the financing itself, we are very well advanced with the lenders. The sort of remaining piece of the puzzle is U.S. Exim, which is an important part of the lender group. Unfortunately, with the U.S. government shutdown, they haven't been able to sign on the dotted line. But as soon as the shutdown lifts, we will be reengaging with them and we still expect to be able to sign that financing by the end of the year. Operator: Our next question is from Daniel Major at UBS. Daniel Major: Mark, Graham, can you hear me, okay? Mark Hill: Yes. Daniel Major: Great. Two questions, one on the portfolio, great to see more progress and realizing good value for Hemlo and Tongon. Is there any other potential areas of the portfolio following kind of senior management change, et cetera, that you see as opportunities? And is there any processes ongoing for any other assets in the portfolio? Mark Hill: Well, look, not at this stage. Like as I said at the start, the focus is really on the Americas and at NGM and PV and getting those up to where we need them and delivering on the Lumwana expansion and the Reko Diq construction. So we haven't really focused on anything else at this point. But since September, when I took over. Daniel Major: Okay. And then maybe two questions on the NGM dynamic. Firstly, with respect to dialogue with the JV partner around Fourmile and potential exploration kind of depth, if we look at your Slide 11 to the right-hand side of the divide between the Nevada Gold Mines below Goldrush and Fourmile. Has there been any update on kind of results within the JV in that zone recently? And how is the dialogue between the 2 parties changed at all? And could that potentially result in discussions around staged vending or Fourmile? Mark Hill: Okay. So look, just to maybe talk to Fourmile for a minute. Now obviously, as you are well aware, at some stage, that will end up in the in the joint venture with Newmont. I mean, Newmont are well aware of Fourmile, and they're well aware of all our current operations as our joint venture partner. But that's not going to be until we finish this drilling, get those declines in place and basically deliver a feasibility study, and then we will discuss how that earnings is going to work with Newmont. And then on the other question, I don't have any update on any more results. Graham Shuttleworth: Yes, there are no material changes, Dan. Daniel Major: Okay. That's useful. And maybe one final one. Just, I guess, directionally thinking about NGM into next year, would you incrementally expect kind of significantly higher production? Or would it be a flatter profile at a high level in this year? Obviously, I guess, you'll give the guidance for the Q4. Mark Hill: Yes. We'll give the guidance with Q4, but it will be, at this stage, based on what I thought it would be relatively flat, I would have mentioned. Operator: [Operator Instructions] Our next question comes from Tanya Jakusconek at Scotia Capital. Cleveland Rueckert: Tanya. We can't hear you. Tanya Jakusconek: You can't or you can? Cleveland Rueckert: We can know. Tanya Jakusconek: Okay. Good. I'm just going to circle back to the review, Mark, that you've been doing. You said you went to visit most of the operations and met with most of the team. And it sounds as though the focus for you is just getting this predictability on the maintenance programs to really deliver quarter-on-quarter delivery. When you did all of this, and I know when you go around and you look at things, did you have to make any management changes that we should be aware of? Mark Hill: Thanks, Tanya. No, look, at this stage, that's not what it's about. Like I mean, the team in Nevada, which you've probably quite familiar with anyway. But look, we have a strong team, but there is obviously some gaps in the planned maintenance and things because we can't keep having things go wrong unexpectedly like we had at Carlin. So I don't think it's about necessarily people changes. It's just about getting those plans in place and making sure they're solid and we can rely on them going forward. And look, the other obvious -- I just want to bring that in. The other reason I was obviously in Nevada is I was there for the investigation into that fatality because that's the other big priority that we've got to get on top of, which I'm sure you would agree, and put some changes in place to address that. Tanya Jakusconek: Yes. I was just going to ask, Mark, because that's 3 fatalities is a lot. I was just wondering that as you looked and reviewed the asset bases like are there significant changes to the procedures that need to be done? And is the higher turnover at Nevada Gold Mines, obviously, something that you're going to focus on as well in terms of health and safety and improve productivity? Mark Hill: Yes. So Tanya, I don't think it is a gap in our processes and procedures and standards. I mean we went through this, as you know, in Latin America in 2022 when we had that fatality at PV. And look, what I think it is, I think it's about culture. I think it's about leadership. I think most of those systems are in place, and I think they're solid. And we're just going to have to reset and get everyone on the same page that safety is the #1 priority of this company. And as you'd be aware, the minute we get safety in line, normally, what you see is you see an uptick in production and overall just more efficient operations. But look, let me just hand it over to Graham for a minute as well because he's been deeply involved with this. If he's got any additional comments to that. Graham Shuttleworth: Thanks, Mark, and thanks, Tanya. I think Mark has hitted on the head in terms of the leadership component. And specifically, when we talk about that, I think, is the supervision in the workplace. We believe we need to get more face on with the people underground in the process from our supervisors. And in some of the reviews and the investigations that we've obviously conducted, they've has shown that perhaps some of the supervisors have been burdened with administrative tasks too. So we need to get them back into the field. I think also on reflection, not only based on these fatalities that we've seen, but I think in the data that we've been collecting over the last while, the better part of 3 years now, I mean you would have seen our total recordable injury frequency rate come down year-on-year but that's contrasted by the number of fatalities we've had in the last couple of years. And clearly, there's been a focus on the lagging indicators and driving that down from an injury perspective. And we've missed something in terms of the hazard recognition, particularly on the fatal risks. And I think more focus on the leading indicators is key for us. It is something we've recognized and you may have remembered from some of the other presentations that we put together that we have prioritized leading indicators. And one of those programs is the critical control verifications that we would do, which really is engagement in the field with people conducting tasks that have a fatal risk associated with it. And although we've seen a great uptake across the group in excess of 86,000 rather CCVs completed year-to-date. I think what we now have to focus on is the quality of those so that we are ensuring that everyone is learning from them that they're recognizing the hazards in the workplace associated with those fatal risks. And then I think another aspect that we have highlighted and touched on and debated over the last while is I think our safety team, from a group perspective, although we firmly believe safety is a line function and must be incorporated at a site level, at a group level, we do need a few more resources to drive some of these initiatives and plans to focus on things like the leading indicators, the competency-based training that we've highlighted and getting the supervisors back into the field. So I think in a nutshell, those are some of the focus areas, but we've obviously got a plan. And as Mark has mentioned, this is our #1 focus for the team, the entirety. Tanya Jakusconek: Yes. It's good to hear, focusing on the safety. Maybe one last question for me, Mark. It sounds as though you've put the pause, you've hit the pause about not any potential asset sales. I know we previously had talked about maybe Mali was for sale. Has that paused as well? Mark Hill: Well, I think Mali, my focus, Tanya, I don't know the you read some of the reports. But look, my focus is on getting these 4 people out of jails. So that's what I'm working through at the minute. I mean, they've been in Castro now for, what, 11 months. So my focus is on that rather than anything else in Mali at the minute. And if we get that achieved, then obviously, we will look at restarting that operation. As you know, we still have people on site doing the care and maintenance, so we could restart that operation. But the focus is we have to get those people out of jail or my focus anyway. Tanya Jakusconek: Yes, we hope to get them out as well. Operator: Our next question comes from Anita Soni of CIBC World Markets. Anita Soni: Hi, can you hear me? Mark Hill: Yes. Anita Soni: Okay. So I'm going to focus in on PV at first. So previously, Mark, Bristol had talked about the degradation of the PV stockpiles. Could you give us an update on that? And if you've made any progress there and what that could mean in terms of resequencing of stockpiles to be processed earlier? Mark Hill: Well, Anita, yes, thanks. So look, the recovery, as I said, is the focus, right? Because I think we've broken the back of throughput. You would have seen we've had record throughputs at PV now. So it's all about recovery. Actually, I've got Hatch on site at the minute. They're doing an independent review for us as well. And I think there are several moving parts and not being a metallurgist. But what I can say to you, obviously, the handling of those stockpiles, as you pointed out, is absolutely critical. So it's how we blend that feed going into the float circuit so that we can make sure that we don't get wild swings in our recovery throughout the day. So look, there's a lot of things going on. And I think what we need to do is get real-time data back to the operator so that we can adjust the feed and better control what goes into the float circuit. So I know that's probably not very specific for you, but that's sort of the situation we're in at the minute. Anita Soni: Just to understand because the second question was actually related to the recovery rates of PV, but seem to be undershooting what you had guided to earlier this year by about 5% or 6%. Are you processing any of these lower grade stockpiles right now? Or is it just the prior -- expected like the prior targeted grades and, I guess, direct ore feed that... Mark Hill: Well, it's a blend of a fresh and stockpile material that we're putting through the plant now. So it's -- as it always has been, it's a combined feedstock. Anita Soni: All right. Maybe I'll get some more detail from you tonight at the dinner. And then the second question that I had was with respect to the collars. I must say I'm a bit surprised that you guys have put on collars. I think it's about -- I realize it's only about 10% of the production, assuming prior estimates, but 10% of the production over that time frame. But why did you guys put the mine? And why not stay on levered to the gold price? Graham Shuttleworth: Hi Tanya, it's Graham. -- sorry, Anita, apologies. Anita Soni: You want Tanya, Mark Bristow, or Tom Palmer, which one is even better? Graham Shuttleworth: That's a toss-up. Anita yes, thanks. We -- the collar was put on at a time early in the third quarter at a time of record gold prices associated with a potential strategic opportunity, which ultimately didn't close. I think it's important to realize that as you point out, this is less than 10% of our production. And the top of that collar is over $4,300 per ounce. So at current record high gold prices, we're still fully exposed to these current record gold prices. And to put it in perspective, even if the gold price were to go to $5,000 per ounce, we'd still have 99% exposure to the spot prices. So it's a very small position. It's not something we intend to do going forward. It doesn't -- it shouldn't be read as a change in our strategy with respect to hedging. It was a product of a specific situation, which ultimately didn't transpire, but we're comfortable that those positions are not going to have a material impact on our financial results. Anita Soni: So now I'm intrigued, this strategic opportunity, was it acquisition or divestiture? Graham Shuttleworth: I think if I was going to tell you that, I would have told you that. Operator: Our final question comes from John Tumazos at Very Independent Research. John Tumazos: Mark, in terms of the big picture, which of your corporate policies are different than your predecessor? Certainly, we're all on the same page for cost and safety and maintenance, et cetera. Mark Hill: Well, look, I don't think the strategy, John, has changed at all. I mean you've obviously gathered my focus or where I see the most value is obviously in Nevada. So we're going to build out those 2 growth projects we have. But then the next thing, you're definitely shifting the focus to America. And I've already started with that, like we're going to spend more -- a bigger proportion of our exploration as well in Nevada and North America. So I suppose it's not really a shift, but if you ask me where my attention is going to be and maybe there is a little bit of a change, then it will be all the focus we're going to put into North America because I do see a big opportunity there, and I do see that as the next big project and the next big growth area for Barrick. Operator: That concludes our Q&A session for today. Back to Cleve for any closing remarks. Cleveland Rueckert: Great. Thank you, everyone, for joining us today. We look forward to speaking with you again on our full year results call in February. And as always, please get in touch with us if you have any further follow-up questions. Thanks again very much.
Operator: Greetings, and welcome to the Starwood Property Trust Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Zach Tanenbaum, Head of Investor Relations. Thank you. You may begin. Zachary Tanenbaum: Thank you, operator. Good morning, and welcome to Starwood Property Trust Earnings Call. This morning, we filed our 10-Q and issued a press release with a presentation of our results, which are both available on our website and have been filed with the SEC. Before the call begins, I would like to remind everyone that certain statements made in the course of this call are forward-looking statements, which do not guarantee future events or performance. Please refer to our 10-Q and press release for cautionary factors related to these statements. Additionally, certain non-GAAP financial measures will be discussed on this call. For reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP, please refer to our press release filed this morning. Joining me on the call today are Barry Sternlicht, the company's Chairman and Chief Executive Officer; Jeff DiModica, the company's President; and Rina Paniry, the company's Chief Financial Officer. With that, I'm now going to turn the call over to Rina. Rina Paniry: Thank you, Zach, and good morning, everyone. This quarter, we reported distributable earnings, or DE, of $149 million or $0.40 per share. GAAP net income was $0.19 per share. Our new net lease acquisition, which I will discuss further in my Property segment remarks, contributed to lower GAAP earnings due to $0.04 of depreciation and lower distributable earnings due to $0.03 of dilution in part because the new assets contributed to only a portion of the quarter, while dividends were paid for the full quarter. We also experienced higher-than-normal cash drag given the $2.3 billion of capital raises we completed in the quarter. We expect earnings to normalize once this cash is deployed and our new acquisition increases its investment pace and completes the refinancing of its existing facilities. In the quarter, we committed $4.6 billion of new investments across our businesses, including $2.2 billion in net lease, $1.4 billion in Commercial Lending and a record $791 million in Infrastructure Lending, bringing total assets to a record $29.9 billion at quarter end, and demonstrating the continued diversification and strength of our unique multi-cylinder platform. I will begin my segment discussion this morning with Commercial and Residential Lending, which contributed $159 million of DE to the quarter or $0.43 per share. In Commercial Lending, we originated $1.4 billion of loans, of which nearly all was funded, along with another $219 million of pre-existing loan commitments. After repayment of $1.3 billion, including a $58 million office loan, this portfolio grew $271 million to $15.8 billion. On the topic of credit quality, we continue to resolve our higher risk-weighted loans and foreclosed assets, which Jeff will discuss. We have $642 million of reserves $469 million in CECL and $173 million of previously taken REO impairment. Together, these represent 3.8% of our lending and REO portfolio and translate to $1.73 per share book value, which is already reflected in today's undepreciated book value of $19.39. You will notice in our 10-Q that we classified a $33 million 5-rated mezzanine loan on a Dublin office portfolio as credit deteriorated. The loan already maintained an adequate general reserve, but in light of a pending loan modification, the reserve was reclassified from general to specific. Turning to Residential Lending. Our on-balance sheet loan portfolio ended the quarter at $2.3 billion, consistent with last quarter as $52 million of repayments were largely offset by $41 million of positive mark-to-market adjustments. Our retained RMBS portfolio remained relatively steady at $409 million. In our Property segment, which now includes our newly acquired net lease platform, we reported DE of $28 million or $0.08 per share. On July 23, we completed the $2.2 billion acquisition of Fundamental Income properties, which contributed $10 million of DE in the partial quarter from acquisition to quarter end. The purchase was treated as an asset acquisition for GAAP purposes, which means the purchase price was allocated to properties and lease intangibles. The portfolio consists of 475 properties diversified across 61 industries and 43 states with a weighted average lease term of 17.1 years and occupancy of 100%. Two comments I would like to make on the accounting ramifications of this acquisition. First, from a GAAP perspective, you will see elevated depreciation and amortization levels. The impact was $0.04 for the partial period with this pace expected to accelerate as the business contributes fully to future quarters and as we acquire new assets. Second, from a DE perspective, we introduced a new GAAP to DE reconciling item for straight-line rent, which is noncash. In our Woodstar affordable multifamily portfolio, we refinanced 30% of the portfolio's assets with $614 million of new debt. Of this amount, $310 million repaid maturing debt and $302 million was received as incremental proceeds, evidencing the significant value growth in this book during our ownership period. The new debt carries a weighted average spread of SOFR plus 1.76% and a 10-year term. $368 million of this refinancing closed in the quarter with the remaining closing in October. Our Investing and Servicing segment contributed $47 million of DE or $0.12 per share to the quarter. Our special servicer continued to benefit from elevated transfer volumes, which were once again dominated by office loans. Our named servicing portfolio ended the quarter at $99 billion. Active servicing balances rose to $10.6 billion due to $300 million of net transfers in, most of which were office, driving special servicing fees higher in the quarter. In our conduit Starwood Mortgage Capital, we completed 5 securitizations totaling $222 million at profit margins consistent with historic levels. Our Infrastructure Lending segment contributed $32 million of DE or $0.08 per share to the quarter. We committed a record $791 million of loans, of which $678 million was funded and received $691 million of repayments, leaving our portfolio balance steady at $3.1 billion. Subsequent to quarter end, we completed our sixth actively managed infrastructure CLO, a $500 million transaction that priced at a record low coupon of SOFR plus 172, further expanding our nonrecourse capital base. Turning to liquidity and capitalization. We ended the quarter with $2.2 billion of total liquidity, elevated due to our recent capital raises and cash out refinancing. Our debt to undepreciated equity ratio remained stable at 2.5x, and we continue to maintain over $9 billion of available credit capacity across our business lines. During the quarter, we executed $3.9 billion of capital markets transactions, including $1.6 billion in term loan repricing at 175 basis points and 200 basis points over SOFR, 2 high-yield issuances, one for $550 million and one for $500 million at fixed rates of 5.75% and 5.25%, a $700 million 7-year Term Loan B at 225% over SOFR and a $534 million equity raise that was accretive to GAAP book value. These actions increased our average corporate debt maturity to 3.8 years with only $400 million of corporate debt maturing between now and 2027. With that, I will now turn the call over to Jeff. Jeffrey Dimodica: Thanks, Rina, and good morning, everyone. This quarter, we continued to operate in an environment of improving stability in credit market performance. The forward SOFR curve now points to rates falling into the low 3% range by late 2026, about 100 basis points below where expectations stood a year ago, which is positive for our legacy credits. That shift, combined with steady credit spreads has supported a more constructive real estate financing market in which we expect to maintain our elevated origination pace. In commercial real estate, we're seeing signs of increasing transaction velocity as buyers and sellers narrow valuation gaps and capital flows return to higher quality assets. Banks remain selective and continue to favor growing their secured financing lines over competing with us for whole loans. This allows well-capitalized lenders like Starwood Property Trust to lend at today's tighter spreads while maintaining consistent risk-adjusted returns and strong structural protections. We built this company to perform in all environments, diversified across lending verticals, servicing and owned properties, which creates a balance sheet that provides flexibility and durability. That diversification, combined with consistent access to capital allows us to invest through cycles and position for growth as the markets normalize. Following the capital markets activity that Rina mentioned, our liquidity stood at $2.2 billion, leaving our balance sheet well positioned to support continued investment across our debt and equity businesses, and our intent is to continue to grow. Our Commercial Lending originations through the first 9 months of the year alone totaled $4.6 billion on pace for our second highest year in our 16-year history. Our total investing pace through the first 9 months across all businesses was $10.2 billion, also putting us on pace for a record year. The full earnings power of these new investments will be felt in 2026 as we continue to fund our existing loans and add new ones. In Commercial Lending, we continue to lean in on our core investment themes, data centers, multifamily, industrial and Europe, while maintaining a disciplined credit posture. Our U.S. office exposure remains low at 8% of our total assets, down from 9% last quarter. As always, we remain highly focused on credit. Our total CECL and REO reserves Rina mentioned reflect prudent additions on a small number of challenged assets, which were somewhat offset by the upgrade of a $139 million office loan in Brooklyn from a 4 to a 3 risk rating in the quarter. The improvement follows strong leasing progress that is expected to bring the property to full occupancy in the fourth quarter. This quarter, we downgraded 2 loans to a 5 risk rating, a $242 million mixed-use property in Dallas and a $91 million multifamily in Phoenix, both of which were previously 4 rated. We expect to foreclose on these loans in the coming months, and we use our internal asset management function and the expertise of our manager, Starwood Capital Group, to stabilize operations and reduce elevated expenses before we look to exit in the coming year. To date, we've resolved 7 loans totaling $512 million. There are another $230 million of resolutions currently in progress, all of which are expected to recover our original basis. To clarify, we do not consider an asset to be resolved until it has legally exited our balance sheet. So these resolutions exclude foreclosures of $1.1 billion. Inclusive of foreclosures, our resolutions total would be 16 loans for an aggregate of $1.6 billion UPB. We also had 3 loans move from a 3 to a 4 rating in the quarter, a $107 million studio loan in Queens, a $267 million new build industrial asset just outside the Midtown Tunnel and a $33 million multifamily in Dallas, with the downgrades due to slower-than-expected leasing and sponsor liquidity challenges. Our Infrastructure Lending platform again delivered strong results with origination volume of $2.2 billion in the first 9 months of the year, exceeding every full year since we acquired this platform from GE in 2018. As Rina mentioned, we completed our sixth infrastructure CLO subsequent to quarter end with nonrecourse, non-mark-to-market CLOs now financing 2/3 of this portfolio. In Residential Lending, we continue to evaluate strategic opportunities to reenter the residential origination space as credit spreads tighten, treasury yields are stable and market dynamics improve. Our REIS business continues to be a stable and countercyclical contributor with L&R continuing to be ranked the #1 special servicer in the U.S., and we expect above-trend revenues to continue in the coming quarters and years. Our CMBS conduit lending business continues to be a strong performer, and our CMBS portfolio continues to benefit from significant demand for credit assets and the resulting spread compression. Turning to our Property segment and our new net lease platform. The team has already begun originating new transactions. And after they were out of the market for a number of months during the marketing process, we are building a very strong pipeline. The triple net assets we acquired have strengthened our portfolio diversification by increasing recurring cash flow from long-term triple net leases financed with long-term fixed rate debt. We remain focused on scaling this business through its established ABS Master Trust securitization program. Post quarter end, we completed the first issuance under our ownership for $391 million at a record tight spread of 145 basis points over the 7-year amid strong investor demand. We expect subsequent securitizations to continue to tighten given the Master Trust grows and becomes more diversified with more securitizations. Rina mentioned the significant depreciation the portfolio creates, which will lower our book value over time. And thus, we will once again be encouraging investors to look at our undepreciated book value. We underwrote and expected this business to create near-term earnings dilution through integration as it did this quarter, but we expect it to contribute positively to distributable earnings as we scale. This quarter's results highlight the strength of our diversified franchise and our unrivaled access to multiple sources of capital. We remain proud to be the only commercial mortgage REIT that has never cut its dividend. With strong liquidity and our opportunity set increasing, we are positioned to grow and thrive as markets evolve with a balance sheet built to withstand volatility and capitalize on opportunity. We continue to invest in technology and artificial intelligence to enhance efficiency and decision-making across our lending and servicing platforms. These efforts are already yielding better analytics and faster response times, and we expect them to support long-term margin expansions as they scale. In fact, I used AI to write the bones of my comments today. With that, I'll turn the call to Barry. Barry Sternlicht: Thank you, Jeff, and thank you, Rina and Zach, and good morning, everyone. Just some quick filling comments, I guess, since chat wrote the bones of Jeff's comments, we can use his agent, and he doesn't have to talk anymore. We could just have this agent speak for himself. But moving back to and filling in some comments, I think it was an interesting quarter. Obviously, only half our book today is still large loan lending. It's about half of our assets, about $15.5 billion on almost $30 billion of assets. I think we created a near-term trough for ourselves with the fundamental acquisition. It was a strategic move. And while it was dilutive of at least $0.04 in the quarter, you have -- it is very leveraged to its overhead. We bought an entire business, including the management team. And as you scale the book, the results of the accretion of the book becomes rather dramatic. And 2 things we see. One, our cost of financing has dropped, as Jeff mentioned in his final comments, at 145 over. That's materially better than we underwrote when we bought the business. And two, the opportunities that we didn't realize that they had been out of the market for as long as they were during the sale process. So we didn't produce enough net lease in the quarter. But by stretching the duration of the book, the 17 years average lease and the inherent bumps in the rent, which average between 2% and 3%, we've actually stretched the duration of our book. And now we have a business inside of us that -- and if you look at triple net lease REITs in the marketplace, they're trading between, well, as low as 2%, but normally on 5%, 6%, 6% dividend yields. So you have a business that's worth inherently more in us with the parent paying close to 10.5% at the moment. So we will grow this rapidly, and we'll have to spin it off and realize the value of the extraordinary business we bought. It will get better and better over time. But near term, we are definitely suffering from dilution and probably didn't communicate that well enough to the analyst community though we remain very optimistic about the pipeline and the future growth. I'm going to step back for a second and talk about the whole company and then the economy. Starting with the economy. I mean the economy is a bit bifurcated, as you know, with the low end of the market not doing very well and the luxury market doing extremely well. But one thing as it affects real estate is you'll see, we see tremendous volume in transactions in Europe. And as the rate complex comes down, as the short end comes down, and we all know it will come down, certainly by May of '23 (sic) [ May of '26 ] when Powell is replaced, but likely before then, and it's only a question of the pacing between now and then. Transaction volumes in the United States should pick up dramatically, too. And what you're seeing is a lot of people thought rates would be lower. They're not through the woods yet. Rents haven't yet responded in the growth phase in most asset classes in real estate. But I think if you're looking backwards, you're looking the wrong way. I mean what we saw was a 500 basis point nearly vertical increase in rates happened very suddenly. Companies' assets, portfolios had to adjust to that. Their caps burned off over time. But in front of you, you have a declining interest rate curve. And more importantly, you have a very -- at least in the United States, a very meaningful drop in supply. So fundamentals should improve unless we get something of a serious recession, which isn't likely to happen in many quarters of the country because net worth are up and people are doing okay. Energy prices are calm. Inflation, while higher than people would like is probably onetime with the tariffs. It will bleed through in the fourth quarter and the first quarter, but the labor market should continue to weaken. And I think that sets up for a pretty benign period for real estate and pretty sound fundamentals coming out in '26 and as we emerge from this still increase in supply in the multifamily, the market rate multifamily. One of the other interesting things when you look at our company and you talk about the dilution, which is, we hope, temporary from fundamental is we're sitting on a $1.5 billion gain in our affordable book. And there, we mentioned last quarter, but not this quarter, rents in the portfolio will rise 6.7% we know already. That's the carryover from '25 to '26. There'll be an additional increase most likely in April of next year. That might put the increase to closer to 8% or even higher of 10%. We'll only probably be able to take a carryover to the following year. So that inherent growth in our book, that gain is available if we wanted it ever to cover the dividend. But we choose to enjoy the fruits of that portfolio. And Jeff mentioned, we did a $300 million cash out refi on just 30% of the book this quarter. And I will say that, that is one of the most important things about this year for the -- for our company is the complete fortress balance sheet that we've been building at ever lower spreads to SOFR and stretching duration and moving to less secured debt and repaying repos. It's a fundamental change in the balance sheet, which is probably for sure, the best in the industry. We'll continue to do that and continue to diversify and continue to strengthen our balance sheet in an effort to continue to bring down our costs which will allow us, in the case of fundamental, we can do a deal at a 7%, 7.25% and instead of a 7.75% because our cost of funds has dropped dramatically and is a competitive advantage for the franchise. So I think -- I don't really have much more I want to say. I think that we're very productive. The firm is producing lots of new paper across all its platforms. The business is particularly residential business now with lower rates, perhaps we can recapture some of that capital that's there. Also, we look to resolve our REO and nonaccrual assets. And we can see the future in our book as the capital is laid out. We know we can grow our earnings and get back to a place that we want to be, which is earning well north of our dividend. So from regular way business, we can always get there if we want. So thanks. And with that, we'll take questions. Operator: [Operator Instructions] Our first question comes from the line of Don Fandetti with Wells Fargo. Donald Fandetti: Can you talk a little bit more about your near-term DE expectations? I mean you're running below the dividend. Obviously, the net lease will ramp up and some other factors. Can you just sort of give us a framework there on the timing of covering the dividend? Jeffrey Dimodica: Barry, do you want to take that? Barry Sternlicht: Well, we can lay out our book, and we can see the earnings. And in an individual quarter like this one, if you put the money out in the last month of the quarter, you don't get the full benefit of the capital deployment. So it will ramp going up hopefully steadily each quarter. We're looking at other assets that are -- that we think can become productive earnings assets again that are turning the corner. So I don't know, [ Rina ], do you want to fill that in a little bit more? But I think in general, we're probably having one more quarter of, I would say, rougher, but not the real earnings power of the company. And then I think it's a pretty clear sailing. Jeffrey Dimodica: Yes. We expected, Barry, over a year ago when we modeled sort of this trough in this period that goes into early next year and then those earnings start to pick up as we get future funding as the fundings on a lot of these portfolios increase as fundamental starts to grow, and we have a few other good news things that we hope will happen in early '26. So we believe that we're on a path to getting back to where we've historically been in the not-too-distant future. Donald Fandetti: Got it. And can you talk a little bit about where we are on the credit migration front and building reserves? I mean do you think -- are we looking at like 2, 3 more quarters of just uncertainty on the credit migration and risk of building reserves? Jeffrey Dimodica: Yes, it's a great question. We obviously did move a couple of things to 4. We moved one back down an office building that people probably would have thought would have been terrible in Brooklyn. We've now got 3 very large leases that will fill that entire building, and we'll decide whether we're going to hold it or move on from that. But we'll be back at our basis. And so that was a great outcome on office. And on the other side, it's been a few undercapitalized sponsors who just haven't leased up as quickly that's moving some loans to 4. I think we tend to know the flavor of what these look like. It's a few of the apartments that we did in 2021 against 4 caps that we expected a 5.25%, 5.5% exit debt yield. We probably got there. But given the rate rise, it's probably not quite enough to get out. Those would be very small losses if we did take losses in the multis. But for the most part, we've already worked out of 3, and we have another 2 coming at our basis on the multi side. And in general, I think we don't expect to have larger losses there. And the office side, it's known problems. Whether they get slightly better or slightly worse from here is what's going to create any movement within 4 and 5. But I think we know what the subset is today, 3 years after the rate rise began. It takes a while to figure it out. In general, our sponsors have continued to put in equity across these assets, even the ones that we've moved from 3 to 4, all had new equity coming in from the sponsors. So you get a little bit surprised sometimes if the sponsor decides not to defend a significant amount of equity. But for the most part, I think we see the playing field now. So I wouldn't expect a significant build from here, Don, if that's the direction of your question. Operator: Our next question comes from the line of Jade Rahmani with KBW. Jade Rahmani: Regarding the REO and nonaccruals, are you expecting sort of a steady cadence of dispositions and ultimate resolution? And over what time frame? Jeffrey Dimodica: Yes. I think we said we've got about $500 million that we've resolved and $1.1 billion that we've foreclosed on. So some people would say that's $1.6 billion. That's not how we look at it though. We have a 3-year plan with our Board, and it's about 1/3 per year is how we're looking at it. So we hope to have this pig mostly through the python at some point in 2027, late 2027. And along with that, with our larger lending book picking up and offsetting it, the loss of that drag at the same time that we have a much larger book contributing, we really look forward to getting through next year and looking at a much brighter horizon beyond. But I don't have a perfect time line, but it's about 1/3 a year. Barry Sternlicht: I was just going to say that we do have too much liquidity. $2.2 billion is probably $1 billion higher than we normally carry. So that's additional earnings power. It's just a question of how fast we can deploy it. And we just do models. But -- and now you're seeing also repayments. People are paying us back again, which is good news, and we can lay it out the capital with fresh lenses. But it will pick up. I think you'll see additional repayments in the U.S. as rates fall. It's not so much rates as spreads. I mean spreads are crashing and across the corporate and real estate credit markets. Fortunately, our lines are going with it, but keeping our net spreads attractive and consistent with prior years. But it is leading to a lot and refinancings. I think the parent company will do something like $30 billion of refinancing this year. And that's -- we're like everyone else, we're refinancing anything that's not nailed to the ground because of the attractiveness of spreads. Jeffrey Dimodica: And that $2.2 billion is a really big headline number. The low point this month will be probably closer to $1.4 billion after we pay down the secured debt that we expected to pay down on these high-yield issuances. We have a bunch of expected fundings. And as Barry said, we did have significant repayments. We had $1.3 billion in CRE and $700 million in SIF. That's $2 billion of repayments. So it's over $500 million of equity that came in at the same time as these high-yield deals that we accretively did and the term loan that we accretively did, but with the expectation that we'll be paying down secured repos and a bunch of fundings on this larger pipeline happening in the near future. If you add in $150 million or so of equity per month that we expect generically to put out in our run rate businesses, should they maintain today's pace, we're right back to a very normal liquidity position in a few months with a lot of firepower to continue to grow. Jade Rahmani: I wanted to ask about the multifamily market. I think it's been somewhat disappointing the second half of this year where everyone expected turning the corner on the supply overhang and rents troughing and starting to perhaps grow. That seems to be pushed out. But generally speaking, aside from the Florida affordable housing portfolio, what are your views on the multifamily sector? And are you more bullish about the outlook in '26? Barry Sternlicht: It's Barry. While we -- well, supply will drop 60%, 65% or more in some of the markets, and we own 110,000 apartments, of which 53,000 are affordable in the balance market rate. It is city-by-city rent increases. And I think one of the -- I think Willy Walker's firms has put out a note 3.5% rent growth next year. I think you'll see it in the back half of the year. I think the supply is definitely going down, but it's still here. And everyone finishing a deal right now, everyone in lease-up is offering fairly significant concessions a month or 2 months to lease up so they can pay their debt service and they can try to sell these assets. What's interesting is the depth of the purchase market. I mean people are -- we're selling in our other opportunity funds, a dozen or so projects. Cap rates range from 4.3% to 5.5%, depending on the market. I'd say around 5%, 4.75% is clearing. And why are people buying this? First of all, the negative arb is going away as the short end comes down. Second of all, you're buying this asset at a huge discount to replacement cost. So unless the country goes into negative population growth, you're going to see continued demand. And demand, as you know, we're 95% occupied in most every market. And rents are affordable. The affordability of rents since incomes went up and rents didn't go anywhere for 2 or 3 years now, your affordability has dropped in our own portfolio from like 25%, 26%, warning is 30% down to 22%, 21%. So again, it's really -- we're all watching what's happening to the 18- to 24-year-olds that I think the unemployment rate has more than doubled in 18 months, whether that's chat or people just wanting to do different things in their careers or mismatch of education versus the job opportunities. I think that isn't your typical renter. They're usually a little older than that. They may be if you're 18, you're in college, so 18 to 22 is a college age child. But I do think we're all watching and we're all sort of scratching our heads. But in reality, you still have this wave of apartments finishing in all these markets. And some of them are better than others. You're seeing green shoots in some of the Florida markets. We expect that to accelerate next year. So it really depends on where your footprint is. But city of some of the other towns, I mean, Austin is a very difficult market. Probably it is the worst in the country. It ran the furthest, quickest, and now it's giving a lot of it back. But rents are falling double digit in that town. And then if you go to, as you know, [ mark ] cities with no supply, you're seeing 4% to 5% rent growth in California. San Francisco is looking positive 7%, positive 8%. There's no supply, and there's job growth as companies return to the valley for their AI adventures. So it is a national stat, but it's a very local thing that we have to watch and sort of Phoenix is tough. Interestingly, you'd worry about homes competing against apartments, but they still remain unaffordable and the mortgage spreads are historically high. So -- and you can see the more abundant housing market. So I think people are -- will still be in the renter community, but it would help, by the way, if we had some legal immigration, which has always grown the population in the U.S. And I think it's the first time in 250 years, the U.S. population will fall year-over-year because of net immigration and 1.7x birth rate, which is quite low. We have the same birth rate as France. So maybe too much Netflix, anyway. Jeffrey Dimodica: Jade, you also mentioned the Florida multi as part of that. And Barry said $1.5 billion gain. It could be higher than that, we would see. But this cash out refinancing is the first time that we've shown you guys something that could look somewhat like a mark if you were to extrapolate. We had $309 million of agency debt previously from our purchase with $75 million of original equity. We took new debt of $614 million, so over $300 million more. That's a $225 million gain or it's 4x our original equity of $75 million on that portfolio, which is plus/minus 30% of our portfolio. And that's a gain just on the debt. The equity also has a gain, obviously. So I think that Barry giving you the $1.5 billion plus gain on that portfolio, I think this should make people feel very comfortable that, that is, in fact, the number given this is agency debt to agency debt and that we have that large of a gain just on the debt side without even including the gain on our equity. So I just want to touch on that given you brought it up. Operator: Our next question comes from the line of Rick Shane with JPMorgan. Richard Shane: Look, one of the things that we're hearing anecdotally is that companies start to deploy capital again, the market is competitive, spreads are fairly tight. I guess in some ways, it seems to us like the window -- the opportunity window opened or closed very quickly. I'm not even sure which direction to describe it as. Is that what you guys are seeing, too? And what do you attribute that to? Is it competition from your traditional peers? Is it private capital? Is it just that funding costs are so tight, as you've noted on your own side? What's driving this? Jeffrey Dimodica: Barry, you want me to start, and then you can go? Barry Sternlicht: Sure. And Dennis can also talk about the markets. I think he's on the call, isn't he? Jeffrey Dimodica: Yes. Dennis, why don't you go ahead? Dennis Schuh: Sure. Rick, obviously, we had a pretty big quarter in Q3. It was primarily multifamily and industrial. And I think we earned above trend versus the last handful of quarters. So despite spreads sort of contracting, our financing has also contracted sort of with it. So we're still earning a number that's above trend despite that. Jeffrey Dimodica: Yes. I'd add to that. Yes, Rick, to your supposition, more money has been raised in private credit and in the debt space. And there is less transaction volume, so more people are going after similar loans. Ultimately, as Dennis just said, we're earning trend returns and multifamily loans generically went from at the beginning of the year, probably 300 over to 240 over or so today for a transitional multifamily floater. And you would think that would hurt our ROEs, but we've been able to move our repos lower at the same time. I mentioned in my earlier that the banks are really leaning in to lend to us. It's a much higher ROE business. They have a 10% capital charge on making a whole loan on real estate. They only have 20% of that 10% if they make a loan to us. So you go from 10x leverage to 50x leverage as a bank, and that creates a great ROE story for the bank. So the banks have really leaned into giving us tighter and tighter financing. They have room to continue to tighten. So I'd say if we tighten a bit more, we should -- we expect to still earn a similar returns to what we're earning. But at some point, I think everybody taps out if you start getting significantly tighter than that, but we are certainly not worried about it in the near future. And as Dennis said, we have a large pipeline coming, and we expect to maintain this pace. This will be our second largest origination year ever. And my expectation for next year with the market starring a bit is that we hopefully do more again next year than this year. So things are definitely opening up, but they are on the tight end as you suppose. Barry, anything to add? Barry Sternlicht: Yes. I'd just add, I mean, if you look at our production, it's as near records and the yield on equity, the return on equity is actually consistent with past. I think there's one other new kid on the block, which you should not ignore, which is data center financing. As you can see, there's massive paper being written and hundreds of billions of dollars will hit the market. And the market will figure out where to price it, but many people buying it are doing back leverage. And whether it's Apollo, Ares with Blackstone or any of the KKR, I mean, everyone is participating in some of this, and it's virtually endless. And it's really from a portfolio construction, we're really careful about credit quality. Others may not be short term. And we are constructive. We're paying a lot of attention to not only the tenant, but the underlying tenant as we build the book. We did participate in the large financing late in the quarter, like most of our peer set. So -- and that pricing works for us at the moment. And spreads have tightened dramatically even in that space, but we still can earn the ROEs that we would like to earn. So I'm not -- we've been through like 6 or 7, oh my God, the market is too crowded. And we have a pretty long relationship in the marketplace now having originated over $100 billion of loans. And people know -- I think one thing people have grown to favor is knowing that their counterparty is going to own their loan and they're dealing with one person. I think that has become a really important notion for borrowers who previously had a bank originated a loan and then they syndicated it to someone offshore and then they try to restructure it in some possible. So I think that's helping players like us across the marketplace because we are a holder. We're going to resolve it and work through it with them. So I think that's been a significant shift in the borrower community. They really want to come to a one-stop shop and know that we'll be there holding the paper, they can talk to us. So I think that's quite helpful. Richard Shane: Got it. Okay. And I appreciate the thoughtful answer, and I know it's taking a lot of time, but I would like to do one follow-up. Barry, you had talked about data center financing. And I think one of the potential risks associated with that is we're talking about long-lived assets, but those buildings are really going to be filled with rapidly and the multiple of the technology versus the property is pretty significant with potentially very quickly depreciating assets inside. How do you guys think about that as you measure risk? And I suspect a lot of it has to do with counterparty, but I'm curious how different data center financing is versus your traditional businesses? Barry Sternlicht: Well, it depends actually what you're financing. So sometimes you are financing the building and sometimes you're financing the building, the equipment, as you know the equipment can be 60% of the cost of the building. And that includes everything. I guess there are certain credits we favor and certain credits we wouldn't favor. I mean you can just look in the credit default swap market and see how the market thinks about the different credits so far. I will say that I'm actually on the West Coast and had a technology event. And I think the numbers out of chat are going to astonish people in terms of their revenue growth, which will be significantly higher than the market thinks. Same is true in Anthropic. I mean I think these companies do have in the aggregate, $1 trillion of free cash flow. And they -- other than one of them, they don't carry much net debt. So these are really good credits, and I think we're going to rely on the credits. And I think if you look at -- we're going to sign a deal with the hyperscale, you know we're in the data center business. We have about a $20 billion book. We're building for Amazon, for ByteDance, for hopefully, Google, Oracle. Microsoft. I'd say that they're not investing like they're walking. They're investing like they're going to continue to upgrade their equipment to stay competitive and the burden won't fall on the landlords. I mean these are -- if the markets are correct, the need for data center space and what you see in the consumption of -- I don't know about you, but my chat has gotten slower. I mean it's definitely slower than it was 3 months ago. So I think they're at capacity. And if you listen to them, I mean, believe them and believe the productivity gains that will come through corporate P&Ls. I mean, I think we're pretty sanguine on most of the credits, I think there are a few of them that worry us, and there will be a correction as the inevitably is. So we just have to be -- we have great debt yields, great lease coverage and the best credits in the world as your guarantor with steps. It's not awful. It's not awful. It's pretty good. It's a pure cash flow. There's no capital, there's no CapEx for us. I mean we got to balance it. Jeffrey Dimodica: Rick, you framed it as counterparty risk and talked about depreciation, but the lease doesn't depreciate. Our loans fully amortized. We've done probably 4 large ones. Our loans fully amortized over the lease term. There's no reliance on residual value in our underwriting. So again, it comes back to counterparty risk, as Barry talked about, and these are pretty good risks to take when you talk about the companies that we're talking about. Operator: [Operator Instructions] Our next question comes from the line of Doug Harter with UBS. Douglas Harter: As we look at the new triple net lease business, it looks like the kind of the cap rate that you show on that slide is kind of in the 5% range, which seems below peers. Is there anything that's affecting that in the short term? And as that business scales, kind of where do you think cap rates can get to? Jeffrey Dimodica: Yes. We only had 2 quarters in there. And so this quarter, it will look funky at [indiscernible] so it's a 6.9% or 7% implied cap rate with no goodwill on this portfolio was the purchase price. So much higher. So there's a normalization that it will scare people if they see that 5 handle number that is not a correct number. Douglas Harter: Great. I appreciate that clarity. And then, Jeff, you briefly touched on it, but just hoping you could talk a little bit more about kind of the value and how the lenders were valuing Woodstar kind of as you went through that refinance process. Jeffrey Dimodica: Yes. Thanks, Doug. I did briefly, but we had $75 million of original equity that with this cash out refinancing, we took $300 million out. Obviously, it's 4x our equity return. So the portfolio has done really, really well. And if you gross that up on our entire portfolio of $500 million and change purchase price, and that's just on the debt. The equity piece also has a gain. I think you get very easily to where Barry came in at $1.5 billion gain pretty quickly. So I think the market should feel pretty good about that being something that is available to us should we choose to take some of it, and that will be up to Barry and the Board as to the timing and when. Operator: That concludes our question-and-answer session. I'll turn the floor back to Mr. Sternlicht for any final comments. Jeffrey Dimodica: Barry, before you go, we have something sort of new that just came in. It just priced, but we priced our fourth CLO in the CRE side. It just priced a few minutes ago, so I couldn't really say anything previously. 165 basis points over SOFR, 87% advance rate. That's a very strong deal for us. We have 3 large billion-dollar CLOs previous to that in the CRE side. We've actually bought out a decent amount of paper over those. So bondholders have done very well on those. And CRE CLOs will never be a business for us. It's a trade when it makes sense, and it's made some sense today. It's made a lot of sense in the energy infrastructure business as well, where we just priced our sixth CLO, and I think 2/3 or almost 3/4 of our debt is now financed in CLOs on the energy side. So we're very happy to have priced a CLO really tight with a great advance rate 5 minutes ago. So good news also there. But Barry, I'll turn it to you now for final comments. Barry Sternlicht: No, I'd say this is because of primarily fundamental, this has been a transitionary quarter for us, but the underlying businesses are super strong. The curve is favorable. The team is proven originators across our entire platform. So we'll get through. I think we made the right long-term decision by buying Fundamental. This is a quarter where you wouldn't recognize that decision, but I think you'll be super happy as we scale the business. We're betting so. So we own a lot of our stock. Thanks for being with us today, and enjoy your week. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Hello, everyone, and welcome to today's Kaspi.kz's Third Quarter and 9 Months 2025 Financial Results Call. My name is Sam, and I'll be the call moderator today. [Operator Instructions]. I'd now like to hand you over to today's host, David Ferguson, Head of Investor Relations at Kaspi.kz to begin. So David, please go ahead. David Ferguson: Yes. Hi, Sam. Thank you. Good morning, good afternoon, everyone. Welcome to our Kaspi.kz's 3Q 2025 Results Call. Apologies for starting a little bit late, but let's crack on. So on the call, you've got myself, David Ferguson; Mikheil Lomtadze, CEO and Co-Founder of Kaspi.kz; Tengiz Mosidze and Yuri Didenko, the Deputy CEOs of the company. As usual, Mikheil and myself will take you through the presentation, and then we'll open up the call to Q&A where the whole team is available. So on that note, Mikheil, over to you. Thank you. Mikheil Lomtadze: Yes. Thank you, David. So let's go straight to the presentation. So briefly, the results for the quarter across all our platforms. What we're showing here is the results also without excluding effect of some external factors. So the Payments grew TPV, 18%; revenue, 10%; nice growth on the net income of 12%. The marketplace mainly impacted by the shortage of supply of the smartphones and iPhones more specifically. So our growth has been 12% year-over-year, but 20% GMV growth in case if we exclude the effect of the smartphones. And you can also see that our revenue would be 32% up, excluding effect for the smartphones and 16% net income growth, excluding effect of the -- largely of the smartphones, 7% growth if we consider that factor in. The fintech also has shown nice growth, 16% on TFV. 24% on revenue, and it would be 28% growth, excluding some of the effects like tax on the government securities revenue and other external factors. So I will go through them on the following slide, but 15% growth if we actually include them. And our top line growth of 20% year-over-year, and 23% if we exclude the external factors, and 21% if we exclude the external factors as well. And also considering where we are in terms of our performance and the next year, we are also starting ADS buyback in November for [ $100 million ] would like to bring forward -- considering our cash generation and performance, we would like to bring forward the distribution of cash, but also it's a good investment considering where we are in the stock. So this is just briefly some of the factors we have listed. For the external ones, which had the impact on our performance from the financial point of view, again, the core business has performed really nicely. Some of the things which have happened from external factors is the smartphone registration requirement and shortage of supply of iPhones that had about 8% impact on the GMV and 3% on the consolidated income. However, we still believe that the demand is there. So next year should be a good year to recover. 10% tax on revenue from government securities. I mean, in most of the markets, actually, the revenue is taxed. So Kazakhstan introduced the tax on the revenues from the government securities this year, and it's minus 1% on net income. Increase in minimum reserve requirements, but also we cannot -- those reserves are kept with the National Bank, and there is no interest accrued. So that had an impact of minus 1%. And the base rate decreased (sic) [ increased ] from 15.25% to 16.5%, again, impact on consolidated net income, minus 4%. We are in the environment of high interest rates. As the interest rates inflation normalizes, there is an additional performance positives for the next year. This is just to tell you and explain that actually the core business performing really nicely, and the growth rates are quite high. So if you exclude the smartphones, our GMV growth has been 25% and highest growth top 5 categories like beauty and personal care, 69% growth; clothing, 51% growth; and home and garden, 35%. So we're really growing across the board on many of the categories, and the smartphones because of the supply disruption really had an impact this year. But again, we believe that demand is there. So we should -- we expect to recover next year and base also will be supportive for the growth next year. e-Grocery, we continue building up the leading e-Grocery business. So as you can see, we continue growing very nicely. We have about 1.3 million customers now. We grew on the GMV 53%, and we are growing on the transactions, 55%. We're scaling across the board. We have -- as we speak, we had 9 dark stores in the third Q. We're just adding another one, and we plan to enter another at least 2 cities next year. So our -- we have ambitious plans. As you remember, the business is growing fast, but it's also profitable. So for us, it's a very exciting vertical, which both, drives the engagement, but also brings a lot of value to consumers just because of the speed of the delivery, and the quality of services we provide. Another update is also on the -- connecting to other banks and payment systems to our payment and the QR code -- ability to pay with the QR code. So now we have even more banks connecting to our platform. The growth has been very high, 176% in terms of the TPV, and 5.4 million transactions in the third Q. So transactions are going even faster. We have now 7 banks connecting to it, and we have Alipay, which enables our consumers to transact with the QR code in the countries where Alipay is present. And we have also introduced the functionality when users of Alipay coming to Kazakhstan can also transact with the Kaspi QR. So we're building up this flexibility for our consumers, which is also useful for the merchants and will continue growing very nicely and fast. We also are going for the specific verticals we have mentioned briefly during our previous calls. So the restaurants is one of the verticals, which we are excited about. It's a major vertical, and the spending in our lives. So we have been growing very nicely. This is the functionality to remind everyone when the consumer can actually pay with the QR code, straight in the restaurant instantly, but also can leave the tip, and all this happens in our mobile application. So TPV has grown 259x, and the transactions in excess of 1 million transactions in the third Q. So growth is there. The vertical is also very valuable service for the restaurants, and consumers love it, and we continue rolling this out. As we are going for the restaurants vertical, we also have integrated the third-party restaurant delivery platform. It's Glovo. It's a subsidiary of Delivery Hero in Kazakhstan. It's a top 3 player in the country. So now we have integrated them in our Super App. Basically, consumers can access the Glovo service through a single registration, which is Kaspi ID. And from the registration, they can have access to the full service of the Glovo app, and they can -- they are also integrated with our payments so the consumers can seamlessly pay with the Kaspi Pay. So it's a major step for us. So we're working with a third-party mobile application. And yes, it's exciting that the teams are now working together to develop the service further. But this is again around the restaurant vertical, and we're excited to continue building up services in the specific verticals in the future. We have also done -- Kaspi has been doing regularly the events called Kaspi Key Note event when we present the major innovations and demonstrate them and tell what the service is about. So we have launched 3 services on the Kaspi Key Note event: it's pay by palm, it's advertising service and the Kaspi AI. So pay by palm is probably one of the -- of our major innovations in the payments after we have introduced the QR code. And before that, we have introduced the payments and the wire transfer by the mobile number. We were the first one to do that. So it's very cool feature when you basically just connect through our mobile application and the device to the Kaspi Pay-by-palm, Kaspi Alaqan, Alaqan in Kazakh means palm. And then you can simply put your palm on the top of our device, and the payment goes through. So it's very exciting innovation. We are planning to roll out it at end of this year. It will be free of charge for the merchants for the first 3 months. And we're -- in general, our view in the payments business is that we would like to give as much flexibility and the choice to consumers as possible. So now our consumers are able to pay with the card, obviously, can pay with the QR code, can pay with the palm. And in the future, we'll be -- we're also expecting to introduce some additional service. So we would like to give as much flexibility to the consumers as possible. And we're also working with the National Bank so that our consumers can also pay through any QR code at any merchant. So our consumers will have as much choice as possible, and this innovation will just bring additional very exciting way to transact in the stores, especially in the high intensity transactions. There is a video we have published both of Kaspi Alaqan and also the event. So you are welcome to check them out. It's really cool, and the service is really exciting, and initial feedback is really great. Advertising revenue has been one of the fastest-growing revenue drivers for us on the marketplace specifically, and we have grown ad revenue 56% year-over-year. And as we think about advertising, we constantly launch the services, which enable merchants to increase their sales, but also for consumers to make a very informed decisions. So we have launched, as we speak, the service when our merchants can advertise on the third-party platforms. So it's a pretty exciting and really cool service when you can immediately, almost like within the 1 minute, you can you can set up the campaign. You can manage the campaign from the screen of your smartphone. You can review the analytics and the third-party platforms, you can preview your ads and the platforms, which are -- merchants will be able to advertise on Facebook, Instagram, TikTok and Google, and we're very excited. This is just one more tool for our merchants to have a very efficient advertising campaigns, but also they can track them, they can manage them, and analytics are really in-depth around those marketing campaigns. So very excited about this new service in advertising we have just launched. We also have been working a lot behind the scenes on the on the AI, Kaspi AI Assistant. Our view of Kaspi AI Assistant is actually quite simple. We call him assistant because we believe that technology that we are developing at Kaspi will help to make daily tasks faster, simpler, more convenient, better quality. So we are looking for very specific use cases, which technology we're developing in Kaspi can enable. Again, technology has very wide -- as you guys know, very wide applications. However, we believe that to deliver the most value, we want the technology to be assistant in a specific tasks for either merchants and in the future consumers. So this is the first application of that technology, which we're launching. It's Kaspi AI Assistant for the merchants. So the way the service works is quite straightforward. David, can you switch to the slide? So basically, you can create -- the goal and the application of this service is to enrich the product content and create the rich content, which helps you to increase the interest from the consumers, and therefore, that converts into your sales. So it's basically, you are uploading the photos. You can see some functionality screens here. You're uploading the photo, then Kaspi AI creates a photos for your product. In this case, for example, the Kaspi AI will select the model, which will be wearing your hoodie. Then Kaspi AI also creates the description. Description is based on many different insights and parameters, which also includes the customer reviews and what is important for the customers in order to make the informed decision about this product. And afterwards, you can preview the product, and you can publish it. So it's really -- before that, it would take whatever per item may be, depending how complicated the item is, maybe 10, 15 minutes to upload the item and create the description, and that was the main -- one of the main pain points for the merchants. Now it just takes minutes, and everything is filled up automatically. You can even make a photo of the label, and then whole characteristics of the product will be filled up also automatically. And then -- we still call this an assistant, which means the control is with the merchant or with the user, so user can edit, user can confirm those descriptions, can select the photos, can ask AI to create more photos and so on and so forth. But that's really a very powerful tool, which has shown extraordinary results. As most of the technologies and the services we are developing, we run those services on ourselves first. And then we get convinced that technology is really working, and the service has the value. And after that, we offer it to customers and the merchants in that specific case. So we have enriched about over 0.5 million products. And I just can show just some of the examples. So for example, this one is the kettle and how much else you can say about the kettle in order to have more interest from buyers and to drive your sales? But actually, what Kaspi AI will suggest you to do -- and again, this is all generated by Kaspi AI. Those are actual screens and actual text, interaction works like -- similar like to the AI assistant. So it will create the photo in the interior. It will suggest to create the photo in the hand -- with the hand holding the smartphone, for example, because this is actually smart kettle. So it's not only boiling water, but it's doing a bit more of the functions. And also, it will suggest to create and will create the size of the kettle because then you can understand from those photos that actually this is the way it looks in interior. It's more than just a kettle. It's a smart kettle, and also it has sizes so you can understand how it stands in interior in terms of the size. And then it will create also the description, which will give you more details around each of those points. So this, for example, card product has been enriched, and the results were quite meaningful. So we have this product after enrichment increased by 35% in clicks, interest from consumers, and gave an 83% increase in the sales. And again, this is the product which was just photo or limited photo, limited description, and this is the rich content which sells, which also gives consumer more tools to make the right decision. Another example is tires, how much you can tell about tires? Obviously, tire is a tire. Everybody knows what tire looks like. However, Kaspi AI actually identified that if you create the infographic, which has, on the first page, which usually consumer sees, you need to say actually, 'What is the seasonality of this tire? And also list some main most important characteristics in infographics so that consumer can make a decision while looking at the photo." So this is how Kaspi AI created the whole thing. And then on top of it, it actually inserted the description and created a description, which says a little bit more on every individual -- most important parameter of the tire so that consumer can make the right decision. Again, all of those are created by Kaspi AI, including the photos and infographics and description. So clicks actually increased to 40%. So they drive more interest from the consumers, and 53% of the sales increased just because of this change on that tire. So it's really exciting technology. We have been working on this behind the scenes for quite some time. We have been running different -- obviously running different experiments before we decided to launch on the merchants. Here, what you see on the screen is like we would normally do with any similar technology and innovation. We basically identified 30 days before -- let's assume there are two similar control groups, right? So red is the product which we improved -- enriched the content, and then the gray color is the control group. So those are the similar products, let's assume similar kettles or similar tires, and we observed them for 30 days. And as you can see, behavior is very similar because those groups are extremely comparable products. After that, we have had our Kaspi AI to enrich the content. So again, to create the products, to create the description and characteristics and so on and so forth. And as you can see, 30 days after the enrichment, the control group continue performing decently, but it's still giving some increase. However, enriched content has more than 2x interest and clicks from the consumers than the control group. So this is a very exciting technology. It's the first application out of many which technology can be applied, and we are rolling this out. It will be available for the merchants in January of 2026. But again, as I mentioned, we are ourselves using this technology, and ourselves are enriching already the content, and we have enriched about over 500,000 products on our marketplace e-commerce side. I would like also to mention just very briefly some of the important priorities Hepsiburada is working on. And our main goal is really to ensure that we have a very sort of strong performance and continue exciting the consumers and merchants, and there are four priorities. Number one is the delivery, and they are not in priority, right? So we're focused -- we are working on four of them: so -- the main areas of investment is delivery; BNPL and the payment options from the banks; marketing; and user experience. On delivery side, we are making the low-ticket items more beneficial for the merchants to ship. Before that, the delivery cost was more than the value of the item which was sold. So we have actually worked on making sure that delivery is economically viable for the merchants and especially in the low-ticket items because those items are the ones which also driving engagement. And also, we have launched the weekly delivery, which was not -- yes, weekly delivery basically was not the market practice. And we believe that if you are e-commerce business, you should be delivering on the weekends, especially if the traditional retail works on the weekends. BNPL from banks and payment options, it's a wider selection of the banks and the wider selection of the payment terms and specifically also in the low-ticket items, which again are driving the engagement. Marketing, that's another area of investments and improvements. Teams are working mostly to optimize performance to make sure that if we are marketing the products, those products are high quality on the good terms, and therefore, they generate more interest, more traffic and more views. And as soon as this traffic lands in your mobile application, of course, user experience improvements are targeted to redesigning the consumer shopping journey in order to have the higher conversion rates. So those are -- there are a number of other things we're working on, of course, but this is something which gives us both results, but also they are important both for merchants and for the consumers. So as a result of those -- for improvements and changes in some of the areas, we have shown a very nice growth in number of purchases, which is the main metric for us, which shows the growing engagement from both consumers and merchants. So the growth has been through the year. In the third Q, plus 16% in order growth, which is a really exciting trend. Obviously, we will continue making further improvements and investments, but that's already a reasonable result to share with you. Some couple of things just to give you a bit heads up like some of the things which we're sort of working on. Just to visualize those are really -- you don't have to be the rocket scientists. There are some really simple stuff that you can do. So in case of the payment options, for example, we have shown to the consumers number of payments you are making, but also the monthly payment that you might have with the BNPL payment option, and those results before and after gave us maybe a test 4.5% growth in the GMV. This is -- again, I'm just showing you some simple examples. Obviously, I'm not going to take your time to go through all the improvements we have done. Another slide is, for example, the redesigning some of the homepage items. So we have we have basically brought in more sort of personalization in order for consumers to easier understand some of the products that they are fit for them or interesting for them. So recently viewed products and especially for you sections on the homepage and also in principle, just to see more products on the homepage. So CTR increased almost 2x, from 15% to 31% in A/B test for recently viewed section. And especially for you section increased from 18% to 23% click-through rate. So it just tells you how much of the simple improvements on the user experience can bring the value. We're also working on the third-party platforms, in this case, is influencers, which Hepsiburada has a significant influencer channel, which drives the sales. And here, we have basically also made a very sort of important changes, basically helping the influencers and the merchants in this case, to launch the campaigns when you reduce the price, and you also have the reduction from the Hepsiburada, how much of the benefit you will get, how much of the sales uplift you will have, and you can also see the products which you can launch. So these A/B tests gave us more than 9% the GMV uplift. And again, this is the service when merchant can launch the prices, and the price reduction is also matched with Hepsiburada commission reduction. And then influencers -- again, influencers here can actually easier see the offers which they can market to their subscribers. So we have done -- you can easier see the brands, you can see the products, and those are also very much -- we're trying to match those -- this selection with specific influencer. So influencer channel is quite substantial and A/B test gave us also the same excess -- in excess of 9% GMV growth. So all in all, I mean, we have introduced some of the major innovations on the Kaspi side, and we're also achieving the growth in orders, which is very healthy because we're investing our efforts into delivery, marketing, payment options, BNPL and user experience improvements. And back to you, David. David Ferguson: All right. So thank you, Mikheil. Let's go on and just talk about the performance of the core business, starting with the payment platform. So I think that's the key message here on this slide. Payments growth remains robust, but also consistent throughout the year. Volumes up 14% in the third quarter, up 15% year-on-year for the 9-month period. And as we've talked about previously, just this reflects the ongoing popularity of Kaspi Pay, bill payments, and the fast adoption of B2B payments. Strong volume growth translates plus growth in ticket size, translates into faster growth in TPV, up 18% in the third quarter versus 14% volume growth, up 21% for the 9-month period versus 15% volume growth. So again, strong and consistent trends. What you have within the 69% of our volume that come from Kaspi QR and card is -- the shift continues to move in favor of QR, and that drives the take rate down, down 9 basis points in Q3, 8 basis points for the 9-month period. And again, that trend is consistent. You've seen that actually playing out over the last couple of years. The combination of strong top line growth, strong volume growth, strong TPV growth, but with take rate dilution results in lower revenue growth, plus 10% and plus 14% for the third quarter and 9-month period. Again, as you've consistently seen top line dropping through to the bottom line, operational gearing and cost control, faster bottom line growth in payments of 12% and 17%, respectively. Moving on to marketplace. So here, again, actually that you see the purchase volumes very strong and again, consistent throughout the year, up 36% year-on-year in the third quarter, up 36% year-on-year for the 9-month period. Transaction growth on marketplace remains fast. In terms of GMV growth, GMV growth up 12% and 15% year-on-year. This slide really illustrates the impact of the supply issues in smartphones, which as you see, excluding smartphones, GMV is up 20% for the third quarter and up 21% year-on-year. And you should keep in mind that the smartphone supply disruption is relevant not just for e-commerce, but for m-commerce as well. marketplace's take rate continues to move up, hitting once again, all-time high levels, 10.3% for the third quarter and for the 9-month period, driven by value-added services, namely Kaspi advertising and Kaspi delivery. As Mikheil showed you, advertising revenue up 56% in the third quarter, up 76% for the 9-month period. If we look more specifically at e-commerce, 12% GMV growth in the third quarter. If we adjust for smartphone, GMV growth up 25%. For the 9-month period, GMV up 19%. And again, if we adjust for smartphones, up 29% year-on-year. The performance of e-commerce ex smartphones remains very, very strong. The smartphone supply disruption is a countrywide issue. As we move into next year, from March, we have a very favorable comp, and we'd also expect over the course of next year for supply issues to naturally resolve themselves. The competitive position of e-commerce remains completely unchanged. And actually, on the purchase side of the equation, you see here again, growth very strong, up 86% year-on-year, and up 90% year-on-year for the third quarter and 9-month period, respectively, with e-Grocery contributing to that fast growth. M-commerce, always the slower growing of the marketplace platforms, but nonetheless, still an important platform, particularly for onboarding merchants. GMV growth up 12% in both periods. Here, too, if we adjust the smartphones, GMV growth up 17% and 15% in the third quarter, the 9-month period. Take rate moved up slightly, again, as we continue to just add additional value-added services and marketing campaigns for our merchants. And on travel, travel continues to post decent growth. GMV up 13% in the third quarter, up 17% for the 9-month period. Here, too, take rate is moving up nicely, 50 basis points in the third quarter, 60 basis points for the 9-month period. That is primarily due to the growth in Kaspi Tours now account for around 10% of GMV, Travel's GMV launched around 2 years ago. So it has grown nicely from 0% and will continue as we move into next year to grow above Travel's overall GMV rate, implying further take rate expansion. So the combination of GMV -- take rate expansion above GMV growth plus fast growth in grocery revenue translates into revenue growth in marketplace well above GMV growth, up 24% and 27% year-on-year for the period. Here, too, if we make the smartphone adjustment, you see revenue up 32% and 34%. So really just again, reiterating the point that the supply disruption in smartphones, which we expect to be temporary and to resolve itself over the course of next year is the primary and actually only reason for the sort of the slower growth that you are seeing in marketplace. Same comments on the net income side of things, up 7% and 13%, adjusted for smartphones, up 16% and 20%. Net income growth will grow below revenue growth, and that is just the mix effect of 1P e-Grocery growing fast and taking share within the mix. Finally, in Kazakhstan, moving on to the fintech platform. TFV growth remains very robust, up 16% and 17% in the third quarter and 9-month period. So here, too, not just robust, but again, consistent over the course of the year. The TFV growth is being driven by merchant lending, which we expect to keep growing at a faster rate than the consumer lending products. That's actually nothing new. That's been the case over the last couple of years and should remain the case going forward. The growth in origination is happening with stable pricing. The fintech yield flat year-on-year at around 16% in the third quarter, 18% for the 9-month period. And here too, you see strong growth in the loan portfolio, up 30% and 32% year-on-year, growing at a faster rate than the deposit base. But here too, the deposit base continues to see very robust and predictable trends. The new products that we've introduced and that we've talked about previously have seen solid month-on-month growth in deposits since their introduction. Cost of risk, 0.6% versus 0.5% in the same period last year. Overall, credit trends remain strong and consistent, albeit as we mentioned at the H1 numbers, currency depreciation in the first part of the year did necessitate by a macro provisioning in the first part of the year. NPLs have moved up slightly. But again, this is the trend that's been consistent over -- slightly versus the end of last year. This has been the trend throughout the course of this year. And overall, credit trends remain strong and consistent. Lower coverage reflects the growing share of the car loan and the growing share of the merchant financing. The car loan is secured. The merchant financing is sort of by nature, a lower risk product and therefore, requires less provisioning, provisioning unchanged on the consumer side of the equation. So what we have is just the mix effect. With strong origination in previous periods, stable pricing, you have decent and accelerating fintech revenue growth, up 24% in the third quarter and up 21% for the 9-month period. Faster revenue growth has also translated into accelerating net income growth. Accelerating net income growth up to 15% from 10% in the 9-month period. That's despite the growth in interest expenses in the third quarter, up 30% year-on-year. Adjusted net income growth reflects the effects of the base rate increase. So you can see that if rates hadn't moved up in the first part of the year, actually, the fintech platform would be on track for -- it would have delivered 28% bottom line growth in the third quarter and 18% for the 9-month period. So here, I think the point to illustrate is just how material the rate increases have been on the bottom line, but interest rates in Kazakhstan are at high levels, and this can move the other way when rates trend downwards. So moving on to Hepsiburada. As Mikheil talked about what -- there's multiple product initiatives taking place around payment options, marketing, delivering, user experience and so on. And one way you can sort of track the progress ultimately is in terms of purchases -- driving purchases, frequency of transactions on the marketplace. And you can see here that the initiatives that we have launched are gathering, increasing momentum, with purchase volumes up 16% for the third quarter versus plus 4% for the 9-month period. So that's a really encouraging increase in growth momentum as we look into next year. That mirrors in the GMV side of the equation. Financials are inflation adjusted. We're talking about real growth here. So I know there's been some sort of confusion around that in some of the commentary that I've seen. But here, too, you see GMV growth moving up, up 15% for the third quarter versus 5% for the 9-month period. So the investments, the product improvements that we're making are starting to drive an improvement in the top line performance of the business, and that's reflected in both 3P and the 1P sides of the business. The 15% and 5% GMV growth translates again into faster real revenue growth of 22% and 11% for the 9-month period. So here, too, you see that the investments that we're making start to translate into a faster-growing business. That is the aim, to invest and drive the top line performance of this business up to a faster rate for a sustained period of time. And that is also being helped at the revenue level by growth in advertising and growth in external delivery services, hence, the faster revenue growth versus GMV growth. You can see the impact of the investments that we're making. The investments are targeted primarily into those sort of four areas that we've talked about: delivery, payment options, marketing and user experience. And you see that impact on the EBITDA level, but you can see that these investments are translating into faster revenue growth. And the aim is for that faster revenue growth to be sustainable as we go into future years. The investments impact the bottom line. But what you can see here, if we look at the third quarter of 2025, is that the main area of that investment is on the payment options, the buy now, pay later options that we're integrating with third-party banks. That's the main increase, performance advertising and delivery to a lesser extent. Hepsiburada has also announced a $100 million share capital increase. And again, it is raising funds with a view to ensuring that, that business is well capitalized to pursue its different objectives over the course of next year. So what does all of this mean. For Kaspi in Kazakhstan, you see decent and consistent revenue growth, up 20% in both periods. Here, you see again at the revenue level, at a group level, the impact of smartphones, revenue would be up 23% and 22%, respectively, over the third quarter and the 9-month period. And then at the net income level, here, you have the impact, the 21% net income growth in the third quarter, and the 24% net income growth reflects the impact of smartphones, the higher base rate and the other external factors, regulatory and tax changes that have been introduced over the course of this year, but it helps you to understand the underlying operating performance of the business. And to put some perspective on this, if you think about at the beginning of the year, when we guided for net income growth of around 20%, you can see that without these external factors that have occurred subsequently, we're actually trending very close, exactly on track for that. The underlying core business growth drivers remain unchanged. Here is the consolidated numbers in -- it's just the culmination of Kazakhstan and Turkey together. And then in terms of the guidance, on the middle column here, you see the updated guidance. So lower GMV growth. This reflects the absence of the recovery in smartphones in the fourth quarter. Again, just to reiterate from March 2026, if nothing else, we have a very, very favorable base effect going forward. And there's no reason to think that the supply disruption won't resolve itself over the course of next year. If we adjust for smartphones, you can see that marketplace is on track for 19% to 21% GMV growth. TPV payment growth around 20%. That's at the top end of the range we provided at the beginning and summer periods, and TFV growth in line with the guidance that we provided at the summer period around 15%. So it's really only the smartphone issue that's affecting the top line trends. Bottom line of around 10% growth in Kazakhstan, that is lower than the around 15%, and that reflects smartphones, it reflects the tax and regulatory changes and again, the impact of the higher base. If you ex out those factors, the business will be on track for around 18% to 20% growth next year. And this gives you some indication of what growth would be as the smartphone issues resolve themselves. Interest rates at some point move down, and the tax and regulatory factors at least move into the base. We've also launched the $100 million, or we will launch post this call, the $100 million ADS buyback program. And I think what we've said in the press release as we look into 2006 (sic) [2026] we expect to be able to achieve a balance between investing in the business, returning cash to our shareholders via both buybacks. This $100 million ADS buyback program doesn't have to be the end. It can be the start and the resumption of dividend payments. It's too early to go into the detail just to preempt that question around exactly what dividends can be. But I think we've been pretty consistent. This year was an investment year. We've made those investments to put the foundations in place for future growth. That was what we said 12 months ago. Our message has been consistent, and we can achieve -- and our message now is we can achieve a balance between investing in our growth and returning cash next year. So I hope that's sort of pretty clear to people. So on that note, let's open the call up to Q&A, please. Operator: [Operator Instructions] Our first question comes from the line of Ygal Arounian from Citigroup. Ygal Arounian: Maybe I'll start with Hepsi in Turkey, and the updates there on the investment is really helpful. Can you just help sort of paint the picture on kind of where we're going from here, particularly around like the investment level needed when we can get to reverse the trend in terms of the operating losses? And how you found the competitive environment so far to be in Turkey, better than expected, worse than expected, sort of any insights around that? And then second question back to Kaspi and Kazakhstan and the advertising product numbers. I mean, real strong growth there, and it looks like, still very early in terms of penetration. You've got a lot of different products. So just help us think about how to think about advertising kind of -- if you benchmark against global peers, how big it can be, which areas that you can drive more advertising or less? Just kind of help think through that product as well. David Ferguson: All right, Ygal. Thanks for your questions. Mikheil, do you want to take both of those questions? Mikheil Lomtadze: Yes, sure. So on the Hepsiburada side, we are -- again, as a part of our priorities and the strategy is always to make sure that the products or the services and both for consumers and merchants is the one which brings the value. So that is our priority, which means when you think in terms of the growth or in terms of consumer engagement and the merchant side, that's our most important priority. So the growth is a result of those changes. And we believe that by building up the highest quality products and the user experience, those are the -- yes, those are the priorities which will generate the value for us going forward. So that -- that is our priority, has been our priority for this year. And the teams are working on the -- yes, basically on bringing the quality of the products to the next level. So the investments that you really see, those are the investments which, again, on the delivery side, we want to deliver both faster, but also have more engagement for merchants. And on the consumer side and the marketing side, those are the investments which bring traffic, which converts at the increasing rate into the sales. And most of our initiatives, strategic priorities are around the mobile application, which we are obviously prioritizing. So that's where we are. And we don't really see the huge need for capital investments going forward. But again, if those are justified by improving the quality of the services and the speed of delivery and the infrastructure for the delivery, then we'll bring those investments into the company. So that's basically on this -- and our priority is really growth. So that's -- but growth, high-quality growth, which means growth of happy engaged customers and happy engaged merchants. So that's on the Hepsiburada side. Yes. And in terms of the overall competitive dynamics on the market, again, I think we have been saying this many times that we do pay attention to competition. But at the same time, we believe that our priority needs to be quality of the services and bringing excitement by the quality of the services to the merchants and consumers. So we don't think about competition in a traditional way like maybe some other companies would think. So that's on the Hepsiburada side. In terms of Kazakhstan, I think we are developing the full range of the advertising services, which are in different stages of the development. So we have -- you can advertise products now through the product listings. We have advertising service for the brands. We have advertising service when you can actually introduce these points or rewards as a merchant. We also are thinking how we can enhance the merchant experience in the app itself in order for the merchants to bring a very highly targeted engaged consumer base to their products and to their shop in Kaspi.kz itself. So yes, so it's growing very nicely. The merchants giving us a very good feedback. And yes, we believe that we can continue growing this business, and it will grow faster than the rest of the -- we believe it will grow faster than the rest of the revenue on advertising. We just launched -- I think we've talked during the last presentation, if I'm not mistaken, that we launched gift certificates even for offline retailers. So all of those things at some point, they will start contributing meaningfully to the growth. So advertising is really exciting. And that's our core competency. It's all about data. It's all about user experience, and it's all about the merchant experience in the mobile application. So yes, we're very excited about the advertising services, and they will continue growing much faster than the rest of our revenue. Operator: Our next question comes from the line of James Friedman from SIG. James Friedman: I wanted to ask about the -- so on the marketplace side, the take rate was up again 80 basis points. So I was hoping you could elaborate on some of the components that are driving that. And then on the advertising side, can you just explain kind of in simple terms when you say you'll run the advertising campaigns for the merchants on the Super App. Just I'm trying to understand what it means to run it for them? So one on marketplace, one on advertising. Mikheil Lomtadze: Sure. So on the take rate, the main drivers of the take rate are really additional services and advertising more specifically and also the delivery revenues. So that's the main driver of the take rate. We are not -- as you remember, historically, we believe that we want to deliver the value to the merchants by additional services, not by constantly increasing the seller fees. So that's not our strategy. So the increases that you actually see they are driven by additional added value services, and those are at the moment, specifically advertising and delivery. So that's on the take rate. In terms of the advertising, I mean, it's quite straightforward, right? So the current technologies enable us to develop a very sort of simple user experience when the merchants from the screen of their smartphone, they can select the items they want to promote and then advertise, and then they just tell us a bit the type of customers they want to reach. So it's a very simple service, all the data-driven. We truly believe that advertising needs to be developed in a way that you can launch an advertising campaign on Kaspi with the one hand by driving a car, if you are a small merchant. And this is how we're looking into this. So this is not something which complicates the merchant's life. They just can quickly launch it a very simple settings. They just need to tell us the type of merchants they -- sorry, the type of consumers they want to reach, and then we will do the rest of the job for them. And behind this, of course, is number of technologies which we're developing and the data, which enables us to have this very high prediction, high accuracy advertising services or advertising campaigns for merchants, which deliver them the value at an affordable cost. So that's basically the way we look at the advertising. It's simpler than many other big advertising platforms just because you don't really -- we don't really -- we do a lot of work for the merchants rather than merchants going through the complicated quest of setting up the advertising campaign. So this is why the services are showing high engagement in the growth rates. Operator: Our next question comes from Griffen Drebing from Wolfe Research. Griffen Drebing: Griffen Drebing on for Darrin. Just wanted to touch on the smartphone impact again. I know last quarter, you mentioned there would not be an improvement, so the 8 points impact to GMV largely as expected. But just any color on current trends through October, first week of November or updated thoughts on the potential duration? And then how you're viewing the sustainability of non-smartphone marketplace growth given so much strength across the top verticals? David Ferguson: All right, Griffen, thanks for your question. So maybe I'll just really start on that one. So just for the benefit of everyone, I think there's sort of two issues to be aware of. The VAS first was number one. New registration requirements, those were introduced in the spring, and that was the sort of the initial cause of the supply disruption. What -- subsequently that -- how that's evolved into then just a shortage of the latest models, iPhone type 17 models across the entire country, and you have a situation where now people who are long overdue a new smartphone don't want to go out and purchase the old model when they know that the new model will be available shortly. So that's what's going on in the market. There's nothing to show any improvement currently. Supply remains, particularly of new models in incredibly constrained. But Apple will get new phones into the country over the next couple of months. So number one, as I mentioned earlier, you've got a very favorable comp. It kicks in, in March of next year. So that's your base if nothing else, favorable comp. And number two, there's no reason to believe that whilst it's taking a little bit longer than we would have hoped that the supply disruption won't normalize over the next couple of months and certainly through the first part of next year. So that's on smartphones, and we've shown you just how material that is and how meaningful that can be when it does turn, and it will turn. So that's the first thing. But then the second thing we've showed you is that ex smartphones, marketplace and particularly e-commerce growth in all of the verticals is really, really strong. So again, as you look into next year, when smartphones come back, other verticals should also remain pretty decent, and you have marketplace and e-commerce sort of returning to its more normalized growth trajectory. There's no change in marketplace's competitive position, and the supply disruption is not unique to Kaspi. It's a country-wide issue, and it's in one vertical. Everything else is pretty much performing as we'd expect it to within marketplace. So that would be my main comments. Operator: [Operator Instructions] Our next question comes from Reggie Smith of JPMorgan. Reginald Smith: Perfect. I guess one quick follow-up on the marketplace question a second ago. I guess there was some quick math. I think year-to-date, you guys are at 16% growth in marketplace GMV. I think your guide calls for like 12% to 14% for the entire year. Just wondering, am I thinking about that right, does that assume like a low single-digit GMV growth in the fourth quarter? And is that primarily like seasonality around the cell phone purchases? And then one other piece with that. I know you mentioned iPhone. Is this an issue for like all phones, so like Samsung phones or Android phones as well? Maybe just talk a little bit about the mix of, I guess, iPhone sales versus Android in the country, just to give us some background. And I have one follow-up after that. David Ferguson: Well, I'll start. Yes, I mean, you will see marketplace growth moderate in the fourth quarter. So remember, marketplace is not just e-commerce, it's e-commerce, m-commerce and travel. But yes, that you will see that, that happens, number one. And number two, I would say, on the smartphone issue, well, particularly at this time of year, it's high-end smartphones. It's particularly the likes of an iPhone 17. So it's not just that. But that sort of -- this is when the latest models are released. And if you think about it, if a smartphone is $1,500, that's a lot of missed GMV, or it's a lot of gain GMV when it comes back, and a lot of missed revenue versus an average ticket size on marketplace and on e-commerce, that's materially below that. So that would be my comments. I don't know if Mikheil wants to add anything about the market as a whole. Mikheil Lomtadze: Yes. Well, I think that -- well, the GMV growth is a combination of also the value of items which are sold. And as David said, the highest value item in the smartphones is specifically the iPhones. And since the new model has not reached in the requested volumes, the country, it's not only Kazakhstan specific, then basically the people don't have a trigger to change their phone. But we just believe this thing will change in the future because demand is there. But Reggie, in terms of looking at the trends and the engagement, I think that the number of transactions is -- or number of purchases is actually extremely sort of valuable number just because that actually tells you how many purchases consumers make, how many times they interact with your marketplace and not just the value of items they buy. And you can see that actually the value of the marketplace purchases went up 36% and -- not the value, sorry, the number of the marketplace purchases went up 36%. And e-commerce, which is taking share from the m-commerce is actually plus 86%. So I think, again, transactions on the marketplace, 36% up, transactions on e-commerce, 86% up quarter-on-quarter. So this just tells you that there is a very healthy engagement, and our core business continues performing well, and those external factors eventually will have to -- we believe will disappear because demand is there, and supply will be reinstituted. It's just unfortunate that it's not happening as quickly as all of us wanted. Reginald Smith: Yes. And that makes sense. It's interesting. I hear you talk about the iPhones, and I'm thinking about, here in the States, $1,500 for a phone, a lot of Americans are pulling back on those types of purchases. So I'm surprised that folks are still, I guess, hungry for new iPhones out in Kazakhstan. One last one for me. Thinking about grocery and delivery. I know obviously, those businesses are scaling now. But remind me you're thinking about -- are those businesses like self-sustainingly profitable on their own longer term? Or are you still thinking about them as kind of engagement tools to keep people on the platform so you can monetize them through other ways? That's it for me. Mikheil Lomtadze: Yes. The grocery business is very much self-sustainable. We are on the profitability side. I think some time ago, we did show the profitability of e-Grocery. So you can go back to those numbers, and those numbers are the same pretty much. So yes, it is still sustainable. It's profitable. But as we are also having more demand for our products than the capacity to fulfill, we are building up dark stores, which is not -- which is not just an investment which is huge, but still to build once, the state-of-the-art dark stores, which we are opening depending on the size, but it can be an investment from, what is it, $10 million, $15 million, something like this, which can hold inventory for at least 15, 20 days on 10,000-plus SKUs. So those, when we say we're entering the new city, we are building the dark store sort of first or renting it if its rent is very affordable. So those are the investments we're taking because we need to build the infrastructure to meet the demand. But the good news is that demand is there, and it's almost like always demand is more than we can serve. So we are following the demand. At the moment, as we speak, we have about 10 dark stores, and we will enter a couple of new cities next year. And so we'll continue sort of building that infrastructure. Reginald Smith: Got it. If I could just sneak one more in. I know this is important to investors. The dividend, I saw you guys are going to reinstate that next year. Should we think about that being at a similar level to where it was or maybe even higher given that the income base is higher today than it was before you paused it? David Ferguson: Well, Reggie, I'd just say on that. You should keep in mind, I mean international will require further expansion. So that's something to keep in your base case and will remain an important priority. International was never there pre-2025. So that's number one. Number two, having -- again, having said that, we can have a balance between the two. Our track record of returning cash primarily via dividends, but also via buybacks speaks for itself, and we get that this is something that is important to our investors. It's precisely why we've actually started the buyback, or it's one of the reasons why we've started the buyback earlier than we'd initially indicated. In our H1 numbers, we indicated cash returns would start from the beginning of the year. So we'll do our best to get the balance right between investing in future growth and returning cash via different methods, both buyback and dividends, and we can decide what is appropriate as we move into next year at the right point in time. But it's -- it wouldn't be right at this stage to go into specifics around what payout ratios can be. Operator: Thank you. Unfortunately, we have run out of time for any further questions. At this time, I'd like to hand back to David for any closing remarks. David Ferguson: All right. Thanks, Sam. Thanks, everyone, for your time. We've done it now 20 minutes, but we have another meeting starting shortly. So we'll wrap things up now. Happy to follow up one-on-one post the call. So get in touch if you have follow-up questions. Thanks a lot for your time, and speak to you soon. Thanks, everyone. Bye. Mikheil Lomtadze: Thank you, everyone. Operator: And this concludes today's webinar. Thank you all for joining. You'll now be disconnected.
Verda Tasar: Hello, everyone, welcome to Ulker Biskuvi's Third Quarter 2025 Earnings Call. Thank you for joining us today and for your continued interest in our company. We appreciate your time as we review another solid quarter of performance, highlighting our continued focus on sustainable growth, operational efficiency and delivering value to our consumers and shareholders. With that, I will now hand it over to our CFO, Fulya Banu Surucu, who will walk you through the operational and financial results in detail. Fulya Banu, please. Fulya Surucu: Beste, thank you. Good morning, good afternoon, everyone. Thank you for joining us today for Ulker Biskuvi's third quarter 2025. Due to a last-minute change of plans, our CEO had to travel and could not attend this meeting. He apologizes for that and said hi to everyone. So today, I will walk you through our operational performance highlights and provide a deeper dive into our financials and segment performance, discuss our balance sheet, strategic initiatives and conclude with our outlook. After the presentation, I will be happy to take your questions. To begin, Ulker continues to deliver strong results, driven by our diverse product portfolio, correct strategies and commitment to innovation. So let's begin with a snapshot of the macroeconomic landscape in Turkiye as we entered the last quarter of 2025. Despite ongoing global uncertainties, the country's GDP growth rate is projected to stabilize at 2.7% for this year. And it is expected to land at 3.7% for 2026 per IMF, higher than the world's GDP growth of 2.8%. Turkiye CDS spreads have shown improvements, reflecting increased investor confidence and a more stable outlook compared to previous years. Inflation remains as a challenging topic, even though there is a significant variation when you break this down by main items. As of September 2025, total inflation stands at 33.3% year-over-year. Consumer confidence index has shown gradual improvement over the past year, causing a positive shift in consumer outlook. In summary, we operate in a dynamic volatile macroeconomic environment. GDP growth remains resilient. We see an improvement in consumer confidence, but we are mindful of inflationary pressures and probable shifts in consumer confidence and behavior. So today's key messages is mainly -- there are 6 key messages I'd like to share with you. Agility is staying responsive amid economic volatility; champion link value and accessibility, ensuring our products remain affordable and widely available; driving consistent growth momentum through innovation and execution; leveraging AI-driven performance and operational excellence; delivering impactful new product development and consumer-centric campaigns; maintaining operational excellence and rigorous cost management to safeguard our margins. So in summary, this is how we will continue to deliver value to our investors, our customers and all our stakeholders towards the end of the year and continuing in 2026 as well. On the next page, we will talk about new product launches and their contributions. So let's start with third quarter first. During the first 3 quarters of the year, we successfully introduced a series of new products, each closely aligned with evolving consumer needs. These launches delivered a meaningful contribution, accounting for 4% of our snacking revenue in the third quarter. Our innovation pipeline remains robust with strong consumer engagement. Let me take a look at how the picture changes or how the picture looks as of 9 months revenue contribution. For the first 9 months, new product launches accounted for 13% of domestic and 6% of international snacking revenue, totaling 11%. This demonstrates our ability to drive growth through innovation. We continue to innovate both domestically and internationally, ensuring our portfolio meets evolving consumer preferences. Our sustainability strategy remains at the core of our strategy and our vision. We advanced our Beyond Hazelnuts and regenerative agriculture programs, we published our 10th sustainability report, and we won the Sustainable Business Award for Carbon Management and Net Zero. Our social responsibility initiatives like the Mobile Health Service continue to make a positive impact. When we take a look at the highlights in terms of corporate communications, we have continued to strengthen our corporate reputation through community engagement, sustainability and brand storytelling. We are proud to be the main sponsor of the European Para Youth Games in Istanbul, supporting young athletes and inclusivity. With inspiring stories, we reached millions via digital and press channels Competing With Heart video series. Our communication efforts have amplified our achievements. We have been awarded various platforms -- in various platforms for excellence in business, HR, digital transformation, safety, sustainability and quality. So our people are our greatest asset. We are proud to be recognized as Turkiye's Happiest Workplace for the fourth year in a row. We have invested in AI training, R&D development and well-being initiatives, earning 21 awards, including 11 gold at the International Business Awards, which is one of the most prestigious award programs in the business world. All these achievements reflected our ongoing investment in people, innovation and operational excellence, positioning us for sustainable growth and continued success. So let me continue with our operational performance. Ulker's geographic footprint continues to be a key driver for our resilience and long-term growth. Let me start with our home market, Turkiye. Despite a challenging macroeconomic environment, which I have shared at the beginning of the presentation with all of you, we delivered 4.9% revenue growth and a solid 7.9% EBITDA growth, which is adjusted for inflation accounting number. This performance reflects our disciplined solid pricing, strong brand equity and operational agility. Export operations delivered 19% revenue growth, supported by strong demand in key markets and improved market execution. EBITDA decline of 8%, primarily due to ongoing inflationary pressures and the depreciation of Turkish lira that impacted cost base and profitability. We remain confident that our export strategy is on the right track and we continue to prioritize sustainable growth and brand strengthen in our international markets. In Middle East, you see a 5.9% revenue growth. And in North Africa, we delivered 29.5% revenue growth, supported by strong momentum and pricing. EBITDA was slightly down by 0.7%, but we view this as a short-term margin normalization. Finally, in Central Asia, we achieved 11.5% revenue growth. Even though there was a decline in EBITDA, this was impacted by currency devaluation, input cost inflation and our overall, our geographic diversity continues to be a strategic advantage, helping us balance risk and capture growth across multiple markets. Turning to our revenue mix. Ulker's scale and [indiscernible] which are clearly reflected in our top line performance. As of the first 9 months of 2025, we generated TRY 80.9 billion in net revenue, with 71% coming from our domestic operations and 29% from international markets. And you also see on the same page deck, I mean, the breakdown of the export -- international markets by export, Central Asia, North Africa and Middle East as well. Let me take a look at our global -- our market share. Ulker continues to hold the leading market shares in key categories across our core regions. In Turkiye, we remain the undisputed leader in biscuits, chocolate and cakes with 34% market share. In Middle East, our strong presence in biscuit category continues with 27% market share. In North Africa, we are gaining ground, especially in biscuits, where our market share has reached 14%. In Central Asia, we are also an important player in chocolate with 14% market share. So Ulker, in summary, maintained leading market shares in biscuit, chocolate and cake in all the regions we operate. So let me continue with the financial performance, how we delivered financially in Q3. In Q3 '25, we accelerated growth with balanced top line and margin improvement. Revenue, gross profit, EBITDA and net income all increased year-on-year, reflecting our effective strategies and operational discipline. Now let's take a look on a deeper perspective on each bucket for Q3. Volume increased by 0.7% from 172 tons in Q3 '24 to 174 tons in Q3 2025. Total revenue up 4.8%, reaching TRY 25.4 million compared to TRY 24.2 million last year. The gain came again from our disciplined pricing promotions and improved mix. Gross profit rose 13% to TRY 7.4 million from TRY 6.6 million in Q3 '24. Gross margin expanded from 27.1% to 29.2%, a 2.1 percentage point improvement driven by lower cost pressure and better product portfolio mix. EBITDA grew 16.5%, delivering TRY 4.5 million, up from TRY 3.9 million a year ago. So net income reached to TRY 1.1 million, demonstrating the strong pass-through from margin improvement to bottom line earnings. In this quarter, we are not just defending our margins in a challenging environment, but we are also growing them with revenue and profit both advancing versus prior year. So on a 9-month perspective, for the first 9 months, we balanced growth and headwinds. While some metrics faced pressure, our net debt to EBITDA remains at a healthy level and we continue to focus on sustainable profitability. So for the first 9 months, total volume declined by 1.5%. Revenue increased by 4.6%, reaching TRY 80.9 million. Gross profit increased -- slightly increased to 30.2%, reaching TRY 24.4 million. And EBITDA remained at 17.8%, again, with inflation accounting adjusted, which is quite a healthy number and we delivered 5.7% net income of TRY 4.6 million. And net debt to EBITDA, this is just a calculation from the face of the balance sheet, 1.76. And over the coming slides, I will be sharing with you the net debt to EBITDA from covenant calculation perspective, which is quite a low number and which is a very healthy number. So when we look at the breakdown domestic versus international. So our financial performance is strong across both domestic and international markets with notable improvements in EBITDA and gross profit. We continue to optimize our regional mix for profitability. Our domestic operations total revenue decreased by 3%, reaching to TRY 17.1 million in Q3 2025. Gross profit increased by 10.2%, reaching 28.5% gross profit margin, delivering TRY 4.9 million gross profit and EBITDA margin on the domestic side is approximately 19.7%, close to 20%, reaching to TRY 3.37 million. Total snacks market in Turkiye contracted approximately by 2.1% year-over-year compared to Q2 2025. And in line with this market contraction, our domestic volume also in Turkiye declined accordingly, reflecting the broader industry trend. However, this was offset by a strong 9.6% volume growth in export and international operations, which contributed positively to our overall volume. In terms of international business, total revenue is up 26.1% reaching to TRY 8.2 million in total revenue and we were able to deliver approximately 31% gross profit margin in international business and delivering an EBITDA margin of 13.7%. So the breakdown domestic versus -- domestic and international shows 2 distinct dynamics: domestically improving margins despite lower revenue, demonstrating strong pricing power and cost discipline. Internationally robust top line growth but some margin compression due to FX and cost factors, both regions contributing positively [indiscernible] EBITDA growth. So let me continue on the consolidated volume and revenue contribution by category. Overall, total snacking revenue grew by 5.1%, supported by innovation and effective marketing. On this slide, we move from regional to category level performance. Snacking sales volume grew 1.3%, reaching to 153 tons in Q3 2025. Snacking sales value increased by 5.1% from TRY 23 million to TRY 24.2 million. This value growth shows the positive mix and impact, more premium SKUs successful innovation launches and price discipline across all our core categories. And category mix, biscuits rose from 57% in Q3 to 59% in Q3 '25. Chocolate declined slightly from 33% to 31%, reflecting competitive pricing and portfolio adjustments. And cake steady at 10% continue to provide category diversification. Overall, snacking portfolio revenue increase was supported by targeted product launches, optimized volume mix and integrated marketing campaigns, both digital and in-store aimed at strengthening brand equity and consumer flow. This strategic focus allowed us to build value even on modest volume gains. So on balance sheet finance, again, we closed the quarter on a very -- with a very strong balance sheet. Our balance sheet remains robust. We have closed with 63% of our net position hedged, secured a new syndication with our commercial banks and EBRD and our covenant-based net debt EBITDA is at 1.11 as of September 2025. I'm sure you have seen from the news that our syndication loan is finalized with the commercial banks reaching to $250 million, 5-year bullet syndication loan, the first in the Turkish private sector since 2020 with very prestigious led by JPMorgan and its very highly prestigious international banks with 11 banks, we were able to complete the first 5-year bullet syndication since 2020 in Turkish private sector. And very recently, we have also closed EUR 75 million with EBRD with the same conditions, again, a 5-year bullet with the same conditions that is on syndication. So with all these new updates, our long-term loan is around 31%, short-term is 69% and this will -- over the coming months, this will change to long-term when we finalize -- I mean, it's already finalized in October. But as of Q4, most of the loans will go to the long-term bucket on this table. So in terms of net debt EBITDA, it's 1.11. So you see our high focus on net debt EBITDA. And in terms of working capital, yes, there is a slight increase versus prior year, but it's mainly driven by seasonality and we may go into detail if you have additional questions in terms of working capital. So for outlook, we shared with you that a net sales growth of 3% and EBITDA margin of 17.5%. But with this volatile environment and uncertainties, we shared with you a range for net sales with plus and minus 1%, EBITDA margin with plus and minus 0.4%. As of Q3 end, we also keep the same outlook for 2025 and we believe that we will be able to meet the targets that we have shared with you. So this 5H growth model, our CEO shared this with you. Again, most of our strategy is based on these 5H growth models that we have stated beginning of the year, which we are also very keen and very proud about. So that's all I'd like to -- I wanted to share with you in terms of our Q3 performance. So we believe that our Q3 performance is quite strong. And I'm happy to take any questions you have for me. Operator: [Operator Instructions] Our first question is from Eren Ercis from Yapi Kredi. Eren Ercis: Congratulations for the good results. My question is regarding to your 2025 guidance. Your guidance implies a 2% revenue decline and around 1 point year-over-year EBITDA margin contraction in fourth quarter of 2025. Could you please elaborate on the main reasons behind maintaining this guidance despite the strong this quarter performance and higher trading growth? And how do you see fourth quarter 2025 and October trends and also 2026? Fulya Surucu: Thank you for your question. So there is a base impact in Q4 2024. So our fourth quarter in 2024 was very, very strong, extremely strong, especially with some new innovations. If you might remember, Dubai Chocolate, we were first in the market from a commercial perspective, first company in the market with a branded Ulker's brand in the market, which really has huge sales, much better sales and much more sales than we had anticipated, which contributed significantly to our Q4 numbers. So also Q4 2024 was very, very strong. So there is a base impact. So if I tell you that there might be a slight decrease versus 2024, these are the reasons. So again, we believe that Q4 will be a strong Q4 as well. October went overall well. And we do not expect, hopefully, any huge surprises unless something very unexpected comes out globally or regionally. So we believe that we will be able to meet our guidance. And I think not changing the guidance and meeting this guidance in such a volatile environment is also another success, I believe. Eren Ercis: Okay. And I have one more follow-up question according to your EBITDA margin, if it's okay for you? Fulya Surucu: Of course. Sure, please go ahead. Eren Ercis: When we look at your third quarter domestic EBITDA margin improvement seems partly linked to product mix. It could be attributable to higher chocolate unit prices during 2 periods. Could you confirm whether this was the main driver or if there was also a positive contribution from raw material costs or pricing efficiencies? Fulya Surucu: Overall, I can tell you without going into too much detail yet, you have the right idea, yes. Operator: Our next question is from Alasdair Alexander from Sanarus Investment Management. You mentioned seasonality on the inventory levels. Where do you expect inventory to be by end of the year and going into next year? Fulya Surucu: Well, the increase in -- so there is also seasonality impact in 2024, by the end of 2024, we ended up with very low inventory levels. And when we started this year in 2025, there was an increase in inventories related to the higher cocoa shipments in half 1, which impacted our inventory numbers. So the increase in inventory is a direct result of a planned rebalancing and a significant shift in the timing of our procurement compared to last year. So when we had this, the relevant impact will also neutralize we believe that by year-end. And we had very low inventory levels in 2024. And we believe that a deliberate planned front-loading of our cocoa procurement in the first half of 2025, which also is still impacting us will be normalized by year-end. Operator: Our next question is from Ali Kerim from Gedik Investments. Ali Akkoyunlu: My question is more on 2026. You bought some raw materials during the first half of the year. And since then, cocoa dropped by 30%. The first question is, how you avoid inventory losses on this? And the second question is, if the trend continues like this, how do you think that will impact your financial performance in 2026? Fulya Surucu: Thank you for your question. Yes, cocoa dropped very unexpectedly in the last couple of months or maybe in the last couple of weeks. But again, it increased and it kind of went down again. And as of today, we do not know how it's going to be towards the end of the year. It keeps changing. It went up to 4,800. So we definitely monitor it very closely. Now it's around 4,400 in GDP. So we keep definitely monitoring it. But what we are -- the first part of our procurement in the first half of the year, which impacted us, I mean, positively, especially in the first half of the year and then the last year as well. We have a hedge policy that we shared before. But again, we do not disclose any numbers how much we are closed or not. It is not a number that is disclosed. I believe that, I mean, first, we do not know how things will change. And second, based on that, I think we will be able to navigate through this challenge. And a significant portion of our cocoa needs for the remainder of 2025 is secured as also into -- 2026 has also been secured at prices determined by our half 1 numbers. But again, as of today, we do not disclose any exact number. And I believe that with the volatilities and uncertainties, we should be able to navigate it. But as of today, it is early to say anything. And I believe also that the benefit of the recent drop in spot prices will have a lag effect. We'll see. Operator: Our next question is from Mehmet Yigit from Unlu & Co. Congrats for the results. How do you see the Turkiye total snacking market so far in the fourth quarter 2025? What is the reason for higher inventory and working capital in 2025 compared to 2024? Fulya Surucu: In terms of the total snacking market, the market contracted by 2.1%, including all snacking markets. So -- and for the first 9 months, it decreases by 1.8%. And on a Q3, quarter-to-quarter basis, it decreased by 2.1%. So there is a shrinkage in the market that impacts all the companies and consumers. So that's how we see it. I mean, in Q4, there might be a slight sequential improvement over Q3, driven by a typical year-end seasonality and holiday demand. So I expect Q4 to be slightly better than Q3. But Q3 and on the first 9 months of this year, there was a shrinkage and contraction in the market, which impacted all of us. So fourth quarter is expected to be better. Regarding your second question of inventory, I think I kind of answered it in the prior question. But overall, let me summarize that in the first half of the year, we had an increase in inventories of the higher cocoa shipments that we had in half 1. With this higher inventory shipments in half 1, it kind of continued in Q2 and Q3 that impact Q3 as well that impacted our inventory levels. And we expect it to normalize towards the end of the year. And I think overall, that's the main reason. Operator: Our next question is from Cemal Demirtas from Ata Yatirim. Cemal Demirtas: Congratulations for the results. My first question is about the cocoa side. You mentioned about it that you secured. But could you tell us a little bit about the hedging mechanism there? And related to the margin recovery, we see the second quarter margin was very much negative surprise and we see a positive surprise in the third quarter. Considering the cocoa price or other raw material prices, should we expect the margins to stabilize around 17% to 18% in the following quarters, maybe also in 2026? Is it a fair assumption? And related to working capital, should we see also some normalization in the following year? Because as my colleagues mentioned, your working capital needs increased compared to last year, but what should be the picture for 2026? And related to demand side, you said better quarter in fourth quarter so far. Is it in the domestic or both in domestic and international side? Fulya Surucu: Okay. Let me start with your last question. The demand side is both international and domestic. So that's the expectation. In terms of working capital, yes, we expect 2026 to normalize. And in fact, I expect that you will be able to see it through Q4 as well. Regarding -- what was the first -- the first question is relating to cocoa hedge and margin. So related to margin, Cemal, we think that we will be able to meet our guidance. So from that guidance, you should -- you can also, I mean, calculate the expected Q4 margin. We believe that we should be able to meet that target to meet that margin number and we will be able to meet our full year guidance as promised before. And regarding cocoa hedge, yes, definitely, there is a hedge policy in the company that goes throughout the year. But as of today, we do not disclose how much is hedged or unhedged. And as you know, the number -- the cocoa number is very volatile. It decreased to 4,000 and it increased to 4,800. It is 4,400 and we still do not know what is going to happen in November, by the end of November, December and January, we'll see. But I mean, we are confident. We are acting per our policy as stated our policy. And depending on the changes on the benefit -- the benefit of the recent drop in spot prices will have a lag effect. And we do not expect to see a material positive impact on our cost of goods sold until further into 2026. Hope this helps. Cemal Demirtas: And Fulya, as a follow-up, related to your open position and your hedging, do you have any specific target for that, just like the cost of your debt? When I look at your FX and the interest expense, in TL terms, I calculate around 27% in TL terms. if I'm not wrong, in the following quarters because when we look at your open position when the TL depreciation narrows, you should have lower financial expenses. But as you are protecting your position through hedging, you have a stable FX or like the interest expense and plus FX position. Should we expect that to continue or could you make any rebalancing in your hedging positions depending on the conditions? Fulya Surucu: Our hedging position will not change. We set a policy that stays very clearly that minimum 60% of the open balance sheet position needs to be hedged. So we will continue with that policy and with that positioning. And I think for the last 2 to 3 years, that ratio did not go below 60% every quarter and this will continue. Operator: Our next question is from Mehmet Gerz from Osmanl? Portfoy. What are terms of royalty payments to you this holding for the use of Ulker brand, which for some reason, belongs to the parent company? Fulya Surucu: So we do not disclose this number. And this is not -- and this is based on a relationship on every business there is a holder of the brand, then there are companies that are using that brand to operate to make their operations. We do not own the brands. We are operating on that brand and there is a company that holds that brand. It's the same everywhere in the world and there is a royalty relationship between these companies. And naturally, Yildiz Holding holds the Ulker brand and we are operating under Ulker brand. There is definitely a royalty relationship or a transaction between these 2, but we do not disclose any numbers regarding on that. But I can assure you that the number is no different than any number that is -- I mean, this is an example in other companies in the world. Operator: Our next question is from Gustavo Campos from Jefferies. Gustavo Campos: I have a few questions here. Firstly, I'm trying to understand a little bit more. It seems like your international EBITDA was quite mixed when you break it up by regions. It seems like Central Asia, like Kazakhstan was a bit weaker there, while in the Middle East it was a little bit better. Could you please like explain a little bit on what's happening on the underlying backdrop to justify this? And I'm also trying to understand for your exports, it seems like there was a significant recovery in EBITDA in the third quarter when you look at it year-over-year growth. Was it this only due to higher volumes that were allocated to being exported or was there like actual improvement in the underlying pricing? That would be my first couple of questions here. Fulya Surucu: Thank you. Let me start with your last question. Yes, we achieved a good turnaround in Q3 in our international business. A recovery in demand in Q3, our medical volumes grew by a very strong 15% year-over-year. Turkiye export volumes also returned to a positive growth of 2.8%. So this volume recovery also translated directly into a top line growth with net sales increasing 41% in Turkiye exports and 14% in Middle East, North Africa and Central Asia year-over-year. So there is also a sharp improvement in profitability compared to Q2 '24 and '25. We are actively and successfully managing the cost and pricing environment. In International segment, EBITDA margin also recovered from Q2 to Q3. So when we come to Central Asia numbers on a specific basis, on a year-to-date basis, there is a sales decline of 16.5% on a year-to-date basis. But in Q3, there is also a very good recovery in Q3 on our volume, delivering 7.6% volume growth versus prior year. There are strategic shifts from margin production -- protection to aggressively securing top line growth. We achieved a 7.6% year-over-year increase in sales volume and this also reflected to our margin reaching to 30.5%. I hope that helps. Let me know if you have any other questions. Gustavo Campos: Yes. No, I was just trying to understand like did you have like better pricing in your exports? Was there any price recovery or was it just higher volumes that were exported? Fulya Surucu: It's mainly the volume increase that impacted the numbers. Gustavo Campos: Understood. And in Central Asia, is it correct to assume that backdrop in Kazakhstan remained somewhat weak and that's what explains the weakness in your Central Asia segment? Fulya Surucu: Yes, mainly Kazakhstan, yes. Gustavo Campos: Okay, understood. I'm also trying to understand a little bit about your working capital. I think we covered inventories, but on your receivables, it seems like your receivable days they increased significantly, not only in second quarter and third quarter due to seasonality, but when I compare it to previous years, it also looks like we are at highs, like multiyear highs, if I'm not mistaken here. Do you have like any perspective on whether your receivables position will start improving moving forward? Do you have any targets? And I'm trying to understand what is driving the significant increase in your receivables position. Fulya Surucu: Thank you for the question. We believe that -- I believe that the increase in receivables is mainly a temporary fluctuation directly linked to a high volume of sales activity with our primary distribution companies during the third quarter. There is no collection issue at all. I can assure you that. The pattern is there is -- I mean, the seasonality and pattern is consistent with our business cycle. The balance was higher at the end of Q1, decreased in Q2 following collections and now has risen again in Q3 after Q3 sales. And we expect the receivable balance to normalize to stabilize in the fourth quarter as collections for these Q3 will come through in Q4 and will be realized. And we do not disclose any, I mean, DSO target number or a working capital number. Our objective here is always to optimize it. Gustavo Campos: Understood. So my understanding here is that it was mainly due to the strong top line and EBITDA growth and this is also partially seasonal and you expect -- in 2026, do you expect any normalization from -- compared to current levels or it may be too soon to tell? Fulya Surucu: Yes. No, we expect the normalization starting in Q4 2025 and then to continue the momentum in 2026. Does that help? Gustavo Campos: Understood Yes, very helpful. Last couple of questions here. Could you please confirm you repaid the 2025 remaining outstanding bond amount with cash in your balance? And do you expect to raise any debt to offset this decrease in your cash balance for this? Fulya Surucu: Let me answer your question in 2 phases. The first one is, yes, we paid the remaining outstanding Eurobond balance as cash by the end of October from our cash balance. The second one is we raised debt in order to refinance our current outstanding loan, which was going to mature in 2026 April. So we kind of early refinanced it, but it was a 3-year syndication loan. Now we refinanced it with a 5-year bullet structure. So it is also completed. And the loan with EBRD part is also completed. So to your both questions, yes and yes. Gustavo Campos: Understood. What was the rate that you are paying for this new syndicated loan? Fulya Surucu: Of course, much lower than the prior syndication. And you will be -- you should be able to see some more numbers when we complete or announce our Q4 numbers, annual numbers. But much lower rates than we had in prior syndication and very stable... Gustavo Campos: Understood. And then you still have like roughly, I think, like $550 million worth of short-term debt. If I exclude the bond and I exclude this EBRD syndicated loans that you refinanced, you still have roughly $550 million worth of short-term debt, rough estimation here. How are you planning to refinance those? Fulya Surucu: We do not have a short-term debt. So the Eurobond was refinanced last year in July 2024. This debt had a 7-year maturity. So $550 million Eurobond was refinanced in July of 2024 with 7-year maturity, which matures in 2031. The current syndication, which was going to mature in April 2026 is also refinanced by the end of October with a 5-year bullet structure. So we are going to pay it in 2030, so in 5 years. So all of them will be transferred to long-term when we issue our Q4 -- most of them will be transferred to long-term when we share our full year numbers. But $250 million Eurobond is also repaid by the end of October this year, outstanding with our cash. So all the loans that are outstanding right now have a long-term maturity, 2031, 2030. Gustavo Campos: Okay, yes. I just see like, for example, you still have roughly $350 million of short-term letter of credits, if I'm not mistaken. Do you plan to continue to roll over this balance or are you planning to refinance this in some other way? Fulya Surucu: So because this is -- this report is as of September year-to-date, you do not see that it is closed, but the closed outstanding Eurobond that was coming from 2020, which was going to mature this October 2025 is already paid. So this report states September year-to-date, but I tell you that by the end of October 2025, all the outstanding Eurobond debt from the year 2020 is already paid with cash. And you should be able to see that by the end of December when we issue our full year numbers, I mean, beginning of 2026. So it is already paid. And 2 of the refinances are already done and their maturity is 2030 and 2031. So all of them are long-term. The short-term you see right now is already paid with cash by the end of October 2025. The reason why you don't see it is because you had a report stating the situation by the end of September 30, 2025. I hope it makes sense? Operator: Our next question is from Evgeniya Bystrova from Barclays. Evgeniya Bystrova: I have several questions. So first of all, on your working capital, do you expect the same inventories inflow in first half of 2026 as it happened this year? Then my second question is regarding the Romanian IFC loan maturing in 2026. What is your strategy to address that? And finally, I guess it's also kind of a follow-up to a question by my previous colleague. So like you refinanced obviously, most of your short-term debt, extended the maturity profile. So what would be your strategy going forward? Are you expecting any M&As in the pipeline? And finally, I guess, to clarify the previous question, I agree that you do have like letters of credit debt on your balance sheet, which was considered to be short-term. And it's not part of previous Eurobond or any syndication loan. So it was separate as a short-term debt. And at least at the end of H1, it was around $350 million. So I guess the question was, how are you planning to address that? Because we do see that on the balance sheet even at the end of September. And if we exclude Eurobonds and other bank loans that were extended, there would still be part of letters of credit on your balance sheet, it seems. I hope it clarifies. Fulya Surucu: Okay. Thank you for your questions. So let me start. I kind of noted them one by one. If I miss something, please remind me. So let me start with IFC loan, which is going to mature in April 2026. So we have a great progress on that. And hopefully, you should be hearing the news and updates with IFC very soon. So -- but I can assure you that with 5-year bullets that we closed with our commercial banks, which is the first time since 2020 in the Turkish private sector. We had a lot of demand. It is successfully completed with EBRD. It is successfully completed with commercial banks and you will see the update soon with IFC as well. But I can tell you that the progresses are all in the right track and progressing in the right direction. So that's one. Regarding the inventory, so we -- as I have also shared in the prior quarters, we do not have an exact working capital number or target, because -- I mean, depending on the conditions, depending on the changing environment volatilities and so on, our target for working capital is optimizing the working capital, okay? So some things might change, I mean, in order to reach this number of DI or this number of DSO. So what I can tell you that this focus on optimization of working capital will continue throughout 2026 as well. We'll make sure that we close -- we will have the optimized inventory and cocoa levels in 2026 and throughout 2025 as well. And we'll continue to focus on that. That's all I can share. And we expect, as I have also shared in the prior questions that we expect a normalization throughout 2025 and 2026 as well. So this was inventory and working capital. M&A, yes, let me share with you also. Yes, we have also -- we closed 2 very important financings very, very successfully last year Eurobond with 7-year maturity, very recently in October, 5-year bullets with commercial banks. So all of them are long term right now. There is not a -- I mean, M&A plan or pipeline that I can share or I can make public with you right now. But what I can tell you is our objective and our mission is to have Ulker's growth and growth ambition will continue and to make Ulker -- to strengthen Ulker's global presence in the markets that we operate will continue. We will see. That's all I can share with you right now. And regarding the LCs, the LCs are used in cocoa procurement. So short-term debt -- the short-term debt number you see is mainly LCs. LCs are used to procure cocoa and it will be based on our own resources. We generate adequate operating cash to pay our LCs. And they are very important -- one of the very important tools, first, to mitigate our risk and second, to optimize our working capital and to manage cash. So I think LCs, especially for our business where there is a very long cocoa cycle from end-to-end is very much needed. And I believe that we have done a great job here by increasing our LC limits with our very important finance partners. And this definitely contributes to our business on many perspectives very, very positively. Hope that helps? Operator: [Operator Instructions] Okay. It looks like Gustavo from Jefferies has a follow-up. Gustavo Campos: Yes. A very quick follow-up here. How does your average realized cost for cocoa compare -- in 2024 compares to 2025? Can you give us like some high-level idea of like how much higher were your cocoa costs incurred from 1 year to the other? That would be my last question. Fulya Surucu: Thank you for your question, but we do not disclose these details unfortunately. Operator: We would like to thank everyone for the participation today. I will now hand it back to the Ulker team for the closing remarks. Fulya Surucu: Thank you for your attendance and for your great questions today. If you have any further questions, please reach out to me or my team. I believe that we delivered great results in Q3 and I believe that this momentum will continue in Q4 and we will meet our guidance. Thank you all and have a great day or evening. Operator: That concludes the call for today. Thank you, and have a nice day.
Operator: Good morning. My name is Joanna, and I will be your conference operator today. I would like to welcome everyone to the ADENTRA Third Quarter 2025 Results Conference Call. [Operator Instructions] With me on the call are Rob Brown, ADENTRA's President and CEO; and Faiz Karmally, Vice President and CFO. ADENTRA's third quarter 2025 earnings release, financial statements, MD&A and other quarterly filings are available on the Investors section of our website at www.adentragroup.com. These statements have also been filed on a entrust profile on SEDAR at www.sedar+.ca. I want to remind listeners that management's comments during this call may include forward-looking statements. These statements involve various known and unknown risks and uncertainties and are based on management's current expectations and beliefs, which may prove to be incorrect. Actual results could differ materially from those described in these forward-looking statements. Please refer to the tax in ADENTRA's earnings press release and financial filings for a discussion of the risks and uncertainties associated with these forward-looking statements. All dollar figures referred to today are in U.S. dollars unless stated otherwise. I would now like to turn the call over to Rob Brown. Please go ahead. Robert Brown: Thanks, and good morning, everyone. We delivered strong results in the third quarter, highlighting the resilience and consistency of ADENTRA's operating model. We grew sales, adjusted EBITDA and maintained strong earnings despite a continued soft residential construction market and an uncertain macro backdrop. For the quarter, we generated sales of $592 million up 4% year-over-year; adjusted EBITDA of $49.9 million and adjusted EPS of $0.70. Organic sales grew 1.7% as product prices continue to firm throughout the year. Given our price pass-through model, these pricing gains supported gross profit growth even in a steel volume environment. Woolf Distributing, which we acquired in mid-2024, also contributed to our top line performance. Gross margin came in at 21.4%, up slightly from last year, reflecting continued discipline in pricing and procurement. Operating expenses rose by 5%, driven by inflationary pressures on premises and wages as well as mark-to-market LTIP adjustments related to share price gains. Earnings per share were $0.42, consistent with last year's Q3 results. We also continued to convert earnings into cash, generating $60.6 million of operating cash flow in the quarter. That includes $35 million from operating cash flow before changes in working capital and an additional $25 million from working capital release as we executed our plan to reduce inventory ahead of a seasonally slower fourth quarter. We returned $7.4 million to shareholders during the quarter through dividends and buybacks under our normal course issuer bid. Since launching the program in March, we've repurchased more than 740,000 shares or about 3% of the outstanding shares at an average price of CAD 29 per share. Our leverage ratio was 2.7x, down from the seasonal peak in Q2, and we expect it to be closer to the mid-2s by the end of the year. That positions us well for capital deployment on potential M&A activity in 2026. On the strategic front, over the last 5 years, we've acquired companies representing $1.1 billion in acquired revenue. These companies have significantly diversified our product offering and expanded our exposure to higher margin specialty categories. The integration of Woolf, which was acquired in July 2024, continues to perform on plan, broadening our Midwest presence and enhancing access to the Pro Dealer channel. From a trade perspective, our product mix remains well balanced. Roughly 30% of our products are subject to country-specific tariffs at average rates around 20%. Importantly, the recent U.S. Section 232 review of Wood Products largely excluded our product categories. We continue to manage tariff exposure through our price pass-through model and diversified global sourcing network spanning 30-plus countries, providing us with diverse product options and different price points for our customers. If tariffs increase product costs, we adjust pricing accordingly to hold gross margin percentage. In addition, our cost-conscious management approach remains a key competitive advantage. We're focused on asset efficiency and continuous improvements in returns on capital deployed. This discipline, combined with a scalable operating model, positions us to benefit from operating leverage as volumes recover. With that, I'll turn it over to Faiz to walk through the financials in more detail. Faiz Karmally: Thanks, Rob, and good morning, everyone. As Rob noted, third quarter results demonstrate stable performance across our business. Let me take you through the numbers. Sales were $592.1 million, up 4.1% from the prior year. That includes a 2.4% contribution from Woolf and 1.7% organic growth driven mainly by product price appreciation. In the U.S., sales rose 4.4% to $548 million with wealth accounting for roughly 2.6 points of growth and organic sales adding 1.8 points. In Canada, sales in Canadian dollars were up 1.2%, reflecting higher prices offset by slightly lower volumes. Gross margin increased 4% to $126 million, with margin rate up slightly to 21.4%. That reflects effective pricing discipline and procurement execution across our operations. Operating expenses were $101.6 million, up 5% year-over-year. The increase was driven by higher premise costs, wage inflation and a $1.4 million mark-to-market adjustment on long-term incentives. Importantly, we continue to invest selectively in our people and infrastructure to support sustainable growth while maintaining strong cost discipline. Adjusted EBITDA was $49.9 million, up 3.9% from last year. Adjusted EBITDA margin was 8.4%, consistent with the prior year and in line with our target range at this point in the cycle. Net income was $10.1 million or $0.42 per share, broadly in line with Q3 2024. On an adjusted basis, net income was $17.2 million and adjusted EPS was $0.70 compared to $0.74 a year ago. Operating cash flow was $60.6 million compared to $67.7 million in Q3 last year. The slight decline reflects timing differences in tax payments and working capital. Year-to-date, cash flow from operations totaled $61 million. Leverage stood at 2.7x net debt-to-EBITDA at quarter end. We remain comfortable with our balance sheet position and expect further deleveraging through the end of the year. Lastly, the Board approved an increase in our annual dividend to CAD 0.64 per share, reflecting confidence in our stable cash generation and long-term outlook. With that, I'll turn the call back to Rob for his closing remarks before the Q&A. Rob? Robert Brown: Thanks, Faiz. As we look ahead, the fourth quarter is typically a seasonally slower period for construction activity, and we expect adjusted EBITDA to be broadly in line with our first quarter performance. Affordability remains a challenge for U.S. homebuyers, given mortgage rates and limited housing supply and trade tensions continue to add macro uncertainty. That said, our long-term view on the residential construction market is unchanged, structural undersupply, favorable demographics and an aging housing stock all point to sustained demand over time. We will continue to execute within our full cycle value creation framework, focusing on operating efficiency, organic growth initiatives and disciplined execution of our market consolidation strategy. We see ample opportunity to deliver double-digit returns and accretive growth for the long term through continued operational excellence, prudent capital allocation and selective acquisitions in our large and fragmented market. We have a lean, scalable distribution platform with inherent operating leverage and the management team focused on continuous improvement, growth and returns on capital. With that, we'll open the line for questions. Operator: [Operator Instructions] The first question comes from Kyle McPhee of Cormark. Kyle McPhee: Everyone. Good update. Thanks for your commentary on quantifying the updated tariff rate exposure now. Correct me if I'm wrong, but the updated and higher tariff cost exposure that will trigger corresponding pricing gains on your revenue line on a near immediate basis, and we'll see that in the upcoming results? And second part to this, to the extent you're taking price and there's no demand response versus the demand realities that prevailed prior to this tariff change, this could actually benefit your profit expectations. Is that playing out right now? Or is it fair to say your organic volume expectations are directionally eroding as you in the sector take price up? Robert Brown: I think we need to see a little bit how it plays out. It's tempting math to, say, 30% of your mix is going up by 20% tariffs because we're price pass-through. That is true, the price pass-through piece. But the playing it out piece, I think you have to -- we have to wait and see what happens in terms of competitors, have all added inventory in advance of tariffs. So I think there's going to be some moving down in terms of inventory in the market, which may take some time, which I think is going to keep prices more orderly. . I would also say that there is the possibility of suppliers taking some of the costs, and then there's always the possibility of what we do, we carry good, better, best. So there may be some rotation as between -- price points between the highest and the lowest price offering in the mix. So I think all of that, we just need to give a little bit of time. I would say yes, we will be pricing with new tariffs in mind and passing that through to maintain our margin and tariffs are adding cost to products that we're sourcing. So I think there's definitely upward movement. But the scale and the timing of that, I think we just need to have a bit of a wait and see. Kyle McPhee: Okay. And then, in Q3, your organic volume performance was pretty good in the context of the demand environment and in the context of what gears the sector have been reporting. Is there anything company specific you can point us to, to help explain your relatively strong performance? I suspect it's a variety of things, but curious what you think is worth highlighting and how sustainable this sector performances for ADENTRA? Robert Brown: Yes. As always, it's typically never one thing, but we are pleased with how we have performed in a relatively muted macro environment. I think that the team has executed very well. We continue to get better at pricing and our use of technology, the sophistication of our supply chain, including global sources, given lots of different options to our customers, all those things contribute to how we perform in terms of share in the market. So it's always difficult to put your finger on market share information, but I would say that our team is doing very well in, again, what we consider to be probably more of a trough market. The business is still finding its way into some very good results. Operator: The next question comes from Hamir Patel at CIBC. Hamir Patel: Rob, can you speak to how the M&A pipeline is looking? And are there any sort of product areas that are looking most compelling today? . Robert Brown: Yes, the pipelines looks very good. We've got a large opportunity set that we've continued to kind of nurture here as we've delevered through the course of the year, as commented on where the balance sheet should finish the year. That gives us a significant amount of dry powder to do some things on the M&A front next year, and we've got discussions and opportunities that I would be optimistic about us getting something done on the M&A front next year and getting back to that additional growth. We've enjoyed the benefit this year. Starting to fall off the table, but of having the acquisitive growth piece of the Woolf deal that we did last year. And we expect that to continue to be a key part of the ADENTRA growth story. In terms of particular areas that we're focused on. No change there. I think we've said in the past, we cast a very wide net in terms of looking at opportunities. There are some geographies that we think are a little bit more attractive than others. And then there's the theme that we continue to want to add products to our mix that are higher value specialty branded products that continue to improve the quality of the portfolio that we distribute. Hamir Patel: Okay. Great. That's helpful. And Rob, I know you're pointing to Q4 EBITDA similar to Q1, which I guess was around $40 million. How should we think about how gross profit margins would fare in Q4 this year? Faiz Karmally: Hamir, it's Faiz here. I can take that one. I think they'll be fairly consistent, Hamir, with Q3 and Q4. Our gross margin percentage at 21.4% is right in the range. If you look year-to-date, our gross margin percentage performance is actually quite consistent with last year. So I don't think there's any kind of things you wouldn't expect to note on that front. I think they'll be fairly consistent. . Operator: The next question comes from Frederic Tremblay at Desjardins. Frederic Tremblay: Just wanted to ask on the inventory reduction following what we saw in Q3. Is there more coming in Q4? And if you could maybe help us get a better sense of the magnitude of that inventory reduction, if you expect one? . Faiz Karmally: Frederic, it's Faiz here. So we do expect further inventory reductions into the fourth quarter. We took a good chunk out in the third quarter, and I think there's some more to go. So I think in terms of order of magnitude, it could be another sort of $15 million to $20 million plus or minus, that I think will get out in the fourth quarter. And that, I think, will position us as was mentioned in the comments to bring our leverage closer to kind of to the mid-2s between the cash that we cut of inventory and the cash that the business will just generate -- as you saw in -- well, in Q3 and in the previous quarters, we convert a healthy amount of our adjusted EBITDA to free cash flow, and we'll do that again in Q4 as well. Frederic Tremblay: Great. That's very helpful. I wanted to ask about Canada. We saw a slight volume decrease in the quarter, and it was actually the second consecutive quarter of seeing slight decreases there in volumes. Is that you feel that this is due to some of the pricing initiatives in the market or just general construction market softness? Just trying to get a better sense of what's happening there. Robert Brown: Yes, more general. I mean is like to use the phrase, it's in a range. It's not a massive concern. So I think it's more representative of local market conditions. Our Canadian business has performed. It's star, it consistently performs. And so generally, what we see in that business is representative of the conditions that are available in the market. The only other thing that we've got our eye on, that's probably worth mentioning is the Section 232 tariffs do include cabinets. And there's 2 applications that tariff for ADENTRA. The first would be, if you look at our U.S. business, that will shut out or making for cabinets more expensive, which will be advantageous to our U.S. customers that are cabinet manufacturers. So we supply, obviously, all inputs to that as a customer base. And if there's tariffs on incoming cabinets from other jurisdictions, that's going to be net helpful to that customer. And then the second piece is some of those imports into the United States are cabinets that are manufactured in Canada. So that would be a bit of a pullback for our Canadian cabinet customer manufacturing base. The net between the 2 is tilted to our U.S. customer base just because of our representation in that country. But that's the only thing I would point out that's kind of specific to Canadian manufacturing environment going forward. Operator: The next question comes from Zachary Evershed at National Bank. . Zachary Evershed: Congrats on the quarter. I'll actually take the inverse of Fred's question. Given the stronger pricing that you saw in Canada as well, is there a broader trend back up in pricing even after you adjust for the effect of tariffs? . Robert Brown: I mean things are getting more expensive, I think, is the theme. Even if you think of the impact of tariffs, generally, what we see when we have those types of things happen is you also have domestic producers. And I would just remind that domestic sourcing is the majority of our business. We augment that with import supply solutions for our customers. But the greater bulk of what we're doing is with domestics. But when there is trade disruption that generally forces prices up, lifts all boats, whether it's domestic or import. And yes, so I mean you saw that in the quarter where we had a little bit of price appreciation. That's really at the beginning of the story around tariffs because you'll recall, up until the recent 232 trade ruling, most of our tariffs were set aside or most of our goods were imported were not tariffed. That number is really doubled now up to the 30% that we disclosed at the average country rate of 20%. So yes, all in all, we're expecting prices over time to be a little bit firmer. And we'll do our pieces we've described around price pass-through related to that. Zachary Evershed: Great color. And on that topic, how do your customers typically react when you do try to take profit on a visible externality like tariffs? Because I think I heard you mention your dynamic pricing is to maintain gross margin percentage. Robert Brown: Yes. I mean we are a distributor. We're not here to kind of time to market or such we expect to kind of get paid for the service provided. And this is well worn road that that's our role in channel and within the supply chain. We can look back at other exogenous events, cover being the most recent one. And we followed the same playbook. And I would add as did the rest of the industry and the competitor set. So we're not out there on our own. We're a distributor, and we're going to do our piece in channel and take the gross profit margin that's attached to that. . Zachary Evershed: And on your outlook for CapEx, any pockets of strength that are worth growth investments? Robert Brown: No, nothing stands out most -- I mean, we really characterize our CapEx as maintenance. And we do the occasional things act in terms of expanding some of our light manufacturing in markets where there's good payback to that, but it just doesn't really stand out because it's such a capital-light model that we're operating. It's a $10 million or $12 million spend per year. . Operator: The next question comes from Jonathan Goldman at Scotiabank. . Jonathan Goldman: Could you remind us what's the lag between when you put through new tariffs or higher pricing and it hits your P&L? And then I guess given the higher tariff exposure that you have now, is it reasonable to expect that pricing could accelerate in Q4? Or are the other factors that you mentioned, Rob, maybe like higher channel inventory and competitive dynamics enough to mitigate any sort of higher pricing we might see quarter-on-quarter? Robert Brown: Yes, it's a good question. Jonathan, I think on the pricing acceleration, I don't expect an acceleration in Q4. I think that comments I made earlier, which you just referenced of the wait and see are probably the most realistic scenario. And -- but I mean, we did have some price increases in Q3. That was helpful. But I don't think the rate of change is likely to accelerate at least in the short term here. . In terms of the lag, that really depends a little bit again on those same factors and what the market is willing to bear. But as our cost of sales or our sourcing costs go up, we don't wait. We start to put those through, but it's really somewhat averaged across the inventory that we've got. There could be a little bit of a delay but I think it really comes down to more what's the magnitude of the price change. And at this point, we don't see a massive short-term magnitude of price change emerging. Jonathan Goldman: Okay. That's really good color. And then I guess maybe switching to the expenses. I appreciate you guys really quantifying the mark-to-market adjustment there. But you did also call out inflationary pressures on wages and facilities. I guess, do you expect that to continue into Q4? And I guess maybe thinking a little longer term, how should we think about your ability to drive operating leverage on a flat demand environment? . Faiz Karmally: Jonathan, it's Faiz here. On your first question into Q4, I would say probably no significant shifts on a sequential basis. On the premise and the people, I think we've kind of taken those for the year. And we've got some things to manage around those 2. Our head count is down a little bit year-over-year. Our facility count is actually down a little bit as well. We've done some rationalization there where it makes sense to try and offset some of those inflationary increases. So for Q4, I think your assumption kind of Q3 to Q4, it's probably pretty similar on those line items, which are, the majority of our expenses, I think, is probably a fair assumption. . In terms of how to think about operating leverage in a flat demand environment, I think we've got strategies in place that are working below the top line as well. So in terms of increasing our gross margin percentage over time and continuing to be tight on expenses. Those are things that we just do every year. Year-to-date for operating expenses, if you take out all the kind of onetime things, transaction costs related to acquisitions. We had the trade case recovery. Just the organic expenses are up kind of about 2% year-over-year which is less than the rate of inflation. So we do have the ability to continue to be sharp on costs and manage those down. And I think you'll see us continue to do that into 2026. But in terms of where -- how the business model is set up today, Jonathan, we've cut, but we've not cut too deep. So the way I would describe it is when we do see -- even if it's kind of a low growth environment, I think a lot of that is going to fall directly to the bottom line. We've kind of set ourselves up from a business model and an expense-based perspective to achieve that. Jonathan Goldman: Okay. That's helpful. And then I guess maybe 1 more for me on the M&A, and you guys talked about that potentially in '26 as the leverage coming down. Have you noticed any change in seller expectations or valuations that you're seeing in the private space maybe relative to public multiples? Robert Brown: Not really, just because the public and private multiples. The headline grabbing public multiples are for businesses that are such substantially different in scale, they don't translate between the two. So I mean, from our perspective, no, we're going to still operate in similar ranges we've discussed in the past. The thing that's to flex is how folks are doing on their EBITDA profile and what we consider to be sustainable EBITDA going forward. We've done quite well this year, I think, in the market environment that's been available. Others maybe not as strong performance. And those are things that enter into the discussions when we are in kind of M&A mode with some of our targets. . Operator: [Operator Instructions] The next question is the follow-up from Kyle McPhee at Cormark. Kyle McPhee: Can you remind us or explain for us the timing lag for ADENTRA to benefit from a cycle turn as we eventually see new starts up, rates down, home inventory turnover up long until it typically translates to organic volume tailwinds for your business? . Robert Brown: I would say that the -- if you think about new residential construction, so housing starts, that's generally a couple of quarters because we are more in the finishing stages. And if you think of the repair and remodel market, that's more immediate. And our participation, particularly on the home center side, can be quite immediate. So we've got a good mix there that we consider to be quite well diversified. The commercial segment, which is about 20% of what we do, I would describe as it's always kind of a little bit more in steady state, it may be going up. a little bit or going down a little bit, kind of a rolling hills profile. So that one I would just describe as more stable and is it kind of waiting around and having movements in the way I described the first two. So a long answer to your question. The shorter answer would be it's a quarter to 2 to 3 quarters depending on what sector you're talking about in the economy. Kyle McPhee: Okay. Appreciate that color. And last one, does the uncertainty with the demand environment, whether or not this is lower for longer, does that impact your willingness to do M&A? I know you have the pipeline, but does it impact your willingness using your balance sheet that's quickly deleveraging here to fund the deal flow? Or does deal flow get delayed or maybe you prioritize smaller stuff or for larger stuff, just waiting for more macro clarity. Any color on that would be appreciated. Robert Brown: No. I mean, from our perspective, our volumes are stable. We've got some price appreciation. Gross profit margin is being well managed. Cost is disciplined, like Fed said, we've got a really high free cash flow conversion rate and our leverage is coming down. And then, by the way, the tariff landscape is visible at least for now. So I don't think any of those things have us on the sidelines. We've said that the pipeline is encouraging. And now we've got the balance sheet back to where we want to be active again. So we're not sitting waiting for some massive change in macro to release us. This will be normal course that we're executing on some M&A opportunities as we go, generate cash flow, put it took. Operator: Thank you. We have no further questions. I will turn the call back over to Bob Brown for closing comments. . Robert Brown: Okay. Thanks, Joanna. Nice job. I appreciate your help today and everybody for joining us. Reach out to Faiz or I If you've got any follow-ups, we be happy to chat further. Have a great day. . Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Daniel Amir: My name is Daniel Amir, Head of Investor Relations. This webcast is being recorded and will be available for replay in the Investors section of eToro's website. Our earnings press release, investor presentation and October monthly spreadsheet is now available on our website at investors.etoro.com. Today, I'm joined by Yoni Assia, our CEO; and by Meron Shani, our CFO. Following the prepared remarks, we will conduct a Q&A session and answer questions from both institutional research analysts and a selection of the most upvoted questions previously submitted by eToro's retail shareholders. But before we begin, I want to note that today's discussion contains forward-looking statements including statements about goals, business outlook, industry trends, market opportunities, expectations for future financial performance and similar items, all of which are subject to risks, uncertainties and assumptions. And you can find more information about these risks and uncertainties in the press release that we issued today and in the Risk Factors section of our filings at sec.gov. Actual results may differ, and we take no obligation to revise or update any forward-looking statements. Finally, during today's meeting, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Definitions and reconciliation of GAAP to non-GAAP measures is available in our press release, investor presentation and on the sec.gov website as applicable. With that, I will pass the call to Yoni. Jonathan Assia: Thank you, Daniel, and thank you, everyone, for joining us today. Welcome to our third quarter's 2025 earnings call. After Meron and I conclude our prepared remarks, we'll open it up for questions. We're proud to share another strong quarter that reflects eToro's continued momentum and growing strength as a global leader in trading and investing. This performance with net contribution up 28% year-over-year to $215 million and adjusted EBITDA rising 43% to $78 million, delivering solid operating margins of 36% is a testament to the vision, resilience and scalability of our diversified business. What excites us most is the remarkable pace of innovation unfolding across eToro, with AI accelerating our product development. We're not only enhancing the platform that our users know today, we're reshaping the future of investing. We're expanding into new frontiers in crypto, tokenization and AI, while also broadening our global reach to serve an ever-growing community of smart investors. This wave of innovation is delivering tangible results, record assets under administration, robust growth across all segments and unprecedented engagement in Copy Trading. Together, these achievements underscore how our investment in technology is fueling growth, deepening client engagement and bringing us ever closer to our mission, which is to empower everyone to trade and invest in a simple and transparent way. Our key performance indicators accelerated meaningfully this quarter. Funded accounts grew 16% year-over-year to $3.73 billion with organic funded accounts expanding at a double-digit rate. This growth demonstrates the growing appeal of eToro's differentiated platform, the trust we've built with our global community of investors and the success of our disciplined and data-driven marketing approach. Assets under administration reached an all-time high of $20.8 billion, up 76% year-over-year, fueled by growth in new deposits and strong user investment returns in both crypto and equities this year. The positive momentum in our KPIs has continued into Q4 as shown in the October results released today. These results show our strategy in action. We're democratizing investing by making it simple, accessible and social while combining multi-asset trading with smarter products like Copy Trading and smart portfolios to empower investors everywhere. As we execute on this vision, we're confident in our ability to deliver lasting value for our users and shareholders. To achieve the strong performance we delivered in Q3, we've remained focused on executing across our 4 strategic pillars of trading, investing, wealth management and neo-banking while accelerating product innovation across the platform. Let me share a few highlights across each of these areas. In trading, we're continuing to expand market access globally. We continue to expect our 24/5 trading. We began offering retail investors access to stocks listed on NASDAQ Nordic Exchanges throughout our partnership with NASDAQ. This expansion comes amid rising retail investor interest in the global markets. Today, we offer access to 22 different exchanges worldwide and plan to increase to over 30 in 2026. We've expanded futures across Europe and launched spot-quoted futures and partnership with the CME Group. Retail participation continues to grow in these markets, and we are pleased to give local traders the ability to execute in a more advanced and diversified strategies. Our expansion to futures also establishes the infrastructure to support prediction markets in the future. In investing, we're bringing together the power of community and AI to drive deeper user engagement on eToro's platform and help investors make smarter decisions with AI. Our Pro Investor community has grown to over 4,000 investors globally, supported by our new Pro Investor Program. This program is designed to support users on their journey to certify themselves as professional investors. Our Pro Investors gain exposure and grow their profile by sharing their expertise with eToro's global user base. In addition, over 130 pro investors now have north of $1 million assets under management with our top Pro Investor growing from $50 million to over $250 million in 2025 alone, a milestone that reflects the growth and influence of our Pro Investor Program. Last month, we launched Copy Trading in the U.S. We're excited to bring our flagship product to the world's largest capital market. Copy Trading today is experienced across approximately 1/3 of our users. With the launch of Copy Trading in the U.S., we anticipate increased user engagement and platform traction. In AI, we're entering the next great leap in trading and investing, one that puts the power of professional grade technology directly in the hands of every investor. With our newly launched eToro apps, users can build, share and scale their own investment tools across our global community. What was once the privilege of sophisticated institutions is now being democratized. Our AI-driven insights from sentiment to decision analysis enable investors to think and act as institutional investors by creating their own strategies, dashboards and innovations that shape the future of investing. In wealth management, we launched a new subscription model for the eToro Club, our loyalty and rewards program, offering members premium benefits and exclusive features. The subscription offers members smarter tools, monetary benefits and more personalized support while driving incremental engagement. Furthermore, we've expanded the eToro long-term savings offering for our U.K. users with the new eToro Cash ISA and cashback rewards on management and do-it-yourself ISAs. And in Australia, we advanced the integration of Spaceship, giving users direct access to superannuation products through the eToro platform. These developments demonstrate our commitment to continuously enhancing wealth management offering, which is a multitrillion-dollar opportunity. With the Australian superannuation market valued at over $2.5 trillion and the U.K. individual savings account market exceeding $1.3 trillion. In neo-banking, we continue to enhance our global platform by delivering localized experiences that strengthen user trust, drive adoption and support sustainable growth across our key regions. This quarter, we expanded our localization offering in the UAE, Singapore and Australia. Furthermore, across the U.K. and Europe, on top of the 4% cash back in stocks, we now offer also a 1% cash back in stocks for new crypto deposits. We plan to expand this offering to more countries in the future. We're also very pleased with the strong traction we've seen with the eToro Money card available today in Europe and the U.K., which saw a 2.4x increase in cards issued quarter-over-quarter. Looking ahead, we believe there are 5 key factors that will drive eToro's continued growth and advance our mission to open the global markets, connect users to leading investors and give them tools they need to grow their knowledge and wealth. Number one, advancing at the forefront of innovation; number two, continuing to expand globally; number three, expanding our U.S. presence; number four, broadening our product offering with AI; and number five is leading into inevitable lasting macro trends. We are focused on positioning our business to capture the significant growth opportunities presented by these 5 factors. First, advancing the platform at the forefront of innovation. From day 1, product innovation has been at the core of who we are. We've built a strong track record of identifying early major trends like social trading and crypto and turning these trends into products that bring real financial utility to our users. Our social investing products continue to define who we are today as a company. From the outset 15 years ago, eToro set out to transform retail investing experience by pioneering the concept of social investing, empowering individuals to learn from one another and invest together. We believe there is a tremendous value and shared knowledge and collective insight. Over the years, we have led the industry with innovations such as our social network, Copy Trading, crypto investing, fractional shares, machine learn driven analytics and our smart portfolios. Together, these capabilities make investing more inclusive, informed and collaborative for our growing global community. Artificial intelligence is the next frontier in investing, and we're already seeing the impact across our business. Our AI analyst story launched last quarter has already been used by over 1/3 of our club members, a strong sign of engagement and potential. As we expand our AI capabilities, we're giving investor powerful tools to make smarter decisions, improve performance and deepen their connection to our platform. Our vision is also centered on building open, tokenized and borderless market to help millions to build wealth. We're bringing U.S.-listed equities to the blockchain enabling 24/5 trading of over 500 prominent stocks with plans to move forward to 24/7 as the markets evolve. We're currently developing a crypto wallet that will open the opportunity for our users through decentralized finance to participate in innovations like on-chain prediction markets, lending, loans and swaps of their assets of millions of different crypto assets and connect our tokenized assets ecosystem and benefit from tokenization of real-world assets, which will happen over time. We expect these more advanced crypto products to continue to increase our client engagement within the crypto industry. Second, continue to expand globally. We're proud to serve users in more than 75 different countries across the world. The diversification of our revenues across geographies is the core strength of eToro and a differentiator of our business. In Q2, we expanded our footprint in Asia by launching our capital market services license in Singapore, a meaningful step towards scaling our business in that region. Looking ahead, we plan to further localize our offering in key markets and continue to expand globally in region where we're underpenetrated, as part of our broader strategy to solidify eToro's position as a truly global platform serving investors everywhere. Third, expanding our U.S. presence. We're seeing solid growth in the U.S. Year-to-date, new funded accounts have already surpassed those of 2024 and we've achieved that growth while remaining disciplined and efficient in our marketing spend, consistent with our strategy. To continue this growth, we're focused on bringing the full product offering for which we are known globally into the U.S. market. For example, in the third quarter, we brought in an crypto offering in the U.S. to include more than 100 different crypto assets and introduced staking in the U.S. As a result, we saw a 3x increase in our crypto volumes quarter-over-quarter in the U.S. market. Additionally, last month, we announced the launch of Copy Trading in the U.S., a major milestone that lays the foundation for our next phase of expansion in this market. The Copy Trading product is a significant driver of user engagement with our platform as reflected in the increase of the number of trades we've seen this year. We expect Copy Trading to be an important driver of growth in the U.S. going forward. Fourth, broadening our product offering. In our core markets, we're focused on increasing engagement and share of wallet by broadening what we offer across our 4 strategic pillars. Trading, investing, wealth management and neo-banking. We continue to expand each of these areas quarter after quarter. As mentioned, recent highlights include the launch of the savings products in the U.K. and France, expansion of the eToro Money card across Europe, the rollout of features and options across key European markets and introducing localized trading and cash management capabilities in new regions as well. This approach has proven successful over time by driving both higher user retention and growth in assets per account. And fifth, leaning into lasting macro trends. Over the next 20 years, we will see the largest generational transformation of wealth in history with over $150 trillion moving to younger generations globally. These younger generations are digital first, and they're far more engaged with equities in crypto than their parents. On their back end, we also expect to see $100 trillion moving on change as capital markets transform into digital assets. Moreover, in many non-U.S. markets, retail participation remains below U.S. levels. We believe this gap will continue to narrow as younger generations more inclined to invest in crypto and equities than their parents enter the market, offering us a long runway for growth across our global franchise. These secular shifts are powerful tailwind that will continue to support both assets under administration and new account growth over the long term. Altogether, these 5 drivers gives us strong confidence in our ability to deliver sustainable, profitable growth and position eToro as the global broker of choice. Lastly, we announced today a $150 million share repurchase program, underscoring our confidence in eToro's long-term growth prospects and our continued commitment to delivering value for shareholders. We believe that our stock is undervalued. And given our significant cash generation, we have the flexibility to buy back shares. Our strong cash position also gives us the ability to consider M&A opportunities to drive inorganic growth. We're evaluating a range of opportunities, though we will remain disciplined in any transaction we pursue. In sum, this quarter's results and KPIs for October clearly demonstrate that our strategy is working. We're achieving double-digit growth in organic funded accounts, significantly increasing our assets under administration, expanding net contribution and adjusted EBITDA margins and doing so while entering new markets and launching new products that strengthen our leadership for the future. With strong execution, financial discipline and a relentless focus on innovation, we believe we're very well positioned to drive long-term value, and we're just getting started. With that, I will pass now along the call to Meron, our CFO, to discuss our financial results. Meron Shani: Thank you, Yoni. As Yoni mentioned, we are very pleased with our third quarter results. Third quarter net contribution grew 28% year-over-year to $215 million and adjusted EBITDA grew 43% year-over-year to $78 million. In line with our focus on diversified, profitable revenue growth, our adjusted EBITDA margin was 36%, expanding 370 basis points from a year ago. These results are consistent with our view that our long-term adjusted EBITDA margins will increase from these levels. Our momentum has accelerated in the third quarter. Assets under administration for the quarter increased 76% year-over-year to a record of $20.8 billion, while our funded accounts grew 16% year-over-year to $3.73 million. The growth was driven by strong user acquisition and retention efforts and ongoing disciplined marketing. Let's take a closer look at our third quarter financials by business lines compared to a year ago. Our net trading contribution from crypto grew 229% year-over-year to $56 million, which was largely driven by higher invested amount per trade and increased crypto activity, especially in the month of July and August. Our net trading contribution from capital markets, equities, commodities and currencies declined 21% year-over-year to $73 million as investors shifted activity between crypto and capital markets. The 15% rise in the number of trades was driven by strong momentum across Copy Trading with record inflows into Copy, a clear reflection of growing customer engagement and platform strength. Net interest income contributed $62 million, up 44% year-over-year, largely driven by a 52% increase in higher interest-earning assets due to an increase in customers' cash deposits, customers' margin book, staking and corporate cash. eToro Money contribution grew 50% year-over-year to $21 million, largely driven by an increase in total money transfers. In the third quarter, adjusted OpEx was $137 million, flat quarter-on-quarter. Our adjusted selling and marketing expense was $47 million or 22% of net contribution. Our business model provides us with flexibility in our selling and marketing expense, where approximately 70% of our expense is dynamic. Adjusted R&D and G&A and operating expenses were $36 million and $54 million, respectively. Our adjusted diluted EPS for the quarter was $0.60 compared to $0.51 in the third quarter of 2024. Moving to our balance sheet. We ended the quarter with $1.2 billion in cash, cash equivalents and short-term investments and generated $57 million in free cash flow from operations. Now let me share a few comments on fourth quarter trends. As part of our quarterly results today, we also released our October monthly KPIs. Consistent with our commitment to greater transparency and enhanced disclosure, we will now begin publishing KPIs on a monthly basis. We've also made a detailed spreadsheet available on our website, which includes historical monthly data to help investors better track our performance over time. Our goal is to provide the investment community with the information and tools needed to more clearly understand, model and evaluate our business. The month of October continues the strength that we saw in Q3. Our capital markets and crypto businesses saw significant year-over-year growth in both total number of trades and invested amount per trade. Assets under administration was $20.5 billion, up 72% year-over-year and funded accounts were 3.76, up 17% year-over-year. To summarize, we are very pleased with our strong Q3 performance and positive momentum, and we believe we are well positioned to capture new opportunities, drive sustainable growth, and further strengthen eToro's leadership in global investing. With that, Daniel, let's move to Q&A. Daniel Amir: Thank you, Meron. The first question here comes from a list of questions that have been pre-submitted by our retail investors. This question is for Yoni. So eToro announced its new subscription offering. Can you comment on why eToro decided to launch the program? And what is the opportunity? Jonathan Assia: Sure. We've built the eToro Club program to provide great premium benefits including unique features, better service as well as discounts to various parts in eToro, as well as the card, the cash back and now the crypto cash back. The club originally was based only on the tiers of how much assets customers have. And we wanted to provide the same great benefits to people who want to subscribe to the new eToro subscription. This also consolidates to subscription models that we've had from acquisitions that we've done in the past, and we're very excited to see how the pickup is already to the new subscription model. Daniel Amir: Thank you, Yoni. Operator? Operator: [Operator Instructions] Our first question will be coming from Dan Fannon of Jefferies. Daniel Fannon: I wanted to talk about account growth. And so obviously, it's been good or quite strong. I was hoping you could talk about if there are regions or new markets that are contributing more and maybe the breakdown of that account growth here, not just for the quarter, but also October, if there's any more granularity, that would be helpful. Jonathan Assia: Sure. Meron? Meron Shani: Thank you, Dan. So with regards to our current growth, like organically, as we discussed in the past, we have achieved a double-digit growth. We've seen great results coming out of the cohort of clients that we are bringing, increasing the level of deposits on to the platform and increasing their level also of engagement with the platform. So overall, very good results. With regards to geographic, we are not breaking down geographically, but I could definitely tell you that we are seeing early, but good signs coming out of the new regions that we launched in the -- recently and in the last few years as well as well as a significant strength coming from our core markets. Jonathan Assia: And we have seen also a very good increase in the size of accounts coming into eToro. So it's both new funded accounts growth and their first-time deposit, which is a very good indicator to the future size of the accounts. Operator: And our next question will be coming from Devin Ryan of Citizens. Devin Ryan: A question on artificial intelligence implications here. So great to see 30% of club members engage with eToro. It'd be great to hear about anything you can share on kind of conversion uplift from doing research to actually trading and trade frequency. I know we're early days here, but I'm just trying to think about that. And then more broadly, taking a step back, just some of the other types of offerings you're planning to launch with artificial intelligence and just how you feel like that can maybe differentiate the eToro offering in the market? Jonathan Assia: Sure. So during our Pro Investor Summit about 2 weeks ago, we've actually announced our new tools, an AI studio for Pro investors to actually vibe code tools. Those tools include both new types of analysis that can actually look at their portfolio using AIs, look at other people's portfolio using AIs, read the entire feed and create automated strategy. I think the biggest driver eventually of AI, and I started, I think I did my first automated trading strategy when I was about 16, 17 is the transition from just click to trade through the UX to eventually running automated strategies, quantitative strategies of our users. And what we've built is the ability for our Pro investors to actually build those apps, those strategies. It includes dashboards and analysis of how they generate their trades and then actually provide an app store, so all of our customers can access that. And we've seen some really amazing apps developed already by our Pro investors. Just as a quick example, we've had one of our Pro investors actually creating the persona of Warren Buffett, Benjamin Gram, and I think it was Cathie Wood basically ranking his stocks in his portfolio and suggesting how to rebalance the portfolio. So I do believe AI One is an amazing tool for people who are not necessarily technical to actually bring in sort of their ideas on how to automate their strategies, how to make their strategies more professional on top of the eToro platform. And I think over time, that drives both high returns, so making our customers more successful and actually higher velocity of trades in eToro. Operator: And our next question will be coming from Craig Siegenthaler of Bank of America. Craig Siegenthaler: Our question is on your strategic focus by geography. So please correct me if I'm wrong, but I see a company that is very focused on growth in the U.S., in Asia and maybe widening geographically into new markets. But eToro has leading share in Europe with some scale. And this market also looks a lot less competitive than the U.S. and Asia. So my question is, why not focus on your first-mover advantage in Europe, and continue to deepen our investor base there, especially given that there are less regulatory restrictions on your CopyTrader model in Europe than in the U.S.? Jonathan Assia: Sure. So as we think of our growth strategy, first of all, we think of long-term growth, and we do want to build significant presence in the U.S. and in Asia. Nonetheless, on the day-to-day, when we drive our marketing and most of our marketing is a data-driven performance marketing approach, we always look at basically the ratio between CAC to LTV. So when we have a strong region, and obviously, Europe -- some of our strongest regions in Europe, UAE, Australia as well, we're actually doubling down on growth there as well. So we are focused on growing the business through data-driven approach and make sure that where we see the highest return on investment, that's where we continuously grow and invest more. So we are definitely focused on maintaining our leadership in Europe in the retail brokerage industry. Operator: And our next question will be coming from James Yaro of Goldman Sachs. James Yaro: Could you help us think about the account growth algorithm here. What do you see as achievable for account growth going forward? Is it high single digits or double-digit account growth on a yearly basis? And then in the press release, you talked about net new accounts in the first 3 quarters being stronger than all of 2024, but maybe any ability to comment more narrowly on the 3Q '25 trends? Jonathan Assia: Sure. So first of all, strategically, we are aiming towards double-digit growth of funded accounts. We believe, again, the total available market of new generations coming into the market, the market itself will grow in double digits, and we believe we can outpace the market growth in all of our -- both existing strong regions in Europe and beyond as well as obviously new regions such as the U.S. The comment in the press release, I do believe, was regarding the U.S., which post IPO, we actually started basically revamping both our product strategy in the U.S., bringing all of eToro's global products into the U.S., including now more than 100 crypto assets staking that was launched in the U.S. as well as very excited about launching CopyTrader now in the U.S. So we do expect double-digit growth in funded accounts moving forward strategically across all regions. Operator: And our next question will be Brett Knoblauch of Cantor Fitzgerald. Brett Knoblauch: Maybe two, one on the crypto side, it was a really strong quarter in terms of crypto volumes. I think you guys marginally outpaced global spot volumes by kind of 2:1, if not more. Can you point to how much of that was maybe from what you did in the U.S. and had new tradable assets in the U.S. plus maybe outside of the U.S.? And then as a follow-up, I think ECC came in a bit below where we were expecting. Can you just talk about the dynamics at play within the ECC during this quarter as well? Jonathan Assia: Sure. So I'll cover high level and then I'll let Meron talk a bit about the numbers in the quarter. But first of all, when you look at our numbers in the last 8 quarters, and you see that in the investor presentation, what we've seen over time is very clear. When one asset class is very strong, we see a shift towards that asset class from other asset classes. So every time crypto has a very strong momentum, we actually see the non-crypto revenues or capital markets revenue actually going down a bit. And then as crypto goes down, we see capital markets significantly shift higher as well. And that is a dynamic that we did see in Q3. In addition to that, within capital markets, there are 2 segments. There's currencies, commodities and indices basically future based and there's stocks. And we did see more stock trading volumes increase in Q3, which led to the lower -- basically take rate as take rate on stock trading is lower than on commodities, indices and FX. Regarding the crypto market, of course, we've seen a couple of all times high during Q3 that always supports our crypto revenues and trading activities. In general, we do expect to continue and see a strong crypto market with a very, very positive U.S. administration towards the crypto industry and a lot of new product rollouts for eToro within the crypto industry, with that a bit about the actual numbers in Q3. Meron Shani: Sure. So we can see definitely a sequential growth from Q2 in a very high pace, both on the number of trades as well as the invested amount. We saw elevated activity coming in July and August as we released our KPIs also early September about the summer. So very good traction coming out of the crypto activities of customers in the summer. We did see a slight reduction in that in September, but remains on the same level also in October. We're very happy about what we see in the industry. And in general, as it goes to become more and more mainstream, we'll see the number of trades and the number of customers tapping into crypto growing. And together with that, our revenues as well. Operator: Our next question will be coming from Chris Allen of Citi. Christopher Allen: Maybe you could talk about capital allocation priorities here. You announced the buyback this morning, make some sense with a lot of exploration now, but you've also talked in the past about looking at inorganic growth opportunities, particularly in the U.S. to build that out. So help us think about the different levers here from a capital allocation perspective? Jonathan Assia: Sure. So first of all, we've added a significant amount of cash flow already this year. So our balance sheet grew from $1 billion to $1.8 billion in total with $1.2 billion in cash and short-term investments. So we have a very strong balance sheet to look both at buyback. And again, at these levels, we do believe the price is undervalued, which is why we're buying as well. And of course, leaves a significant amount of dry powder also to look at acquisitions. We have been talking to various potential targets. We're always excited to meet great teams of great founders with products that we believe add value to our customers and that our products will add value to their customers, and we're actively exploring these opportunities across different regions. And of course, as we announce them, you'll know what are the actual targets. Operator: And our next question will be coming from Bill Katz of TD Cowen. William Katz: Just a question coming back to your commentary about the longer-term opportunity for the prediction and the event market. I was wondering if you could maybe lay out your pathway of like how you get there. Is this an organic opportunity? Is it inorganic? And then within that, I was wondering if you could share your thoughts on just philosophically how you think about the sports or gambling opportunity within that? Jonathan Assia: Sure. So prediction markets, we're looking at basically both alternatives. So first of all, we've launched futures in Europe and the future rails that we've launched in Europe are the same rails that eventually enable basically to trade prediction markets in the U.S. as well. In addition, we are launching our crypto wallet, which will enable our customers to engage with on chain prediction markets such as poly chain and others. So we're actually going towards both of those directions. We do believe that prediction markets on financial events, on geopolitics, on economic events have -- do create significant value and people thinking about their trading strategies or hedging what they want to do. And that initially will be our focus to help our customers basically find those financial opportunities that are related to their portfolios. Operator: Our next question will be coming from Alex Kramm of UBS. Alex Kramm: Just on CopyTrader in the U.S., I know it's super early, but maybe you can talk a little bit about how you're looking to scale it in terms of marketing you're leaning in. I think you have 300,000 roughly accounts in the U.S. I think you said earlier, CopyTrader globally has 1/3 or so of your clients have uptake there. So just how should we be thinking about the opportunity and how quickly you can scale and if the third is kind of like a good target for the U.S. as well? Jonathan Assia: Sure. So our view holistically is always, as we enter new markets to roll out all of the products that we offer globally in that market. And of course, we look at the U.S. as a huge opportunity with now crypto back, staking back and CopyTrader now launched alongside stocks and options trading as well. And the way we look at each product that we release is an attachment of a customer. So a customer engaging with CopyTrader. What we see over time is the increase in both size of the wallet or share of wallet as well as over time, LTV increases significantly. So the way we view it is we continue basically to do what we do across the globe now here in the U.S., which is promoting the CopyTrader feature within the app, increase the attachment rate of Copy Trading, building gradually more and more great investors that in the U.S. people can copy. And over time, we'll see that increasing LTV and enabling us to basically spend more or increase our CACs and the marketing budget to bring in more users to the eToro platform. So it's all about bringing all of the products to our U.S. product strategy, then make sure that throughout the product, we create those attachment rates that increase the lifetime value and share of wallet of our customers here in the U.S., and that obviously leads to us scaling up our marketing strategy here in the U.S. in a profitable way. Operator: And our next question will be coming from Jamie Friedman of Susquehanna International Group. James Friedman: [Technical Difficulty] I wanted to ask first about the funded accounts as well. [Technical Difficulty] Jonathan Assia: Let's move to the next question, and then I'll come back if we can get a better connection with him. Operator: Our next question will be coming from John Todaro of Needham. John Todaro: Congrats here. I just wanted to follow up, and I'll make sure I heard it correctly. Would you guys look for kind of economic partnerships on prediction markets with like a Kalshi or Polymarket? And then if I could get kind of a second question. It sounds like there is some -- I don't know if you want to call it cannibalization intra-quarter between some of these trading products, as you mentioned, where crypto maybe goes up and some of the other markets go down a little bit. How do you eventually get around that where they kind of are all kind of up and up on -- in the same quarter? Jonathan Assia: Sure. So first of all, we are talking to Kalshi and Polymarket, obviously, the market leaders in prediction markets. And we are excited about exploring the path of our users to be able to trade prediction markets on financial events. On the -- sorry, do you want to take it? Meron Shani: Yes, like switching between the... Jonathan Assia: I'm not sure whether cannibalization is the right way to describe when customers inter-quarter trade different products. So over time, when you look at the growth of the net contribution of trading, both in crypto and capital markets, you see them growing over time. And we think it's a great opportunity for people to actually reshuffle or rebalance their portfolios. We've seen by this -- by the way, the same also between U.S. stocks and European stocks earlier this year as European stocks were very strong and a lot of our customers started buying basically defense stocks. We've seen, obviously, in the past, the same happening with meme stocks. Later, we've seen it with meme coins. So again, as we bring in more products to our customers, we expect constant rebalancing of customers between different assets. And actually, that's the strength of eToro versus pure crypto companies, which don't have stocks or significant capital markets, and it's a significant strength of eToro, the fact that we cover today 22 different global exchanges, so our customers can trade all of those different products, alongside, of course, both on-exchange and off-exchange derivatives like futures and options. So we feel that the fact that customers are trading in between the different assets is a strength and something that we actually want to see with all of our customers. Operator: And our next question comes from Brian Bedell of Deutsche Bank. Brian Bedell: Maybe just to go back to Copy Trading, the mechanics of that in the U.S., in particular. I know there was some different regulatory regime in terms of being able to offer it with, I guess, the advisory component being a critical component of being able to be paid. Can you just go through the mechanics of how this is operating in the U.S. versus outside the U.S.? And if it's the same now or when you expect to have that aligned with how it works outside the U.S.? And any commentary on initial take-up. I know it's very early, of course. Jonathan Assia: Sure. So first of all, it's very early to look at take rates and engagement, but we have seen already people being copied and people are copying top investors here on the U.S. platform, which is great to see. Second on the mechanics. The mechanics are quite similar from how it operates. So you can actually -- when you copy an investor, it copies their entire portfolio into your portfolio in the amount you chose. So you copy somebody with $1,000, it fractionalizes his entire account across stocks and crypto and it basically opens those trades in your account. And every time they trade, it will trade in your account at the same time, the same price and the same proportion. So the mechanics of copying works the same here in the U.S. and outside the U.S. We are looking right now outside the U.S., we've actually just revamped our Pro Investor Program, which is around how do the Pro investors actually get paid here. We're still early stages. We'll be building that as well as we move towards next year. The second copy product, which is our Smart Portfolios product, where our Global Chief Investment Office actually curates specific portfolios, about 120 different smart portfolios across different strategies. That part will fall under an RIA license, which we are in the process and expect that to launch in H1 next year. Operator: And our next question will be coming from Dan Dolev of MIZ. Dan Dolev: Congrats, guys. Great quarter, great October. I have a question on banking. A lot of fintech companies view banking as the Holy Grail, kind of, that's what everyone wants to do. So Yoni, Meron, like how do you guys view sort of like banking services globally in the U.S., et cetera, in terms of the long-term opportunity for eToro? Jonathan Assia: Sure. So I generally say everybody is looking at the concept of the super app, right? So we believe our core is actually helping our customers find beta in alpha into their portfolio to generate over time, returns in to compound wealth over time. So our view comes more from our core expertise on trading and investing. What we've seen over time is basically expanding the business also into savings, the various pension schemes around the world where we have already launched U.K., Australia and France recently, including the now new launch of Cash ISAs in the U.K. And lastly, of course, neo-banking. And what we wanted to see and what we're seeing in our strategy is basically when we provide our customers the virtual bank account on eToro, interest rate that they can get on their local currency and the ability to convert easily FX from euro to dollars or pounds to dollars to efficiently trade also U.S. capital markets and then attach into that also the Visa debit card, we remove the need of a customer to actually take their money back to the bank. So I think us as a financial super app, we're looking for customers to increase their share of wallet over time on eToro. We believe most of customer assets should be compounded towards capital markets in crypto markets and they should easily spend from that account without the need to actually take their money back into the bank. And we've seen that significantly improve basically attachment rates of customers, lifetime value of customers, which is why we're also providing great incentives to use our Visa debit card with a 4% stock back. So when you spend and we see a lot of our customers now posting on X when they're spending on a meal and then they get a 4% stock back into their portfolio. Again, why the stock back? Because we do believe that all of our customers would actually have most of their funds or the vast majority of their funds in capital markets and crypto markets, and that's the efficient way to compound wealth over time. Dan Dolev: Great. Makes a lot of sense. Congrats again on a great quarter. Operator: And our next question will come from Jamie Friedman of Susquehanna International Group. James Friedman: Yoni, the press release indicates that the 16% growth in funded accounts was driven both by the user acquisition, but also the retention. I was hoping at a high level, you could unpack that -- those dimensions. And then if I could just sneak in another one, Meron. Can you remind us about the typical seasonality in the business as we build out our models? Jonathan Assia: Sure. So we currently don't break down win backs churn and retention, but we've been engaging significantly in going back into basically our database of funded accounts across time and making sure that they are kept up to date on all of the new product releases, whether it's, again, the debit card in Europe, whether it's futures trading, or whether it's the new crypto wallet and the ability to use our crypto to buy stocks. So as we do that, we bring in also old customers into eToro sort of customers that churned in the past that are now joining back eToro for our new products. The second question, you can answer, Meron. Meron Shani: Yes. With regards to -- you touched about the breakdown, we do not provide it, but we can definitely see strong signs coming out of both the retention side as well as the acquisition as we aim -- as we discussed in the past, for a double-digit growth on the funded accounts on an annual basis. Jonathan Assia: Regarding seasonality, I would say, historically, we see strong Q1s and Q4s. It's mostly though related, I believe, to the market. So I would say we're enjoying usually seasons of the markets. And it seems, again, if I look at the last 3 years, Q1s and Q4s are usually good markets in both crypto and capital markets. But of course, we don't control the rain or the seasons. Operator: Next question will be coming from Alex Kramm of UBS. Alex Kramm: Just wanted a couple of follow-up questions. Hopefully, I didn't miss this earlier. But on the expense side, I think previously, you said flattish for the remainder of the year. Is that still right for the fourth quarter? And then just another housekeeping one on the interest income. I know there's a lot of moving pieces, but I think the implied rates -- interest rate actually went up quarter-over-quarter if you just use the interest earning assets. So again, I know there's a lot of things in there, but maybe just unpack what you're seeing on the interest income side? Jonathan Assia: Sure. I'll start on the first one, which was related to the expenses. So yes, definitely, we -- as we mentioned last quarter, we're aiming to keep our cost base the same quarter-on-quarter. And indeed, we came with a flat view. So we are roughly looking at staying within those lines also in Q4. With regards to the -- what was the second question? Meron Shani: Second question, Daniel? Alex Kramm: The interest income... Jonathan Assia: So we have seen like definitely, there is a decrease in the interest rate coming from the 2 rate cuts. But what we have witnessed in those periods is that actually customers' balances in all different asset classes have actually grown. Now -- so even though there is a direct reduction expected in interest income. Over time, we do see those balances increase. And therefore, we should be able to grow also on the revenue. That's also taking into consideration that customers are inclining when the interest rates are lower, to bring their assets more into a more riskier portfolios that will generate higher return for them than the lower interest rate in the market. Operator: And we have no further questions. And for closing remarks, we'll bring it back to Daniel. Daniel Amir: Thank you for attending our earnings call today. We're looking forward to seeing you at our upcoming investor conference during the quarter. These conferences are on our website that you can go see on the Investor Relations section. And thank you, and have a great day. Jonathan Assia: Thank you very much. Meron Shani: Thank you.
Operator: Good day, and thank you for standing by. Welcome to Akebia's Third Quarter 2025 Financial Results 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, Mercedes Carrasco, Senior Director of Investor Relations. Please go ahead. Mercedes Carrasco: Thank you, and welcome to Akebia's Third Quarter 2025 Financial Results and Business Update Conference Call. Please note that a press release was issued earlier today, Monday, November 10, detailing our third quarter 2025 financial results, and that release is available on the Investors section of our website. For your convenience, a replay of today's call will also be available on our website after we conclude. Joining me for today's call, we have John Butler, Chief Executive Officer; Nick Grund, Chief Commercial Officer; and Erik Ostrowski, Chief Financial and Chief Business Officer. I'd like to remind everyone that this call includes forward-looking statements. Each forward-looking statement on this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Additional information describing these risks is included in the financial results press release that we issued on November 10 as well as in our Risk Factors and Management Discussion and Analysis section of our most recent annual and quarterly reports filed with the SEC. With that, I'd like to introduce our CEO, John Butler. John Butler: Thanks, Mercedes, and thanks to all of you for joining us this morning. The team is just back from a very successful American Society of Nephrology meeting, where we met with prescribers and customers and also presented data that continue to demonstrate the positive impact Vafseo can potentially have on important clinical outcomes in dialysis patients, the quality of data that we believe will lead to Vafseo becoming standard of care to treat anemia in dialysis patients. Of course, today, there is a significant focus on our current launch progress. I'm proud to share that through 41 weeks of launch, Vafseo has generated more total prescriptions than any recent launch in dialysis. This is a reflection of the recognition from prescribers of the potential clinical benefit Vafseo can bring. That being said, from a business perspective, I'm not satisfied with generating $14.3 million in revenue this quarter. No one on the Akebia team is. But to be clear, we are pleased with the direction of all the important launch indicators that we believe will lead to long-term success for the product. We increased accessible patients from 40,000 patients in the first half of the year to almost 70,000 by the end of Q3 with the initiation of the DaVita pilot and the addition of IRC and several smaller providers late in the quarter. However, as we advance through the launch, we continue to appreciate how long it takes to align all of the logistics and processes for a new therapy to be made available for patients, particularly one that will be delivered to a patient's home, a departure from how anemia has been treated for the past 35 years. The bottom line is that getting patients on therapy and in some cases, keeping them on in the highly protocolized dialysis environment has taken longer than we expected. That said, these are operational issues that we and our dialysis provider customers are working through as quickly as possible. We believe that our positioning is compelling. Market research in every conversation I had at the ASN meeting supports physician desire to prescribe. Nick will share more information on our launch as well as sentiments from prescribers that we heard at ASN. Further, I expect that strong interest from physicians is only going to grow with the Win-Odds analysis based on data from the INNO2VATE trial that was presented at ASN last week by Dr. Glenn Chertow. The purpose of the Win-Odds analysis is to bring a greater level of statistical power to analyzing critical clinical outcomes. It's a statistical method designed to prioritize clinically meaningful endpoints in outcomes trials. This post-hoc data analysis showed that patients randomized to vadadustat experienced a lower risk of death or hospitalization compared with patients randomized to the ESA control darbepoetin alfa. The benefit became more significant when you looked at an on-treatment analysis. You've heard me say repeatedly that continuing to provide data that supports the clinical differentiation of Vafseo will be critical for the product to become standard of care. This data is an incredibly strong start and an important step in delivering on that promise. We will, of course, work diligently to have these new data published so our medical team can communicate them in the field as appropriate. Moreover, Dr. Block has adopted this Win-Odds endpoint as the primary endpoint in the VOICE study, which we expect to read out in early 2027. As a reminder, late next year, we'll also have the results from the VOCAL study that we're conducting at DaVita clinics. These readouts will be 2 important data catalysts for the company, and we believe the newly generated information should support continued long-term growth of Vafseo prescribing. Now both the VOICE and VOCAL studies utilize 3 times weekly or TIW dosing regimens. We've said before that observed dosing will be important for the in-center patient population as the dosing schedule can coincide with their dialysis treatments. Now we plan to engage further with the FDA on adding TIW dosing to the label, but we have heard from physicians and providers that they are moving to this dosing regimen based on the evidence that already exists. To this end, U.S. Renal Care is currently implementing a TIW dosing protocol in their clinics with a goal to have it available in all clinics in Q1 of next year. I expect some physicians may wait until Q1 to start new patients on Vafseo when they can leverage TIW dosing. Now additionally, USRC will be shifting from using 150-milligram tablets at home to 300-milligram tablets for in-center use, which could impact inventory levels in Q4. In the long run, I believe this change, enabling observed dosing will improve physicians' ability to drive patient adherence and compliance, which have been factors impacting growth. Before handing the call over to Nick, I want to go back to our launch for a moment. Having more prescriptions written in the first 41 weeks of a launch than any recent launch in dialysis suggests a very strong reception from the dialysis community. Hearing feedback from physicians about their positive experiences with Vafseo and seeing data like Dr. Chertow presented regarding the potential favorable mortality and decreased hospitalization benefits compared to ESAs gives me more reason to believe we will achieve our goal of making Vafseo standard of care for dialysis patients. I'm extremely confident in achieving that long-term goal. In the near term, our team is tackling operational issues head on to overcome them. Now let me turn it over to Nick to give more granularity on these efforts. Nick? Nicholas Grund: Thanks, John. Good morning, folks. Like many others at Akebia, I spent the last several days in Houston at ASN talking to nephrologists and leaders from various dialysis organizations. The positive sentiment on Vafseo as a compelling treatment for anemia remains high. In fact, from market research, we now have early insights into the perceptions of nephrologists who have patients on therapy. We're pleased to see that more than half of the nephrologists surveyed view Vafseo as providing more consistent control of anemia than their ESA with fewer dose adjustments. More importantly, at ASN, we met with all of the large and midsized dialysis organizations with prescribing access, and they reinforced that they are vested in the success of Vafseo. All these factors give me confidence that we will achieve our goal of making Vafseo standard of care for dialysis patients. I believe that by continuing to address operational challenges and further improving access, we continue to unlock the true value of Vafseo. To that end, I'll share quarterly launch metrics. But note that as we bring on more dialysis providers in the coming quarters, we will not be able to continue to provide dosing level data moving forward. During the quarter, approximately 725 prescribers wrote a prescription for Vafseo and each prescriber on average wrote approximately 12.7 prescriptions. More than 85% of prescriptions were refills in quarter 3, and the average dose of those refills has increased 5% versus the prior quarter and 32% above the starting dose. We believe this reflects that physicians are getting comfortable treating patients to the optimal therapeutic dose and that this trend of increasing average dose will have a positive impact on revenue. In summary, overall, Vafseo demand in quarter 3 was flat versus quarter 2, with new patient starts offset by lower-than-expected initial adherence. With expanded access, we have more to do to gain new prescribers and get more patients on therapy. We have extremely strong advocacy at USRC, as we said before, and saw a strong initial uptake. Now over 85% of USRC physicians have written a prescription. However, we have seen continued lower adherence at USRC than we expected, lower than the industry standard we shared with you in quarter 2, and the adherence rate at USRC is lower than we anticipate at other dialysis organizations. To improve adherence, we revamped and highlighted our messaging, retrained our sales team to better educate physicians and particularly anemia managers on potential GI issues and dosing and titration strategies. Our medical team is also supporting USRC in adjusting its protocols. Much of this work is still continuing. And in recent months, we've seen an increase in patients getting a first refill, which we believe means caregivers are beginning to better understand how to successfully treat with Vafseo. While a positive sign that our efforts are making an impact, there is still more to do. I'm proud of our medical team for identifying solutions to discontinuations at any time and educating prescribers on Vafseo data to support dosing decisions as they address challenging protocol restrictions. Also important, the data we are seeing suggest discontinuations are lower in PD patients and at organizations with protocols permitting 3 times weekly or TIW dosing. As additional dialysis organizations adopt TIW dosing, including USRC, as John mentioned, we believe we'll continue to see an increase in patient adherence. To continue the success of the Vafseo launch, we need to continue to increase prescribing access across dialysis organizations. We referred to having prescribing access when a dialysis organization has created and operationalized the Vafseo treatment protocol. In quarter 3, we increased prescribing access by greater than 25,000 patients. Additional patients came from 3 sources: Innovative Renal Care, or IRC, the DaVita pilot and a number of other regionally important small and independent dialysis providers. While we anticipated broad access to DCI, the fourth largest dialysis organization, they have yet not enabled broad prescribing access through a protocol. IRC, the fifth largest dialysis center, made Vafseo available to patients in mid-August and required all clinic staff to be trained by the end of September. With strong physician advocacy and all staff trained, we expect physicians to trial Vafseo in certain patient subgroups, leading to broader adoption in Q1 2026. The DaVita pilot in over 100 clinics that treat nearly 10,000 patients also began in mid-August. Within large complex organizations, it makes sense to do a test run to ensure a smooth rollout. And during the pilot, we saw patients being identified, labs being drawn, insurance being verified and patients preparing to go on therapy in quarter 4. The pilot was successful in that those processes were streamlined and revised when needed and patients have since been dosed. We are pleased to say that DaVita has decided to roll Vafseo out to the remainder of its clinics and that Vafseo is available broadly as of today. With over 200,000 patients within DaVita now having prescribing access, our teams are working with prescribers to identify those appropriate to start on Vafseo. In summary, while gaining significant traction is taking time, I believe the core tenets of a successful launch are in place and strengthening. We have strong market awareness, increased prescribing access, and we've already overcome several operational issues. With prescribing access for Vafseo at over 260,000 patients today, we expect several dialysis organizations to increase ordering in the fourth quarter of this year and importantly, to build momentum into 2026. Let me now turn it over to Erik. Erik Ostrowski: Thanks, Nick. We're happy to report another solid quarter of top line performance with Vafseo and Auryxia. I'll now provide an overview of our results as compared to the third quarter of last year. Total revenues, which are comprised primarily of net product revenues and also include license collaboration and other revenues were $58.8 million in this quarter as compared to $37.4 million in Q3 of last year, representing an increase of over $21 million. Of these amounts, net product revenues increased to $56.8 million this quarter from $35.6 million in Q3 of last year. This was driven by sales of Vafseo, which were $14.3 million in the quarter as well as by an increase in Auryxia sales, which were $42.5 million this quarter as compared to $35.6 million in Q3 of last year. As a reminder, Auryxia lost IP exclusivity in March, and there is an authorized generic for Auryxia on the market, though no generics have been approved by the FDA at this time. We are pleased to post another strong quarterly Auryxia results, though caution future Auryxia sales levels are challenging to predict due to the uncertainty around the timing of potential additional generic competition. Cost of goods sold decreased to $9.4 million this quarter as compared to $14.2 million in Q3 of last year. The key driver of this costs reduction is that we are no longer recording a $9 million quarterly noncash amortization charge related to the acquired developed product rights for Auryxia, which is now fully amortized. Also of note, Vafseo sales in the quarter were derived from prelaunch inventory, which does not include the full cost of manufacturing and as a portion of Vafseo inventory-related costs were previously expensed R&D prior to Vafseo's FDA approval. R&D expenses increased to $14.9 million this quarter from $8.5 million in Q3 of last year, driven by increased clinical trial program activities, including our VOICE and VOCAL studies, which aim to continue to generate data highlighting the benefits of treating patients with Vafseo as well as higher headcount-related costs. SG&A expenses increased to $29.1 million this quarter as compared to $26.5 million in Q3 of last year. The increase was primarily driven by higher marketing costs in connection with the Vafseo U.S. launch as well as increased headcount-related expense. Turning to the bottom line. We generated net income of approximately $540,000 this quarter as compared to a net loss of $20 million in Q3 of last year. This quarter's net income was primarily driven by the increase in net product revenues, which was partially offset by higher operating expenses. Our cash position is strong. We ended Q3 with $166.4 million in cash and cash equivalents. We believe our existing cash resources and the cash we expect to generate from product, royalty, supply and license revenues are sufficient to fund our current operating plan to profitability, including the advancement of our existing pipeline. In closing, our Q3 financials reflect our continued execution of the Vafseo launch and the continued steadiness of the Auryxia revenue stream. We look forward to discussing our Vafseo launch progress as well as the advancement of our pipeline on our next earnings call. We'll now open the call up to questions. Operator? Operator: [Operator Instructions] And our first question comes from Roanna Ruiz of Leerink Partners. Roanna Clarissa Ruiz: So a couple from me. I was curious, what strategies could you use to overcome the operational challenges that you mentioned for Vafseo, including the average adherence, I think you mentioned the U.S. renal. And are there any learnings you can take from the pilot program with DaVita that could help you figure this out and enhance it going forward? John Butler: Great questions. And I think they're both for Nick. So I'm going to turn it over to him. Nicholas Grund: Yes. The first part of the question is really strategies around adherence. As we've looked at it, typically, what we're seeing is adherence being challenging really in that what we call the first refill. And that first refill is immediately following the initial prescription. So they get prescribed at the starting dose of 300 milligrams. A lot of those patients who are being started are higher dose ESA patients. So they're coming from a high dose to 300 milligram and their experience, in some cases, a hemoglobin dip. What we found out is that the anemia manager is used to their ESA. They've been using it for 30 years, and they're responding by switching the patient back to an ESA as opposed to titrating the drug. It's a titratable drug. The average dose in our studies was roughly 435 milligrams. So the expectation is to titrate. And what we've seen is there's a lack of titration there. And so what we focused on is really the messaging with our sales team with the anemia managers around titration strategies and et cetera. In addition, our medical team has been working with the DOs around protocols associated with how we think about long-term use of the product. And both those things together, we've seen some recent trends that suggest we're moving in the right direction, but still a ton of work to do there. The second piece is DaVita. DaVita learnings, as the second largest dialysis organization, they do these pilots for a reason. And that's really to work out the kinks. Those kinks can be in places where an initial prescription gets loaded into the system, that person needs to have a clinical review. They also need to have a reimbursement review. That order then gets sent to the specialty pharmacy who then fills the prescription at the patient's home. And the idea behind the pilot was to actually test all those aspects. And where needed, DaVita adjusted those. And so as we think about the learnings from that is with USRC, we saw a very motivated DO dialysis organization. They were prepared ahead of time with many of those things. So they move very, very quickly. DaVita took a little bit longer. So this is really a prescriber-driven launch within DaVita. It's not a top-down push of any kind. It's prescriber by prescriber. And it just took us a little time to figure out the distance between the prescription being -- the patient being identified and the prescription being filled. Those learnings and frankly, all the learnings throughout the learn, we've been able to apply to every deal that's come on board. And that's one of the reasons why we expect adherence in new dialysis organizations who are starting to be actually lower than -- or higher than the adherence we saw at USRC early on. So we're taking those learnings and we're sharing them broadly, and we believe they're having an impact. John Butler: Let me just I add a couple of things. The pilot was successful. So the learnings were it takes time to work through it. DaVita seemed very happy with it. And as a matter of fact, rolled out Village wide, as they call it, to their entire community, 200,000 patients as of today, which is sooner, frankly, than we actually expected it. But where I think Nick was saying, the real learnings came from what we saw at U.S. Renal first and how then protocols and the like were implemented at DaVita and some of the others. We're -- in some ways, dialysis is an interesting community in that everybody kind of knows what everybody else is doing, right? And there's a lot of communication. I mean even at the ASN meeting, there's a meeting of Chief Medical Officers across all of the different dialysis providers to share data kind of activities, things they're doing medically and clinically. And we know Dr. Block shared significant information about their experience with Vafseo. And we think clearly, those learnings impacted how DaVita built their protocol, which, again, we expect will be very, very helpful. I think even in the early pilot days, we're not seeing and don't expect to see the same issues around adherence because of some of the tweaks they made to those protocols. So that is the learning too. Nick referenced the anemia manager. The anemia manager is so important to this process. They're used to giving EPO or MIRCERA or whatever in the clinic every day. So they see this dip in hemoglobin and they don't have control because the drug is at the patient's home, so they immediately go back to what's comfortable. And they really have to have a lot of training about how to work beyond that. It took like 20-plus years to really understand how to dose ESAs, and we've been on the market for 41 weeks. And I'm amazed at how much progress they've made in really understanding how to use the product. And again, going forward, we're really confident in the trends that we're seeing. Operator: And our next question comes from Julian Harrison of BTIG. Andrew Kassin: This is Andrew Kassin on for Julian Harrison. Just a quick question on one of the presentations from ASN. Could you discuss what physician feedback has been like regarding the post-hoc analysis of vadadustat's impact on hospitalization outcomes? John Butler: Yes. Andrew, thanks so much for asking that question. It is obviously early days. We only had the presentation last Thursday, I think it was. But certainly a focus of the conversations I've had. And again, I believe that, that was part of the presentation Dr. Block made to the other Chief Medical Officers. We obviously weren't in that presentation. But this is important data. This is really meaningful data. When you look at the INNO2VATE data overall, we saw about a 1% lower mortality rate and about an 8% lower hospitalization rate, but neither of those were statistically significant. using this winds analysis where you -- with a hierarchy, right? It's better to be alive than dead and it's better to be out of the hospital than in the hospital. You can really drill down on what matters to patients. And the clinicians that I spoke to were incredibly excited about this. I mean these, of course, are people who believe in the product already, and this is the kind of evidence that they need. So we can't obviously use this in the field or the medical folks can't communicate this until it's published. So it's important for us to move that quickly. But this is the promise that we believe that the drug would have, and it's being demonstrated. And of course, we'll confirm it prospectively with the VOICE trial as well. So we're -- again, I think, hopefully, you hear the bullish tone of my voice. I mean, coming off this ASN meeting, not only where people were talking about the good experience that they're having and where there's frustration, it's frustration with operational issues. It's the -- hey, this is something that's going to change care for patients, and they want to be a part of it. So things in dialysis don't happen overnight, but we're on the right track. I'm absolutely confident of that. Andrew Kassin: And if I could just ask one more quickly. Just on acute kidney injury, have you gotten any sense of what the registrational path could potentially look like for this indication? Has there been any communication with the agency on potential expectations? John Butler: No, not yet. This is acute kidney injury is our compound AKB-9090, which we expect to start Phase I early next year. So it's a little early for having that conversation. The great thing is there's this group, the Kidney Health initiative that ASN sponsors that has multiple manufacturers, the FDA is part of that as well. Elisa Thompson goes to those meetings regularly. And Steve Burke, our Chief Medical Officer and Head of R&D, he's a part of that. He actually chairs the Drug Committee, and he's chairing a special section on AKI. So similar to the way FDA agreed on a path forward for IgAN and seemingly for FSGS as well through the PARASOL activities, I would hope that there'll be real clarity on where AKI or what you have to do in a really streamlined way to get an AKI product approved. We have a few years before that matters to us yet, but it's great that Steve is directly working on that with the FDA and the ASN and the rest of KHI. Operator: Our next question comes from Matthew Caufield of H.C. Wainwright & Company. Matthew Caufield: Just kind of a 2-part question. First for Vafseo. At this stage, what do you view as the greatest hurdles to the LDO and medium dialysis organization expansion for just building on near-term growth? And then separately, for Auryxia, it was mentioned that the generic had not entered the market yet. And I was just curious kind of what your thoughts were there. It seems that may come as a slight surprise. Just trying to get sort of your thinking on that. John Butler: Thanks for the questions, Matt. I'll take the second one first. Auryxia, this is the gift that keeps on giving. We had an expectation that there would be generic approvals in March. There haven't been we don't know why, and we're certainly not going to ask anyone. We're simply going to continue to provide product to the market. So we know exactly what the authorized generic can sell. We -- that obviously, they buy from us. So again, we will continue to provide the market over time. You can see from the revenue numbers. I mean, it's continued to do incredibly well, particularly in this TDAPA period for the phosphate binders. So as long as that continues, we'll take advantage of it. As Erik referenced, I mean, it's just hard to think long term about it because ultimately, I expect the generic will be approved. But we know this is -- we've had challenges manufacturing the product. It's not -- we have supply now, but it isn't as easy as some of the other things we work on. So is that having an influence? I don't know. But we're happy enough to fill the market need there. And the greatest hurdle, I'm going to ask Nick to comment on this in a second. But to me, it's working through all of these processes at the dialysis providers. It's not as simple as you launch other drugs. It's like the doctor wants to write a prescription, they write a prescription, they bring it to the pharmacy, it gets filled. Your work is to get payers to have it on formulary, et cetera. Here, there's just so many more hurdles that we've had to jump. And we knew we had those, but I think just the timing of getting through them has been frustrating for us. But as you get through them, then you have access. And then it's about driving that demand at the physician level. So that's what gives me confidence. This isn't a question of do physicians believe in the product. They want to write it. We've got to get through these operational challenges. I don't know if you want to add something there, Nick. Nicholas Grund: Yes, really, really 3 things, and John did a nice job on one of them. The first one is access. When I think about access, getting it to prescribing access where there's a protocol people can use broadly. Now with DaVita today, the pilot is over and it's available to 200,000 patients. And so that one, I would say, while we still have work to do with Fresenius, we have a number of patients, so 260,000 patients that we can go after here in quarter 4 and in 2026. And so I don't want to say behind us, but certainly a big step forward in this quarter. The second is really the operational issues, which John talked about. I'd say if you met DO, you've met one DO. In some cases, we need to be the expert on their process so that we can explain that to physicians, prescribing physicians in order for them to be able to easily get patients on product. And I think we're understanding that, and we're moving that forward. The last one is the adherence thing, which we talked about a bunch. When I think about adherence, there's so much learnings that we had from USRC. In fact, they've been helping to communicate the learnings at the CMO meeting that John referenced, and people are changing behaviors. They're changing protocols for new folks to represent the learnings from the USRC experience. They're changing their protocols to potentially allow for better adherence with patients. And our team is out there supporting that either from the commercial side or from the medical side. Matthew Caufield: Please go ahead. John Butler: Yes, on Access, we started the year at 40,000 -- roughly 40,000 patients. We're going to enter '26 with something like 7x that number of patients who have Access. We just have to work through all of those issues. So you go from 10,000 DaVita patients who can get access to the product to 200,000. We're so pleased that they're starting earlier because, again, they're going to work through some of those issues over the course of the next couple of months. But that, I think, will put us in a great place to start 2026. 7x the number of patients who can potentially access the product, and that's without even getting Fresenius, which, of course, we continue to work, had some great meetings with them at ASN. And at some point, they won't be on an island. They'll make access for the product as well. So -- but a lot of work to do. Thanks for the questions Matt. Operator: And our next question comes from Roger Song of Jefferies. Jiale Song: Appreciating the current prescription is mostly coming from USRC strong. And then just curious about when you start with those new patients, including the DaVita and then DCI IRC upcoming. So how should we think about the new patient start compared to USRC with a pretty strong start? And then also just a quick question related to the inventory. So you mentioned 4Q will be a little bit different. Just give us some color around the 3Q inventory? And then how should we expect for the 4Q? John Butler: Yes, Roger, thanks so much for those questions. So I think it's a really important question. The USRC experience, I don't believe you should think about kind of projecting that on to the other dialysis providers, right? I mean what we had at USRC, with the advocacy we had from Jeff Block and Mary Dietrich, the CMO and Assistant CMO, they -- it was a push, right? If you think of it that way. They basically said, here are the reimbursed patients, go put them on. And you saw that in the first quarter. And that was great. At the same time, it led to some of the adherence issues that we've been talking about and the fact that the anemia nurses were kind of quick to switch people over. So it was great on the one hand because you've got this bolus of patients on. They got a ton of experience and everyone else has learned from that. But as you think about DaVita and IRC and ultimately DCI and Fresenius, it is much more of a prescriber-driven growth in patients, right? So it will be on -- which is great. I mean we can handle that very well, right? This is why we have a commercial organization in place and a medical organization to support protocols and the like. So it's hard to take that and move it over. You really have to think about each of those in a unique way. Now again, you have that broad support at the corporate level, but you're just not -- they're not forcing people to write the drug. And remember, during the TDAPA period, you still have to go through this process where you have to confirm insurance and the like. So U.S. Renal did that first. Hey, here's all the patients that are insured. Now the docs need to say, I want to write it for this patient, then you have to see that they're insured, and this all takes time to get the patient on. So I think we've learned a lot through the DaVita pilot process that it took longer than we had expected, and they had some glitches with their systems that they worked through. But again, you don't go from 100 sites to however many thousand DaVita has without -- it doesn't all turn on a dime but we're incredibly well positioned for '26. And when I think about some of the meetings we had with the corporate folks at ASN last week and the language they were using to us around where this product should fit, again, these are the things that give me confidence. I'll let Nick answer the question on current inventory. But just the reference point that I made in my remarks, U.S. renal, again, where more of our -- most of our sales come from, they've been using 150-milligram tablets. That's what they ship to patients' homes. So they have inventory of that. They know they're going to be moving. They're not going to force anyone, but I expect that most patients and physicians will move to TIW dosing. TIW dosing, the drug is at the dialysis center, obviously, because they give it during dialysis, and they use 300-milligram tablets for that. So they'll have to work down their 150 inventory. It's a shorter supply chain because all of -- we ship directly to the dialysis providers. So they don't need as much inventory on a go-forward basis of the 300. So we don't know exactly what that will be in Q4, but I think it will clearly be a little bit less inventory than they had ending Q3. And that number... Nicholas Grund: Yes. So they added about $1 million in quarter 3 in total inventory into their thing. The other thing to keep in mind is they make the switch to TIW, if you're a physician who wants to put a patient on product, you're likely to say, "Hey, I want to not put them through a -- go to QD and then switch them to TIW. There may be some resistance in the system for new patients to start in quarter 4 while they wait for the TIW protocol to be available to them. John Butler: Yes. They've made that clear to all the USRC physicians that they'll be moving to that. They're doing it gradually through centers and expect to have them all available early -- hopefully, early in Q1. And I do think that may -- if I'm a doc and I have someone I want to start, and I know I want to use TIW, I'm going to wait until I can access that probably before I put them on. So that could impact patient starts in the fourth quarter. But again, that is with the -- what we would expect to be improved adherence and compliance, that's a long-term win for us for sure. Operator: I'm showing no further questions at this time. I'd like to turn it back to John Butler for closing remarks. John Butler: Thank you so much, [ Dedi ], and thanks to all of you for joining us this morning. As I said upfront, we're not satisfied with the revenue number we presented this morning, mostly because with data analyses like we presented last week, we're gaining awareness of the type of impact that Vafseo can have for patients. We are gaining access to patients. As I mentioned, when we start '26, we expect to have access to almost 7x as many patients as we did at the start of this year. We're dealing with the operational issues we're encountering, and we're driving demand from prescribers. Coming off this ASN meeting, my confidence has never been higher, and I look forward to updating you all on our progress. Thanks, everybody. Have a great day. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Welcome to Dole Plc's Third Quarter 2025 Results Webcast. Today's conference is being broadcast live over the Internet and is also being recorded for playback purposes. [Operator Instructions] For opening remarks and introductions, I would like to turn the call over to the Head of Investor Relations with Dole plc, James O'Regan. James Regan: Thank you, Derek. Welcome, everybody, and thank you for taking the time to join our third quarter 2025 results webcast. Joining me today is our Chief Executive Officer, Rory Byrne, our Chief Operating Officer, Johan Linden; and our Chief Financial Officer, Jacinta Devine. During this webcast, we will be referring to presentation slides and supplemental remarks. And these, along with our earnings release and other related materials are available on the Investor Relations section of the Dole plc website. Please note, our remarks today will include certain forward-looking statements within the provisions of the federal securities safe harbor law. These reflect circumstances at the time they are made, and the company expressly disclaims any obligation to update or revise any forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied due to a wide range of factors, including those set forth in our SEC filings and press releases. Information regarding the use of non-GAAP financial measures may be found in our press release which also includes a reconciliation to the most comparable GAAP measures. With that, I am pleased to turn today's call over to Rory. Rory Byrne: Thank you, James, and welcome, everybody. Thank you all for joining us today as we discuss our results for the third quarter of 2025 and provide an update on our latest developments. So turning firstly to the highlights on Slide 4. We are very pleased to report another good result for the third quarter, in line with market expectations. Our two diversified fresh produce segments have delivered excellent results, offsetting the anticipated short-term headwinds in our Fresh Foods segment and demonstrated the strength of our diversified and resilient business model. As discussed on our last earnings call, we completed the sale of our noncore Fresh Vegetable division in early August. This was a key strategic priority for us, and it created greater flexibility in our capital allocation strategy. As part of the evolution of this capital allocation strategy, today, we also announced our Board of Directors approval of a $100 million share repurchase program, which will be used opportunistically. We continue to see attractive opportunities to deploy capital, supporting our strategic growth and adding the buyback program provides flexibility to repurchase shares and the share price represents an attractive opportunity to enhance shareholder value. Turning now to the operational review and starting with Fresh Fruit on Slide 6. I Firstly, I'm very pleased to update you all on an exciting new milestone for the Fresh Fruit business, the launch of our new Dole Colada Royale pineapple. Bringing this product to the market is the culmination of 15 years of dedication to research and development at our own research facilities and farms in Honduras. The Colada Royale is our first new pineapple variety in many years, developed through conventional non-GMO breeding to deliver a distinctive and new flavor and appearance for the tropical category. While volumes remain low for now, the Colada Royale is already selling at a material premium, delivering high margins on a per box basis, while also stimulating excitement for the category. The launch also provides us with a competitive edge for a wider tropical portfolio, and we continue to invest in complementary products, including plantains, limes and mangos. Importantly, the launch also reinforces our commitment to community and purpose, with a portion of every box sold supporting the creation of a new community center with farm workers and families in our Honduran pineapple region, delivering health care, training and language services. So looking now more closely at the performance in quarter 3. As anticipated, result was lower than the prior year, driven primarily by higher sourcing costs, particularly for bananas. As we have noted over the course of the year, our own sourcing costs in 2025 were always anticipated to be higher due to the impact of the tropical storm Sara had on our important Honduras sourcing region late last year. However, as 2025 has progressed, we have been impacted by growing conditions for the industry in Latin America as it reduced yields and higher spot prices have increased procurement costs. Looking out to 2026, we are progressing well with the rehabilitation of our impacted farms in Honduras as well as actively making additional investments to enhance our supply across our portfolio. Positively, demand for bananas continues to be robust in both our key North American and European markets. And while this heightened demand is contributing to the tight supply and cost pressures we saw in Q3, there's also clearly a really good sign for the health of the category overall. Moving on then to diversified EMEA on Slide 7. The positive momentum seen in the first half of the year continued in the third quarter, with the segment delivering significant adjusted EBITDA growth on both the reported and like-for-like basis. We continue to see strong underlying growth in markets that have performed well all year, such as Spain, and we had a good growth in our Dutch business. In the Nordics, the benefits of the increased investments in our distribution and logistics capabilities have driven both revenue growth and some margin expansion. Looking ahead, while we do not anticipate the same rate of growth seen in Q3 to continue in Q4, it is clear that diversified EMEA segment overall is performing in a healthy way, benefiting from the ever-advancing integration of our operations. Turning now to our Diversified Americas segment on Slide 8. While the third quarter is typically the least active quarter in Diversified Americas due to the timing of key Southern Hemisphere export seasons, this segment delivered a very positive result with a strong performance, both on the export side and continued good performance in our North American market. As part of the continued streamlining of our operations, at the beginning of the fourth quarter, we announced the integration of Dole Diversified North America into Oppy, our largest diversified fruit distribution sales operation in the North American market. Looking forward, we believe our businesses in this segment are well placed to deliver a good end to the year. And with that, I'll hand over to Jacinta to give the financial review for the third quarter. Jacinta Devine: Thank you, Rory, and thank you all for joining our webcast. Turning firstly to the financial highlights on Slide 10. Overall, the results for the third quarter was ahead of our own expectations. Revenue of $2.3 billion was 10.5% higher on a reported basis and 8% higher on a like-for-like basis, reflecting the continued good underlying growth across each of our segments. Net income was lower due to a loss of $10 million in discontinued operations, driven by a loss on disposal of the Fresh Vegetable business. There was also an associated noncash fair value charge of $8 million on fixed assets excluded from the sale. These decreases were partially offset by $10 million insurance proceeds recognized in the period, increases related to fair value adjustments of financial instruments and higher earnings in equity method investments. Now looking at the non-GAAP performance measures. Adjusted EBITDA decreased $1.3 million. The decrease was primarily due to decreases in fresh fruit, partially offset by strong performances in both diversified segments. Adjusted net income decreased $3 million predominantly due to the decrease in adjusted EBITDA as well as higher depreciation expense, partially offset by lower tax expense. Adjusted diluted EPS was $0.16 compared to $0.19 in the prior year. Turning now to the divisional updates, starting with Fresh Fruit on Slide 12. Revenue increased 11% primarily due to higher volumes and pricing of bananas, pineapple and plantains on a worldwide basis. As anticipated, higher sourcing costs for bananas were the major driver in the decrease in adjusted EBITDA in this quarter. In the quarter, we also experienced higher food sourcing costs in pineapples and plantains as well as lower profits in commercial cargo. Now turning to Diversified EMEA, who delivered another excellent result in the third quarter, continuing the strong performance seen over the course of this year. Reported revenue increased 11%, primarily due to strong underlying performance in Scandinavia, Spain and the Netherlands as well as a $57 million favorable impact from FX, partially offset by a net negative impact from M&A of $9 million. Excluding these impacts, on a like-for-like basis, revenue increased 6% or $50 million. Adjusted EBITDA increased $10 million or 34% driven by higher earnings in Scandinavia, Spain, the Netherlands and South Africa as well as a favorable impact from FX translation. On a like-for-like basis, adjusted EBITDA increased 24% or $7 million. Diversified Americas also had a very strong third quarter. Revenue increased 8% or $30 million. Driving this increase was revenue growth in most commodities sold in the North American market, but particularly in kiwis and berries. Adjusted EBITDA increased $4 million or 46%, driven by a strong performance in the Southern Hemisphere export business, primarily due to positive final liquidations of the prior export season as well as continued good performance in the North American market. And now turning to cash flow and capital allocation. Cash capital expenditure was $20.9 million in the quarter and an additional $0.7 million of assets were acquired under finance leases. The combined total included expenditure on Honduras farms rehabilitation project which was covered by insurance proceeds, along with logistics and warehouse investments in EMEA and ongoing reinvestments in other farming and transportation infrastructure. As we get close to year-end, we are reducing our full year expectation for routine capital expenditure to approximately $85 million, with the reduction mainly due to the timing of the execution of certain projects. This routine capital expenditure excludes the rehabilitation costs of our farms in Honduras, which we estimate to be approximately $25 million, which will be covered by insurance proceeds. In line with our typical seasonal working capital trend, we started to see the unwind of the material working capital build from the first half, albeit somewhat curtailed this year by the strong volume and revenue growth being seen across the business. The combination of these factors resulted in free cash flow from continuing operations of $66.5 million for the quarter. In keeping with previous years, we do expect that the unwind in working capital will significantly increase as we head towards the end of the year. As discussed previously, we disposed of our Fresh Vegetable business at the beginning of August and this resulted in an inflow of $68 million and was an important contributor to the reduction in net debt to $664 million by quarter end. We are pleased to declare an $0.085 dividend for the third quarter, which will be paid on January 6 to shareholders of record on December 9. Now I will hand you back to Rory, who will give an update on our full year outlook and provide further detail on our go-forward capital allocation strategy. Rory Byrne: Thank you, Jacinta. Well, 2025 is proving to be a very dynamic year, and we're very pleased that our broadly based business model has delivered year-on-year adjusted EBITDA growth for the first 9 months. As we approach the latter part of the financial year, macroeconomic volatility continues, some industry-specific factors may influence our results, including the current supply and demand conditions for bananas. However, the momentum within the overall business gives us confidence that our full year adjusted EBITDA should be at the upper end of our targeted range of $380 million to $390 million. In summary, our sector and indeed, our position within the sector gives us ample opportunity to grow and generate strong returns for shareholders. The announcement today of the $100 million buyback program provides another lever for driving long-term sustainable shareholder value. And our presentation slide include further detail on our overall capital allocation framework. I want to conclude by once again thanking all our outstanding people right across the group for their ongoing commitment and dedication to driving Dole Plc forward. And in particular, this quarter, give special mention to our pineapple team, both on research and production side in Latin America, and also our sales and marketing teams in North America who have delivered on our long-term vision to bring a new and innovative product to the market with Dole's Colada Royale. As always, we really appreciate all our essential partners, suppliers, customers and all our other stakeholders for their continued support. And with that, I'll hand you back to the operator to open the line for questions. Operator: [Operator Instructions] Your first question comes on the line of Christopher Barnes with Deutsche Bank. Christopher Barnes: I guess I'd just like to start on the implied outlook for the fourth quarter, and I appreciate that forecasting in this environment is an imperfect exercise to say the least. But could you just elaborate on the key drivers of the implied 10% decline at the upper end of the annual EBITDA guidance? It just seems that cost versus pricing mismatches in Fresh Fruit and mainly bananas are the biggest contributor, especially given the volume momentum you've enjoyed year-to-date. So I'd just love more color around the fourth quarter? And then just thinking about 2026, like should we expect that these cost pressures continue into 2026? Or is the annual contracting progressing to your favor on pricing? Or is there some other offset, whether through your sourcing, easier compares from less tight industry supply? Like just love perspective on the fourth quarter and then into 2026. Rory Byrne: Thanks, Chris, for the question. Obviously, as you say, guidance in this quite volatile macroeconomic environment becomes increasingly challenging. And I think another factor, and we've highlighted it previously, but perhaps not in the current quarter, you can't forget that we really had an excellent 2024. So it's at an incredibly high benchmark for us going into '25. We highlight some of the specific headwinds that we had ourselves in Honduras. And yes, there has been some exacerbation of those with industry-wide problems. We've seen problems in Panama. We've seen problems in Costa Rica. And that has had quite a significant impact on the spot price and coming out of Ecuador, and that's impacted on our procurement costs when we've had to reorganize some of our procurement. So we definitely see some of those headwinds continuing into Q4, which is probably a factor in arriving at the guidance. But we're still comfortable that the overall guidance is a pretty good number as a benchmark against the '24 outcome. And then looking out to '26, it's definitely a little bit early to start to give any more comprehensive guidance for '26, and we're working through the process of our budget process and indeed contract negotiations. But I think on an overall basis, and based on a long experience within the industry, what we've tended to find is that if supply conditions tend to -- if it continues for a sustained period of time, we do see that the market normally adjusts in all aspects to that supply/demand equation. So no particular reason to be unduly concerned about '26, but very early to give any predictions. So I hope, Chris, that gives you an overview of where we're at on guidance. Christopher Barnes: Yes. That was very helpful. And then just a quick follow-up on the topic of tariffs into the U.S. I know it's different each time we speak, but we have seen some evidence of select exclusions for certain agricultural products in the last couple of months. So with that in mind, is there anything new to share from your and the broader produce industry's efforts to secure exclusions for tropical produce that you can't grow commercially in the U.S.? Rory Byrne: No, we have nothing new to share on that, Chris. I mean certainly the principal that products that cannot be commercially grown within the U.S. should be excluded from the tariff scenario is clearly established by the U.S. administration. I think it's just taking a little bit of time to convert that principle into practical reality. And obviously, there's a lot of moving parts, particularly at this moment in time around the whole tariff equation. So I think over time, clearly, our industry is a good example of international trade. The U.S., I think, wants people will be able to have access to healthy products on a full year-round basis and particular tropical projects such as bananas and pineapple. So while it might take a little bit of time to change, we are confident that over a sensible period of time, there should be positive changes. But there's no specific news just at the moment to update you on that front. Operator: Your next question comes from the line of Gary Martin with Davy. Gary Martin: Can you hear me now? Rory Byrne: Got you now. Gary Martin: Perfect. I'll say again, congrats on a strong set of results. Just a few quick ones for me. I think maybe the most pressing one would be just around the capital allocation. Obviously, a big announcement there around the authorization of $100 million aggregate buyback. It would be good to get your kind of two-cents on your thinking behind the buyback program and how that plays into the rest of your capital allocation policy? And maybe just as an add-on, how you kind of think about leverage going forward? Rory Byrne: Thanks, Gary. So I think we said for a long time that we had a big strategic overhang in terms of the potential future outcome on our discontinued operation, the Vegetable division, that we previously had. So we had said very clearly that we wanted to wait to get an outcome on that. And we're very happy with the outcome of that. It did give us clarity around the focus on our three main operating divisions, and it did give us clarity in terms of being able to be more definitive around our capital allocation strategy. So we wanted to have, if you like, the tool and the toolkit in terms of having the buyback capacity available. We certainly believe that there are plenty of opportunities, whether it's small or larger opportunities to grow within our individual divisions, and we're not going to ignore those opportunities in terms of whether it's capital development projects or small bolt-on acquisitions, in particular. Certainly, some of the bigger acquisitions and the valuation multiples are still probably a little bit too high, so we'll be patient on that front. And I think in general terms, having a progressive dividend policy combined with the buyback program and combined with plenty of capital investment opportunities, I think we're now well positioned in terms of having set up our capital allocation strategy in a good and clear way for the investment community. Gary Martin: That makes sense. And maybe just to dive in a tiny bit deeper into just one component there. I just try to kind of join it with your current set of results. So I mean you've talked about investing to date. I think one area mentioned in your prepared remarks was investment in the Nordic region and diversified EMEA, and that seems to be paying dividends. Are there any other areas that you'd flag kind of in that particular ballpark? And I suppose when I think about the Nordics and when I think about the number of strong quarters in a row for the diversified segments, how sticky is some of the kind of the upside to these investments into the long term? Rory Byrne: We've plenty of investments underway. And obviously, if we undertake them, Gary, we try to make them as sticky as possible. So we've done a number of smaller, in the overall scheme of things, investments in some of our distribution capability even in terms of non-fresh fruit products, and they're coming through in a very, very positive way. We're constantly exploring the potential for even further automation of our very significant facilities and our interaction with some of our key customers in that region, and that is something that's an ongoing process. You look around the different divisions then Fresh Fruit. We've highlighted things like plantains or limes where we have been expanding our presence and control our access to the product. We're probably doing a little bit more and looking at it a little bit more on the organic space to make sure that we have -- while the demand, particularly both in Europe and North America continues to be strong for certain customers on the organic space. And we want to make sure that we have the right mix between third-party and controlled production on that. And maybe a little bit of rebalancing in terms of the sourcing capabilities that we have across the different geographies in Latin America and South America on the Fresh Fruit side. And the Diversified Americas business, we're expanding our handling capability and particularly products like cherries. We're broadening our core base in there and interacting with some key partner producers in that region as well. And then it's some of other smaller investments around the group, be it in Ireland upgrading our facilities, Spain enhancing our avocado ripening capability, France developing our banana riping capabilities in Sète in France. So lots of projects and lots of development opportunities. So I hope that covers the question you had, Gary? Gary Martin: Very thoroughly. I maybe just have one final one, trying to be more anorak. But maybe just one for Jacinta. Even just around the reduction in routine CapEx, you may have glossed over in your prepared remarks, but it would be good to dive into the kind of nature of the reduction in routine CapEx and whether you expect that to be kind of around the $85 million level on a go-forward basis? Jacinta Devine: Gary, yes, the reduction is just really timing. As we're now in almost the middle of November, we can see that our ability to complete some of the projects that we had targeted is, we're going to -- it'd be unlikely that we get there before the end of the year. So that's really why we've called it back. We would expect those projects to be completed in 2026. I suppose, in terms of go forward, typically, we've always said that we'd like to run our normal routine CapEx in line with our depreciation, which is just over $100 million. So that's the sort of long-term number. Now obviously, there can be opportunities outside of that, that may be up this year. We had the vessels that we acquired at the start of the year. But in normal terms around in line with our depreciation, which is about $100 million. Operator: Your next question comes from the line of Pooran Sharma with Stephens. Pooran Sharma: Can you hear me now? Rory Byrne: Yes. Pooran Sharma: I appreciate the question here. Just wanted to maybe get a sense of how your negotiations with your customers have been going so far in annual contracting season? I know you said it was too early, but you mentioned in past years, if supply conditions -- tight supply conditions persist that the industry generally tends to adjust itself. So I was just wondering if you can maybe just give us a little bit more qualitative granularity in regards to how some of your negotiations with your customers have been faring so far this season? Rory Byrne: Yes, it's a little bit of a delicate moment, and we're in the middle of the process, so we don't give too much information. Maybe Johan, you could give just a little bit of high-level color on that as well to add to deal with Pooran's question. Johan Linden: Yes. So I wish I was going to say exactly like what you said there, Rory, that it's too early, and we are right in the middle of it. But considering the supply situation, we believe it's well understood within the markets because it's been very well -- it's been impacting everyone with Panama being shut down that took out the sizable volume, Honduras having the weather last year took out a sizable volume and now Costa Rica also having weather. So we believe the customers are aware of the situation, and we feel that the discussions that we're having and the negotiations that we're having with the retailers are always very tough, but we also believe that we are getting our story across. So we feel optimistic about the future. Pooran Sharma: Okay. Great. Appreciate the color there. And I was just maybe wondering if you could kind of talk more about some of the strength that you're seeing in the diversified fresh produce. And maybe just focusing on EMEA here, I know you gave some color with the last questions. You've made some solid investments. But in terms of like the underlying drivers, the consumer health and those areas, I was just wondering if you were able to share a little bit more color in regards to the performance you've seen thus far? Rory Byrne: I think on an overall basis, you also have to recognize the strength of our business in the diversified segment. In EMEA, if you look across the European countries, we're the #1 player in Ireland, in the U.K., in Spain, Czech Republic, Sweden, Denmark, a strong presence in Germany, Netherlands, France, Italy. So we've got a really, really well-oiled machine in Europe, and we've got a really strong platform to build with our existing customer base across all the segments from retail to wholesale to food service. And I think the combination, if you go back in time, even though we are now very much all just one Dole plc, but there was a process of integrating the strengths of the Dole Food Company and total projects. And I think we're seeing a lot of the benefits of that coming through in giving us a much more comprehensive package of offering to the major customers across the different markets. We've been working very hard to consolidate our activities, particularly in Holland and Northern Europe. We've been developing in France. We have a hugely strong platform in Spain. Like this year, for example, we opened our avocado ripening facilities. We're dual branding a range of exotic products and getting a lot of positive traction with our customers. Scandinavia, we've always had a very, very strong position in the marketplace, and we're building on that with our core activities and adding in additional interesting aspects to it. North America, then if you look at the fresh diversified business in North America, a strong platform with our Oppy business as a platform and the marketing function. But our other businesses whether it's Gambles in Toronto, our fresh connection export business as well, have been working hard. And then as we said in the call, probably had some difficulties going back a few years with the pandemic period and the supply chain disruption was quite difficult on our South American businesses. We've grouped in a very positive way. And now we've got a strong platform to build on. We're looking at some expansion activity in Chile and Peru. And Argentina, it continues to be difficult, but we're performing well and focused on certain products. So I think all in all, the streamlining of the Dole Direct North American business into Oppy is another step in the direction of making our businesses more efficient and making ourselves more attractive to our key customers. So I hope that gives you a high-level overview of it, Pooran. Johan Linden: And Rory, maybe just one thing to add there is that we see also very healthy consumer demand. It seems the consumer is focusing on affordability, they're focusing on health. They're going to the channels where we are representing our products. So we seem to be in a good spot right now. Operator: Your next question comes from the line of Peter Galbo with Bank of America. Peter Galbo: Can you hear me okay? Rory Byrne: We got you. Peter Galbo: Great. Thank you for the questions. Maybe just to go back to Chris Barnes' question around tariff and to ask it in a slightly different way. Just what was embedded in the guidance this year, the $380 million to $390 million in terms of overall tariff hit? And I ask it in the context of, if we do get relief or the Supreme Court tosses out IEEPA tariffs, whatever it's going to be, just what's kind of the flow-through of what was embedded in this year's guidance relative to what could be a potential tailwind for next year? Rory Byrne: We didn't build in any particular positive or negative into the guidance for this year. We've been working our way through it very carefully with our customer and our supply base. And clearly, I think if for some reason, the tariffs got unwound, that would just be a pass-through in some way, so we wouldn't get any particular benefit and hopefully not suffer any particular negative. So it's more I think the key point really, and Chris' question was more about the long-term issues that clearly our industry is not the specific targets of tariffs. And we hope over time that, that comes through and a realignment of the tariff approach. Peter Galbo: Got it. Helpful. And then I know it was, again, a relatively short-term hiccup maybe here in the fourth quarter. But I wanted to ask about SNAP and just whether there was any real implications or issues you saw even in the first 10 days of this month particularly around fresh fruits and vegetables, I'd have to think some of those have some SNAP exposure. So just whatever you saw, and again, if we get resolution today, it could be a nice tailwind, but kind of what you saw in the very short term. Rory Byrne: Johan, do you want to comment on that in terms of the government shutdown impacts as well? Johan Linden: Yes. So we have not seen any trends out of the shutdowns. We only have anecdotal stories coming back from the market. And what people are saying is that in the areas where there are a lot of government employees, they have seen a slight decrease of sales in the stores, and maybe that they have been moving a little bit more to affordable products. And there, we just want to remember that we are very affordable products with many of the products we have, especially the bananas. And anecdotally, the people are also saying that maybe they see that some consumers in these areas are moving to more, what is perceived to be, inexpensive formats like discount stores. And again, we are represented across all channels. So for us, we feel that we are in a good position. But again, no real trends. It's only stories coming back from the market. Operator: There are no further questions at this time. I will now turn the call back to Rory Byrne for closing remarks. Rory Byrne: Thank you, Derek. So yes, we're very pleased that our broadly based business model has yet again performed well in the quarter. We've made some good operational and strategic progress over the course of '25. Having sold the Fresh Vegetable business, it did clear the path to give us much more clarity of focus and strategic focus on our 3 key operating divisions. And indeed, the financial flexibility to put in place the $100 million buyback program and add to our investor, shareholder value toolkit. So overall, we believe we're well positioned to continue to successfully progress over the next few years, and thank you very much for joining us today. Operator: This concludes today's call. Thank you for attending. 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Verda Tasar: Hello, everyone, welcome to Ulker Biskuvi's Third Quarter 2025 Earnings Call. Thank you for joining us today and for your continued interest in our company. We appreciate your time as we review another solid quarter of performance, highlighting our continued focus on sustainable growth, operational efficiency and delivering value to our consumers and shareholders. With that, I will now hand it over to our CFO, Fulya Banu Surucu, who will walk you through the operational and financial results in detail. Fulya Banu, please. Fulya Surucu: Beste, thank you. Good morning, good afternoon, everyone. Thank you for joining us today for Ulker Biskuvi's third quarter 2025. Due to a last-minute change of plans, our CEO had to travel and could not attend this meeting. He apologizes for that and said hi to everyone. So today, I will walk you through our operational performance highlights and provide a deeper dive into our financials and segment performance, discuss our balance sheet, strategic initiatives and conclude with our outlook. After the presentation, I will be happy to take your questions. To begin, Ulker continues to deliver strong results, driven by our diverse product portfolio, correct strategies and commitment to innovation. So let's begin with a snapshot of the macroeconomic landscape in Turkiye as we entered the last quarter of 2025. Despite ongoing global uncertainties, the country's GDP growth rate is projected to stabilize at 2.7% for this year. And it is expected to land at 3.7% for 2026 per IMF, higher than the world's GDP growth of 2.8%. Turkiye CDS spreads have shown improvements, reflecting increased investor confidence and a more stable outlook compared to previous years. Inflation remains as a challenging topic, even though there is a significant variation when you break this down by main items. As of September 2025, total inflation stands at 33.3% year-over-year. Consumer confidence index has shown gradual improvement over the past year, causing a positive shift in consumer outlook. In summary, we operate in a dynamic volatile macroeconomic environment. GDP growth remains resilient. We see an improvement in consumer confidence, but we are mindful of inflationary pressures and probable shifts in consumer confidence and behavior. So today's key messages is mainly -- there are 6 key messages I'd like to share with you. Agility is staying responsive amid economic volatility; champion link value and accessibility, ensuring our products remain affordable and widely available; driving consistent growth momentum through innovation and execution; leveraging AI-driven performance and operational excellence; delivering impactful new product development and consumer-centric campaigns; maintaining operational excellence and rigorous cost management to safeguard our margins. So in summary, this is how we will continue to deliver value to our investors, our customers and all our stakeholders towards the end of the year and continuing in 2026 as well. On the next page, we will talk about new product launches and their contributions. So let's start with third quarter first. During the first 3 quarters of the year, we successfully introduced a series of new products, each closely aligned with evolving consumer needs. These launches delivered a meaningful contribution, accounting for 4% of our snacking revenue in the third quarter. Our innovation pipeline remains robust with strong consumer engagement. Let me take a look at how the picture changes or how the picture looks as of 9 months revenue contribution. For the first 9 months, new product launches accounted for 13% of domestic and 6% of international snacking revenue, totaling 11%. This demonstrates our ability to drive growth through innovation. We continue to innovate both domestically and internationally, ensuring our portfolio meets evolving consumer preferences. Our sustainability strategy remains at the core of our strategy and our vision. We advanced our Beyond Hazelnuts and regenerative agriculture programs, we published our 10th sustainability report, and we won the Sustainable Business Award for Carbon Management and Net Zero. Our social responsibility initiatives like the Mobile Health Service continue to make a positive impact. When we take a look at the highlights in terms of corporate communications, we have continued to strengthen our corporate reputation through community engagement, sustainability and brand storytelling. We are proud to be the main sponsor of the European Para Youth Games in Istanbul, supporting young athletes and inclusivity. With inspiring stories, we reached millions via digital and press channels Competing With Heart video series. Our communication efforts have amplified our achievements. We have been awarded various platforms -- in various platforms for excellence in business, HR, digital transformation, safety, sustainability and quality. So our people are our greatest asset. We are proud to be recognized as Turkiye's Happiest Workplace for the fourth year in a row. We have invested in AI training, R&D development and well-being initiatives, earning 21 awards, including 11 gold at the International Business Awards, which is one of the most prestigious award programs in the business world. All these achievements reflected our ongoing investment in people, innovation and operational excellence, positioning us for sustainable growth and continued success. So let me continue with our operational performance. Ulker's geographic footprint continues to be a key driver for our resilience and long-term growth. Let me start with our home market, Turkiye. Despite a challenging macroeconomic environment, which I have shared at the beginning of the presentation with all of you, we delivered 4.9% revenue growth and a solid 7.9% EBITDA growth, which is adjusted for inflation accounting number. This performance reflects our disciplined solid pricing, strong brand equity and operational agility. Export operations delivered 19% revenue growth, supported by strong demand in key markets and improved market execution. EBITDA decline of 8%, primarily due to ongoing inflationary pressures and the depreciation of Turkish lira that impacted cost base and profitability. We remain confident that our export strategy is on the right track and we continue to prioritize sustainable growth and brand strengthen in our international markets. In Middle East, you see a 5.9% revenue growth. And in North Africa, we delivered 29.5% revenue growth, supported by strong momentum and pricing. EBITDA was slightly down by 0.7%, but we view this as a short-term margin normalization. Finally, in Central Asia, we achieved 11.5% revenue growth. Even though there was a decline in EBITDA, this was impacted by currency devaluation, input cost inflation and our overall, our geographic diversity continues to be a strategic advantage, helping us balance risk and capture growth across multiple markets. Turning to our revenue mix. Ulker's scale and [indiscernible] which are clearly reflected in our top line performance. As of the first 9 months of 2025, we generated TRY 80.9 billion in net revenue, with 71% coming from our domestic operations and 29% from international markets. And you also see on the same page deck, I mean, the breakdown of the export -- international markets by export, Central Asia, North Africa and Middle East as well. Let me take a look at our global -- our market share. Ulker continues to hold the leading market shares in key categories across our core regions. In Turkiye, we remain the undisputed leader in biscuits, chocolate and cakes with 34% market share. In Middle East, our strong presence in biscuit category continues with 27% market share. In North Africa, we are gaining ground, especially in biscuits, where our market share has reached 14%. In Central Asia, we are also an important player in chocolate with 14% market share. So Ulker, in summary, maintained leading market shares in biscuit, chocolate and cake in all the regions we operate. So let me continue with the financial performance, how we delivered financially in Q3. In Q3 '25, we accelerated growth with balanced top line and margin improvement. Revenue, gross profit, EBITDA and net income all increased year-on-year, reflecting our effective strategies and operational discipline. Now let's take a look on a deeper perspective on each bucket for Q3. Volume increased by 0.7% from 172 tons in Q3 '24 to 174 tons in Q3 2025. Total revenue up 4.8%, reaching TRY 25.4 million compared to TRY 24.2 million last year. The gain came again from our disciplined pricing promotions and improved mix. Gross profit rose 13% to TRY 7.4 million from TRY 6.6 million in Q3 '24. Gross margin expanded from 27.1% to 29.2%, a 2.1 percentage point improvement driven by lower cost pressure and better product portfolio mix. EBITDA grew 16.5%, delivering TRY 4.5 million, up from TRY 3.9 million a year ago. So net income reached to TRY 1.1 million, demonstrating the strong pass-through from margin improvement to bottom line earnings. In this quarter, we are not just defending our margins in a challenging environment, but we are also growing them with revenue and profit both advancing versus prior year. So on a 9-month perspective, for the first 9 months, we balanced growth and headwinds. While some metrics faced pressure, our net debt to EBITDA remains at a healthy level and we continue to focus on sustainable profitability. So for the first 9 months, total volume declined by 1.5%. Revenue increased by 4.6%, reaching TRY 80.9 million. Gross profit increased -- slightly increased to 30.2%, reaching TRY 24.4 million. And EBITDA remained at 17.8%, again, with inflation accounting adjusted, which is quite a healthy number and we delivered 5.7% net income of TRY 4.6 million. And net debt to EBITDA, this is just a calculation from the face of the balance sheet, 1.76. And over the coming slides, I will be sharing with you the net debt to EBITDA from covenant calculation perspective, which is quite a low number and which is a very healthy number. So when we look at the breakdown domestic versus international. So our financial performance is strong across both domestic and international markets with notable improvements in EBITDA and gross profit. We continue to optimize our regional mix for profitability. Our domestic operations total revenue decreased by 3%, reaching to TRY 17.1 million in Q3 2025. Gross profit increased by 10.2%, reaching 28.5% gross profit margin, delivering TRY 4.9 million gross profit and EBITDA margin on the domestic side is approximately 19.7%, close to 20%, reaching to TRY 3.37 million. Total snacks market in Turkiye contracted approximately by 2.1% year-over-year compared to Q2 2025. And in line with this market contraction, our domestic volume also in Turkiye declined accordingly, reflecting the broader industry trend. However, this was offset by a strong 9.6% volume growth in export and international operations, which contributed positively to our overall volume. In terms of international business, total revenue is up 26.1% reaching to TRY 8.2 million in total revenue and we were able to deliver approximately 31% gross profit margin in international business and delivering an EBITDA margin of 13.7%. So the breakdown domestic versus -- domestic and international shows 2 distinct dynamics: domestically improving margins despite lower revenue, demonstrating strong pricing power and cost discipline. Internationally robust top line growth but some margin compression due to FX and cost factors, both regions contributing positively [indiscernible] EBITDA growth. So let me continue on the consolidated volume and revenue contribution by category. Overall, total snacking revenue grew by 5.1%, supported by innovation and effective marketing. On this slide, we move from regional to category level performance. Snacking sales volume grew 1.3%, reaching to 153 tons in Q3 2025. Snacking sales value increased by 5.1% from TRY 23 million to TRY 24.2 million. This value growth shows the positive mix and impact, more premium SKUs successful innovation launches and price discipline across all our core categories. And category mix, biscuits rose from 57% in Q3 to 59% in Q3 '25. Chocolate declined slightly from 33% to 31%, reflecting competitive pricing and portfolio adjustments. And cake steady at 10% continue to provide category diversification. Overall, snacking portfolio revenue increase was supported by targeted product launches, optimized volume mix and integrated marketing campaigns, both digital and in-store aimed at strengthening brand equity and consumer flow. This strategic focus allowed us to build value even on modest volume gains. So on balance sheet finance, again, we closed the quarter on a very -- with a very strong balance sheet. Our balance sheet remains robust. We have closed with 63% of our net position hedged, secured a new syndication with our commercial banks and EBRD and our covenant-based net debt EBITDA is at 1.11 as of September 2025. I'm sure you have seen from the news that our syndication loan is finalized with the commercial banks reaching to $250 million, 5-year bullet syndication loan, the first in the Turkish private sector since 2020 with very prestigious led by JPMorgan and its very highly prestigious international banks with 11 banks, we were able to complete the first 5-year bullet syndication since 2020 in Turkish private sector. And very recently, we have also closed EUR 75 million with EBRD with the same conditions, again, a 5-year bullet with the same conditions that is on syndication. So with all these new updates, our long-term loan is around 31%, short-term is 69% and this will -- over the coming months, this will change to long-term when we finalize -- I mean, it's already finalized in October. But as of Q4, most of the loans will go to the long-term bucket on this table. So in terms of net debt EBITDA, it's 1.11. So you see our high focus on net debt EBITDA. And in terms of working capital, yes, there is a slight increase versus prior year, but it's mainly driven by seasonality and we may go into detail if you have additional questions in terms of working capital. So for outlook, we shared with you that a net sales growth of 3% and EBITDA margin of 17.5%. But with this volatile environment and uncertainties, we shared with you a range for net sales with plus and minus 1%, EBITDA margin with plus and minus 0.4%. As of Q3 end, we also keep the same outlook for 2025 and we believe that we will be able to meet the targets that we have shared with you. So this 5H growth model, our CEO shared this with you. Again, most of our strategy is based on these 5H growth models that we have stated beginning of the year, which we are also very keen and very proud about. So that's all I'd like to -- I wanted to share with you in terms of our Q3 performance. So we believe that our Q3 performance is quite strong. And I'm happy to take any questions you have for me. Operator: [Operator Instructions] Our first question is from Eren Ercis from Yapi Kredi. Eren Ercis: Congratulations for the good results. My question is regarding to your 2025 guidance. Your guidance implies a 2% revenue decline and around 1 point year-over-year EBITDA margin contraction in fourth quarter of 2025. Could you please elaborate on the main reasons behind maintaining this guidance despite the strong this quarter performance and higher trading growth? And how do you see fourth quarter 2025 and October trends and also 2026? Fulya Surucu: Thank you for your question. So there is a base impact in Q4 2024. So our fourth quarter in 2024 was very, very strong, extremely strong, especially with some new innovations. If you might remember, Dubai Chocolate, we were first in the market from a commercial perspective, first company in the market with a branded Ulker's brand in the market, which really has huge sales, much better sales and much more sales than we had anticipated, which contributed significantly to our Q4 numbers. So also Q4 2024 was very, very strong. So there is a base impact. So if I tell you that there might be a slight decrease versus 2024, these are the reasons. So again, we believe that Q4 will be a strong Q4 as well. October went overall well. And we do not expect, hopefully, any huge surprises unless something very unexpected comes out globally or regionally. So we believe that we will be able to meet our guidance. And I think not changing the guidance and meeting this guidance in such a volatile environment is also another success, I believe. Eren Ercis: Okay. And I have one more follow-up question according to your EBITDA margin, if it's okay for you? Fulya Surucu: Of course. Sure, please go ahead. Eren Ercis: When we look at your third quarter domestic EBITDA margin improvement seems partly linked to product mix. It could be attributable to higher chocolate unit prices during 2 periods. Could you confirm whether this was the main driver or if there was also a positive contribution from raw material costs or pricing efficiencies? Fulya Surucu: Overall, I can tell you without going into too much detail yet, you have the right idea, yes. Operator: Our next question is from Alasdair Alexander from Sanarus Investment Management. You mentioned seasonality on the inventory levels. Where do you expect inventory to be by end of the year and going into next year? Fulya Surucu: Well, the increase in -- so there is also seasonality impact in 2024, by the end of 2024, we ended up with very low inventory levels. And when we started this year in 2025, there was an increase in inventories related to the higher cocoa shipments in half 1, which impacted our inventory numbers. So the increase in inventory is a direct result of a planned rebalancing and a significant shift in the timing of our procurement compared to last year. So when we had this, the relevant impact will also neutralize we believe that by year-end. And we had very low inventory levels in 2024. And we believe that a deliberate planned front-loading of our cocoa procurement in the first half of 2025, which also is still impacting us will be normalized by year-end. Operator: Our next question is from Ali Kerim from Gedik Investments. Ali Akkoyunlu: My question is more on 2026. You bought some raw materials during the first half of the year. And since then, cocoa dropped by 30%. The first question is, how you avoid inventory losses on this? And the second question is, if the trend continues like this, how do you think that will impact your financial performance in 2026? Fulya Surucu: Thank you for your question. Yes, cocoa dropped very unexpectedly in the last couple of months or maybe in the last couple of weeks. But again, it increased and it kind of went down again. And as of today, we do not know how it's going to be towards the end of the year. It keeps changing. It went up to 4,800. So we definitely monitor it very closely. Now it's around 4,400 in GDP. So we keep definitely monitoring it. But what we are -- the first part of our procurement in the first half of the year, which impacted us, I mean, positively, especially in the first half of the year and then the last year as well. We have a hedge policy that we shared before. But again, we do not disclose any numbers how much we are closed or not. It is not a number that is disclosed. I believe that, I mean, first, we do not know how things will change. And second, based on that, I think we will be able to navigate through this challenge. And a significant portion of our cocoa needs for the remainder of 2025 is secured as also into -- 2026 has also been secured at prices determined by our half 1 numbers. But again, as of today, we do not disclose any exact number. And I believe that with the volatilities and uncertainties, we should be able to navigate it. But as of today, it is early to say anything. And I believe also that the benefit of the recent drop in spot prices will have a lag effect. We'll see. Operator: Our next question is from Mehmet Yigit from Unlu & Co. Congrats for the results. How do you see the Turkiye total snacking market so far in the fourth quarter 2025? What is the reason for higher inventory and working capital in 2025 compared to 2024? Fulya Surucu: In terms of the total snacking market, the market contracted by 2.1%, including all snacking markets. So -- and for the first 9 months, it decreases by 1.8%. And on a Q3, quarter-to-quarter basis, it decreased by 2.1%. So there is a shrinkage in the market that impacts all the companies and consumers. So that's how we see it. I mean, in Q4, there might be a slight sequential improvement over Q3, driven by a typical year-end seasonality and holiday demand. So I expect Q4 to be slightly better than Q3. But Q3 and on the first 9 months of this year, there was a shrinkage and contraction in the market, which impacted all of us. So fourth quarter is expected to be better. Regarding your second question of inventory, I think I kind of answered it in the prior question. But overall, let me summarize that in the first half of the year, we had an increase in inventories of the higher cocoa shipments that we had in half 1. With this higher inventory shipments in half 1, it kind of continued in Q2 and Q3 that impact Q3 as well that impacted our inventory levels. And we expect it to normalize towards the end of the year. And I think overall, that's the main reason. Operator: Our next question is from Cemal Demirtas from Ata Yatirim. Cemal Demirtas: Congratulations for the results. My first question is about the cocoa side. You mentioned about it that you secured. But could you tell us a little bit about the hedging mechanism there? And related to the margin recovery, we see the second quarter margin was very much negative surprise and we see a positive surprise in the third quarter. Considering the cocoa price or other raw material prices, should we expect the margins to stabilize around 17% to 18% in the following quarters, maybe also in 2026? Is it a fair assumption? And related to working capital, should we see also some normalization in the following year? Because as my colleagues mentioned, your working capital needs increased compared to last year, but what should be the picture for 2026? And related to demand side, you said better quarter in fourth quarter so far. Is it in the domestic or both in domestic and international side? Fulya Surucu: Okay. Let me start with your last question. The demand side is both international and domestic. So that's the expectation. In terms of working capital, yes, we expect 2026 to normalize. And in fact, I expect that you will be able to see it through Q4 as well. Regarding -- what was the first -- the first question is relating to cocoa hedge and margin. So related to margin, Cemal, we think that we will be able to meet our guidance. So from that guidance, you should -- you can also, I mean, calculate the expected Q4 margin. We believe that we should be able to meet that target to meet that margin number and we will be able to meet our full year guidance as promised before. And regarding cocoa hedge, yes, definitely, there is a hedge policy in the company that goes throughout the year. But as of today, we do not disclose how much is hedged or unhedged. And as you know, the number -- the cocoa number is very volatile. It decreased to 4,000 and it increased to 4,800. It is 4,400 and we still do not know what is going to happen in November, by the end of November, December and January, we'll see. But I mean, we are confident. We are acting per our policy as stated our policy. And depending on the changes on the benefit -- the benefit of the recent drop in spot prices will have a lag effect. And we do not expect to see a material positive impact on our cost of goods sold until further into 2026. Hope this helps. Cemal Demirtas: And Fulya, as a follow-up, related to your open position and your hedging, do you have any specific target for that, just like the cost of your debt? When I look at your FX and the interest expense, in TL terms, I calculate around 27% in TL terms. if I'm not wrong, in the following quarters because when we look at your open position when the TL depreciation narrows, you should have lower financial expenses. But as you are protecting your position through hedging, you have a stable FX or like the interest expense and plus FX position. Should we expect that to continue or could you make any rebalancing in your hedging positions depending on the conditions? Fulya Surucu: Our hedging position will not change. We set a policy that stays very clearly that minimum 60% of the open balance sheet position needs to be hedged. So we will continue with that policy and with that positioning. And I think for the last 2 to 3 years, that ratio did not go below 60% every quarter and this will continue. Operator: Our next question is from Mehmet Gerz from Osmanl? Portfoy. What are terms of royalty payments to you this holding for the use of Ulker brand, which for some reason, belongs to the parent company? Fulya Surucu: So we do not disclose this number. And this is not -- and this is based on a relationship on every business there is a holder of the brand, then there are companies that are using that brand to operate to make their operations. We do not own the brands. We are operating on that brand and there is a company that holds that brand. It's the same everywhere in the world and there is a royalty relationship between these companies. And naturally, Yildiz Holding holds the Ulker brand and we are operating under Ulker brand. There is definitely a royalty relationship or a transaction between these 2, but we do not disclose any numbers regarding on that. But I can assure you that the number is no different than any number that is -- I mean, this is an example in other companies in the world. Operator: Our next question is from Gustavo Campos from Jefferies. Gustavo Campos: I have a few questions here. Firstly, I'm trying to understand a little bit more. It seems like your international EBITDA was quite mixed when you break it up by regions. It seems like Central Asia, like Kazakhstan was a bit weaker there, while in the Middle East it was a little bit better. Could you please like explain a little bit on what's happening on the underlying backdrop to justify this? And I'm also trying to understand for your exports, it seems like there was a significant recovery in EBITDA in the third quarter when you look at it year-over-year growth. Was it this only due to higher volumes that were allocated to being exported or was there like actual improvement in the underlying pricing? That would be my first couple of questions here. Fulya Surucu: Thank you. Let me start with your last question. Yes, we achieved a good turnaround in Q3 in our international business. A recovery in demand in Q3, our medical volumes grew by a very strong 15% year-over-year. Turkiye export volumes also returned to a positive growth of 2.8%. So this volume recovery also translated directly into a top line growth with net sales increasing 41% in Turkiye exports and 14% in Middle East, North Africa and Central Asia year-over-year. So there is also a sharp improvement in profitability compared to Q2 '24 and '25. We are actively and successfully managing the cost and pricing environment. In International segment, EBITDA margin also recovered from Q2 to Q3. So when we come to Central Asia numbers on a specific basis, on a year-to-date basis, there is a sales decline of 16.5% on a year-to-date basis. But in Q3, there is also a very good recovery in Q3 on our volume, delivering 7.6% volume growth versus prior year. There are strategic shifts from margin production -- protection to aggressively securing top line growth. We achieved a 7.6% year-over-year increase in sales volume and this also reflected to our margin reaching to 30.5%. I hope that helps. Let me know if you have any other questions. Gustavo Campos: Yes. No, I was just trying to understand like did you have like better pricing in your exports? Was there any price recovery or was it just higher volumes that were exported? Fulya Surucu: It's mainly the volume increase that impacted the numbers. Gustavo Campos: Understood. And in Central Asia, is it correct to assume that backdrop in Kazakhstan remained somewhat weak and that's what explains the weakness in your Central Asia segment? Fulya Surucu: Yes, mainly Kazakhstan, yes. Gustavo Campos: Okay, understood. I'm also trying to understand a little bit about your working capital. I think we covered inventories, but on your receivables, it seems like your receivable days they increased significantly, not only in second quarter and third quarter due to seasonality, but when I compare it to previous years, it also looks like we are at highs, like multiyear highs, if I'm not mistaken here. Do you have like any perspective on whether your receivables position will start improving moving forward? Do you have any targets? And I'm trying to understand what is driving the significant increase in your receivables position. Fulya Surucu: Thank you for the question. We believe that -- I believe that the increase in receivables is mainly a temporary fluctuation directly linked to a high volume of sales activity with our primary distribution companies during the third quarter. There is no collection issue at all. I can assure you that. The pattern is there is -- I mean, the seasonality and pattern is consistent with our business cycle. The balance was higher at the end of Q1, decreased in Q2 following collections and now has risen again in Q3 after Q3 sales. And we expect the receivable balance to normalize to stabilize in the fourth quarter as collections for these Q3 will come through in Q4 and will be realized. And we do not disclose any, I mean, DSO target number or a working capital number. Our objective here is always to optimize it. Gustavo Campos: Understood. So my understanding here is that it was mainly due to the strong top line and EBITDA growth and this is also partially seasonal and you expect -- in 2026, do you expect any normalization from -- compared to current levels or it may be too soon to tell? Fulya Surucu: Yes. No, we expect the normalization starting in Q4 2025 and then to continue the momentum in 2026. Does that help? Gustavo Campos: Understood Yes, very helpful. Last couple of questions here. Could you please confirm you repaid the 2025 remaining outstanding bond amount with cash in your balance? And do you expect to raise any debt to offset this decrease in your cash balance for this? Fulya Surucu: Let me answer your question in 2 phases. The first one is, yes, we paid the remaining outstanding Eurobond balance as cash by the end of October from our cash balance. The second one is we raised debt in order to refinance our current outstanding loan, which was going to mature in 2026 April. So we kind of early refinanced it, but it was a 3-year syndication loan. Now we refinanced it with a 5-year bullet structure. So it is also completed. And the loan with EBRD part is also completed. So to your both questions, yes and yes. Gustavo Campos: Understood. What was the rate that you are paying for this new syndicated loan? Fulya Surucu: Of course, much lower than the prior syndication. And you will be -- you should be able to see some more numbers when we complete or announce our Q4 numbers, annual numbers. But much lower rates than we had in prior syndication and very stable... Gustavo Campos: Understood. And then you still have like roughly, I think, like $550 million worth of short-term debt. If I exclude the bond and I exclude this EBRD syndicated loans that you refinanced, you still have roughly $550 million worth of short-term debt, rough estimation here. How are you planning to refinance those? Fulya Surucu: We do not have a short-term debt. So the Eurobond was refinanced last year in July 2024. This debt had a 7-year maturity. So $550 million Eurobond was refinanced in July of 2024 with 7-year maturity, which matures in 2031. The current syndication, which was going to mature in April 2026 is also refinanced by the end of October with a 5-year bullet structure. So we are going to pay it in 2030, so in 5 years. So all of them will be transferred to long-term when we issue our Q4 -- most of them will be transferred to long-term when we share our full year numbers. But $250 million Eurobond is also repaid by the end of October this year, outstanding with our cash. So all the loans that are outstanding right now have a long-term maturity, 2031, 2030. Gustavo Campos: Okay, yes. I just see like, for example, you still have roughly $350 million of short-term letter of credits, if I'm not mistaken. Do you plan to continue to roll over this balance or are you planning to refinance this in some other way? Fulya Surucu: So because this is -- this report is as of September year-to-date, you do not see that it is closed, but the closed outstanding Eurobond that was coming from 2020, which was going to mature this October 2025 is already paid. So this report states September year-to-date, but I tell you that by the end of October 2025, all the outstanding Eurobond debt from the year 2020 is already paid with cash. And you should be able to see that by the end of December when we issue our full year numbers, I mean, beginning of 2026. So it is already paid. And 2 of the refinances are already done and their maturity is 2030 and 2031. So all of them are long-term. The short-term you see right now is already paid with cash by the end of October 2025. The reason why you don't see it is because you had a report stating the situation by the end of September 30, 2025. I hope it makes sense? Operator: Our next question is from Evgeniya Bystrova from Barclays. Evgeniya Bystrova: I have several questions. So first of all, on your working capital, do you expect the same inventories inflow in first half of 2026 as it happened this year? Then my second question is regarding the Romanian IFC loan maturing in 2026. What is your strategy to address that? And finally, I guess it's also kind of a follow-up to a question by my previous colleague. So like you refinanced obviously, most of your short-term debt, extended the maturity profile. So what would be your strategy going forward? Are you expecting any M&As in the pipeline? And finally, I guess, to clarify the previous question, I agree that you do have like letters of credit debt on your balance sheet, which was considered to be short-term. And it's not part of previous Eurobond or any syndication loan. So it was separate as a short-term debt. And at least at the end of H1, it was around $350 million. So I guess the question was, how are you planning to address that? Because we do see that on the balance sheet even at the end of September. And if we exclude Eurobonds and other bank loans that were extended, there would still be part of letters of credit on your balance sheet, it seems. I hope it clarifies. Fulya Surucu: Okay. Thank you for your questions. So let me start. I kind of noted them one by one. If I miss something, please remind me. So let me start with IFC loan, which is going to mature in April 2026. So we have a great progress on that. And hopefully, you should be hearing the news and updates with IFC very soon. So -- but I can assure you that with 5-year bullets that we closed with our commercial banks, which is the first time since 2020 in the Turkish private sector. We had a lot of demand. It is successfully completed with EBRD. It is successfully completed with commercial banks and you will see the update soon with IFC as well. But I can tell you that the progresses are all in the right track and progressing in the right direction. So that's one. Regarding the inventory, so we -- as I have also shared in the prior quarters, we do not have an exact working capital number or target, because -- I mean, depending on the conditions, depending on the changing environment volatilities and so on, our target for working capital is optimizing the working capital, okay? So some things might change, I mean, in order to reach this number of DI or this number of DSO. So what I can tell you that this focus on optimization of working capital will continue throughout 2026 as well. We'll make sure that we close -- we will have the optimized inventory and cocoa levels in 2026 and throughout 2025 as well. And we'll continue to focus on that. That's all I can share. And we expect, as I have also shared in the prior questions that we expect a normalization throughout 2025 and 2026 as well. So this was inventory and working capital. M&A, yes, let me share with you also. Yes, we have also -- we closed 2 very important financings very, very successfully last year Eurobond with 7-year maturity, very recently in October, 5-year bullets with commercial banks. So all of them are long term right now. There is not a -- I mean, M&A plan or pipeline that I can share or I can make public with you right now. But what I can tell you is our objective and our mission is to have Ulker's growth and growth ambition will continue and to make Ulker -- to strengthen Ulker's global presence in the markets that we operate will continue. We will see. That's all I can share with you right now. And regarding the LCs, the LCs are used in cocoa procurement. So short-term debt -- the short-term debt number you see is mainly LCs. LCs are used to procure cocoa and it will be based on our own resources. We generate adequate operating cash to pay our LCs. And they are very important -- one of the very important tools, first, to mitigate our risk and second, to optimize our working capital and to manage cash. So I think LCs, especially for our business where there is a very long cocoa cycle from end-to-end is very much needed. And I believe that we have done a great job here by increasing our LC limits with our very important finance partners. And this definitely contributes to our business on many perspectives very, very positively. Hope that helps? Operator: [Operator Instructions] Okay. It looks like Gustavo from Jefferies has a follow-up. Gustavo Campos: Yes. A very quick follow-up here. How does your average realized cost for cocoa compare -- in 2024 compares to 2025? Can you give us like some high-level idea of like how much higher were your cocoa costs incurred from 1 year to the other? That would be my last question. Fulya Surucu: Thank you for your question, but we do not disclose these details unfortunately. Operator: We would like to thank everyone for the participation today. I will now hand it back to the Ulker team for the closing remarks. Fulya Surucu: Thank you for your attendance and for your great questions today. If you have any further questions, please reach out to me or my team. I believe that we delivered great results in Q3 and I believe that this momentum will continue in Q4 and we will meet our guidance. Thank you all and have a great day or evening. Operator: That concludes the call for today. Thank you, and have a nice day.
Mohamed Shameel Joosub: Good afternoon, and good morning to those joining the call in the U.S. Welcome to the highlights call for our 6 months ended 30th of September 2025. I'm joined by our Group's CFO, Raisibe Morathi, as well as our Head of Investor Relations, JP Davids. We trust that you enjoyed our video presentation that we screened before this call. The video is available on our website and covers our purpose-led strategy, Core Vision 2030 and the performance against our strategic ambitions. For those not able to watch our presentation, I will take you through some key highlights from this period. We will then move into a Q&A session. We had a great start to the financial year, delivering ahead of our double-digit EBITDA growth target while also reporting excellent return metrics. Revenue of ZAR 81.6 billion was 10.9% and was supported by an excellent commercial performance. Customers are up 8.6% to 223 million with our Vision 2030 target of 260 million customers well within our sights. Our financial business is also rapidly progressing towards our target of 120 million customers by 2030. We reached 94 million financial service customers in the period, up 13.1%. We see financial services as a key differentiator for our customers and our investment case. Financial services now makes up around 25% of our profit before tax. Our Vision 2030 double-digit growth ambition is supported by product and geographical diversification. We operate across 8 markets in Africa, but manage the business in 4 segments, starting in the North with Egypt, which reported another stellar performance of results. Critically, as the country's macro conditions have stabilized, we are now converting the local currency growth into stellar rand and euro growth. For example, Egypt contributed ZAR 7.8 billion to the group's operating profit, up 66.5% on a rand basis. This growth is broad-based across consumer and mobile business, fixed and Vodafone Cash. Shifting a little further south to Safaricom. As an associate, Safaricom contributed ZAR 2.1 billion to operating profit, increasing 65.3%. Safaricom's result was supported by an excellent performance in Kenya with EBITDA margins of 57.3%, up 2.2 percentage points and lower losses in Ethiopia. Kenya delivered another excellent top line performance with another standout performance from M-Pesa, which was up 14% on a very large base. Our 4 markets that make up the international business more than doubling operating profit to ZAR 2.1 billion. This result reflected double-digit service revenue growth in the DRC, Lesotho and Tanzania. The operating leverage of these assets was also evident in the period with EBITDA margins recovering to 33.9% from 28.2% in the prior period. Finally, to South Africa, which remains the largest component of operating profit at ZAR 8.8 billion, while we delivered growth in consumer contract, Vodacom business and beyond mobile services, it still proved to be a challenging period for South Africa. Pressure on prepaid and a once-off cost weighed on the results. We target EBITDA growth in the second half, but expect prepaid to remain challenging in the near term. We intend to balance price discipline with an appropriate response to competitive noise in prepaid. Before I shift back to the group metrics, we separately announced last week that the long-standing Please Call Me matter had been settled by the parties out of court. The settlement cost was recorded in these results. Both parties are glad that finality has been reached in this regard. At a group level, the strong growth across the 3 segments delivered net profit to equity holders of ZAR 9.1 billion with headline earnings per share of ZAR 4.67, up 32.3%. Our headline earnings included some one-off impacts in the current and prior year periods. If we iron these out of the results, the underlying growth was in the mid-20s. We're also pleased to report a healthy balance sheet and return metrics. Return on capital employed increased 3.8 percentage points to 26.3%. With returns in mind, we have a policy of paying at least 75% of headline earnings as a dividend. For the interim period, the Board declared a dividend of ZAR 3.30 per share, up 15.8%. As a reminder, in the prior period, the Board adjusted the payout ratio to 86% to account for the phasing of Ethiopia losses, which is skewed to the first half. The payout ratio was set to 71% in the second half to balance this out. Starting from performance to purpose, which is at the heart of Vodacom, our video sets out the progress we are making on our 3 purpose pillars of empowering people, protecting the planet and maintaining trust. We have well-established Euro projects and new initiatives that drive each of these pillars. In the period, we launched the marquee program to empower 1 million Egyptian rural women over the next 3 years. This program was created in association with Egypt's Micro, Small and Medium Enterprises Development Agency, CARE Egypt Foundation and Samsung. It is designed to foster digital and financial inclusion by equipping rural women with skills and tools to utilize Vodafone Cash services and engage in digital education. Before we move to Q&A, I will make some comments on our outlook. We remain well on track with our medium-term targets with a clear focus on double-digit service revenue and EBITDA growth. For the remainder of financial year 2026, we anticipate an improved performance from South Africa with strong EBITDA growth from Egypt and international business consistent with our double-digit target. We expect capital expenditures to step up in the second half, having spent ZAR 9.4 billion in the past 6 months. We plan to spend ZAR 23 billion across the markets in the current financial year. That concludes my review. Raisibe and I are now ready to answer any questions you may have. JP Davids: Thank you, Shameel. There are quite a few questions on South Africa to get us going, and we will start with the top line questions and then move into EBITDA and other variables. So we've got Ganesh from Barclays. We've also got Jonathan Kennedy-Good of Prescient, and Maddy, all asking questions around prepaid. In short, can we give a little bit of commentary on what played out in the quarter? Maybe some color on some of the ARPU trends we saw in the quarter and how we're thinking about these trends into the coming quarters? So what is the second quarter telling us about 3Q and 4Q to come? Mohamed Shameel Joosub: Okay. Thank you, JP. So I think on prepaid, a couple of things. So firstly, we are seeing the consumer much more under pressure than we've previously seen. So that's the one part. We're seeing consumer wallet impacted by gambling. So we think that's also affecting the consumer wallet. That said, we've also seen some competitive pressures in the half and especially in the second quarter. And as a result of -- and what we've had to do is to make sure that we stay competitive. So we've not lost any customers. We've managed to hold on to our customers. ARPU has broadly remained stable. Q1 was ZAR 58 per sub ARPU and Q2 was ZAR 57 per sub. So the ARPU has kind of remained stable. But of course, there was a much more negative result in the -- minus 2.9% in the second quarter contributing to a minus 1.6% over the half. So what we've done to stay competitive is a few folds. So firstly, making sure that the inflow continues to be strong in terms of customers and balancing out any churn. So I think from a customer base perspective, the base is growing, not declining. So that's the first point on prepaid specifically. The second thing is, we've had to improve some of the offers that we're putting out there to make sure that we're also staying competitive against some of the competitive offers that have emerged. We have some competitors. So the weakness is coming more in voice than it's coming in data. And that's because one of our competitors is throwing in voice or a lot of voice into offers. So we're having to counter that as well in some of our offers. What we're pushing for is more transparent offers. So we've used a lot of private pricing previously. So we're moving towards more transparent pricing, especially you'll see it in our LTE bundles as well, but also trying to push more longer-term bundles so that we can try and gain having grown the segment of shorter-term bundles, we're now trying to get customers more into longer-term bundles so we can get more of the committed spend, especially where a customer is using more than one SIM. Some actions have been taken proactively and some -- especially to give an example, in the fixed wireless space, what we've seen is a very good growth in terms of net adds, gaining of market share. So we've seen -- because historically, we were always under-indexed in that space. And someone like Telkom had a lot more stability in revenues because they had a bigger FWA base. What we've now done is to make sure that we're growing that. So we're seeing 4, 5 points increase in market share from last year to this year. And so that's picking up quite nicely. So we'll continue to grow that segment as well. JP Davids: Hopefully, that also deals with [Siphelele's] question from Matrix around competitive dynamics in prepaid and Jono had a similar question around SA prepaid. But remaining on South African prepaid, Maddy had a question around the regulatory setup in South Africa. Do you ever see a scenario where South Africa follows markets like Egypt, Tanzania with price floors? Mohamed Shameel Joosub: I think it's certainly something worth considering and the industry collectively have agreed to approach government in terms of having that discussions. And the reason for that is that it's actually creating a lot more stability. And what we're seeing is that the fragmentation in the markets is actually -- is leading to a situation, especially in a lot of the developed markets where you're seeing it's curbing investment back into the networks, into fiber and so on. So the in-market consolidation, price flows or price regulation has actually proven to be very healthy. So we are, of course, trying to have this more markets on the pricing. Today, we have Egypt and Tanzania, and we're currently busy with the DRC and Mozambique where the regulators are actively considering and have done studies and they have come out with the results. So that -- so we're looking at implementation there. In South Africa, still early days in terms of the discussions, but certainly something that we'll keep trying for. JP Davids: Sticking with the top line in South Africa, Maddy and a couple of others just had a question around the postpaid trends in the quarter. It looked like a little bit of a slowdown quarter-on-quarter. Any cause for concern there? Or does the outlook remain broadly unchanged for postpaid? Mohamed Shameel Joosub: I think broadly postpaid is growing around 5%. There's some deferrals from last year this year that create a little bit of noise in the half yearly results. But I think the underlying trend is around about 5% on contract, and that will remain stable this year, the previous year and probably into next year as well. JP Davids: Shifting to South Africa's EBITDA and perhaps also EBITDA margin. I think there's sort of 8 different questions being asked of the same nature, but in slightly different ways, which is, can we help try and understand -- the participants on the call understand what 1H would have looked like without the one-off cost in it? And if we are unable to do that, perhaps provide some color into the second half of the year around what South African EBITDA growth or margins could look like? Raisibe Morathi: So as the settlement arrangement is highly confidential. Unfortunately, we're not able to give you the normalized view, excluding that. But I think just looking at where we landed at EBITDA minus 5.3%, it is quite clear that it's not a number that is shattering. I think we have put that behind us. And the forward look is that we expect our EBITDA growth to somewhat normalize in the second half of the year and to end the EBITDA margin, which is printing somewhere between 36% and 37%, which is back to the trend that we had outside of this settlement that we have put up behind us now. And in terms of where that is going to come from, was cautious that the prepaid trend has been quite tough. So a lot of initiatives that Shameel spoke about in terms of improving the trend in the prepaid revenue, but also continue with the journey on our costs. So our cost program is still fairly robust. And that is covering a range of things from the sharing agenda to really managing our day-to-day headcount costs and all of those everyday costs. And we do believe that our efficiencies will still come through to support the normalization in the second half. JP Davids: Thank you, Raisibe. Just before we leave South Africa, we switch track a little bit. I think Nadim just has a follow-up on prepaid. It's Nadim from Standard Bank. Just asking a slightly more specific question around the SA prepaid menu. Are you in the process of transforming the South African prepaid menu to adjust for the current market context? I guess picking up on your discussion around transparency, et cetera. So maybe just another minute or 2 on that. And what he's trying to see is, are you trying to drive any specific type of behavioral shift that you'd like to see in the customer? Mohamed Shameel Joosub: Yes, I think it's a couple of fold. One is that making sure there's more transparent offers versus, let's call it, basically private pricing. So more making sure that all customers can see all the offers, keeping a lot of the offers static is the one part because you have a percentage of the base that is not private pricing engaged. So you lose out on that part of the customer base who doesn't see it. So that's the one part. And then, of course, creating more competitive structural offers that stretches the customer into weekly, bimonthly and monthly offers so that you can actually get more longevity out of the customer. You'll also see we've launched things like spend-and-get. If you spend a certain amount, ZAR 120 with us, we give you free funeral cover as an example. So that caters for the customers' need because that same customer would be buying funeral cover and normally telco. So if they spend ZAR 120 with us for the month, and they can buy whatever packages they want to, then that will unlock free funeral cover. And that's already existing in digital channels with VodaPay and is actually picking up quite nicely in terms of take-up. JP Davids: There are a few questions on the call around the estimate for the settlement for the Please Call Me matter. Just to reiterate what Raisibe said, that's a confidential agreement, and we will not be disclosing that number. Shifting gear to the fiber landscape. We've got a couple of questions there. [indiscernible] from there is asking around HeroTel and Fibertime scaling very quickly with their coverage in townships where around 1/3 of the population stays in South Africa. What are our plans for township in rural areas when it comes to fiber connectivity? So that's the first question on fiber. The second question on fiber comes from Funeka from Nedbank asking just around the sustainable return on investment on the Maziv deal. So over what period do you expect that you'll generate that sustainable return on investment? Mohamed Shameel Joosub: So on the -- on fiber generally, so remember, Fibertime and those solutions are out there. But remember, HeroTel is part of the Maziv transaction. So remember, Maziv have acquired HeroTel with the final piece still at the competition authorities, but they already own 49% that's part of the deal. So that is already part of the Maziv deal and of course, you add that capability there as well. So you've got the secondary towns, you've got the townships and you've got the rural areas that are all covered by the rollout of fiber. And I think the models are very clear. So we, of course, are cognizant of the Fibertime, what they're doing as well. And we're doing similar kind of things in Kenya. So we're also seeing a lot of success in connecting multi-dwelling units, I would say, at an even lower price per home connected in Kenya. So in fact, we were just in an earlier call with staff showing them the benefits and the uptake of that service. So we'll use the learnings from across our markets to roll out in South Africa, but also into the other markets as we look to build FiberCos in each of our markets. Raisibe Morathi: So in terms of the return on investment, so similar approach that we follow with all M&A that we would target the return to exceed our cost of capital, which, in this case, is roughly about 15%. So -- and we expect that to take place in the medium term. So we're quite comfortable that the value add of this investment, both quantitatively and qualitatively is quite strong. JP Davids: Shifting out of South Africa for a bit. Just one question on international before we move on to Egypt. And the question on international is really around the margins in the first half from Rohit at Citi. He's just asking what is the driver of that improvement in the first half? And is this level of margin sustainable going forward, that being close to -- sorry, 34% EBITDA margin? Raisibe Morathi: So yes, it is sustainable. We're quite pleased to see an improvement in our international business, noting that the prior year was also impacted by the one-offs in DRC, which we are over that. We are now moving along. And DRC was always a very strong top line growth. And that list of items that we dealt with last year, it is a business that we continue to see some prospects for growth. We've also called out Tanzania, which has really done very well, supported by a stable macro environment and also a pricing environment that has a price loss. So the momentum that we're seeing in Tanzania continues. And we're also doing a network replacement, which is really positioning us very well to be more 4G ready in more sites. So quite exciting. We're seeing a very nice recovery in Mozambique, where -- from the election disruptions to pricing disruptions, that we had in the past. So whilst we are still in negotiations to see whether or not the price growth can be implemented and implemented the correct way this time around. But nevertheless, we are seeing some operational momentum where there's less and less of a negative growth. And now we actually ended with a quarter that is a positive growth, so really contributing and of course, with [indiscernible] also quite stable. So the sustainability of margin in IB absolutely, and we do think that there's even room for improvement of that margin going forward. JP Davids: Moving to Egypt. I'll pick up Funeka's question from Nedbank because it's relayed by quite a few people just around the EBITDA margin in Egypt at around 46%, 47%, excluding sort of lumps and bumps in the half year. Is this a sustainable medium-term margin? And related to that, what is driving that margin upside in both Egypt and IB? Is it operational leverage? Is it cost cutting? What's behind that? Raisibe Morathi: So there is strong growth top line. Egypt still grew in the 40s in terms of the service revenue. Of course, we had a price increase of 30% in the last quarter last year. So as we left that, the last quarter of this financial year, we will probably dip into the 30s, but still robust growth driven by operational momentum and basically all the different components in the business being financial services, CBU, enterprise and all of that really do very, very well and with a very strong CVM offerings. So the margin of 47%, that is a bit of an outperform where we expect that margin is sustainable at around mid-40s, 45% and thereabouts. But of course, if we can achieve more than that, we'll absolutely be happy. But I do think that expectations at 47% is probably a little bit too high at this point in time. And particularly as we are expecting that the revenue growth will normalize as we lap the price increase. \And I've already covered the IB environment. And maybe just one more point on IB is that before the challenges that we experienced in Mozambique, Mozambique was running at an EBITDA margin of 40%. So there's still a lot of room for Mozambique to improve. So all of that and all those dynamics, we believe that they do position us for sustainable EBITDA margins in those 2. JP Davids: A quick follow-up there for Shameel. Rohit, just asking what is the scope for another price increase in Egypt next year? Mohamed Shameel Joosub: Yes. So I think I don't think we should pencil in automatic price increases. I think really the devaluation or if there's a devaluation, then I think one can then approach government for a price increase. So -- but I think given the price floors that we have in that market, you're going to have strong conversion, traffic up, rate steady and you'll still have a consistent conversion of that into revenue. So I mean, in the half, traffic was up 22%. So you've still got very strong traffic growth, and therefore, you've got strong ARPU growth. In terms of price increases, we also have a mechanism where we do have what I call natural price increases each year where we give customers more for more, and that's part of our modus operandi in Egypt, and that also contributes positively to our growth. And what we are seeing is that you'll see us having put a little bit more CapEx or more CapEx into Egypt this year because we are seeing that revenue monetize very quickly, especially as we're rolling out more 5G sites, and that's also helping to monetize very quickly. So the average payback in Egypt being less than a year, so if we put up a new tower. So we are, from a capital allocation perspective, also carefully managing where we allocate capital. JP Davids: There are a couple of questions on financial services. I'll start with the high-level ones, and then I'll get into the more specific ones. So at a high level, Jono is asking around our appetite to list the financial services business, noting that a couple of our peers appear to be doing that at the moment. And then Jonathan from Prescient is trying to get more color around the micro lending landscape. And he's trying to get a sense of how these micro loans such as Fuliza, if they can be perhaps detrimental to voice and data spend? Or is it, I guess, a net-net positive for the customer where you extend these micro loans? Mohamed Shameel Joosub: Okay. So maybe a couple of things. So on the financial services side, I think really, really strong growth across all our markets, $477 billion of transactions, up 13%. The way I like to think about it is our take rate is about 0.4, 0.5 per transaction. You can see ZAR 8 billion from Vodacom, ZAR 12.2 billion from Safaricom during the period. So that's annualizing at about a $2.2 billion a year or over ZAR 40 billion of revenue coming from fintech. Now what we're trying to position is we're not looking to separately list the financial service businesses because we do see it intricately linked to our value proposition that we're providing to the customer. In fact, we see it more closely linked and then coupling that with loyalty going forward. What we are looking at, and that's why we're giving so much color on it is that the positioning for us is that we have something very different to offer from a normal telco. And with a 25% contribution coming through, to profit coming through from the fintech side. What we're also doing is we're building centers of excellence and then using that to basically push through the group. So an example would be in South Africa, we have a very big insurance business and a lot of capabilities and platforms that we built. So now we're using that as a center of excellence to expand into more markets with Kenya and Tanzania being the 2 markets that we'll focus on. So we're not trying to do everything at once. We're also going -- making sure we can pick up on it. And then on the reverse, what we're doing is on international money transfer, we'll do it the other way around. We'll take it to Egypt, we'll take it to South Africa. We'll take it to Ethiopia and so on. And the same with -- we're seeing a lot of benefits coming through now starting with investments, and it's starting to scale very quickly. In terms of your question on lending, there's no balance sheet risk on it. We do about $11 billion of loans now, but it's all -- the balance sheet risk is taken by the lending institution, and we take a good margin on it. And depending on the type of product, the margins are higher or lower. So we have -- so example would be overdraft style products have a very, very high margin. In terms of is it contributing or detracting from airtime? These services have been running for many, many years now. And actually, it hasn't impacted airtime at all. I mean take a market like Kenya, the market is still growing very, very strongly, but our fintech services is sitting at 44% of revenue. So actually, it's beneficial to airtime, not necessarily. So you would have an airtime advance or in some of the M-Pesa markets, you could even take a loan, then buy airtime. So we see it as actually being complementary as opposed to detracting from the revenue. Remember, you're not paying for the services through airtime, you're paying for it from your wallet. JP Davids: There is a specific question on financial services from Nadim and just really building on that answer you've given, Shameel, which is what are the focus areas for Egypt over the next sort of 12 to 24 months in terms of that financial services ecosystem. Mohamed Shameel Joosub: I think there's quite a few. And if we take from the learnings from the other markets, Egypt is still very much still P2P. So that's person-to-person payments and money transfer. So I think growing out the payments ecosystem, growing out the merchants ecosystem, bringing in the lending part, bringing in insurance, bringing in international money transfer. So there's a whole host of services, virtual cards, all of these type of things. There's still a myriad of different products that we can still grow in Egypt. But I think what's very positive in Egypt is that the base also continues to grow because of the amount of people that are unbanked. And what's happened is that's why we've got such a large market share in the wallet. The wallets become the trusted part. So remember, there was also a trust element of people keeping their money, let's say, not in banks and so on. And now they're becoming more and more confident in that context. So that's why we're seeing this big growth that we've seen over the last couple of years. JP Davids: We have a few group questions, and then we'll come back to South Africa. So first one is from David at New Street Research. Just wanted a little bit more color around that CapEx step-up in the second half of the year. Where do you intend to deploy more CapEx in the second half? Perhaps the next one for Raisibe is. It's just a clarification from Maddy. He asked, was the settlement factored into the EPS base when considering dividend per share. So just wanted to know, did we adjust for that, yes or no? And then perhaps again back to Shameel, Maddi just asking around whether there's any sort of M&A action to anticipate from our side? Where are we focused from an M&A perspective at the moment? Mohamed Shameel Joosub: Okay. So look, I think from a CapEx perspective, of course, I mean, the obvious one, if you spend ZAR 4 billion in South Africa, we have to spend close to ZAR 12 billion. So there's ZAR 8 billion of the additional spend going towards -- to South Africa specifically. So that's the one. And then there's more CapEx that we've allocated to both IB and Egypt for the remaining part of the year to make sure that we can continue to take advantage of the growth that we're seeing, specifically in Tanzania, DRC and Egypt. Raisibe Morathi: So in terms of whether the settlement is coming all the way through to EPS, that is correct. And we did not make any adjustment in terms of considering the dividend. Mohamed Shameel Joosub: So from an M&A perspective, I mean, we -- I'd say, look, the big thing for us is, of course, to finally get the approvals on this massive transaction that the cash flow and so on so that we can start to unlock the benefits of that transaction and the benefits to society in general in South Africa as quickly as possible. So a little bit frustrating, to be honest. Hopefully, it will be sorted out in the next week or 2, but a little bit frustrating that it's taking so long given that we've already had conditional approval on the transaction from ICASA. That's the one. And then further M&A opportunities a little bit -- so it will be -- a lot of it will be centered around basically more JVs and these type of things around fiber and where the opportunities lie, where there's an opportunity to do -- what we want to do is to do rural coverage and fiber in all markets and also data centers. So where there's an opportunity to partner, we will partner. So that's the one part. But these are small-sized investments. Then, of course, the rest is a little bit, of course, if there's any opportunities for in-market consolidation, certainly something that we would consider. Yes, and we're kind of keeping our powder dry in case some opportunities present themselves. JP Davids: Okay. There are going to be a few more, I guess, specific questions now across the portfolio. Let's come back to South Africa. So Preshendran has 2, Preshendran from 361. He asked firstly around gambling in South Africa. Is the gambling data traffic zero rated? Or is it paid by the gambling houses? And how do these vouchers work, for example, the ones that are available on Vodapay? Perhaps related or unrelated to that, he's just asking around the growth in financial services for Vodacom South Africa. What is driving Vodacom Financial Services revenue growth at the moment? Mohamed Shameel Joosub: Okay. So firstly, on gambling. So the platforms, if they are 0 rated, basically is done through what we would call reverse build data. So we're certainly not zero rating any gambling parts because there's nothing enough for us to do it. But you can buy reverse build data and then zero rate it. And so some of the gambling houses are doing that, and they are zero rating data across networks, but they're paying for it. Secondly, on vouchers, essentially, all we do is we sell vouchers. So we sell food vouchers, we sell fuel vouchers. We sell clothing vouchers, we sell gambling vouchers. So that's all in the Vodapay store, if you like. And yes, we have seen a good tick up of that as well. And so clearly, people are buying gambling vouchers. But frankly speaking, if they don't buy from us, they're buying from someone else. So -- and part of the -- let's call it, the super app is having these services available. In terms of financial services in South Africa, so you're seeing very strong growth coming through in terms of the insurance business. So insurance business is growing in the teens. So that's been a very strong growth for us. and it's picking up quite nicely, and we're looking at how can we take the expertise that we've built and actually take it to the international markets. And then we're still seeing a good tick up on the payment services. And then, of course, on VodaPay in terms of things like airtime that we're selling directly, the -- we've more than tripled the amount of airtime we're selling directly versus what we were selling before. So more than 10% of our airtime coming directly through our channels. And by combining the apps, we've actually seen an uplift in terms of the amount of transactions that we're doing, and that's picked up quite nicely. JP Davids: Jo has a specific question on Airtime Advance in South Africa, which I will take. He's asking what proportion of financial services revenue is from Airtime Advance. It's not a specific number we give out, but it is well less than half of the number. But unfortunately, not going to get much more out of us than that. David from New Street, wanted to follow up on the competition levels in South Africa, particularly the prepaid space and after the quarter. So what are we seeing into, I guess, what we call our sort of summer campaign or summer season? Mohamed Shameel Joosub: Yes. So I think -- so a couple of things on the summer season. I think, of course, for us, we'll be betting against a very strong comp from last year because we had an excellent [indiscernible] but of course, it's always a good period for us as we go into the summer period, and we look for an uplift from Q2 to -- from Q3 to over Q2. So that's an important part for us. What we have done is basically put out some compelling offers going into the summer period, dealing with some of the competitive stuff that we've seen and so on. And I think part of it, of course, is also some competitors overreacting and throwing a lot of voice [ and naturally the ] decline actually in prepaid is more coming from the voice side than it's coming from the data side. And that's because some competitors have thrown in a lot of voice into offers and then we've had to compensate for that by improving the offers on our side. So there's a bit of that playing out into the market. And and it's not the MVNOs. So that's the issue that we have there. But I think as we're going into the summer period, making sure we're competitive at the point of sale in terms of devices, inflow, the offers itself, utilizing the loyalty, driving people towards our app, but also our loyalty programs and so on is very much part of the summer promotion. JP Davids: We have one last question on the webcast at the moment. So I'll pick it up. The last question as it currently stands is from Anup at Moon Capital. He wanted to chat about tower mergers in Egypt. Is there a possibility of tower mergers in Egypt? Just your thoughts around if there's anything there to be interested in and whether we would take part in any sort of tower plays in that market? Mohamed Shameel Joosub: To be honest, nothing on the cards at this stage and nothing that we're considering or even looking at in terms of tower mergers. Is there possibilities? Sure, depending on who wants to sell their towers. And would -- is it something that we would consider? I think it would depend on what is it offer and effectively what the benefits are for us because we have got a high level of sharing in that market. So one would have to look at it on its merit and see if there's any synergies, opportunities in terms of whose towers and what does it look like at this stage, there isn't really any towercos in the market. There was talk of IHS being licensed a couple of years ago, but actually it didn't amount too much or nothing really happened. But other than that, there's no towercos. It's all owned by the towercos. JP Davids: My call for more questions prompted more questions, which is great news. So -- the first one of these comes from Matrix, a follow-up question. He wanted a bit more color on our thoughts around the MVNO space in South Africa. And his specific question is, what is our thought around what this market share could look like for the MVNOs in, I guess, in the medium to longer term? So how much market share do we think MVNOs could take? Perhaps just staying with South Africa, let's ask a second one at the same time. Jono has a follow-up from Absa. Is there any sense of how long this increased competitive environment in South Africa could go on for? -- do we get a sense that this is a couple of quarters? Or is this something we're anticipating drags into FY '27? And thank you, Jono, for acknowledging that's perhaps an unfair question. Mohamed Shameel Joosub: Yes. So firstly, on the MVNO space, and I think always important to remember, MVNOs buy from MNOs. And in this case, an MVNO is buying from an MVNO who's buying from a telco. So effectively, or if you want to call Cell C and MVNO, if you like. But what we're seeing is that we haven't really seen any change in the customer bases or in the revenue lines as it relates -- as it goes into the Cell C numbers or even into the MTN numbers where more of the MVNOs are sitting. So there hasn't really been any change in market shares in that context. So that's point number one. Point number two is always remember you're buying from someone, so you have to mark up that service. I think with the competitive parts that you're seeing at the moment, that changes the game a lot in terms of also the -- let's call it, you'll see some of our competitive offers that are out there for summer, some of the offers that are coming from MTN, of course, from Telkom and so on. So I think that reduces. So whether you like it or not, you've actually reduced the competitive gap, if I can put it that way, between you and what the MVNOs could potentially do. Also, I think when you come up with more transparent offers, you're also reducing that gap further because you're putting out to all your customers the same price point. whereas on CVM, you maybe have 60%, 65% of your base. So 35% of your base weren't CVM engaged. Now they're seeing the office straight up. Those are the kind of transitions that were happening. And I think that will make the MVNO case, how should I say, interesting, more difficult. You can choose the adjective that you want to for it. But I think that's really the way I see the MVNO part. And of course, I think where there's a loyalty play, I think that's a different part. And I always say, if the banks want to give the telcos money, then the telco should take it. So that's different. I think like what you're seeing, would say, [indiscernible] consistent base last 12 years, giving to some of the high-value customers, better offers, that type of thing or offers, I wouldn't say better offers, but offers. Those type of things, I think are sustainable, but they're also being funded and they're being funded out of somebody else's wallet. But if it's a pure price game, I think when the competitive dynamics, as you're seeing at the moment, we don't sit by and leave it. So we will take the negative, but we also make sure that we respond. Do I think it bottoms out? Yes, I think it does. But honestly, it's not an exact sign, so we'll have to see. But I think what we've seen historically is you go through a few quarters of this and then you gain stability. JP Davids: So, noco has a follow-up question on voice revenue. It's not clear whether it's in the context of South Africa or the group. So perhaps we can just provide a lens on both. Just how do we think about voice and voice revenue, the outlook for voice and voice revenue going forward? Mohamed Shameel Joosub: So I think if you look at the group in total, basically, voice now consists of 16.6% of the group's revenue. And that was flattish, so minus 0.2% during the half. So you can see that structurally is becoming less as the other sides are growing much faster. So it's becoming less and less of an issue. I think voice will have its challenges. Some markets, of course, voice is still in growth. example, Egypt, the DRC, Tanzania and so on. And then you have some markets where like South Africa, where voice is actually in decline, driven by things like OTT voice, but also driven by where competition have just thrown in like what we've recently seen to improve their competitive part, they've just thrown in voice. Of course, MVNOs by that. So you'll know what I'm talking about one of the big players throwing in voice sadly, and that's what's caused some of the weakness in voice for all of us. JP Davids: Adrian from PSG Wealth had a question on what we think the value Optasia brings to telco operators just generally. I guess this would obviously be in the context of Optasia's recent listing. Mohamed Shameel Joosub: Yes. Look, I think, of course, they've been a partner of ours for a long time. They add value on the Airtime Advance part and so on. And we've made sure that we've -- let's just say that we have a good deal, let's put it that way, on the one side. And then on the other side, as they increase their new products and offerings, of course, we would look to scale some of that into our markets. So an example would be the offering overdraft products in the DRC. So -- and we're partnering with them there. So as some of these products come to market, we will consider it. Of course, it's different to Airtime Advance because you're also then competing with some of the banks, the likes of KCB and Access Bank and so on in these different markets. So we look at it on a market-by-market basis. And if the margins are better and if it opens up a bigger base for us, then we consider it. JP Davids: Then what looks like our last question for the moment from Robert at Deutsche Bank. He references some press reports about a breakup at Safaricom by the government a little while ago. Any update on that? And would you move to increase your stake in that eventuality? Mohamed Shameel Joosub: So there's no discussions about breaking up Safaricom. I can categorically say that as I'm on the Board, so is Raisibe. So there's nothing being envisaged in that respect. In terms of increasing stakes, we look at in any market where our partners want to sell, we would consider it. And of course, we'd expect that they would talk to us as we've been partners for a very long time. So in all our markets. So I think in that context, if there is a want to sell, I'm sure they'll talk to us. JP Davids: Thank you, Shameel. Thank you, Rose. We are done with the Q&A. Shameel, did you want to quickly wrap up? Mohamed Shameel Joosub: Yes. Maybe just to say thank you to everybody, and we'll see you on the road shows. But if they have any questions, please reach out to JP. Of course, I think for us, this was an important half because it's the first proof point down to EBITDA and earnings of the 2030 strategy and very happy that as someone put it today, I saw one of the headlines best results in the last 10 years, and I think that's probably accurate. We -- it's the highest earnings growth we've had probably longer than that, in fact, but very, very pleased with the outcome. Also very pleased with the underlying growth. And I think for me, the strategy that we've put together, both from a geographical diversification perspective, is paying dividends, but also from a product diversification with the fintech and fiber and IoT also playing out quite nicely into the numbers. So nice to see that the strategy is now bearing fruit because you lay the foundations and then you start to see the benefits a year or 2 after that you laid those foundations. So really strong in that respect. So looking forward to a good second half. Thank you.
Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Tower Semiconductor Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. I would now like to hand the conference over to your speaker today, Ms. Noit Levy, Senior Vice President of Investor Relations and Human Resources. Please go ahead, madam. Noit Levi-Karoubi: Thank you. Good day, and thank you, everyone, for joining us. Welcome to Tower Semiconductor's Third Quarter 2025 Financial Results Conference Call. With us today are Mr. Russell Ellwanger, our CEO; Dr. Marco Racanelli, our President; and Mr. Oren Shirazi, our CFO. Before we begin, please note that certain statements made during this call may be forward-looking and are subject to risks and uncertainties that could cause actual results to differ materially. These risks are detailed in our SEC filings, Form 20-F and 6-K as well as filings with the Israeli Securities Authority, all available on our website. Tower assumes no obligation to update forward-looking statements. Our third quarter 2025 results are prepared in accordance with U.S. GAAP. Some data presented may include non-GAAP financial measures as defined under SEC Regulation G. Reconciliations to GAAP figures and full explanations are provided in today's press release and financial tables. For your reference, the supporting slide deck is available on our website and integrated into this webcast. With that, I'd like to turn the call over to our CEO, Mr. Russell Ellwanger. Russell? Russell Ellwanger: Hello, everyone. Thank you for joining this earnings call. We are in the best position, growing our core technologies, Power Management, CMOS Image Sensors, 65-nanometer RF Mobile, each of which demonstrating year-over-year revenue growth, providing an excellent foundation on top of which the extreme AI-driven data center demand for our silicon photonics and silicon germanium RF platforms is driving unprecedented company growth. We ended our third quarter with revenue at $396 million, resulting in net profit of $54 million. We guide our fourth quarter to be a revenue record of $440 million, plus/minus 5%, fulfilling our beginning of year target of quarter-over-quarter growth throughout the year with strong acceleration in the second half. This underscores the increasing demand momentum we see in our served markets and is as well the result of further manufacturing capabilities, namely the very first step of a large ramp, having repurposed with added capacity for factories towards new and/or stronger silicon photonics and silicon germanium capabilities. The fourth quarter guidance indeed demonstrates the burgeoning trajectory we are on. In the following minutes, we will present the successes that we share with our customers, driving top and bottom line growth over the years to come. Now to review our third quarter of 2025 revenue breakdown and discuss the key trends, please see Slide 4 as reference. Our RF infrastructure business continues to deliver exceptional growth, increasing its contribution to corporate revenue from $67 million or 18% of corporate revenue in the third quarter of last year to $107 million or 27% for the third quarter of this year. For the full year, we expect this business to grow by 75% with silicon photonics more than doubling from the 2024 $105 million. This significant expansion reflects the strong customer adoption of our advanced technologies and validates our strategic investments in these markets. The momentum we are seeing positions RF infrastructure, silicon photonics and silicon germanium platforms as a key pillar for our long-term growth, fortified and propelled by deep partnerships-based innovations with the foremost industry titans. Our silicon photonics business grew in the third quarter to $52 million, approximately 70% growth as compared to the third quarter of 2024. Market demand for silicon photonics continues to surge, driven by a stronger-than-anticipated ramp in 1.6T products on top of the robust 400G and 800G demand. We have expanded capacity with our advanced SiPho platforms in Fab 9, San Antonio, having shipped revenue wafers in the third quarter and expecting multiple thousands to be shipped in the fourth quarter of this year. We are in advanced stages of qualifications in Fab 2, Israel, expecting our first production shipments in the first quarter of 2026. In 300-millimeter, we have started wafer production for the innovative receipt products we announced last quarter and anticipate revenue contribution from 300-millimeter silicon photonics to start in the fourth quarter of this year. Our capacity growth is fully aligned with and spoken to by our customer demand outlook. Silicon photonics continues to increase market share over EML solutions given its significant cost advantage. SiPho typically requires half the number of lasers as an equivalent EML product with performance benefits, especially seen at 1.6T. As such, we anticipate this market share shift to be permanent. Hence, we are, at this point, going to add additional CapEx to address an even increased surging demand. Looking at next-generation 3.2T data rates, which will require a doubling of speed for each lane from the current 200 gigabit per second to 400 gigabit per second, we have multiple programs with industry leaders to both extend silicon capability, but we are also pursuing integrating indium phosphide modulators for our previous announcements with OpenLight and as well are investigating other material systems to ensure that our customer partnerships are not just ready, but leading the transition to next-generation requirements for 3.2T and 6.4T. In the past quarter, in partnership with Xscape Photonics and NVIDIA back start-up, we delivered the industry's first optically pumped on-chip multi-wavelength laser platform for AI data center fabrics. This innovation further expands our participation in the laser market, particularly for co-packaged optics applications, a significant adjacent opportunity, leveraging our high-volume SiPho platforms. We showcased these advancements along with others at a highly successful Tower Technical Symposium event in China with approximately 300 attendees, where eOptoLink delivered the keynote addressing Tower's role in supporting phenomenal market growth. Later this month, we anticipate another great TGS event in Santa Clara with Broadcom's President, Charlie Kawwas, delivering the invited customer keynote. Looking at silicon germanium, Silicon germanium transimpedance amplifiers and laser drivers are essential components for optical transceivers. The growth in SiGe demand is a function of data center build-outs, be it SiPho or EML-based solutions with an additional accelerator, the adoption of linear pluggable optics. Due to the elimination of the DSP in the LPO module, LPO requires both the driver for transmit and the TIA for receive to have an added function of continuous time linear equalizer, which significantly adds to the silicon area of each of the TIA and drivers, hence, nicely increasing the amount of silicon needed per unit. Multiple SiGe customers have begun material LPO production volumes, indicating a clear upward trend in this market. We started silicon germanium production in Fab 2 of our most advanced SiGe platforms and are seeing eager adoption by these customers, driving meaningful additional contributions to SiGe capacity and shipments projected to ramp throughout 2026 and delivering high volumes thereafter. In addition to infrastructure, we have secured a new silicon germanium wall noise amplifier designed for a Tier 1 handset customer with an initial ramp in Q4 '25 and then proceeding through 2026 and beyond, adding a significant new growth opportunity to our existing leading market share in optical transceivers as discussed, itself being a high-growth market. Moving to RF Mobile. It represented about 26% of our Q3 '25 corporate revenue. RFSOI has shown steady quarter-over-quarter demand increases with our more advanced 65-nanometer 300-millimeter platform at higher than 20% increase second half 2025 over second half 2024. We released this quarter an updated RFSOI technology that not only provides double-digit better Ron-Coff relative to our competitors as measured by multiple Tier 1 customers, but also reduces layer count by 15%, improving our customers and our margins, hence, enhancing our market share. This technology also allows customers the freedom to make a trade-off between the better Ron-Coff to enable a smaller die size or to have higher power handling. And as such, we are seeing strong customer traction, providing much confidence in multiyear growth. This quarter, we made important advancements in our sensor and displays technologies, which represented 14% of our third quarter corporate revenue and expected to show mid-teens full year-over-year growth. We received our first production PO for Q1 '26 shipments for OLED display backplane silicon and continue to enhance this offering, having added high-speed logic and high-speed SRAM capabilities, enabling support for 120-hertz refresh rates, critical for next generations of VR and MR applications. Medical and photography sensor revenue remained stable, while the majority of our growth and strongest position is in machine vision, where we supply the second largest player in this market in addition to other key customers. Power management represented 17% of our third quarter corporate revenue. Our power business has performed well, targeting a year-over-year growth of 15% with disproportionately higher growth for advanced 300-millimeter platforms, one driver of which being the strong ramp of the handset envelope tracker [indiscernible] volume expected to continue through the next multiyears. Targeting the growing market of data center power, we have recently demonstrated 16-volt operating voltage devices with more than 40% lower Rdson than prior technology and as well introduce new elements to our 1.2, 3.3 volt 65-nanometer BCD flow, improving power conversion efficiency aligned to our key customer needs. The wireless charger IC market is growing rapidly and demanding higher voltage LDMOS. To that end, working closely with lead customers, we have provided a 40-volt extension to our 300-millimeter BCD process. Specific to automotive and battery management applications, we have multiple engagements for a differentiated 140-volt reserve flow allowing higher voltages without the need for the added high expense of SOI substrates. We've continued to add to the competitiveness of this platform, greatly reducing the cell size through added features and optimized architecture. Moving to utilization. At years begin, we announced a repurposing of several of our factories, predominantly towards higher capacities for RF infrastructure, namely silicon germanium and silicon photonics. To upgrade -- to update on the progress, qualification and initial ramps are going well with hundreds of silicon germanium wafers shipped in Q2 and thousands in Q3 from Fab 9 in San Antonio. We met our first internal milestone of customer SiPho shipments in Q3 from San Antonio with several thousands planned to ship in Q4. Fab 2, Migdal Haemek, Israel is on track to ship our first and meaningful number of silicon germanium wafers in Q4 '25 and silicon photonic wafers in Q1 '26. Additionally, we expect to see our first production revenue for SiPho at 300-millimeter in Fab 7 in this present quarter, Q4. Therefore, while we are in the final qualifications and initial ramp of the repurposed fabs and added capacity, our third quarter utilization levels, Fab 2 in Israel operated at about 65% utilization. Fab 3 maintained our model full utilization of 85% with growing activities for SiPho capacity. Fab 5 was at 75% utilization. Fab 7, 300-millimeter was fully utilized, well above our 85% utilization model. Fab 9 was at 60% utilization. In summary, what a position to be in with all our core technologies demonstrating year-over-year revenue growth, the right technologies growing with the right customers. On top of this, our long-term silicon germanium leadership for optical transceivers, coupled with correct market insights, namely believing in the benefits of silicon photonics, having begun 8 years ago with the right partner and adding those who have become the most momentous adopters of this technology has enabled us by far to be in the lead position for silicon photonics manufacturing and development. This has proven timely to meet the soaring demands of data center technology road map and build-out. A present and future pathway for unprecedented growth for Tower. In close collaboration with our customers, we have advanced both capacity increases and technology road map deliverables real time, addressing the rocketing requirements for AI infrastructure. Specific to demand-driven capacity expansions, we target 2025 silicon photonics revenue to be above $220 million, up from $105 million in 2024 and very importantly, at a Q4 '25 annualized revenue run rate exceeding $320 million. The $320 million SiPho run rate is enabled by the very first steps in qualification and ramp of the previously announced $350 million investment. We have begun an additional investment of $300 million for further substantial SiPho capacity expansion, and next-generation capabilities in Fab 3, Fab 9, Fab 2 and Fab 7, this investment targeted to achieve full volume in wafer starts in the second half of 2026. The total capacity is fully aligned to and directly requested by our customers. The resulting capacity should increase our SiPho shipments by over 3x against our targeted fourth quarter '25 qualified utilized capacity. With that, I'd like to turn the call to our CFO, Mr. Oren Shirazi. Oren, please. Oren Shirazi: Hello, everyone. Earlier today, we released our quarterly financial results and balance sheet. For the third quarter of 2025, we reported revenue of $396 million, reflecting a year-over-year revenue increase of 7% and a quarter-over-quarter revenue increase of 6%. Gross profit for the first quarter was $93 million, 16% higher compared to $80 million in the second quarter, and operating profit was $51 million, 27% higher sequentially compared to $40 million in the second quarter. Net profit for the quarter was $54 million, 15% higher compared to net profit of $47 million in the second quarter and earnings per share were $0.48 basic and $0.47 diluted as compared to $0.42 basic and $0.41 diluted earnings per share reported for the second quarter. Newport Beach fab lease extension. As mentioned in today's press release, to address the continuous and growing SiPho and SiGe demand and given the full utilization of our Newport Beach fab, we are extending the Newport Beach fab lease by up to an additional 3.5 years beyond its previous 2027 term. An upfront lease payment of $105 million will be recorded as cash used for operating activities in our Q4 '25 statement of cash flows with corresponding impact on our balance sheet cash amount, while the resulted P&L impact would be, as announced earlier today, $6 million per quarter to be recorded over a 5-year period as required by GAAP in the COGS line. Hedging, I would like now to describe our currency hedging activities. In relation to the Japanese yen, since the majority of TPSCo's revenues is denominated in yen and the vast majority of TPSCo's costs are in yen, we have a natural hedge over most of our Japanese business and operations. To mitigate part of the remaining yen exposure, we are executing zero-cost cylinder transactions to hedge the currency fluctuations. Hence, while the yen rate against the dollar may fluctuate, there is limited impact on our margin. In relation to the Israeli shekel currency, while we have no revenues in this currency, since a portion of our cost in Israel is denominated in shekel currency, we also hedge a large portion of such currency risk by engaging 0 cost cylinder transactions to mitigate this exposure. Hence, while the shekel rate against the dollar may fluctuate, the impact on our margins is limited. Moving to our balance sheet and future cash and cash -- CapEx and cash plans. As I noted earlier, our balance sheet remains very strong as evidenced by the following indicators and financial ratios. As of the end of September 2025, our assets totaled over $3 billion, primarily comprised of $1.4 billion in fixed assets net, mainly comprised of fab machinery and $1.8 billion of current assets. Current assets ratio is very strong at about 7x, while shareholders' equity reached a record of $2.8 billion at the end of September 2025. Our strong financial position allows us to invest in strategic opportunities that support our corporate vision as follows: for our high-margin SiPho and SiGe business, we previously announced plans to invest $350 million to expand our capacity in our 8-inch fabs in Israel and Texas and in our 12-inch Uozu fab in Japan. This CapEx includes a large portion of capability CapEx for advanced development and high-end RF technology-related projects. 50% of this amount has been paid to date, while the remaining 50% are expected to be paid in the coming year. In addition, as we announced earlier today, we have decided to allocate an additional $300 million investment for capacity, growth and next-generation capabilities, mainly for machinery for additional SiPho and SiGe capacity growth for our 8-inch fab and for our 12-inch fab. This would put total SiPho and SiGe capacity and capabilities related CapEx plan at an aggregate of $650 million. All of these investments are fully reflected in our previously presented strategic and financial model. Under this model, we are targeting $2.7 billion in annual revenues at full loading of our existing fab and qualified capacity, including the previously stated capacity expansion plan, $560 million in annual operating profit and $500 million in annual net profit. That concludes my prepared remarks. Now I'd like to turn the call back to the operator so we can take your questions. Operator: [Operator Instructions] And we're going to take the first question and it comes from the line of Cody Acree from Investment Bank. Cody Acree: Congrats on the progress. Oren, if I can just get a quick clarification. You said that the incremental $300 million was already considered in your $2.77 billion total revenue expectations long term. Is that right? Oren Shirazi: Yes, yes. It may mean that we will achieve this target earlier than somebody previously expected. But yes, it is included. Cody Acree: Okay. So if no incremental upside, then what's the accelerated pace do you expect? I guess, what's the give and take of that extra CapEx? Oren Shirazi: Acceleration of achievement towards the $500 million net profit run rate, which, as you know, we are still not there. So we will accelerate the achievement. And of course, the accelerated achievement will enable higher profit sooner. Cody Acree: Okay. Great. And then maybe, Russell, can you just talk about some of the applications that you see driving the aggressive growth you're seeing in RF infrastructure? Russell Ellwanger: Yes. The biggest and strongest is just really the need for build-out, specifically, I think, AI-driven, but it continues for high volumes of 400 gigabit per second, very high volume of 800 gigabit per second in multiple formulations of it, both DR8 and 2xFR4s. And then as stated, a very high volume right now going into 1.6 gigabit where we're seeing somewhere about 30% of all of our starts being dedicated to that platform presently. So it's really just for the continual build-out of data center and a big movement right now going into the 1.6 G. Operator: Now we'll go and take our next question -- and it comes from the line of Tavy Rosner from Barclays. Tavy Rosner: Congratulations on the strong results. I wanted to ask 2 quick ones on the silicon photonics, please. You mentioned the leading position of Tower. So who do you see as your main competitors these days? And given the supply-demand imbalance at the moment, are you able or considering to raise prices? Russell Ellwanger: Abel is -- probably the answer to that would be yes. But considering no, we're very close with our customers. We understand what their needs are. We have long-term road maps, and we're not opportunistic if you would look at it that way of because demand is very, very tight to gouge somebody for an extra couple of wafers. I think that's the surest way to losing goodwill and partnership. What we are seeing, however, is extremely strong demand. And having stated that, that's the reason for after having invested $350 million, which is -- we're seeing the first signs of that ramp right now to increase another $300 million of investment. I had stated that we're targeting a Q4 SiPho revenue shipment run rate of over $320 million. And against the qualified capacity that we're shipping the Q4 against, we're increasing that by over 3x in start capability within the next 4 quarters, expecting to have that entire 3x plus available for starts in the second half of 2026. So that's quite a bit, if you were to say 3x of a $320 million run rate, that's quite a substantial growth in SiPho that we're projecting for ourselves. So having come from, what, plus/minus $28 million '23 to $105 million in '24. So this year, we're targeting over $220 million for the full year with a $320 million plus run rate in Q4, but bringing that to well above $900 million by target. And that target is really spoken to by customers. That's not field of dreams, if you build it, they will come. That's customers saying, please build it, we need the capacity. And so I think we sit very strong with our relationships with SiPho. Now also I stated that in the script that we're doing quite a bit on capability, not just for present 1.6T generation, but to make sure that our customers are in a leading position for the capabilities needed for 3.2T or for 6.4T, specifically the needs for a faster capable modulator of a 400G. And those activities are very real time. So we're investing real time on increasing capacity, which is really being demanded by the industry. And fortunately, as stated, we are by far in the leading position on manufacturing, but believe also to be in the leading position as far as developing next-generation platforms with the leaders so that we're both prepared well before the demand actually arises. Did that answer your question, I hope? Tavy Rosner: Yes. Just [indiscernible] the first part, do you see any changes in competitive dynamics? Anyone else deploying capital in that field to try and take some share away from you guys? Russell Ellwanger: I believe that most people would like to take share from us. It's a good growth market with good strong customers. The point is really to the question that you asked, to be opportunistic on pricing would be probably a good invitation for our customers to say, hey, we don't want to be a long-term partner, go look for someone else that you can leverage us with pricing on, and they don't have to do that. We're working very closely with our customers to be reasonable and to have win-wins on both sides. So -- but yes, I'm sure that there's others that are trying to eat into where we're at. It's very difficult, though, for somebody to break into our position right now. Fortunately, and really for this call, have with us Marco Racanelli, the RF activities report directly under him. I don't know, Marco, if you had any color you wanted to add to that. Marco Racanelli: Yes. I think on the pricing discussion, as you say, we're not taking advantage of the situation just because capacity is tight in the industry today. But we are adding value in our advanced platforms. And so in that regard, we do price higher technologies that deliver more value to customers. So in that aspect, over time, we do anticipate some price improvement as customers migrate to these more advanced technologies. And I will say as well that SiPho is already very accretive in margin. So it's -- we do get paid for the value that we add, and that's how things should be based. We stated very strongly that SiPho has a very strong benefit for our customers against EML. So for our customers to be using our platforms now, and if you look at a halving of lasers, it's a big deal. You have as well at this point then for the 1.6T, the use of a silicon modulator that's inside of the PIC itself versus needing an indium phosphide modulator that costs much more money and quite a bit of 3.5 area. So there's value in the platforms. And obviously, we both share in whatever value is created. Operator: And it comes from the line of Richard Shannon from Craig-Hallum Capital Group. Richard Shannon: Congrats on some very nice numbers here. Let me start off with a few questions here on silicon photonics. Russell, you made an interesting comment that I probably didn't transcribe in my own notes here very well, but you mentioned something about the shift to silicon photonics is permanent. Can you explain what you mean by that, please? Russell Ellwanger: What we stated in the script, it's very cost conducive against EML. It takes half the lasers. So if you look at twofold, the cost of 3.5 and also the capacity constraint of 3.5, that's both a big benefit to be able to use silicon photonics at the 400, 800, 1.6T and potentially, depending on development, even at 3.2T, going to SiPho, you have a silicon modulator, which is also very cost conducive against needing to have a 3.5 modulator. So yes, by stating that there's a cost benefit that certainly drives long-term stickiness. But in addition to the cost benefit, there's performance benefit as well. And when you combine cost and performance, that's really an absolute winning combination for market share stickiness, right? Richard Shannon: Okay. My second question is looking at 1.6 here. Obviously, we're seeing module makers talk about some nice ramps you're starting next year. What kind of mix do you expect to have of 1.6 versus slower speeds in your business, I don't know, next year or in a particular point? Just trying to get a sense of how fast this is scaling versus the older slower technologies. Russell Ellwanger: Right now, the 1.6 is close to 1/3 of our starts. So that gives you a feel for where we're at right now, and that's up from almost nothing at the beginning of the year, but a very quick ramp movement to the 1.6T. I would expect that it will go to over 50% within the first multiple quarters of the next year. Richard Shannon: Okay. That is helpful. My last question on silicon photonics here is following up on your comments as well as one of the questions here about reaching 3x. I think it was a capacity comment in silicon photonics from the run rate of this current fourth quarter. What kind of time frame do you expect to be able to get to your full utilization level on that? It sounds like you could be this year -- or excuse me, in '26, but I just want to get your sense of what you're expecting there. Russell Ellwanger: The demand is there or will be there by customer forecast. By planning, we should be fully installed within the first half of '26 and having all the tools up and running, being able to hit the full start capability within the second half. So the shipment level really depends at what point in the second half we do the wafer starts. You're typically be looking at somewhere of a 3- to 4-month cycle between the starts and the shipment, given whatever the PO -- the size of the POs are. So we certainly would foresee seeing a portion of this increased capacity coming into revenue within the second half of '26. But take into account that the first ramp that we're doing has not been realized yet either. So the previous $350 million investment is right now in its first stages of ramping. So within the first half and predominantly in the second quarter, we should see a very big pickup in our silicon photonics shipments revenue, and that should continue in the third and fourth quarter. Will we hit the full 3x or 3-plus x shipment capacity in 2026, that I really don't know. The demand is there. It's a question -- and I do believe that we'll start the full amount within the second half of the year. The shipment could drag on into Q1, plus/minus, but I think we'll see -- we should see a good amount of it. I mean that's why we're doing the investment. And certainly, that's why we're accelerating it. Richard Shannon: Okay. Perfect. One last question for me, I'll jump out of line. Oren, can you talk about kind of gross margin fall through in the next few quarters, obviously, knowing that silicon photonics is a margin-accretive business for you, and it sounds like that will be your major driver here. How do we think about this going forward here? And I want to get a sense of also when additional depreciation builds in here to think about that going forward? Oren Shirazi: Yes. So I think currently, the gross profit in Q3 was 24%, $93 million over $396 million, that's the actual number. And it should be better. As you see our long-term financial model and which has higher percentages. And usually, we speak about incremental margin of 50%. And of course, because of the cycle, it will be higher nicely, and it will be offset by 2 elements. One is the Newport Beach lease amount that we said that we will pay additional $6 million -- not additional, we will pay a total of $6 million. And the second is what you mentioned here correctly, the depreciation from the additional CapEx. The total additional CapEx is $600 million over 15 years. So it's about $10 million a quarter. But some of that already started. So it's a gradual ramp towards the $10 million. Operator: Now we're going to take our next question and it comes from the line of Mehdi Hosseini from SIG. Mehdi Hosseini: A couple of follow-ups, and I apologize, I joined the call late. I apologize if I'm repeating some of the questions already covered. Russell, when you look at the opportunities associated with transceiver, are you also baking in increased content? In other words, I'm under assumption that most of the opportunity is currently on the transmit side and whether receive side of transmitter would also give you opportunity to increase content. Russell Ellwanger: Certainly, to increase volumes. But had stated that really a very nice immediate upside was a pretty advanced platform that's shipping at 300-millimeter receive SiPho in the fourth quarter. And we'll go into some several formulations beyond what we're doing in the fourth quarter in 2026. So yes, the receive is incremental served market that right now, most -- well, everything we're doing other than this first 300-millimeter activities is for transmit. So very good question. Mehdi Hosseini: Is there any way we could kind of think about how this SiPho capacity increase by 3x would be split into increased content versus units of transceiver shipped to the end market? Russell Ellwanger: I'm not really sure exactly what you mean by increased content, but it's units being used in transceivers. So -- and at the 1.6 -- I'm sorry, go ahead. Mehdi Hosseini: Right, right. As you increase the mix of receive and transmit within the same transmitter, how much of that is baked into capacity increase of 3 times -- or 3x? Russell Ellwanger: Right now, the increase of 3x is including very little received. It's most all transmit. Mehdi Hosseini: So would you need to increase capacity again as your customers migrate to receive SiGe with SiPho? Russell Ellwanger: Yes, and we'd be really thrilled to do so. We have platforms that are doing it. I mean it's not that we're not proactive against it. It's that right now, the transmit demand is so high. But yes, receive, but receive really comes into very strong capabilities with DEMuX, and that's a big area that we're focused on. Mehdi Hosseini: Okay. Just a quick follow-up. In the longer term, where are we with packaging? I think a couple of quarters ago, you highlighted doing R&D, so you would extend your addressable market to include some packaging. Is there an update you can share with us? Russell Ellwanger: We have an activity with a leading packaging house focused on formulating a CPO, a full CPO. We certainly have other activities around NPO, big activities with through silicon via that's required for NPO and potentially for CPO as well. So we're making progresses there. It's not that there's a lot of CPO being used right now. It's not, but we're making good progresses. We also have other activities driving additional really strong capabilities. We're talking multiple generations down the road, but a really big program focused on 51.2T to have a very, very advanced modulation that would possibly be required within a PIC structure for whatever CPO would be used. Mehdi Hosseini: Okay. And these opportunities are more -- if they materialize into revenue more later this decade, it would take a couple of years for commercialization, right? Russell Ellwanger: I think it's a couple of years before CPO is strongly commercialized period, independent of Tower. Operator: And the question comes from the line of Lisa Thompson from Zacks Investment Research. Lisa Thompson: I was wondering if you could talk a little bit about 3.2T. It seems like the technology may not be able to go from 1.6 to 3.2. Can you tell us kind of where they are specifically with trying to solve that problem? And is there still a risk that an entire new technology might be needed? Russell Ellwanger: I don't think an entire new technology will be needed. There are certain issues even around the DSP that's being worked on. But no, I don't think a new technology. From our standpoint, the thing that's really required is the modulation, as mentioned at 400G. And as stated in the script, we're working on 3 different pathways depending on customers' needs and desires to do the 400G modulator. So from the pure modulation standpoint, I think we're addressing it very strongly with very good progresses from the entire transceiver, the build-out or CPO, I mean those are other issues, but I don't think that they're not attackable or solvable. So I don't think that 3.2T will be held up. Lisa Thompson: Okay. And let me just clarify, is the revenues from SiPho totally gated by capacity? I mean is the demand there if you can build it? Russell Ellwanger: Yes. Lisa Thompson: Okay. And then one small question. When are you going to start reporting Agrate utilization? Is that way far off? Russell Ellwanger: It needn't be. We could start reporting it any time. We just haven't. We're in the midst of the first ramp there. So -- but we could start reporting it. There's no reason that we wouldn't. Operator: And now we're going to take our last question for today. And it comes from the line of Richard Shannon from Craig-Hallum Capital Group. Richard Shannon: Great. Let me ask one more question here. Russell, kind of big picture, looking across your business with the obvious angle also inclusive of silicon photonics. How do you think about 300-millimeter? You obviously have some through a couple of joint ventures or whatever the right term is there with Intel and ST and then have some capacity in Japan here. But how do you think about acquiring more of that? It seems very important for you to have here and obviously, very important for silicon photonics. It's clearly a big growth driver here. Is this something where you can find more partnerships like you have with the 2 partners you've already announced in the past? Or do you see greenfield? Or how do you intend to address that? Russell Ellwanger: Richard, it's an excellent question, and it's one that we're focused on. No, I don't think that we'll be addressing it through partnerships such as what we have with ST or what we have with Intel, we'd be addressing it somewhat organically should we go forward there. But I think it's an excellent preface to be excited for our Q4 release, and we'll be talking more to it at that point. Operator: That does conclude our Q&A session. I would now like to turn the call to Mr. Russell Ellwanger for any closing remarks. Russell Ellwanger: Well, truly, thank you for continued interest in Tower. Thank you for the support of Tower. Certainly appreciate the questions that were asked as well during the call. Really, we're very excited to update you over the coming quarters as this more than 3x capacity that we talk about for the SiPho, SiGe growth as that comes online and to update you about the other progresses and activities. Again, very good question, a question about how this CapEx investment impacts the financial model, where Oren mentioned about it bringing in the time line of reaching certain revenue levels, and it's accelerating the time line at -- due to the SiPho was mentioned accretive margins, doing it at a somewhat different financial model. So we're very excited to update on all of these things. And as we get ready and prepare and give the end of year comments, which is always a summary of the year and an outlook of what we're doing in the coming years, I think there's many exciting things that we'll be talking about with you about the direction of the company and how all of these accretive actions really turn out to be a very strong benefit and a strong ROI. If we look at what we're doing with SiPho as far as CapEx, the really nice thing with the SiPho and the CapEx is that it's truly from the time that you start shipping wafers, you're dealing with a half year ROI on the CapEx that you put into the tools. So that's not from the time of ordering the CapEx, but from the time of actually being qualified and shipping wafers and doing that ramp, ROIs are very, very quick. So as Oren had stated, knowing that we're doing a very big expansion, knowing that, that expansion is spoken to by customers requesting the capacities and seeing the quick turn with this market on an ROI, you can see then how the timing of revenue is really greatly accelerated. And hope to give -- well, not hope, we will be giving much color on that as we give the end of year and the forward-looking statements when we release Q4. So again, very looking forward to going over that with you, an extremely exciting time for the company, extremely exciting, I think, for our customers and for us in the midst of customer partnerships with people that trust us and that look for us for their solution and for growing their own businesses. Very excited to host our 2025 Technical Global Symposium in Santa Clara next week, be November 18, open for all customers, very happy that you would be coming and listening to us. As stated, Dr. Charlie Kawwas from Broadcom will be giving the customer invited talk there. It should be extremely interesting. I've heard him speak at times before and a great speaker with a tremendous amount of knowledge and capability. Dr. Racanelli will be giving an in-depth overview. It sounds like contradictory, but an in-depth overview of all our technologies. And I'll give the introductory talk, really talking about the culture of Tower, where we're going and what is the basis of what I believe to be one-of-a-kind customer partnerships. Now in addition to this technical symposium, on December 10, we'll be participating at the 23rd Barclays Annual Global Technology Conference in San Francisco; on January 13 and 14 at the 28th Annual Needham Growth Conference in New York. And of course, any of you as investors or analysts that wish to have additional calls with the company, please contact Noit or [indiscernible] and very happy to accommodate those according to your needs and desires. So with that, I'll end the call. And again, thank you. A very exciting time. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Inovio Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Monday, November 10, 2025. And I would now like to turn the conference over to Jennie Wilson. Thank you. Please go ahead. Jennie Willson: Good afternoon and thank you for joining the Inovio Third Quarter 2025 Financial Results Conference Call. Joining me today on today's call are Dr. Jacqui Shea, President and Chief Executive Officer; Dr. Mike Sumner, Chief Medical Officer; Peter Kies, Chief Financial Officer; and Steve Egge, Chief Commercial Officer. Today's call will review our corporate and financial information for the quarter ended September 30, 2025, as well as provide a general business update. Following prepared remarks, we will conduct a question-and-answer session. During the call, we will be making forward-looking statements regarding future events and the future performance of the company. These events relate to our business plans to develop Inovio's DNA medicines platform, which include clinical and regulatory developments and timing of clinical data readouts and planned regulatory submissions of our request for priority review by the FDA of our BLA submission for INO-3107 and our expectation that the FDA will accept the submission by the end of 2025, along with capital resources, including the sufficiency of our cash resources, our expectations regarding competition, the size and growth of the potential markets for INO-3107, if approved, and our ability to serve those markets, the rate and degree of market acceptance of INO-3107 and strategic matters. All of these statements are based on the beliefs and expectations of management as of today. Actual events or results could differ materially. We refer you to the documents we file from time to time with the SEC, which under the Risk Factors heading identify important factors that could cause actual results to differ materially from those expressed by the company verbally as well as statements made within this afternoon's press release. This call is being webcast live and a link can be found on our website, ir.inovio.com and a replay will be made available shortly after this call is concluded. I will now turn the call over to Inovio's President and CEO, Dr. Jacqui Shea. Jacqueline Shea: Good afternoon, and thank you for joining today's call. Today, I'm very pleased to share some important updates on the key progress we've made recently. First and foremost, we have achieved our primary objective for this year, which is completing the rolling submission of our BLA for INO-3107. This represents a milestone in our work to deliver on the promise of DNA medicine for the RRP community and is our first BLA submission, an important moment for Inovio as well. We are now focused on the next steps in the process of bringing 3107 to patients. First, we expect to receive file acceptance by the FDA by year-end, and we have requested a priority review of the BLA, which, if granted, would provide for a potential PDUFA date around mid-2026. Second, we are continuing to drive commercial efforts forward in preparation for a swift and efficient launch, if approved. Although we will be second to market, we continue to believe that INO-3107 has compelling advantages that could make it the preferred treatment by RRP patients and their health care providers. Based on its clinical results and tolerability to date and the simplicity of its patient-centric treatment regimen. As we work toward a potential launch date for our first commercial product, we're also advancing our next-generation DNA medicine candidates. I'm pleased to report that landmark proof-of-concept data on our DNA-encoded Monoclonal Antibody or DMAb technology was recently published in Nature Medicine. We are also preparing for an upcoming presentation of promising preclinical data from our DNA encoded protein or DPROT technology at the World Federation of Hemophilia Global Forum. Both of these programs leverage a key strength of our DNA medicine platform, the ability to drive sustained targeted protein production within the body. We believe our DMAb and DPROT technologies have immense potential to treat multiple diseases and I look forward to sharing more on our progress in the coming months. Now I'll turn it over to Mike for some additional details about our regulatory progress and next steps for 3107. Mike? Michael Sumner: Thanks, Jacqui. This is indeed a pivotal moment for our RRP program and for Inovio. We completed the rolling submission of our BLA on October 30, submitting a strong application package that we believe clearly articulates the clinical efficacy of 3107 and demonstrates a tolerable safety profile in clinical trials to date. We submitted under the accelerated approval pathway and have requested a priority review. So we anticipate file acceptance by year-end. and if priority review is granted, a PDUFA date potentially mid next year. In the meantime, we are preparing for our pre-approval inspections for both in-house and external manufacturing sites. And you may remember that the FDA completed our clinical inspection in August this year. We are also working to finalize our confirmatory trial plans. We had previously aligned with the FDA on a design for a randomized placebo-controlled trial based on guidance indicating that a placebo control arm was required for an indication in patients who had two or more surgeries in the year prior to treatment. We now recognize that the landscape has changed following the recent full approval of Papzimeos including how the FDA might view data requirements to support product approvals. The agency has confirmed that we only need to have initiated the confirmatory trial and enrolled the patient prior to approval, which we believe is achievable based upon our progress to date. As you will recall, we are working with more than 20 U.S. academic sites and have made significant progress with site initiation activities, which should enable us to rapidly initiate our confirmatory trial and deliver results in a timely manner. We nevertheless want the opportunity to further discuss potential options for our confirmatory trial design with the agency and have submitted a request for a Type D meeting. With a potential approval approaching, I'd like to take a moment to highlight the strengths of our RRP program, strengths that have been foundational to our progress so far and that I believe have the potential to position 3107 as a paradigm-shifting treatment preferred by patients and their health care providers. First, we believe that there is a significant unmet need among the adult RRP patient community, even with an approved treatment on the market, and they deserve to have therapeutic options that work for them to reduce the number of surgeries needed to control their debilitating rare disease. Next, 3107 has a mechanism of action that elicited an antigen-specific T cell response that corresponded to a reduction in surgery in our Phase I/II trial. In fact, the majority of patients experienced fewer surgeries with most experiencing a 50% to 100% reduction compared to the year before treatment. That clinical benefit continued to improve for most patients in the second 12-month period post treatment without additional dosing. I also want to highlight that our innovative CELLECTRA administration technology is an integral part to the effectiveness of INO-3107, enabling the targeted localized delivery of a DNA immunotherapy and offering a simple, effective and well-tolerated treatment experience. Building on these foundational strengths, I think what really sets 3107 apart is its potential to address the biggest concern that RRP community has shared time and again. First and foremost, we know that RRP patients, every single surgery matters. As we shared at the European Society for Medical Oncology Congress recently, INO-3107 demonstrated continued clinical benefit with a persistent decline in the mean number of surgeries through year 2 post therapy. For patients, that means a substantially lower average number of surgeries per year, a 78% drop from baseline to year 2, meaning less exposure to the risks and costs of surgery. We also believe one of the key strengths of our DNA medicine platform is the ability to continue treatment beyond the initial treatment regimen, further enhancing the immune response as we have demonstrated with other HPV-targeted DNA medicines. We believe this provides an opportunity to consider a longer-term treatment strategy to potentially extend or further improve clinical response, which is important for a chronic often lifelong virally mediated disease. The RRP community has also been very clear in their goal to make surgery a last resort, not a first-line treatment. As I said earlier, that was top of mind when we set out to study 3107 and our treatment regimen stands in stark contrast to Precigen's recently approved product. In their clinical trial prior to the third and fourth doses, patients were scoped to identify any residual papilloma tissue. And if any was found, a surgery was performed to maintain what is referred to as minimal residual disease or MRD. This process is reflected in the dosage and administration section of the prescribing information. They report these surgeries are performed to mitigate the effect of the immunosuppressive papilloma microenvironment and maximize the chance of clinical benefit for their product. So what does this requirement for maintenance of MRD during the dosing window mean for patients? 83% of patients in their clinical study underwent at least one of these surgeries with 40% undergoing surgery at both time points. For the patients who later went on to have a complete response, 72% of patients or 13 out of 18 received surgery in the dosing window. These MRD surgeries during the dosing window were not counted against their efficacy endpoint as they only started counting surgeries following completion of dosing. In contrast, in our trial for 3107, we counted every surgery following the first day of treatment against our endpoint. We believe that every patient deserves a treatment that reduces the number of surgeries they face and that includes any surgeries that are part of a treatment regimen. That's just one of the core reasons we see so much potential for 3107 and believe it could become the product of choice for RRP patients and providers. With that, I'll turn it over to our Chief Commercial Officer, Steve Egge to provide an update on the commercial front. Steve? Thanks, Mike. Steven Egge: I'd like to start with why we're confident that 3107 has the potential to become the product of choice in the RRP market. A key advantage for 3107 is a positively differentiated product profile that I believe will appeal to laryngologists and to their RRP patients who are looking for an effective, well-tolerated treatment that minimizes exposure to the risks and costs of surgery, including during the treatment window. And this belief is founded on market research. The physicians we've spoken to were most interested in the fact that the vast majority of patients saw a significant benefit of 50% to 100% reduction in surgeries from 3107. And for many of them, that benefit continued to improve over time. Physicians were similarly impressed with the tolerability data, which shows that 3107 was generally well tolerated, limiting the impact on patients' return to daily life. This is very important when considering the treatment protocol includes 4 doses over a relatively short period of time. And in terms of the treatment regimen itself, 3107 offers a more patient-centric approach that takes into account real concerns of both physicians and their RRP patients. It can be administered in the physician's office without an ultracold chain requirement. The device is simple to use. And as Mike noted, very importantly, there's no requirement for minimum residual disease surgeries during the treatment window. We believe and the market research supports that there are many laryngologists and RRP patients who, given a choice, don't want to risk additional surgeries as part of the treatment that is intended to provide relief from surgery. And finally, as Mike noted, 3107 has been studied in a broad population of RRP patients, specifically in patients with as few as two surgeries during the year prior to treatment. We believe it's important for patients to start treatment as soon as possible after diagnosis to avoid the risk of irreversible damage from repeated surgery. Of course, in addition to these strengths, we'll learn from the launch of Papzimeos, and we will plan to be a fast follower in a market that we believe will continue to have significant unmet need when we enter. Moving now to a few updates on launch preparations. We've continued on pace with our regulatory progress. Since our last quarterly report, we've made noted progress on both the market research and operational fronts. We've continued critical research with payers, developed our initial pricing strategy, commenced price optimization work and completed targeting segmentation and product positioning work supporting a positively differentiated product profile. We're preparing for commercialization. We're finalizing contracts with our specialty distributor, specialty pharmacy and patient hub partners, finalizing our go-to-market model and advancing the build-out of our commercial organization. I look forward to providing more updates on our progress next quarter as we further advance our commercial preparations. We're planning to get out of the gate quickly if approved and I'm excited about the opportunity to bring this much-needed treatment to the RRP community. With that, I'll turn it over to Peter for a financial update. Peter? Peter Kies: Thanks, Steve. Today, I'd like to provide an overview of Inovio's financial results for the third quarter 2025 and provide a snapshot of the year so far. I am pleased to report that we have continued to align our resources to support the development of our lead candidate, INO-3107 and we will be focused on the critical needs ahead as we work towards a potential launch in mid-2026. As you can see here, we've continued to reduce our operating expenses over the past year. Operating expenses dropped from $27.3 million in the third quarter of 2024 to $21.2 million in the third quarter of 2025, a 22% decrease. When you look at the first 9 months of 2025, we reduced operating expenses by 25% compared to the same time period last year. Our net loss for the quarter increased to $45.5 million or $0.87 per share basic and dilutive, primarily driven by a $22.5 million noncash loss on fair value adjustments related to our warrant liabilities. As the fair value of the warrants fluctuate with our share price and other market inputs, this adjustment can result in significant variability in our reported net loss. However, the net loss from operations prior to other income and expense items for the third quarter of 2025 decreased 22% to $21.2 million from a loss from operations of $27.3 million in the third quarter of 2024. On a per share basis, both basic and dilutive, the loss from operations for the third quarter of 2025 dropped 58% to $0.41 per share from $0.97 per share for the third quarter of 2024. You can see similar reductions in our net loss from operations for the first 9 months of 2025 versus 2024 as we continue to conserve and direct our resources to support the 3107 program. We finished the quarter of 2025 with $50.8 million in cash, cash equivalents and short-term investments compared to $94.1 million as of December 31, 2024. We estimate our cash runway to take us into the second quarter of 2026. This projection includes a net operational cash burn estimate of approximately $22 million for the fourth quarter of 2025. These cash runway projections do not include any further capital raise activities that we may undertake. As a reminder, you can find our full financial statements in this afternoon's press release as well as in our quarterly report Form 10-Q filed with the SEC today. And with that, I'll turn it back over to Jacqui. Jacqueline Shea: Thanks, Peter. While our primary focus continues to be on 3107 and a potential launch mid next year, we see immense opportunity across the rest of our pipeline as well. We're excited about the potential we see for INO-3112 for head and neck cancer and INO-5401 for glioblastoma as well as a potential cancer prevention treatment in people with BRCA mutations. And while we're currently focusing resources on 3107, we look forward to exploring opportunities to advance those programs. And as I mentioned during my opening comments, -- earlier in the clinical pipeline, proof-of-concept data on Inovio's DMAb technology was recently published in Nature Medicine. This study led by the Wistar Institute in collaboration with Inovio, AstraZeneca and clinical investigators at the Perelman School of Medicine at the University of Pennsylvania was the first clinical demonstration that monoclonal antibodies, which are complex proteins, can be durably and tolerably produced within the human body without generating antidrug antibodies. Our DPROT technology builds on this research and our promising preclinical work evaluating the potential to expand into vivo production of therapeutic proteins will be presented this week at the World Federation of Hemophilia Global Forum, including our first research on Factor VIII production. Our deep approach aims to address some of the shortcomings of conventional therapeutic protein replacement treatments, including gene therapy approaches. As we work to bring the first approved DNA medicine to the United States, we are actively looking for future partnerships and development opportunities to advance these and other promising candidates across our pipeline. I'd now like to open up the call to answer any questions you might have. Operator? Operator: [Operator Instructions] And your first question comes from the line of Ted Tenthoff from Piper Sandler. Edward Tenthoff: When it comes to Papzimeos, have you guys heard if they've officially launched yet? And I'm wondering how big of a deal do you think this head start that they have is, especially in a market where it's going to be a lot about education and educating physicians about new therapeutic options. Jacqueline Shea: Thanks, Ted. Yes. So what we've heard from their public statements is that Papzimeos became available to order as of October 21. So Steve, do you want to talk about our expectations of being a fast follower and how we see our market entry? Steven Egge: Sure. So we would expect when we look at rare disease analogies and in the time period kind of between when they're out and when we would expect to be approved in mid-'26, if the current time line holds, we would expect single-digit penetration into the prevalent population in that time period. So at the time we enter, the majority of the prevalent population will be available. Obviously, the incident annual diagnosed patients will be available. And then over time, we've talked about, we would expect continued treatment or redosing also to represent an opportunity. So by the time we arrive, the vast majority of the opportunity will remain. And like we've talked about previously, we do expect to have the preferred product profile in this space. So over time, we think there's still a significant opportunity, of course, for 3107. Operator: And your next question comes from the line of Jay Olson from Oppenheimer. Jay Olson: Congrats on the progress. Our first question is, do you expect to have a similar label for 3107 versus Papzymeos? And do you think the requirement for debulking with Papzymeos is something that could present a key differentiator in the label for 3107? And then our second follow-up question is related to -- I think you mentioned you're still planning to run a pivotal study for full FDA approval. Is that study also required for ex U.S. approval? Jacqueline Shea: Thanks, Jake. Great question. So Mike, maybe I can ask you to take the label question, first of all. Michael Sumner: Yes, certainly. So I mean, from a patient population perspective, we studied a broad population. We had 2 to 8 surgeries pretreatment with INO-3107. And we demonstrated clinical efficacy across the entire range of surgeries. As you are aware, we have a well-tolerated product profile. So we do believe our data would justify a broad label similar to what Papzimeos received. Jacqueline Shea: So in terms of the minimal residual disease surgeries that Precigen's treatment regimen requires, we do think that, that's going to be a really key differentiator. What we're hearing from our market research is Physicians have questions around the logistics of scheduling those surgeries, so do payers as well. So we think in addition to what it means for patients, patients clearly don't want to undergo additional surgeries as part of the treatment regimen. But just from the logistical point of view as well, it also creates some challenges. Steve, Mike, I don't know if you'd like to add to that. Michael Sumner: No, I think you've covered it. That's good. Jacqueline Shea: And then in terms of the confirmatory trial, Mike? Michael Sumner: Yes. So I mean, obviously, you heard me say today that we have submitted a Type D meeting request to the agency to align on what that confirmatory study is going to look like. It's difficult to say exactly the value of that study to a European filing without knowing the exact design. But clearly, any data collected under -- in a rigorous manner is going to help define our efficacy and safety profile. So I think any study that we perform will be of value to our European filing. Operator: And your next question comes from the line of Sudan Loganathan from Stephens. Felix Ampomah: Congrats on the quarter. This is Felix Ampomah for Sudan. I have 1 or 2 questions. Number one, can you please comment on the sales force preparedness post 3107 approval? And then secondly, if 3107 is approved, given that it's a DNA-based medicine and also Papzimeos is virus-based, can you comment on switching from Papzimeos to 3107, if there wouldn't be any cross reactivity issues there? Jacqueline Shea: Great questions, Felix. So maybe, Steve, you can take the commercial readiness question. Steven Egge: Yes. So we're -- as I mentioned in the prepared comments, we're advancing our launch preparations. In terms of what a field force would look like, we are planning to have MSLs as well as an access team out ahead of approval to begin to engage in scientific exchange as well as work with payers on pre-approval information exchange. And then we haven't guided in terms of the timing on the sales force. You've probably heard Precigen has shared that they expect a sales team of 18 or 18 territories. And I think it's a safe assumption that we would be kind of in that neighborhood, but we haven't provided specific guidance there. But we're certainly advancing commercial plans and plan to get out of the gate very, very quickly post approval. Jacqueline Shea: Mike, the cross-reactivity? Michael Sumner: Yes, certainly. So there's certainly no reason to suspect there would be any cross-reactivity issues for patients who have previously received Papzimeos to receive INO-3107. The one thing we would anticipate, though, is it will be important to give the entire treatment regimen as clearly, we present different epitopes to patients. So they will need to have all 4 courses of the treatment. Operator: And your next question comes from the line of Ram Selvaraju from H.C. Wainwright. Eduardo Martinez-Montes: This is Eduardo on for Ram. I guess some questions related to the DMAb and the DPROT technologies. I was hoping if you could comment a bit on the levels of expression that you're achieving for the DMAb. I know that there was a SARS-CoV neutralizing antibodies that you guys published in Nature Medicine, as you mentioned. Curious about what kind of titers you guys are achieving and if that compares favorably to kind of existing recombinant kind of titers and doses and where you can -- how you're envisioning prioritizing programs within each of these technologies and platforms? Jacqueline Shea: Yes. That's a really great question. So we're excited around our DMAb technology. In the Nature Medicine paper, we described production of 2 different monoclonal antibodies against SARS-CoV-2 within the body. We were able to get sustained expression over 72 weeks. We didn't see any antidrug antibodies being produced. And this was a dose escalation and safety study, and we were able to see a dose response with an increasing amount of the DNA medicine being administered and we were able to increase the dose by giving -- sorry, increase the amount of monoclonal antibodies that we were able to detect in the blood by giving a second dose. So we were able to demonstrate in this first clinical proof-of-concept study, a concentration in the blood of about of over 1 microgram per ml. And that would certainly put us into the right range for a number of different antibody therapies as well as potentially some protein replacement candidates as well. But this was the first proof-of-concept study. We were able to show that these monoclonal antibodies were functional as well and as functional as the native monoclonal that we designed this program around. So we think this is very promising and has read through to production of other proteins within the body. At the end of the day, monoclonal antibodies are a complex protein to produce and we think this data bodes extremely well. Eduardo Martinez-Montes: Great. And any thoughts or comments on what specific programs you're going to potentially prioritize in further development down the line? Jacqueline Shea: Yes. So we've -- this week, we're going to be presenting our first data on some of the preclinical work on some undisclosed targets that we've been conducting. And this first target that we're presenting on is Factor VIII for the treatment of hemophilia A. As we're progressing these programs, clearly, the majority of our resources are going towards 3107 at the moment supporting the potential launch of 3107. And so we're going to be looking to advance these programs once we get into the clinic through partnerships or once we have additional financial resources available. Operator: And there are no further questions at this time. I will now hand the call back to Jacqui Shea for any closing remarks. Jacqueline Shea: Thank you. Before we close, I'd like to reiterate the key catalysts ahead. We're now focused on the next milestones for 3107, which include expected BLA file acceptance by year-end and a potential PDUFA date in mid-2026. We'll also finalize our confirmatory trial design with FDA and have this study underway before approval. And we'll continue to advance our commercial preparations so that we'll be ready to launch our first commercial product in the year ahead. In closing, I'd like to take a moment to thank all the patients, advocates and doctors of the RRP community who have made our progress with 3107 possible. You are at the heart of our efforts to deliver on the promise of DNA medicine and our mission to provide every RRP patient with effective and durable relief from the devastating cycle of surgical interventions. As always, we're moving forward with the patient in mind, knowing that every day and every surgery matters. Thank you for your attention, and good evening, everyone. Operator: And this concludes today's call. Thank you for participating. You may all disconnect.