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Laura Lindholm: A warm welcome, and thank you for joining Cloetta's Q3 Interim Report Presentation. I'm Laura Lindholm, the Director of Communications and Investor Relations. Our CEO, Katarina; and CFO, Frans will first go through our results, after which we will move to the Q&A [Operator Instructions] Over to you, Katarina. Katarina Tell: Thank you, Laura. I'm very proud to present our third quarter results. We have now successfully established a strong uplift in profitability. We are steadily approaching our midterm target of an EBIT margin of at least 12% by 2027. And this quarter is an important milestone on our continued focus on driving profitable growth. But first, over to the agenda. Today, it looks as following. I will start with Cloetta in a brief. Then I recap on our strategic framework and our updated financial targets that we shared earlier in this year. After that, I move over to our Q3 highlights. Our CFO, Frans, will then walk you through our Q3 financials. And as always, we wrap up with a Q&A. For any new listeners on the call, let me start to tell you a bit about Cloetta. Today, we are the leading confectionery company in Northern Europe. We were founded in 1862 and have for over 160 years, been spreading joy through our iconic brands, and we are planning to stick around for at least another 160 years. We have grown a lot since the early days, and now we have operation in 11 countries. In 2024, we hit SEK 8.6 billion in sales, and our operating margin was 10.6%. As I already mentioned, we have now established a strong uplift from this profitability level, which we will talk more about today. Over half of our sales come from our 10 biggest brands, and we call them our Superbrands. Despite the current geopolitical uncertainty, our company remains largely unaffected. This resilience is due to several key factors. First, we operate in a noncyclical market with stable consumer demand, which provides a solid foundation even in uncertain times. Second, our strong and trusted brands gives us the ability to adjust prices when needed without losing customer loyalty. Third, our broad product portfolio allow us to offer a range of alternatives, helping us adapt quickly shift in consumer behaviors. And finally, our primary focus is on Northern Europe, a region that is generally less impacted by global geopolitical tensions compared to other parts of the world. Together, these strengths position us well to continue to deliver stable performance and long-term value. I will now briefly walk you through how we bring our vision to life through our strategic framework and then in relation to this, also our updated financial targets. For more detailed information, please view the recording of our Investor Day available on our website. So let me start by talking about our vision at Cloetta because it's really capture what we're all about. Our vision is to be the winning confectionery company inspiring a more joyful world. And that is not just a nice phrase on a wall. For us, it's really a commitment to excellence, to innovation and most importantly, to the joy we bring to people every single day. This vision is what guide us, and it is what pushes us to keep improving, to stay curious and to lead the way in our industry. We have created a clear strategic framework to guide us forward. And right at the center is, of course, our vision, to be the winning confectionery company inspiring a more joyful world. But having a vision isn't enough on its own. We can't chase every opportunity or be everywhere at once. So we have made some choices that will help us scale, grow and make the biggest impact where it matters the most. We have 5 core markets, and they are Sweden, Denmark, Norway, Finland and the Netherlands. Around 80% of our total sales today come from our core markets. Our first strategic priority is to focus on our 10 Superbrands in our core markets. These are the brands with the biggest potential and by focusing on expanding strategy, we can unlock new opportunities, grow and drive scale. I will today also give you 2 examples of how we work with them. Next, we are looking beyond our core markets. We have identified 3 high potential markets outside our core markets, and they are the U.K., Germany and North America. By focusing more and making clear choices, we believe we can truly make a difference and achieve strong growth in those markets. Our third priority is to step up marketing and innovation. The market is constantly evolving, and we need to stay ahead, not just reacting to trends, but actually helping them to shape them as well. For the past 7 years, we focused purely on organic growth, but now we are open to exploring M&A as long as it fits our strategy and makes good business sense. That said, any M&A would be an accelerator and is not built in the plan to reach our financial targets. To make all of this happen, we also need the right enablers in place. That means having a simple, efficient operating model and a structure that supports our goals. During Q2, we announced changes to our organizational structure, including some reduction in positions and updates to our group management team. The goal is to better align with our strategy and move faster, but also to support our profitability journey, and we have now finalized all major project milestones. People and our culture are, of course, key to our success. Without that, everything else is just a black box. Our culture is the foundation of everything we do, and we are committed to build a strong, capable and joyful organization. I would like to take the opportunity to thank all my colleagues for keeping their eye on our progress and delivering results, especially during the last 6 months of transformation. Now I'd like to share a few concrete examples of how we are bringing our strategic framework to life. Today, I would especially like to focus on our first pillar, and that is win with Superbrands. One of our key focus areas here is expanding our top 10 brands into new categories, sales channels and core markets. In Q3, we initiated 2 now ongoing launches for Malaco, a super brand within the candy category. The launch of Fruit Drops builds on the trend of consumers increasingly looking for sustainable products and with more natural ingredients. The launch is still ongoing, but both pouches are already available in Sweden. One is available in Norway and both will be launched in Denmark in the first quarter next year. Fruit Drops are vegan and do not include artificial colors or flavors. They contribute to our sustainability agenda and are also aligned with our targets to offer products that match the evolving consumer preferences. The other ongoing launch I would like to highlight is the Chewy Soft Bites. Consumers are seeking for exciting sensory experience and Chewy Soft Bites certainly reflects this trend. This is another multi-market launch, which builds on product that was already proven consumer concept in the U.K. They have been in the Dutch market for a bit more than a year and are now launched in Denmark, Norway and Sweden. And the 3 bags are already now among the top 10 most sold novelties in Denmark in 2025. My other example of our achievement within Superbrand is related to the pastilles category, which is around 10% of our total sales. In the quarter, we were very successfully launched a limited edition of Läkerol hot pepper pastilles in the Nordic. The target of this limited launch was to bring new consumer both to the brand but also to the category. We more than succeeded as more than 40% of the consumer who brought the products were new to the pastilles category. Linked to our strategic priorities and vision, we updated our long-term financial targets in March this year. With a clear plan, we have stepped up our long-term organic target from 1% to 2% to 3% to 4%. Our long-term adjusted EBIT target will remain at 14%, but our plan shows that we should at least reach 12% by 2027. Historically, our net debt target has been around 2.5. Considering our consistent achievement of this target in recent years, we have set a new net debt target below 1.5. However, should a compelling M&A opportunity arise, we might temporarily exceed it. Last but not least, our dividend policy have moved from a payout without a range of 40% to 60% to above 50% of the profit after taxes. And now a short quarterly update. As previously mentioned, our strong uplift in profitability continues, and I'd like to highlight some key takeaways. We are committed to profitable growth, and this is also reflected in this quarter. We reached 11.9% in EBIT margin, which brings our rolling 12 months profitability to 11.4%. We have now a strong uplift in profitability established, and we are steadily approaching our target of at least 12% by 2027. In this quarter, we delivered stable, profitable and organic sales growth with some regional variations. The Nordic region showed strong organic sales growth, while the other European markets faced some short-term challenges due to slowing inflation and related market dynamics. We continue to grow double digit in the U.S. Inflation continued to slow down in all our European markets and retailers and food industry manufacturers experienced some pressure related to food pricing. At the same time, lower inflation creates opportunities. And one example is that more consumer most likely will return to the chocolate category. With our broad portfolio and our new strategic framework, we have a clear path towards our long-term organic growth target of 3% to 4%. As previously mentioned, our new strategic framework is in place and all our major milestones linked to our operating structure are also achieved. With strategy and most of the structure now in place, we expect to see the result of this work during next year. And now it's finally time for the financial, and I hand over to Frans, who is eager to walk you through both our third quarter and first 9 months financials. Frans Rydén: Thank you, Katarina. So yes, let me take you through some more details here. But again, I would also summarize this as stable growth, strong uplift in profitability, strong cash flow resulting in a strong financial position. So starting with the net sales, as I always do. So in the quarter, we delivered stable, profitable organic sales growth of 1.3%, which brings the year-to-date organic growth to 2.2%. And I'm emphasizing profitable here, and that is key and a key aspect to understand the growth in the quarter, and I will come back to that. Now within this growth, as Katarina highlighted, we had strong growth in the Nordic region, a very strong growth, as a matter of fact, as well as in North America, but that growth was partially offset by the rest of Europe as sales were affected by changing retailer dynamics. Now we don't report sales or growth by market. But in the report towards the back, you have a table there where we do report percent share of total sales by market. Now it is a bit of a blunt tool to understand the detailed growth in the quarter. But if you look at the year-to-date, you can get a view of what I just shared. So if you add up the percentages, you can see that the sales outside of the Nordic region have dropped from accounting for 34% of our total net sales last year, year-to-date Q3 last year to only 31% of our total sales Q3 -- Q3 year-to-date this year. So it's a drop of a couple of percent there, and that's sort of an indication of what I just shared. And that is net of the fact that the strong growth we see in North America, of course, counts in the reporting as outside the Nordic region. Now one of the benefits of our portfolio is not only that we play in various confectionery categories, but also that our sales are across a number of markets. And I would argue that a continued stable profitable growth despite the rest of Europe faring a bit worse lately is an effect of that. Now without going into too much details by market here outside of the Nordic region, I'd like to say that it's well known that the general inflation has put a strain on consumers, and that in turn has affected retailers and the trade dynamics have changed, and there are both societal and political pressures relating to food pricing. And those pressures picked up as some of the commodity cost inflation slowed down over the summer, including a very much publicized cost of cocoa coming down from its historically high peak. So not all costs have come down, of course, and there is a delay when changes start to affect manufacturers. But in this environment, our strategy has remained to drive profitable growth also when it has meant giving up some short-term sales. And the context here is very important, and that context includes that we are still rebuilding margins that we used to have but have lost in the Branded Package segment. And we are rebuilding those margins through growth and scale through cost controls and efficiencies and while continuing to invest in marketing and innovation, but also through fair pricing. Now before moving on to the sales by segment and the profitability, let me also state that the reported sales were affected by currency headwinds as the Swedish krona strengthened. Nonetheless, the sales of SEK 2.177 billion that you see in the left graph on the last column of the left graph, that is our ninth consecutive quarter of sales above SEK 2 billion. And it is actually a step-up in sales of almost SEK 100 million versus quarter 2 this year. And as you recall, quarter 2 really benefited heavily from the Easter phasing. So we are pleased with continuing the upward trajectory in our sales. Separately, note that the structural changes in the quarter is zero, and that is as the divestment of the Nutisal brand took place in June last year and therefore, no longer feature in the quarterly comparator, but of course, it's still there in the year-to-date. So moving on to the sales by segment and showing -- actually, starting with the base of the slide today is the Pick & Mix segment, which grew a strong 9.4% in the quarter. And just, I mean, let your eyes feast over those previous quarters here. I mean it is very, very nice. Now that growth was then partially offset by the branded package shown above, where organic sales were down 1.8%, which is actually quite similar to the average development in the first half of this year. But again, as mentioned, related to the development outside the Nordic region. And this is arguably another angle to the strength of our portfolio that we have this portfolio where we can pick up on shifts in consumer behavior, whether that is at the macro level with consumers increasingly loving our Candyking Pick & Mix offering or at the micro level, allowing us to lean on other categories as we did when the price of cocoa spiked. I think it's also a sign of strength that consumers have continued to buy our product as prices in retail have gone up. And also for Q3, our volumes, they're actually down only about 1%. And if I would exclude chocolate in that, then our volumes are actually flat to growing. Then unpacking the branded package sales a little bit, maybe pun intended there, the growth is affected by our continued optimization of the product portfolio to improve profitability. And I'll come back to that as well. But primarily, this is about us staying firm to our strategy of growing profitably rather than to grow at any expense. And the focus on profit is obviously best reflected when we look at the profit. So let's move on to that. So we're very pleased with the result in the quarter to deliver another uplift of operating profit margin adjusted to 11.9%. That's 110 bps better than last year, and it lifts the year-to-date margin to 11.5% and the rolling 12-month margin, as Katarina mentioned, to 11.4%, and that is the strongest since 2019. 11.9% also makes this quarter the fourth consecutive quarter with a margin above 11%. And we can compare that to the prior 3 years where the average margin was, let's say, in the 10%-ish range, but where no individual quarter actually reached 11%. So when we talk about a permanent uplift in operating profit margin, I think that is a fair representation. Obviously, it's also interesting to note that we are consistently getting closer to our midterm target, which is to reach a margin of at least 12% no later than 2027. I want to break this down a little bit further. So if we look at the key drivers for the improved profitability, they are, number one, carryover effect of fair pricing initiatives that we took last year and a little bit at the start of this year, but it's not new pricing in the quarter. Secondly, it's about cost control and efficiencies. And both segments are favorable here. For Pick & Mix, it's on account of efficiencies in merchandising and fixtures. And on the branded package side, again, the portfolio optimization and net revenue management comes back. And as a comment on that, when we optimize the portfolio, it is about replacing slower-moving, lower-margin products with something better, and that helps not only our business, but also our customers by providing a product that the consumer wants even more of. So it's really a win-win-win situation. And then finally, on cost control and efficiencies, both segments benefit from savings from the change to the organizational structure to benefit our new strategy that Katarina mentioned. Then the volume mix, it is unfavorable. And within there, you do have an unfavorable mix as Pick & Mix grows faster than the Branded Package segment but that is partially offset by a favorable mix within the branded package on account of the focus of profitable growth, as mentioned. You also have the effect of the slightly lower volumes, which is sort of the 1% that I mentioned, but also given lower production, it means that there is less volumes to spread the fixed cost over. Finally, and maybe most importantly, for the long-term outlook, the step-up in profitability is not due to any reduction in the investments behind our Superbrands. And I do want to add that at SEK 259 million, as you see in the last column in the left graph, that is actually our highest ever quarterly profit in Swedish krona. In this strong profit, I can also mention that we -- it doesn't include any reimbursement for costs that we incurred in Q1 2024 as a result of the isolated quality incident at that time due to one of our suppliers. But that process is ongoing, and we now estimate to receive such reimbursement in, let's say, in the next 6 months. So with that, let's step up and look at the profitability by segment and see if that actually reflects what I just said. So over and under, you see that both segments margin improved in the quarter, both over last year for the quarter and also year-to-date. The Pick & Mix segment on the lower half, where quarterly margin again is above 9%, also shows why we, during the Investor Day, raised the margin target for Pick & Mix from the prior 5% to 7% to what we now have now is 7% to 9%. And for the Branded Package segment at the top, we improved the adjusted operating profit to 12.9%. And while that is a good thing, we also know that this margin used to be above 14%, and we will continue this work as outlined in the Investor Day through the focus on our Superbrands in our core market through stepping up in the effectiveness of our marketing and innovation and to continue to recover margins there. That said, let's move to the sales, general and admin. Here, you see that costs are down both in absolute and as a percent of sales. But firstly, the strengthening of the Swedish krona in the quarter, which we earlier saw suppressed our reported sales. It does have the opposite effect when we translate our foreign incurred SG&A to Swedish krona. But then you have the net effect of cost controls, offsetting annual salary increases and other inflation, while again not driven by reduced investments in our Superbrands. Now with respect to the cost control, the quarter does benefit from savings from the restructuring program for the new organization. And here, I can reconfirm what we have shared earlier that we expect to achieve up to 20% of the annualized savings of SEK 60 million to SEK 70 million in the second half of the year and the full effect as of the first quarter next year. On the year-to-date, I want to mention the items affecting comparability there of SEK 52 million in lower cost, and that SEK 52 million is the net effect of the onetime impairment of Nutisal that we took last year when we sold it and then the provision related to the organizational changes this year, which is mostly severance cost. So since the provision this year is smaller than the impairment last year, the items affecting comparability comes out as a favorable variance here. Coming then to our cash flow. As mentioned in quarter 2, our normal seasonal pattern is to tie up cash in the first half and generate cash in the second half. And that holds very much true as we look at quarter 3. So in the quarter, we generated a very healthy SEK 339 million in free cash flow. On a profit after tax of SEK 189 million, so almost double the profit. The key driver of the free cash flow is, of course, the stronger operating result, but then a favorable working capital management. But also as the comparator where last year, the steep inflation meant a much less favorable working capital. Last year in Q3, we actually opened with extra payables on account of purchases to replace raw materials with quality defect, which was again the same thing as this isolated quality issue that I mentioned earlier. Now this year, of course, we don't have that problem. Our CapEx in the quarter at SEK 41 million remains on the lower side. And as presented during the Investor Day, is that we expect investments will start to rise in the future to secure growth and profit. Now in this strong free cash flow, -- could it be just phasing from Q2? Well, the answer is no because actually, on a year-to-date basis, this is the first time ever that we've exceeded SEK 0.5 billion in free cash flow. It's actually strong -- so it's the strongest we've had year-to-date. It's more than 50% higher than year-to-date last year. So obviously, it's not a phasing. Finally, with our strong financial position, we have also paid back SEK 800 million of loans to our credit institutions, and you see that in the graph at the top and to the right, which brings me to my last slide on financial position. So we closed the quarter with a net debt to EBITDA of 1.1. So again, better than our new lower target to be below 1.5 and 1.1 is the same we delivered in Q1 this year. And these 2 quarters are tied for the gold, 1.1 is the lowest ever we've had for Cloetta. And the result is a combination of the strong cash flow that we looked at, resulting in lower net debt, bringing it down to SEK 1.4 billion. That's almost down SEK 0.5 billion versus Q3 last year. And then, of course, the improved earnings that we have now spoken quite a bit about. In quarter 2, leverage went up a bit as we paid dividends. So it's great to see that it's back down again to an all-time low. And actually, on the note of dividend, it is really encouraging that our year-to-date profit after tax of SEK 558 million is already SEK 1.96 per share, and that's only after 3 quarters, mind you. So we're pleased to have created good conditions also with respect to our fourth financial target on dividend in addition to top line growth, the stronger EBIT margin and keeping leverage low. Finally, we have plenty of access to additional unused credit facilities and commercial papers based on the new credit facilities entered into during the quarter and as shared earlier in the press release. So access to cash, together with our cash on hand totaled about SEK 2.5 billion as we closed the quarter. So for yet one more quarter, I conclude that our financial position is very strong. And with that, over to you, Laura. Laura Lindholm: Thank you very much, Frans, and thank you very much, Katarina. We already have questions in the chat, but we will start with the telephone lines. [ Valentina ] over to you and for our first caller. Operator: [Operator Instructions] The first question comes from Adrian Elmlund from Nordea. Adrian Elmlund: Adrian here from Nordea. Can you hear me? Katarina Tell: Yes. Frans Rydén: Yes. Adrian Elmlund: Very good. Pleased to see the results. I have a couple of questions, 3 of them, I think. So first off, [ Berry Kelevot ] noted this morning that they expected some mid-single-digit percentage decline of their sales and volumes in cocoa products in the upcoming financial year. So this is, as you know, due to the continued pressure of high cocoa prices. But kind of my question here to you is, do you believe that the market has priced in the inflated cocoa prices, meaning basically what price per tonne do you think is priced in? Looking at the chart now, I think that we're seeing some USD 6,500 per tonne at the moment. Just want to see your reflections on that during the overall market. Frans Rydén: Yes. So I'm just thinking how to reflect this. I think it's -- I think the way that we like to think about this is that, obviously, when costs are coming down, which they have, at least for the cocoa, but not all commodities are down. Sugar, for example, is actually up. And cocoa is not really cheap based on historical levels. But when they're coming down, that's a good thing. It means that over time, the cost for the consumer will be lower, they'll come back into the category. So we think that's a very good thing. Now at the same time, it doesn't happen immediately. It depends on how much inventory you have, what kind of contracts you have in place, how the rest of your business looks. And of course, we look at the competitors and we -- when they publish their results, we can see what is happening in their business. But I don't really want to comment on their businesses instead focus on ours. And ours is simply the following that, that we will continue to execute our fair pricing, which means that when costs go up, we take pricing. And when they come down, we roll back. But of course, it has to be done in a responsible manner as well together with the retailers. And that, I think, over time, will serve everyone really well. And I think what we will see is that consumers that maybe have moved into, let's say, chocolate muffins and similar products when cocoa was very expensive and they've given up on their chocolate tablets, they'll come back into the confectionery category. But exactly how much has been priced in, I think that varies really between the different players in the market. Adrian Elmlund: Okay. A second question here. I want to dig a bit into the margin contribution here between the Nordics and the rest of Europe. Kind of what I'm looking here is trying to understand how much of the margin uplift in the quarter is thanks to a stronger geographical mix, contract your own margin enhancing activities or sort of product mix? Frans Rydén: Okay. Fair enough. So maybe given that we don't actually publish margins by market, but I think what I could help you here is to start with that. So we are Northern Europe's leading confectionery company. It's not just a slogan. We have very strong relationships with our customers that go back decades and decades, maybe hundreds of years in some cases. And our position with the consumers is unparalleled, I would argue, for the products that we play in. So we're very, very strong there. Whereas in the rest of Europe, we're more of a challenger, which is where the opportunity comes from. Here's what we can make something different out of our business. But obviously, we are much stronger in the Nordic regions than before. Now I think if you think about the 2 big markets there like Germany and U.K., I think it's fair to say that Germany is perceived as a market with a lot of strong discount retailers and that you have to work hard for your margins there. But for the U.K. we have in the past actually reported a little bit around the profitability there. I think it was as late as Q2 this year and certainly in last year as well, where we said that we had some negative taxable results in the U.K. And as a result, we had deferred tax provisions that we chose not to recognize. So we basically have said that the U.K. result is not good. So if you think about the U.K. having negative taxable results and the fact that Germany is a tough market, you could see how there is a favorable mix when the Nordic European countries are growing faster. But beyond that, I can't share you a number today. Adrian Elmlund: That really helps. Kind of a follow-up question to that, if I may. like how confident are you that the sales pressure that you're now seeing outside the Nordics, as you stated in the CEO words, are short term? And why are you not seeing similar patterns in the Nordics? Do you think that can happen? Katarina Tell: Yes. I can answer this one. So as mentioned also in the CEO word is, of course, we have -- we launched our new strategy during the spring. We have created a structure, done some reorganization. And now we are -- the strategy are set. The organizational setup or structure are more or less done. So we expect to see the result of this next year. And as you remember, we have to grow with the Superbrands, and then we have to grow beyond core markets. And here, we see still some opportunities where we believe we will have growth in U.K., in Germany, in North America. And then we also have the third strategic pillar, and that is to grow through innovation and excel in marketing. We believe in the strategies, and we believe also we have the structure in place to deliver on the strategies for next year, if that answers your questions. Adrian Elmlund: Okay. I have one final question. Sorry for taking multiple questions here. But the final one. Regarding the pilot stores here in the U.S., you said that you're going to give us some news before the year-end. But could you share anything with regards to how these insights into the consumer preferences, as you stated, have -- like what feedback have you gotten? It basically implies at least that you've gotten some positive feedback. Katarina Tell: So it's very much about learning how is the best mix, how are the consumers' behavior in the store and so on. And this is, of course, important when you roll out a concept to have those learnings going forward. Laura Lindholm: Adrian and Valentina, it seems we have no further questions from the lines. Could you confirm that? Operator: We have no more questions from the phone. Laura Lindholm: Thank you very much. Then we move over to the chat. Speaking of the U.S., we have a question from Danske Bank. The U.S. market size, how large is the U.S. as a percentage of your total sales? Frans Rydén: So we actually shared for North America is what we've shared, and I think we'll stay with that when we have the Investor Day. So in 2024, it was about 3% of our total sales that we had direct sales in there. Of course, products tends also to enter maybe in a more indirect way to the U.S. market, but we have 3% sales. And since then, as you know, we've been growing in double-digit numbers. So simply put, should be north of 3% sales. Laura Lindholm: Thank you, Frans. And then a second question also from Danske Bank about raw material costs and margin outlook. With raw material like sugar and cocoa down year-to-date, how do you see this impacting your cost and sales in 2026 on this, all else equal, do you expect margins to be stronger or weaker going forward? Frans Rydén: Well, so our midterm target is to reach at least 12% by 2027, and we're not there yet, 11.4%. So obviously, we are intent to improve on the margins. And as I mentioned, on the Branded Package segment, we used to be above 14%. So it's -- this is not greed. This is actually recovering the margins that we have lost, and we will do that by continuing to invest behind our brands and in innovation. And it's a critical part of the new strategy is about stepping up our marketing innovation. I think it's going to be a win-win-win again for us, for our customers and for the consumer. So the margins will improve. Then how does the raw material and pricing go into this? So we'll stay with what we said before here, which is that we will price for the cost. And of course, in the past, we've also lowered the prices at times when they have come down, but we have to look at the whole portfolio, and we have to also look at the variance versus when we took pricing the last time in that market because the pricing is not -- let's say, it's not always exactly going at the same time in each market. It depends on the contracts. So we will price for cost. Laura Lindholm: Very good. And then the next question also from Danske Bank is about the IKEA global partnership. How has your global partnership with IKEA developed? Do you think which refers to the quarter? Katarina Tell: Yes. So the cooperation progress according to plan. So the last year, we had an agreement with IKEA in Sweden, but it was only limited to IKEA Sweden. And this year, we signed a global contract with IKEA. I said, it's progressing according to plan. And in the next quarterly release, we will give you a more detailed update about how it's progressing with IKEA. Laura Lindholm: Thank you, Katarina. And then also 2 more from Danske Bank. First one is about the M&A pipeline. How does your acquisition pipeline look like? Are there any companies you are currently in discussion with? Frans Rydén: Number one, [ Emmanuel ] thank you very much for asking a lot of questions. It's a lot more fun. But now unfortunately, obviously, we can't get into any specifics. But I think the most important aspect here, and Katarina emphasized it in the beginning as well, which is that M&A for us is an accelerator. We can deliver these financial targets without an M&A. So we're not going to jump into something unless it really makes business sense, and it helps drive the strategy forward. So -- but of course, we are open to it, and we're being approached and we're looking at things, but we're not going to just jump on to something. Laura Lindholm: Very good. And then the final one from Danske Bank. On Pick & Mix, how much is volume growth versus price? Any particular market you want to highlight during Q3? Frans Rydén: So what we've said in the past is that we don't separate price from other things. And part of the reason for that is -- and Pick & Mix is a great example because the pricing model will look different between customers depending on what type of assortment they have contracted with us to carry. For example, if there's more chocolate or less chocolate, it has to do with how often they want our merchandisers to refill and clean the shelves, if this should happen over weekends to have continued strong sales on Saturdays, not only on Fridays and whatever -- like there's a very complex setup. And if I would give you a price number, then every customer who had seen a lower price increase than that will be happy and they will be silent. But everyone who thought that they got a higher price increase than that, they will be calling us and complaining. So it's not really a fair number to give. I think what I can say, however, is that Pick & Mix, and we said this before, is clearly on consumer trend. It's about individualization. It's about plastic free, it's in-store, arguably entertainment. Consumers spend a lot of time in front of Pick & Mix shelves when they pick their fruit and their meat, where cereals and stuff, you just throw that into the cart when you're shopping. So it is a fantastic segment of confectionery and there is volume growth. There's real volume growth in there. Laura Lindholm: Thank you, Frans, and thank you, Emmanuel, at Danske Bank. We move over to DNB Carnegie. How do you see the impact from the lower cocoa prices in terms of lag or total impact going forward? Frans Rydén: Yes. So again, so obviously, when we are having conversations with our customers, we do that based on the world market prices. But then you have the different thing, which is how long time does it take to get the pricing, how much inventories do you hold, what kind of -- what have you contracted? And I would assume it's the same thing for all our other peer companies out there. And so this will vary. What we will do is we will continue to build our margins, and we will continue to execute fair pricing. Laura Lindholm: Thank you very much. Frans, I think there's another question on Pick & Mix, but we, I think, have answered that already previously through to the Danske Bank question. Good. Operator, any last questions from the telephone lines? Operator: No more questions from the phone. Laura Lindholm: Thank you. That concludes our event. And we take, of course, the opportunity to remind everyone of our upcoming IR events. Our next report, the Q4 report is published on the 4th of February, and that's followed by an investor lunch in Stockholm arranged by Danske Bank on the 5th, the following day. But before that, quite a lot is happening. Next week, we attend the Berenberg Pan-European Discovery Conference, U.S.A. and then also after that, have a planned visit to Ljungsbro in Sweden together with Danske Bank. It's time to conclude. And before we meet again, we, of course, hope that you get the chance to enjoy our wide portfolio of confectionery products during many joyful occasions. Thank you for today. Frans Rydén: Thank you. Bye-bye. Laura Lindholm: Thank you. Bye-bye.
Ivan Vindheim: Good morning, everyone, both in the room and online. Thank you very much for joining us this morning in connection with the release and the presentation of Mowi's third quarter results of 2025. My name is Ivan Vindheim, and I'm the CEO of Mowi. And together with our CFO Kristian Ellingsen, I will take you through the numbers and the fundamentals this morning and to the best of my and our ability, add a few appropriate comments to them. And after presentation, our analyst, Ole Petter Urheim, will host Q&A session. Those of you who are following the presentation online, can submit your questions or comments in advance or as we go along by e-mail. Please refer to websites at mowi.com for necessary details. Disclaimer is both long and extensive. So I think we leave it for a self-study. So with that out of the way, I think we are ready for the highlights of the quarter. And to begin with, and on a general note, I think it's fair to say that the third quarter was like previous quarters this year, characterized by soft prices following well-supplied markets. And in the third quarter, with prices even below industry cost. For our part, this translated into EUR 1.39 billion in operating revenues and an operational profit of EUR 112 million on record high harvest volumes of 166,000 tonnes. The latter slightly above our guidance. Otherwise, the third quarter is typically the more challenging time of year biologically, and this third quarter was no exception to the rule. But despite this, our weighted realized production cost of EUR 5.42 per kilo for 7 farming countries was stable quarter-over-quarter and down by 5% year-over-year. So all else being equal, our P&L cost in the third quarter is down by EUR 50 million year-over-year and EUR 126 million year-to-date, which are both considerable amounts. And furthermore, our standing biomass cost continues to develop well on lower feed prices, which bodes well for our P&L cost next year. But in the third quarter, however, we expect a stable realized production cost quarter-over-quarter. Otherwise, our acquisition of Nova Sea was approved and closed in October. So now we are in full swing with the integration chasing EUR 34 million in synergies among other things. And for this sake, this entity will be fully consolidated as from the fourth quarter. Carrying on 2 other divisions, Consumer and Feed. They delivered another strong quarter. I think it's fair to say with record-high earnings to mention some. And in terms of our strategic review of the Feed division, it's progressing, and we expect to reach a conclusion before year-end. And finally, as the last bullet point reads, our Board of Directors has decided to distribute a quarterly dividend of NOK 1.50 per share after the third quarter. I think that does it for the highlights of the quarter. So then we move on to our Farming volume guidance. As we can see from the chart here, we have update since last time we reported, once again, now from 545,000 tonnes to 554,000 tonnes, primarily due to the consolidation of Nova Sea as from that fourth quarter. And it's equivalent to a growth of as high as 10.5% year-over-year. And next year, we expect to have 605,000 tonnes in Mowi, and that translates to a further 9.2% growth year-over-year. And finally, we reaffirm our 2029 organic farming volume target of at least 650,000 tonnes. And this, will achieve through, among other things, increased smolt stocking and by means of postsmolt because we are still unutilized license capacity in Mowi in several other countries where we operate. And with postsmolt, we can increase the productivity on licenses already in operation, which are to be set into operation. And further on that note, this is a picture of Kilvik, which will be a 6,000 tonnes state-of-the-art postsmolt RAS facility on the coast of Helgeland when finished and which came in with a Nova Sea acquisition. And in October, we were ordered 4 new closed containment systems for postsmolt production in Region West in the wake of the new environmental licensing scheme in Norway and the return of previously revoked licenses under the traffic light system. So altogether, this increases our postsmolt volumes in Norway from 30 million postsmolt to 40 million postsmolt and to 50 million postsmolt on group level in the 500 grams to 1.2 kilograms range. So Mowi's Farming volume growth continues unabated after the rather quiet 2010s and is now surpassing that of the wider industry by a large margin, cementing our #1 position in the market for the Atlantic salmon. Then from the grand scheme of things to more specifically about the third quarter. And first here, our key financial figures. There are a lot of numbers on this slide. So I think you will have to focus on the most important ones now and leave the rest for later in Kristian's session. And as we have just been through turnover profit, I think we skip them here and go straight to cash and net interest-bearing debt, which stood at EUR 1.76 billion at the end of the quarter. And when Nova Sea fully consolidated and paid for, it would have been EUR 2.51 billion with a corresponding equity ratio of 46%. But the latter is indicating a sustainable debt level and a solid balance sheet also post-closing. But having said that, we will revert to our new and exact debt target after the fourth quarter when the budget for next year has been set. Furthermore, underlying earnings per share was EUR 0.13 in the quarter whilst annualized return on capital employed was 7.5%, both affected by the soft prices in the quarter. And the same goes for our region margins for the value chain, which we will get back to in detail shortly when we go through the different business entities. But first, somewhat more about the prices in the quarter, which we have characterized as soft a few times already following well-supplied markets in the third quarter like previous quarters this year and in the third quarter, with prices even below industry costs. But on a positive note, however, industry supply growth has now normalized after unprecedented growth earlier this year and is now hovering around 0%, which under normal circumstances should pave the way for better prices going forward. Then our own price performance in the quarter, which I would say was strong in relative terms as it was 15% above the reference price, which is the standard we like to hold ourselves to internally and against which we measure ourselves, as you can hear. Positively, impacted by contract share 21% in the quarter and contract prices above the prevailing spot price in addition to reasonably good harvest weights and the high quality of our fish. So with that, I think we can start to drill down into the different business entities. And we begin as usual with Mowi Norway, our largest and most important entity by far and locomotive our business model. And if you take the numbers first, operational profit was EUR 111 million from Mowi Norway in the quarter whilst margin was EUR 1.5 per kilo and harvest volumes 99,500 tonnes. In a rather challenging quarter for Mowi Norway, I think it's fair to say, given the season but still a decent quarter with costs down year-over-year, as you can see from the chart here on quite neutral harvest volumes, but unfortunately, more than outweighed by lower prices year-over-year, which is where the shoe pinches this year. And these comments also apply to the different regions in Mowi Norway in the quarter and to some more than others with our margin slam dunk by Region North this time around on good biology and on very low cost whilst we struggled somewhat more in the other regions, but still a decent quarter for Mowi Norway, I would say, all in all given the prevailing prices. Then the volume guidance for Mowi Norway, which we have upped since last time we reported from 320,000 tonnes to 329,000 tonnes due to primarily the consolidation of Nova Sea as from the fourth quarter and is equivalent to a growth of 8.4% year-over-year. And next year, we expect to harvest 380,000 tonnes in Mowi Norway, and that translates to a further growth of 15.5% year-over-year. But the short-term goal on these assets is still 400,000 tonnes, which we hope to reach in the not-too-distant future and which would be the next milestone in Mowi in Norway. Then the last slide on Norway, our sales contract portfolio. Contract share was 19% for Mowi Norway in the quarter and was with that spot on our guidance. And these contracts contributed positively to our earnings, as I said earlier this morning. As for the fourth quarter, we expect our contract share in Norway to be about 23%, relatively stable contract prices quarter-over-quarter. And this contract share is including Nova Sea. And finally, as to next year, as we are negotiating new contracts as we speak, we cannot say much about that today other than to refer to the fourth quarter release. In the meantime, we must keep our cards close to our chest for natural reasons. That concludes Mowi Norway. So then we can have a look at our 6 other farming countries and we start with Mowi Scotland. Mowi Scotland was a margin winner in the third quarter, only beaten by Region North in Norway, thanks partly to the highest contract share in the group in the quarter. And this resulted in a margin of EUR 1.54 per kilo for 17,000 tonnes harvest volumes in Scotland, which in turn translated into an operational profit of EUR 27 million, which is a strong result, I would say, on reasonably good biology, I guess, it could add to that. Otherwise, this is a picture of our new broodstock facility at Ardessie, which will supply us with high-quality eggs in Mowi Scotland going forward. As you all know, it all starts with high-quality eggs in this industry as genetics trumps most things for all living beings and even more so for the salmon as the environment in the sea is much tougher than on land. And speaking of the sea, then overseas to Chile. Mowi Chile posted an operational profit of EUR 12 million in the third quarter by means of a margin of EUR 0.55 per kilo on 22,000 tonnes harvest volumes, which is a decent result, I would say, given the prevailing prices, thanks once again to the lowest cost in the group in the quarter. And finally, biology was also once again strong in Chile in the third quarter. That was unfortunately not the case in Canada in the quarter. We suffered a loss of EUR 31 million due to very challenging biology, particularly in the East, following a prolonged period with very high sea temperatures, which led to several low DO incidents and significant issues with sea lice with all that entails. But on a positive side, biology has now recovered. So hopefully, we have put this behind us, knock on wood, which brings us to our 2 smallest farming entities, Mowi Ireland and Mowi Faroes. And if you take Mowi Ireland first. Our Irish operation has also been through a few challenging months biologically this summer and autumn. So in light of that, I would say, an operating profit of EUR 1 million in Ireland in the quarter is respectable. The same, I would say, about Mowi Faroes margin of EUR 0.55 in the quarter, considering that we have 100% spot price exposure in the Faroes. It is translated into an operating profit of EUR 1 million for Mowi Faroes in the third quarter on almost 2,500 tonnes harvest volumes. Biological metrics was once again strong in the Faroes in the quarter. Then further out into the Atlantic Ocean and to Iceland and our Atlantic farming operation, Arctic Fish. Arctic Fish wrestled both low prices and high cost in the quarter, and this resulted in a loss of EUR 6 million in Iceland in the third quarter. But biology continues to develop reasonably well. And combined with our cost measures in Iceland, we still believe we will get the cost level down to a sustainable level. I think that concludes Mowi Farming. So then we can move on to Consumer Products, our downstream business. Low prices for farming means low raw material costs for Consumer Products and therefore, higher profit. And this relationship proved to be true also in the third quarter as we posted a quarterly record high operating EBIT of EUR 66 million, which is up by more than 50% year-over-year on sold volumes at record high levels, where the latter is also demonstrating a strong demand for our products. Then last one out this morning, Mowi Feed. The third quarter is high season for our feed operation as it follows the sea temperatures in the Northern Hemisphere and the growth in sea for Mowi Farming, and this translated into a quarterly record high operational EBITDA of EUR 26 million in the quarter. Otherwise, our Feed continues to perform well. And in terms of our strategic review of this division, as we said earlier this morning, is progressing, and we expect to reach a conclusion before year-end. But beyond that, we do not have any further comments on this, this morning. So please bear that in mind when we come to the Q&A session. So then, Kristian, the floor is all yours. You can take us through the financial figures and the fundamentals. Thank you so far. Kristian Ellingsen: Thank you very much, Ivan. Good morning, everyone. I hope you are doing well. As usual, we start with the overview of profit and loss, which shows record high year-to-date volumes and revenues while quarterly revenue was stable from Q2. Operational EBIT was down from Q3 '24 on lower spot prices, partly offset by lower costs and higher volumes. And with regards to the items between operational EBIT and financial EBIT, this was mainly related to the net fair value adjustment of biomass, which was positive this time around on higher salmon prices, including forward prices versus the end of the second quarter. Income from associated companies was mainly related to Nova Sea with an operational profit of EUR 0.87 per kilo in the quarter, and Nova Sea will be consolidated into the group figures from Q4. Net financial items were relatively stable as lower interest cost was offset by other movements. Earnings translated into an underlying earnings per share of EUR 0.13 while the cash flow per share was good at EUR 0.39. Return on capital employed year-to-date was 12.6%, slightly above the minimum target level, and this reflects a year with higher supply and pressure on prices. We then move on to the financial position, the balance sheet, which was relatively stable from Q3 '24 as we see here in the table. Mowi has a strong financial position. And including the effects of the acquisition of Nova Sea, equity ratio would be 46% or 49% measured on the covenant methodology. There was a good cash generation in the quarter, and net interest-bearing debt ended at EUR 1.76 billion. Working capital release contributed positively. This includes the effect of lower biomass costs, which was down 5% from last year and 4% sequentially from Q2. On taxes and CapEx, the comparison figures in Q3 '24 were impacted by some special effects such as tax refunds in Canada and traffic light auction in Norway on CapEx. So adjusted for these effects, tax and CapEx were in practice quite stable. Interest payments are down as reflected here. Our long-term net interest-bearing debt target will be updated after Q4 when the budget for '26 has been set. Yes. So our cost -- sorry, our cash flow guidance for 2025 has been updated related to the inclusion of effects for Nova Sea in Q4. And in brackets, we have listed the previously indicated figures. So working capital tie-up is estimated to EUR 75 million. On CapEx, we expect EUR 355 million. Nova Sea has ongoing construction projects related to fresh water expansion and the new processing facility. And the estimate on interest payments has been increased to EUR 95 million while the updated tax estimate is now EUR 170 million. This overview on our financing is unchanged from the previous quarter. So we then leave this for self-study. We then give some words here on the cost development, which definitely goes in the right direction as also shown here on the graph. As guided, the realized P&L costs in Q3 of EUR 5.42 per kilo was stable from EUR 5.39 in Q2. And the realized cost is also expected to be stable on this EUR 5.4 level in Q4 based on current information. The cost reduction in Q3 '24 was EUR 50 million, and the year-to-date effect is EUR 126 million. The cost reductions are driven by lower feed prices with feed prices being down 13% versus Q3 last year, but our various cost measures, operational and improvements have also helped. So the cash cost has come down, and the cost at stock per kilo standing biomass is down 5%, as mentioned from last year. And we expect realized P&L cost in 2026 to be reduced versus 2025. And it's, of course, very positive that our different cost measures are now visible in our numbers. And since 2020, the cost focus in Mowi has been significantly increased. Cost has been emphasized as one of our strategic pillars. And operational improvements throughout the value chain and the cost saving program in recent years with almost 2,000 different initiatives have given results. And we have a very good starting point for our cost work as we are now the #1 or #2 performer in the various regions. And the 3-year average shows that we are all -- we are also #1 in Norway as shown here on the growth. But we are not finished here. We have identified a potential for EUR 300 million to EUR 400 million savings in the next 5 years through postsmolt Mowi 4.0, yield, automation and of course, the cost saving and productivity programs. And that is a nice segue into the next slide, which shows productivity and FTEs. Salary and personnel costs, that's the second largest cost item after Feed. And since we initiated this productivity program back in 2020, we have reduced close to 3,500 FTEs as shown here on the graph on a like-for-like basis. And if you also look at nominal FTEs, they are down 7% in a time with a significant volume increase for Mowi. So productivity has really improved significantly. We make sure that all of our measures do not negatively impact operations or HSE, and this has been achieved through automation, rightsizing, natural turnover, less overtime, less contracted labor, retirement, et cetera. This slide here shows some of our achievement on productivity, including preliminary 2026 figures. And in Mowi Farming, we see that we have a 38% increase on tonnes per employee. In Norway, we started on a higher productivity level, but productivity is still up 20%. And in downstream, we have a 30% productivity improvement. And this has been achieved through a combination of automation, digitalization, general focus on cost, focus on FTEs, looking through the value chain, challenging the business units, the departments. So a solid work. We then move on to market fundamentals starting with supply. Supply growth was, as already mentioned, record high also in the third quarter with more volumes than Q3 '24, driven by Norway. The biological improvements earlier in '25 combined with seasonal challenges in Q3 led to this growth, which came after 3 years with 0 growth for the industry. We estimate 5% demand growth in the quarter with a 12% higher consumption, partially offset then by lower prices. In Europe, consumption increased by 7% year-on-year on strong retail performance. Promotional activity and lower shelf prices has had a positive effect on demand. In the U.S., consumption increased by 13% with the prepacked segment driving good retail volumes. And Asia has seen a 34% volume increase with strong growth in all regions. And lower price points and more large-sized salmon was more available this quarter, and that has helped. And China has been particularly strong at 40% growth, as we see here in the numbers. And while demand has been good at 5% growth, the high supply in the market has taken its toll on prices. And we saw an inflection point on supply in September and a good price response from that. If you take a look at industry supply growth estimates for Q4, we expect negative volume growth year-on-year in Europe but positive in Chile. And also for 2026, the situation is a bit different in Europe versus Chile. If you look at the total, based on overall biomass statistics and current trends, we estimate 1% global industry supply growth versus as high as 9% than for 2025. Mowi's own volume guidance has been increased to record high 554,000 tonnes for 2025. That's up 10.5% year-on-year. And for '26, we then estimate a further increase up to 605,000 tonnes, up 9.2%, supported by biomass and sea up 10.9%. Then we're ready for some comments from Ivan on the outlook. Ivan Vindheim: Thank you, Kristian. Much appreciated. Then it's time to conclude with some closing remarks before we wrap up the Q&A session hosted by our analyst, Ole Petter Urheim. And to begin with, and on a general note, as I said earlier this morning, the third quarter was like previous quarters this year, characterized by soft prices following well-supplied markets. And in the third quarter, the price is even below industry cost. But on a positive note, however, industry supply growth has now normalized after unprecedented growth earlier this year and is now hovering around 0%, which on the normal circumstances should pave the way for better prices going forward. Otherwise, we continue to see strong demand for our products, demonstrated by sold volumes at record high levels in Consumer Products in the quarter. And our standing biomass cost in sea continues to develop well on lower feed prices, which bodes well for our P&L cost next year. In the fourth quarter, however, we expect a stable realized production cost quarter-over-quarter. So then the only outstanding piece of the puzzle is our farming volumes and our volume guidance, which we have increased since last time we reported for this year, once again, now from 545,000 tonnes to 554,000 tonnes. This is equivalent to a growth of as high as 10.5% a year-over-year. And next year, we expect to harvest 605,000 tonnes in Mowi, and that translates to a further 9.2% growth year-over-year. So Mowi's Farming volume growth continues unabated and is surpassing that to the wider industry and our listed peers by a large margin, as we saw earlier this morning. So once again, a big thank you to all of my colleagues who have made it happen. It's, of course, much, much appreciated. So with this short summary, Ole Petter and Kristian, I think we're ready for the Q&A session. So if Kristian can please join me on the stage and help me out with answering the questions, then you, Ole Petter can administer the questions from the audience and the web. Ole Petter Juvik Urheim: Yes. And I think we will start with questions here from the audience. Christian Nordby: Christian Nordby, Arctic Securities. We've seen in Chile quite a buildup in overall biomass. What's your view on biology in Chile based on this higher biomass there? And do you fear that this could backlash into worse productivity later? Ivan Vindheim: So that's a good question, Christian. And biology in Chile has been really good this year. And I also say last year. And as I said, during the presentation this morning, the lowest cost in Mowi is in Chile. So that is also a proof. So -- and we expect a continued good biology going forward. Christian Nordby: And you're now going into closed cage postsmolt production. Can you -- is it the same design for all the ones you're ordering? Or is it different? Or have you done this before at that design? And can you give some insight into it? Ivan Vindheim: This, we have done in Mowi for a long, long time. We started in 2013. So when we order the 4 new ones here, we go from 6 to 10 closed containment systems for postsmolt production. We use the same technology. We use it for postsmolt, as you said, and it works also financially. The reason why we ordered 4 last ones here was because of the new environmental licensing scheme in Norway, which makes this viable from a financial point of view. Henrik Knutsen: Henrik Knutsen, Pareto Securities. You mentioned biomass close to 11% higher year-over-year. Do you have a comparable figure if you were to include or exclude Nova Sea? Ivan Vindheim: That we can take after the Q&A session. Henrik Knutsen: Okay. And how much more biomass do you have in sea in Norway, again, including or excluding Nova Sea? Ivan Vindheim: And again, that should be taken after the Q&A session. Martin Kaland: Martin Kaland, ABG Sundal Collier. Have you seen or experienced any impact from the tariffs in the U.S. on prices to end consumers, consumption or trade flows? Ivan Vindheim: That's really a good question. So, so far, so good. But of course, there is impact here, but nothing that has been dramatic so far. So let's see how this develops. Martin Kaland: And did you mention CapEx for the closed containment systems and the volume potential you expect from it? Ivan Vindheim: We don't. As said, we will order this month, right? So we are a little bit ahead of the curve and we start to talk about the CapEx amount, et cetera, that we have to work to at a later stage. But again, it's financially viable with the new environmental licensing scheme. So we use licenses we have, which will be returned to us. So there was a silent audience today. Do we have any questions from the web, Ole Petter? Ole Petter Juvik Urheim: Yes, we have. So we have received a question from the web on how demand in China is given the strong developments in recent quarters? Kristian Ellingsen: Yes. China has been very good in recent years. We see now that China is around 6% of the global consumption for salmon. So the position has been increased. We see in China, of course, positive responses from lower prices. But we also see a growing middle class. We see that logistics has improved and various restrictions have improved. We also see that there are some interesting trends on sales channels in China. We see that there is an interesting mix of e-commerce and home delivery solutions, et cetera. So the take from the Norwegian Seafood Council is that the home consumption for salmon in China is higher than we have perhaps previously estimated. It's actually around 60% according to them on the total consumption. And if you take that home consumption, it's actually tilted a little bit towards various e-commerce solutions than more traditional retail that we know from, for example, Europe. So there are some interesting developments, interesting trends. Again, the positive effects on prices are there. But we believe also that should salmon prices improve, there are some structural things that also happened here on the demand side. So at least this is partly sticky. So -- and with the growing middle class, I think there is still good potential in China. Ole Petter Juvik Urheim: Yes. And we have a question from Alexander Sloane from Barclays. Can you quantify expected farming costs decline in 2026 as you see it today? Kristian Ellingsen: We choose not to be that specific. But let's say it like this, we have indicated, of course, the cost level in Q3, Q4. It's around the EUR 5.4 level. We will see that there is a potential versus that to put it like that, so i.e., lower than that. But apart from that, I think the best indication is what we have already said on the biomass cost at stock reductions, 4% quarter-over-quarter and 5% year-on-year. And then, of course, there's always a question of how much inflation will contribute on the other side. Will there be any surprises on the biology, et cetera. So that's why it's always very difficult for us to give any numbers on these kind of estimates. But I think those -- looking at the biomass cost of stock, the current cost level and down from there, at least those are some indication. I could also just add that we, of course, have talked a lot about feed prices here today and the effects of that. But if you look at the cost year-to-date in farming and the reduction there, it's actually between 75% and 80% that's related to feed. But that also means that there are some other elements that also down like health costs, like productivity helps, more volumes helps, of course, on dilution, but also repair and maintenance costs down. So we see that it helps to work with our cost base and to realize reduction also in other areas. Ole Petter Juvik Urheim: Another question from Alexander Sloane. With your 1% global supply growth forecast for 2026, what do you see as key upside and downside risks? Ivan Vindheim: Yes. Maybe I can start. So no, internally, we see more downside risk than upside risk. So to say less is more when you answer questions. So that's at least the start of the question. Maybe you have some more bits and pieces you want to add, Kristian? Kristian Ellingsen: No, I think that's a good summary. And of course, Ivan has also mentioned the 2-way division of the market. That could be expected on the current composition of the biomass, et cetera, but I definitely agree that there is on the downside risk. Ivan Vindheim: And maybe I could add this to the question. No one has better biological KPIs, metrics, of course, than the Chilean farmers. So bear that in mind, all of you. So we are not world champions in Norway, although we'd like to think we are. Ole Petter Juvik Urheim: Okay. So last question from Alexander Sloane here. What impact do you think that Peru reduced quota could have on fish oil and fish meal prices? Any risk we see repeat of 2023 spike? Kristian Ellingsen: I think it's important here to say that there has been such a provisional quota so far on the anchovy fishery in Peru. There is an ongoing research fishery to determine this quota what that will be now in the end. There are some rumors that stocks have -- that there have been some migration then from the northern part to the more southern part. Usually, it is a northern fishery, that's the most important in Peru. But of course, we have to look at both the quotas for the northern fishery and also the southern fishery should there be any movements here on the stocks. So it's a little bit early to give any more information that. Let's wait for the final quota information, et cetera. Ole Petter Juvik Urheim: Yes. And then seems to be the last question from Knut-Ivar Bakken, Sparbanken Markets. Mowi will invest in 4 closed containment system to restore 2.6 licenses in Region West. In addition, you already operate other closed containment systems. Should we expect that Mowi will invest in more closed containment systems in 2026 and 2027 to restore all of the 10.5 withdrawn licenses? Ivan Vindheim: It depends. It depends. So let's revert to that at a later stage. Ole Petter Juvik Urheim: Okay. With that, I think we can conclude the Q&A. Ivan Vindheim: Thank you. Then it only remains for me to thank everyone for the attention. We hope to see you back already in February at our fourth quarter release, if not before. So in the meantime, please take care and have a great day ahead. Thank you.
Operator: Ladies and gentlemen, greetings, and welcome to the Baldwin Group Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bonnie Bishop, Executive Director, Investor Relations. Please go ahead. Bonnie Bishop: Thank you. Welcome to the Baldwin Group's Third Quarter 2025 Earnings Call. Today's call is being recorded. Third quarter financial results, supplemental information and Form 10-Q were issued earlier this afternoon and are available on the company's website at ir.baldwin.com. Please note that remarks made today may include forward-looking statements subject to various assumptions, risks and uncertainties, including, for example, our strategy with respect to our capital allocation in the future. The company's actual results may differ materially from those contemplated by such statements. For a more detailed discussion, please refer to the note regarding forward-looking statements in the company's earnings release and our most recent Form 10-Q, both of which are available on the Baldwin website. During the call today, the company may also discuss certain non-GAAP financial measures. For a more detailed discussion of these non-GAAP financial measures and historical reconciliation to the most closely comparable GAAP measures, please refer to the company's earnings release and supplemental information, both of which have been posted on the company's website at ir.baldwin.com. I will now turn the call over to Trevor Baldwin, Chief Executive Officer of the Baldwin Group. Trevor Baldwin: Good afternoon, and thank you for joining us to discuss our third quarter results reported earlier today. I'm joined by Brad Hale, Chief Financial Officer; and Bonnie Bishop, Executive Director of Investor Relations. We generated strong overall results in the third quarter despite a dynamic operating environment and the expected persistence of certain idiosyncrasies we highlighted last quarter. Organic revenue growth in the quarter was 5%, bringing our year-to-date organic revenue growth to 9%. Adjusted EBITDA was flat year-over-year, bringing our year-to-date adjusted EBITDA growth to 9%. Adjusted EBITDA margin and adjusted diluted earnings per share contracted slightly in the quarter. On a year-to-date basis, adjusted EBITDA margin is roughly flat year-over-year and adjusted diluted earnings per share has grown 11% year-over-year. We previously discussed two temporary items that we expected to have a finite impact on our results over the near term. First, a procedural accounting change in our Insurance Advisory Solutions segment impacting timing of when we recognize commission revenues. And second, the reduced commission from QBE that went effective on May 1 on the builder-sourced homeowners’ book of business we are rolling into our recently formed reciprocal exchange BRIE. As a reminder, these are temporary headwinds persisting through the first half of 2026, which then reverse into tailwinds as these are not revenues that are lost, just deferred relative to when they will be recognized in our P&L. Adjusting for these items, total commissions and fees organic revenue growth in Q3 would have been 10% and total overall organic revenue growth would have been 9%, bringing the year-to-date totals for both metrics to 11%. In Insurance Advisory Solutions, overall organic revenue growth was flat compared to the third quarter of 2024. Removing the impact of the procedural accounting change, overall organic revenue growth was 4% and organic growth on core commissions and fees was 6%. Sales velocity remained top decile at 20% in the third quarter, bringing year-to-date sales velocity to 19%, highlighting our consistent ability to take share and win new business. In fact, as we sit here today, our backlog of won but not yet booked new business that should bind in the first half of 2026 is sitting at a historic high for our firm, including several 7-figure commission and fee client wins from large global competitors, highlighting the demand for our innovative advice and solutions in the marketplace and the growing power and impact of our integrated operating platform. We are consistently performing in the top decile for new business generation in our industry based on recent industry data showing the median at 12.2% and the top quartile at 15.9%, reinforcing the effectiveness of our go-to-market strategy and the positive regard clients and prospects have for our teams and the solutions we are delivering. The impact of rate and exposure or renewal premium change was a meaningful headwind at minus 5.7%, reflective of the continued client caution tied to macro uncertainty and reduction in large cat-exposed coastal property pricing, partially offset by ongoing rate action in certain litigation-exposed casualty lines of business. From where we sit today, we expect the third quarter renewal premium change headwind reflects a floor going forward from which we will see incremental improvement over the coming quarters. However, we don't anticipate this fully reverses into a tailwind in the near term, highlighting the importance of our industry-leading new business generation capabilities to drive sustainable growth over time. In our Underwriting Capacity & Technology Solutions segment, organic revenue growth came in at 16%, driven by continued strength in our multifamily portfolio, which grew commissions and fees at 16% and our commercial umbrella portfolio, which grew organic revenue 15%. As discussed last quarter, we continue to maintain underwriting discipline in our E&S homeowners’ book in a rapidly softening property environment, which was a 400 basis point drag on UCTS organic growth in the quarter. In July, we began migrating renewals of the builder book away from QBE into the reciprocal insurance exchange we launched earlier this year, which thus far is performing in line to slightly better than expectations. Additionally, following the transaction we announced with Hippo, we have begun work with the Hippo and Spinnaker teams on a second builder homeowners insurance program, which we expect to launch next year. Over time, we expect it will materially increase our capture rate of Westwood's builder business into proprietary MSI programs, which sits at around a 30% capture rate today. This should unlock a meaningful growth opportunity for MGA and expand vital insurance capacity for our builder partners and their homebuyer customers. In our Mainstreet Insurance Solutions segment, organic revenue growth was slightly negative, driven by the onetime commission reset on the QBE Builder book and continued elevated attrition in our Medicare business due to the broader managed care marketplace disruption. Removing the impact of the onetime commission reset on the QBE Builder book, overall organic revenue growth was 8%. As a reminder, this impact will persist until April of 2026, after which it turns into a multiyear tailwind as the commission reduction we are absorbing today reverses back into fee revenues for our attorney-in-fact vehicle, which manages the reciprocal exchange. I want to take a minute to talk about the exciting momentum we are seeing across our embedded home insurance businesses. As I mentioned last quarter, in December, we launched our new technology platform and digital experience to support the seamless sale of home insurance at point of mortgage origination and home sale. This quarter, our embedded mortgage and real estate business went live with 3 new mortgage and real estate channel partners, bringing the total channel partners live on our platform to 10. Included in the partners who went live on our platform in Q3 was a top 20 mortgage originator who went live in mid-August and has shown very promising proof points of success. In our second week post go-live, we sold over 150% of the volume achieved by their previous insurance partner in their best day ever over a two year period, and we have maintained those elevated volumes. These results are enabled by our proprietary technology platform that powers our digital insurance buying experience and the seamless nature of this process in the mortgage and real estate transaction flows. In fact, when a potential homeowner engages through our digital experience, we bind a home insurance policy for them at a rate that is 3.5x what is achieved through nondigital channels. The power of our technology platform and digital agent experience includes AI-powered real-time agent advice, which is driving tremendous momentum in conversion rates and presents opportunity for margin expansion in the medium to long term. We remain bullish on the growth prospects for this business as we continue to make progress towards simplifying the homeownership journey through our embedded technology. Our pipeline of new embedded partners in this channel is as strong as we have seen yet with our implementation backlog well into 2026. As we mentioned last quarter, we completed the acquisition of Hippo's Homebuilder Distribution network in July. We are now live and facilitating the home insurance process for 20 of the top 25 homebuilders across the country. Our builder partners account for 57% of all new homes built in the U.S. and 93% of the homes built by the top 25 builders in the U.S. In aggregate, the partners in our combined embedded home insurance strategies drove over 500,000 home and mortgage closings in 2024, which accounts for roughly 12% of homes sold in the U.S. annually, positioning us as the leading embedded personal lines distribution platform in the $500 billion premium U.S. personal lines market. Before I turn it over to Brad to provide additional details on our Q3 financial performance, I want to share a strategic update that marks a pivotal moment in our evolution. Today, we're announcing our 3B30 Catalyst program, a 3-year transformation program launched during the third quarter of 2025. Catalyst is designed to accelerate the infusion of automation, business process optimization and artificial intelligence to transform and elevate our workforce, building on our 2 foundational pillars of talent and technology for building the broker of the future and meeting our aspirational goal of 3B30. This initiative is designed not only to elevate the work and impact our colleagues are delivering on a daily basis, but to unlock new avenues for growth. By aligning our workforce and technology investments with the demands of a rapidly changing market, we are positioning ourselves to accelerate innovation across our client engagement model and insurance product offerings, enhance client and colleague experience through smarter, more agile client service delivery, empower our teams to elevate their focus on high-impact growth-driving activities and enable enhanced real-time decision-making by streamlining processes, data and systems. We anticipate a cumulative transformation charge of approximately $40 million by the end of 2028 with cumulative savings over the same period of approximately $50 million and projected run rate annualized savings of $40 million by the end of 2028. We expect savings to ramp over time with no material savings in 2025, $3 million to $5 million in savings in 2026 and $10 million to $15 million in 2027. We expect charges of $15 million in each of 2026 and 2027. The 3B30 catalyst program is designed to accelerate our ability to capture operating leverage across our business while simultaneously enhancing growth, both organically and through M&A. Cash restructuring charges of approximately $40 million reflect the savings to cost ratio of roughly 1.25x and are largely related to workforce transformation and technology implementation. The charges represent less than 10% of expected free cash flow over the next 3 years and do not impact our expectation to deliver double-digit free cash flow growth driven by strong growth in revenue, operating income and working capital improvements. This is an important step forward for our firm, one that reflects our commitment to positioning ourselves for the rapidly evolving technology landscape, further bolstering our status as a leading destination for our industry's top talent and accelerating our pace to fulfill our vision for the broker of the future. As we move forward, we remain focused on delivering long-term value for our clients, colleagues and shareholders, driving growth and innovation and expanding margins and free cash flow. In summary, we're pleased with our third quarter results in such a dynamic insurance market and macro-operating environment. While we expect we will continue to face an insurance marketplace in transition, we are increasingly confident in our ability to deliver in 2026 and beyond as evidenced by the strength of the underlying momentum in the business. We sincerely thank our clients for placing their trust in us to provide strategic guidance, expert insights and innovative solutions in an ever-changing risk landscape. We also extend our deep appreciation to our colleagues for their steadfast dedication and tireless efforts in delivering meaningful results for our clients and valued insurance partners. With that, I will turn it over to Brad, who will detail our financial results. Bradford Hale: Thanks, Trevor, and good afternoon, everyone. For the third quarter, we generated organic revenue growth of 5% and total revenue of $365.4 million. Looking at the segment level, organic revenue growth was flat in IAS, up 16% in UCTS and down 2% in MIS. We reported GAAP net loss for the third quarter of $30.2 million or GAAP diluted loss per share of $0.27. Adjusted net income for the third quarter, which excludes share-based compensation, amortization and other onetime expenses, was $36.5 million or $0.31 per fully diluted share. A table reconciling GAAP net income to adjusted net income can be found in our earnings release and our 10-Q filed with the SEC. Adjusted EBITDA for the third quarter was roughly flat at $72.5 million compared to $72.8 million in the prior year period. Adjusted EBITDA margin declined approximately 170 basis points year-over-year to 19.8% for the quarter compared to 21.5% in the prior year period. Adjusted free cash flow for the third quarter was up 26% to $42 million compared to $33 million in Q3 2024. The increase in adjusted free cash flow was driven by improved working capital, which we communicated would normalize in the back half of 2025. We ended the quarter with net leverage at approximately 4.1x, down from Q2 2025 and remain on track to hit or exceed our goal of 4x by the end of the year. On that topic, with the business entering this period of a positive inflection on our financial profile through improved free cash flow, reduced leverage and line of sight to achieve our goal of bringing leverage under 4x and maintaining it there going forward, I want to take a minute to talk about capital allocation priorities. First, our highest and best use of capital is organic reinvestment in our business, whether it is the technology platforms we have built to support our leading embedded insurance franchise, continued investment in specialized insurance talent or ongoing investments in scaling our sales force, these investments drive our highest returns measured on both an internal rate of return and return on invested capital basis. We have ample opportunity to continue these investments at elevated returns with the governor on those investments being the margin accretion objectives we have outlined and remain committed to. Second is M&A, where we have proven over the past 5 years, we can be disciplined allocators of capital to drive enhanced business results and strong financial returns. We are enthused by the quality of opportunities in our pipeline, and we plan to remain thoughtful relative to our capital allocation strategy, resulting in an M&A cadence that is more episodic in nature. Third, and a new leg of the stool for capital allocation at Baldwin behind internal reinvestment and M&A, we are adding share repurchases. We believe this can be an important tool used opportunistically to deploy capital when we see market dislocations to create compelling return opportunities for our shareholders. Consistent with the foregoing, based on discussions held with our Board of Directors, once our net leverage is comfortably under 4x, our Board intends to authorize a share buyback plan of up to $200 million, subject to maintaining our long-term leverage goals. On the capital management front, in September, we announced the successful repricing of our Term Loan B to SOFR plus 250 basis points, a 50 basis points improvement on the spread or approximately $5 million of annual interest expense savings. We also had entered into a floating to fixed interest rate swap agreement with a notional amount of $500 million, which exchanges 1-month SOFR for a fixed rate of 3.244%. Moving to expectations. For the fourth quarter, we expect revenue of $345 million to $355 million and organic revenue growth in the mid-single digits. We anticipate adjusted EBITDA between $68 million and $73 million and adjusted diluted EPS of $0.28 to $0.32 per share. Consistent with prior years, we are also sharing a broad initial view of 2026 financial expectations. We preliminarily expect 2026 revenue in the $1.66 billion to $1.7 billion range, organic growth in the high single digits, adjusted EBITDA in the $380 million to $400 million range and adjusted diluted earnings per share between $1.95 and $2.10. This would result in a 5-year CAGR for all of those metrics in the high teens to low 20s percent. In addition, we expect double-digit growth in operating free cash flow. As we've previously indicated, we expect an acceleration of organic revenue growth in the back half of 2026 once we lap the idiosyncratic headwinds discussed. In summary, we are pleased with the overall performance of the business year-to-date as we continue to navigate a dynamic operating environment. We continue to see incredibly strong internal fundamentals across all 3 of our segments and feel confident in our ability to generate durable outsized results for shareholders. We will now take questions. Operator? Operator: [Operator Instructions] Our first question comes from Gregory Peters with Raymond James. Charles Peters: So I think I'd like to start with the results in the IAS segment. You called out a couple of things in your commentary, the flat organic. I think you said excluding the revenue recognition change, I think you said organic was up 4%. And then you talked about the sales velocity being up really strong. And I guess what I'm trying to get at is I'm trying to reconcile what we hear from you quarter after quarter, which is really strong sales velocity and success in the sales velocity and trying to reconcile that with what we're seeing with the IAS organic numbers. And maybe that's -- maybe that the revenue recognition change is going to what is the deciding factor here and what changes next year. I'm not sure, but I thought I'd just give you an opportunity to talk more about that. Trevor Baldwin: Yes. Greg, it's Trevor. So let's -- I think, unpack a few points there. One, again, sales velocity of 20% in the quarter, 19% year-to-date, strong results, something we're, I think, super pleased with top decile relative to what we see across the industry. And I think strong confirmation around the value that clients and prospects are seeing from our teams and how they go to market. And a lot of confidence around that momentum. You heard me talk about the largest backlog of clients won but not yet booked, including some very large clients from large global brokers. So the momentum there continues. The second is the accounting procedural change we mentioned, which is about a $7 million headwind to revenue and $5 million headwind to EBITDA in the quarter. Of note, that's not revenue that's gone. That's simply timing. As a reminder, we move from truing up to cash receipt trends on a monthly basis to waiting until policy expiration. And so that's simply revenue and EBITDA that will be booked next year upon policy expirations. The third is rate and exposure. Renewal premium change was a 5.7% headwind in the quarter, representing kind of a low point in our historical data as well as what we expect to be a floor going forward. I anticipate that we will see that incrementally improve over the coming quarters before normalizing into a neutral, if not slight tailwind in the back half of next year. And as we unpack that data, I think it's helpful to parse it a little bit as we look at our Property and Casualty business in IAS, rate and exposure was about a 2.8% headwind. And you can think about that being probably about 1/3 rate, 2/3 just sluggish exposure pull-through as we continue to see client caution. On the employee benefit side, it was about an 800 basis point headwind. And you can think about that largely being exposure driven as a result of a softer employment environment. What I would tell you is based on what we're seeing in health care cost trend, renewal dynamics, et cetera, we expect that to normalize back up certainly by the beginning of 2026 based on expected rate pull-through as a result of elevated medical loss ratios that have been seen across the industry. As you just step back broadly, we're in a period of, call it, 12 to 18 months of renewal premium change headwinds. We called that out on our last call, where we expected this year to be a 2% to 3% headwind. We're sitting at 2.5% headwind year-to-date. And I would expect that that's still a good number for the full year. As we think about the impact of that next year, I think that headwind ebbs and likely flattens out or reverses into a slight tailwind as you get into the back half of next year as we begin lapping some of these periods of elevated rate pullback, particularly in large cat-exposed property. So we feel really good about the underlying fundamentals in the IAS business. We feel good about client retention. We feel good about -- really good about new business wins and momentum that continues to build there. And we expect we've got 6 to 9 months of continued, what I'd call, insurance and macro market headwinds that are going to show up in the form of ebbing renewal premium change headwinds. But ultimately, as you think about the broader dynamics of kind of where the dynamics of risk are headed, both from a natural catastrophe standpoint in terms of frequency and severity of events, in terms of social inflation or legal system abuse on casualty, it's hard to imagine a world where renewal premium change isn't at least low to mid-single digits over time. And if you normalize to that, just taking the 5.7% RPC to flat plus normalizing for the accounting change, IAS is a double-digit growth business in the quarter. Charles Peters: Just a clarification on the procedural change. Is that -- so it's a headwind, a couple of quarters of headwind. Is there going to be -- once we anniversary it, is there going to be like 4 quarters of an unusual benefit and then we go back to some normalized rate? Trevor Baldwin: Yes, that's the right way to think about it, Greg. Charles Peters: Yes. Great. The second question -- I guess it's technically the third, but the second question I had was on the organic revenue results in the Underwriting Capacity & Technology Solutions business because that's been really very consistent and strong -- recorded strong results. And I'm just curious about what kind of competition you're seeing in that marketplace. And I guess the genesis behind that would be earlier today, Progressive had its quarterly call, and they talked about renters insurance as being an area of focus for them. And so it just triggered, hey, how are you -- it doesn't show up in your numbers, but how are you seeing competitive pressures in your [UCTS] business? Trevor Baldwin: Yes. So Greg, I'd say broadly, we have a diversified portfolio of products, including both commercial and personal lines, including property, short tail, casualty, mid and long tail. And so there's not a broad brush, I'd say, commentary to answer that question. Competitive dynamics, market pressures vary product by product, line by line. At a very high level, what I would tell you is we're very thoughtful about the products that we go to market with and ensuring that we've been able to identify a way in which we can carve out a real right to win, both around how the product is built and underwritten and highly segmented from a pricing standpoint as well as from a distribution standpoint and how we have unique access and competitive advantage relative to the way in which our product is being sold into the marketplace. Specific to your question around renters, I think there's multiple ways in which people go to market for that business. We happen to go to market exclusively as an embedded insurance provider, meaning we're partnering with the ERP technology platforms, the property management firms, used to operate their buildings and manage their leases and books. And so we become that kind of embedded solution of convenience. As a result, we're not -- our renters product is not sold in traditional manners. I think as Progressive thinks about their product, I suspect it's more like a GEICO renters product or a Lemonade renters product, and that's a more traditional go-to-market strategy. And that's just one -- we're just not competing for that type of business. Our renters customer is one that is opting into our product because they can find it in less than 30 seconds natively in the leasing workflow. It's the solution of convenience. We, in fact, are going to be launching next year a new innovative renters product that is embedded into the rent ledger and so kind of naturally embedded into the rent payment, which we're really excited about some of the momentum that could drive and the continued building penetration. So we feel good about our competitive positioning there. It's not that we don't have competitors. We do. But this is a space we've been in for a while. We have leading market share, and we feel really good about our right to win and the competitive moats we have as a result of our technology platform and how that enables our go-to-market. Operator: Our next question comes from Charlie Lederer with BMO Capital Markets. Charles Lederer: Quick one on your preliminary outlook for 2026 organic of high single digits. What are you, if anything, embedding for the attorney-in-fact fees and BRIE and also the embedded mortgage channel revenue? Trevor Baldwin: Yes. Charlie, this is Trevor. I would tell you that we have nominal assumptions built in for the attorney-in-fact, and while I wouldn't quite call it nominal on embedded, it's not -- it's certainly not heroic. That's a business we expect to build over time. We're super excited about the momentum we have there. You heard me share some of those statistics around the early proof points of success with some of our mortgage partners that have gone live on the platform. So we're quite enthused. We've got a terrific backlog. Our digital agent workflow and kind of how it's embedded into the mortgage process, how it enables a seamless insurance buying and binding experience is driving really, really compelling conversion statistics. When a potential homeowner opts into our digital experience, we find a home policy for them 3.5x the rate at which we do through traditional channels. And as a result, we're already ahead of our early kind of pro formas and expectations around conversion rates in the mortgage channel, and we're super excited. So lots of momentum there. But we don't -- we anticipate that has a growing impact on our financial results, but not a material impact on 2026. Charles Lederer: That's helpful. And then maybe just another one on -- if I take out the pull forward that you guys called out last quarter and then take out some of the headwinds this quarter from the accounting change and then presumably, the pull forward was taken out of this quarter. I mean the acceleration is like pretty pronounced. I guess -- I mean, is that just sales velocity? Because sales velocity was a little slower. So I'm trying to kind of connect the dots. Maybe it's just business mix. I don't know if there's any color you can add. Trevor Baldwin: I mean, I guess I'm not fully following the question, Charlie. Like sales velocity was 20%, so quite strong. When you say pull forward, you mean the impact of the procedural accounting change and how that pushes out the timing of recognizing revenue? Charles Lederer: I was more talking about like the -- I think you guys talked about two energy clients last quarter that bumped up the IAS organic. Maybe I'm... Trevor Baldwin: Yes. Those were pulled forward into the second quarter, correct? Charles Lederer: I From the third quarter, right? Or was it... Trevor Baldwin: That's correct. Charles Lederer: Yes. So I guess if you kind of factor that in, it's a pretty pronounced acceleration. So I don't know if that's just business mix or -- yes, I guess I was just trying to understand. Trevor Baldwin: Yes. I'm following you, Charlie. So yes, I think I would point you to rate and exposure and the headwinds that created as an offset. But yes, as you heard, we're feeling really good about the underlying momentum in the IAS business. It's somewhat masked by the market renewal premium change dynamics and this accounting change that's just simply pushing revenue into next year. But at 20% sales velocity, that's as good as it gets. And we're super pleased with the momentum and the backlog of new business and how that positions us into 2026. Operator: The next question comes from Elyse Greenspan with Wells Fargo. Elyse Greenspan: I guess I have a follow-up trying to parse together some of just the commentary on IAS and specific to the guide, right? I think you guys said organic mid-single digits, right, I think, in the fourth quarter. What are you assuming for IAS? And then within the guidance next year for high single-digit organic, I think you said that's back half heavy. So do you expect to start like in the low single digits and pick up? And then also, what does that imply, I guess, for IAS embedded within the guide next year as well? Trevor Baldwin: Yes. Elyse, this is Trevor. So consistent with past practice, we're not going to get into segment level OG guide. What I would say is we feel good about mid-single digits for Q4 across the business. As we look towards 2026, we feel good about high single digits and we would expect organic growth to accelerate through the year, particularly in the back half as we lap the 2 idiosyncratic headwinds that we called out that come to an end then. As you've overheard in some of the earlier Q&A, we have strong new business momentum in the IAS business. We have had pretty meaningful renewal premium change headwinds, some driven by rate, some driven by exposure. We expect that we've seen the floor there and that, that begins to ebb. But I would still expect RPC headwinds in the first half of next year before that begins to normalize. Elyse Greenspan: And then within the guidance for next year, what -- within the revenue guide, what are you assuming for M&A? And I know, obviously, it depends upon when they are -- when the deals close, but what's embedded within next year's guidance for any level of M&A? Bradford Hale: Yes. I would say we have a nominal amount of M&A embedded into next year's guidance. We continue to maintain a strong pipeline. with a lot of really interesting opportunities, but it's nominal to the guide we provided for '26. Elyse Greenspan: And then the savings that you guys outlined like $3 million to $5 million next year, right, I think $10 million to $15 million in '27. Is the expectation that those will all fall to the bottom line and help margin? Or is there some level of reinvestment being contemplated as well? Trevor Baldwin: Those savings articulated are net of reinvestment. Operator: Our next question comes from Pablo Singzon with JPMorgan. Pablo Singzon: So maybe first one for Trevor. I know you spoke about employee benefits early on this year. I was a bit surprised by your uptick. I think you had mentioned something like an 800 bps headwind there versus about 300 bps in P&C. Is there anything unique about the employers you place insurance for? Maybe they work in industries that are more economic sensitive? And just given the weakness in the labor market that's being widely reported on today, what gives you confidence that you'll see a recovery in IAS OG next year? Trevor Baldwin: Yes. Pablo, no, I don't think there's a particular uniqueness in our employee benefits client base. I mean, as I think about where it skews heavy, our largest concentration of benefits clients would be in -- on the West Coast with a pretty heavy bent towards technology. So maybe we skew a little bit heavier there, which would make sense just based on some of the headcount trends we've seen relative to kind of early adopters on AI and things of that nature. As we -- as you mentioned, our confidence around the OG and the acceleration heading into next year, that's less about -- that doesn't contemplate a stronger labor market. That contemplates kind of real-time visibility that we have now into the cost of health care and the cost of health insurance and how that ultimately will inflate premiums. There's been a pretty significant increase in health care cost trend this year, well documented in the managed care space, but I'd say that, that also exists in the traditional pre-65 marketplace as well. And while I'd say that is good in multiple ways for our business. One, as costs go up, demand for our advice and our innovative solutions goes up. Our scale and the breadth of kind of tools and capabilities enable us to bring value in ways that many of our smaller competitors are just unable to do. And it also drives ultimately up costs for a business that's largely commission-oriented. When premiums are up, as you know, our revenues tend to trend in a similar direction. Pablo Singzon: Okay. That's helpful. And then Second question is just on the PBE and the ramp-up in attorney-in-fact fees, right? So I guess the question there is holding premium volumes constant, and this goes to basically the gap between the commission you lost and how much you still earn in fees, right? How many years will it take you to sort of get back to your previous state, assuming premium volumes are the same, right? Trevor Baldwin: Yes, we expect it to take 2 to 2.5 years from 05/01/2026. Importantly, Pablo, for the time being, we account for that AIF on the equity method. And so it will not come into revenue. It will come into EBITDA. Operator: Our next question comes from Andrew Anderson with Jefferies. Andrew Andersen: Sorry, maybe some more questions on the reciprocal. I think in response to an earlier question, you said you were anticipating a nominal benefit from the reciprocal in organic. I guess, is there -- is any part of this going into organic? If you could just maybe parse that out a bit? Bradford Hale: Yes, Andrew, thanks. It's Brad. No, there's no benefit to organic on the reciprocal. I think that was in reference to the other part of that question. The only benefit of the AIF is the direct earnings benefit where we get 75% of the earnings under the equity method. Andrew Andersen: Okay. And then when we're talking about this turning into a tailwind, and you kind of just mentioned a moment ago, it sounds like it could take 2 years to fully flip over. And I think the fee income would be on kind of the policies binding and on a look back. So I guess I'm struggling with how it turns into a tailwind in the second half of '26? It feels like maybe you're past the peak of the headwind, but there still is a headwind persisting until we get to the end of 2 years. Is that the right way of thinking about it? Trevor Baldwin: No. no, it's not. So on 04/30/2026, the headwinds from the commission step down going from 31 to 26 on the QBE program ceased to be a headwind because the entire portfolio will have annualized on to that 26% commission rate. At the same time, the attorney-in-fact, which we own, will be accruing revenue in at 5% of premium as earned into the reciprocal. And that's an important distinction because commissions are booked upfront upon policy binding, whereas AIF fees are booked over life of the policy ratably. And so there is a difference in the earn-in rate from a timing perspective, which drives some of this. And then there's also the time line that it takes to roll all of the premium off of QBE in all of the states we're doing business into the reciprocal. And so while the first 12 months, you fully absorb the commission reduction, it takes us a couple of years to fully roll all of that premium off of QBE in all of the states we're doing business in fully into the reciprocal. The AIF does not begin earning AIF fees until those premiums renew into that reciprocal vehicle. Now importantly, we started with Texas on July 1, which is the largest state in the QBE portfolio and we will likely be following thereafter with California, which is the second largest state. And so we intend to get through the states with the largest volumes of premium next year and have the vast majority of that premium rolling in. As a result, the AIF fees, they're already beginning to earn they're just not meaningful at this point in time, but they will build month by month. And after that 2- to 2.5-year time period should be fully run rated in. Operator: Our next question comes from Brian Meredith with UBS. Brian Meredith: Two questions. Just first one, Trevor, just curious your assumptions as far as how much you're going to be able to renew in the reciprocal in your guidance? And what is it looking like so far? Trevor Baldwin: Yes. So we are currently renewing at a rate that is slightly better than our assumption coming in. We are constraining that with a higher cancellation reserve out of -- I'd say, an appropriate degree of caution. But thus far, we've seen cancellation rates level out at a level that is below what our initial assumptions were. Brian Meredith: Great. That's helpful. And the second question, just big picture back on the capital management, and I appreciate the color, Brad, you gave on getting below -- comfortably below 4x before you buy back stock. But just given where your stock is trading right now and it feels like it's obviously below its intrinsic value. Why wouldn't you use some of the free cash flow you're generating right now and buy back some stock a little bit right now? It seems like a pretty good return on investment. Bradford Hale: Yes. Thanks, Brian. So look, we do, as we mentioned in the prepared remarks, intend to authorize a buyback program once our leverage is comfortably below 4x. We've been incredibly vocal publicly about reaching that guide and the critical importance of financial flexibility that comes post reaching that sort of less than 4x. Importantly, we don't intend to use buybacks programmatically. Really, this adds a tool to the toolkit for us when we're seeing periods of dislocation in our stock price. It is very clearly a third option for us for capital deployment after, as we talked about organic investments and M&A. But certainly, there are times where it makes financial sense, as you indicated. That decision point will really be whether we feel like we can generate significantly better risk-adjusted returns at that point in time through a buyback versus deploying capital through M&A. And we leverage various valuation techniques and metrics as well as our line of sight to the M&A pipeline and making that decision. So 4x remains a priority, and that's why we're not stepping in now. Trevor Baldwin: But Brian, we agree with your general sentiment, which is it is a very attractive investment opportunity right now. And we just feel like we've made very strong commitments to our shareholders around prioritizing getting leverage under 4x before all else. And so we'll be there shortly, and then we'll see where things stand. Operator: Our next question comes from Tommy McJoynt with KBW. Thomas Mcjoynt-Griffith: When you give us that $40 million annualized run rate savings from the expense program, what expense line denominator should we reference to get to a result of thinking about Baldwin's automation efforts are going to take out x percent of expenses out of the business? Trevor Baldwin: Yes, you should largely think about that as being related to workforce transformation. Thomas Mcjoynt-Griffith: Okay. And then you did mention the 3B30. I don't know if I just didn't hear it, but when you first introduced it a year ago, it was 3B30 in 5. Is there a time line for that program still? And is it still the same? Trevor Baldwin: Haven't changed. Same time line. Operator: Our next question comes from Pablo Singzon with JPMorgan. Pablo Singzon: So on the UCTS business, I think about $15 million of the organic revenues generated this year are arising from basically this -- a rental program that has converted to captive format. And I guess the question there is, do you expect that business to grow next year? And do you expect further conversions, right? Because effectively, what's happening is that instead of booking a commission, you're booking a premium and that helps organic. So I was just wondering sort of your plans for at least that piece of UCTS. Trevor Baldwin: Yes, Pablo, we would expect it to continue to grow, but not at the rate on a relative basis that it is now. We think about that captive as really being an opportunity to optimize the economics on a very well-run, low volatility program. And so you should really think about that as our way of accessing the appropriate level of supplemental and contingent revenues on a high-performing program. And with that, I think we're going to wrap up for the evening. So I want to just thank you all for joining us on the call. We're really excited for the growing momentum we have across our business. as we head into 2026. In closing, I want to thank our colleagues for their hard work and dedication in delivering innovative solutions and exceptional results for our clients. And I also want to thank our clients for their continued trust and confidence in our teams. Thank you all very much, and we look forward to speaking to you again next quarter. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Hello, and welcome to the Royal Vopak Third Quarter 2025 Update. [Operator Instructions] This call is being recorded. I'm pleased to present Fatjona Topciu, Head of Investor Relations. Please go ahead with your meeting. Fatjona Topciu: Good morning, everyone, and welcome to our Q3 2025 results analyst call. My name is Fatjona Topciu, Head of IR. Our CEO, Dick Richelle; and CFO, Michiel Gilsing, will guide you through our latest results. We will refer to the Q3 2025 analyst presentation, which you can follow on screen and download from our website. After the presentation, we will have the opportunity for Q&A. A replay of the webcast will be made available on our website as well. Before we start, I would like to refer to the disclaimer content of the forward-looking statements, which you are familiar with. I would like to remind you that we may make forward-looking statements during the presentation, which involve certain risks and uncertainties. Accordingly, this is applicable to the entire call, including the answers provided to questions during the Q&A. And with that, I would like to hand over the call to Dick. D.J.M. Richelle: Thank you very much, Fatjona, and good morning to all of you. Thanks for joining us in the call this morning. Let's start with the key priorities of our strategy framework towards 2030. We continue to focus on improving the performance of our existing portfolio. This includes both our sustainability efforts and our financial results with an operating cash return target for the portfolio of above 13% throughout the cycle. As part of our grow and accelerate strategic pillars, we continue to invest in attractive opportunities in the market with a total proportional investment ambition of EUR 4 billion by 2030. Our Improve, Grow, Accelerate strategy underpins our well-diversified and resilient portfolio and provides a solid foundation to continuing to deliver value to all our stakeholders. Moving to the key highlights for the first 9 months of this year. Let's first start on the improved side. Year-to-date, demand for our services remained healthy across the entire portfolio, and that resulted in a proportional occupancy rate of 91% with continued high satisfaction from our customers. We reported strong financial performance, growing our proportional EBITDA to EUR 902 million and an operating cash return of 16.2%. At the same time, our proportional operating free cash flow per share increased by 4.3% year-on-year to EUR 5.56, demonstrating our strong cash generation. Supported by a resilient portfolio and business performance offsetting around EUR 30 million of negative currency translation impact compared to last year, we confirm our full year proportional EBITDA outlook in the range of EUR 1.17 billion to EUR 1.2 billion. We're making good progress in growing our gas and industrial footprint. We invest in additional throughput capacity at the REEF terminal in West Canada, while at the same time, we're making good progress in the terminal constructing together with our partner, AltaGas. In China, we're strengthening our industrial position with the expansion of 2 industrial terminals in Caojing and in Haiteng. We're expanding LNG infrastructure in Colombia at SPEC terminal. And in India, our joint venture, AVTL, announced the development of a greenfield LPG import terminal in Mumbai, including a bottling plant and storage for liquid products as well. AVTL also acquired 75% of LPG Hindustan terminal in Haldia. We're pleased to see the developments at multiple locations in the fast-growing Indian market. So far, since we announced our ambition to grow in gas and industrial terminals globally, we've committed EUR 1.6 billion. So now let's move to accelerate investments for the energy transition infrastructure. In Oman, we signed a joint venture agreement with OQ to develop and operate energy storage and terminal infrastructure. With our partner, we look forward to developing infrastructure at the strategic location of Duqm and jointly supporting sustainable industrial growth. The investment in Malaysia related to low carbon fuels is progressing, and we look forward to start construction early 2026. So far, since we announced our growth program for Accelerate, we've committed EUR 256 million in energy transition infrastructure. Now looking at our financial performance for the different terminal types we operate. We see an overall strong performance with higher results compared to the same period last year. Gas markets were stable with our terminals being supported by long-term contracts, mainly due to some planned out-of-service capacity, a positive one-off last year and the temporary challenges at EemsEnergyTerminal, the results of the gas segment went down on a year-to-year basis. In the Industrial segment, growth is contributing. And together with the one-off in the second quarter, we see 15% increase in this attractive and strategic segment on a year-to-year basis. Chemical markets remain weak, while our terminals continue to perform relatively stable despite some locations seeing lower occupancy rates. Energy markets, which we serve with our oil terminals continue to see strong demand, especially in the hubs like Rotterdam and Singapore. All in all, this has led to an increased proportional EBITDA of EUR 902 million and a strong operating cash return of 16.2% for the first 9 months of 2025. To mention some highlights in our strategic pillar of improve, we are pleased to see an expansion commissioned at our inland Lesedi terminal in South Africa, where we increased our terminal capacity by 40%, supporting the region with distribution of clean petroleum fuels. In Spain, our joint venture divested the Barcelona terminal, which was storing petroleum, chemical and vegetable oil products. And in a continued effort to improve our sustainability performance, we invest in a sustainable heating system at our Vlissingen terminal in the Netherlands, significantly reducing the emissions and decreasing operating costs. Now let's move to the growth investments to start with an update on this year's proportional growth CapEx spend. Year-to-date, we spent EUR 447 million on growth, and we expect this number to be around EUR 700 million for the full year, a significant increase from 2024. This figure reflects our share of investments, but not our equity contribution. Since the start of our Improve, Grow and Accelerate strategy, we've committed a total of EUR 1.9 billion. EUR 502 million of this EUR 1.9 billion has been committed since the beginning of this year. We're well underway to invest EUR 4 billion towards 2030, which we aim to allocate in opportunities that meet our investment criteria. On this slide, we highlight the investment commitments that we've taken during the third quarter. We're investing around the world with a total proportional investment commitment of EUR 188 million only this quarter. We're progressing on our LPG terminal in Canada and building a new terminal in India. In Colombia, LNG regasification capacity is expanded at SPEC terminal. And in China, our leading industrial position is strengthened with expansions in Caojing and Haiteng. All these investments around the world will do together with partners. Now let's take a closer look at the REEF terminal in West Canada. Construction work is progressing well, and the project is on track to be commissioned at the end of 2026 within budget. We're investing an additional EUR 34 million to increase the throughput capacity of the terminal, leveraging the common infrastructure of the terminal such as the constructed jetty. This additional throughput capacity will become available in the second half of 2027. In the meantime, we will continue to investigate together with our partner, AltaGas, potential optimizations of the terminal and a next phase of expansions. In Colombia, our SPEC terminal plays an important role in ensuring local energy security. With an investment of EUR 25 million, the regasification capacity will be expanded by 33%. This additional capacity will diversify SPEC business offering to new industrial customers and get connected to the country's gas grid. This investment is backed by long-term contracts and will deliver attractive operating cash returns upon completion. We're delivering on growth with multiple expansions at existing and new locations, and our capability to deliver will ensure project execution in the coming -- in the years to come, with multiple key investments coming online that will support future growth. We're on track to have both REEF and the fourth tank at Gate commissioned by the end of 2026. And further down the line, multiple expansions and new terminals will follow, supporting long-term stable and growing returns. To wrap it up, we presented strong results this quarter, supported by a healthy demand for infrastructure and leading to an operating cash return of 16.2% year-to-date. We continue to deliver growth with our key growth projects on track and new expansions announced. And we're pleased to confirm our outlook despite a negative currency translation effect of EUR 30 million. With that, I'd like to hand it over to Michiel to give more details on the year-to-date and third quarter numbers. Michiel Gilsing: Thank you, Dick. And also from my side, good morning to all of you. In the third quarter, we saw continued strong performance from our resilient portfolio. Our proportional operating free cash flow per share has increased by 4.3% year-on-year, driven by continued high demand for our storage infrastructure, increased EBITDA and our share buyback programs. These results highlight the strength of our well-diversified portfolio, particularly in times of increased uncertainty and volatility. Simultaneously, we continue to ramp up our investments in attractive and accretive growth projects while returning value to our shareholders. Let's take a closer look at the performance of the portfolio during the third quarter of this year. I would like to start with a reminder that in the second quarter of this year, we reported a one-off EUR 22 million, which was related to a commercial resolution in our Asia and Middle East business unit. This needs to be considered when comparing the third quarter with the second quarter results on a proportional revenue and EBITDA level. The proportional occupancy in Q3 was 90.3%. This decrease compared to Q2 is mainly related to a temporary impact caused by the timing of some contract renewal. We recorded proportional revenues of EUR 467 million during Q3. Excluding the one-off, on an autonomous basis, the lower occupancy was offset by improved pricing, leading to an increase in revenues. Proportional EBITDA in Q3 decreased to EUR 287 million, again caused by the one-off in Q2. On an autonomous basis, EBITDA increased by 0.4% quarter-on-quarter, indicating strong performance of our existing operating assets. And finally, our cash flow generation remains strong, which we will highlight in detail later in this presentation. As mentioned, the translation effect of foreign currencies remains a headwind to our results. If we look at the proportional EBITDA split by currency, we can see that 27% of our EBITDA is generated in euro, which means that for the remainder of the EBITDA, we face translation risks in our P&L. Comparing our results on a constant currency basis, we can clearly see that our results this year have been strong. Also, it provides additional context for our Q3 performance. Excluding one-off in the second quarter, our performance in Q3 was in line with Q2 and above Q1. Back to our global network. This slide provides a more detailed breakdown of the proportional EBITDA generated by our business units in the different regions. Excluding negative currency exchange effects of EUR 18 million and EUR 2 million divestment impact, proportional EBITDA increased by 3.2% versus year-to-date 2024. A large part of this growth can be explained by the strong contribution of EUR 17 million from our growth projects, particularly in China and the Netherlands. Additionally, we saw particularly strong performance from our Asia and Middle East business unit, which is primarily driven by the result of a commercial resolution in the second quarter. Across the remaining business units, the performance was relatively stable with some weakness in the Netherlands related to the out-of-service capacity and the temporary challenges in EemsEnergyTerminal, for which we are pleased that a technical solution has been identified and is expected to be completed by early next year, while the terminal remains fully operational. Moving on to the cash flow generation. We are continuously focused on generating predictable growing cash flows to create shareholder value for our shareholders. We achieved this by growing our revenues while maintaining high EBITDA margins and strong EBITDA to cash conversion. Despite a strong currency headwind, we saw slightly higher proportional revenues year-on-year. Since costs were stable, our proportional EBITDA margin improved by 20 basis points. The cash conversion of our portfolio, which indicates the portion of EBITDA that is converted into proportional cash flow slightly decreased to 71.4% due to an increase of operating CapEx. The proportional operating free cash flow per share increased by 4.3%, driven primarily by the reduced share count following our share buyback programs in '24 and '25. Finally, we realized a stable operating cash flow return of 16.2%, well above our long-term target of 13%. Q4 is characterized by higher operating CapEx spend, hence, operating cash return for the full year is expected to be in line with the prior year. Moving on from proportional figures to consolidated figures. We get a good picture of the cash flow that becomes available for capital allocation at the holding level. Our cash flow from operations, which includes upstream dividends from our joint ventures remains strong, showing a 2% year-on-year increase. After deducting operating CapEx and IFRS 16 lease payments from the CFFO, we arrive at a consolidated operating free cash flow of EUR 557 million, equivalent to EUR 4.82 per share. Factoring in the increase in net debt and all finance and tax-related cash flows, we arrive at free cash flow of EUR 618 million. This represents the available cash that we can strategically allocate to pay dividend, to invest in growth or to buy back our own shares. In the first 9 months of the year, we have used roughly half of our available cash flow to distribute value to shareholders. As we have completed our share buyback program for the year and paid our annual dividend, cash available in the fourth quarter will be primarily used for growth investments. This all in line with our long-term capital allocation policy that aims to deliver value to our shareholders while pursuing growth opportunities at the same time. Our capital allocation framework consists of 4 distinct pillars, aiming to maintain a robust balance sheet, distribute value to shareholders, invest in attractive growth opportunities and yearly evaluate share buyback programs. In the next part of the presentation, I will briefly highlight the developments on our key capital allocation achievements. Starting at our first priority, the balance sheet. Proportional leverage, which reflects the economic share of the joint venture debt versus the part of the EBITDA of the joint ventures decreased slightly to 2.56x compared to the end of 2024 when it was at 2.67x. If we exclude the impact of assets under construction, which do not contribute yet to the EBITDA, proportional leverage is at 2.12x, which is the lowest level in the last 5 years. Our ambition for the proportional leverage range is between 2.5 and 3x. To facilitate the development of growth opportunities that enhance cash return, Vopak's proportional leverage may temporarily fluctuate between 3 and 3.5 during the construction period, which can last 2 to 3 years. Additionally, we maintain control of our financing expenses by limiting the exposure to volatility in interest rates. We achieved this by borrowing predominantly at fixed rates, around 80%. As mentioned, we have the long-term ambition to generate reliable and attractive returns for our shareholders. This is why we increased our dividend per share by 6.7% to EUR 1.60 in 2025, adding to our long track record of annual dividend distributions. On top of that, we updated our capital allocation policy to include share buyback programs. Over the last 2 years, we have successfully completed 2 programs with a total value of EUR 400 million and as a result, decreasing our share count by 8.3%. Considering both the dividends paid and the share buyback programs, we have offered an average shareholder yield of 8.1% in the period '24, '25. Investing in growth opportunities is an important part of our capital allocation policy. As highlighted during our recent Capital Markets Day in March, we have the ambition to invest EUR 4 billion on a proportional basis by 2030 to grow our base in gas and industrial terminals and to accelerate towards energy and transition infrastructure. At this point, we have already committed around EUR 1.9 billion to growth investments since 2022, of which EUR 526 million has been commissioned and is contributing to our results. And as you can see in the graph, we are ramping up our investments significantly this year with expected proportional growth CapEx of around EUR 700 million. We continue to see attractive growth opportunities in the market that we will pursue in order to grow the cash generation of our portfolio. Our ambition remains unchanged to actively support our customers with infrastructure for the ongoing energy transition and to invest when opportunities arise at returns in line with our portfolio ambition. We see this as an opportunity to invest rather than a target to spend. In India, our joint venture, AVTL, announced an investment in a greenfield terminal at the JPNA port in Mumbai. This terminal with capacity for LPG storage, a bottling plant and capacity for liquid storage is a strategic investment serving the fast-developing Hinterland. The investment, of which EUR 70 million is Vopak's share is funded by the proceeds from the listing and is expected to be commissioned in phases starting mid-2026. Also, AVTL acquired 75% of the Hindustan LPG terminal for a total amount of EUR 100 million, which is equal to a proportional investment of EUR 42 million for Vopak. Upon the closing of the transaction, our share in this terminal will effectively rise to 31.67% from the 24% we own currently. On the Vopak holding level, we expect a cash in of EUR 32 million following the closing of the transaction. The acquisition will allow AVTL to expand its business at the Haldia location in LPG storage. For Vopak, this is another showcase on how we create and unlock value for our shareholders while optimizing our joint venture structure and controlling the cash flow at the holding level. That brings me to the full year outlook of 2025. We confirm our financial outlook with a proportional EBITDA range of EUR 1.17 billion to EUR 1.2 billion, subject to market uncertainty and currency exchange movements. We expect proportional operating CapEx of below EUR 300 million and proportional growth CapEx of around EUR 700 million for 2025. For the longer term, our ambition remains unchanged. We aim to invest EUR 4 billion proportional growth CapEx in industrial, gas and energy transition infrastructure by 2030, while generating at least 13% operating cash return from the portfolio. Our ambition, as mentioned, for the proportional leverage range is between 2.5 and 3x. Bringing it all together in this slide, we had a strong Q3 performance and delivered on our financial performance with a healthy occupancy rate and a record high proportional EBITDA for the first 9 months of the year. With regards to our growth ambition, we are well on track to invest EUR 4 billion proportional growth CapEx by 2030. We remain committed to capture opportunities to grow in industrial and gas terminals and accelerate towards infrastructure for the energy transition. Our well-diversified portfolio caters for uncertainty and volatility in the market. As a result of that, we are confirming our outlook. These factors, combined with a strong capital allocation framework create value to our shareholders, leading to an increase of free cash flow per share of 4.3% compared to last year. This concludes my remarks in the presentation, and I would like to hand back to Dick for the Q&A. D.J.M. Richelle: Thank you, Michiel. With that, I'd like to ask the operator to please open the line for question and answers. Operator: [Operator Instructions] And now we're going to take our first question, and it comes from the line of Kristof Samoy from KBC Securities. Kristof Samoy: I will start with 2. Can you elaborate a little bit on the contract renewals that you commented on during the presentation and the impact it had on occupancy rates and how you see that picking up again in the fourth quarter? And then as a general remark, it's more of a, let's say, a strategic question. What's the impact that you see on your industry of the potential for a Power of Siberia Gas Line 2? And what could the potential impact be on your ongoing business development activities? These are my first 2 questions. D.J.M. Richelle: Can you maybe before we answer, maybe repeat the second question? We couldn't quite hear it. The impact of what? Kristof Samoy: The Power of Siberia, the gas pipeline between Russia and China. D.J.M. Richelle: Okay. Yes. Okay. Well, maybe if I start with the contract renewals, that's basically in Fujairah and in Rotterdam. So it's oil storage, where we are like rolling over a contract from one party to the other. So it's a temporary occupancy consequence, as you see. And we have -- we're in the process now of rolling it over to new contracts. So that should happen in Q4 and the beginning of 2026. So fundamentally, it's not something that we're concerned about. Then maybe to the impact of the power line or the LNG connection between Russia and China. I think the way we look at it is if you consider of the main infrastructure that we have on LNG today in Western Europe, that's basically Gate and EemsEnergyTerminal. They are already fully dependent on the LNG imports that are coming from countries other than coming from Russia. So I don't think that has a big impact. I think we look still very comfortable and positive towards the medium- to long-term outlook for that infrastructure. And with what's happening between Russia directly and China is not having a major impact or not expected to have any impact on our plans for LNG in the different parts. As you can see in Colombia, as you can see with the plans that we have and the developments going on in Australia, in Pakistan, they're all kind of like individual market dynamics that we understand well and have no impact from the developments that you're describing. Operator: Now we take our next question -- and it comes from the line of David Kerstens from Jefferies. David Kerstens: I've got 2 questions, please. I think you highlighted in the press release that the -- or in the presentation that the impact of the lower occupancy was offset by better pricing and higher throughput revenues. Can you indicate where in the portfolio you see this higher pricing and where throughput revenue increases? And then also the second question, I think the contribution from growth projects on proportional EBITDA increased to EUR 17 million year-to-date, I think, versus EUR 9 million in the first half of the year. How do you expect this figure to develop for the remainder of the year and for 2026 and 2027, given that the project pipeline is now nicely building up. And I think in the past, you used to give a rough ballpark number what you expect from growth projects on EBITDA. Those are my 2 questions. D.J.M. Richelle: Yes. Thanks, David. I'll take the first one, and I'll leave Michiel to do the second one. So on the first one on the better pricing and throughput, that's mainly in the main oil terminals. We see that we still have quite a bit of an opportunity to do our pricing quite well. If you look at particular throughput levels, we've seen some additional throughput in the Vlissingen terminal because we've added actually more capacity in Vlissingen. And you also see that AVTL has seen a bit more throughput in this last quarter. So by and large, I think positive developments in that area. But I think the main one that stands out, although not to be exaggerated, but I think the one that stands out is still some power that we have on the oil side in the hub locations, mainly. David Kerstens: Pricing power, yes. D.J.M. Richelle: Yes. Operator: Now we're going to take our next question. Michiel Gilsing: Next question is on the proportional EBITDA contribution of growth projects. So indeed, the first 3 quarters were around EUR 17 million. So for the last quarter, you may expect another close to EUR 10 million contribution. Operator: And now we're going to take the question from Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: I have 2 questions. Firstly, on Australia, you obviously announced that you've entered into an exclusive agreement with Seapeak. I was just wondering if you could provide an update on the potential time line going forward for that project. And in particular, I know regulatory approvals are important there. So an update on the time line would be helpful. And then secondly, Michiel, you said that the Asian and Middle East business was stronger this quarter due to a commercial resolution. Are you able to provide a little bit of color as to what that was? D.J.M. Richelle: Sure. Jeremy, maybe on Australia, to start off with, the project is developing well, as we indicate. We have a really good team in place and everything lined up to actually move forward with the permit application that is being prepared at this moment. That is, as you rightfully indicate, a lengthy and a very -- I wouldn't say lengthy, but a diligent process in that part of Australia, and we go through that. So the time line, but that obviously is subject to how the permit process is developing. The time line we expect towards the end of 2026 to have more clarity on this and to be able to hopefully move forward with the project at that time. But as I said, that depends a bit on how some of the developments on the permit are moving ahead. I think the attractiveness of the project for us is because of the location that we found for our import facility. We get good support both from the government and from all the interested parties in Australia. So we have good hopes that this project will move forward. But obviously, we have to move diligently through the approval and the permitting processes, which is happening at this moment. So happy to continue to update you in the following quarters. Michiel Gilsing: Yes. Jeremy, on the commercial resolution, effectively, that took place in Q2. So it was announced in Q2 as well. So it wasn't in Q3, but it had to do with the commercial settlement of a significant contract we have in that region in Malaysia. And as a result, we had a one-off gain of EUR 22 million. So that's effectively what happened. I can't give you all the details of this, but it's a one-off. It's a good commercial settlement, and it impacted Q2 positively. But as a result, Q3 looks weaker than Q2. Operator: Now we are going to take our next question and it comes from the line of Berkelder from AAOB. Thijs Berkelder: Thijs Berkelder, ABN AMRO ODDO BHF. I have a question on your growth CapEx. You're guiding for EUR 700 million proportional growth CapEx. What is the guidance on consolidated growth CapEx just for the modeling? The second question is on leverage. Looking at your share price, it also is clear to you probably that European investors simply want to eliminate their own economy and prefer share buybacks far over long-term strong growth CapEx plans. So looking at your leverage being at the low end of the range, what are you expecting for year-end? And is it logical to assume that the new share buyback announcement will come in? Finally, apart from Australia, can you maybe give an update on your growth projects in South Africa, in EemsEnergy and in battery storage Netherlands? Michiel Gilsing: Yes, on the -- let me start with the second question because the first question, I don't know by the top of my head, to be honest. So we need to see whether we can find a number and whether we're able to disclose it. Then on the leverage and the share buyback, yes, obviously, we prefer to grow the company because we think that the EBITDA multiples, which we can realize on the growth projects are still quite attractive. Obviously, if you look at the trading multiple of the company is historically quite low at the moment. So that still makes it attractive to do share buybacks, but growth is still prioritized over share buybacks. But definitely, we will -- like we have done in the last 2 years, yes, we will always have a positive look at the share buyback if there is room to do it. We're going through our budget process in the coming months, update our long-term financials, see what the available room is. Obviously, a lower leverage helps us there. So that's the guidance I can give at the moment, Thijs. And on the consolidated growth CapEx, it is going to be somewhere around EUR 300 million to EUR 350 million. D.J.M. Richelle: And then maybe, Thijs, on the last question, so update on South Africa, on Eems, on batteries. In terms of projects South Africa LNG fundamentals still continue to look very attractive. I think time lines is something that have to be watched given the fact that in order to build a power plant that the LNG would support or would basically supply into needs to get also the permit and we've seen that there's some delay on the permit process of the power plant. So that's what we continue to follow. Again, fundamentals still look attractive. The role that we can play looks very attractive. We need to work through these topics. I think that's on South Africa. On Eems, as we say, happy that we have the compressors identified and being put into motion to have 2026 onwards, at least the technical challenge, the temporary technical challenge solved as we indicated. And I think we're going through the renewal process for Eems at the end of 2027, and that's an ongoing process. And the third one was on batteries for the Netherlands. As we've indicated before, we have a few -- 2 to be specific battery positions that we are currently developing. That's in the Netherlands. We also have a few in Belgium, and we're developing all of them individually in the course of our normal project development funnel, expecting the first investment, if everything moves in the right direction, somewhere in the course of 2026. That's the idea. So we continue to develop this field. There are opportunities, the role that we can play. We're actually confirming the attractiveness. And let's see how the development cycle plays out and how big this can become for us. Thijs Berkelder: Maybe one additional question on growth CapEx. Are you also looking at acquisitive investments such as New Fortress has assets for sale. Is Vopak interested there? Or are you in talks on other acquisitive moves? D.J.M. Richelle: If we were, this would probably not be the right moment to share that with you. We're always looking at a lot of opportunities, Thijs. There's a lot of people that there that we get from people that have great ideas on what potentially could be done. And I think as long as it makes strategic sense for us as a company, we will definitely consider those and that could be in, I would say, the so-called more traditional space of our business, and it could also be in a little bit more adventurous pieces. But that could also, for instance, be on the battery space. We continue to keep our eyes wide open and make the right moves as we think we can get there. Operator: And the question comes from the line of Dirk Verbiesen from ING. Dirk Verbiesen: I also have some questions. Maybe I'll start on the, let's say, the cost restructuring program, the ongoing program. What are your expectations for Q4? And is this, let's say, a program to counter maybe inflationary pressures on an ongoing basis? Or should we see some benefits structurally visible in EBITDA, let's say, as from 2026? That's my first question. Second question I have is on Eems. And the announcement on Exmar and the floating gasification facility. Let's say, what is the -- maybe to get an idea on the size and scale of your commitments in this future prospect. Maybe you can share some there. And then on Oman, it is positioned in Accelerate as a potential project. But I also read that there are traditional energy flows as well. So maybe some clarification there on what the actual mix may look like and also in terms of timing on firm commitments, FIDs and so on from your side? Michiel Gilsing: Yes. Let me start with the first question and then hand it over to Dick for EemsEnergy and the Oman question. Yes, on the cost restructuring, indeed, we have quite a bit of a cost focus, didn't start this year, but already 1.5 years ago, we took out one layer in the organization. So we have reduced the number of layers in the company. So basically, every business unit, which originally reported to the division and then the division to the Executive Board, every business unit now reports to either Dick or myself. So that is a benefit where we like to control, let's say, the support functions of the business. Presently, we're in the process of looking at the global office, and we expect -- while you can -- we see it already in the monthly results that the cost is coming down of the global office, and that's going to continue in 2026. So those will be structural benefits, and we're also looking at our IT organization because we have commissioned most of our own systems on terminals where we would like to commission it. So IT department goes into a different phase. That's where we carefully look at the cash out of IT, which should also lead to structural benefits and more from 2026 because that program still has to be sort of designed. And then we have all kind of business initiatives to indeed keep the cost under control, energy management, making sure that we are smart in operating CapEx, carefully look at the way we build our projects, so to really look at each and every angle to improve the business. Part of that is maybe to cope with inflation pressure. But for us, it is really to continuously focus on areas where we can still improve the cash flow performance of the company. That's the most important thing. And then in a structural manner because the markets are quite good. The results have gone up quite a bit from a cash flow point of view over the last 3, 4 years, adding EUR 250 million cash flow to where we were in 2021. But we obviously want to make sure that we also run the company in a very efficient and effective manner. And thereby, we see still opportunities to increase our free cash flow while we are running at a high occupancy level. D.J.M. Richelle: And maybe, Dirk, on the other 2 questions, maybe first one on Eems, Indeed, so the current setup in Eems is we have 2 FSRUs. One is the one owned by Exmar and then the other one through a bit of a difficult structure, but in the end, owned by also New Fortress Energy. And that's the one that we're going to now replace in the renewal process. So after 2027, we will replace that FSRU with an FSRU from Exmar. The commitment that we have today is that we work together with Exmar on the renewal process, so the permit renewal and the customer contract renewal. That's a process that we currently go through. And that is a process that obviously, in terms of commitment, the individual commitment, we would not disclose what the individual commitment is to Exmar, but we have exclusivity on the right FSRUs to make sure that we can go through this process and make sure that we get the renewal done and then have the 2 Exmar FSRUs in place in Eems. So that's the process that we currently go through, and that's why we've announced to have that -- to reach that agreement with Exmar. I think that's one. And then the other question you asked was on Oman. And that's a joint venture that we signed with OQ. It's in the Port of Duqm and Duqm has a few attractive parts. And I think the fundamental attractiveness of Duqm sits in the fact that the renewable energy is very competitive over there simply because of the climatological circumstances of that part of Oman. So hence, the concentration of the country to produce green ammonia for exports is really focused on that part of Duqm instead of allowing all the individual producers of the potential green hydrogen, green ammonia to build their own infrastructure. The Omani government has basically said, let's bring one specialist in and make sure that we share the infrastructure in the export port of Duqm. So that's the overall plan. In the meantime, and in the initial phases of the development over there, we expect that there's, for example, a huge potential for also LPG exports in the country and specifically through the port of Duqm. So that's the reason why for now, we've classified it as a fundamental long-term investment under the Accelerate. Yes, if the first investments come in and sit in LPG, we would probably reclassify part of that investment. But I think the key message here is it's a new country. I think the role that we as Vopak can play is really a very good role, and it's an attractive country for us to be in, and we expect quite a bit from that in the future. So excited about it. Dirk Verbiesen: Okay. That's very helpful. Maybe on the restructuring efforts you are implementing, is there another expectation for Q4 of a few million? And how long will this program last as an exception that you can apply it as an exceptional charge? Michiel Gilsing: Yes. In exceptional, something still may happen in Q4 because the program is indeed ongoing. And as I said, more to come. The impact in Q4 will be -- the positive impact of lower cost will be a bit in line with what we have seen in Q3. And then obviously, any further benefits of this program are going to be included in the outlook of next year for '26. But definitely, we aim, as I said, not to be only to see an impact in '26, but also definitely beyond '26. Operator: [Operator Instructions] And the question comes from the line of Kristof Samoy from KBC Securities. Kristof Samoy: Yes. I have 2 further questions. First of all, I still need to do some number crunching on the operational cash returns. But can you maybe detail already a little bit what is the reason of the drop in the OCR quarter-on-quarter? And then secondly, what about the Vopak Energy Park in Antwerp? How is this project progressing? And is there any material change following the outcome of the IMO meeting, which was not very favorable in terms of alternative marine fuels? Michiel Gilsing: Yes. Thank you, Kristof. Let me tackle the one on the OCR, and then I hand it over to Dick for the Antwerp major development. Yes, by nature, but that maybe sounds a bit strange. But by nature, you see within Vopak always the cash return of the first quarter is the highest, and then it sort of gradually goes down during the year. And the reason for that is that most of the operating CapEx is effectively spent in Q4. So the pattern most of the time is like we spend around 10% of our operating CapEx in the first quarter and then 20% in the second, 30% in the third and 40% in the fourth. And that has to do with budget approvals with people need to design it and then start to really come on speed in the second half of the year. And as a result, if you deduct the operating CapEx from the cash flow generated by the business, effectively, if the business is relatively stable, you will notice that the cash per quarter effectively goes a bit down versus the capital employed, which is relatively stable. And as a result, the OCR gradually goes down from Q1 to ultimately Q4. And then on average, we think that it's going to land somewhere around 15% for the year. D.J.M. Richelle: Maybe Kristof, on the energy park in Antwerp, continued exciting development. How excited can you be for a land that is empty? Well, that's exactly why we are excited for it because all the infrastructure that was on the land has been demolished successfully over the past period. We're now in the phase of the necessary cleanup and that soil cleanup that is currently going on with a massive project, which is going according to plan and in line, obviously, with all the obligations that we have assumed when we acquired the site, and that goes well. I think that's on the pure progress on where the land is developing. Then on the commercial side and the development side of the land, there's a few angles that we take. There's an opportunity to host a green plastics producer over there that uses methanol as a feedstock. And that project is developing well. So we would host basically the plant on our site and build the necessary storage and infrastructure capacity needed to go to and from the plant. That's together with Vioneo. So that's one. And we're looking at ammonia and CO2 developments that look attractive, but depends a bit on the regulatory framework on how fast these developments would allow people to commit for it. I think the location continues to be very attractive for us. The outlook continues to be for us very attractive and interesting. And then specifically on the IMO, yes, that will take probably a little bit more time for people to get sufficient clarity on what needs to happen over there. The fact that we potentially would have a methanol import opportunity to support the plant. I was just speaking about, gives us the opportunity, obviously, to expand in further methanol storage in Antwerp at this particular site. So I think, by and large, good progress on the pure development of the land and then the commercial opportunities are for us also attractive. Batteries, by the way, is also an opportunity that we see over there. There's land available, good power connection available, and we will definitely pursue all the options that we have to really turn this into Vopak Energy Park in Antwerp. So I hope that helps. Operator: Now we're going to take our next question. And the question comes from the line of Thijs Berkelder from ODDO BHF. Thijs Berkelder: Question on cash in the fourth quarter related to some items. Did you already receive the shareholder loans from the Indian JV back? And how much was that? Then you're indicating you will receive EUR 32 million back related to Hindustan LPG. What is roughly the proceeds from the divestment of Barcelona? And did you make any divestments yet in the Vopak Venture entities? Michiel Gilsing: Yes. On the shareholder loan, so the application has gone to the authorities to get approval, but that's a bit of -- as I mentioned before, it's a bit of a longer process than you would hope for. But that amount is going to be around EUR 40 million. So we hope that, that is still going to be approved by the year-end, but I can't guarantee that, to be honest. So with the Haldia sales and dividend, which we will still get out of Haldia, we expect that shareholder loan plus Haldia is going to be around EUR 75 million cash in for the holding. The Barcelona cash in was relatively small because a lot of that money has been used to also repay some of the debt. So we will get some additional money, but it's lower than -- it's only a few million there. And on the Vopak Ventures, yes, good that you mentioned it, Thijs, because effectively, we have been able to reduce the portfolio already quite a bit. So some cash has come in, but it's somewhere between EUR 5 million and EUR 10 million. So the portfolio is relatively small at the moment. So basically, we have decided the likelihood that we can sell the portfolio in one lot is pretty low because of the size of the portfolio. So basically, we're going to -- what we're going to do going forward is step by step, we will reduce the portfolio to a lower amount. And in the fourth quarter, we will also look at, okay, what's still the value of the portfolio versus what we think we can still realize and then we will update the market on that as well. Thijs Berkelder: And it means a potential impairment of EUR 10 million or so? Michiel Gilsing: That could happen, but too early to tell because we need to go through the process. That's a Q4 process. But yes, I don't have any guidance on that yet, but I will update as soon as I have that. Operator: Now we will take our next question and the question comes from the line of Dirk Verbiesen from ING. Dirk Verbiesen: Yes. One follow-up, if I may. The remarks about the technical challenges in Eems and the solution or let's say, the problems have been identified. Is that -- is there a -- has that changed in a way that now a solution is found? Or is it more the same, let's say, tone of voice from Q2? Or have there been any developments there? D.J.M. Richelle: No same tone of voice, Dirk. What we've indicated is a temporary technical challenge. The solution for that challenge has been identified before Q3, and that sits in the acquisition of the procurement of additional compressor capacity. And that capacity is not typically something you buy off the shelf. That takes a little bit of time before they get in, and they are expected to be in service at the end of this year. And therefore, we expect to go back to a different and a normal type operation in -- as from 2026. So more or less in line. I think what we're more specific about now is probably the time line on when we expect it to be done, but all according to at least the plan that we have. Operator: Dear speakers, there are no further questions for today. This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Sami Taipalus: Good morning, everyone, and welcome to the Sampo Group Third Quarter 2025 Conference Call. My name is Sami Taipalus, and I'm Head of Investor Relations at Sampo. I'm joined on the call by Group CEO, Morten Thorsrud; and Group CFO, Knut-Arne Alsaker. The call will feature a short presentation from Morten followed by Q&A. A recording of the call will later be available on sampo.com. With that, I hand over to Morten. Please go ahead. Morten Thorsrud: Thanks, Sami, and good morning, and warmly welcome to the conference call on Sampo's third quarter results also on my side. As this is my first set of results as CEO, I'm going to spend a little bit of time on our strategy and how it's playing out in our results. But before I go into that, let me first comment briefly on the third quarter as such. Sampo delivered another excellent set of results in the third quarter. By and large, we saw the same positive operating trends as earlier in the year, with strong premium growth, driven by private and SME and solid margins. The claims environment has been favorable with benign weather, large claims below budget and frequency trends in line with expectations. Still, we are continuing to be prudent in setting our loss ratio picks, meaning the benign claims environment has not fully flowed to the bottom line. On our underwriting margin, we saw a roughly 50 basis points of improvement in the underlying Nordic combined ratio, driven by both the cost and risk ratio. U.K. margins, on the other hand, continued to normalize from the elevated levels seen in the prior year, but remained within our target range. All in, year-to-date underwriting profit grew by 17%, driving a 14% increase in operating EPS to EUR 0.38. The result comes on the back of very strong performance through the strategic period so far, leading us to upgrade our operating EPS target from the period 2024 to 2026 to now above 9%. Outside of the operating result, we had a EUR 355 million gain from our stake in NOBA, driven by successful IPO, followed by strong share price performance. We sold only 1/4 of our holdings in the IPO, meaning we retain a 15% stake in NOBA valued at EUR 636 million, at the end of September. The EUR 150 million sales proceeds from the IPO will be returned to shareholders through a share buyback announced today. So that was an overview of the result. Now, let me turn to strategy. I'd like to start with a short comment on where Sampo is as a company today. We are, of course, a pure-play P&C insurer, large and well diversified with EUR 10 billion of premiums, spread across 5 markets of roughly equal portfolio size and then the 3 Baltic countries on top of this. However, what really stands out is that Sampo is at the forefront of the industry in pretty much every area in which it operates. As mainly a direct insurer, without material physical distribution, it has been essential for us to master the art of digital P&C insurance. In the Nordics, we've been at the helm of the industry digitalization, while the acquisition of Hastings in 2020 has catapulted us into a leading position in the U.K. price comparison website market. At the same time, our unparalleled partnership network with the Nordic motor industry, bring wide customer reach and expertise in new car technology. We are a leading -- we are a leader and digital frontrunner also in the Nordic commercial market, and we are the market leader and preferred partner in the Nordic large corporate market. Further, our pan-Nordic PI proposition has recently been strengthened by specialist insurer, Oona. Our Baltic business is a profitable, low-cost direct writer in a market of brokers and agents. Indeed, even Denmark, which used to be our Achilles heel, has been transformed into an attractive opportunity for us now through the acquisition of Topdanmark last year. In conclusion, we are in an enviable position to meet the future of our industry. So where do we go from here? I see the biggest opportunity in leveraging our unique set of operational capabilities to drive organic growth. As shown on this slide, we see structural growth opportunities in areas representing more than half of group's premiums. These should be familiar, is the digital U.K. market, PI in the Nordics, private property, SMEs. Our ambition in these areas are backed by structural trends as well as competitive advantages. For example, in PI, we are seeing increasing demand, combined with our first rate Nordic PI offering, which create opportunities across the customer segments. Similarly, U.K. consumers continue to shop more and more on price comparison websites, for which we have optimized our business. Taking a step back, we see growth opportunities in other parts of our portfolio as well. Right now, I would highlight Nordic motor, where we are in a pole position to benefit from a normalization in new car sales. Now, I talked a lot about growth, so before we go further, let me be completely clear on one thing, we are only interested in growing, of course, at attractive margins. The underwriting discipline that Sampo is known for remains fully intact. Turning to the numbers. Our results show that our strategy has traction. The growth that we've seen in the third quarter is a continuation of several years of strong development, as we can see on the left-hand side on this slide. Partially, this is the result of elevated inflation, particularly in the U.K., but at the same time, our growth is broadly based as we illustrate on the right-hand side. I would even argue that this understates the breadth of our growth momentum. In the third quarter, we achieved growth of 5% or more in all countries in both business area Private and Commercial in the Nordics. Let's take a closer look at operating trends by segment. I'll start with Private Nordic, which delivered a fourth consecutive quarter of record high GDP growth. What's behind this? Well, let's focus at least on 3 things. First, good underwriting through the inflation spike means that we have had -- we have not had to do corrective price actions in the same way as some of our competitors. This supports retention and increasingly allows us to attract new customers. Second, we have strong momentum in our target growth areas. PI, in particular, is strong, which is why we also have raised our guidance and outlook on GDP growth with a now ambition of more than 10% for the strategic period. Third, we are benefiting from higher new car sales with strong motor GDP growth of 13% in the quarter. Put simply, the investments we have made into underwriting, pricing and service are paying off as customer traction. Let me turn to the U.K. The last few quarters have truly illustrated the skills we have in trading on price comparison websites. By actively shifting the mix and leveraging our innovative telematics product, we have sustained attractive policy count growth and solid margins, while market pricing has fallen. This comes on the back of a strong 2024, allowing us to raise our U.K. underwriting profit growth target to now 20% to 25%. Looking ahead, we're always adapting to growth. We are always adapting growth to market conditions. The start of 2025 saw attractive motor market conditions, but as pricing declined, we have responded by slowing our growth rates. At the end of Q3, market pricing has fallen to a level, where we see fewer opportunities for growth, while larger part of the portfolio begins to hit up against target margins. As we are committed to being a disciplined underwriter, this means that we need to see increasing motor market pricing to be able to continue to grow. Like in the Nordics, we have a great track record in delivering solid margins through the cycle, also in the U.K., and we very much intend to keep this. The good news is that due to diversification, we are not too reliant on any one market or strategy for profit growth. Next, I will make a few short comments on Commercial. Our portfolio is dominated by SMEs that tend to act in a similar way to private customers. Here, we can leverage the same skill set that we have in private, particularly as the market is becoming more digital. Outside of SME, a material part of the book is what one could call local specialty business that require specific skills and a strong market presence. This includes our market-leading agriculture business in Denmark and Personal Insurance. Only some 20% of commercial sales are done via brokers, and retention are almost as high as in private. Turning to performance. We continue to deliver solid growth, driven by our target areas, SME, PI and online sales. So we can again see that our strategy has traction. Then, to the Topdanmark integration, Q3 saw a critical step in the Topdanmark integration process in the form of the legal merger of Topdanmark into If. Following this, we have seen a surge in synergies, as we've been able to move to If's Nordic operating model and start also to restructure our reinsurance programs. We have now delivered run rate synergies of EUR 24 million year-to-date, meaning we have reached our target for 2025 one quarter early. You should take this with a pinch of salt, synergy emergence can be a bit lumpy. So we stick to our target of EUR 140 million of ultimate synergies in 2028. Nonetheless, the strong execution to date increases our confidence in being able to achieve this figure. Longer term, the most important thing about the Topdanmark deal is that it transforms our competitive position in Denmark. Since it's still early days, we are not yet fully benefiting from our combined strength in the Danish market, and thus, there is a clear opportunity to improve the performance going forward. Final slide, let me try to tie it all together. We are in a great position as a group. Our results show that we have an organic growth strategy that is working and that we continue to deliver attractive and stable margins. The third quarter performance brings year-to-date underwriting profit growth to 17%, driving a 14% increase in 9-month operating EPS. This follows a 13% operating EPS growth in 2024. On back of these strong results, we have increased our operating EPS target for 2024 to 2026 to above 9%, up from the previous target of about 7%. The increase in the target show that we are going into 2026 with confidence and with ambition. We have great momentum, and we will not let up on pace. That concludes my opening remarks. Back to you, Sami, for Q&A. Sami Taipalus: Thank you, Morten. Operator, we are now ready to begin the question-and-answer session. Operator: [Operator Instructions] The next question comes from David Barma from Bank of America. David Barma: Firstly, on growth in Nordic Private, it was really good again this quarter. Could you give us a bit more color on growth by country? We spent a lot of time on Norway in the last few quarters, but maybe if you could give us some color on the rest of the geographies and the key lines that have been driving the growth in Q3, please? And then secondly, on Storm Amy in October, would you have some early estimates that you can share on the impact for Sampo, please? And then lastly, on the U.K., top line and policy count growth were still pretty strong in the quarter despite average premium being down high single digits. So could you please comment on the profitability of that new business? And how you're seeing market conditions change since the comments you've made on -- regarding Q3, I mean, in the last 6 weeks or so? Morten Thorsrud: Yes. Perfect. I'll try to answer to these 3 questions. First, on growth in Nordic Private, yes, quite a stellar performance, 10% growth overall for Private Nordic, and it's actually quite broad-based. So we have 5% or more in all countries, which actually is the situation, both within Private and Commercial. So both Private and Commercial produced more than 5% growth in all countries. And Norway, of course, still continue to stand out with double-digit growth. But it's good to see that the growth now is broad-based, and also, definitely, the other countries strongly support the growth story. When it comes to Storm Amy, it was a fairly sizable event, mainly impacting Norway in beginning of October. Initial estimate for us is between EUR 30 million and EUR 40 million. So somewhat sizable event, but of course, we're used to seeing these events from time to time, typically in the fall. Top line and policy growth in the U.K., what you will see is that we shifted the growth towards a little bit some other areas. So we had -- continued to have good growth in our telematics offering, also in other areas like bike, van, home. And then we had less growth in, what you could call, the core or classic motor product. So I think we used our excellent capabilities in the U.K. market in driving growth in areas where we believe that we still get attractive margins. And we still then have the same target for our U.K. operation. We talked about 88% to 90% in operating ratio. That is still what we focus on, and that's still what we aim to achieve when we write business, also the new business that we write now. Operator: The next question comes from Ulrik Zürcher of Nordea. Ulrik Zürcher: Yes. I thought the Nordic cost ratio was quite impressive in this quarter. Has anything changed? I think you indicated around 22.5% or something for the full year, which would mean, the cost ratio is a bit back-end loaded into Q4. Has that changed? And also, I'm wondering about given the strong top line momentum and scale economics that you have with -- like what should we look out for, for cost improvement in '26? Morten Thorsrud: Yes. The Nordic cost ratio develops favorably. As you remember, the starting point is 23%, when we include the overhead cost in Topdanmark, that is now included in If's cost base. And the progress is good. So we have a target of 40 basis points reductions for this year, and that's also the target for next year. Of course, growth is supporting this, and also, the synergy realization is supporting this. But again, there is nothing new on the target. We have a 40 basis points target for this year and also next year on cost ratio reduction in the Nordics. Ulrik Zürcher: Okay. Great. And also just a follow-up slightly on Norway. Like, obviously, this sort of exceptional situation can't continue forever. Do you see it continuing into next year? Or are we approaching sort of the peak of the market repricing? Morten Thorsrud: That's hard to comment on really what will happen in the future. Pricing in the Norwegian market has come down a little bit over the last few months. And, of course, it's difficult to expect that repricing will continue on these levels, but I'll revert from speculating when it comes to exactly when. Ulrik Zürcher: And also, a last one, just on the renewal date. I think it was mentioned in your presentation, but -- should we expect like continued strong commercial momentum into the renewal date with both price hikes and new volumes or just more normalized 5%? Morten Thorsrud: I think we continue to expect good development on the commercial book of business, also in the coming quarters. Operator: The next question comes from Vinit Malhotra from Mediobanca. Vinit Malhotra: Hope you can hear me clearly. The 2 questions I would choose today. First is the solvency even when adjusted for a little bit the buyback. I mean, was -- is there anything you would flag in that operating earnings contribution of about 9%, a touch lighter than other quarters. And maybe there's nothing to flag really, but I just thought I'll ask you on the solvency. The other thing I would -- wanted to quickly check is -- when we see your Slide 56, which is very helpful on the new car sales, and I see some big moves, but also Sweden being a little lower than recent, at least last 2 quarters, is there something to flag? Because also Q3 '24 was quite weak on the Swedish number here on the Slide 56. Is there something you would like to flag here? Also because -- are you seeing more competition? We've heard one of your peers talk about opening new contracts with car dealers. There's something you'd like to -- is there something there that is worth noting here for you? Knut Alsaker: Vinit, why don't I start with the solvency, Knut-Arne here, while Morten is trying to find Slide 46 (sic) [ Slide 56 ]. There's really nothing to flag on the solvency in terms of things that worry me. There are some things to be aware of in the 172% that we print. As you referred to, it is including the full buyback, which we announced today, which shaved off 5% on the solvency. Then there are some seasonality in calculating solvency ratios, where that ratio will go up in the beginning of the year because we have a tilt on renewals towards 1/1. So there's a lot of premium reserves, which is beneficial for the solvency calculation, and there's less premium reserves in the third quarter. In the third quarter, that basically shaved off a couple of percentage points of the solvency. But like I said, that will come back. Then, the solvency ratio in the third -- on 30th of September was lower due to higher FX risk related to NOBA. We didn't -- we basically couldn't hedge the Swedish krona exposure before we knew what the share price roughly would land on when it comes to NOBA post-IPO, but that is now being done, and a lot of it has already been done. So that will add back some 3, 4 percentage points on the solvency as well. And then fourthly, I think it is, there is a bit of technicalities related to the legal merger of Topdanmark, it's only 1% or so. That also will come back in the beginning of the year when we have the internal model in place. That is on top of the already announced SCR benefit of EUR 60 million to EUR 90 million, which we talked before. So there are some things that move the solvency ratio a little bit like I now had listed, but nothing that worries me in terms of the stability and solidity of our capital base. Morten Thorsrud: Good. And then to the now famous Slide 56. So that's the overview of new car sales in the Nordics. And as it shows, strong development in the Nordics overall, new car sales increasing with almost 10%, which is, of course, something that supports us, in particular, business area Private, where we see a 13% GDP growth on motor actually in the third quarter. Then the growth is mainly driven by other countries than Sweden. And for us, it's, in particular, important with growth in the Swedish market due to this special car damage warranty construction, where we are clearly the market leader, continue to be the market leader, which means that we have a good upside when the Swedish market continue to bounce back. But it's good to see now at least that the Swedish new car sales is also starting to show positive development. Operator: The next question comes from Nadia Claressa from JPMorgan. Nadia Claressa: Two questions from me, please. The first one is just going back on reserving. I think based on your opening commentary, Morten, it does seem like Q3 was a case of being opportunistically more cautious. So if you could just please confirm that the Q3 PYD is driven purely by this rather than any developments or underlying issues in your book? That would be great. And also, is this something that we should continue to expect going forward if the large loss experience allows for it? Or was this also more extra caution given your first quarter as CEO? So that's the first question. And secondly, on the change in the operating EPS target, just out of curiosity, why are you upgrading this now? I mean, were there any specific drivers that changed your view in the past quarter alone? Or was this more of like a catch-up given the strong year-to-date performance? Morten Thorsrud: Good. I think on the reserving, you're exactly right that this is how we typically operate. We try to be cautious. We would like to have sufficient reserves, and of course, we saw a very benign development in the third quarter with benign development on large claims, benign development in terms of weather claims and also favorable frequency development. So it's part of our DNA to make sure that we have strong reserves, and there is nothing more than that, that explains the reason why we have a little bit less runoff gain in this quarter. Then, to the change in the operating EPS target, while we thought it was natural to do an update in a way almost midterm in the strategy period. Could I have done it after Q2, but then it would have been the previous CEO making predictions for the future. So we thought it was sensible for us to do it now. And it's a good way for me to, of course, also indicate that we have a strong belief in continued strong development, continued strong performance. So that's why we chose to update the operating EPS target at this time. Operator: The next question comes from Vash Gosalia from Goldman Sachs. Vash Gosalia: Just one quick question as most of the other ones have been asked. Just on the new car sales, could you help us understand what are your market shares in each country with new car sales? Why I'm asking this is because your comments sort of makes me believe that you're going to benefit from rising sales in each country. But in the past, you have mentioned that Sweden is an exception where you, I think, have around 40% market share. So just trying to get a sense of where the other countries are, and that will be quite helpful. Morten Thorsrud: Yes, it's correct that we will benefit from increased new car sales in, of course, all markets. We are somewhat stronger on new car transactions than used car transactions. So a growth in this will benefit us in all markets. Don't have sort of exact market shares on the top of my head. But, in Sweden, we have about 70% -- 7-0, 70% market share on the car damage warranty construction. We have partnership with, by far, the most of the large brands in Sweden. And that's why that market is of particular importance. And again, when you buy a car in Sweden, you get a car damage warranty that comes with the car for free, is paid by the importer, and we are the main provider of this type of insurance. Vash Gosalia: So sorry, just to follow up on that. For the other countries, could you at least give us a flavor of how far you are from the 70% mark? I mean, would you say you're roughly close to that? Or materially... Morten Thorsrud: No, no, that's far from. This is quite an exceptional thing. The car damage warranty construction is something that only exists in Sweden. In the other markets, we would be typically having a market share a little bit above our underlying market share in motor in each market. So we will have an overweight towards new cars, but absolutely not in the same magnitude. Operator: The next question comes from Emil Immonen from DNB Carnegie. Emil Immonen: Just a couple more. First, on the operating EPS growth target, the 9%. Could you maybe elaborate on exactly how you think about it? The underlying driving factors as to reach it on average, you don't need that much growth next year, it would seem to me at this point. Morten Thorsrud: Yes. And I think, in many ways, you have to look at the target with the same lens that you typically do when looking at Sampo's targets, it's an above 9% target. It's not 9%, it's above 9%. And I think it's signaling that we expect that we'll continue a strong performance, but it's an above 9% target. Emil Immonen: Okay. And then one more question on NOBA, about how you approach that now as an investment. It was IPO-ed, and it's performing quite well on the stock market, it would seem. Is it still a legacy investment in your view that you want to exit fully? Or what's the thinking on that? Morten Thorsrud: Yes, we've been rather clear on that all the time that our strategy is to exit fully. So we sold down from 20% to 15% in conjunction with the IPO. And we will, of course, in the future, also reduce our holding and eventually exit the NOBA position. Operator: The next question comes from Henry Heathfield from Morningstar. Henry Heathfield: I was just wondering if I could return back to this sort of cost ratio, basically in the Nordics. So if I'm right, you're tracking or you're currently at 22.5%. Based on the 40 bps, you should be at 22.6% if I am right, and you're at EUR 24 million year-to-date, which is the target. So I'm just kind of wondering what's stopping you, either this year or next year, from kind of raising those cost synergy targets? Morten Thorsrud: I think we believe that we have an ambitious target in reducing by 40 basis points for a number of years going forward. That will give us strong support in terms of also underlying profitability. Of course, cost ratio is always jumping a bit up and down quarter-to-quarter. But yes, we are on good track on delivering on the 40 basis points improvement for this year and also have a good outlook then for next year. But I think 40 basis points is substantial and an important contribution, of course, to the Nordic business. So we continue with that as the target. Henry Heathfield: Is there anything I should be thinking about in terms of the fourth quarter in terms of headwinds or you're just being conservative basically and sticking to your targets really? Morten Thorsrud: No. I think, on the fourth quarter, we, of course, have the information about the Storm Amy, which is why we chose not to increase the forecast, but rather stick to the previous announced forecast or outlook. That, of course, is a sizable event, but something that is quite natural for our business, something that we typically see at this time of the year. But that's what's kind of puts a little bit of caution on the fourth quarter. Operator: The next question comes from Youdish Chicooree from Autonomous Research. Youdish Chicooree: This is Youdish from Autonomous Research. So my 2 questions. The first one is on the growth topic in the Nordics. You talked about the solid and broad-based trends in Private and Commercial. But could you also comment on Industrial? And yes, I'm really -- I really want to know whether you think this segment could be a drag on the overall growth next year. That's my first question. And then secondly, on the fixed income running yield, I mean, for the first time, the mark-to-market yield dropped below the running yield. So I was wondering if you could help us understand the implications of this and whether the book yield or the book running yield will drop by roughly 30 basis points in the coming couple of years, basically? Morten Thorsrud: Yes. I'll address the growth in Industrial, and then, Knut-Arne will do the fixed income and running yield. . Industrial is showing a minus 50% growth in gross written premiums in the third quarter. One should bear in mind that it's a small quarter for industrial. There's not that many customers renewing in the third quarter. So in terms of nominal amounts, this is not a huge figure. Year-to-date growth is down by some 4% in industrial. Largely, this is driven by the derisking that we've done in Industrial, where we'd like to see less volatility from our industrial business, and in particular, the property part of it, which should secure our profits going forward. In terms of growth, Industrial is, of course, a little bit different than the other business areas. We will only grow in Industrial when we see that the market opportunity allows for it. And the Industrial, which, of course, is the same also for other business areas, but you have more volatility on the pricing in the Industrial segment. So, therefore, it's natural that the growth in industrial is a little bit more volatile than what you see in Private and Commercial, but it's usually more a stable development. Knut Alsaker: On the fixed income running yield, Youdish, I would say that you're right in your assumption, everything else equal, and then, let's see where rates go in the future. But everything else equal, the running yield would trend downwards to the mark-to-market yield that we indicated end of third quarter. So roughly a 30 basis point drop, but trending downward, not necessarily in 1 quarter, obviously, given the maturity profile that we have. Operator: The next question comes from Vash Gosalia from Goldman Sachs. Vash Gosalia: Just a quick follow-up on your comment on NOBA. So we know you have, I think, 180-day restriction. But just trying to understand, is it fair to assume that you would sell down the entire stake within the current plan, so which is by the end of 2026? Or do you think there's a risk some of it might fall over to 2027 as well? Morten Thorsrud: No, it's correct that we have a 180-day lockup, and we started with ownership of close to 20%. Now, we reduced it down to 15%. It's not likely that we will sell off everything, of course, at once after the lockup period expires. We have to look at the market development, and most likely, this is going to be a more gradual process. But it all depends on market conditions at the time. So it could take some time, but -- and I think that's the natural sort of expectation that we do this gradually in a controlled manner. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Sami Taipalus: All right. Thank you very much. That concludes the call for today. Thank you for listening in.
Stefan Wikstrand: Good morning, everyone, and welcome to our Q3 earnings call. Whilst the attendee list is starting to fill up here, I just want to point out that we will do this call as usual. So, we'll start with a brief presentation of the quarter. And then we'll go into a Q&A section where you can ask questions. [Operator Instructions] I think the attendee list is done, and everyone connected. So, with that, I will then hand over to our CEO, Vlad Suglobov. Vladislav Suglobov: Good morning, everyone, and welcome to our third quarter results call. And we obviously have also Stefan, our CFO, with us today. And let's begin by giving you a brief overview of this morning's report. We are pleased with the quarter's overall performance. In USD, revenue increased 0.2% sequentially in comparison to Q2. It's been a while since it happened when we had sequential revenue growth. The change of the trend is attributed to product improvements that we made in Q1 and Q2, and the gradual expansion of user acquisition spend, which was made possible thanks to these improvements in our products, namely in Sherlock. And Sherlock was the highlight of the quarter, achieving 5.6% growth sequentially in USD terms. Year-over-year, over the last 3 quarters, it went from minus 7.3% in Q1 to minus 3.5% in Q2 and then to plus 7.9%, almost 8% in Q3 in USD terms. So, with the positive changes that we've made to the game in Q1 and Q2, we were able to increase profitable user acquisition spend, and our new management and marketing helped bring energy to this process. And now the game seems to be on the trajectory for at least moderate growth. And the game accounts for about 29% of our net revenue. It's 1 of our 3 pillars of our revenue generation. So, this is a welcome change that should help our top-line dynamic. And if we look at the other 2 pillars of our portfolio and revenue generation, Jewels' family of games had a stable performance quarter-to-quarter, but it declined year-over-year. And Hidden City was down 5.2% sequentially in the quarter and down 14.1% year-over-year. So, not as good performance as Sherlock, but again, we did the changes, successful changes on Sherlock. And so, we were able to expand user acquisition there, and the dynamic of the game has changed. And now we have to work on the other 2 pillars of our revenue generation to try to achieve the same. So, our actively managed portfolio of games together increased 2.6% sequentially in USD terms. So, this positive dynamic of Sherlock, which is quite strong, actually shines through a more mediocre performance of the rest of the portfolio. And now that we have made these improvements to Sherlock, we will, of course, turn our attention to Jewel's family of games and Hidden City to try and use the lessons that we've learned on Sherlock to try and improve the dynamic of these 2 other games. And hopefully, will help us turn around the trend in our top line. In other news, monthly average gross revenue per paying user was at a new record of USD 70.8. And again, during the quarter, one of the tools that we used to turn around the performance of the top line is user acquisition. And we increased UA spend in the quarter to 21% compared to 19% in the previous quarter and also 19% a year ago in Q3. And if you look at how our user acquisition spend was evolving over the last few quarters, we kind of hit a minimum outside of our -- or very close to the bottom bracket of the range we previously communicated. And from there, with the help of the changes and the new management and the marketing and adding new advertising channels, we started increasing the spend, and we went all the way up to 21%, which is very close to the upper bracket of the previously communicated range, 17% to 22%. And during the fourth quarter, we think that we will have to go outside of that range, but probably not higher than 25% of revenue, most likely not higher than 25% of revenue. So, our goal is to continue this momentum and expand user acquisition to invest profitably in the growth of the portfolio revenue through existing and new games and primarily Sherlock, in order to turn around the top-line dynamic. The gross margin reached a record 71.2% in the quarter, up from 68.8% last year, thanks to the continued success of G5 Store. And we remain debt-free and continue to have strong, solid cash flow, and something we are very proud of. Now let's take a closer look at G5 Store, which continues to show remarkable growth. As you know, one of the key advantages of G5 Store is lower payment processing fees, which are in the low single digits. That's quite a contrast to the 12% to 30% fees typically charged by third-party application stores. The cost efficiency directly contributes to our improved profitability and the expansion of our gross margin. G5 Store is our third-largest source of revenue. And during the quarter, it accounted for 24.7%, so almost 1/4 of total net revenue of the company, up significantly from 17.1% last year. And it's a great milestone for us when we launched G5 Store some 5 years ago. I don't think we really thought it will be responsible for the quarter of all revenue generation in the company. And yet here we are, and it continues to grow quite substantially. Gross revenue growth in USD terms was 30% year-over-year in G5 Store and 6% sequentially. In addition to the G5 Store, we've also seen steady growth in our web shop. And web shop is a module that allows our players on mobile platforms to pay directly to G5 through their browser, through our payment processing, which obviously dramatically lowers the payment processing fee because mobile application stores, they charge the highest processing fees. And during the quarter, the revenue flowing through web shop accounted for 3% of total net revenue from mobile platforms, an improvement compared to 2.6% in Q2. We believe and we are optimistic that this percentage can continue to increase in the coming quarters, boosting our gross margin further in addition to the effect that we're getting from G5 Store. And last quarter, we mentioned that G5 Store will start to scale its revenue by licensing and distributing third-party games that are or were successful in mobile platforms. We have signed a few of these deals, and we aim to release the first game from other developers on G5 Store before the end of the year. This will bring much desired incremental revenue to mobile game developers while further expanding the reach and scale of G5 Store operations. And now G5 Store is 25% of our business, it is at a size where its strong continued growth may start positively affecting the overall top line dynamic and help us with the plan to turn the situation over to growth, obviously. Now let's look in a bit more detail on the quarter, leading up to a record gross margin. Own games accounted for over 73% of net revenue, and active own games accounted for 66% of total net revenue, up from 63% last year. Gross margin reached a record high of 71.2%, up from 68.8% a year ago, primarily as we discussed, due to the continued growth of G5 Store and with some help from the G5 web shop. Monthly average gross revenue per paying user reached a new all-time high of USD 70.8. This is compared to the last year's figure of USD 64.9. So, this continued growth of this particular key metric reflects the continued trend for the improvement of the underlying quality of the audience. We are in a situation where a relatively small number of high-paying users, high-paying players in key countries, drives a substantial part of the revenue, while acquiring other types of players in other countries is not economically justified. And so, the overall player numbers, therefore, decline. But as long as that gold cohort remains with us, as long as we can refill it with user acquisition and retain them for a long enough period of time, the fundamentals of the company will be healthy. So, in the future, you may see a situation where there is actually growth in revenue, but the audience metrics are still trending down. That would not be something abnormal. And G5 Store is another factor which affects these numbers because generally in G5 Store, we have higher paying players compared to mobile and overall smaller player numbers than on mobile to generate the same amount of revenue. So as G5 Store continues to become a larger and larger part of our revenue, the overall user numbers shrink. But again, this really doesn't mean that there is anything wrong as long as we have our golden cohort of users, and we know how to find them, and we know how to retain them and we know how to monetize them. As you remember, in free-to-play games, there's only a small number of people that actually play for the experience. So now let's look at the operating profit for the quarter on the next slide. And operating profit for the period came in at SEK 12.6 million compared to SEK 22.9 million last year, and this resulted in an EBIT margin of 5.5%, down from last year. The lower EBIT was only marginally impacted by foreign exchange revaluations. More importantly, we have deployed more capital into user acquisition during the quarter, which increased, as I mentioned, 2 percentage points compared to both previous quarter and as well as compared to last year. And this obviously had a negative impact on EBIT. However, as mentioned before, the positive changes we've made to Sherlock made it possible to expand profitable user acquisition from lower levels and turn around the game’s revenue performance. The long-term vision here is that as long as we can continue to acquire users profitably and increase the acquisition of users profitably, it does make sense for us, obviously, to do that. And we will grow back gradually to a higher profitability through that, through increasing our top line, but also with the trends in the G5 Store and G5 web shop, we'll also see in the future the expansion of the gross margin. It's been happening very reliably over the quarters, which will also help us restore profitability eventually once we have fixed the top line trend situation. During the quarter, the net capitalization impact on earnings was SEK 0.6 million compared to minus SEK 5.4 million last year. Now let's turn to talk about our cash position. Capitalization impact on cash flow was minus SEK 23.2 million, less than SEK 25.5 million last year. The movement of working capital was negative SEK 1.7 million compared to positive SEK 27.2 million last year. And total cash flow during the third quarter was SEK 10.4 million, down from SEK 53.3 million last year. Total cash at the end of the period stood at a strong SEK 247 million despite the buybacks of SEK 8.4 million that we made during the quarter. All right. Let's move on to the final slide and discuss some final thoughts on the outlook from here. So, we will continue to implement our core strategy of improving the metrics of our active games of our existing revenue pillars, which will make expanding profitable UA possible in order to turn around the trend of the revenue of these pillar games and through that, our portfolio. We also see positive momentum going into the seasonally strong Q4 and Q1. So hopefully, we'll have some help from that. In Q4, because of this, we may go as high as 25% of UA reinvestment from gross revenue. The increase will help us optimize for growth while maintaining profitability. That's the aim. And as we've said before, we will notify the market when we venture out of the range of 17% to 22% of UA to gross revenue, which is what we now plan on doing, and that's why we are communicating it clearly. During the quarter, we made 14 iterations on several games in our new game pipeline. Among notable developments, there was a discontinuation of 1 game after it failed to reach sufficient metrics, while another game passed early soft launch with promising metrics. This new game is moving forward to more advanced stages in the funnel, and we look forward to seeing further development of this concept in the next quarter. Twilight Land is now in the late-stage soft launch phase. And we have achieved very good early metrics and good midterm metrics in this game, but we need more work on the long-term metrics, and we need more observation of these long-term metrics and a few more tests. And tests at this stage of soft launch take a little bit more time because you have to wait for the players to get to the point which you're trying to measure. So, we expect that over the next several months, we will gradually increase user acquisition on Twilight Land while still doing some more tests and doing some iterations on the game. Then this increase in Twilight Land is another reason why we think we will go to a higher level of user acquisition expenses in the Q4. And through our recent initiative to expand the G5 Store with the distribution of third-party games on the platform, we have made agreements to bring third-party games to G5 Store. The teams are actively working on preparing their games for release on G5 Store and the first release, as I mentioned, is set to happen before the end of the year. And as I mentioned again, both the size of G5 Store and the speed of expansion will continue to have a positive effect on our top line dynamic. And now the store is much bigger, so it will be much easier for this effect to sort of shine through the overall revenue mix to the top line dynamic. The G5 Store growth and also growth of the flow of payments from mobile users through G5 web shop will continue to help us boost our gross margin. And we will, of course, continue to focus on operational efficiencies in development and marketing, including continued integration of generative AI where it makes sense. And it actually makes sense. Tools are getting better. Throughout all of this, we maintain strong financial discipline. We continue to generate solid cash flow and maintain a strong net cash position, which gives us the flexibility to execute on strategic initiatives that will strengthen the foundation for future growth. I'd like to end the presentation by thanking you for following G5 and also thanking the whole G5 team for their outstanding efforts in delivering this quarter's result. This concludes our presentation, and let's open the call for questions, which I think we already have. Stefan Wikstrand: Yes. And I will just repeat if you want to raise a question verbally, you raise your hand. We have already -- I will get back to that in a minute. You can also ask questions in the Q&A box that [indiscernible] has also done already. We'll get back to that one as well. But I will start by inviting Simon Jönsson from ABG to ask his question. Simon Jönsson: Hope you can hear me. I want to first off revisit the UA spending and the guidance you provided for Q4. Of course, very interesting. And I understand that the increase in Q3 was mainly Sherlock, but the further increase you expect in Q4, is that also Sherlock primarily you think? Or is it primarily other active games? Because, yeah, you said Twilight Land needs more time, so that shouldn't be the main UA driver, I think, at least. Please correct me if I'm wrong. Vladislav Suglobov: That is right. The primary driver will be -- is Sherlock. And then number two is likely going to be Hidden City because the games are quite close in terms of the genre and the mechanics. And so, we've tried, so to speak, transferring some of the successful things that we've done on Sherlock to Hidden City, and the game is quite responsive to that. So, we expect that this will continue, and we will be able to spend more on user acquisition in Hidden City. It is more difficult with Jewels family of games, Jewels of Rome, specifically, our experiments of transferring our findings from Sherlock to Jewels of Rome did not really work out. But over the next few months, we will be trying different approaches. It may or may not have effect on Q4 user acquisition, probably not. It's a short period of time until the end of the year. And then a little bit is Twilight Land. And then we don't know exactly how much, but we felt that it would be prudent to communicate that we might be exceeding the range. We basically do not want to be held back in Q4 by the 22% or having to deliver exactly 22%. And as we said, we will communicate if we think that we will exceed the range, and we think we will exceed the range for these reasons. Simon Jönsson: All right. And a follow-up on that. Since you have made changes to Sherlock earlier this year that sort of prompted this growth, have you already done similar changes to Hidden City? Is that correctly? Vladislav Suglobov: It's in early stages. So, the report covers Q3, so we discussed mostly Q3. But it's quite straightforward that if you have fixed one hidden object game, you might actually be able to fix another hidden object game as well. So, it's natural to think that we would try to do that, and we have some encouraging signs. Simon Jönsson: All right. Makes sense. Just on a final note on new releases since you said you need some more time on Twilight Land. Should we still view Twilight Land as sort of the main upcoming game, you think? Or are there others that have sort of catch up? Or yes, what's the near-term outlook coming quarters? Vladislav Suglobov: Yes. Well, it's the most complete and the most ready of the new games. Another game that was probably the second by completeness was discontinued during the quarter due to not having reached the metrics. And then the 2 other games, 1 of them already successfully passed through the initial soft launch stages with great results, I would say, unprecedented results for us. So, we're quite optimistic about this game, but it's still in the early development stages. With regard to Twilight Land potential or the potential of early -- of other games that are in earlier stages, it is -- again, it is hard to say. We try to only allow the games that have a chance of scaling to certain benchmark that we have of meaningful monthly revenue. So, in that sense, Twilight still -- we've not given hope on this game. So, it has some really good things going about it, but we have to work more on the certain longer-term metrics. And that's the situation. And we will find out in the next few months, I think. Stefan Wikstrand: Then we have Hjalmar from Redeye. There we go. Hjalmar go ahead. Hjalmar Ahlberg: Maybe just first a quick follow-up on Twilight. Would you say that, I mean, there's a small chance that the game is not being launched or that's rather a thing about when it's being launched? Vladislav Suglobov: That's a great question. I think there's still some chance that it will not be launched, and it always exists. I think until we are totally happy about the metrics. I would say, to be totally honest, I think there's still a chance that it will not be launched. But also, I think that so far, we have achieved really good results with the game on the early and medium-term LTV progression that there's also a very good chance that we will resolve the rest, and it will be launched. But we will have to wait and find out. I'm also not the person actively hands on working in the game. I know the overall situation and what is good and what is holding up. But it is difficult for me not being on the team to know exactly the chances or how they feel about that. And if you work on games for a long period of time, you always get attached to games. So, I reserve the right to say, well, this is not good enough or if we cannot reach the metrics that we think we should be reaching, and it takes too much time. But at the same time, I still -- part of me believes the team can turn this around, and we will find out which reality is going to happen. Hjalmar Ahlberg: And with your new guidance, so to say, for UA in Q4, I guess it's -- I mean, difficult to say how top line will respond in the short term. But other than that, would you say that you aim to remain stable in terms of other OpEx and so on, just to get some flavor on what to expect in terms of EBIT margin in the short term. Vladislav Suglobov: Yes. I think we are quite stable in terms of OpEx and other parameters from quarter-to-quarter. So I think there are no big changes are expected. Hjalmar Ahlberg: Right. And also, regarding the launch of third-party games, I think this was asked in Q2 as well, but have you decided how you will report this? Will it be similar to your own games in terms of gross margin, UA and so on? Just to understand how it will look financially. I guess it's a small impact in Q4, but if you can give some information and update on that. Vladislav Suglobov: Yes, it's probably a small impact in Q4. But yes, we'll be reporting exactly the same way that we report on our existing games. Hjalmar Ahlberg: All right. And also, regarding this kind of new UA approach and more focus on higher paying users. Are these kind of players that are coming from other games? Or is it like a growing user base overall? Is that something you can have any insight to? Vladislav Suglobov: Well, this is the -- the way I think about it, and we are discovering more about our user, about this golden cohort, so to speak, is the -- this is the audience that sometimes has been with us for a very long time and played several games. And sometimes this is the audience that we have acquired relatively recently. But the key differentiator for us is that the person not only plays the game for a long period of time, but they also fall into this schedule of repeated purchases that are aligned with their play cycle or every week or every couple of weeks. And some people wait for like very special deals and then buy in bulk. Some other people are more like impulse buyers. But in the end, one uniting characteristic is that they can afford to pay in these games. It's not that much money, by the way, taken on a per week or per month basis. And they are -- they seem to be okay and happily doing that for quite a long period of time. And the way our games are structured is that you can enjoy them for years. So, I mean, these users, they're mainly from the United States and Western Europe. This is where there's the highest concentration of them. But this is also where it is quite difficult to acquire organic traffic, right? Because these are highly valued users and advertisers of the whole world are after them, whether on PC or on mobile platforms. And then if you look at other countries with lower value per user, we sometimes get the influx of people from countries where historically, we cannot really find these gold cohort users. And then these players may not be as engaged or they make payments, but those are relatively small, but they inflate our user numbers and user metrics without bringing any substantial contribution to the company's revenue. And I think the overall situation in the mobile marketing ecosystem is that it evolves towards fully valuing the user, right, for the product that can make -- justify paying for that user and making profit on them. And so, we can justify paying and be competitive in the market and paying for these users and then turn a healthy profit on them. And we cannot actually justify buying in cheaper geographies, at least for now, in many cheaper geographies, the users are way cheaper there, but they also don't fall into this pattern, so they don't recoup the investment. So naturally, we skew towards buying fewer but more valuable and profitable users. And I guess, in the countries where our games don't work as well, then those users are better sold, so to speak, to some other business that can extract better profit from them, right? So, kind of that's the way the -- I think the ecosystem evolves, and it's natural that when we go from the times of receiving a lot of big numbers of users in early days of mobile gaming. But over time, we're sort of looking at consolidating the user base towards the type of users that actually is driving the revenue of the company. So at least this is the view from my perspective, looking at how mobile marketing is evolving. And yes, and then if we look at the demographics of these users, again, we discussed the countries, but they are predominantly female players of age 35 plus or even higher depending on the platform, we tend to have even more pronounced characteristics on G5 Store, where these tend to be players and payers who are even older and are even more -- skew even more female. Hjalmar Ahlberg: All right. And also, can you give some -- I mean, you indicated that 25% of UA for Q4 and that you will be in the higher end of your range. Is that kind of an indication for 2026 as well? Or will you change depending on how you perform in the coming quarters? Vladislav Suglobov: I would say that if it works out and the aim here is to kind of bottom out now, right, and then to grow out from here, we'd be happy to keep UA spend at that level if we can be certain that we are driving the growth that will make us profitable eventually. I would rather not be reducing that. On the other hand, if we feel that we are unable to deploy this much capital in Q4 for whatever reason, be it the market or the fact that we weren't able to continue improving the characteristics of games, then it will be good news for the margin in the short term, but this would also mean that maybe long term, it's not the best thing in the long run, right? Because the way out of here is expanding the acquisition that is fundamentally profitable and that will drive the increase in the top line. Hjalmar Ahlberg: Got it. And also, a final one, I forgot if you can give any information on the third-party games. Are those games that are already available on other platforms? Or is it completely new games? Vladislav Suglobov: Yes. Those are games that already exist, that exist on mobile that make good enough money there and the developers are looking to make incremental revenue, and we believe that they can make good incremental revenue that makes sense for them to port these games over to G5 Store. So, the good thing here is that the timeline of bringing this game to G5 Store is way, way shorter than developing a game from scratch, which can last years. In this case, we are talking months. And then the -- it's not as capital intensive, obviously, compared to creating a game from scratch from 0. So, we look forward to the first releases. We -- again, G5 Store continues growing. We see we are achieving amazing results like 25% for our games on average, 25% of revenue is coming from G5 Store, any developer out there would like to generate 25% extra incremental revenue, right? Wouldn't they? Even if this extra 25% are shared with the distributor, it's still an amazing deal in the market where it's difficult to find new users. It's difficult to find growth. And so, all this incremental revenue basically becomes also your incremental margin. So, I think it's a great opportunity for developers and for us. And again, the first games are coming to G5 Store relatively quickly. So, we'll see how it works out, but we're optimistic. Stefan Wikstrand: [Operator Instructions] We have 2 questions another popping into the Q&A. Vladislav Suglobov: We have 3 now. Stefan Wikstrand: Now, we have 3. Vladislav Suglobov: Okay. Let's start from the top. So, [indiscernible] is asking sales and marketing, excluding user acquisition, decreased to SEK 9.7 million from SEK 15 million. Why did the costs come down? Is the new lower level the new normal? We should expect to continue going forward. Stefan, can you remind me, does that increase -- does that line include the staff also? Stefan Wikstrand: Yes. Vladislav Suglobov: It does. Yes. So, we've done -- so user acquisition expenses went up year-over-year, 19% to 21%. But in absolute terms, I think they actually declined by 7% or so, right, because the revenue is smaller. So, user acquisition was larger last year, not as a percentage of revenue, but as an absolute number, at least in SEK. That's what I saw on the first page. I think it was minus 7%. But Stefan, correct me if I'm wrong. And then another important thing that has changed year-over-year is that we've done the rightsizing of marketing somewhere between Q1 and Q3. I think we finished with that this year. Obviously, the company has seen times where we were much larger, so we needed more people to manage this complexity. And with the decline of top line over several years, we thought that it's a good time to rightsize marketing and also with the change of management to sort of make it more efficient, more focused, more energetic. And I think it worked out given the results in Q3. But the -- yes, that basically explains the numbers, right? Stefan, am I missing? Stefan Wikstrand: No, I can only concur with that. And those changes that Vlad mentioned on kind of rightsizing the team occurred primarily in Q1 and Q2. We saw some effect in Q2, but the full effect is kind of seen in Q3. So that's why it's kind of on a lower run rate. And I think, yes, you should expect these levels rather than anything else going forward. Vladislav Suglobov: That's right. Okay. Let's move on to the next one. This is from Erik. And the question is on the G5 Store, obviously, gross margins are favorable, but do you see any difference in KPIs versus the traditional platforms in terms of user retention, ARPU or other? Yes, we do. I think we mentioned that the metrics of G5 Store across the board are way better than on mobile platforms. We have higher revenue per user. Even the difference in the processing fee does not explain the difference. So, like the gross amount is also higher. And then we retain a larger portion of that. We see higher retention rates as well. And those are 2 main things for us, right? The -- how much people are paying the average check and how well they are retained by the game. And that's why we are deriving quite a substantial revenue from G5 Store, having substantially smaller number of people actually playing through G5 Store. There seems to be a double effect here. There's obviously some selection effect where we feel that -- and we can track that some users who are very loyal to G5 games, they may begin playing on other platforms, but eventually, they will settle on G5 Store, and we make sure to incentivize players to transition to G5 Store as much as we can because it makes sense for us to have this direct connection to the player. Not everyone does it, but people who do it, they seem to be the most trusting and the most loyal customers of the company. And therefore, it's natural that they sort of inflate the overall metrics. But there also seems to be conversion of our earlier users into G5 Store by means of ways that we cannot even track. We just noticed that players were playing some time ago on other platforms and some other games and then they have decided to try and download from G5 Store. We also see people -- we also see new players converting to G5 Store. But another thing that we see is that even accounting for that, the metrics still seem to be higher. And this is where we continue to have the explanation is that our games, the type of games that we make, these very high-quality, high-resolution games with a lot of stuff happening on the screen, they appeal to older demographic and older demographic or more mature demographic, however you put it. And they, on average, prefer to enjoy this game on a large screen. It's a more premium feeling. You have more justification for spending money. You enjoy it way more. And this is really -- large screens is really where our games shine and where they are really competitive as an experience compared to games made for mobile with the scale down, let's use the word more primitive graphics. It's really a different experience on a large screen. And so, there's -- we think that this premium effect explains the difference in monetization and retention as well. So, the next question is, you mentioned in the report that Jewel's family of games likely need 6, 8 months to refresh the product. Is this something that is required before you can scale UA for the franchise? Well, nothing will prevent us from trying to scale UA for the franchise in the meantime. But the effect of that would be most pronounced if we were able to implement the changes in the game that would be -- that will improve the metrics. One of the challenges that we have is that in order to be able to conduct multiple tests and measurements, you need enough users, and you need enough players. And with this trend towards smaller number of high-paying players, we need larger cohorts of these to make conclusive decision whether or not the change in the game was positive. Or I would just say that we will be able to do these changes, iterations in a more educated and faster way if we had enough inflow of new users. So, we might actually increase user acquisition spend on these games sort of ahead of the improvements in our efforts to make the iterations and have measurable results faster. Okay. We have next question from [indiscernible] again. If you release a game on G5 Store, will you own the customer data? Will the gamer be able to transfer progress to mobile? Or will he or she lose progress if he or she switched to mobile? So, look, we're getting into the details of our contracts with the developers. I wouldn't like to do that. They're confidential, but we obviously are thinking about these questions, and we're trying to make a fair deal here, which would make sense for us as the party bringing users to the table, but as well to the developer and their main interest is incremental revenue, really, not user data. So that's the way I see this should work, and we try to align the agreements in accordance to these principles. And once again, I think the -- if you think of smaller developers, it's great to have that business, but it's also not so great in the sense that you have to -- you are very dependent on Apple or Google or any distribution stores, but you're also very dependent on advertising companies and incremental revenue is very hard to find. So, they really want that incremental revenue, and we can give it to them. And I think that's an important point in the discussion when we have it with them. The next question is, is the company focused on releasing in U.S. and Europe? Or are there any plans to translate and release current and future games to Asia, Japan and China? So, first of all, all our games are localized in Japanese and in Mandarin and Cantonese. So, they're not unavailable there. They are available. Historically, we had some big successes in Japan. Unfortunately, we were not able to replicate them later on. We are working on bringing our games to China. And hopefully, there will be some announcements in the coming quarters, but there's not much that I can say now. Yes, that's the end of the list. No more hands, no more questions. I think that's it. Stefan Wikstrand: I think that's it. Vladislav Suglobov: All right. Stefan Wikstrand: Okay. Well, then, any final remarks before we wrap up? Vladislav Suglobov: No. Thank you, everyone, for spending your morning with us. And thank you for following G5. We'll talk soon. Stefan Wikstrand: Thank you. Bye.
Operator: Hello, and welcome to the Group Bouygues 9 Months 2025 Results Call. [Operator Instructions] Now I will hand the conference over to Frederique Delavaud, Head of Investor Relations. Please go ahead. Frederique Delavaud: Good morning, everyone, and thank you for joining us for the presentation of Bouygues 9 months 2025 results. This presentation will be led by Pascal Grange, Deputy CEO of the Bouygues Group; Stéphane Stoll, who, as you know, was appointed CFO of the Bouygues Group beginning of August; and Christian Lecoq, CFO of Bouygues Telecom. Following their presentation, they will be answering your questions. Pascal, I'll let you start this call. Pascal Grangé: Thank you, Frederique, and good morning, everyone. Before listing our highlights, I would like to recall that, as we have already mentioned since the beginning of the year, the global macroeconomic and geopolitical environment remains very uncertain, notably in France. That being said, I want to highlight that group expects for 2025, a slight increase in sales year-on-year, excluding exchange rate effects and a slight increase in COPA year-on-year. These expectations are reflected in the group's 9 months results that are strong. Looking at the main indicators for the 9 months, we can see that. First, group sales were up 0.9% year-on-year, notably driven by the construction businesses. Q3 group sales were stable year-on-year given ForEx, which had an impact of around minus EUR 50 million over the quarter. Second, COPA increase year-on-year was notable in the first 9 months 2025. The increase was driven by the construction businesses and Equans. Third, excluding the exceptional income tax surcharge for large companies in France of EUR 60 million, the net result attributable to the group was up year-on-year. I'll remind you that the effects on the net profit attributable to the group of the French Finance law and the Social Security Financing law, which was passed during the first quarter of 2025, including mainly the exceptional income tax surcharge for large companies in France had been estimated at around EUR 100 million for the full year 2025. This is still our evaluation to date, and EUR 80 million already been recorded in the first 9 months 2025. Fourth, the group benefits from a particularly robust financial structure. At end September 2025, our net debt improved versus end September 2024. And in September [Technical Difficulty] Standard & Poor's revised our negative to stable the outlook associated with its A- credit rating. Let's now have a look at our key figures on Slide 5. Group sales in the first 9 months [Technical Difficulty] '25 stood at EUR 41.9 billion, up 0.9% year-on-year. This increase was notably driven by Bouygues Construction, Colas and Bouygues Telecom with the contribution of La Poste Telecom. In the first 9 months '25, the group COPA increased by EUR 95 million year-on-year and reached EUR 1,814 million. This increase was led by the construction businesses on Equans, TFA and Bouygues Telecom [Technical Difficulty] COPA being down year-on-year. The net profit attributable to the group was EUR 675 million. This amount is not comparable to that of the 9 months 2024 as it includes the exceptional income tax surcharge for large companies in France, minus EUR 60 million. Excluding this surcharge on a comparable basis, the net profit attributable to the group would have been up EUR 48 million year-on-year at EUR 735 million. Last, Net debt was EUR 7.6 billion, an improvement of EUR 856 million year-on-year. This is a very good performance, in particular, if we consider the amount of net acquisitions made over the year, mainly including Bouygues Telecom's acquisition of La Poste Telecom for almost EUR 1 billion. This is a theoretical vision, of course. But without these acquisitions, our net debt would have been improved by EUR 1.9 billion year-on-year. Let's now turn to the review of operations [Technical Difficulty] on Slide 8. Let's begin [Technical Difficulty] in the construction businesses. You can see that at end September 2025, the backlog was at a very high level of EUR 32.1 billion, providing good [Technical Difficulty]. Looking into details on Slide 9, let's start with Colas backlog, which was up EUR 1.4 billion year-on-year at EUR 14.2 billion, with Rail backlog up 31% year-on-year. In roads, the backlog was up 2% year-on-year, of which French and international backlogs were respectively down 3% and up 4% year-on-year. At constant exchange rates, the backlog was up 12% year-on-year. To be noted that the backlog [Technical Difficulty] to be executed in the current year and next year was up around EUR 400 million year-on-year. At Bouygues Telecom -- Bouygues Construction, the backlog stood at EUR 17.2 billion, down EUR 0.7 billion year-on-year, but stable compared to end June 2025. Civil works was down 14% year-on-year. And in building, the French backlog was up 12%, and the international backlog was up 1%. At constant exchange rates, the backlog was down 3% year-on-year. It is important to notice that EUR 17.2 billion is a very high level of backlog. At end September 2025, the backlog to be executed in the current year and next year was down around EUR 200 million year-on-year. However, additional significant contracts are expected by mid-2026, notably internationally, which will support the level of the backlog. In that respect, you probably read this morning that Bouygues Construction will carry out the civil engineering works for two new EPRs at Sizewell C nuclear power station in the U.K. as part of a civil work alliance. The share of Bouygues Construction in this construction is estimated at around EUR 3.3 billion. This is [Technical Difficulty] very good news. To be noticed that the scope of works will be carried out through the delivery of a series of work orders, and so Bouygues Construction will book the related orders as they are instructed starting from [Technical Difficulty] fourth quarter. [Technical Difficulty] at Bouygues Immobilier, the backlog was at EUR 0.7 billion at end September 2025, down EUR 0.3 billion year-on-year. The decrease of around EUR 70 million in backlog since June 2025 is mainly due to the deconsolidation of activities in Poland in July 2025. Moving to Slide 10. I will make a few comments on the strong commercial activity in the construction businesses. First, at [Technical Difficulty] level, the order intake [Technical Difficulty] was at EUR 10.8 billion. In Road activities, this order intake was slightly up with a slight decrease in Mainland France as expected in the pre local elections here, and it was up [indiscernible] internationally with significant [Technical Difficulty] awarded in Q3 in Morocco, in the U.S. and in Canada. In Rail, the order intake was up strongly in the first 9 months with also notably a significant contract awarded in the U.K. in Q3. Then [Technical Difficulty] construction level, the order intake in the first 9 months reached EUR 6.8 billion, driven largely by the contracts of less than EUR 100 million. Several large contracts were awarded in 9 months 2025, including [Technical Difficulty] three contracts for more than EUR 100 million in Q3. Do not forget that year-on-year change in order intake at Bouygues Construction is not representative, given fluctuations in the award of large contracts. As a reminder, 9 months 2024 order intake included several major contracts, notably the Torrens to Darlington Highway contract worth more than EUR 2 billion, creating a particularly strong basis of comparison. And as I already mentioned in previous calls, please also note that additional significant contracts are expected by mid-2026. At Bouygues Immobilier, residential reservations stood at EUR 0.9 billion at end September 2025. To be noted, an improvement year-on-year [Technical Difficulty] residential unit reservations [Technical Difficulty] and stable in volume in a still changing market environment and a decrease in block reservations. Two small positive signs are to be noted. Sell-off and cancellation rates improved year-on-year. Last, as we have already said many times, the commercial property market remains at a standstill. Now let's have a look at sales on Slide 11. Sales were up 2% year-on-year and 3% like-for-like at constant exchange rates. First, sales were up 1% year-on-year at EUR 11.9 billion, driven by Rail up 12%. This growth being supported notably by Egypt, France and Germany. Roads were stable with France up 2%, EMEA up 2%, Asia Pacific strongly up 19%, and North America down 5%. Colas sales were up 2% year-on-year at constant exchange rates. Second, Bouygues Construction sales were up 4% year-on-year [indiscernible] driven by its three segments of activity, all up year-on-year. Bouygues Construction sales were up 5% year-on-year at constant exchange rates. Last, at Bouygues Immobilier, sales were down 6% [Technical Difficulty] EUR 0.9 billion with residential property down 4% year-on-year, restated for the disposal of activities in Poland. Next slide. Current operating profit from activities of the construction businesses was EUR 591 million, improving EUR 115 million compared to 9 months 2024, driven by the three business segments. COPA at Colas was slightly up year-on-year, improving by EUR 11 million with the [indiscernible] margin from activities improving 0.1 points at 2.7%. COPA at Bouygues Construction was strongly up year-on-year, increasing by EUR 45 million and with 0.4 points COPA margin improvement at 3.3%. At Bouygues Immobilier level, COPA was up EUR 59 million year-on-year. It includes some one-off items, representing a global amount of EUR 27 million with the disposal of Poland activities in particular. Now I'll hand over to [Technical Difficulty] who will comment Equans results. Stéphane Stoll: Thank you, Pascal. Good morning, everyone. Let's move to Slide 14. Equans backlog at end of September 2025 was stable year-on-year at EUR 25.8 billion. Order [Technical Difficulty] 9 months of 2025 stood at EUR 13.9 billion, a high level close to the one of September 2024. It is worth noticing that order intake in contracts of less than EUR 5 million was up year-on-year [Technical Difficulty] representing more than 2/3 [Technical Difficulty] intake. On the other hand, order intake in projects of more than EUR 5 million was down year-on-year, reflecting a high basis of comparison in 2024 and a wait-and-see stance in some areas of activity, notably in [Technical Difficulty] data centers in Europe and on the EV market. In parallel, we continue to observe a gradual improvement in the order intake margin. As for sales, they were down 2% year-on-year in the 9 months 2025. This essentially reflects three main items. First, [indiscernible] the continued careful selection of [Technical Difficulty]. Second, a proactive exit from nonstrategic activities, notably the new business in the U.K. that we mentioned in the previous publications. And third, a temporary slowdown in relation to the wait-and-see stance in data centers and gigafactories I mentioned earlier. First 9 months sales were also impacted by a negative exchange effect of minus EUR 55 million. This effect concentrated in Q3, sales being impacted by a negative minus EUR 66 million over the quarter. As such, Q3 sales down 4.2% year-on-year were down 2.8% year-on-year at constant exchange rates. Equans contribution to the group's COPA represented EUR 565 million, a significant increase of EUR 91 million year-on-year with a 4.1% COPA margin up 0.7 points year-on-year, confirming the continued successful execution of the Perform plan. Let me finally give you some updates on our recent M&A developments. Equans secured four bolt-on acquisitions in this quarter in Germany, Austria, Italy and North America, around EUR 180 million of full year sales. These acquisitions are in line with the strategy shared during the Capital Market Day back in 2023. To end with Equans on Slide 15, let me just add that in [Technical Difficulty] 2025, Equans will continue its strategic plan and is aiming at achieving a slight decrease in sales versus 2024 at constant exchange rate given: one, the proactive exit from remaining nonstrategic and nonperforming activities; and second, the temporary slowdown in some areas of activity. And Equans is also aiming at achieving a margin from activities close to 4.3%, up from the 4.2% mentioned end of July. Finally, Equans confirmed it is targeting a cash conversion rate, which is COPA to cash flow before working capital requirement of between 80% and 100%. And as a reminder, Equans aims to gradually catch up with the organic growth of sector peers and to achieve a margin from activities of 5% in 2025. Now Christian is going to detail Bouygues Telecom's main figures. Christian Lecoq: Thank you, Stéphane, and good morning, everyone. Before turning to Slide 17 and entering into the 9 months and the third quarter performance of Bouygues Telecom, I would like to say a few words about the integration of La Poste Telecom within Bouygues Telecom. It has now been 1 year since we [Technical Difficulty] completed the acquisition of La Poste Telecom [Technical Difficulty] have already achieved several successful milestones, notably: first, the strengthening of our mobile business, thanks to La Poste Telecom's customer base and the vast distribution network of over 6,000 post office of La Poste Group; and second, the promising [Technical Difficulty] fixed commercial offers [Technical Difficulty] in September 2025. Since October 2025, new La Poste Mobile's customers have access to Bouygues Telecom's mobile network and can benefit from [Technical Difficulty] services such as 5G or [Technical Difficulty]. That being said, performance has remained this quarter, solid and fixed, as you can see on Slide 17. FTTH continued to experience strong growth with 371,000 new customers during the first 9 months [Technical Difficulty] third quarter. With a total of 4.6 million customers, FTTH customers represented 85% of our fixed customer base, up from 79% 1 year ago. This is the result of a wider FTTH [Technical Difficulty] combined with the excellent quality of our network and services. As we have already achieved a very high level of migrations from DSL to FTTH, we will certainly observe a logical slowdown in these migrations in the coming quarters. Please also note that the target of 40 million FTTH premises marketed have been reached more than 1 year ahead of schedule, which is also a very good achievement. You can also see that we had a total of 5.3 million fixed customers at end September 2025. This represents an increase of 184,000 customers in the 9 months, of which 79,000 in the third quarter. This good momentum is driven by both: first, B.iG and B&YOU Pure Fibre offers with customer satisfaction improving and churn lowering. And second, as I have already mentioned, the promising launch of the fixed commercial offers of La Poste Telecom in September 2025. The momentum remained also good on value with fixed ABPU up EUR 0.2 year-on-year at EUR 33.4 per client and per month. As you can see on Slide 18, the commercial performance was good in mobile in a mature and still competitive market. We observed ongoing positive effects of B.iG on customer satisfaction and churn, and continued growth of converged households and [Technical Difficulty] per household. At September 2025, Bouygues Telecom had 18.5 million mobile plan customers, excluding MtoM; thanks to 231,000 new customers in the first 9 months, of which 125,000 in third quarter. Mobile ABPU, including La Poste Telecom, was stable versus Q2 2025 at EUR 17.3 per client and per month. It reflects continued low pricing for new customers in the low-end segment and the dilutive effect of La Poste Telecom as expected. Let's have a look at the key figures on Slide 19. As a reminder, La Poste Telecom has been consolidated in Bouygues Telecom's financial statements since 1st November 2024. That being said, we achieved a 5% growth in sales billed to customer year-on-year, broadly stable, excluding La Poste Telecom. Total sales were up 4% year-on-year with 3% growth in other sales. EBITDA, after leases, was stable year-on-year at EUR 1,505 million. This stability is explained by an increase in sales billed to customers and ongoing efforts to control costs, compensated by second, higher energy costs due to the end of very favorable hedging conditions between 2020 and 2024. The current operating profit from activities was down EUR 94 million at EUR 509 million, reflecting the increase in G&A in line with our CapEx trajectory and of course, the higher energy costs I already mentioned. Last, you can notice that gross CapEx was EUR 1,036 million in 9 months 2025. I'll remind you that the CapEx are nonlinear over the year. Moving to Slide 20. Let me remind you Bouygues Telecom's 2025 targets. First, sales billed to customers, including La Poste Telecom, would be higher than in 2024. Second, sales billed to customers like-to-like, excluding La Poste Telecom, are expected to be close to the level of 2024. The figure will be either slightly higher or slightly slower, depending on the duration and intensity of the competitive pressure currently [Technical Difficulty]. Third, EBITDA after leases will be broadly stable compared to 2024. In 2025, Bouygues Telecom will no longer benefit from the very favorable low hedged energy prices arranged in 2020 and 2021. La Poste Telecom’'s contribution to EBITDA after leases will be limited in 2025, with the full effect expected from 2028. And last, gross capital expenditures, excluding frequencies, is expected at around EUR 1.5 billion, including [Technical Difficulty] expenditure related to -- for the migration of La Poste Telecom Mobile customers. Pascal, I now let you share a few words on TF1. Pascal Grangé: Thank you, Christian. Turning to Slide 22. Let's talk briefly about TF1's results, which were released on the 30th [Technical Difficulty]. First, the TF1 Group reinforced its audience leadership. Among them, the total audience share among women under 50 who are purchasing decision-makers was at 33.8%, up [Technical Difficulty] the total audience share among individuals aged 25 to 49 was at 30.7%, up 0.7 points. Second, in the 9 months 2025, [Technical Difficulty] were stable year-on-year. Media sales decreased by 1% year-on-year with advertising revenues down 2%, and the continued strong growth momentum for TF1+, up 41% year-on-year. Studio TF1 posted revenues up 11% year-on-year, including a EUR 25 million contribution from JPG. Third, COPA amounted to EUR 191 million, slightly down EUR 7 million, and COPA margin was at 11.9% in 9 months '25, down 0.5 points year-on-year. It includes a cost of program of EUR 662 million. The slight decrease versus the 9 months 2024 was due notably to the base effect related to the EURO 2024 football tournament. Please also note that there was a capital gain of EUR 17 million in relation with the disposal of My Little Paris and PlayTwo recorded in Q3 2025. As a reminder, in Q3 2024 [Technical Difficulty] had a capital gain of EUR 27 million in relation to the disposal of the Ushuaia brand license. Turning to Slide 23. I will end by saying that the TF1 Group confirmed the following targets. A strong double-digit revenue growth in digital. On the dividend side, aiming for a growing dividend policy in the coming years. After observing that domestic instability adversely impacted ad market in October, first indications are also below expectations in November visibility until year-end. As such, TF1 has adjusted its 2025 guidance for margin from activities to a level between 10.5% and 11.5%. Previously, TF1 Group was targeting a broadly stable margin from activities compared to 2024, which was 12.6%. Stéphane, I'm now going to -- Stéphane is now going to comment on the group's key financial figures. Stéphane Stoll: [Technical Difficulty] start with the P&L on Slide 25. We have already discussed 9 months sales and current operating profit from activities at the beginning of this call. I will thus focus on the bottom part of the P&L this morning. First, PPA was minus EUR 77 million, [Technical Difficulty] includes mainly EUR 35 million recorded at Bouygues SA level in relation to Equans, and EUR 26 million recorded at Bouygues Telecom level. Second, other operating income and expenses, which do not reflect operational activity were negative at minus EUR 151 million end of September 2025. This amount is largely due to, on the one hand, noncurrent charges in relation to the Equans management incentive plan, which represented EUR 66 million, an amount split between Equans and Bouygues SA. On the other hand, some provision recorded at Bouygues Construction and Colas, respectively, in relation to a change in regulation in U.K. and to recent developments relating to an international project at Colas Rail dating back to 2011. Third, financial result, which comprise [Technical Difficulty] cost of net debt, interest expense on lease obligation and other financial income and expenses stood at minus EUR 305 million, an amount close but a bit higher than to that of the 9 months of 2024. Fourth, a tax charge was recorded for EUR 443 million, higher than last year in relation to higher operational results. This amount excludes the EUR 71 million of exceptional income tax surcharge for large companies in France. Fifth, [Technical Difficulty] the tax surcharge on the net result attributable to the group was minus EUR 60 million, leading this result to reach EUR 675 million, down EUR 12 million versus last year. Excluding this tax surcharge, the net result attributable to the group [Technical Difficulty] have been up EUR 48 million this year, as already mentioned by Pascal. Let's now turn to Slide 26 to describe the net debt evolution between end of December 2024 and end of September 2025. As you can see, net debt increased by around EUR 1.6 billion since the end of 2024. This negative change is quite usual and related to the seasonality of our activities. The good news is that the magnitude of the increase in the net debt is significantly lower than that of last year, which was around EUR 2.2 billion. This increase includes, first, acquisitions net of disposals totaling minus EUR 118 million achieved at Colas, Equans, Bouygues Immobilier and TF1, as well as investment in joint ventures at Bouygues Telecom and purchase of TF1 shares. Second, capital transactions and other for EUR 155 million including largely exercise of stock option. Third, dividends for a total of EUR 864 million, including EUR 755 million from Bouygues' shareholder, the remaining part being almost entirely paid to Bouygues Telecom and TF1 minority shareholders. And last, minus EUR 725 million from operations that I will comment on the next slide. So turning to the change in net debt [Technical Difficulty] for the first 9 months of 2025 on this Slide 27, you can observe that it breaks down as follows. On the one hand, net cash flow, including lease expense stood at EUR 2.7 billion, an improvement of EUR 162 million compared to the first 9 months [Technical Difficulty]. And on the other hand, net CapEx was EUR 1.5 billion, a slightly lower amount compared to the first 9 months of 2024. As such, our free cash flow before working capital requirements was EUR 1.2 billion, [Technical Difficulty] higher versus last year. on the chart that the change in working capital requirements and other stood at minus EUR 1.9 billion, a usual negative change at this period of the year. I will now turn our attention to the group financial structure on Slide 28. You can see the group maintained a very high level of liquidity at EUR 14.4 billion, which comprised EUR 3.1 billion in cash and equivalents, and EUR 11.3 billion in undrawn medium- and long-term credit facilities. Both shareholders' equity and net debt improved significantly versus end of September 2024. As a result, net gearing reached 53% at end of September 2025, an improvement compared to 61% at end of September 2024. And you can see from the chart on the right-hand side that the debt maturity schedule is well spread over time. I remind you that our next bond redemption is in October 2026. Last, I want to highlight that the group benefits from the strong credit ratings. At Standard & Poor's, our rating is A-, and the outlook associated to this rating has been revised in September from negative to stable. At Moody's, our rating is A3 with a stable outlook. Pascal, I'm giving you back the floor for the conclusion. Pascal Grangé: Indeed, I will end this presentation on Slide 30 by saying that in a very uncertain global environment, the group's six business segments continued to prove their ability to keep pace with developments in their respective markets. They also pursues their efforts to improve profitability. [Technical Difficulty] we are targeting a slight increase in current operating profit from activities versus 2024. Second, [Technical Difficulty] we specified that group's 2025 sales are expected to be slightly up versus 2024 at constant exchange rates. And that given fluctuations in currencies, notably those related to the U.S. dollar, group sales as published are now expected to be close to the level of 2024. I'll remind you that previously, the group -- the Bouygues Group was targeting for 2025 a slight increase in sales and in current operating profit from activities versus 2024. Last, the effects on profit -- on the net profit attributable to the group of the French Finance law and the Social Security financing law [Technical Difficulty] first quarter of 2025, remain estimated to date at around EUR 100 million for 2025. We have finished our presentation, and we thank you for your attention. We are now with Stéphane and Christian ready to answer your questions. Operator, please open the floor for questions. Operator: [Operator Instructions] The next question comes from Carlos Caburrasi from Kepler Cheuvreux. Carlos Caburrasi: Just a quick one from my side. You're again upgrading Equans 2025 margin target, but your 2027 view remains unchanged. So I was wondering if there's anything here that we're missing or if it's likely that by 2027, the margin will be above 5%. And if you allow me, hypothetically, where do you see Equans' margin by 2030? Does 6%, 7% seem a reasonable assumption? Stéphane Stoll: Well, we -- nothing changed since our last publication. We are indeed very pleased that Equans is moving down to 4.3% this year. We confirm that our target for now for 2027 margin [Technical Difficulty] at 5% as per our guidance from -- dating back from Capital Market Day in 2023. We are confident that we will be able to achieve this 5% margin. For now, we don't want to communicate anything else. And as to your question to the 2030 margin at Equans, let me simply state as we already stated in our last publication, that we see no reason why Equans would not be capable of achieving margins which [Technical Difficulty] are close or similar to the one that's our aim, mid long term. So that's what I can answer to your two questions. Operator: The next question comes from Mathieu Robilliard from Barclays. Mathieu Robilliard: I had a few questions. First, if I may ask, I mean you made an offer, along with other players for Altice assets. Yes, the offer was refused. You didn't change your beat. I just wanted to check if you could confirm you're still in discussion with Altice at the moment? The second one was on taxes. You flagged the impact of the change in the corporate tax in 2025, there's no discussions in the French Parliament, but 2026 would be about the same. So obviously, this has not been finalized and a lot of things can still change. But in principle, if the current proposal was to be passed, does it mean that the corporate tax that you pay in 2026 would be similar to the impact you saw in 2025 about EUR 100 million? And lastly, on telecoms, I had a question about the ARPU. So Christian, you mentioned that the ARPU including La Poste, it's flat quarter-on-quarter. I was wondering if we look at ARPU, excluding La Poste, what was the trend in Q3 compared to Q2? Is it getting a bit worse? Is it stabilizing? Obviously, it's a very competitive environment, but any color in terms of the more recent trends would be great. Pascal Grangé: First, I will answer to the question related to taxes. In fact, if the current law was to be passed this year, we will have an additional impact this year related to the -- that this additional tax is based on level of tax [Technical Difficulty] this year. So we will have to renew a new charge of around approximately EUR 40 million to EUR 50 million this year. I mean [Technical Difficulty] we have the remaining part. Overall, it will be a bit lower because -- overall the second part of this additional tax will be paid in 2026. Stéphane Stoll: Okay. On the Altice situation, as you rightly mentioned, we -- and as you know, we submitted a joint offer on October 14. And then as you know, this offer was promptly rejected by Altice on the next day. So for now, to be honest, we are not in discussion. We are hopeful that we are capable of entering into [Technical Difficulty] in the coming weeks. Since we believe that this EUR 17 billion offer that we submitted to be quite attractive for at least two major reasons: it offers a valuation of significantly more than EUR 21 billion for Altice, taking into account the valuation of the assets, which are not part of our proposal, such as XP Fibre. It thus represents a significant premium compared to the value estimated by brokers. As you know, some EUR 17 billion increase [Technical Difficulty] synergies leads to an attractive equity value for Altice shareholders. And on the -- we also believe it's an attractive offer because it provides a global solution for most of Altice France assets. So I believe -- we believe it represents a credible [Technical Difficulty] very lengthy and highly uncertain. So we are not in discussion for now, but we are still hopeful that we will be capable of entering such discussion into the near future. Christian Lecoq: Regarding mobile ABPU, mobile ABPU for Bouygues Telecom excluding La Poste Telecom, was at EUR 18.4, so plus EUR 0.1 compared to Q2, 2025. You can find all the figures at the end of the presentation in the annex on the website. I'll just remind you that usually in Q3, ABPU is better or higher because of roaming impact. We have positive roaming impact in Q4. Operator: The next question comes from Rohit Modi from Citi. Rohit Modi: I've got two basically. Firstly, on your guidance -- full year guidance. I understand the revenue guidance, flat revenue guidance would imply a decline -- kind of decline in revenue in 4Q, but your COPA guidance, slight increase still leaves some room for a decline or upside. I mean, if you can directionally guide us how we should see COPA, whether it's declining, flat or continue to increase in 4Q. That would be great. Second question is, again, sorry, on consolidation. Just trying to understand what happens in a no-deal scenario. How do you see -- are there any assets that can still go ahead and buy from SFR without having the consortium going for a joint bid? And how do you see the market if there is a no deal? Is that getting worse from here? Or you see the same kind of conditions? Stéphane Stoll: Okay. On your first question regarding the full year guidance, what we can simply say for the Q4 2025 COPA, of course, this quarter is not [Technical Difficulty] So it's difficult to answer. But I'll remind you that Q4 2024 COPA was EUR 816 million and Q4 2025 COPA would probably in the same order of magnitude than this Q4 2024. Pascal Grangé: Please, I'll remind you that, in fact, there is no -- we have some exchange rate effects, but this exchange rate effects does not affect our profitability, in fact, because, in fact, we are very local. So [Technical Difficulty] our expenses are in the same current -- the currency of our revenues. So there is no ForEx significant impact, I mean. Stéphane Stoll: On the consolidation and the no-deal scenario, [Technical Difficulty] this is still possibility. So what will change the market will remain as it is today with four competitors, and we believe that Bouygues Telecom will be capable of delivering its continued [Technical Difficulty] it's current state and delivering results in line with the strategy. So nothing more specific to comment, I believe, on this specific topic. Rohit Modi: And will there be any other effect that in case there is no group deal you can still buy from SFR that SFR will be willing to sell? Stéphane Stoll: For now, our consortium stands, our offer was confirmed. We are hopeful that we are -- we'll be still capable of entering into construction discussion with Altice in the coming weeks. It's -- we believe this deal to be of interest for all stakeholders. And so we are hopeful that we will be able at some point in time to convince Altice to change its mind. Operator: [Operator Instructions] The next question comes from Mollie Witcombe from Goldman Sachs. Mollie Witcombe: Just a couple of questions from me, please. Firstly, I'm just wondering how you're thinking about group capital allocation and shareholder remuneration in the context of the French offer. How long do you wait before looking to pursue potential other options in other businesses? Are you still looking at potential M&A options in other businesses even as this is kind of ticking along in the background? And then my second question is just on Equans top line trends. You have talked about the connection to the slowdown in data centers, et cetera. I'm just wondering, do you feel that this is more industry-wide? Is there a kind of reason why Equans in particular, is seeing this trend? And how you're thinking about it going into next year? Should we expect this to continue into kind of H1 and beyond? Or how should we think about this in the midterm? Pascal Grangé: I will answer your first question. In fact, you have seen that our financial structure is very strong and the idea of maintaining a very strong financial structure is to be able to deliver [Technical Difficulty] all our business lines. And so we have obviously this important project of consolidation of the telecom market in France. But in the meantime, we are studying and we are working on some M&A for the other business lines. There is no relationship of these different of -- the development of all business lines is independent of what we do on SFR. So [Technical Difficulty] and we have some [Technical Difficulty] either in construction, in Equans, in Colas, no issue in that respect. Stéphane Stoll: As you know, we communicated on a significant acquisition that we are pursuing in the U.S. for Colas. And as I mentioned, we [Technical Difficulty] secured Q3 quarter at Equans for bolt-on acquisitions in Germany, Austria, Italy and the U.S. So confirming the strategy of bolt-on acquisition that we presented back in 2023. On trends, we certainly believe that the temporary slowdown that I mentioned on the data centers in Europe and the EV battery gigafactory [Technical Difficulty] is definitely industry-wide specific to Equans. Having said that, we still believe that fundamentally, the markets on which Equans operates are strong and will provide interesting development opportunities. So we do not expect any further significant slowdown for now. And so that -- we believe that Equans is on a continued path. We mentioned and we confirm that we expect to -- we expect Equans to get close to its peers in terms also of organic growth. [Technical Difficulty] the plan, and we are not worried at all for next year. Equans markets are resilient. We are at the heart of three long-lasting transition, energy transition, industry transition, digital transition, and that will not change. Operator: The next question comes from Eric Ravary from CIC. Eric Ravary: Two from my side. First one is on Bouygues Construction, it's very strong COPA figure in Q3. Could you give us any comment on this performance? Is it linked to one specific project? And second question is on Equans. Could you give us the share of data centers and gigafactories in the order intake in the 2024 to assess what is a decrease of all of the order intake in '25? Pascal Grangé: First, I will answer on Bouygues Construction. In fact, our aim for -- there is a Bouygues Construction cycle in projects, which are huge projects and the profitability could vary from 1 year to the other. But there is no very specific items this year, explaining the improvement of the profitability. We have a strategic plan in order to have Bouygues Construction raising profitability to 3% to 3.5%. So we are in that range, and this is due to that strategic plan. But no very specific reason. It's a good performance for Bouygues Construction for Equans. Stéphane Stoll: On the gigafactories, as you know, just to answer your -- I don't have precise numbers available, but just gigafactories in Europe with the failure of Northvolt last year, the market is at a halt. So we don't have any significant order intake this year on this specific market, which explains the slowdown that we mentioned. And on the data center business, what we can say in general numbers is that we -- the order of magnitude of our revenues in this business is -- will be this year around EUR 800 million, and it's down more or less EUR 150 million year-to-year. Having said that, we believe we see a very positive trend this time in terms of order intake in data centers in the U.S. While the market is slow in Europe, this might change in the coming months, but it is quite strong in the U.S. and we were able to secure first project in U.S. and in Canada. And this will spell strong revenues next year in this business in the U.S. and Canada. Overall, we are not concerned by the trends, mid-term trends, especially in data center, whether in Europe or in the U.S. Of course, gigafactories, this remains probably -- will remain a slow market next year. Operator: The next question comes from Stéphane Beyazian from ODDO BHF. Stéphane Beyazian: Yes. I was wondering if you set -- if you have set yourself a deadline for getting to an agreement on the Altice bid or basically talks could resume whenever could be 1 month, in 3 months or in 6 months. Second question, I was also wondering how important infrastructure assets of SFR are in your offer. According to the press, Altice is considering to sell some of its infrastructure assets. And I was wondering if such a sale would make a deal easier or more difficulty in the future. Christian Lecoq: So regarding your second question, we share with two kinds of networks. The first one is the mobile network in medium dense area. I understood what I read in the press that the mobile network is not concerned by the willingness of SFR to sell some part of its network. The [Technical Difficulty] kind of network is the fiber network [Technical Difficulty] the horizontal part of the network. It's quite a small network and is not a problem for us if this network belongs to someone else. So no problem for... Stéphane Stoll: And on the time line for now, we don't have any specific time line in mind, and it's whenever it will happen indeed, so. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Pascal Grangé: Thank you for joining us today. We'll be announcing full year 2025 results on 26th of February 2026. Should you have any question, please contact our Investor Relations team [Technical Difficulty] contacting for the press release and on our website. Thank you.
Kazumi Tamaki: Let us get started. Welcome to the earnings briefing of AGC Inc. for the third quarter of fiscal year 2025. I'm Kazumi Tamaki, General Manager, Corporate Communications and Investor Relations, serving as moderator. Today's attendees are Shinji Miyaji, Executive Vice President, Executive Officer and CFO; and Tomoyuki Shiokawa, Executive Officer, General Manager of Finance and Control Division. We will first have CFO Miyaji, provide an overview of the financial results for the third quarter, followed by a Q&A session. We are planning to finish at 3:45 p.m. Your cooperation is appreciated. Without further ado, I ask CFO, Miyaji, to start his presentation. Shinji Miyaji: Thank you. This is Shinji Miyaji, the CFO. Please turn to Page 3. The highlights. Net sales for the first 9 months totaled JPY 1,512.1 billion, down JPY 22.1 billion year-on-year. Positives included an improved product mix and pricing policies for automotive glass, increased shipments and pricing policies for Performance Chemicals and pricing policies for architectural glass in Europe and the Americas, while negatives included a PVC price decline, decreased shipments of EUV photo blanks and European architectural glass and the impact of last year's Russian business transfer. Operating profit was JPY 94.8 billion, up JPY 0.8 billion on effects of profit improvement measures in displays and others despite the adverse impact of the aforementioned factors as well as higher raw materials and fuel costs. Net income attributable to the owners of the parent was up JPY 145.9 billion at JPY 39.5 billion due to the aforementioned positive factors and the nonrecurrence of last year's loss on sale of shares related to the Russian business transfer and large impairment losses in biopharmaceutical CDMO. Operating profit for the third quarter exceeded JPY 40 billion for the first time in 3 years since Q2 of 2022, following profit improvement measures such as pricing policies for European architectural glass and automotive glass. Full year outlook remains unchanged from that announced in August. Page 6. Net sales and operating profit were as explained earlier. Profit before tax included profit increasing factors mentioned earlier in relation to the net income attributable to the owners of the parent as well as impairment losses and foreign exchange losses in biopharmaceutical CDMO during Q2. Page 7. By segment, Architectural Glass, Electronics and Chemicals saw a decrease in the sales and profit. Automotive posted higher sales and profit. Life Science posted lower sales but improved profit. Page 8. I will explain the factors behind year-on-year variance in operating profit. Sales volume, prices, product mix resulted in a positive impact of JPY 10.9 billion. While there was a decline in the selling price of PVC and in shipments of semiconductor-related materials and architectural glass in Europe, there were positive effects from improvements in the product mix and pricing policies for automotive glass and for architectural glass in Europe and the U.S. in Performance Chemicals. Raw material prices differences resulted in a JPY 8.1 billion decrease and cost and other differences, a JPY 2 billion decrease. As a result, operating profit increased by JPY 0.8 billion to JPY 94.8 billion. Page 9, please. Next, balance sheet. The total assets amounted to JPY 2,874.2 billion, down JPY 15.5 billion from the end of last year. The D/E ratio was 0.42x. Please turn to Page 10. This is the cash flow statement. Operating cash flow was JPY 164.7 billion. Investment cash flow, negative JPY 126.4 billion. Consequently, free cash flow was JPY 38.4 billion. Page 11, please. I will now explain CapEx, depreciation and R&D expenses. CapEx totaled JPY 174.1 billion, depreciation amounted to JPY 132.6 billion, and R&D expenses of JPY 44.1 billion. Major capital investment projects are listed as shown. Next, I'll move to the segment-by-segment presentation. Please turn to Page 13. First, Architectural Glass segment. Sales were JPY 320.8 billion; operating profit, JPY 10 billion. In Asia, sales decreased by JPY 3.8 billion to JPY 109.7 billion due to lower prices in Indonesia and other regions, coupled with reduced shipments. In Europe and Americas, sales decreased by JPY 5.2 billion to JPY 209.2 billion due to lower shipments in Europe and transfer of Russian business in February of the previous year. The effects of our pricing policy began contributing from the second quarter onward. Operating profit decreased by JPY 4 billion due to the revenue decline factors that I mentioned earlier and rising raw material and fuel costs. Asia accounted for about 30% of operating profit, while Europe and Americas, about 70%. Please turn to Page 14. Automotive segment sales increased by JPY 10.6 billion to JPY 385.6 billion, and operating profit increased by JPY 12 billion to JPY 23.4 billion. Shipments decreased in Europe, but increased in Japan. To counter rising raw material and fuel prices and manufacturing costs, we implemented structural reforms and productivity and product mix improvements and pricing strategies. Please turn to Page 15. The Electronics segment sales reached JPY 259.7 billion; operating profit, JPY 36 billion. The Display segment saw sales increase by JPY 4 billion to JPY 136.2 billion, driven by higher shipments of LCD glass substrate. The Electronics Materials segment experienced a JPY 11.1 billion decrease in sales to JPY 122.2 billion due to lower shipments of EUV mask blanks, compounded by the impact of yen's appreciation. As a result, operating profit decreased by JPY 400 million. In operating profit, 70% was represented by electronic materials and 30% by displays. Please turn to Page 16. Next, Chemicals. Net sales, JPY 431.3 billion and operating profit, JPY 39.7 billion. Essential chemicals sales were down JPY 20 billion at JPY 284.6 billion on a declining prices of PVC. Sales in Performance Chemicals, up JPY 11.4 billion at JPY 143.6 billion on increased shipments and higher prices of fluorine-related products for semiconductors and transport applications. Profit breakdown was Essential Chemicals, about 30%; Performance Chemicals around 70%. Page 17. Life Science. Net sales, JPY 96.1 billion and operating loss of JPY 16.2 billion. Sales were down despite increased shipments on expanded biopharmaceutical CDMO capacity due to the nonrecurrence of last year's onetime revenue from the contract project settlements and production issues at the Boulder site. Despite effective fixed cost reductions in biopharmaceutical CDMO, profit improvement was only JPY 0.5 billion, seriously affected by aforementioned revenue-reducing factors. Page 18. Strategic Businesses. Net sales were down JPY 2.2 billion at JPY 363.3 billion year-on-year. Despite growth in Performance Chemicals and Mobility, affected by a temporary slowdown in electronic shipments and the nonrecurrence of onetime revenue from contract project settlements in Life Science. Operating profit was down JPY 7.2 billion at JPY 40.7 billion, strongly affected by declining electronics shipments. Page 20. The full year forecast remains unchanged from August. Page 21. No changes to the full year forecast by segment either. Page 22. Comparing the fourth quarter forecast to the third quarter by segment, Architectural glass expects increased shipments in Japan with the demand increasing for renovation to energy-saving glass. Asia also expects increased shipments on a recovering demand. South America expects shipments to remain strong. Europe expects flat shipments quarter-on-quarter affected by the continued weak economy. In automotive, shipments to increase in Japan, but decrease in Europe and the Americas. We'll continue working on pricing policies and structural reforms. In electronics, display expects a slight decrease in shipments of LCD glass substrates. Electronic Materials expects shipments of semiconductor-related materials to be flat quarter-on-quarter. Optoelectronics expects decreased shipments due to the entry into the adjustment period. Page 23. Next, chemicals. Essential Chemicals. Although regular facility maintenance is planned in Southeast Asia, shipments are expected to increase driven by a gradual startup of the expanded facility in Thailand. Performance Chemicals. Shipments of fluorine-related products for semiconductors and transportation applications are expected to remain firm. Next, Life Sciences. Contract sales for small molecule pharmaceuticals and agrochemical CDMO are expected to increase. For biopharmaceutical CDMO, the loss is expected to narrow due to sales increase at a site in Denmark and the structural reform of the Colorado sites. Turn to Page 24, please. There are no changes to the full year outlook for strategic businesses. Page 25. There are also no changes to the full year outlook for CapEx, depreciation and R&D expenses. Please turn to Page 26. With regard to shareholder returns, the dividend forecast remains unchanged as a stable dividend policy targeting at a DOE of about 3% remain unchanged. Please turn to Page 28. I will now explain the 2 organizational changes announced today together with the earnings results. So let me go over the details. The first is one aimed at improving the profitability of the Chemicals segment. As shown on the left of the slide, the chlor-alkali business was previously categorized as essential chemicals, while the business centered on fluorine-related products was categorized as Performance Chemicals. Starting from January 2026, next year, the entire chemical chain in Japan from upstream electrolysis to downstream performance chemicals products will be integrated into a single SBU, strategic business unit, in order to optimize the overall business and improve profitability. That is shown on the right of the slide at the bottom. The essential chemicals business in South Asia, on the other hand, will become an independent SBU, strategic business unit to accelerate its profitability improvement. So going forward, from next year onward, the subsegment structure for the Chemicals segment in our earnings announcements will also align with this organizational change. Now please turn to Page 29. The second organizational change is to accelerate productivity innovation. As you can see in this diagram, up until now, the Information Systems division handled IT infrastructure development, while the digital and innovation promotion division focused on business process innovation using digital technologies. And these functioned as separate entities collaborating on digital initiatives. Now as you can see in this diagram, as a superstructure, we are establishing a new digital and innovation management division to oversee these functions. As you can see on the right bottom corner, our company has been selected as a DX stock fifth time 4 years in a row, and our DX initiatives have been rated highly externally as one of the most advanced companies. In this regard, through its organizational reform, we will pursue synergies and strategies and technologies and human resources. Furthermore, we will advance digital solutions as business innovation under a unified digital strategy to enhance corporate value and strengthen competitiveness further. That concludes my presentation. Thank you for your attention. Kazumi Tamaki: We will now take questions. If you wish to ask questions, please push the Q&A button and type in your questions. We will first go over the questions we received in advance. The first question. The actual results for the third quarter, how it compared to the projected results. Miyaji would respond. Shinji Miyaji: For the third quarter, sales on par with our projection for operating profit, a bit stronger than our expectation. That is overall for the company by segment, the situation was as follows. First, architectural glass sales or slightly lower, but operating profit was slightly higher than projection. Especially since the second quarter, in the -- in Europe and the Americas, policy -- pricing policies and cost reductions measures have proven to be effective. As a result, operating profit was better than our projections. For automotive, sales and operating profit were both better than our projection for sales. Improvement in product mix based on our strategy of volume to value, we saw effect. And we also implemented prices, reflecting that. And this strategy proved to be effective. And as a result, both sales and operating profit were better than our projection. Electronics, overall, sales were slightly better than projection, whereas for operating profit, slightly lower than our projection. For sales, some did better than others. But for operating profit, in particular, in display, we saw a temporary cost increase, and we had some impacts in foreign currency with higher Asian currencies. So as a result, operating profit was slightly lower than our projection. For chemicals, sales were slightly lower than our projection. Operating profit, slightly better. Especially in operating profit, Essential Chemicals and Performance Chemicals, both saw the effect of cost improvements, resulting in slightly better results than expectation. Life Science sales slightly lower, operating profit on par with our projection. For sales in small molecule pharmaceuticals, sales were not that exciting. But for operating profit, both biopharmaceuticals and small molecule pharmaceuticals were on line with our projections. Kazumi Tamaki: Next question. Earlier, you talked about outlook for the fourth quarter qualitatively. But once again, if you compare this to the third quarter, how do you expect the fourth quarter to play out? Can you give us more details? That was the question. Shinji Miyaji: So for the fourth quarter outlook, in terms of sales revenue, those will be on par with the third quarter probably. But in terms of operating profit compared to third quarter, we are going to see a decline probably. So that's the overall outlook. By segment, as I said earlier, for architectural glass, both sales and operating profit will be in line with the third quarter. In our view and for Japan and Asia, demand is expected to increase. But in Europe and others. Because of seasonality partially, there will be a decline. So overall, both sales and profit will be in line with the third quarter. As for automotive business, in U.S. and Europe in the fourth quarter, because of seasonality, we're expecting a decline. There is going to be increase in shipment in Japan, but because of the shipment decline in Europe and Americas, we are going to see a decline in both revenue and profit. As for Electronics, sales are expected to be as the same as the third quarter, but we're going to see a decline in profit. As for electronic materials, in terms of sales, especially after electronics materials are going to -- has already passed the peak in shipments. So in the fourth quarter, we are expected to see some decline. And as for LCD glass substrate, the demand is a bit weaker compared to third quarter. So operating profit will be affected by that decline. And operating profit is going well in Opto electronics, but the display, but for -- this cannot cover the electronic material decline in profit. And as for Chemicals, we are going to see increase in revenue but decline in profit. Especially in Thailand, there will be a production facility that will come online. And so there will be shipment increase. And as for fluorine products, in the fourth quarter, demand is a bit stronger. So we're expecting the sales to increase. But as for operating profit, in essential chemicals, there will be scheduled maintenance -- turnaround maintenance, and there is going to be a slight dip. So there is going to be a decrease in profit. And Life Science, we're expecting increase in both revenue and profit. In terms of sales, the sales are expected to increase in the sites in Copenhagen and operating profit will also increase accordingly. And fixed cost in sites in Colorado will improve. And so costs will be declined. The full-scale effect will be from the next fiscal year, but there will be a slight effect that will be already materialized in the fourth quarter. Kazumi Tamaki: The next question for EUV mask blanks on quarter-on-quarter or year-on-year basis. What is the situation, is the question. And compared to the plan, how were the situation in the third quarter? Shinji Miyaji: Here again, not much change in our stories. In 2020, we saw a big growth in this business. But this year, rather in 2024, we saw a big growth in this business. But for this year, due to the demand situation for our main clients, we expect the shipments to decrease. For 2026 onward, we expect sales to increase -- start to increase again. But as far as this year is concerned, not very exciting. We don't disclose the season-by-season changes, but the overall story remains unchanged. In Taiwan and others, our clients there, and we are continuing to expand our customer base, and we are seeing the effects of that. Kazumi Tamaki: This, once again, EUV mask blanks question. In major customers, there are various news headlines that are being heard. So compared to 3 months before, is there any change in your outlook for demand? That was the question. Shinji Miyaji: So EV manufacturers, as you know, all those that you already know. And in each in those manufacturers, there is various capital policies that are announced and there's subsidy provided by the government. So basically, this has been favorite -- favorable for us. And there is also a lot of news and in-house production is going to start up in foundries first. And so the demand that we initially assumed is now coming to materialize. So there are slightly less concern with a little bit of less visual thinking. Kazumi Tamaki: Next question. Also on EUV mask blanks. Other than your main customer, how is your market share increasing. And what about the situation of certification in state-of-the-art areas, including 2-nanometer? Shinji Miyaji: It's very difficult to give you the details. But regarding our market share, other than our main customers, we have yet to see a rapid increase in our market share. 2 nanometer, 1.4 nanometer, we are developing those to be certified. We will continue our efforts in these areas, and we are seeing the effect to a certain degree. For this year, with this factor in mind, sales are not growing that rapidly either. So starting next year, we would like to supply to new customers as well as increased supplies to existing customers. Kazumi Tamaki: Next question. With regard to image sensor glass filters, was there any entry by competitors? And from the next fiscal year onward, what will be your outlook for shipments, inclusive of the competitive landscape. That was the question. Shinji Miyaji: So for glass filter for image sensors, there are a lot of different manufacturers that have been around. And we are targeting at super high-end products or customers that are producing those products. Those are the main customers. So in that sense, whether there are competitors or not, well, there are many competitors in image sensors, but as for super high-end segment, there is very limited competition. So that has not changed. But I'm not saying that there's no competitor whatsoever. So we keep providing cutting-edge products to lead and get ahead of the pack and to secure the dominant position. And that exclusive strong position has not changed. Kazumi Tamaki: Moving on to Life Science. What is the effect of the sale of the Colorado sites? Where are you on that? And once the sales materialize, what impact would it have on your results? Shinji Miyaji: The Colorado site sales, we are working towards that. But so far, there is nothing that we can make any announcement on. Quite a number of companies are showing interest in this site itself. So we will continue to pursue early sale. But this is November already. So it seems not very likely that we will have the sale complete by the end of this year, meaning it's going to be next year that is a more likely scenario. Kazumi Tamaki: Next question is for biopharmaceutical business. Can you explain the status by site? Shinji Miyaji: By site. Well, what is easiest to understand is Colorado. It is going to be closed and the redundancies have been announced. Headcounts declined. And the cost is expected to decline further to the end of this year, and this is going to be a contributor for the next fiscal year. That will be easiest to understand. As for Seattle, in the past, there were some production disruptions, but major -- many of those have been resolved. So in terms of production, there's much less concern now. So we are now striving to obtain demand or orders, and we are seeing some results, and there is an obvious increase in inquiries. But as I've been saying all along, it takes time to move to the full-scale production. So the full-scale recovery is not expected until 2027. So overall, what we can say is that in Europe, in Copenhagen, we have increased the production capacity and there were some problems that we faced, but those have been now resolved. So in terms of manufacturing products, there is no concern. So we have to get orders, win orders and produce products. We are totally focused on that now. And as for animal cells, that is how we are. But in Heidelberg microbes and the Milan genetic sales, they are all performing quite well. So there's no concern and apprehension and things are going well. So animal cells have to be restructured, and we have to increase the capacity utilization, and we're striving for that. And the order taking is increasing steadily. But when it comes to really solid performance, we have to wait until 2027. Kazumi Tamaki: The next question is for Life Science business overall. Sales is behind and operating profit is on track it appears compared to the full year forecast. Is the demand tracking behind your projection? If that's the case, why is it that profit is doing well. Shinji Miyaji: Well, we can't really say that profit is doing well. But so far, we've been able to do what we have been planning to do, assuming to do. Up to third quarter, the first 9 months for small molecule pharmaceuticals, slightly below our projection. But this is a real seasonal business, lots of sales in the fourth quarter, so we're not concerned. So overall, we are seeing steady progress, both for small molecule and biopharmaceuticals. So next year is going to be very important. As for the Life Science business as a whole, if you look at the third quarter actual results, cost and other contributors turn out to be negative on a year-on-year basis. So was there any particular onetime factor like withdrawal costs. So what is the breakdown of this item. So in comparison to the third quarter last year, in 2024 third quarter, there was a onetime revenue I think this was cancellation fee. There was a onetime revenue in quite some amount. So there's no such thing that was a big factor. Kazumi Tamaki: The next question is about the Boulder sites. The production issues continued, but how about the third quarter. Did you continue to see the production issues in the third quarter? Shinji Miyaji: For our Boulder sites operation, since we decided to discontinue our operation there, the third quarter is already preparing for that. So it's not really production issues. It's just that preparation for the business withdrawal took place during this period. Kazumi Tamaki: The next question is about Chemicals segment. Essential Chemicals and Performance Chemicals, both seems to have improved in profitability. What was the factor behind this? Shinji Miyaji: Well, yes, this is about a comparison to the last fiscal year, right? So in comparison to the previous year, is it the question. The question is about the comparison. So improvement, is it from the second quarter in what comparison to what, I'm not sure. But this was a question that was pre-received. So there is no specification about the time period. So as compared to the second quarter, I would guess, on an annual basis, there's a decline in profit. So probably profitability has increased from the second quarter. So in comparison to second quarter, so what has improved? Well, more or less, Essential Chemicals improved more, especially outside of Japan, shipments have increased and cost has declined. Cost was reduced in the Essential Chemicals, both in Japan and overseas. As for Performance Chemicals, cost has decreased. In Japan, essentials and performance chemicals, utility charges have declined. But as compared to the second quarter, profits have increased. Kazumi Tamaki: Next question is on Essential Chemicals. The capacity increase in Thailand, what is the current status? By the end of the year, you expect full capacity operation. Does that remain unchanged? Shinji Miyaji: Yes, we have started the operation, and we expect full capacity operation at the year-end. So things are proceeding as planned. And the impact is, as explained earlier, for this year, profit-wise, no contribution, but steady ramp-up. Kazumi Tamaki: Next question is about Chemicals segment. From next year, there's going to be organizational change. What is the purpose behind this once again? Shinji Miyaji: Well, the same slide is now shown here. So previously, our subsegments were divided as shown on the left, but this will be changed to what is shown on the right. So we start with electrolysis and with electrolysis, chlorine and caustic soda are generated and using chlorine as a feedstock, chlorine and other Performance Chemicals products are produced. And the whole thing is called chemical chain. And in Japan in the upstream, the chlor-alkali business. And in the downstream, there's Performance Chemicals products, and they belong to different business headquarters, business units. So it's not about optimization of chains, but it's about optimization of business units. So they are byproducts to each other. So if you look at the Japanese chemical chain as a whole, you can further -- there's further room for more optimization. So we have changed our gear to have optimization of the total chain. So rather than upstream and downstreams looked at separately, we look at volume of caustic soda and chlorine and optimize them in the whole chemical chain. And Essential Chemicals, Southeast Asia will be separated out because they had been a totally independent business separate from Japanese essential chemicals from the beginning, but they were in the same SBU with the Japanese Essential Chemicals, but Southeast Asia business is self-complete. So as a strategic business unit, it became independent and profitability improvement initiative that is underway has to be accelerated in this regard. Kazumi Tamaki: Next question for automotive. The situation in the third quarter. 3 months ago, you were expecting a decline in revenue and profit from Q2 to Q3. The actual was a double-digit growth in profit. What were the differences? Shinji Miyaji: So we're talking about quarter-on-quarter. It's not double-digit increase. The profit increase from Q2 was JPY 0.8 billion, I think. For automotive, in the second quarter, JPY 7.4 billion, up to JPY 8.3 billion in the third quarter. So JPY 900 million or JPY 0.9 billion. So it's not really double digit. But, especially in Japan and Asia, we continue to see strong business. That's one big factor. And North America is recovering somewhat. So combined -- those 2 factors combined was better than our projection. And therefore, Q3 was better than Q2, but not a big jump. Kazumi Tamaki: We are running out of time. So this will be the last question. So for architectural glass, in Europe, demand has been sluggish, but prices seems to have increased significantly. So what was the factor for this? Was there any supply capacity decline? And also, you haven't seen signs for bottoming out in Asian market. Can you tell us your outlook for demand in Asia? Shinji Miyaji: So there's a question about Europe and Asia. As for Europe, last year, we have to go back to the end of last year. There was a severe winter weather and gas prices surged. And we have not been able to recover on that immediately from the gas prices and the spread has worsened significantly because of that late catch-up. So the gas increase or cost increase passed on to the product price has been implemented, and that result has been reflected in the second quarter onward. On the other hand, in order to increase price, you have to look at the capacity. And so our company and whole industry, including our company, has taken some supply reduction. And from the second quarter onward, there were some effects from maintenance of prices. So as you know, the European economy has been quite weak, so we cannot expect too much from the demand increase, but prices are expected to be maintained at a relatively higher level. On the other hand, for Asia, demand is not strong, especially in Thailand, industrial structure is not that favorable. So it's a bit difficult. In Indonesia, there is going to be a gradual recovery. But compared to the past, there's an industrial structural issue that still remains. And so in terms of architectural glass, the profit improvement in Southeast Asia is a challenge for us. Kazumi Tamaki: It is now time, so we're going to end the Q&A session here. For the answers, we couldn't respond, the IR personnel will come back to you later. If you have any further questions, please call us in Japanese at 03-3218-5096, that is for questions in Japanese. And if you wish to communicate in English, please send to us at this address and please fill out the survey sheets that you will see after you leave. Thank you very much. Have a good day.
Unknown Executive: Good morning, everyone. Welcome to our third quarter of 2025 Results Conference Call. First, let me introduce our management. We have our former beloved CEO, Khun Somchai. Somchai Lertsutiwong: [Foreign Language] Unknown Executive: Our newly appointed CEO, Khun Pratthana. Pratthana Leelapanang: [Foreign Language] Unknown Executive: Our CFO, Khun Tee. Tee Seeumpornroj: [Foreign Language] Unknown Executive: We have Chief Enterprise Business, Khun Phupa. Phupa Akavipat: [Foreign Language] Unknown Executive: We also have Chief Retail Business, Khun Prapat. Prapat Siangjan: [Foreign Language] Unknown Executive: Khun Nattiya and myself will be briefing you the results and running this session. So at this moment, allow me to officially welcome Khun Pratthana, our new Chief Executive Officer, following the transition from Khun Somchai, who has successfully led AIS for the past decade through multiple transformation milestones. Khun Somchai has been with AIS close to 30 years, and holding CEO position for the past 11 years. Now let us hear from Khun Somchai, as he would like to share a few words with this community. Somchai Lertsutiwong: Good morning, investors and analysts. I would like to take this opportunity to thank all of you that support me all the time. For me is a really great time here. It have been the pleasure me to serving as a CEO for the past 11 years. I will miss the -- missing with all of you, but I never miss the Roadshow. Even if you still invite me, I am willing to go with Pratthana, and I will be by your side and follow up and push Pratthana to make more and more return to -- off you. Okay. For me, I view hard list leadership to Khun Pratthana, who you'll know well. And I feel confident as we will continue to go with greater vision and energy. I hope the investor analysts will continue to support AIS under the next chapter of leadership under Khun Pratthana. Thank you very much. We hope to see you in any Roadshow that you invite me. Thank you very much. Unknown Executive: Thank you Khun Somchai for your kind words. We truly will miss you, and we hope that we can invite to the roadshow. Before we begin the quarterly session, let me introduce the new office chart. While we now have Khun Pratthana as our new CEO. Khun Pratthana also has been with AIS close to 30 years. Before this position, we are familiar with his role as Chief Consumer Business, taking care of mobile service, and then he was promoted to Deputy CEO, Chief Operating Officer, next to CEO position. Under Khun Pratthana, we have 2 Deputy CEOs, and now 7 business units responsible by C levels reporting to him. At this moment Khun Pratthana will be acting as Mobile Business unit head, while Khun Tee is acting as Broadband Business unit head. The company is in the process of succession plan. Now let us hear a few words from Khun Pratthana. Pratthana Leelapanang: Very good morning to the -- everyone here in the conference call, to all analysts. I've been honored that the company appointed me as the new leader of the team. Under Khun Somchai leadership, AIS has evolved from mobile network operator into a fully, I would like to use the word, integrated digital service providers. And we have set -- we believe that AIS under leadership of Khun Somchai have set a new benchmark for multiple times, including this quarter for the industry. I'm very committed to build upon the strong foundations of AIS, and to drive AIS together with the whole team to a very new era whereby digital and AI infrastructures will play a very pivotal role for country capabilities in the digital economies era. AIS team as a whole is looking forward to work hard internally and with partners across industry to deliver exceptional experience for the customer and exceptional values for our every customer. With the comprehensive sets, our product service across 5G, broadband, enterprise solutions, retail, entertainment and about to come digital financial services. Again, I'm truly honored, and we are very committed to bringing the best for Thailand and society sustainably. Thank you very much. Unknown Executive: Thank you very much for your notes, and we now expect to hear more from him in subsequent events. Now let me begin with a short brief and then going directly into Q&A. At this time, you may also reserve to ask the question through the chat box. Please kindly put your name and your corporate name. In the third quarter, AIS continued posting solid results with core service revenue continued growing, supporting by strong connectivity and content proposition, despite a challenging economic situation. Mobile remained resilient, focusing on 5G and driving more values to uplift ARPU alongside content engagement. Broadband delivered another strong quarter with continued focus on quality subscribers, innovative products and premium bundles beyond broadband. Enterprise momentum remains solid, driven by EDS & Cloud, while we will continue to drive data center growth through our [Technical Difficulty]. The retail business grow uncertain retail strategy in product mix, stock management and sales capability. Profitability was strong from efficient cost control and lower spectrum costs. Looking at the first 9 months of 2025, AIS delivered a quality across all key metrics. Our EBITDA margin remained strong at 55% total revenue with ROIC at 15%. The net debt to EBITDA was at 1.9x, underscoring a very solid financial position and a low cost of borrowing. Overall, AIS continued to outperform with quality growth in expanding our business beyond connectivity and efficient capital management. We expect to continue delivering strong returns to shareholder. While we are anticipating that this investment community will be interested on the impact from 2100 megahertz NT contract expiry and the recent auction cost savings. We have placed an illustration showing the accounting impact in both MD&A and our conference call slides, where you can download through our website. Further questions regarding specifically on this, please reach out to IR team after this session. And this is the end of a short brief, and we'll start with the Q&A session now. Unknown Executive: [Operator Instructions] And we have Ranjan from JPM. Ranjan Sharma: First of all, all the best Khun Somchai. I wish you all the best, and it's been a great leadership of AIS under you, and all the best to Khun Pratthana, look forward to the same execution under you as well. So with that, I can come to my question. Like Khun Pratthana, can you help us understand your key objectives and KPIs as we look to lead the organization and also how you think about capital allocation as well. Pratthana Leelapanang: So the key objective and KPI of the organizations is to bring forward the growth for a cross business, integrating mobile broadband, enterprise, entertainment, retail, and digital financial service to come. So we truly believe that AIS can play more roles in the AI and digital infrastructure, bringing values to the countries so that we set forward ourselves to go there. Ranjan Sharma: Can I just follow up on the capital allocation side as well, I mean, given that you're generating such strong free cash flows now, how you look to use the excess capital? Tee Seeumpornroj: Sorry. We didn't hear you clearly. Are you asking about the excess -- excess cash? Ranjan Sharma: Yes. Given your strong free cash flow generation of the business, how you think about capital allocation going forward? Tee Seeumpornroj: Okay. Yes. I think in the end, first and foremost, every time this, then -- it's dividend, right? So I think we committed to pay a high dividend payout ratio. That's to be expected from our shareholders in a way. But apart from that, I think we are preparing -- it's actually good that we have excess capital right now because looking forward we see a lot of growth path that we can take. Khun Pratthana mentioned a bit about growing in a few directions, enterprise, infrastructure, also mobile and broadband as well. We still believe there's room to grow. So I think you may see that we may come back with a bit more investment over the next few years and also in preparation for the spectrum auction that we anticipated to happen in the next year or 2. I think that will be a certain requirement to put the money back to work and hopefully to grow the business again. Unknown Executive: We have Piyush from HSBC. Piyush Choudhary: First of all, all the best, Khun Somchai, and congrats Khun Pratthana on the new role, and wish you the best. I have few questions. Firstly, if you can discuss about the macro environment in Thailand. And how do you see the kind of growth outlook in both mobile and fixed broadband, the ARPU outlook as well? Second question is your 9-month performance has been really strong. So why guidance has been kept unchanged. Are you expecting kind of any headwinds in the fourth quarter on the cost side? And thirdly, if I may ask, there was a sharp decline in admin and other expenses of 21% year-on-year, what drove it and the outlook for the same? Pratthana Leelapanang: Allow me to address the first one in the macro environment. Thailand is now still, I would say, under the period of recovering. Especially the last quarter, we start to see a bit more positive in economy recovery. We believe towards the end of the year and next year will be still under the phase of recovery. In any way, we do not see a negative side, but positive sign. For mobile, broadband and telecom in Thailand, it's very clear that the market is really move on focusing on value creation rather than hyper competition. And you also see from us and our competitors on that particular focus, so the profitability has been brought back to the industry, and we both are competing to bring value for customers. In terms of outlook, when we think about how things would grow, I believe that the digital services based on both mobile, broadband, enterprise, we play a very important role to add values. So we do expect a positive side of it continue on. On the guidance, we do not expect the surprise for the last quarter. And this is now about to end the quarter. We do not have a plan also to revise it. That's what I want to say. Unknown Executive: On your last question about admin side. In admin, we also booked performance-related item. That's basically the bonus. So there's accrual in particular quarter, especially last quarter and some adjustment in this quarter as well. Next, on the top three, we have a high base. If you recall, last year, we mentioned that we booked the accrual performance base in Q3 for Q2 and Q1 as well. So we started the year in 2024 with a very conservative outlook. And we had a very low admin expense in first and second quarter last year. So in third quarter, we accrue more performance bonus, and therefore, it was a high base. Piyush Choudhary: Right. Third quarter number is a normalized number. There is no reversal of any provisions, right, in this? Unknown Executive: It's not that big of an item. So you may -- some look at the third quarter onward. If no further questions from Piyush, we have Thitithep from KKPS. Thitithep Nophaket: Okay. I have 3 questions. Number one on the mobile phone revenue gap between [indiscernible], we have seen quite a substantial gap in the past 2 or 3 quarters. May I have your view on why the CapEx is, because when I look at the price band of 2 companies, they are almost identical and the U.S. went the gap to continue in the next few quarters as the first question. The second 1 may have your view on the CapEx outlook for 2026 and possibly 2027? Because right now our 5G network already covered in 95% of the population. And the third 1 right now, people are using the 5G package is already 35%, 36% of user subscriber base. Do you expect that my pension has to continue? And what would be the peak, can it lead to 100% in the next few years? Those are all the figures. Pratthana Leelapanang: Allow me to address the first one. In terms of mobile revenue gaps, I would say we look inwards rather than outward. We have been very focusing on the customer needs, acquiring the right segment of a customer on the quality basis. So that has been helping as to improve the mobile revenue as well as improve the customer experiment along the way. Because you might remember when we talk about unlimited low plan and all of those is continue to be tapered off. So that has helped improve the ARPU and revenue. On the other side of competition, I think they were also putting forward that attempt as well, depending on the speed of each company. But I do see a positive trend of both competing on building on values. Whether the gap is wider remain to be seen, we don't know. But we will continue on focusing on what we are doing, bringing our quality and value to mobile services. So I think that's number one. On number two, in terms of investment for network, we will continue on making sure that we strengthen our network services with the proper CapEx to fund that particular experience. For the past year, 1.5 years, the CapEx has been on the low side simply because we are pre-investing in 5G, and the capacity is enough. We have seen the continued ongoing of traffic for both mobile and broadband. That would require us to make sure that we invest profitably to lead in the customer experience continue on. So that you can expect that we will fund that in 2026, '27 onward. On your last question regarding 5G, now we are at about 30-plus percent of penetrations. We do believe that 5G penetration can go to 70%, 80%, 90%, not so far away from now. Everyone would need to use it, and we are confident that it will grow. So I think there are a lot more room for AIS to build on that piece. Unknown Executive: Now we have from Khun Pisut from KS. Pisut Ngamvijitvong: Yes. First of all, congratulation to your good results, Khun Somchai for your retirement. Hopefully, you have a good time with your baby, and also Khun Pratthana. Somchai Lertsutiwong: I will quote your suggestion for my daughter. Thank you very much. Pisut Ngamvijitvong: [indiscernible] Unknown Executive: [Foreign Language] Pisut Ngamvijitvong: My first question is about your [ C-Band ]. If you look at your ARPU, it went up from 120 to 150. I mean, 120 before the market consolidation to 150 in this quarter. And prepaying revenue has gone up nicely. Do you think this is -- what is the right proportion of mix between prepaid and postpaid level because you see that the prepaid revenue mix has been going up as well. And we have seen the 2 steps when you reset the price for [indiscernible] 2024 and also over the... Unknown Executive: [Foreign Language] Pisut Ngamvijitvong: My question is about prepaid revenue. Basically, it went up quite okay. My question is that how far your prepaid ARPU can go up further? And what is -- what do you think -- what is the mix for the level in the prepaid and postpaid? Pratthana Leelapanang: Okay. On prepaid, I would like to put the perspective of prepaid and postpaid announced that they could be so cut, it very much like the method of payment. People subscribe monthly subscription in prepaid, and they do pay mainly subscription very large segment ten or millions of customer paying subscription for data in a monthly basis. So I would say that very close to postpaid in some way and the way they pay for it is through the bank account, bank application and so on. So it's a mixture now of how they want to use packages and the way of payment among pre and post. Prepaid has been continuing on recover from past 4, 5 year, whereby there are a huge amount of customers, and many of those have multiple SIM and some SIM are inactive. When the country strengthened the personal identification or those number has been disappeared for the market in millions. So the number of prepaid and overall shrink a bit for the past 3 years. And at the same time, the market recover from hypercompetition or overly provide unlimited data. So that has helped prepaid ARPU to continue on. We do believe that both prepaid and postpaid ARPU will highly depend on the needs of customers to use data. And we do expect that the data demand will continue on growing year-on-year. So that's what I believe it would be. On the prepaid alone ARPU, we still think there are room because the penetration of 5G will continue on growing for both postpaid and prepaid. So that you can expect that you'll see a continuation of it. Pisut Ngamvijitvong: My second question is about your network CapEx. Your 9 months network CapEx seems below your full year guidance quite a bit. But you'll keep the guidance unchanged. You may not want to change the [indiscernible] EBITDA, but in terms of the network CapEx, do you think it is possible for you to understand what do you target to spend for this year? And this means that we will help the free cash flow to make more aggressive presettlements for this year and next year. Pratthana Leelapanang: Allow me to address this one. We are very committed to network qualities. Supporting our customers, it will be on schedule on our plan. There are many of work in progress that may not immediately reflect in Q3, but that's on plan. Pisut Ngamvijitvong: My last question is about -- on the liquidity front, the NBTC has been trying to enforce some of the market package to serve to help us -- I mean, the cost of living of the people. I think first thing that about to find out. And also what I heard from the industry is that it's about to revisit the selling rate for voice and data not spotting that what's happening next year is about 3.5 gigahertz plan that could be option in 2027. Could you please give some comments on these 3 things on the [indiscernible] front? Pratthana Leelapanang: On the attempt of the regulators, we see as a very positive trend that the government do see a very strong value of digital services, and it will be part of every one, as well as the government service through that digital services. That's why mobile and broadband has been on the highlighted how the government will support tie to have access to all of those in a very economical way. What we have been providing AIS and the industry is a very competitive telecom services, and we are the third from the lowest price in the world in terms of price per gigabyte or even broadband in service. So we see a very good trend. Even though it looked like -- there will be more imposed, and we will work with regulators to bring the best for the consumers. So that's what I would say. And the cost structure itself also is unavoidable anyway that we have continue on cost structure of spectrum network investment and many more. It will continue on to be in next year, the new spectrum comes, it will be more. But with the economical of scale, and the technologies, we believe that we will bring in value continue on with -- even with those structures. Unknown Executive: Next we have Khun Wasu from Maybank. Wasu Mattanapotchanart: I'm Wasu from Maybank. I have three questions. So the first 1 is about the admin expense. Can we expect the admin expense to be relatively stable Q-on-Q in the fourth quarter? Or alternatively, can we use the number that we saw in Q3 as the base going forward. So that's the first question. The second question is about the marketing expense. So I'm aware that 4Q is usually the high expense for the marketing expense. But for this year, in particular, is it reasonable to assume that the marketing expense will drop year-on-year because of the more earning period that we are seeing this year. So that's the second question. And the final question is about the CapEx trend over the long term. Given that Khun Pratthana just mentioned that the data usage is rising. And also to -- just completed the network consolidation process last month. So should we expect AIS to increase the network CapEx in 2026 and 2027 to maintain the network quality leadership going forward. Unknown Executive: On admin side, it may be difficult to gauge where the numbers will land. However, in third quarter, because there are some adjustments on both the staff-related and IT rationalization. So likelihood is fourth quarter, it could be higher on the admin side. Marketing wise, yes, it's morning period. However, we also do have plans on certain marketing campaigns also relative to the content engagement. Normally, it's a high season. So difficult to say what the number will be, but we expect that we will continue to try to manage the marketing campaigns as properly. CapEx trend in the future. So maybe just remind you a bit that 2, 3 years back, if you recall, we did invest quite heavily on the 700 megahertz for 5G. So that also gave us quite a lot of capacity over the last few years. As we are moving forward, we also -- as Khun Pratthana mentioned, we want to ensure that we lead in the network quality leadership and customer experience, including some new features of the network that we want to build upon. So the tendency is we are looking at the higher trend of the CapEx versus this year. Next we have Arthur from Citibank. Arthur Pineda: Firstly, all the best to Khun Somchai and congrats to Khun Pratthana for taking the hot seat. Several questions, please. Firstly, you mentioned digital and AI services as a key focus area. How should we see this from an investment and CapEx standpoint? Are you, for instance, looking to invest more in additional data center capacities outside of the JV with GULF or things like GP as a service? I'm just wondering how this impacts CapEx and earnings volatility going forward? Second question I had is with regard to mobile. AIS has been gaining market share over the last 2 quarters. What do you think it's been doing differently, both of you seem to be quite rational and focus on quality subscribers. I'm just wondering what's driving that gap? Is this mainly because of the churn related to their network outage? And has that started to change into the fourth quarter? Pratthana Leelapanang: The first one regarding AI and digital infrastructure. We are pursuing with the joint venture structure with GULF into AIS, as well as [ GSA ], I believe we have also released information regarding the joint investment with GULF on that. We do see a very strong demand and needs of investing in AI infrastructures. That would also related to GPU and AI factories that later on, you probably will see -- allow me to not go into detail today, but that will be past and passive of our plan to go for very strong demand. It will be in form of the joint ventures with partners and maybe more that to be released later. That's the first one. The second one regarding mobile. We are very focused on quality, supporting existing customer and quality acquisitions. We did not change our strategy at all for the past 24 months. And I think it is the right strategy to make sure that customers have the best product, and we hope to continue on. The competitors some way somehow moving in the same direction. And I believe that we also see a very positive trend later as well. Arthur Pineda: So if you could -- just allow me ask another question. I'm just wondering about pricing for the mobile services. Consolidation has happened 2 years ago. We've not really seen any notable changes for pricing in the industry even with inflation and all. I'm just wondering the outlook for 2026, do you expect this to remain static and the strategy will just remain on upselling and bundling? Or is there room for prices to finally move? Pratthana Leelapanang: The whole mobile base is beyond $90 million, and all of those are all in different price plans. The pricing in the market for new acquisition has been improved in the ways that the unsustainable price plan has been eliminated or continue on to be improved in terms of value offering. With that, on the surface, we may not see the price hike, but you have -- if you look closer, you will see the elimination of those unsustainable plan. That's the whole fundamental of it. And with the base and a new customer coming in, we see the demand to use more data continue on. And that gives us opportunity to offer them individually with the proper packages for the upsell and cross sales. And that's also, again, has helped improve our revenue and profitabilities. And we see that one continue on rather than price hike. Unknown Executive: We have Ranjan to follow up. Ranjan Sharma: I have my follow-up question. Thank you for giving me the opportunity. It's actually coming from an investor. So I want to ask them on your behalf. Can you give more clarity on future CapEx and how that's going to evolve? And how are you going to allocate that between mobile, broadband, data centers, digital banks and the other initiatives that you might have. So the question is around the total CapEx spending in the coming periods and how it is going to be allocated between the different businesses -- existing and new business. Tee Seeumpornroj: I think, you're asking for the future plan that we are still working with the shareholders and the Board. But in terms of the trend and direction, as I think when Nattiya mentioned the past 2 years, I think we minimize the spending on CapEx because we invested earlier when we expanded 5G. The next 2 years, what we'll do, as Khun Pratthana mentioned as well is, we will try to come back to make sure we have the best network in the market. You see the trend of data usage still going up. So we want to make sure that we have enough capacity to serve the customers. In terms of how we separate that? I think it's hard to say because mobile broadband is easy. I think you can project that they can use certain percentage to revenue. We have more customers, we have more usage in our network. So that we need to invest a bit more there. Also, when we acquired TTB, we also didn't spend a lot in terms of CapEx for network on the broadband side. After 2 years and it's time to actually go back and start to make sure we have enough thought to expand the service again. But when you rope in data center and other big ticket infrastructure, that sometimes take a bit of time to build up. And also, we're going to invest when we also get some security on future cash flow. So we can tally the numbers out, but I think that us get that plan finalized with the Board, and we give guidance next year. But whatever we spend on data center or even the AI infrastructure, it will need to link to certain anchor demand that we feel secure with that number because it's a JV, so it won't show up as part of the CapEx of even to guide, but maybe in terms of investment that we're going to put into the JV, we're still working at all those formulas. And hopefully, when we do guidance for next year, then we can give you a bit more clarity on that. Unknown Executive: We have Nuttapop from Thanachart. Nuttapop Prasitsuksant: I think since you have reclaimed #1 market share in mobile again, so right now maybe looking for the new revenue stream. So may I start the first question on Enterprise Business that we see a lot of new investment in AI data center globally. Do you see an uptick or like accelerating demand for big corporate or even small corporate in Thailand to take up this kind of like -- to basically to propel your Enterprise Business, that's number one. Or do you think Thailand need some, I don't know, 3, 5 years like time before that to grow? Second one is on the product sales also. We have seen a big improvement in terms of margin. But I think over the past few years, sales revenue or like broadband sales revenue is quite stable. So can we expect more of the margin improvement or the sales improvement to boost that portion later? Because I think you have to do a lot of the renovation of your branches, of your service points, can we hope for the growth on that? And lastly, Khun Pratthana, do you think that -- are you still happy with these four pillars, if I'm not wrong, to drive AIS further? Or do you think to get the new revenue stream or to move the company further? Do you expect another pillar to be added going forward? Pratthana Leelapanang: Allow me to take the first question about the enterprise and the uptake on the AI and data center. We still see the strong demand from the enterprise customer, the big customer, including the hyperscaler that coming to Thailand. We still see around 18% to 20% market growth and strong demand on that one. If you're talking about how they adopt the AI, I think all the enterprise customers are talking about AI demanding more on the network infrastructure because the AI also required to download and upload more. We see business from the hyperscaler who invested and expand in the data center in Thailand, that I think the information I could share. Tee Seeumpornroj: From the sales side, the first 9 months that we performed is about 13% growth comparing to last year. So that is the, I think, is driven by the apples that -- what we are actually a lot in September. And in terms of the margins, the contribution margin is growing about 7.5% is about 8% comparing to last year. So that is -- I'm going to keep momentum -- of this momentum until the year-end. For the sales side, I think we're going to achieve more than double digit for the year-end also for the -- that is my perspective in terms of the sales. Okay. For the expected margin improvement, we're going to improve about, maybe 10% comparing to last year also in year 2025 comparing 2024. What we are going to achieve is -- the first one we are going to focus on the product, which is the Apple, which is the highest season of the fourth quarter of AI retail. The second one, we're keeping on the renovations, which is -- we're going to have more 20 locations that we're going to renew it to make the atmosphere and also the occurrence of the store. We're going to focus on our own brand, which is [ Laem ]. I think when you get the sample last time, and I think we get, in terms of the sales a bit growing, and I think the market is improving also on that one. But last but very important is about the financing focus, which is the -- how to make the people come to the store and easy to buy. I think that is going to work firstly with the bank and nonbank. I think those are the four focus for detail. And yes, of course, the last very important that we're going to introduce -- actually, we are on the trial phase is about the omnichannel. Once you go to the retail store, and you cannot find the model or the color that you want, from now on, you can order and you can pay at your store, you get the point of the AIS point, and then we ship to your house within the certain days that we are going to focus on this one. Pratthana Leelapanang: And the last one regarding the growth pillars. I'd like to address in a way to reflect markets and the stage of Thailand. In mobile, our #1 core pillar. Once again, we are only at 30-plus percent in 5G penetrations. There is a lot more room for us to better serve customers in the deeper penetration of 5G. In other countries, go beyond 50%, 60%, 70% already. And that pillar is still very strong for us to do more work, to serve customers and grow the company in mobile pillars. The second one, broadband. The broadband, fundamentally every home will need broadband in the future. Thailand is at about 50% household -- living household penetration of broadband, and we do see room for us to grow. As Khun Tee mentioned earlier that we make sure that our investment will support that strongly to get every whole broadband available. And thirdly, a very important pillar is the enterprise, which every enterprise in the future would be digitalized. We're just starting the journey of enterprise in term of enterprise telecommunication solutions as well as the digital infrastructure, AI infrastructure for the future enterprise as well as the digital government. So those are 3 fundamental pillars that I believe did continue on to be very important for us to make sure that we meet the demand and provide the best product and services. And on top of that now, is entertainment, retail, digital financing are coming on top to serve the customer. With these 3 plus 3 pillars are our key pillars to move forward. There will be more to come and later on when the times can be released the information. Unknown Executive: We have Izzati from Macquarie. Izzati Hakim: I have a question on the AI infrastructure. So I just wanted to get a sense in terms of the competitive landscape, especially when it comes to the DC to DC connections, the terrestrial fiber wholesale part of the business, which I believe is topped under your EDS segment. So with the hyperscalers coming in Thailand and also in ASEAN in a big way, how has that changed in terms of negotiating with these key clients of yours? And are we seeing any competitive pressures coming from smaller private companies trying to provide similar services in terms of connectivity. Just want to get your thoughts on that. Pratthana Leelapanang: Allow me to take these questions. About the AI and infrastructure, actually, the way that we see is relating to the data center business and also the software on top of that. We have the strong, let's say, the partnership and strong position on the pricing point on the electric city as well. I mean, when we build the data center that normally we would have the anchor customer or some secure customer before we build and those customers come to us because of the TCO and mostly coming from the cost of electricity that we can manage the price. And then -- that is a key issue that I want to share. The second one about the DCI, I mean the data center cross-connect interconnectivity. We have the solid foundation that is ready to serve. The upcoming demand of the data center, as we see now, we have around 40 -- this is roughly number of the data center around Thailand. And we see the growth around 20% or the demand of around up to 1 gig in the near future. So our infrastructure on that 1 is ready. And when you talk about the EDS, we also have the feature that we call the sale network management, which allow the customer who are in the data center managed network by themselves and then increase our time to market also the service quality to our customer. I think -- our competitors, we don't see the significant competitiveness or the price point fighting on that space a lot. I mean, it may be -- it is because of the -- we have very big infrastructure to serve the demand already. And instead of seeing the competitors, we see them as a partner because we partner with them, we have the model to go to market and expand our adoption to the partner as well. That is our strategy to do this year and next year. Unknown Executive: We have Khun Supachai's question from the chat box. So the first question is, can you explain the slower year-on-year growth in Enterprise revenue in the third quarter compared to the first half? What is the trend in the fourth quarter? Pratthana Leelapanang: Actually, the reason that we see -- even though the slower on that one is very limited and very minimum. The explanation is about the Prompt Pay that we have on the order. We are working on to recover that one. I think that's a short answer for that question. Unknown Executive: What is the trend in fourth quarter? Pratthana Leelapanang: I think we will be able to catch up the expectation from the shareholder on the enterprise revenue. Unknown Executive: The second question goes to retail, and that's from [indiscernible]. What is the recent development in retail business after introducing your house spend being up. What is the feedback on this brand, particularly any new initiative to share? Tee Seeumpornroj: Okay. We launched on July this year, and I see the growth until today is about 56% growth comparing to the first launching. So we're going to complete maybe $15 million. This is -- you see from the number, it's not that much comparing to the other revenue that we have, but anyway, the margin of the level on the house branding is extremely high comparing to what we are actually selling in the store. So that is the first milestone that we actually. The second one is we're going to increase in terms of the SKU, the number of the linkage. So we're going to add up another three more items, which is related to the iPhone 17, this is going to boost up sales of iPhone 17 also, so that is our own brand. And the third one is, we're going to sales in more channel. We just start selling in our own location, which is populated by the AIS, but we go in to expand to the partners, [indiscernible], so that is the link up in the summary. And like I said before, so the online sales in our own channel going to be one of our focus. The omnichannel, once you go to online, you can shop online, you can go to offline, you can go online also. So that is the three things in short that we are going to focus differently comparing to last quarter. Unknown Executive: Third question, what would be a big change Khun Pratthana would like to bring to AIS in the next 3 to 5 years? Pratthana Leelapanang: First of all, I must say that we -- under Khun Somchai leadership, we have set the industry benchmark bringing company into a very strong integrated digital service providers. Number one is not changed, but to build on the strength and the fundamental asset that we have on integrated digital service providers. And number two, as I mentioned earlier at the beginning that we are very clear that in the digital and AI infrastructure era, AIS could play a very important role serving the countries, bringing a pivotal point of these capability, product and services to the country and to every customer, and we do intend to do so. Unknown Executive: On the side note, he asked me to also -- big congrats to Khun Pratthana and thank you Khun Somchai for your leadership and support. I am learning a lot from watching you lead. I wish you a happy retirement. That's from [indiscernible]. Next we have Khun Pisut from KS, again. Pisut Ngamvijitvong: Yes. Thank you for the follow-up questions. The first one is on many revenue grew 5% versus the GDP growth, 2% plus minus, even below. I remember that Khun Somchai management used to mention that the mobile growth will be similar to the GDP growth and this is much better than what you have said before. So next year, GDP growth would be not much different from this year or even slower. And Khun Pratthana come in recently imply some confidence that AIS will outgrow the mobile [indiscernible] with the GDP effective next year. This my interpretation scores. What do you have idea on this one? Pratthana Leelapanang: Currently, we are entering into the phase that everyone, every business do require to use digital services to even leave or do what. I think it's fundamental that digital infrastructure fund the growth of the countries. So we do hope, next year GDP would be better than what you said. We do really hope for that. But once again, the 5G broadband enterprise, we have started a lot, but there are a lot more things to do. So in mobile, in particular, as mentioned, 5G is just 30% penetration, and we expect to be more. So I would say that it will be ongoing, hopefully, I can say, growth and development of customer behavior as we start to see growth coming back and new application will come in, I'm very positive about that. Pisut Ngamvijitvong: And my next question is, with your revenue keep growing, right, and your CapEx will be higher in the [indiscernible] but your CapEx from sales or CapEx intensity would be stable or even lower. Am I on the right direction on this one? Tee Seeumpornroj: I think you should look at the long term compared to the past, not compared to just this year or last year. I think the -- if you'd go back a little bit higher than this past 2 years, but it won't be as high as when we start expanding the 5G. I think the reason for that is, as mentioned, we want to modernize our network as well, and also prepare for new growth. So that's something that we need to put some of the money upfront so that we can grow the business more than just the current mobile broadband services. But as I mentioned, percent to sales, it won't -- you can look at that as a benchmark. It varies within those range. Unknown Executive: Next we have Khun Minling. She leaves us questions in the chat box. Can you compare 2,100 megahertz, which will expire in 2027 with 3,500 megahertz that -- which one you prefer. And if you can get 3,500 megahertz before 2027, will 2,100 megahertz still be needed? Pratthana Leelapanang: 2,100 megahertz is on Schedule 2 reoptions as is expired. And NBTC and the country are looking at our spectrum bands whether it make available in public for auctions. We cannot say right now, in particular, as Khun Somchai always mentioned that we look at every spectrum both individually and collectively, value combined. So we see later when NBTC and now which one is available, we will be participating. The 2,100 megahertz is a fundamental band for our network and competitor network, for sure. 3,500 megahertz would be new to the industry previously source of in between telecom and television satellites. We believe that the schedule of 3,500 megahertz will be parts and parts of the whole thing related to satellite television as well. We cannot say whether it's going to be available sooner than scheduled, it remain to be seen, but we will consider it individually. There will be more spectrum as well that NBTC might put it for auction. So we will look at everyone, as mentioned. Unknown Executive: And the last question from [indiscernible] from the chat box. First, congratulations on your results. I have two questions. First, could you share how the ARPU momentum looks for the mobile and home internet business in October? Second, what is your revenue guidance for the fourth quarter? And what positive factors are you expecting to support it? Pratthana Leelapanang: So we see good trend. The government has been supportive of countries to recover. For the past few weeks, the stipulation program also help every businesses. And even though it's not direct to us, we see a very positive trend ongoing for mobile. I think for the fourth quarter on the broadband side, I think we will still see the positive trend continue. But given normally the last month, we won't get to sell a lot anyway. So I think we still expect a good result. But in the end, it's also depending on the competition in the market. After we announced our result and also our competitor announced the result and I think both sides will go back and try to revise the SIG so that still the unknown factor that can impact the performance towards the last 2 months, yes. Unknown Executive: We would like the last questions from Piyush, follow-up from HSBC. Piyush Choudhary: I have two questions. Firstly, on home broadband. Could you share what drove kind of the ARPU quarter-on-quarter by 2%? And what other initiatives company is undertaking to continue this ARPU growth in home broadband? Secondly, on the mobile side, 5G subscriber penetration is still hovering around 34%. So what is the limiting factor? What initiatives like company could take to further improve this penetration? If you can share the split of 5G subs between prepaid and postpaid? Tee Seeumpornroj: I think on the broadband ARPU, okay, the strategy for sure is, right now, we try to offer a higher-quality broadband service to the higher segment. The more we can get the people who have money to spend to subscribe a better service than it's better for us. We are not looking at increasing ARPU across the board. Normally, we will have new product and services launching in the last quarter of the year as well. But this year, we refrain from that because we are doing the IT migration of the system. So the new product service is going to come out probably early next year. And that will be the continued effort in trying to lifting the ARPU up. We're looking at increasing a number of services that we have with existing customers as well. That hopefully will continue to fill the ARPU growth for 1 to 2, 3 more years. Pratthana Leelapanang: For mobile 5G, the growth of 5G is going along with the 5G device penetration in the markets. Thailand markets are not under the highly subsidy markets, customers purchase their phone individually rather than highly subsidized to fund the growth of 5G. So the key factor is 5G device penetration and 5G device injection to Thailand. We see a positive trend of more and more model continue on being a better offering of 5G model bit by bit. 4G and 3G, I would say, 4G mostly is still widely available at very economical price. So it will take a bit of time as well for 5G to bring down into those level of price, but we see a positive trend. To really support customer, as our Retail, Khun Prapat mentioned, our footprints, our service direct to customer would be able to help AIS to support customer into the 5G era. We continue on seeing a very strong trend of customer adopting better phone with financial services that we, together with our partner, provide later on next year would be also from ourselves supporting customer as a part of the plan, and that would be the engines that we will do a better job for our customer. Unknown Executive: To support on this, we also see 5G handsets growing at 30% year-on-year. If you look at 5G package subscription growing at 36%, so they are growing hand in hand. So there are no further questions and our time -- sorry -- and our time is up. And therefore, thank you, everyone, for participating and see you in the next meeting.
Operator: Welcome to Oncopeptides' Third Quarter Earnings Call for 2025. [Operator Instructions] Now I will hand the conference over to CEO, Sofia Heigis; and CFO, Henrik Bergentoft. Please go ahead. Sofia Heigis: Hi, everyone, and welcome to the presentation of Oncopeptides report for the third quarter of 2025. My name is Sofia Heigis, and I am the CEO of Oncopeptides. As we have increased our shareholder base in the last quarter, I wish to welcome old as well as new shareholders to this earnings call. This is our standard disclaimer. As usual, I'm joined by our CFO, Henrik Bergentoft, and together, we'll present our financial and operational performance for the third quarter, which is concluding that we are still on track towards becoming a profitable company by the end of 2026. The third quarter was a strategically important period for Oncopeptides, as we knew we will have to demonstrate resilience in execution given the vacation period. Net sales reached SEK 20.2 million, representing a 174% increase year-over-year and marking our fourth consecutive quarter-over-quarter growth. In July, we delivered an all-time high, which was followed by another all-time high in September. In between, we saw a seasonal slowdown typical during the European vacation period. And all in all, we saw a quarter of growth, which is a stronger result than the same period 2024. So even though we are still sensitive to seasonal effects, this is a sign of how we have strengthened our position and advanced our launch. Our cash position at the end of the period was SEK 147.9 million, reflecting the successful completion of a rights issue of SEK 150 million, which was oversubscribed by 157%. The strong investor interest underlies confidence in our long-term strategy and provides the financial flexibility to continue building momentum while advancing our partnering discussions, including ongoing negotiations in Japan. On the scientific side, Pepaxti continued to gain credibility and recognition, and following its inclusion in the EHA/EMN clinical guidelines earlier this year, new independent publications and real-world presentations at the IMS Annual Meeting have further reinforced Pepaxti's efficacy and tolerability in real-life use. We also saw continued commercial traction in all our key European markets, with Italy leading the growth, Spain reaching full regional access, and Germany demonstrating more resilience than previous year in the same period. In short, a resilient and strategically important quarter that positions us well for a strong finish to 2025. I'll now hand over to Henrik for a closer look at the financials. Henrik Bergentoft: Thank you so much, Sofia. So let's start with the financial summary for the third quarter of 2025. As said, net sales increased to SEK 20.2 million, a 174% growth compared to last year, excluding the milestone payment from the South Korea licensing deal in 2024. This demonstrates significant top-line momentum. The gross profit reached SEK 19.9 million, reflecting a robust gross margin of 99%, which underscores the strength and scalability of our business model. Operating expenses decreased by about 3% for both the quarter and the 9-month period, showing our continued focus on cost control. As a direct function of sales growth and cost control, our EBIT improved from minus SEK 61.3 million last year to minus SEK 47.1 million this quarter. The net profit amounted to minus SEK 60.9 million, highlighting that this includes net financial items that were impacted by the noncash fair valuation of warrants amounted to minus SEK 10.6 million. Overall, these results demonstrate strong revenue growth and improved cost efficiency despite ongoing investments in our operations, altogether taking us towards the next platform of being profitable by the end of 2026. Looking at operating expenses. Our quarterly sales and marketing costs increased from SEK 29.8 million in 2024 to SEK 31.9 million in 2025. This reflects our expansion efforts with the completion of our organization in Spain and Germany last year and the establishment of our Italian organization this year. General and administrative costs rose just slightly from SEK 18.4 million to SEK 19 million this year. Research and development costs decreased from SEK 21.9 million to SEK 17.3 million as we currently have no ongoing clinical studies. However, we are still advancing our preclinical portfolio. All combined, the cost trend shows our commitment to strategic cost-conscious growth while maintaining discipline in our R&D spending. Turning to liquidity. Our cash position at the end of Q3 amounted to SEK 148 million following the successful rights issue in the third quarter, which was oversubscribed at 157% and injected approximately SEK 150 million before issue-related costs. Our liquidity is now estimated to last until we reach cash flow positive at the end of 2026, assuming continued sales growth. We certainly are proud to have attracted such an interest from both existing and new shareholders in the rights issue. So ending up with some key takeaways from the financial perspective. The company is delivering rapid revenue growth and maintaining exceptional gross margins. Cost control measures are yielding results with operating expenses trending down meanwhile revenue is growing. Liquidity is strong, and recent capital raise provides a runway for continued execution and growth. The business is well-positioned to achieve cash flow positive by the end of 2026, assuming our ongoing sales momentum. That concludes the financial presentation, and I hand over back to you again, Sofia. Sofia Heigis: Thank you, Henrik. Let's now turn to the commercial side, where we continue to build strong momentum across Europe and make progress towards our long-term goal of profitability. We have seen a strong growth trajectory in the last 3 quarters, and our European business continues to grow, supported by positive clinical experience and peer-to-peer recommendations. Looking back, the third quarter is always affected by the vacation period, which is why it is encouraging to see growth and increased demand now in Q3 2025. It's a clear sign of more markets contributing to our revenue stream. Following the inclusion of the EHA/EMN guidelines in July, Pepaxti has gained further recognition from leading myeloma experts. This type of validation has a tangible effect in the field. It strengthens awareness, drives clarity on positioning of Pepaxti, generate confidence among HCPs, which leads to new prescribers through peer-to-peer recommendations. All these factors are critical to our launch success, which support us to make a real difference for more and more patients, which, in turn, of course, drives uptake to generate shareholder value. We continue to build on peptides around the European opportunity for Pepaxti, which we estimate at roughly SEK 1.5 billion annually. There are, however, patients in need for Pepaxti also in the rest of the world. And we are working with current partners and to find new partners to address that unmet need and add revenue streams. The long-term value will be generated from our pipeline, which we are advancing in the preclinical setting with several exciting assets getting closer to clinic. Outside of Europe, our focus remains on concluding a partnership for Japan. Discussions are advancing well, but takes time, a lot due to internal processes and governance, and we are still in late-stage due diligence phase. The structure of the potential agreement follows market practice, including upfront and milestone payments and double-digit royalties, with the partner assuming all costs related to regulatory and commercial activities in Japan. Japan represents a market roughly the size of Germany with a well-defined path to approval agreed with the Japanese regulatory authorities, and key opinion leaders supporting their need of Pepaxti. To close the Japanese partnership will be a landmark event for Oncoenptides, unlocking significant long-term value for both patients and shareholders, and we are focused on concluding a deal that is a win-win for both us and our partner, which naturally will be a win for patients in Japan. Let's move to an update on our European key markets. Regarding market access, we have seen some very positive progress for Irish HCPs. We have an early access program open to ensure HCPs could gain experience to assess if they will support the unmet need for Ireland. This support is critical to be able to get into a price negotiation. Ireland is a small and centralized market. And in a very short time, we have seen 12 patients being included in the AAP program. The data that has been submitted to the payer authority is very encouraging, and KOLs are supporting the need, which is once more confirming that Pepaxti [indiscernible] beyond expectations in real life. We are discussing with HCl publishing a very encouraging data that they have generated, which can support launches also in other markets. We are hopeful that the strong evidence leads to access, but having said that, it commonly takes time and is usually very difficult to gain on Ireland. We expect to know more within the coming quarters. As already mentioned, we hit all-time high demand in July, followed by all-time high demand in September. The vacation period in Europe with a primarily very August, is temporarily affecting net sales growth. I will get more into details per country in a short while. Important to note is that by the end of Q3, more than 550 patients have been treated since launch, and we are now really making a difference to many patients in Europe. The rare disease launch is not only the effort of the company, but all launches are dependent on peer-to-peer recommendations. These can originate from own experience, published real-world data, or guidelines are some of the most important sources for such recommendations. And as already mentioned in the last quarter, we saw great progress in these areas. We have 2-woretsublished and presented at the International Myeloma Society. We got the inclusion of Pepaxti in the updated EHA/EMN guidelines in July, and we got a strong recommendation in our [indiscernible], which is great as these guidelines are now being referenced across Europe. One more important aspect for the mid- and long-term delivery of the launch is to close evidence gaps. That appears due to how the treatment landscape evolves, and that can support differentiation and inform treatment decisions over time. As a small company, we don't see the return on investment in setting up our own studies to close these gaps, but we do invest in ideas that fit our strategy coming from external investigators. This type of study is very cost-effective for us and generates scientific engagements, which is also important to the launch. Here, we do see increased interest from KOLs to generate data on the PDC platform, and we now have investigator-initiated trials contracted in all markets. Here is a map illustrating the sales growth across Europe in Q3 compared to previous quarters. I will now get into more details per market. Germany remains our largest market. It's the market most affected by the vacation period. And when we look at our segments, we can conclude by sales data that the vacation period is affecting the overall multiple myeloma market, and we do see a decline in demand in August. This is also the case for capacity. We anticipated this and are looking to catch up in Q4. Given the slowness in the market, it's important and encouraging to see how we are continuously broadening the prescriber base. Increased experience in Germany has led to several R&D projects being generated currently. And on the topic of scientific progress, we recently signed our very first investigator-initiated study, which we investigate the impact of Pepaxti on systemic inflammation that is ongoing in multiple myeloma patients, the effect on T cells, and further how Pepaxti is diffe5rentiated from other activators by not only affecting the nucleus DNA but also the mitochondrial DNA. These are important scientific questions that will advance our scientific understanding and fuel our launch. [indiscernible] several proposals under review from German KOLs, which is demonstrating the increased interest in Pepaxti and the PDC platform, which we actually lacked at launch. So very encouraging signs as these studies have the potential to close important evidence gaps that can support our launch mid and long term, and also support our pipeline development. Finally, we do see good progress in awareness, which was confirmed by and boosted by the annual German-speaking Hematology Congress taking place now in October. Majority of companies are focused on immunotherapy and earlier lines of treatment. And our symposium, which was focused on the real patients that are more old and in the clinical trials, attracted so many participants as we had to use the overflow room to accommodate everyone. This is a sign that there is a great interest and need to discuss the target patient profile of Pepaxti, and that there is a need to complement immunotherapy. As mentioned, it's encouraging to see that quarter-over-quarter grow our prescriber base. And what we can conclude is that there is still a lot of room to continue this trend, both through our own activities and through peer-to-peer accommodations. The heat map for Germany is visualizing how we are broadening sales of Pepaxti, even though Germany is a scattered market and we have many customers, focusing on the highly populated areas is of importance. And these areas are the most crowded with many pharma companies working to build awareness, and at the same time, many physicians starting to restrict access to pharma. The challenge for us is that we are a small company and the only company launching PBC, while there are many companies launching [indiscernible] opportunity, how we are unique. We have a unique product that really delivers in real life. And as physicians gain experience, they appreciate Pepaxti and they continue to use. We have resiliency, and we are continuing to capture potential step by step. Italy is the second largest market and was the strongest contributor to demand growth in the third quarter. Italy is an excellent example of how better understanding and awareness of Pepaxti gives positive clinical experience already ahead of launch and with a more centralized prescriber base can directly translate into change of prescribing behavior when physicians now get access to Pepaxti. In the third quarter, we reached 90% access at hospital level, and we now only have one high-potential region left to fully unlock. Looking at the strong collaboration between our local field team and prescribers continues to drive performance, confirming that Pepaxti is making a meaningful difference for patients, with encouraging real-world data from Italy presented at the IMS Annual Meeting. This data is highlighting Pepaxti's effectiveness and tolerability in heavily pretreated patients, further supporting uptake in peer-to-peer advocacy. In Italy, we have several investigators from our clinical development program. And already now, we have one investigator-initiated trial ongoing to close an important evidence gap. To conclude on Italy, we have a strong start of the launch and a very promising foundation to build on. [indiscernible] and is demonstrating the evolution on the Italian launch. We sold the first vials already in Q1 ahead of plan. We started to gain regional access in Q2, and we now have a fairly broad base of prescribers already in Q3. Spain stands out as modular scalability for our commercial approach. We now have full regional access across the country. This means we have seen orders from all the regions in multiple myeloma patients, and this is another milestone achieved. Also in Spain, we see scientific progress and launch supporting activities progressing. The real-world data from Spanish investigators presented at the IMS Annual Meeting is the first of its kind, as all patients are previously treated with a bispecific antibody. And given that this drug class is recently launched, we don't have data from our clinical program on how these patients respond to Pepaxti, which is why it is so important and very encouraging to see that also in this patient group, Pepaxti [indiscernible] is confirmed. Just like in Italy, we have an investigator-initiated trial running. And in Spain, the focus is not only on Pepaxti, but also generating evidence in the preclinic for our PDC platform, which can support our partnership discussions for other PDC. Spanish [indiscernible] full coverage of the country, and now it's about increasing the number of prescribers and ensuring more patients are getting Pepaxti, already in fourth line to continue to accelerate the sales for Spain. Moving to partnerships. In addition to the ongoing negotiations with Japanese partners, we continue to explore other deals. In fact, earlier this week, I attended Europe, where we had many interesting and promising first discussions with different types of partners for both Pepaxti and our pipeline. To share a very brief summary and reflection, there is an increased interest to look into NK cell engagement as a result of that the T cell space is being becoming crowded. In addition, indications with extremely high unmet needs like glioblastoma, is of interest to many companies. That this is not only us finding our pipeline strategic interesting, but also many partners are showing interest and want to understand the many opportunities we have at Oncopeptides [indiscernible]. Discussions will continue, and we will keep the market posted. Our current partnerships in South Korea, our partners SCBIO, has a program for Pepaxti, providing full financial support to patients with triple refractory multiple myeloma patients. The program [indiscernible] in Asia beyond the clinical development program, with the first patient being treated at St. Mary Hospital. This initiative not only broadens Pepaxti's global footprint, but also underscores its recognition as a meaningful treatment option for patients with few remain [indiscernible]. The next stage in South Korea is a regulatory submission, which our partner is working towards. We continue to build our PDC platform with Pepaxti leading the way, serving as a proof of concept for the technology. In parallel, we are advancing our SPiKEs platform, focusing on NK cell engagement for oncology, hematology, and autoimmune disease. Both programs illustrate our broader strategy to grow geographically, to partner smartly, and innovate purposely. I will not elaborate more on the pipeline right now as I will get more into details in our upcoming Capital Markets update next week. And before I conclude, I would like to remind everyone about this event, which is on November 13 from 9 to 12 Central European time. will be an online event broadcast here from Stockholm featuring leading myeloma experts, key stakeholders of Oncopeptides, and myself, who will give an update on the future of Oncopeptides, focusing on opportunities beyond what is our core today. If you haven't already, I encourage you to register via our website. It will be an insightful session on both our commercial progress and scientific road map. To summarize, we have a growth momentum. We are now delivering the fourth consecutive quarter of double -- of growth, tracking towards profitability by end of 2026. We have a strong European foundation. Pepaxti is fully approved and reimbursed in key markets, representing about half of the total European opportunity estimated at SEK 1.5 billion per year. We are expanding globally, advancing negotiations ongoing for Japan, and with established partnerships already in South Korea, Africa, and EMEA. We are demonstrating scientific progress with real-world data publications, guideline inclusion, and investigator-initiated trials in all markets, which are strengthening Pepaxti's position. We have an innovative pipeline with next-generation PDC SPiKEs platform that offers long-term growth potential in oncology, hematology, and immunology. And with solid execution, disciplined cost management, and growing market endorsement, Oncopeptides is well on track to deliver sustainable value creation. That concludes the presentation, and I would like to open up for questions. Operator: [Operator Instructions] The next question comes from Richard Ramanius from Redeye. Richard Ramanius: I have a few questions. I'll take them one by one. The first one is how do vacations impact sales exactly? Is that due to sales representatives being on holidays, since I assume patients who are sick are going to continue being treated and doctors continue treating them? Sofia Heigis: Thank you for the question. So it's actually a mix of several different aspects. One is just as you said, that we are, of course, committed to give our teams vacation. So our activity is reduced during certain periods over summer time like in all businesses. But it's also important to note that when the HCPs go on vacation, and in particular in Germany, where you have office-based clinics, there are quite many times quite few HCPs seeing these patients. So they are having fewer patient visits basically. And of course, if multiple myeloma patients are progressing and they will still get treatment. And that is, of course, why we still see growth because the physicians have learned to identify the patients for Pepaxti better, also without us being there as frequent. But I would argue that those are the 2 main factors. So it is really relating to less in the offices and of course, lower activity for Pepaxti. Richard Ramanius: Then I had a question about costs, which decreased quarter-over-quarter. Is this going to carry over into next quarters? Or are Q1 and Q2 more representative of future costs? Henrik Bergentoft: Thank you, Richard, for the question. So what we have said is that we have established an organization that is in place to take us towards profitability next year. And the benchmark we have set out is really the cost base for 2024 that, that will more or less continue onwards to give just to repeat what we have said before. But answering more directly to your question, Q1 and Q2 is more representative for the final quarter because Q3, by natural reasons, contain less activities as compared to the fourth quarter. Richard Ramanius: Yes. I understand. I also looked at the heat maps that Sofia presented from the various countries. And I noticed, especially Italy seems to have a higher growth trend than Spain and -- or uptake and Spain higher than Germany. Would you agree to this? And this trend, you could extrapolate into 2026? Sofia Heigis: I would definitely agree to that. That's a very good analysis made of you. And it comes, of course, with the experience ahead of launch in the different countries where we have previously said that both Italy and Spain, they have more experience from our clinical development program. In Spain, we have the chance to have quite a few patients in early access because luckily price negotiated [indiscernible] experience in this current treatment landscape is really giving the prescribers confidence from the very start. Then another aspect that I mentioned many times before, but I think it can be repeated is that [indiscernible] and Italy are commonly faster uptake in multiple myeloma due to that they have a more centralized prescriber base. So they have pure hematologists, specialists on multiple myeloma prescribing, meaning that every physician see more patients. When it comes to Germany, that is a more scattered market where we have office-based physicians, and they see all the different oncology and hematology indications, and fewer patients per prescriber. And that is together with basically no chance to prepare the launch based on where the Oncopeptide financial situation when the price is then making Germany stand out to be a slower market if you look at the launch uptake from the very start. Italy is for sure the strongest and then Spain. Operator: [Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Henrik Bergentoft: Thank you. And there are a couple of written questions. The first one is, can you comment on October sales? Sofia Heigis: I almost anticipated that question as we actually did comment on July sales in our last report. And we did that due to that we had the rights issue, and we wanted to be as transparent as possible. So what I can say to October as we are not really assessing sales or sales per month per quarter. But as I shared throughout my presentation, we have a very strong momentum in our markets. During the month of October, we have had all the annual hematology site meetings take place both in Spain, in Italy, and in Germany during this month. Late September we had [indiscernible], and in the annual meetings, you have the top [indiscernible] in the countries, but also many prescribers. And that gives us a great opportunity to really pressure test where we stand, gain insights, and also engage, of course, a lot with these physicians. And all in all, the outcome of those meetings and symposia mentioned in Germany, where we had to use the overflow, which is actually quite rare, is very positive. So we are seeing in October that really -- as I mentioned, we're seeing how the guidelines are starting to kind of kick in, and we are seeing a very good sentiment in the markets. Henrik Bergentoft: Question on timeline for [indiscernible]. Sofia Heigis: Yes. So when it comes to the SPiKEs platform, we are -- it's a very -- as many of you know, NK cell engager, that's novel, it's innovative, and it's new. And that is why it requires more work in the preclinic because the preclinical data will inform how you go about in the clinic, which is a much, much higher investment. So you want to do the right studies in preclinic to inform your clinical program to really ensure that you make the right investment at that stage. So we are currently still in preclinic. We also need to do formulation work because these are new assets. And when it comes to the timeline, I would refrain from comment on that because it actually has to do with finances, either if Oncopeptides will be able to finance or if a partnership would be able to finance. And when it comes to partnerships, we have interesting discussions. But as we know both from Oncopeptides and other companies, these type of discussions takes time. So I would like to refrain from commenting on when we can enter because it really comes down to both the preclinical efforts we are making to build kind of a good direction for the clinic, but also the financial situation. Henrik Bergentoft: And speaking of timeline, last question, do you expect that Japan [indiscernible]. Sofia Heigis: So like I mentioned, the discussions are advancing well. We still are advancing with the partner we have been talking about before, but we also have interest from several other partners that we are discussing with to ensure that at the end of the day can conclude the best possible deal. When it comes to the timeline, it's a lot due to the internal processes and governance on the Japanese partner side because Oncopeptides is a small company and we operate with what would be argued a fair speed. But in Japan, there is a culture and [indiscernible] so where they have a lot of committees and where they seek consensus, and they need to go through these committees, we are not controlling the timeline. What we are controlling is that we are progressing, ensuring that we are working towards the best deal possible. Henrik Bergentoft: With that, the Q&A session is concluded, and you want to give some final remarks, Sofia? Sofia Heigis: Yes, sure. So first of all, thank you, everyone, for joining us and listening to us [indiscernible] today with 4 consecutive quarters of strong growth, increasing scientific recognition, and the strengthened financial foundation, we are now entering the final quarter of 2025 with both focus and confidence. We continue to execute with discipline. We will continue to work to expand access to Pepaxti across Europe and in the rest of the world, and we are still progressing towards our profitability target for 2026. And I am looking forward to seeing many of you again at our Capital Market update next week on November 13. So thank you so much, and have a great day.
Operator: Ladies and gentlemen, hello, and welcome to the bpost Group Third Quarter 2025 Analyst Conference Call. On today's call, we have Mr. Philippe Dartienne, CFO. Please note, this call is being recorded. I will now hand over to your host, Mr. Philippe Dartienne, CFO, to begin today's conference. Please go ahead, sir. Philippe Dartienne: Thank you very much. Good morning, ladies and gentlemen. Welcome to all of you, and thank you for joining us. I'm pleased to present to you our third quarter results as CFO for the bpost Group. Chris, our CEO, could not make it today, and I have with me Antoine Lebecq from Investor Relations. We posted the materials on our website this morning. We will walk you through the presentation, and then we'll take your questions. As always, 2 questions each will ensure everyone gets a chance to be addressed in the upcoming hour. I'll start with the quarterly financials, then move on our financial outlook and provide an update on our key transformation initiative for 2025. As you can see on the highlights on Page 3, our group operating income for the third quarter amount to EUR 1.030 billion, remaining broadly stable year-on-year and almost at constant scope as Staci has already contributed for 2 months in the same period last year. As usual, the summer quarters show some seasonal softness, but beyond this, we saw a mix of different factors. At Radial U.S., we continue to see the expected impact for the 2024 contract termination, but even more this time, the materialization effect of those announced earlier this year. As a reminder, these are the same ones that led us to take an impairment at the beginning of the year. Altogether, those elements more than offset the extra month of Staci contribution in the quarter. At the same time, we continue to see good volume growth in Asian cross-border activities. While in Belgium, the domestic mail volumes declined, this was partially compensated by a decent volume growth in Parcels. Our group adjusted EBIT came at minus EUR 3 million, representing a year-on-year decrease of EUR 16.3 million, mainly driven by Radial U.S., where despite sustained margin action, the revenue shortfall due to the anticipated churn and seasonal softness did not allow full absorption of fixed costs in the quarter. More broadly, at bpost Group level, the results we are presenting today are in line with our expectations, and we reconfirm our EBIT outlook at around EUR 180 million for the year 2025. On Slide 4, you will note that the EUR 14 million decline in net profit mirrors the EBIT evolution as in the same period last year, the acquisition of -- the acquisition debt was already on balance sheet and the financial results remain broadly stable. Let's move now to the details of our 3 segments. I'm on Page 5 with BeNe Last Mile segment. We see that the revenue declined by EUR 9 million, amounting to EUR 512 million. Domestic Mail recorded around EUR 16 million decline in revenue, of which EUR 10 million stemmed from transactional and advertising mail and EUR 6 million from press. Excluding press, mail volume contracted by 9.4% in the quarter compared to only 6.7% last year, which had benefited from the election uplift in September 2024. The decline in mail volume had a negative revenue impact of around EUR 20 million, of which was partially compensated by half through a positive price and mix effect of EUR 4.7 million or roughly EUR 10 million. As a result, domestic mail revenue were down by 4.6% or minus 10% year-over-year. On Parcels, revenue increased by EUR 4 million or 3.2% year-on-year, reflecting a volume growth of 2.8% and a slightly positive price/mix effect of 0.5% in this quarter. On the volume side, the reported 2.8% actually corresponds to an average growth of 4.4% per working day. Over the past months, this momentum has been mainly supported by the outperformance of marketplace, notably boosted by sales events and continued strength in the apparel segment. Let's move to the P&L of Last Mile on Page 6. Including some higher intersegment revenues from inbound cross-border volumes handled in the domestic network, our total operating income was slightly down by 1.4% or minus EUR 8 million. At the same time, on the cost side, our OpEx, including D&A, remained broadly stable and mainly reflects 2 effects: lower FTEs resulting from lower volume and efficiency gain, notably from the reorganization of our distribution rounds and retail offices, which are progressing in line with plan, and on the other hand, higher salary cost per FTE around up to 2% year-over-year following the March '25 salary indexation. In contrast with the first half of the year, when EBIT had contracted sharply by almost EUR 64 million year-on-year, mainly due to the end of the press concession in June '24, we see that despite structural mail decline, parcel growth and initial projects of -- sorry, and initial effects of our reorganization are helping to attenuate EBIT erosion. Moving on to 3PL on Page 7. 3PL revenues were broadly stable overall as 2 offsetting events affecting -- came into play. First, effect. 3PL Europe, where revenue increased by EUR 62 million, we benefited from 1 additional month of Staci revenue in the quarter, along with continued commercial expansion of Radial and Active Ants in Europe. That said, sales from existing customers or the famous same-store sale remained soft and even negative in certain geographies during the quarter. As a side note, since we are 1 year after the acquisition of Staci, there will be no further consolidation impact going forward. As we are now advancing in the integration of Staci, Radial Europe and Active Ants, we are really starting to operate as one single business unit as explained at our Capital Market Day in June. Our P&L is being increasingly managed together, this means that from now on, we will only report on 3PL Europe as one single business and gradually phase out stand-alone reporting from individual entities. Second effect, in 3PL North America, revenue decreased by EUR 58 million. At constant exchange rate, this corresponds to a decrease of 24%, mainly driven by revenue churn from contract announced in 2024 and even more so from those announced early '25, partially offset by in-year contribution of new customers, around 60% of which are Radial Fast Track customers as we presented to you at our Capital Market Day. While we are seeing positive and encouraging signs on that front, and I'll come back to that on a moment, we are still feeling the impact as expected of the churn. We continue to execute our sales development plan, and we are confident that these efforts will pay off, but it needs a bit of patience. Let's move on to the P&L of 3PL on Slide 8. With this, the total operating income slightly increased by 1.1%, while our operating expense and D&A increased by 4.8%, primarily driven by in Europe, Staci consolidation impact and one-off reorganization costs, including site closures and relocation of customers to further accelerate 3PL Europe integration and cost structure optimization. In North America, lower variable OpEx in line with the revenue development at Radial U.S., and sustained variable contribution margin close to record high level. The EBIT evolution at Radial U.S. is certainly one of the key highlights of this quarter performance and also the main reason for the gap versus market expectation. Despite 1 additional month of Staci contribution, the minus EUR 30 million EBIT decline in 3PL from plus EUR 1.7 million last year, indeed clearly reflects the situation at Radial U.S. After 3 consecutive years of contraction, revenues are now about 45% below their peak level in Q3 2022. In this quarter, the combined effect of churn and seasonal softness limited our ability to fully absorb fixed costs despite strong VCM discipline and tight cost control. Ironically, we are now at a point where revenue have reached their lowest level ever, and yet our VCM margin stands at all-time high. Looking ahead, the solution lies in top line recovery, and on that front, we are executing our plan and making good progress. Moving on to cross-border on Page 9. Cross-border Europe revenue increased by EUR 11 million or plus 14% year-over-year. This growth was driven by strong volume increase from Asia across all major destinations, notably Belgium, fueled by large Chinese platform and U.S. Across-border North America, Landmark Global continues to face the broader tariff environment that is weighing on existing business and delaying new opportunities. However, this was offset by strong domestic volume in Canada, resulting in an overall plus 1.4% revenue increase for North America, including a 6% negative FX impact. Overall, our cross-border operating income increased by roughly $12 million or 8.7%. As shown on Page 10, our OpEx and D&A increased at the same time by 9.6%, mainly reflecting higher transportation costs linked to the volume growth I just mentioned. EBIT slightly increased to above EUR 17 million with a margin of 11.5%, reflecting a slight dilution from commercial products. Moving on to Corporate segment on Page 11. Adjusted EBIT improved by EUR 1 million to minus EUR 9 million as cost containment measures across spend categories helped offset higher payroll driven by more FTEs and March '25 salary indexation. Then we move to the cash flow on Slide 12. The net cash outflow for the quarter amounts to minus EUR 16 million, representing an improvement of EUR 275 million year-on-year, mainly reflecting the acquisition of Staci last year, which was partially funded in cash for a bit less than EUR 300 million. Besides that, the remaining items to flag are the following: Cash flow from operating activities before change in working cap stood at EUR 71 million and decreased by EUR 7 million year-over-year, mainly reflecting higher corporate tax payment. Change in working capital and provision amounted to EUR 17 million. The plus EUR 16 million variance is primarily explained by the settlement of some terminal dues and some client balances. The net cash outflow from investing activities totaled EUR 28 million, driven by our CapEx for international e-commerce logistics, parcel lockers and capacity expansion. Also, our domestic fleet was considered into this EUR 28 million. This item constitute the main variation in our free cash flow. The net cash outflow for financing activities amounted to minus EUR 776 million and mainly consisted of lease liabilities outflows, while we had on top of the acquisition debt last year. This brings us now to the outlook and our strategic priorities of 2025. Outlook 2025. We presented our group EBIT outlook of the range EUR 150 million to EUR 180 million back in February, and during the Q2 results in August, we indicated that we were targeting the upper end of the range. With a year-to-date EBIT of EUR 97 million, the results we're presenting today are broadly in line with our plan, now allowing us to confirm our full-year outlook at around EUR 180 million. This implies achieving an EBIT of around EUR 80 million to EUR 85 million in Q4 compared with EUR 80 million in the same quarter last year -- sorry, compared to EUR 84 million last year, which we are cautiously optimistic about. Based on current assumption and expectation, we believe this is achievable, particularly thanks to our preparation and readiness for an efficient peak execution across the group. In North America, we validated client volume capacity plan. We have secured to hiring over 4,100 seasonal workers to ensure full site coverage and put peak incentive plans in place. In BeNe Last Mile, beyond the usual measures, we have implemented additional productivity initiatives, including tracking performance at each distribution offices and site and setting up a national tool to further optimize interim and reinforcement of the planning. Of course, we remain vigilant amid challenging market conditions, notably as volume development and the phasing out of end of year peak volumes in Belgium and internationally remain uncertain and partially beyond our control. To wrap up on our outlook, we are also updating our CapEx guidance with a downward revision from EUR 180 million to EUR 140 million. This reflects our disciplined approach to spending in Belgium and in the U.S. and a strategic phasing towards 2026. Overall, we remain focused on prioritization and value creation, ensuring that every euro invested is where it has the highest impact in the group. Finally, as we usually do, I take a few minutes to walk you through the progress we've made on our transformation plan over the last months as part of our Reshape2029 journey we presented to you at the Capital Market Day. When it comes to the update on the strategic initiative, bpost continues to accelerate its transformation, shifting firmly towards becoming an international logistics and parcel operator. Let me walk you through the tangible progress we've made across our segment. I'll start with BeNe Last Mile. Following 2 successful pilot phases, we launched our 9 delivery service on October 15. As new B2B service consisting in a 9-time delivery solution targeted at technician and field workers that helps eliminate detours from central depots and save up to 1.5 hours per day for these technician and field workers. In practice, parcels are collected by bpots until 6:00 p.m. on working days, sorted overnight and then delivered before 7:00 a.m. to selected parcel lockers of our network across Flanders, Brussels and Wallonia. The service is exclusively available for B2B shipment, internal deliveries or business-to-business exchanges requiring high level of reliability. Meanwhile, still in Belgium, our bbox network of parcel lockers continue to expand strongly. We have now around 2,000 active units with 800 more contracted, most of them located in prime location and high-traffic venues like supermarkets. As announced recently with Lidl, we target to have 240 lockers by the end of this year, which represents nearly 10% of the targeted APM capacity. We currently install up to 12 new lockers per day, and by the end of this year, we intend to have 2,500 lockers installed in Belgium. On our future operating model, one of the pillar is bulk rounds, consisting in dedicated parcels round in bulk, serving pickup and drop-off points, including lockers. Here as well, after a successful pilot phase, this model is now fully operational across all sorting centers, servicing 26 distribution offices and handling over 12,000 parcels a day. Before end 2025, we will extend to 29 offices with a capacity close to 21,000 parcels a day. This bulk model is set to become a cornerstone of our 2026 peak strategy capable of managing nearly half of the out-of-home volumes. Let's shift to 3PL Europe. We are entering into a new chapter in leadership with Rainer Kiefer taking over as CFO of 3PL Europe and Staci Americas as of January 2026, succeeding Thomas Mortier, who announced earlier this year its intention to step down at the end of the year and will move into a part-time advisory role starting January 2026. Rainer brings extensive experience from DSV and DB Schenker with a strong track record in transformation and scaling across Europe. This appointment reflects our ambition to accelerate the transformation of the 3PL business, strengthen our European footprint and drive value creation across the full spectrum of contract logistics, fulfillment and omnichannel solutions. With Thomas supporting this transition and Rainer taking a help, we are confident that the business is well positioned to execute the next phase of our growth strategy. In parallel, the integration of Staci remains firmly on track. As cost synergies start to materialize in the second half of the year, we expect to overdeliver on our 2025 synergy targets. The 2026 targets are already secured, fully in line with what we presented to you at the Capital Market Day. In 3PL U.S., our Radial Fast Track rollout is ahead of our plan. 16 customers are already live and 2 more are set to launch in the fourth quarter 2025, each contributing an average ACV between EUR 4 million and EUR 5 million. The in-year revenue from Fast Track is already exceeding internal targets, providing strong momentum in U.S. and validating the scalable potential of the model. As Chris mentioned it last time, there's still a lot of work ahead of us, and the first results are not always immediately visible in the P&L. This is notably the case this quarter in the U.S. That said, we are confident that we are on the right track and focused on doing the right things to deliver sustainable results. We are now ready to take your questions. Again, questions each will allow every one of you to be addressed in the upcoming hour. Operator, please open the line for questions. Operator: [Operator Instructions] The next question comes from Frank Claassen from Degroof Petercam. Frank Claassen: My 2 questions. First of all, on Radial, minus 25% organically in Q3. Could you split the minus 25% between, let's say, the negative same-store sales and the impact of the churn? Is this, let's say, and what can we expect going forward? Is this the bottom? Or do you expect an improving trend in the coming quarters? That's my first question. My second question on Staci. I understand that you don't break down the EBIT anymore or give the separate EBIT. Could you elaborate on how the profitability is developing? Is it according to plan? I recall that you had a sort of guidance or, let's say, target of 10% to 12% EBIT for Staci. Is that still valid? Could you elaborate on that? Philippe Dartienne: Okay. Thank you for your 2 questions. Let's start with Radial. Indeed, we observed a severe decrease in the current quarter, which is mostly explained by the churn. Again, the churn coming that was announced in 2024 that has a full-year impact in 2025 and some churn that were announced at the beginning of the year, and then they're only materializing now. I have one very specific example in mind where the customer said, we're going to stop 1 of the 2 warehouses in the first -- sorry, in the third quarter, so meaning now. This is part of the explanation and this is the bulk of it. Same-store sales evolution is not positive, but nowhere near what we observed in the recent quarters. If you recall, we had a terrible sequence of -- if it's in 2024, minus 4 at the beginning of the year, we peaked, wrong word, but it's a high amount, even it's a negative one, around 9% in the fourth quarter 2024. The beginning of the year was also in negative territories, lower than the minus 9%. Now we are slightly negative, but it's not what it mainly explains the different impact on the EBIT. Simply why? Because the basis at which it applies is also by far lower. This being said, very important to notice that the variable contribution margin has been extremely high, again, sustained quarters-after-quarters, which is a positive sign. That's for Radial. Sorry, and there was a subset in your question about what is the trend. The trend for us is twofold. We have launched in the first quarter of this year, our new product offering or service offering, which is Radial Fast Track that aims at offering solutions which are more flexible, standardized, easy to onboard type of solution, also very asset-light in terms of CapEx and automation, and it's picking up. It's picking up. We have signed 16 customers. We will onboard another 2 between now and the end of the year. Also, important to note is that we will be onboarding customers nearly close to the peak, which is -- which shows how flexible this solution is to onboard new customers. Historically, it was taking roughly 12 months to onboard new customers at Radial because of the high level of customization in the processes and also in the IT systems. In terms of trends, we are optimistic about the product that we have launched because we see it's picking up. There is traction on the market. On the other hand, we need to be realistic. When we are losing customers average size between EUR 50 million and EUR 70 million, while the ACV of the Fast Track typical customers is around 5. You can do the math as well as me. It takes time to be able to compensate this churn. We are also not aware of any new customers who have announced their departure in the near future. That's for Radial. For Staci, it's going according to plan. Yes, it's going according to plan. The EBIT margin is a bit on the low end of the range this quarter, which is mostly explained by the fact that, as I said it, and again, we already announced that there is no news in that one that we want to operate on a geographical platform as one entity, one go-to-market. We have several territories, like Belgium, the Netherlands, U.K., Germany, Italy, where we're really operating as one. The local managers there, they look at their portfolio of customers, what is their needs, what is the solution, the operational solution available to serve those customers and also the footprint. Some movement has been already initiated to relocate customers where they better fit with the requirement of the customer and also optimizing the footprint. It's also the case in the U.S. where one warehouse has been shut down and customers have been transferred to a new site. In Germany, the former site of Staci Germany in Boston has been shut down and customers has been transferred to a former Radial site in Halle. In the Netherlands, in the Active Ants portfolio, we have decided to close 1 of the 2 warehousing in Nieuwegein and those customers have been transferred to Roosendaal. This cost -- these transfers demonstrate that we really want to operate at a local level as one, but it has, unfortunately, on the short term, some cost. There is cost attached to shutting down warehouses and to move customers. It's all for the better. It's to serve the customer in the best possible way and the most efficient way on those territories. Operator: [Operator Instructions] The next question comes from Henk Slotboom from The Idea. Henk Slotboom: One question from my side. We've been hearing a lot about levies on Chinese goods. The French want to do it unilaterally. The Dutch have already said, they might follow the French maybe already as soon as the 1st of January of next year. Now personally, I don't think that EUR 2 per parcel will stop the avalanche of parcels to Europe. It will simply be relocated. What does the situation look like in Belgium? I don't know, if they have similar ideas to do things unilaterally. Well, could it be the case that you benefit from it if stuff is not flown at Schiphol Amsterdam Airport, but at Liège or Brussels instead provided, of course, there are no drugs over there. Philippe Dartienne: Thank you for your question, Henk. Indeed, the situation in Belgium is that the government is thinking of putting EUR 2 per parcel levy. Now it leads to a lot of questions. There is also who's going to collect this EUR 2, which is a very practical problem, and there is no answer to that. Of course, we are not -- we are there to carry the parcels. We are not there to collect this kind of surcharge or taxes levies, whatever you name it. There will definitely be a question of implementation. Interestingly enough, we had a discussion yesterday with one of our Board members who is coming from the Nordic, who faced a bit the same situation, and it took more than 12 months to find a technical solution to implement it. It's still an intent at this stage. There is no implementation date decided. Indeed, it will be difficult to implement. Your comment about, of course, if other countries are deciding for the levies, let's say, in the Netherlands, France, Germany, it could lead to additional volumes in Belgium, but anyway, it would only be a temporary solution. At this stage, it's a very good question, but it's a big question mark when it comes to the implementation date and also the practicalities behind it. Henk Slotboom: Can I ask an add-on to that, Philippe? Philippe Dartienne: Sure. Henk Slotboom: If I look at, for example, Austria Post or Polish Post and that sort of things, they've been entering alliances with, for example, Temu and Shein, who want to move part of their logistics and then I'm talking about warehousing and that sort of things to Europe. You have a fantastic network of fulfillment centers with Radial Europe, with Active Ants, with Staci. Is anything there being discussed with the large Chinese platforms? Philippe Dartienne: Again, a very good question from Henk, as usual. There are movements indeed, we see the Chinese are coming closer to Europe. They are also thinking of implementing themselves in Turkey, which is also close to Europe. Indeed, it's a movement that we see in the market, but I will not comment any further at this stage. Operator: The next question comes from Marco Limite from Barclays. Marco Limite: I've got 2 follow-up questions. One is on Radial U.S. Do we have to think about Q4 as the last quarter of year-over-year decline in revenues, and therefore, we should expect growth from next year? It’s the first question. Second question, on Staci Europe, I mean, if I look at the Q3 numbers, it feels like that most of the decline year-over-year is coming from Radial U.S. At the same time, you've got 1 month more of Radial Europe in the base now. We basically have got 3PL Europe being flat despite growth and despite an additional month. On top of that, you are also talking about synergies being ahead. Just the math doesn't work for me why year-over-year, things are flat despite tailwinds from synergies and an additional month. If you can clarify. Philippe Dartienne: Good. I'll start with Radial. No, in 2026, there still might be some decline in top line because there will be the full-year impact of the customer churn that we observed in 2025. Of course, the one announced in '24 will be over in '25, but there are some of them that will have an impact in 2026. This being said, what is really important for us to look at is the profitability and the cash generation profile and the quality of the portfolio. I really want to remind what we said at the Capital Market Day, not only we want to go for the mid-market, not to have big customers dependent on 2 big customers are requiring huge investment in terms of customization of system, high automation. We want to move out of that one, and they will be gradually phased out. We want to reinforce ourselves our presence in other type of customers. ACV of Radial Fast Track is in the range of 5 million, so totally different, but also and equally important in my eyes is also the portfolio itself in terms of the number of verticals where we want to operate in. In the past, it was focused on only 2. We really want to broaden that one, and we see first signs of result -- positive result going into that direction. Again, as I said, and again, I'm also repeating what we said at the time of the Capital Market Day, it's a long journey. It's not a 1- or 2-quarter journey. It's a long journey to move from big anchor customer focused or very capital intensive and focused on 2 verticals to something which is more nimble and flexible going forward. Again, the math plays against us when it comes in terms of timing. There will be a delay between the moment we could see growth again to be totally honest, transparent, but also totally aligned with what our forecasts are. There is nothing -- no news on that one. There is no change of strategy. There is no acceleration or degradation of the situation. It's happening as we had planned to do it. Marco Limite: Can I just follow up on this one? Is there a risk that more or other large customers are going to, let's say, leave Radial U.S. in the future because you are moving type of strategy and type of service? Philippe Dartienne: The risk is always there, Marco. This being said, interestingly enough, very interestingly, in our Radial Fast Track customers, we have 16 of them that we have new ones, but there is also 2 of them that were former old solution type of customers moved to Radial Fast Track. This also demonstrates that we have now with this solution, capabilities to address their demand. Marco Limite: Europe or 3PL Europe? Philippe Dartienne: Yes, I didn't forget. Don't worry. On Staci, the math add up, but there were maybe -- we need to remind all the elements of the equations. First one and is the vast majority, it's all about the costs relating to the optimization of the operations in different geographies in the U.S., in the Netherlands, in Germany, that explains the chunk of the fact that indeed, when you do the math, you don't see a growth when you come to Staci. There is also, but to a lesser extent, some softness in certain territories, and I'm mostly thinking about France, where the same-store sales has been negative in the quarter. On the other hand, as a positive note, in France, we are not seeing the departure of any customers. Operator: The next question comes from Marc Zwartsenburg from ING. Marc Zwartsenburg: I also have a bit of a follow-up on Radial U,S., because I think you mentioned you will also see a significant decline still in Q4, and that fits also with the story with the mentioning of the churn of the larger accounts. I think originally, there was a sort of a guidance of minus 10% to 20% a bit on the full-year top line, which would indicate still, say, mid-single-digit double digit, let's say, 15% maximum year-on-year decline if you plug in, say, minus 20%. Is that still an applicable guidance that we're looking at still a double-digit decline of around 15% for Q4? Just to get a bit of more feel on the movement of Radial because it's quite big numbers we're talking. That's my first question. Philippe Dartienne: You want me to take it immediately. It's more in the range of 15% to 20%. Marc Zwartsenburg: Q4, we're talking about? Philippe Dartienne: Yes. Marc Zwartsenburg: Then on the parcel volumes, so the working day adjusted number is plus 4.4%. That's a slight improvement from Q2, but how do you -- was that stable through the quarter? How are you looking to the big season? Do you already have a bit of an indication on the big events for Q4, what you expect there? Because I think also here, the guidance was more like a mid-single-digit to high single-digit growth. It looks now more like on the low end of the mid-single digits. What are your thoughts there? What kind of trends do you see? Philippe Dartienne: In fact, there is one very important element. It's not that it's totally new this year, but we see -- and typically in Belgium, we see more-and-more before the peak was very -- excuse me, very focused on 1 or 2 days. By the way, in Belgium, we have the peak, but with also Christmas and Sinterklaas. In fact, it's the month end of November and the month of December, which are, in fact, higher months. Unlike what we see in the U.S., when you see the peak, it's a couple of days. It's more spread all over that period, combined with the fact that we see more-and-more our customers, the one selling directly to the customers or through platform, offering throughout the year, promotion, discount and this kind of stuff. It's very difficult to predict how it will look like. But for sure, we see it's become that higher activity is spread over more days or weeks than it was in the past. Marc Zwartsenburg: Do you see September, October trending higher than the 4.4%? Philippe Dartienne: In that range. Marc Zwartsenburg: It's rather stable. That's currently the trend. Philippe Dartienne: Yes. Marc Zwartsenburg: Then lastly, I know you're not disclosing it, but could you give a bit of an indication of the EBIT contribution of Staci, because it's still important to model that properly also through the quarters because we saw quite a miss on the consensus on particularly the 3PL division and whether that's Staci or whether that's Radial U.S. or whether that's the extra cost, it would be helpful to have a bit more granularity. Can you help us there? Philippe Dartienne: I can help you in repeating what I told you is that the big chunk of the fact that it doesn't grow is linked to this optimization, cost optimization, operational optimization, which is the majority of the variance and the rest coming from same sourcing. You could count on. Marc Zwartsenburg: Staci have no growth on the revenue side and a bit of impact from the fine-tuning of the optimization of the warehouses. Is that how we should see it? Philippe Dartienne: Yes. Marc Zwartsenburg: How long will that take that optimization of the warehouses till when should we pencil that in that the margins may be a bit more at the low end? Philippe Dartienne: I would say -- in fact, the more the people will start working together and depending on the customer need, it might lead to additional ones. This one were the obvious one. I would say, in the next 2 quarters, I'm not expecting any site closures or major site closures now, but It's an ongoing process. Marc Zwartsenburg: For 2 quarters -- yes, exactly. We will see a little bit of double running costs in the meantime. Then after that, we should see the efficiencies coming through. Philippe Dartienne: I hope it will come faster, but it's not to be excluded that we might decide here or there to restructure on another warehouse. There is one that was already planned in the U.S. By the way, it was a journey, nearly 3 years journey at the time of the acquisition of Amware by Staci, they looked at the portfolio, and we were totally aware of that because it was an element that was shared with us at the time of the acquisition. They knew that they had a plan to restructure 3 warehouses. They have done 1 in '24. There is a second one in '25, and there will be the third one in '26. Marc Zwartsenburg: Then thinking about '26, we should see a higher EBIT than what we probably will see in 2025. Is that? Philippe Dartienne: Yes. Marc Zwartsenburg: The path towards your long-term outlook to see a higher EBITDA? Philippe Dartienne: Don't drag me into a budget discussion and a guidance for '26. We will come to you on that one when we publish the Q4, but I give you some element. I have the impression of painting an impressionist painting with dots of colors, some quantities. I'm doing some quantities on the U.S., but don't drag me where I don't want to be dragged. Marc Zwartsenburg: It's the time of the year budget. Operator: The next question comes from Marc Zeck from Kepler Cheuvreux. Marc Zeck: Two, if I may. First one on -- again, Radial U.S. Could you give us a bit of more color or feeling about, let's say, the top 5 customers at Radial U.S., how much of sales is that broadly speaking? For these customers, is there kind of a contract renegotiation period upcoming end of '25 or early in '26? Or is these contracts mostly locked in for a longer period of time? That would be my first question. Second question also on, let's say, the broader U.S. business. I believe we've seen quite a bit of pull forward buying into the U.S. imports for the first 9 months of the year were pretty good, I believe, into the U.S., but we see container imports or container arrivals at U.S. ports dropping quite sharply now in Q4. Is your business in the U.S. mostly related to ocean freight? Should we expect a bit of a negative business development on same-store sales as well for Radial U.S.? Or are you kind of air freight exposed from a product category where we still see quite good numbers, I would say, in the overall market? That's my 2 questions. Philippe Dartienne: Okay. Let me start with the second one. It's a bit of both. Of course, all your comments are valid. We are exposed to air freight and ocean freight. I give you a very practical example. In one of the customers that we have onboarded with Radial Fast Track is a fashion brand coming from Australia, who wanted to be implemented in the U.S. They wanted to have fulfillment there. We are hearing from customers, some other customers that they want to be in the U.S. rather than systematically air freighting stuff. By the way, it's no different than what we are seeing with the Chinese platform now. Let's refer to the comment or the question earlier on the Chinese who want to be implemented -- to implement themselves in Europe to avoid tariffs is the same that we are seeing in U.S. We have a very practical example, as I said, of one who really has decided to come physically in the U.S., and there, we have definitely a role to play and a good service offering. When it comes to Radial, I also want to -- do we have big renewal in the pipe for the coming quarters? The answer is no. We already have renewed some of them in the course of 2025. There, I want to reiterate something which is extremely, extremely important. In the past, what we saw at Radial, especially with the big customers, the situation was the following. They were asking for a lot of customization, a lot of automation that typically are passed on to the customer over a period of 6 to 8 years, while we were having contracts of roughly 4 years. At the same time, we had also our warehouses locked for a period of 7 to 8 years. In many instances, what we saw is the customer left or didn't renew the contract, and we were there even if there was some provision in the contract with unamortized portion of own developments and the liability linked with these warehouses. Since the last 18 months, all renewal or all new contracts signed are [indiscernible] with the lease of the warehouses. It's also important to look at what could be the impact of the customers. In fact, the Radial situation we are in right now is absolutely not the same as the one we saw years ago. Operator: Ladies and gentlemen, there are no further questions. I will hand it back to Philippe to conclude today's conference. Thank you. Philippe Dartienne: Thank you very much, guys, for your intense question session. Antoine is always there to do the follow-up with you in the coming days and weeks. Let's stay in touch. Next time, we'll see, we'll be able to demonstrate that we have executed the peak in a qualitative and efficient way. Thank you very much. Have a good day. Operator: Thank you for joining today's call. You may now disconnect.
Operator: Good morning, and welcome to The New York Times Company's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Anthony DiClemente, Senior Vice President, Investor Relations. Please go ahead. Anthony DiClemente: Thank you, and welcome to The New York Times Company's Third Quarter 2025 Earnings Conference Call. On the call today, we have Meredith Kopit Levien, President and Chief Executive Officer; and Will Bardeen, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call. These statements are based on our current expectations and assumptions, which may change over time. Our actual results could differ materially due to a number of risks and uncertainties that are described in the company's 2024 10-K and subsequent SEC filings. In addition, our presentation will include non-GAAP financial measures, and we have provided reconciliations to the most comparable GAAP measures in our earnings press release, which is available on our website at investors.nytco.com. In addition to our earnings press release, we have also posted a slide presentation relating to our results on our website at investors.nytco.com. And finally, please note that a copy of the prepared remarks from this morning's call will be posted to our investor website shortly after we conclude. With that, I will turn the call over to Meredith. Meredith Kopit Levien: Thanks, Anthony, and good morning, everyone. Q3 was another great quarter across the board at The Times. Our results affirm that our strategy is working as designed. We have world-class journalism and a portfolio of leading lifestyle products in giant spaces where people spend a lot of time. Those products are so valuable that people seek them out by name, form habits and make room for them in their daily lives. And our multi-revenue stream model with subscription, advertising, licensing and affiliate revenue lines that are all growing gives us multiple ways to monetize that value. The media and technology environment is changing rapidly, presenting significant opportunities for companies with the talent, products, intellectual property and brand equity to successfully capitalize on those shifts. The Times is one of those companies. We have a long track record of evolving to meet changing markets and new consumer needs. That, combined with our clear strategy and strong economic foundation gives us real confidence that we're well positioned to keep building a larger and more profitable company for years to come. Now let me share a few highlights from the quarter. We added 460,000 net new digital subscribers, bringing our total subscriber base to 12.3 million. This puts us further along the path to our next milestone of $15 million. These results reflect the value of having multiple levers across our full product portfolio to drive subscriber growth. Digital subscription revenue increased by 14% in the quarter, propelled by strong audience engagement across the enterprise. That engagement is evidence of our continued ability to deliver increasing value to users. We're doing this in several ways by expertly and ambitiously covering the most important news, by expanding our efforts in video, audio and AI to make our reporting more accessible to more people and by making each of our products more valuable with new content, shows, features, games and other enhancements. In Q3, we advanced all these priorities. We substantially grew the amount and impact of our video journalism in news and across the portfolio, both on our platform and in the scaled places where people are consuming it. We've now turned most of our award-winning podcasts into video shows that demonstrate both The Times convening power and our ability to influence the conversation across news and culture. We made video a more prominent part of our flagship Times app with a new watch tab and featured placements on our home feed. In cooking, we're expanding the library of both instructional videos and entertaining shows. And at The Athletic, we are now enhancing our signature analysis and reporting with NFL game footage. We also continue to innovate around our use of AI in the quarter. More and more people are using automated voice to engage with our news report. We're using AI to improve personalization, targeting and monetization across our customer journey, marketing and ad products. And AI now powers features like metric conversion on recipes and richer search on Wirecutter. Beyond video and AI, we keep adding value to our games portfolio. This quarter, we launched a new logic puzzle, Pips, which is off to a great start. Turning to advertising. We had another really strong quarter with digital advertising growing over 20% and total advertising growing nearly 12%. This performance reflects how our strategy to create a larger, more durable digital ad business is working. That entails having a portfolio of compelling products in spaces with broad marketer appeal in addition to news, particularly sports, games and shopping, a large engaged audience that marketers can target effectively and a growing supply of high-performing ad products across a range of formats. Licensing and affiliate revenues also grew in the quarter. The growth in licensing, in particular, is another proof point for how we're able to monetize the increasing value of our products. Finally, we stayed disciplined on expense growth in the quarter even as we invest into our journalism and product experiences, which is a source of our long-term advantage. I'll close with a few thoughts on our path ahead. What we do has never been more important or more valuable. Our independent journalism, trustworthy information and compelling product experiences help people understand the world and lead richer, fuller lives. Even in an environment where the moves of big tech companies are leading to less and less traffic for publishers, we see large and persistent demand for what we do. Against a backdrop of a changing ecosystem, we are confident in our ability to widen the number of people who use and engage deeply with The Times on and beyond our own platforms. That means becoming even more essential to even more people. And as we do that, we expect to deliver even more value for shareholders and for society. With that, I'll turn it over to Will for more details on the quarter. William Bardeen: Thanks, Meredith, and good morning, everyone. As Meredith described, our 2025 third quarter results demonstrate another strong quarter for subscriber growth, revenue growth, AOP growth, margin expansion and free cash flow generation. We saw healthy growth across our multiple revenue streams again in the quarter and continued to make disciplined investments aimed at further differentiating our high-quality journalism and digital products. Year-over-year, consolidated revenues grew approximately 9.5%, AOP grew by approximately 26% and AOP margin expanded by approximately 240 basis points. We generated approximately $393 million of free cash flow in the first 9 months of the year, which reflects our capital-efficient model. We also benefited in Q3 from lower cash taxes paid due to the recent change in tax law that allows us to fully deduct R&D expenditures in the current year. Over that same period, we returned approximately $191 million to shareholders consisting of approximately $110 million in share repurchases and approximately $81 million in dividends. This is consistent with our capital allocation strategy of returning at least 50% of free cash flow to our shareholders over the midterm. Now I'll discuss the third quarter's key results, followed by our financial outlook for the fourth quarter of 2025. Please note that all comparisons are to the prior year period unless otherwise specified. I'll start with our subscription revenues. We added approximately 460,000 net new digital subscribers in the quarter, bringing our total subscriber count to approximately 12.3 million. Subscriber growth came from multiple products across our portfolio. We also continue to be pleased with the rollout of our family plan subscription offering. Total digital-only ARPU grew 3.6% to $9.79 as we stepped up subscribers from promotional to higher prices and raised prices on certain tenured subscribers. We continue to be encouraged by the results we're seeing at pricing step-up points, which we believe reflects the value we continue to add into our products. As a result, we remain confident in our ARPU trajectory. With both higher digital subscribers and higher total digital-only ARPU in the third quarter, digital-only subscription revenues grew approximately 14% to $367 million. Total subscription revenues grew approximately 9% to $495 million, which was in line with the guidance we provided for the quarter. Now turning to advertising revenues. Total advertising revenues for the quarter were $132 million, an increase of approximately 12%, which is higher than the guidance we provided for the quarter. Digital advertising revenues also came in above the guidance we provided, increasing approximately 20% to $98 million. The strength in digital advertising was due mainly to strong marketer demand and new advertising supply. Affiliate licensing and other revenues increased approximately 8% in the quarter to $74 million, primarily as a result of higher licensing revenues. Adjusted operating costs grew 6.2%. This was just above the 5% to 6% guidance range that we provided last quarter. Adjusted diluted EPS in Q3 increased $0.14 to $0.59, primarily driven by higher operating profit. I'll now look ahead to Q4. Digital-only subscription revenues are expected to increase 13% to 16% and total subscription revenues are expected to increase 8% to 10%. Digital advertising revenues are expected to increase mid- to high teens and total advertising revenues are expected to increase high single to low double digits. Affiliate licensing and other revenues are expected to increase mid-single digits. Adjusted operating costs are expected to increase 6% to 7%. We intend to continue operating efficiently while making disciplined investments in our high-quality journalism and digital product experiences that add value for our audiences. In summary, our essential subscription strategy is continuing to work as designed with a valued product portfolio, multiple revenue streams, significant free cash flow generation and a strong balance sheet, we believe we are well positioned to navigate a dynamic market environment. As we enter into year-end, we continue to expect healthy growth in revenues and AOP, margin expansion and strong free cash flow generation for the full year. With that, we're happy to take your questions. Operator: [Operator Instructions] Our first question comes from Thomas Yeh with Morgan Stanley. Thomas Yeh: Two, just on the video formats, I was hoping you could dimensionalize the opportunity around that push. I think the big focus sounds like it's centered on building engagement and brand. But I guess, how should we think about how it affects advertising? Do you see this as maybe another aperture for expanding into video advertising opportunities? And then also maybe just touching on what kind of incremental investment needs this push might entail? And then secondly, on the family plan, it looks like it now represents 2% of your digital-only subscriber footprint and looks like it also came through predominantly on the game side versus the bundle. Can you talk about just what stage of the rollout you're in? And if there's any appetite to push further on that in terms of maybe restricting sharing somehow on your non-family plan? Meredith Kopit Levien: I'm happy to take both those questions, Thomas. Let me start on video. I think the first thing to say is we think it's a big opportunity for the company, and we're in early days of it. We know lots and lots of people are seeking out and getting their news and the other kinds of content we make in the form of video. And so we think having more video gives us a big opportunity to engage the people we already have more and to engage even more people and to do that both on and off our platform. And you asked specifically about advertising, I'd say we are early here. Our first priority is to do what I've just described, which is to drive more engagement. And ultimately, having a wider engaged audience is what drives every part of our business, subscriptions, advertising, affiliate licensing. So we just think -- we think this is a really important part of our go-forward growth plans, and we're very excited about what we're doing there. On family plan, we are really excited about this. We're -- it definitely played a role in the quarter. Family plan is good in a bunch of ways. It's good for market penetration. There, you can think of it as the subscribers we already have, bringing in other subscribers. And because the family plan subscription is priced at a premium, it's additive to subscription revenue. It's great for engagement. It's great for retention. And then I think you asked specifically about it's weighting to games versus the bundle that is not. I would not think about it that way. I would think about it as we've presented a family opportunity in both the bundle and in games, and we are really excited about the performance of both. Operator: And the next question comes from Benjamin Soff with Deutsche Bank. Benjamin Soff: I was wondering if you could talk a bit more about the growth rate in OpEx for 4Q, kind of what's driving that higher growth rate? And should we expect that to continue at similar levels going forward? And then on capital allocation, your cash balance has continued to grow nicely even as you've been returning 50% of free cash flow to shareholders I wanted to check in and see what your latest thoughts were there and how you might potentially go about deploying that cash. William Bardeen: Sure. Thanks. I'll take both of those. So look, on the cost for Q4, the guidance -- and this is relevant to Q3 and going forward, I think the most important thing I always want to say stepping back we remain focused over the long term on sustaining healthy revenue growth, AOP growth and margin expansion. So everything we talk about in cost is in the context of that. Now we do that -- our approach to that and our strategy is to be both disciplined in costs and efficiency, but also making long-term investments that are helping to further areas that best position us for sustainable growth. And that's our world-class news journalism lifestyle products. and the product development that underpins our content. Now that includes areas like video, which Meredith said in her remarks, which we're excited about. So specifically, to your questions on Q4 and Q3, a couple of things we're seeing there is that continued investment into the journalism products, so areas like video. We also have, as you see in Q3 results, and you can expect in Q4, flexibility to lean into areas like sales and marketing when there are good returns in the market or when we see a good opportunity for a great brand campaign. We had to have one in the market now. It's a world to understand, which we really like. And then the last thing to note is that there can be some variable expenses correlated with revenue performance that can lead to fluctuations in any given quarter. This played a bit of a role in Q3. It could well end up playing a role in Q4 as well. So that disciplined approach overall to being really focused on cost efficiency while also making investments is what you're seeing in our cost performance throughout the year as well as in the Q4 guide. There's a question on capital allocation... Anthony DiClemente: Capital allocation, okay, go ahead. William Bardeen: Yes. On that one, I would just say no change in strategy there. We believe the capital allocation strategy is working really well for us. So the key thing is top priority for us has always been we have at a core, our organic growth strategy, essential subscription strategy, so investing into high-return opportunities to continue that growth. We just mentioned video, for example. And then to this point of Meredith talked about in the remarks, a dynamic market environment. We like having a strong balance sheet that gives us optionality to capture opportunities should we see them, including opportunistic additional capital return. That's at least 50% is our -- is the capital return target. And then it's just worth making sure to reemphasize that our bar for capital allocation is really, really high. So you've seen that in our track record thus far with any M&A we've done, and you can expect us to continue to have that very high bar going forward. Operator: And the next question comes from David Karnovsky with JPMorgan. David Karnovsky: Maybe following up on the Watch tab. I wanted to see if you could speak a bit to the functionality of the product. Is the goal to make that highly personalized ? Or are you also kind of highlighting top stories and other parts of the coverage? And how do you think about the process of inserting ads there? And then just secondly, regarding other single product, I think this is the best quarter for net adds on record. Maybe you could just break that down across the various single products and for games specifically, how material were factors like putting mini crossword behind a paywall or PIPs, which you rolled out in August? Meredith Kopit Levien: I'm happy to take both of those, David. Thank you. Let me start with video and the Watch tab, and I'll step back just a little bit and note a number of things we're doing in video and the Watch tab is kind of one of them. We now have on our site and in the app substantially more news video on whatever the major stories of the day are. We have many more reporter videos with reporters essentially explaining their work and humanizing the journalism. That's great for enhancing trust, and it also serves as a teaser to longer-form work that we do. We turned most of our podcasts now into full-length shows. The Watch tab and the work we've done in the today feed to get people to watch video more and go to that tab is all just kind of part of that broader effort to get more engagement with more and more of the journalism in video. In addition, by the way, to reading and listening, neither of those things are going away. In the Watch tab specifically, I would say it is early days on your question about advertising. The most important thing we can do is get lots and lots of people to engage with our video on platform, in the tab and off-platform. And the more we do that, the more opportunity, I think, it opens up across all of our revenue lines. So I'm sort of long term optimistic about that. On your question about single product subscriptions and games, we are really pleased with the strong net adds growth in the quarter, and I would say it's kind of a strategy working as it's designed to do. We've got multiple growth levers, including games that are all going to play different roles in sort of different quarters and games definitely played a role here. On the MINI specifically, which I think you asked about, the idea here is that we were pretty intentional about long-term value creation in the case of the MINI, our decision to make that a paid subscription, very intentional one. We believed and it's proven to be the case that we would do it in a way that did not sacrifice in a big way, engaged audience. So we feel great about that. And the idea here is that we've got sort of multiple ways to monetize across the portfolio, including in games. And what we're optimizing for here is having the widest possible audience for all of our work, in this case, games and also having plenty of reasons for people to feel like they should pay. And you could sort of extrapolate that to the kind of broader theory of how we make free pay decisions across the enterprise. I think the thing to know on games is we are always adding value to the portfolio. We've got a robust pipeline kind of at all times of new games in development and a very good track record here, and we're just excited about the opportunity. Operator: And the next question goes from -- goes to Kutgun Maral with Evercore ISI. Kutgun Maral: Two, if I could. First, advertising continues to be an area of strength in the quarter, and you expect the momentum to carry into the fourth quarter. I know you called out marketer demand and new advertiser supply, but can you unpack the dynamics there a bit more? How much of this is attributable to the underlying market compared to uptick from some of the new product innovations that you've been actively rolling out across the portfolio? And second, on affiliate licensing and other revenues, you had a healthy third quarter. Is there anything more you can share on Q4 and the outlook for the slight deceleration in growth to mid-single digits? I know we're not talking about 2026 just yet, but I was hoping for more color, especially in the context of the Amazon AI partnership. Meredith Kopit Levien: Why don't I take the advertising question, Will, you'll take the one on other revenue. Look, I think the first thing to say is we're really pleased with what we saw in the quarter and frankly, so far all year. And it's a little bit of everything working to answer your question directly. The big picture here is we kind of see the ad business increasingly like we see the consumer business. The consumer strategy is to mean more to more people. And in advertising, we're kind of providing more value to more advertisers in more ways. So we've got these really big products in big spaces where there's lots of consumer interest, especially in news and I would say games and sports but also shopping and cooking. We have lots of engagement for all of those products, which allows us to really effectively target people at scale. We have great ad products. By the way, we've been at that targeting and at those ad products for many years now, very deliberately building first-party data, very deliberately building a suite of proprietary ad products. And we're continuing to sort of extend those across the portfolio. And we keep innovating in our ad products. So our AI-powered brand match, which I think we launched a year ago is really also helping on the targeting front. All of that means we've got ad products that work, and I think we're executing well. So the sort of broad answer is it's a little bit of everything that you're pointing to. William Bardeen: And then on affiliate licensing and other and the dynamics there, it's just always important to remember that, that revenue line has a lot of different items that can both create some variability quarter-to-quarter as well as make it difficult to isolate the contribution of any one particular item. And so we've said this in the past, it's obviously not just affiliate. And licensing, it's multiple licensing deals there. It's booked TV film, it's commercial printing. So a lot of different dynamics. And I think the most important thing to say there, looking forward, not just Q4 but into the future, as you said, is just given our strategy to make our news journalism and product portfolio more valuable to more people, we expect this revenue line to grow over the long term as part of our multiple -- our multi-revenue stream model. Operator: And the next question comes from Doug Arthur with Huber Research Partners. Douglas Arthur: You didn't break out The Athletic as promised. Any color on it? Was it additive in line? Any color would be helpful. Meredith Kopit Levien: Doug, I'll just say we continue to be very pleased with the performance of The Athletic. It remains on track for all the things we wanted to do. I mentioned in my remarks, sort of consistently strong engagement across the portfolio and the addition of video in lots and lots of places. I think this was the quarter where we introduced NFL footage. We already had NBA footage. We introduced NFL footage, and we're combining that with our signature journalism and our reporting, and I think that's a great product experience for engagement. NFL is a huge part of what The Athletic covers. And we're continuing to build audience and awareness for the brand, Athletic. And I would just say it's all going well, big contributor in advertising, all going very, very well. And it's still early. Douglas Arthur: Excellent. Just as a follow-up on the surge in single product subscribers. Are you getting the conversion of those over time that you expect? I mean, how is that playing out to higher-value products? Meredith Kopit Levien: I think the best way to describe it is we really -- it's really the model working kind of as it's designed to work. Our single products are serving as a wonderful engine of audience and engagement and in many instances, or funnels to get people to subscribe either to the individual product or to the bundle. That's all kind of working as we expected it to. And they're also all proving to be very valuable to the sort of multi-revenue stream monetization. I've called out games and sports, in particular, as being big spaces that marketers see real value in and want to be around. And we have on games, scaled audience, lots and lots of people who play our games. And in The Athletic, we are really growing the audience. So we see a big opportunity there. But I would say it's all kind of going. It's all working as it's designed to as far as driving subscription, advertising and ultimately, the whole model. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Anthony DiClemente for any closing remarks. Anthony DiClemente: Well, thanks, everyone, for your interest and for joining us on the earnings call. We'll see you next quarter. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, everyone, and welcome to the Trainline HY 2026 Results. My name is Emily, and I'll be coordinating your call today. [Operator Instructions] I will now hand over to CEO, Jody Ford, to begin. Please go ahead. Jody Ford: Good morning, everyone. Thank you for joining us today for our half year results presentation. I'm Jody Ford, CEO of Trainline, and I'm joined by Pete Wood, our CFO. Let's first go through the disclaimer. On to the agenda for today. I'll give an introduction, briefly discussing the progress we've made in the first half. I'll recap on the opportunity ahead and update on the regulatory backdrop in the U.K. Pete will talk you through our financial performance. I'll then update you on how we are progressing against our strategic priorities and finish with an overview of our digital pay-as-you-go trial, which we recently launched in the U.K. After that, we'll hand back to the operator for questions. As a reminder, we are Europe's #1 rail app, delivering a market-leading user experience for our customers. We aggregate all major carriers and fares, offering a comprehensive range of value-saving products and features. We focus on making the booking experience as seamless as possible. And we use machine learning and AI to supercharge the experience to get customers from A to B. It's our combination of value, convenience and innovation that sets us apart. And that is evident in our scale today with far more app downloads than any of our peers. The strength of our customer proposition is reflected across the group with all 3 of our business units leaders in their respective markets. In U.K. Consumer, we have the #1 travel app in the U.K. In international consumer, we are the largest rail aggregator in Europe. And in Trainline Solutions, we have the leading B2B rail platform across the U.K. and Europe, which now generates over GBP 1 billion of annualized net ticket sales. Looking ahead, we see significant headroom to scale all 3 business units. In U.K. Consumer, we will deepen our competitive moat while increasing the lifetime value of our 18 million strong customer base. In International Consumer, we will deploy our proven aggregation playbook across France, Italy and Spain. By 2030, these markets together should represent a TAM of around EUR 23 billion, including EUR 12 billion generated on aggregated high-speed routes. And in Trainline Solutions, we will scale into the EUR 6 billion business travel opportunity across rail. Our performance in the first half demonstrates the progress we are making against this headroom opportunity. In the U.K., we delivered robust growth, reflecting continued strength in leisure travel alongside the ongoing digitization of rail ticketing. In international, we delivered positive early momentum on the French Southeast high-speed network with sales up 34% following Trenitalia's expansion of services over the summer. And in Trainline Solutions, B2B sales grew strongly, particularly in Europe with international B2B distribution up 55%. Operating leverage amplified our top line growth and the benefits of our cost optimization exercise last year, driving a 14% increase in EBITDA. As a result, we have today increased our profitability guidance for the year, as Pete will discuss shortly. This follows our announcement in September of an enhanced share buyback program, underpinned by our strong cash generation. The enhanced buyback implies we will repurchase 350 million of shares over 3 years. That's around 1/3 of our market cap. Before I hand over to Pete, let me update you on the regulatory backdrop in the U.K. This morning, the government published the outcome of its consultation on the Railways Bill with primary legislation to follow later today. This will allow for the establishment of GBR as an organization as well as the appointment of its key leaders. Since our full year presentation in May, we have maintained an assertive stance with government, pushing them to deliver on the commitment to an open, fair and competitive future retail market. While in parallel, we've sought to resolve existing examples where train operating companies self-preference today. Self-preferencing is where talks offer features within the apps, but we are prevented from offering and market them in ways that we are not allowed to do. This undermines the fair and open competition. We've consistently put forward the case that these practices be rectified. We're making progress. As you can see on the left-hand side of this slide, Previously, Trainline was prevented from offering some temporary fares that could be found on operator websites, and we were blocked from advertising in almost all stations and trains. Following our sustained engagement, the government confirmed earlier this year on both fronts, independent retailers should not be discriminated against. This is a clear step forward. However, we still face blockers and obstacles when it comes to advertising at the station. Furthermore, notable examples of self-preferencing continue to persist. We are prevented from offering train operator loyalty schemes within our app, and we are unable to provide automated delay repay, a major pain point for our customers. We continue to engage with government stakeholders in the wider industry to remove these restrictions and in turn, level the playing field. At the same time, we are innovating to extend our market-leading user experience and cement the loyalty and engagement of our customers. With that, I'll hand over to Pete to talk through our financial performance. Peter Wood: Thanks, Jay, and good morning, everyone. Before I step into the financial performance for the group, let's briefly unpack the performance of each of our business units. Starting first with U.K. Consumer, net ticket sales grew 8% to GBP 2.1 billion, reflecting continued strength in leisure travel and ongoing digitization of rail ticketing. Growth was supported by further market recovery, increased industry rail fares and lapping strikes the year before. As anticipated, growth was partly offset by the first phase of Transport for London's Project Oval expansion, which launched in February and will expand further in H2. Turning next to international, where net ticket sales grew 2% year-on-year to GBP 594 million. Growth was led by domestic customers, particularly on newly aggregated routes such as the high-speed network in Southeast France. This was offset by a 2% decline in foreign travel sales, primarily given changes to Google search results page and a leveling off of inbound demand from the U.S. for European rail travel. I'll now step through the underlying drivers in more detail. This slide breaks down the different market segments across our international business with each segment including domestic and foreign travel sales. You can see that the growth rates vary, reflecting how we are actively managing marketing investments and prioritizing routes with carrier competition. Turning first to Spain and Southeast France. We grew 11% across both markets as we positioned ourselves as the aggregator of choice, partly offset by downward pressures on Spanish rail fares. These markets now represent 22% of international net ticket sales. Elsewhere in France and in Italy, growth was more modest at 3%. Within these markets, which account for 2/3 of international net ticket sales, we continue to manage marketing spend as we await further carrier competition. In Italy, that's expected to happen from early 2027 with [ SECF ] granted slots to run high-speed rail services last month. And in the rest of France, carrier competition is set to expand shortly thereafter, which Jody will discuss later. Germany and the rest of Europe were down 16%. While these markets represent longer-term growth opportunities for Trainline, we are actively prioritizing the markets that have liberalized or are set to liberalize. While changes to Google search results page remained a drag on growth in H1, we are seeing encouraging early signs of traffic building from generative engines. We are the #1 cited rail app in ChatGPT across almost all our core markets, and we are leading in citations from Google's AI overview module, significantly ahead of our other rail aggregators. As a result, sales from generative engines have grown exponentially, increasing 13-fold since Q3 last year, albeit from a low base. Let's move next to Trainline Solutions. Net ticket sales grew 18% in the half to GBP 529 million. Growth was led by B2B distribution and our fastest growing subsegment up 36%. This reflected growing demand from corporate shifting to rail travel as well as our enabling travel management companies to scale their ticket sales in Europe, including the likes of Novan and SAP Concur. Jody will talk shortly in more detail about the strong momentum this business is generating. Bringing this together, top line growth for the group was towards the upper end of our full year expectations. Group net ticket sales grew 8% to GBP 3.2 billion. Revenue grew 2% to GBP 235 million, with growth slower than net ticket sales given the previously announced reduction in the U.K. commission rate. Gross profit was up 6% to GBP 193 million, with growth outpacing revenue given lower cost of sales. Turning to costs. We delivered a reduction of GBP 11 million across cost of sales and other admin expenses, more than offsetting the impact of the commission rate cut in the U.K. Cost of sales were down GBP 6 million, reflecting a reduction in the industry costs in the U.K. Other admin costs reduced by GBP 5 million, given the successful execution of our cost optimization plan in H2 last year. These savings enabled Trainline to deploy more marketing to Southeast France as carrier competition expanded. Our profit grew strongly, outpacing net ticket sales with adjusted EBITDA up 14% to GBP 93 million. This tracked above our previously stated guidance range for the year of between 6% and 9%, and it translated into strong earnings growth with adjusted earnings per share up 27% to GBP 0.126. Underlying free cash flow generation in the half was GBP 79 million. The strength of our cash generation underpins our enhanced share buyback program of up to GBP 150 million, which we announced in September. This is our fourth consecutive program. Over the last 2 years, we have bought back GBP 250 million worth of shares, equivalent to 15% of shares issued at IPO. With the addition of our enhanced program, it would equate to GBP 350 million of capital return to our shareholders over a 3-year period, reflecting our confidence in our outlook and the strength of our business. Altogether, I'm pleased with our performance in the first half, particularly our strong earnings growth and cash generation. Looking ahead to the full year, we continue to expect net ticket sales growth of 6% to 9% and revenue growth of 0% to 3%. Given our profitability performance in the first half, we now expect adjusted EBITDA to grow between 10% and 13% for the full year, above our originally stated guidance of 6% to 9%. Thank you. And I'll now hand back to Jay. Jody Ford: Thanks, Pete. Let's now talk about the progress we're making against our strategic priorities, starting with our U.K. consumer business. As the U.K.'s #1 travel app, our scale and user experience is unmatched. This provides Trainline with a competitive moat, which we are deepening, strengthening the loyalty and engagement of our customer base. First, we'll unlock value for customers through products like SplitSave and price prediction. Second, we solve for our customers' travel needs, including the launch of our new rail disruption features. I'll give you more details on this shortly. Third, we build trust and loyalty, scaling products like digital railcards. And fourth, we increase customer engagement, for example, expanding ancillary services we offer our customers. Let's discuss some of these in more detail. Starting with solving customer needs where we are rolling out a set of new rail disruption features. The features will support customers when navigating disruption on the rail network, leveraging the power of our AI and data tools. It will include travel forecast, which provides personalized notifications to customers in advance if their train is likely to be delayed or canceled. Customers will be able to see the location of their train in real time with a map interface powered by a signal box technology. Our forecasting capabilities will continuously improve, leveraging real-world data sources, including our base of 18 million customers transversing the rail network. Delay repay notifications, which alert customers when they are entitled to compensation. These will be an interim solution until the industry allows third-party retailers to offer fully automated delay repay. Our notifications will provide estimates of what each customer is owed plus a punch out to the relevant top website to complete their claim. Our beta test over the summer enabled the processing around GBP 1 million in compensation claims. And finally, our AI travel assistant, which offers customers a live native chat experience with real-time travel information personalized to their specific journey. Since launch, we've been selective in deploying the AI system within the app, yet it's already done strong levels of customer engagement. So far, it's had over 1 million conversations with customers, almost 1/3 of repeat users. And it's answering most queries with less than 10% handed off to customer service representatives. We'll soon to deploy the assistant more widely across the app, increasing the opportunity for customers to engage with it while also expanding its breadth of real-time knowledge capabilities. Let's watch a short video that brings to life our suite of rail disruption features. [Presentation] Jody Ford: Comes to building trust and loyalty of our customers Trainline has cultivated strong brand affinity over many years. In fact, we are the most trusted brand in the U.K. rail. And our brand consideration is at record levels, significantly outperforming all other retailers. This has supported Trainline's continued growth in the U.K., particularly when faced with notable competition, and it will become increasingly important in an AI-driven search world. One example of how we're building customer loyalty is through digital railcards. We've enhanced our selling within the booking flow, highlighting to customers how much they could save by buying a railcard alongside their ticket. This has scaled our user base 12% to 2.5 million in H1. By doing so, we are enhancing retention of highly engaged customers who transact 4x more often than non-railcard holders. And we're gaining particularly good traction with younger cohorts. Our share of the 16 to 30-year-old railcard segment has now increased to 44%. We're increasing the opportunity for customers to engage with Trainline, broadening our range of ancillary products and services and growing additional revenue streams. These include hotel bookings and insurance sales, which grew strongly in the first half. At the same time, we are optimizing how we monetize our existing products and services. For example, this year, we are focusing on enhancing advertising revenue and in the first half, improved the positioning of ad placements within the app. Likewise, we are currently running tests for a SplitSave fee. This could present a long-term option to supersede the booking fee where SplitSave applies. Now turning to our international business. We continue to position ourselves as the aggregator of choice as European markets liberalize. Over the summer, carrier competition expanded on the EUR 1 billion high-speed corridor in Southeast France. In June, Trenitalia launched 5 return services a day between Paris and Marseille. This is already having a noticeable impact with average fares down 27% on the route. In addition, Trenitalia almost doubled their operations between Paris and Lyon to 9 services a day, and that's due to increase again to 14 services a day from December. We are positioning ourselves as the aggregator of choice on the French Southeast high-speed corridor. We are leveraging our highly rated mobile app to showcase all the fares from all the high-speed carriers with features that help unlock value for customers like TopCombo, which allows customers to stitch together different carriers for return and [ multi-leg ] journeys. At the same time, we're positioning ourselves as the partner of choice for carriers, driving customer demand and in turn supporting their growth. As you know, we paused brand marketing in France a couple of years ago. With Trenitalia's recent expansion, we resumed our efforts to grow our awareness in the Southeast. We are sponsoring Lyon-based football team Olympique Lyonnais, and we are running large campaigns in online video and [ out of home ] at stations and transport hubs around Paris, Lyon and Marseille. We already have good levels of brand awareness across France at around 28%. Our focus on Southeast France has significantly increased brand awareness in the region. Across Paris, Lyon Marseille, our blended awareness score was up 12 points this year to 48%. That's supporting strong net ticket sales growth on the Southeast network, including sales between Paris-Lyon and Paris-Marseille, up 34% in the second quarter. France is a huge rail market worth about EUR 11 billion today. It is expected to grow to around EUR 14 billion or EUR 15 billion by 2030, of which around EUR 7 billion will come from aggregated high-speed routes. We see the Southeast network as a gateway for growth elsewhere in France as carrier competition expands over the coming years. This includes Proxima, who will operate under the Velvet brand. They will run trains between Paris and cities in Western France. This will include Paris de Bordeaux, France's second busiest rail route. In addition, Le Train, ilisto and Renfe are all due to launch domestic services in France too, while cross-border carrier competition is set to arrive in 2030 with Virgin Trains set to launch. In Spain, we're evolving the balance between growth and profitability. Spain has been an ideal market to hone our aggregation playbook, while carrier competition expanded across its EUR 1.5 billion high-speed rail market. We invested behind our user experience and our brand awareness. In turn, we have scaled our net ticket sales, giving us a considerable lead versus other market aggregators, and we continue to see runway for further growth. At the same time, we're increasing our focus on driving profitability in Spain. We are normalizing marketing spend while placing more emphasis upon customer engagement and growth of transaction frequency. Likewise, we are finding new ways to help carriers to grow. We recently launched Sponsored Journeys, a paid service that allows carriers to increase their prominence within our search function. We launched our first pay campaign with [ Durion ], which has been a real success, notably increasing customer demand. Across our international consumer business, increasing ancillary revenue remains a growth opportunity. Having made good progress in hotels last year, in H1, we bolstered our insurance offering with the launch of our new trip insurance product. Often alongside our existing Cancel for Any Reason product, this drove a material increase in insurance revenues. Moving on to Trainline Solutions, our fastest-growing business unit and now generating over GBP 1 billion in net ticket sales. Business travel is our main growth opportunity here and represents around 50% of Trainline Solutions sales. This is generated through our own branded channels as well as through our B2B distribution business. B2B distribution allows travel management companies and other business travel platforms to offer rail tickets to their respective customers. Primarily a U.K. business, we increasingly support our partners to sell tickets from multiple European carriers as well. They can do that all through one simple seamless connection on global API rather than tackle the complexity of connecting to multiple different carriers. As a result, international B2B distribution grew 55% in the first half. This business has good momentum. Many of the world's largest TMCs and travel platforms are now connected to our global API and trying to grow ticket sales. And in September, we expanded our partnership with the world's largest travel management company, Amex GBT, giving us confidence in our future growth. Finally, let's discuss our Digital Pay-as-you-go solution and its new trial in the U.K. As a recap, pay-as-you-go travel provides a convenient option for short distance journeys, also known as contactless or tap in, tap out. It's well established in cities like London where it is frequently used by commuters. However, prepaid ticketing generates most of the passenger revenue for the U.K. rail industry supported by price discrimination. It's far more suitable for long-distance trains where passengers tend to book in advance to get cheaper fares and reserve their seat, and we don't expect that to change. As you know, we've developed an in-app pay-as-you-go solution called digital pay-as-you-go. It leverages our geolocation technology from Signal Box and offers capabilities way beyond traditional tap in tap out systems. For customers, this includes real-time pricing, integrated railcard discounts and the ability to buy group and family tickets. For the industry, it requires no dating infrastructure, reducing the CapEx outlay and the time needed to deploy pay-as-you-go networks. We, therefore, see digital pay-as-you-go as a better solution, which when rolled out can increase our scope to serve commuters and travelers booking on the [ day ]. In September, digital pay-as-you-go trial went live on the East Midlands rail network. This represents a strategic opportunity to test our solution and demonstrate the benefits of digital pay-as-you-go in a live environment. Of the 4 trials awarded by RGG, the East Midlands trial is the most complex given it encompasses 3 different cities, Derby, Nottingham and Leicester. While it's still early days, we are learning fast and feedback that it worked flawlessly is highly encouraging. Before we wrap up, let me play a video showing our digital pay-as-you-go trial in action. [Presentation] Jody Ford: Before I hand over to the operator for questions, let me summarize the key takeaways from the [ heart ]. We have delivered a robust operating performance, improved profitability and strong cash flow, underpinning our enhanced share buyback announcement. And today, we've increased profit guidance for the year, reflecting our disciplined approach to cost management. Looking ahead, I see sizable growth opportunities for our 3 business units, all of which are leaders in their respective markets. In U.K. consumer, we are deepening our competitive moat, launching new rail disruption features and scaling digital railcards. In International Consumer, we are positioning ourselves as the aggregator of choice in Spain and Southeast France as carrier competition increases. While in Training Solutions, we are supporting B2B travel partners as they expand their rail travel sales across Europe. And finally, as you've just seen, we're off to a great start with our digital pay-you-go trial in the U.K., increasing our scope to grow sales of commute and short distance travel. So thank you very much for listening. I'll now hand over to the operator for questions. When asking please state your name and organization. Operator: [Operator Instructions] Our first question today comes from Gareth Davies with Deutsche Numis. Gareth Davies: Just -- First one from me, probably the obvious in terms of PBR consultation document this morning. At face value, it appears to tick a lot of boxes in terms of sort of level playing field and operating in a fair and transparent way on an ongoing basis. Would just be really interested to get your sort of headline thoughts on the key points that are in there and possibly anything you felt should have been covered and isn't. The second one is on the digital pay-as-you-go trial. It sounds like that's going well. Just wondering, is there any scope for that trial to be expanded and you to be allowed to use your own app and go beyond the sort of 1,000 customers that are currently doing it with East Midlands?. And then final one, just on the -- Google was obviously a headwind, particularly salient in the international business. Just wondered, now that we're lapping comps, presumably that is becoming less of an explicit headwind. Can you just give us a little update around how that's evolved? I mean, taking on board that GEO is going very well. But clearly, Google is still pretty important for international inbounds. Jody Ford: Thanks very much, Gareth. Yes, let me start at the top there with the GBR question. And look, there's been lots of news flow over the last sort of few months and an important day today. Let me go kind of right back up to the top and just sort of state that, look, I do think we're actually many years away from a GBR app launching and the 14 different sort of top existing apps ultimately closing down and those customers having to make a choice potentially to go to the GBR app. I think what's driving this is clearly the government's desire to consolidate from a customer point of view to take 14 apps into one and also to improve from a kind of cost base point of view. And then look, just to say right upfront for everyone, we look forward to that moment when it happens. We back ourselves to compete with whatever comes. And I think if you remember where we were 3 years ago with Uber launching, there was concerns and questions, a company that had huge backing that threw a lot of money at the sort of discounting tickets and massive kind of marketing campaigns. And I think 3 years later, you can see kind of how customers have reacted in terms of the strength of the Trainline offering. So sort of to set that out right at the front. Look, as you say, what we're seeing and as I mentioned earlier, principally today is about the launch of GBR primary legislation, which is about the creation of GBR. This sort of has to happen for the government to stand up GBR because of the sort of legal, financial, operational, health and safety and indeed organizational questions that need to be answered. And so that's a lot of the sort of priority for the government and GBR. As you also referenced the consultation document that was published this morning. Look, let me share a few thoughts on that. I think overall, we do actually see that, as you suggest, there's a sort of significant step forward, both in the context and direction of travel for the government. So let me sort of pick a few parts out where it's I think are encouraging. And I just upfront for those who've not had a chance to read that yet, it talks about the creation of a GBR retail unit within the overall GBR. And I think that's important to kind of note, and the elements within that, that I think are helpful. First is it talks about within that GBR retail unit, a separation of the industry management functions from the sort of commercial functions, where the former would be a lot of the RDG existing kind of organization and managing the relationship with -- amongst other third-party retailers like Trainline, whereas the latter of the commercial arm would clearly be the arm responsible for sort of standing up the app and the website and ultimately, we would compete with them. And I think that separation is really important and very helpful. Secondly, it talks about the establishment of a code of practice of how GBR interacts with all participants, obviously, third-party retailers being really important there. And that code of practice, and indeed, we've been pushing for a codification, right, of how this would operate. And I think that will be a really important step and the fact that, that will exist is really important and ultimately enforceable under GBR's license, future license. And then finally, what we get today is sort of laying out that there's the ability for -- if we felt that GBR weren't living up to or live in that code of practice for us to challenge GBR working with through the ORR and really to effectively ensure GBR do indeed operate within an open and fair market. So I think those elements are really helpful. And it's just worth noting these set of, if you like, safeguards don't exist today. And so that feels like very helpful. I think in terms of what we still need to see and it is somewhat self-evident, like this code of practice is not yet defined. And so I would anticipate, but don't have a clear time line, that work would begin on that in the early next year. And our understanding is it would be led by the ORR working with the DFT. And I would anticipate that the CMA would have significant input into that process along with obviously ourselves and other third-party retailers. So I think all of that together provides reassurance. And I think in the way you asked the question, that's I'm encouraged by kind of all of the above with important questions still to answer. What I would just note is this all relates to future design. And as I said, I think this is sort of multiple years kind of from fruition. What's also important in the interim is, as I just laid out in the presentation that we see kind of resolution on areas like delay repay in the interim so that kind of Trainline customers have access to that kind of one-click service. And so that's gone pretty deep on kind of retail and I just spend a minute then talking about the reality of what that means for the app, which is where a lot of the questions end up going. Why do I think it's potentially multiple years away? I think there will -- the next phase and the details of this will be some form of exercise that most likely is a procurement exercise from the government around working out what they want to procure. There would then be that process complete, and there would then be a build phase to develop what would be a relatively important app that would have to sort of handle a lot of different scenarios. It can't just do what [ LNER ] does on long distance or what Northern does on regional or some of the use cases of Southeastern coming in on community. It has to serve all of those. And so what I anticipate and I'm somewhat speculating here is that there would be a period of dual running. So even once the app was created, there would be a GBR app, which will be an important political win. But ultimately, that would dual run alongside the existing top apps and at various points, they would begin to fold those apps into GBR and the customers would then have to kind of restart on the new app. And to my very first point, we're excited for that opportunity. If you kind of think forward a few years and sort of the innovation we're laying out today and think forward another 3 years, I get pretty excited about where we'll be and GBR will kind of be just starting, if you like there. So that's sort of a bit of a state of the nation, right, in how we see all of the GBR points there. And to come to your second question, digital pay-as-you-go trial. Look, of course, I hope there is scope to expand and ultimately be able to put it into our B2C app. I think at this stage, we don't have visibility of that. This trial runs through to the summer. I think it's kind of early days. The government is learning. But I'm really encouraged just to underline like how well we have brought this to life. I think there have been apps that have kind of done the fare capping and the tapping now. But no one has really brought this all together with the route planning and the pricing and I think -- and the kind of UX. And so ultimately, if the government kind of wants -- or any government across Europe wants to sort of bring this to life at scale, having in the U.K., 18 million customers to help bring this to life, I do see that ultimately, it could be in the government's interest to see the third-party retailers offering this type of functionality. So look, that is obviously the aspiration. It's probably too early to speak with any precision on that yet. And then look on kind of Google headwinds and where we're at there. And I think if we sort of stand back on the international results, it's a portfolio of businesses. And as we reported over the last couple of years, we initially kind of Google trains and then we saw this expansion of the page as kind of the AI features coming in and so forth, and we did talk about that as a headwind. I think the way to think about that is that actually impacted different GEOs at different points. And I would say in the very earliest GEOs, we are, as you suggest, beginning to see that headwind turn into a tailwind and I begin to see some green shoots in some of our GEOs coming through as we've kind of entered the half, which is helpful. We don't actually begin to fully lap all of those GEOs and some of the domestic European GEos to later in this half. And so we don't yet see that. But look, I am encouraged in the spirit of the question that I do think that headwind turns into a little bit of a tailwind. So we'll keep close to that. Thanks, Gareth, for the questions. Operator: Our next question comes from Alastair Reid with Investec. Alastair Reid: A couple from me as well, sort of following up on some of those things. I guess, firstly, with the consultation today, with sort of GBR ticketing not being sort of structurally and commercially separated out, do you have any sort of concerns it could lead to potentially commission rates being reduced or the ticketing having sort of less need to cover its own costs, not being sort of overtly self-funding? And secondly, I think you touched on this already. Can you give us any examples you've seen in the past where talks have changed from one provider to another and kind of what share gains you have made in those switching moments? And then lastly, just on the topic of your sort of moats that protect the business from theoretically being disintermediated by sort of agentic AI. Can you talk about is the underlying market data in the industry sort of freely and easily available to all tech firms? And, Yes, I'll leave with that. Jody Ford: Thanks very much. Let me pick up on the first one and then you can perhaps take the second one and come back on the third. So in terms of the broader consultation and how we see the structure of that, I think kind of the direction of the question is going to the very nature of the open and fair retail. Look, we absolutely anticipate that we will be retailing on a fair basis with GBR. And I think where you're going really is the code of practice and how that is defined and we're going to have to engage and wait to see that to come through. I think what I take kind of comfort from is this statement of the value of third-party retailers and the value they've driven in terms of innovation and driving up standards for passengers. So I think that's where we now need to see that kind of actually codified out. And look, the CMA is still involved, and they will be involved going forward and they've really committed to a level playing field. But those are areas that we'll be engaged with over the coming kind of months. Pete, do you want to pick up on the second question, the provider change? Peter Wood: Yes. We've had a couple of examples in the past, Southwest Trains becoming Southwestern Rail, Virgin becoming Avanti were both kind of moments where there were shifts, and kind of as Jody outlined, there is this moment where customers have to make a choice. And from a traffic perspective, which doesn't fully represent sales necessarily, there's been quite significant shifts in the initial kind of period of time. So look, maybe around 30%, 40% in the first 6 weeks or so is something that we have seen in the past. So yes, it really does represent an opportunity for us as these things unfold. Jody Ford: Great. And then to come back to the point on U.K. moats and I think the role of the agentic AI. Look, what I'll do is I'll go up a level. And if I haven't answered the question, please come back because there's quite a lot potentially in that. We think about AI within the business in sort of 3 different areas. The first is how we productize AI and into the Trainline app that really speaks to things like the AI assistant and going forward. We talk about the ecosystem where it's a way to get traffic kind of another surface and then we talk about kind of productivity. I think you're really picking up on that middle one around the broader ecosystem. But just to say we're excited for the first point on productizing. Really feel like that AI is giving us kind of ability to solve new customer problems as it relates to disruption, not just around an AI assistant, but the data sets and predicting travel patterns and potential delays. That's kind of cool stuff. And I think speaking to the kind of moat point here, I just don't believe that there's many other players who can have the data and the dataset the kind of data smart and AI capabilities in our organization and the ability to invest behind it. So we're really pretty excited for where that's going. Then to the ecosystem point. And look, I'll give you my perspective on this, which is I've been doing this for well over a couple of decades now and watch various players enter the market over that period of time and work with them to develop -- as they develop sort of as traffic sources. And I think we're at that phase. And I think the announcements we have seen from ChatGPT, for example, increasingly give me that sense that they really want to ultimately send traffic to us and find a way over time to monetize it, which we think is a good thing, right, because it's much better to have 3 players kind of Google, Meta and let's say, ChatGPT that we're effectively buying qualified high-quality traffic from rather than having a single player or 2 players. And look, I do think that's going to take some time. These things, whilst we see and we spoke to the growth, it still represents less than 1% of our total traffic. And so I think it's -- I think we're talking years for these ad products to develop. I don’t think it's happening in the next few months. And so that's kind of how we view it evolving. And then I think you specifically asked about moats. And I kind of break our moat into 2 sets. We've got what I call our consumer moat and our platform moat. And you were pushing on the platform moat. But just as a sort of reminder, we have a very strong consumer moat. And I think in many things transversing technology change, the consumer moat really stands and is hugely important. And that's about the quality of our brand. It's about the sentiment that exists towards it. It's about our really deep vertical UX. And it's about the app installed base, like the fact we have 18 million users in the U.K. or 27 million across Europe means we have this really strong engaged base that will want to keep using us. And I think when you extract out and say open AI would have to develop a great vertical UX, not just in trains, but in hotels. in planes, in cars, but also in black dresses and selling drones. So it gets very complicated. And so they will definitely work with the great brands and the great UXs that exist out there. And I think that's part of the moat. And then finally to finish, in terms of that platform moat, yes, we have a huge number of data feeds that go back to the industry all over Europe. And these are kind of complex and difficult to develop, and that's part of the moat. And then we have huge commercial agreements because as you know, we're basically selling billions of pounds worth of tickets every year, and that requires bonding and obviously, a lot of due diligence. You can't just initiate these things. It's not like we're selling a few thousand pounds worth. And so that is also a moat, which makes it incredibly difficult to just start a business and then even if you were to, to make it work at scale becomes even more challenging given the sort of size of the numbers we're talking about. Thank you for the question. I hope that picked it all. The next question operator. Operator: Our next question comes from Ed Young with Morgan Stanley. Edward Young: I've got 2 on numbers, please, and then one on strategy. So on the EBITDA guidance upgrade, you've laid out some of the drivers of the stronger EBITDA outlook. But I wonder if you can help us understand what changed specifically since you gave the guidance in September? Is it fair to say that stronger top line has endured into H2? Or is there other moving parts that led to your change in posture there? Second of all, free cash flow growth was suppressed by working capital movement a bit in H1. Should that reverse in H2? And so should free cash flow growth mirror profit growth for the full year? And then finally, on Spain, I know you touched on it in the presentation, but I'd love to hear a bit more color about why now is the right time to move to this more balanced posture for growth versus profitability in Spain? Jody Ford: Great. I'll let Pete pick the first 2 up and come back around on Spain again. Peter Wood: Yes. Thanks, Ed. Yes, let me talk with the top line and then get to EBITDA. And if I think about the U.K. business, we've had a robust first half performance. And there were a few benefits, as I've kind of highlighted, lapping strikes and finally get those behind us kind of supported that figure somewhat. And we do have the headwind of over expanding as the year further unfolds. We've obviously had the first 47 stations which dropped in February. There are another 50 or so which are expected either in December or in January, and there are more later in the year. So there's a kind of headwind that's building. And I think net-net of that, I would expect H2 to be growing at a slower rate overall versus H1. Nonetheless, the EBITDA has performed well in H1 and that confidence we're kind of taking forward into H2. Of course, there will be drop-through from that performance at the top line. I think the other thing of note really is how we are thinking about marketing spend in international. In H1, as Jody outlined, we put more into supporting the expansion of the France and the Southeast corridors there. And that will somewhat persist into H2, where there's more services being run by Trenitalia. So we'll keep pushing there. But in Spain, we're kind of balancing growth and profitability. And look, if I take a real step back here, we started what, 3, 4 years ago when aggregation in Spain was clearly going to be this kind of big all-in-one go moment and we had a very small footprint there. And so we really pushed hard to build brand awareness to make the most of this kind of very dynamic moment for the rail traveling public in Spain. And we pushed hard on the marketing spend, and we've been really pleased with the strong growth that we've seen there. What we've now reached though is a point of kind of evolution where we're developing the next bit of the playbook. We're thinking about how we balance the profitability and the growth. And so we should -- you should expect marketing in international as a result of that to step down a bit in H2 and net-net will be also additive to delivering on the EBITDA guidance that we have shared today. And then your question on free cash flow growth and the working capital movement. Yes, this is always a slightly tricky one because the day of the week and the slightly odd 13 periods of 4 weeks that the settlement process in the U.K. rail industry means that we get some oddities on the 2 points in the year that you see it. Fundamentally, there is a good guide here for cash from a working capital perspective. It is typically a bit better at August than it is in February just because of the cycle of these things. But, when it's a Monday or a Tuesday, that can impact it all as well. So net-net, I don't think you should pay too much attention to the kind of puts and takes that we see at the different points in time, just believe that there is a goodness that lies underneath. And it's normally around the kind of GBP 15 million to GBP 20 million across the year that we would see on average even if that's not at that particular point in the year. Jody Ford: Thanks, Pete. And I think Pete mostly answered the third question around Spain, but let me just give you a little bit of a strategic overlay there. As Pete said, this was a moment in time when we saw what was happening in Spain. It was -- we were almost a 0% market share. We were in a position where all the lines and all the competitors were launching in a kind of 12-month window, and we knew we had to show up there with Trainline not really having a footprint to date. And through those 3 years, we've got to having double-digit market share. And I think importantly, we are now the #1 domestic operator by a distance, significantly ahead of [ Trez ], of Omio, of Uber and any of the other players and the kind of go-to place for aggregation. And so really, we're moving to what I would call balanced growth. We're still leaning forward into Spain and invest in that, but we just don't need this kind of launch level marketing spend. And as you've seen us over the last few years, we sort of play the overall portfolio. And we're now moving, if you like, that firepower into France as that launches to ensure that we become and remain, frankly, in France, the #1 domestic operator, and it's just a moment in time. And look, you have heard as it relates to Italy, we see a huge opportunity there in 2027, and we will think about marketing there again. But we have to kind of balance the overall portfolio and have these kind of launch phases and then what I call more balanced growth phases. Thanks for the questions, Ed. Should we take another? Operator? Operator: Our next question comes from Andrew Ross with Barclays. Andrew Ross: I've got 3, if that's okay. The first one is to follow up on Alastair's question on commission rates. Is it completely ruled out that there will be no review of commission rates for the industry as part of the detail of how GBR kind of comes together for next year? Or kind of more broadly, where are we at on that as we kind of transition from RDG into GBR around the industry commission rate? That's the first question. The second one is on pay-you-go and I guess, scenarios as to when a kind of nationwide contract may be awarded or how this might look and kind of what it might mean for you if you were or weren't to get it? And I guess I'm thinking about kind of the incremental take rate you might achieve if you were to kind of get a broader contract and any kind of cannibalization risk to your core business that you think may or may not happen, I think maybe not given the solution will be portable into your app, as I understand it. Third question is on Agentic AI. Kind of taking your view, Jody, that it's more likely for OpenAI partner with kind of a vertical specialist like yourself, which I agree with. Do you worry about any risk to kind of time spent based monetization, things like cross-selling hotels, ads, that type of thing if we move into a world of kind of agentic transactions and booking trains? Jody Ford: Thanks, Andrew. Look, on that first point, this is -- we've discussed kind of many times, I guess, the idea of commission rates. Look, I'll give you the overall kind of answer here. They have been reviewed, I think, 3 times in the last 20 years every time they've essentially come back and concluded we were at the right commission rate apart from, as you know, at the last time where it was a net 25 basis points impact. We feel that the commission rate is absolutely at the right level and multiple independent players, every time this has been looked at, everyone has concluded we're at the right level. And so I think that's what gives us confidence the way we operate, we have a number of years, kind of 3-plus years of confidence in our commission rate. Look, it's never off the table forever, right? But there is no discussion of that. And so I look forward, as I've always done, believing we're set at the right commission rate. Pete, do you want to pick up on the second one. Peter Wood: Yes. I think just as a reminder, the trials that we have are kind of the first step forward. And quite deliberately, the government is testing different technologies and really seeking to learn what those technologies offer, how customers engage and relate with the different aspects of what's being tested. So we're kind of really quite early on. And whilst we see some real political support for finding a solution for this, and there's mention of this in the [ condoc ]. So that kind of gives you an indication of the direction of travel. There's a lot of detail that still needs to be worked out in terms of how this will be implemented. And as we said in the presentation, I think whilst one route might be a kind of nationwide contract, we don't think this technology is particularly helpful or is likely to be implemented for long distance travel, right? So perhaps a nationwide contract might enable a series of different cities to pick it up. But even that's not a given at the moment as to the way forward, it could be rolled out more regionally. So there's still a lot to see there. Likewise, the commercials that would sit alongside this would need work. I think it is fair to say that on the basis of kind of fair and open, we would expect if there is some sort of national implementation that even if our technology wasn't chosen, there would be some way for us to partake and offer that to customers. So anyway, a lot of details still to be worked out. We're really pleased about the progress we're making and the political support for continuing down this path. We'll have to see how it goes. Jody Ford: And then let me pick up on this sort of Agentic AI and the sort of role of transactions. If I understood, the question was, would we lose other services if it was kind of the transaction occurred within, let's say, text interface in a ChatGPT app or something. Whilst I do see that as a use case and one could imagine certain trains being booked that way, I think we have to assume the core use case is kind of what happens on Google and on Meta. If they fully want to realize the value of that customer, then ultimately, there needs to be a high quality conversion rate. And the best way to do that is for the customer to go into, in our case, a Trainline user experience or it could be any other shopping or commerce user experience where if you think about the pages we show and the clarification of which fare you want and the flexibility of it and frankly, what [ time ] train you want and the ability then to get customer support and to get your ticket and your barcode, that's clearly better done within our app or some experience that is effectively our app. So I still envisage a world where the full experience arrives and they have given us very qualified traffic. Worth knowing that we are absolutely developing and have developed the kind of frameworks of the MCP piece to allow the AI system to engage. And you could imagine the early stuff happening, if you like, within ChatGPT, where we work with ChatGPT, if you like that and then popping into our experience to actually make the transaction come to life. But look, we're all hypothesizing of how this will look. And just to say again, it's less than 1% of traffic right now in our most sort of forward GEOs. And so I kind of feel pretty good. We've got time, I think, for just one more question, and then we'll bring to [ a close ]. Operator: Our final question comes from James Lockyer with Peel Hunt. James Lockyer: I'll just ask 2 at this stage, based on AI. So it's good that you've spoken about 1 million conversations or over 1 million handling customer queries but less than 10% being handed over. Based on the types of questions that are being asked versus the typical questions that your human agents are getting, once mature, where might that 10% land? And what level of cost savings might you be able to realize? And secondly, can you talk about how much -- how you're using AI internally? You mentioned that you are, but it would be good to hear about what we're doing there and what’s companies thinking they'd be able to grow the top line without growing headcount as fast as they might have done without AI. Is that something you're finding too? So any ROI productivity or hiring stuff you can provide there would be useful. Jody Ford: Sure. And given we're kind of at the top of the hour, brief answers, I guess, I'd say overall, the types of questions, what it's allowing is customers to get reassurance, things that they kind of like just didn't know how to -- is this ticket valid on this train? And they would then go and try and find station staff or ask a friend or start reading very detailed conditions. And AI is doing a really great job of that. It wasn't that they were necessarily going to customer service. But where you're going is right, I do think it allows efficiency. It allows our customer service teams to work on the higher value questions, if you like, because it filters out a lot of the ones that can easily be handled by AI. And I think, yes, where you're pushing right, it does lead to kind of greater productivity. As it relates to what we're doing internally, the lots of good stuff and yes, in terms of using the kind of copilot style tools, in terms of helping engineers code and that is definitely seeing kind of productivity improvements. And I think the spirit is to be able to do more with our existing employee base is absolutely how we're looking at it. And then just allowing other things here, we have an experimentation GPT, right, which has got now all of the experiments that we've kind of almost ever done over the last few years in one place, which can be accessed by a UX or a product or an engineering or commercial really quickly versus having to frankly call 9 different people and try and find out, which is what happens in most companies up to this point. And so we're increasingly finding those use cases, which are driving a more cohesive workforce and allowing us to kind of better pull that knowledge and be quicker in the development. So I think again where you're going, delivering more with our existing base is very much how we're thinking about it. Thank you very much for the questions, James, and thank you all for listening today. That's all we've got time for. To recap, we've had a strong first half, delivering a robust operating performance and improving profitability. And in turn, we have today improved our guidance for the full year and see sizable growth opportunities across all 3 of our business units. And I look forward to speaking to you all again soon. Thank you.
Operator: Hello, everyone, and welcome to the Trainline HY 2026 Results. My name is Emily, and I'll be coordinating your call today. [Operator Instructions] I will now hand over to CEO, Jody Ford, to begin. Please go ahead. Jody Ford: Good morning, everyone. Thank you for joining us today for our half year results presentation. I'm Jody Ford, CEO of Trainline, and I'm joined by Pete Wood, our CFO. Let's first go through the disclaimer. On to the agenda for today. I'll give an introduction, briefly discussing the progress we've made in the first half. I'll recap on the opportunity ahead and update on the regulatory backdrop in the U.K. Pete will talk you through our financial performance. I'll then update you on how we are progressing against our strategic priorities and finish with an overview of our digital pay-as-you-go trial, which we recently launched in the U.K. After that, we'll hand back to the operator for questions. As a reminder, we are Europe's #1 rail app, delivering a market-leading user experience for our customers. We aggregate all major carriers and fares, offering a comprehensive range of value-saving products and features. We focus on making the booking experience as seamless as possible. And we use machine learning and AI to supercharge the experience to get customers from A to B. It's our combination of value, convenience and innovation that sets us apart. And that is evident in our scale today with far more app downloads than any of our peers. The strength of our customer proposition is reflected across the group with all 3 of our business units leaders in their respective markets. In U.K. Consumer, we have the #1 travel app in the U.K. In international consumer, we are the largest rail aggregator in Europe. And in Trainline Solutions, we have the leading B2B rail platform across the U.K. and Europe, which now generates over GBP 1 billion of annualized net ticket sales. Looking ahead, we see significant headroom to scale all 3 business units. In U.K. Consumer, we will deepen our competitive moat while increasing the lifetime value of our 18 million strong customer base. In International Consumer, we will deploy our proven aggregation playbook across France, Italy and Spain. By 2030, these markets together should represent a TAM of around EUR 23 billion, including EUR 12 billion generated on aggregated high-speed routes. And in Trainline Solutions, we will scale into the EUR 6 billion business travel opportunity across rail. Our performance in the first half demonstrates the progress we are making against this headroom opportunity. In the U.K., we delivered robust growth, reflecting continued strength in leisure travel alongside the ongoing digitization of rail ticketing. In international, we delivered positive early momentum on the French Southeast high-speed network with sales up 34% following Trenitalia's expansion of services over the summer. And in Trainline Solutions, B2B sales grew strongly, particularly in Europe with international B2B distribution up 55%. Operating leverage amplified our top line growth and the benefits of our cost optimization exercise last year, driving a 14% increase in EBITDA. As a result, we have today increased our profitability guidance for the year, as Pete will discuss shortly. This follows our announcement in September of an enhanced share buyback program, underpinned by our strong cash generation. The enhanced buyback implies we will repurchase 350 million of shares over 3 years. That's around 1/3 of our market cap. Before I hand over to Pete, let me update you on the regulatory backdrop in the U.K. This morning, the government published the outcome of its consultation on the Railways Bill with primary legislation to follow later today. This will allow for the establishment of GBR as an organization as well as the appointment of its key leaders. Since our full year presentation in May, we have maintained an assertive stance with government, pushing them to deliver on the commitment to an open, fair and competitive future retail market. While in parallel, we've sought to resolve existing examples where train operating companies self-preference today. Self-preferencing is where talks offer features within the apps, but we are prevented from offering and market them in ways that we are not allowed to do. This undermines the fair and open competition. We've consistently put forward the case that these practices be rectified. We're making progress. As you can see on the left-hand side of this slide, Previously, Trainline was prevented from offering some temporary fares that could be found on operator websites, and we were blocked from advertising in almost all stations and trains. Following our sustained engagement, the government confirmed earlier this year on both fronts, independent retailers should not be discriminated against. This is a clear step forward. However, we still face blockers and obstacles when it comes to advertising at the station. Furthermore, notable examples of self-preferencing continue to persist. We are prevented from offering train operator loyalty schemes within our app, and we are unable to provide automated delay repay, a major pain point for our customers. We continue to engage with government stakeholders in the wider industry to remove these restrictions and in turn, level the playing field. At the same time, we are innovating to extend our market-leading user experience and cement the loyalty and engagement of our customers. With that, I'll hand over to Pete to talk through our financial performance. Peter Wood: Thanks, Jay, and good morning, everyone. Before I step into the financial performance for the group, let's briefly unpack the performance of each of our business units. Starting first with U.K. Consumer, net ticket sales grew 8% to GBP 2.1 billion, reflecting continued strength in leisure travel and ongoing digitization of rail ticketing. Growth was supported by further market recovery, increased industry rail fares and lapping strikes the year before. As anticipated, growth was partly offset by the first phase of Transport for London's Project Oval expansion, which launched in February and will expand further in H2. Turning next to international, where net ticket sales grew 2% year-on-year to GBP 594 million. Growth was led by domestic customers, particularly on newly aggregated routes such as the high-speed network in Southeast France. This was offset by a 2% decline in foreign travel sales, primarily given changes to Google search results page and a leveling off of inbound demand from the U.S. for European rail travel. I'll now step through the underlying drivers in more detail. This slide breaks down the different market segments across our international business with each segment including domestic and foreign travel sales. You can see that the growth rates vary, reflecting how we are actively managing marketing investments and prioritizing routes with carrier competition. Turning first to Spain and Southeast France. We grew 11% across both markets as we positioned ourselves as the aggregator of choice, partly offset by downward pressures on Spanish rail fares. These markets now represent 22% of international net ticket sales. Elsewhere in France and in Italy, growth was more modest at 3%. Within these markets, which account for 2/3 of international net ticket sales, we continue to manage marketing spend as we await further carrier competition. In Italy, that's expected to happen from early 2027 with [ SECF ] granted slots to run high-speed rail services last month. And in the rest of France, carrier competition is set to expand shortly thereafter, which Jody will discuss later. Germany and the rest of Europe were down 16%. While these markets represent longer-term growth opportunities for Trainline, we are actively prioritizing the markets that have liberalized or are set to liberalize. While changes to Google search results page remained a drag on growth in H1, we are seeing encouraging early signs of traffic building from generative engines. We are the #1 cited rail app in ChatGPT across almost all our core markets, and we are leading in citations from Google's AI overview module, significantly ahead of our other rail aggregators. As a result, sales from generative engines have grown exponentially, increasing 13-fold since Q3 last year, albeit from a low base. Let's move next to Trainline Solutions. Net ticket sales grew 18% in the half to GBP 529 million. Growth was led by B2B distribution and our fastest growing subsegment up 36%. This reflected growing demand from corporate shifting to rail travel as well as our enabling travel management companies to scale their ticket sales in Europe, including the likes of Novan and SAP Concur. Jody will talk shortly in more detail about the strong momentum this business is generating. Bringing this together, top line growth for the group was towards the upper end of our full year expectations. Group net ticket sales grew 8% to GBP 3.2 billion. Revenue grew 2% to GBP 235 million, with growth slower than net ticket sales given the previously announced reduction in the U.K. commission rate. Gross profit was up 6% to GBP 193 million, with growth outpacing revenue given lower cost of sales. Turning to costs. We delivered a reduction of GBP 11 million across cost of sales and other admin expenses, more than offsetting the impact of the commission rate cut in the U.K. Cost of sales were down GBP 6 million, reflecting a reduction in the industry costs in the U.K. Other admin costs reduced by GBP 5 million, given the successful execution of our cost optimization plan in H2 last year. These savings enabled Trainline to deploy more marketing to Southeast France as carrier competition expanded. Our profit grew strongly, outpacing net ticket sales with adjusted EBITDA up 14% to GBP 93 million. This tracked above our previously stated guidance range for the year of between 6% and 9%, and it translated into strong earnings growth with adjusted earnings per share up 27% to GBP 0.126. Underlying free cash flow generation in the half was GBP 79 million. The strength of our cash generation underpins our enhanced share buyback program of up to GBP 150 million, which we announced in September. This is our fourth consecutive program. Over the last 2 years, we have bought back GBP 250 million worth of shares, equivalent to 15% of shares issued at IPO. With the addition of our enhanced program, it would equate to GBP 350 million of capital return to our shareholders over a 3-year period, reflecting our confidence in our outlook and the strength of our business. Altogether, I'm pleased with our performance in the first half, particularly our strong earnings growth and cash generation. Looking ahead to the full year, we continue to expect net ticket sales growth of 6% to 9% and revenue growth of 0% to 3%. Given our profitability performance in the first half, we now expect adjusted EBITDA to grow between 10% and 13% for the full year, above our originally stated guidance of 6% to 9%. Thank you. And I'll now hand back to Jay. Jody Ford: Thanks, Pete. Let's now talk about the progress we're making against our strategic priorities, starting with our U.K. consumer business. As the U.K.'s #1 travel app, our scale and user experience is unmatched. This provides Trainline with a competitive moat, which we are deepening, strengthening the loyalty and engagement of our customer base. First, we'll unlock value for customers through products like SplitSave and price prediction. Second, we solve for our customers' travel needs, including the launch of our new rail disruption features. I'll give you more details on this shortly. Third, we build trust and loyalty, scaling products like digital railcards. And fourth, we increase customer engagement, for example, expanding ancillary services we offer our customers. Let's discuss some of these in more detail. Starting with solving customer needs where we are rolling out a set of new rail disruption features. The features will support customers when navigating disruption on the rail network, leveraging the power of our AI and data tools. It will include travel forecast, which provides personalized notifications to customers in advance if their train is likely to be delayed or canceled. Customers will be able to see the location of their train in real time with a map interface powered by a signal box technology. Our forecasting capabilities will continuously improve, leveraging real-world data sources, including our base of 18 million customers transversing the rail network. Delay repay notifications, which alert customers when they are entitled to compensation. These will be an interim solution until the industry allows third-party retailers to offer fully automated delay repay. Our notifications will provide estimates of what each customer is owed plus a punch out to the relevant top website to complete their claim. Our beta test over the summer enabled the processing around GBP 1 million in compensation claims. And finally, our AI travel assistant, which offers customers a live native chat experience with real-time travel information personalized to their specific journey. Since launch, we've been selective in deploying the AI system within the app, yet it's already done strong levels of customer engagement. So far, it's had over 1 million conversations with customers, almost 1/3 of repeat users. And it's answering most queries with less than 10% handed off to customer service representatives. We'll soon to deploy the assistant more widely across the app, increasing the opportunity for customers to engage with it while also expanding its breadth of real-time knowledge capabilities. Let's watch a short video that brings to life our suite of rail disruption features. [Presentation] Jody Ford: Comes to building trust and loyalty of our customers Trainline has cultivated strong brand affinity over many years. In fact, we are the most trusted brand in the U.K. rail. And our brand consideration is at record levels, significantly outperforming all other retailers. This has supported Trainline's continued growth in the U.K., particularly when faced with notable competition, and it will become increasingly important in an AI-driven search world. One example of how we're building customer loyalty is through digital railcards. We've enhanced our selling within the booking flow, highlighting to customers how much they could save by buying a railcard alongside their ticket. This has scaled our user base 12% to 2.5 million in H1. By doing so, we are enhancing retention of highly engaged customers who transact 4x more often than non-railcard holders. And we're gaining particularly good traction with younger cohorts. Our share of the 16 to 30-year-old railcard segment has now increased to 44%. We're increasing the opportunity for customers to engage with Trainline, broadening our range of ancillary products and services and growing additional revenue streams. These include hotel bookings and insurance sales, which grew strongly in the first half. At the same time, we are optimizing how we monetize our existing products and services. For example, this year, we are focusing on enhancing advertising revenue and in the first half, improved the positioning of ad placements within the app. Likewise, we are currently running tests for a SplitSave fee. This could present a long-term option to supersede the booking fee where SplitSave applies. Now turning to our international business. We continue to position ourselves as the aggregator of choice as European markets liberalize. Over the summer, carrier competition expanded on the EUR 1 billion high-speed corridor in Southeast France. In June, Trenitalia launched 5 return services a day between Paris and Marseille. This is already having a noticeable impact with average fares down 27% on the route. In addition, Trenitalia almost doubled their operations between Paris and Lyon to 9 services a day, and that's due to increase again to 14 services a day from December. We are positioning ourselves as the aggregator of choice on the French Southeast high-speed corridor. We are leveraging our highly rated mobile app to showcase all the fares from all the high-speed carriers with features that help unlock value for customers like TopCombo, which allows customers to stitch together different carriers for return and [ multi-leg ] journeys. At the same time, we're positioning ourselves as the partner of choice for carriers, driving customer demand and in turn supporting their growth. As you know, we paused brand marketing in France a couple of years ago. With Trenitalia's recent expansion, we resumed our efforts to grow our awareness in the Southeast. We are sponsoring Lyon-based football team Olympique Lyonnais, and we are running large campaigns in online video and [ out of home ] at stations and transport hubs around Paris, Lyon and Marseille. We already have good levels of brand awareness across France at around 28%. Our focus on Southeast France has significantly increased brand awareness in the region. Across Paris, Lyon Marseille, our blended awareness score was up 12 points this year to 48%. That's supporting strong net ticket sales growth on the Southeast network, including sales between Paris-Lyon and Paris-Marseille, up 34% in the second quarter. France is a huge rail market worth about EUR 11 billion today. It is expected to grow to around EUR 14 billion or EUR 15 billion by 2030, of which around EUR 7 billion will come from aggregated high-speed routes. We see the Southeast network as a gateway for growth elsewhere in France as carrier competition expands over the coming years. This includes Proxima, who will operate under the Velvet brand. They will run trains between Paris and cities in Western France. This will include Paris de Bordeaux, France's second busiest rail route. In addition, Le Train, ilisto and Renfe are all due to launch domestic services in France too, while cross-border carrier competition is set to arrive in 2030 with Virgin Trains set to launch. In Spain, we're evolving the balance between growth and profitability. Spain has been an ideal market to hone our aggregation playbook, while carrier competition expanded across its EUR 1.5 billion high-speed rail market. We invested behind our user experience and our brand awareness. In turn, we have scaled our net ticket sales, giving us a considerable lead versus other market aggregators, and we continue to see runway for further growth. At the same time, we're increasing our focus on driving profitability in Spain. We are normalizing marketing spend while placing more emphasis upon customer engagement and growth of transaction frequency. Likewise, we are finding new ways to help carriers to grow. We recently launched Sponsored Journeys, a paid service that allows carriers to increase their prominence within our search function. We launched our first pay campaign with [ Durion ], which has been a real success, notably increasing customer demand. Across our international consumer business, increasing ancillary revenue remains a growth opportunity. Having made good progress in hotels last year, in H1, we bolstered our insurance offering with the launch of our new trip insurance product. Often alongside our existing Cancel for Any Reason product, this drove a material increase in insurance revenues. Moving on to Trainline Solutions, our fastest-growing business unit and now generating over GBP 1 billion in net ticket sales. Business travel is our main growth opportunity here and represents around 50% of Trainline Solutions sales. This is generated through our own branded channels as well as through our B2B distribution business. B2B distribution allows travel management companies and other business travel platforms to offer rail tickets to their respective customers. Primarily a U.K. business, we increasingly support our partners to sell tickets from multiple European carriers as well. They can do that all through one simple seamless connection on global API rather than tackle the complexity of connecting to multiple different carriers. As a result, international B2B distribution grew 55% in the first half. This business has good momentum. Many of the world's largest TMCs and travel platforms are now connected to our global API and trying to grow ticket sales. And in September, we expanded our partnership with the world's largest travel management company, Amex GBT, giving us confidence in our future growth. Finally, let's discuss our Digital Pay-as-you-go solution and its new trial in the U.K. As a recap, pay-as-you-go travel provides a convenient option for short distance journeys, also known as contactless or tap in, tap out. It's well established in cities like London where it is frequently used by commuters. However, prepaid ticketing generates most of the passenger revenue for the U.K. rail industry supported by price discrimination. It's far more suitable for long-distance trains where passengers tend to book in advance to get cheaper fares and reserve their seat, and we don't expect that to change. As you know, we've developed an in-app pay-as-you-go solution called digital pay-as-you-go. It leverages our geolocation technology from Signal Box and offers capabilities way beyond traditional tap in tap out systems. For customers, this includes real-time pricing, integrated railcard discounts and the ability to buy group and family tickets. For the industry, it requires no dating infrastructure, reducing the CapEx outlay and the time needed to deploy pay-as-you-go networks. We, therefore, see digital pay-as-you-go as a better solution, which when rolled out can increase our scope to serve commuters and travelers booking on the [ day ]. In September, digital pay-as-you-go trial went live on the East Midlands rail network. This represents a strategic opportunity to test our solution and demonstrate the benefits of digital pay-as-you-go in a live environment. Of the 4 trials awarded by RGG, the East Midlands trial is the most complex given it encompasses 3 different cities, Derby, Nottingham and Leicester. While it's still early days, we are learning fast and feedback that it worked flawlessly is highly encouraging. Before we wrap up, let me play a video showing our digital pay-as-you-go trial in action. [Presentation] Jody Ford: Before I hand over to the operator for questions, let me summarize the key takeaways from the [ heart ]. We have delivered a robust operating performance, improved profitability and strong cash flow, underpinning our enhanced share buyback announcement. And today, we've increased profit guidance for the year, reflecting our disciplined approach to cost management. Looking ahead, I see sizable growth opportunities for our 3 business units, all of which are leaders in their respective markets. In U.K. consumer, we are deepening our competitive moat, launching new rail disruption features and scaling digital railcards. In International Consumer, we are positioning ourselves as the aggregator of choice in Spain and Southeast France as carrier competition increases. While in Training Solutions, we are supporting B2B travel partners as they expand their rail travel sales across Europe. And finally, as you've just seen, we're off to a great start with our digital pay-you-go trial in the U.K., increasing our scope to grow sales of commute and short distance travel. So thank you very much for listening. I'll now hand over to the operator for questions. When asking please state your name and organization. Operator: [Operator Instructions] Our first question today comes from Gareth Davies with Deutsche Numis. Gareth Davies: Just -- First one from me, probably the obvious in terms of PBR consultation document this morning. At face value, it appears to tick a lot of boxes in terms of sort of level playing field and operating in a fair and transparent way on an ongoing basis. Would just be really interested to get your sort of headline thoughts on the key points that are in there and possibly anything you felt should have been covered and isn't. The second one is on the digital pay-as-you-go trial. It sounds like that's going well. Just wondering, is there any scope for that trial to be expanded and you to be allowed to use your own app and go beyond the sort of 1,000 customers that are currently doing it with East Midlands?. And then final one, just on the -- Google was obviously a headwind, particularly salient in the international business. Just wondered, now that we're lapping comps, presumably that is becoming less of an explicit headwind. Can you just give us a little update around how that's evolved? I mean, taking on board that GEO is going very well. But clearly, Google is still pretty important for international inbounds. Jody Ford: Thanks very much, Gareth. Yes, let me start at the top there with the GBR question. And look, there's been lots of news flow over the last sort of few months and an important day today. Let me go kind of right back up to the top and just sort of state that, look, I do think we're actually many years away from a GBR app launching and the 14 different sort of top existing apps ultimately closing down and those customers having to make a choice potentially to go to the GBR app. I think what's driving this is clearly the government's desire to consolidate from a customer point of view to take 14 apps into one and also to improve from a kind of cost base point of view. And then look, just to say right upfront for everyone, we look forward to that moment when it happens. We back ourselves to compete with whatever comes. And I think if you remember where we were 3 years ago with Uber launching, there was concerns and questions, a company that had huge backing that threw a lot of money at the sort of discounting tickets and massive kind of marketing campaigns. And I think 3 years later, you can see kind of how customers have reacted in terms of the strength of the Trainline offering. So sort of to set that out right at the front. Look, as you say, what we're seeing and as I mentioned earlier, principally today is about the launch of GBR primary legislation, which is about the creation of GBR. This sort of has to happen for the government to stand up GBR because of the sort of legal, financial, operational, health and safety and indeed organizational questions that need to be answered. And so that's a lot of the sort of priority for the government and GBR. As you also referenced the consultation document that was published this morning. Look, let me share a few thoughts on that. I think overall, we do actually see that, as you suggest, there's a sort of significant step forward, both in the context and direction of travel for the government. So let me sort of pick a few parts out where it's I think are encouraging. And I just upfront for those who've not had a chance to read that yet, it talks about the creation of a GBR retail unit within the overall GBR. And I think that's important to kind of note, and the elements within that, that I think are helpful. First is it talks about within that GBR retail unit, a separation of the industry management functions from the sort of commercial functions, where the former would be a lot of the RDG existing kind of organization and managing the relationship with -- amongst other third-party retailers like Trainline, whereas the latter of the commercial arm would clearly be the arm responsible for sort of standing up the app and the website and ultimately, we would compete with them. And I think that separation is really important and very helpful. Secondly, it talks about the establishment of a code of practice of how GBR interacts with all participants, obviously, third-party retailers being really important there. And that code of practice, and indeed, we've been pushing for a codification, right, of how this would operate. And I think that will be a really important step and the fact that, that will exist is really important and ultimately enforceable under GBR's license, future license. And then finally, what we get today is sort of laying out that there's the ability for -- if we felt that GBR weren't living up to or live in that code of practice for us to challenge GBR working with through the ORR and really to effectively ensure GBR do indeed operate within an open and fair market. So I think those elements are really helpful. And it's just worth noting these set of, if you like, safeguards don't exist today. And so that feels like very helpful. I think in terms of what we still need to see and it is somewhat self-evident, like this code of practice is not yet defined. And so I would anticipate, but don't have a clear time line, that work would begin on that in the early next year. And our understanding is it would be led by the ORR working with the DFT. And I would anticipate that the CMA would have significant input into that process along with obviously ourselves and other third-party retailers. So I think all of that together provides reassurance. And I think in the way you asked the question, that's I'm encouraged by kind of all of the above with important questions still to answer. What I would just note is this all relates to future design. And as I said, I think this is sort of multiple years kind of from fruition. What's also important in the interim is, as I just laid out in the presentation that we see kind of resolution on areas like delay repay in the interim so that kind of Trainline customers have access to that kind of one-click service. And so that's gone pretty deep on kind of retail and I just spend a minute then talking about the reality of what that means for the app, which is where a lot of the questions end up going. Why do I think it's potentially multiple years away? I think there will -- the next phase and the details of this will be some form of exercise that most likely is a procurement exercise from the government around working out what they want to procure. There would then be that process complete, and there would then be a build phase to develop what would be a relatively important app that would have to sort of handle a lot of different scenarios. It can't just do what [ LNER ] does on long distance or what Northern does on regional or some of the use cases of Southeastern coming in on community. It has to serve all of those. And so what I anticipate and I'm somewhat speculating here is that there would be a period of dual running. So even once the app was created, there would be a GBR app, which will be an important political win. But ultimately, that would dual run alongside the existing top apps and at various points, they would begin to fold those apps into GBR and the customers would then have to kind of restart on the new app. And to my very first point, we're excited for that opportunity. If you kind of think forward a few years and sort of the innovation we're laying out today and think forward another 3 years, I get pretty excited about where we'll be and GBR will kind of be just starting, if you like there. So that's sort of a bit of a state of the nation, right, in how we see all of the GBR points there. And to come to your second question, digital pay-as-you-go trial. Look, of course, I hope there is scope to expand and ultimately be able to put it into our B2C app. I think at this stage, we don't have visibility of that. This trial runs through to the summer. I think it's kind of early days. The government is learning. But I'm really encouraged just to underline like how well we have brought this to life. I think there have been apps that have kind of done the fare capping and the tapping now. But no one has really brought this all together with the route planning and the pricing and I think -- and the kind of UX. And so ultimately, if the government kind of wants -- or any government across Europe wants to sort of bring this to life at scale, having in the U.K., 18 million customers to help bring this to life, I do see that ultimately, it could be in the government's interest to see the third-party retailers offering this type of functionality. So look, that is obviously the aspiration. It's probably too early to speak with any precision on that yet. And then look on kind of Google headwinds and where we're at there. And I think if we sort of stand back on the international results, it's a portfolio of businesses. And as we reported over the last couple of years, we initially kind of Google trains and then we saw this expansion of the page as kind of the AI features coming in and so forth, and we did talk about that as a headwind. I think the way to think about that is that actually impacted different GEOs at different points. And I would say in the very earliest GEOs, we are, as you suggest, beginning to see that headwind turn into a tailwind and I begin to see some green shoots in some of our GEOs coming through as we've kind of entered the half, which is helpful. We don't actually begin to fully lap all of those GEOs and some of the domestic European GEos to later in this half. And so we don't yet see that. But look, I am encouraged in the spirit of the question that I do think that headwind turns into a little bit of a tailwind. So we'll keep close to that. Thanks, Gareth, for the questions. Operator: Our next question comes from Alastair Reid with Investec. Alastair Reid: A couple from me as well, sort of following up on some of those things. I guess, firstly, with the consultation today, with sort of GBR ticketing not being sort of structurally and commercially separated out, do you have any sort of concerns it could lead to potentially commission rates being reduced or the ticketing having sort of less need to cover its own costs, not being sort of overtly self-funding? And secondly, I think you touched on this already. Can you give us any examples you've seen in the past where talks have changed from one provider to another and kind of what share gains you have made in those switching moments? And then lastly, just on the topic of your sort of moats that protect the business from theoretically being disintermediated by sort of agentic AI. Can you talk about is the underlying market data in the industry sort of freely and easily available to all tech firms? And, Yes, I'll leave with that. Jody Ford: Thanks very much. Let me pick up on the first one and then you can perhaps take the second one and come back on the third. So in terms of the broader consultation and how we see the structure of that, I think kind of the direction of the question is going to the very nature of the open and fair retail. Look, we absolutely anticipate that we will be retailing on a fair basis with GBR. And I think where you're going really is the code of practice and how that is defined and we're going to have to engage and wait to see that to come through. I think what I take kind of comfort from is this statement of the value of third-party retailers and the value they've driven in terms of innovation and driving up standards for passengers. So I think that's where we now need to see that kind of actually codified out. And look, the CMA is still involved, and they will be involved going forward and they've really committed to a level playing field. But those are areas that we'll be engaged with over the coming kind of months. Pete, do you want to pick up on the second question, the provider change? Peter Wood: Yes. We've had a couple of examples in the past, Southwest Trains becoming Southwestern Rail, Virgin becoming Avanti were both kind of moments where there were shifts, and kind of as Jody outlined, there is this moment where customers have to make a choice. And from a traffic perspective, which doesn't fully represent sales necessarily, there's been quite significant shifts in the initial kind of period of time. So look, maybe around 30%, 40% in the first 6 weeks or so is something that we have seen in the past. So yes, it really does represent an opportunity for us as these things unfold. Jody Ford: Great. And then to come back to the point on U.K. moats and I think the role of the agentic AI. Look, what I'll do is I'll go up a level. And if I haven't answered the question, please come back because there's quite a lot potentially in that. We think about AI within the business in sort of 3 different areas. The first is how we productize AI and into the Trainline app that really speaks to things like the AI assistant and going forward. We talk about the ecosystem where it's a way to get traffic kind of another surface and then we talk about kind of productivity. I think you're really picking up on that middle one around the broader ecosystem. But just to say we're excited for the first point on productizing. Really feel like that AI is giving us kind of ability to solve new customer problems as it relates to disruption, not just around an AI assistant, but the data sets and predicting travel patterns and potential delays. That's kind of cool stuff. And I think speaking to the kind of moat point here, I just don't believe that there's many other players who can have the data and the dataset the kind of data smart and AI capabilities in our organization and the ability to invest behind it. So we're really pretty excited for where that's going. Then to the ecosystem point. And look, I'll give you my perspective on this, which is I've been doing this for well over a couple of decades now and watch various players enter the market over that period of time and work with them to develop -- as they develop sort of as traffic sources. And I think we're at that phase. And I think the announcements we have seen from ChatGPT, for example, increasingly give me that sense that they really want to ultimately send traffic to us and find a way over time to monetize it, which we think is a good thing, right, because it's much better to have 3 players kind of Google, Meta and let's say, ChatGPT that we're effectively buying qualified high-quality traffic from rather than having a single player or 2 players. And look, I do think that's going to take some time. These things, whilst we see and we spoke to the growth, it still represents less than 1% of our total traffic. And so I think it's -- I think we're talking years for these ad products to develop. I don’t think it's happening in the next few months. And so that's kind of how we view it evolving. And then I think you specifically asked about moats. And I kind of break our moat into 2 sets. We've got what I call our consumer moat and our platform moat. And you were pushing on the platform moat. But just as a sort of reminder, we have a very strong consumer moat. And I think in many things transversing technology change, the consumer moat really stands and is hugely important. And that's about the quality of our brand. It's about the sentiment that exists towards it. It's about our really deep vertical UX. And it's about the app installed base, like the fact we have 18 million users in the U.K. or 27 million across Europe means we have this really strong engaged base that will want to keep using us. And I think when you extract out and say open AI would have to develop a great vertical UX, not just in trains, but in hotels. in planes, in cars, but also in black dresses and selling drones. So it gets very complicated. And so they will definitely work with the great brands and the great UXs that exist out there. And I think that's part of the moat. And then finally to finish, in terms of that platform moat, yes, we have a huge number of data feeds that go back to the industry all over Europe. And these are kind of complex and difficult to develop, and that's part of the moat. And then we have huge commercial agreements because as you know, we're basically selling billions of pounds worth of tickets every year, and that requires bonding and obviously, a lot of due diligence. You can't just initiate these things. It's not like we're selling a few thousand pounds worth. And so that is also a moat, which makes it incredibly difficult to just start a business and then even if you were to, to make it work at scale becomes even more challenging given the sort of size of the numbers we're talking about. Thank you for the question. I hope that picked it all. The next question operator. Operator: Our next question comes from Ed Young with Morgan Stanley. Edward Young: I've got 2 on numbers, please, and then one on strategy. So on the EBITDA guidance upgrade, you've laid out some of the drivers of the stronger EBITDA outlook. But I wonder if you can help us understand what changed specifically since you gave the guidance in September? Is it fair to say that stronger top line has endured into H2? Or is there other moving parts that led to your change in posture there? Second of all, free cash flow growth was suppressed by working capital movement a bit in H1. Should that reverse in H2? And so should free cash flow growth mirror profit growth for the full year? And then finally, on Spain, I know you touched on it in the presentation, but I'd love to hear a bit more color about why now is the right time to move to this more balanced posture for growth versus profitability in Spain? Jody Ford: Great. I'll let Pete pick the first 2 up and come back around on Spain again. Peter Wood: Yes. Thanks, Ed. Yes, let me talk with the top line and then get to EBITDA. And if I think about the U.K. business, we've had a robust first half performance. And there were a few benefits, as I've kind of highlighted, lapping strikes and finally get those behind us kind of supported that figure somewhat. And we do have the headwind of over expanding as the year further unfolds. We've obviously had the first 47 stations which dropped in February. There are another 50 or so which are expected either in December or in January, and there are more later in the year. So there's a kind of headwind that's building. And I think net-net of that, I would expect H2 to be growing at a slower rate overall versus H1. Nonetheless, the EBITDA has performed well in H1 and that confidence we're kind of taking forward into H2. Of course, there will be drop-through from that performance at the top line. I think the other thing of note really is how we are thinking about marketing spend in international. In H1, as Jody outlined, we put more into supporting the expansion of the France and the Southeast corridors there. And that will somewhat persist into H2, where there's more services being run by Trenitalia. So we'll keep pushing there. But in Spain, we're kind of balancing growth and profitability. And look, if I take a real step back here, we started what, 3, 4 years ago when aggregation in Spain was clearly going to be this kind of big all-in-one go moment and we had a very small footprint there. And so we really pushed hard to build brand awareness to make the most of this kind of very dynamic moment for the rail traveling public in Spain. And we pushed hard on the marketing spend, and we've been really pleased with the strong growth that we've seen there. What we've now reached though is a point of kind of evolution where we're developing the next bit of the playbook. We're thinking about how we balance the profitability and the growth. And so we should -- you should expect marketing in international as a result of that to step down a bit in H2 and net-net will be also additive to delivering on the EBITDA guidance that we have shared today. And then your question on free cash flow growth and the working capital movement. Yes, this is always a slightly tricky one because the day of the week and the slightly odd 13 periods of 4 weeks that the settlement process in the U.K. rail industry means that we get some oddities on the 2 points in the year that you see it. Fundamentally, there is a good guide here for cash from a working capital perspective. It is typically a bit better at August than it is in February just because of the cycle of these things. But, when it's a Monday or a Tuesday, that can impact it all as well. So net-net, I don't think you should pay too much attention to the kind of puts and takes that we see at the different points in time, just believe that there is a goodness that lies underneath. And it's normally around the kind of GBP 15 million to GBP 20 million across the year that we would see on average even if that's not at that particular point in the year. Jody Ford: Thanks, Pete. And I think Pete mostly answered the third question around Spain, but let me just give you a little bit of a strategic overlay there. As Pete said, this was a moment in time when we saw what was happening in Spain. It was -- we were almost a 0% market share. We were in a position where all the lines and all the competitors were launching in a kind of 12-month window, and we knew we had to show up there with Trainline not really having a footprint to date. And through those 3 years, we've got to having double-digit market share. And I think importantly, we are now the #1 domestic operator by a distance, significantly ahead of [ Trez ], of Omio, of Uber and any of the other players and the kind of go-to place for aggregation. And so really, we're moving to what I would call balanced growth. We're still leaning forward into Spain and invest in that, but we just don't need this kind of launch level marketing spend. And as you've seen us over the last few years, we sort of play the overall portfolio. And we're now moving, if you like, that firepower into France as that launches to ensure that we become and remain, frankly, in France, the #1 domestic operator, and it's just a moment in time. And look, you have heard as it relates to Italy, we see a huge opportunity there in 2027, and we will think about marketing there again. But we have to kind of balance the overall portfolio and have these kind of launch phases and then what I call more balanced growth phases. Thanks for the questions, Ed. Should we take another? Operator? Operator: Our next question comes from Andrew Ross with Barclays. Andrew Ross: I've got 3, if that's okay. The first one is to follow up on Alastair's question on commission rates. Is it completely ruled out that there will be no review of commission rates for the industry as part of the detail of how GBR kind of comes together for next year? Or kind of more broadly, where are we at on that as we kind of transition from RDG into GBR around the industry commission rate? That's the first question. The second one is on pay-you-go and I guess, scenarios as to when a kind of nationwide contract may be awarded or how this might look and kind of what it might mean for you if you were or weren't to get it? And I guess I'm thinking about kind of the incremental take rate you might achieve if you were to kind of get a broader contract and any kind of cannibalization risk to your core business that you think may or may not happen, I think maybe not given the solution will be portable into your app, as I understand it. Third question is on Agentic AI. Kind of taking your view, Jody, that it's more likely for OpenAI partner with kind of a vertical specialist like yourself, which I agree with. Do you worry about any risk to kind of time spent based monetization, things like cross-selling hotels, ads, that type of thing if we move into a world of kind of agentic transactions and booking trains? Jody Ford: Thanks, Andrew. Look, on that first point, this is -- we've discussed kind of many times, I guess, the idea of commission rates. Look, I'll give you the overall kind of answer here. They have been reviewed, I think, 3 times in the last 20 years every time they've essentially come back and concluded we were at the right commission rate apart from, as you know, at the last time where it was a net 25 basis points impact. We feel that the commission rate is absolutely at the right level and multiple independent players, every time this has been looked at, everyone has concluded we're at the right level. And so I think that's what gives us confidence the way we operate, we have a number of years, kind of 3-plus years of confidence in our commission rate. Look, it's never off the table forever, right? But there is no discussion of that. And so I look forward, as I've always done, believing we're set at the right commission rate. Pete, do you want to pick up on the second one. Peter Wood: Yes. I think just as a reminder, the trials that we have are kind of the first step forward. And quite deliberately, the government is testing different technologies and really seeking to learn what those technologies offer, how customers engage and relate with the different aspects of what's being tested. So we're kind of really quite early on. And whilst we see some real political support for finding a solution for this, and there's mention of this in the [ condoc ]. So that kind of gives you an indication of the direction of travel. There's a lot of detail that still needs to be worked out in terms of how this will be implemented. And as we said in the presentation, I think whilst one route might be a kind of nationwide contract, we don't think this technology is particularly helpful or is likely to be implemented for long distance travel, right? So perhaps a nationwide contract might enable a series of different cities to pick it up. But even that's not a given at the moment as to the way forward, it could be rolled out more regionally. So there's still a lot to see there. Likewise, the commercials that would sit alongside this would need work. I think it is fair to say that on the basis of kind of fair and open, we would expect if there is some sort of national implementation that even if our technology wasn't chosen, there would be some way for us to partake and offer that to customers. So anyway, a lot of details still to be worked out. We're really pleased about the progress we're making and the political support for continuing down this path. We'll have to see how it goes. Jody Ford: And then let me pick up on this sort of Agentic AI and the sort of role of transactions. If I understood, the question was, would we lose other services if it was kind of the transaction occurred within, let's say, text interface in a ChatGPT app or something. Whilst I do see that as a use case and one could imagine certain trains being booked that way, I think we have to assume the core use case is kind of what happens on Google and on Meta. If they fully want to realize the value of that customer, then ultimately, there needs to be a high quality conversion rate. And the best way to do that is for the customer to go into, in our case, a Trainline user experience or it could be any other shopping or commerce user experience where if you think about the pages we show and the clarification of which fare you want and the flexibility of it and frankly, what [ time ] train you want and the ability then to get customer support and to get your ticket and your barcode, that's clearly better done within our app or some experience that is effectively our app. So I still envisage a world where the full experience arrives and they have given us very qualified traffic. Worth knowing that we are absolutely developing and have developed the kind of frameworks of the MCP piece to allow the AI system to engage. And you could imagine the early stuff happening, if you like, within ChatGPT, where we work with ChatGPT, if you like that and then popping into our experience to actually make the transaction come to life. But look, we're all hypothesizing of how this will look. And just to say again, it's less than 1% of traffic right now in our most sort of forward GEOs. And so I kind of feel pretty good. We've got time, I think, for just one more question, and then we'll bring to [ a close ]. Operator: Our final question comes from James Lockyer with Peel Hunt. James Lockyer: I'll just ask 2 at this stage, based on AI. So it's good that you've spoken about 1 million conversations or over 1 million handling customer queries but less than 10% being handed over. Based on the types of questions that are being asked versus the typical questions that your human agents are getting, once mature, where might that 10% land? And what level of cost savings might you be able to realize? And secondly, can you talk about how much -- how you're using AI internally? You mentioned that you are, but it would be good to hear about what we're doing there and what’s companies thinking they'd be able to grow the top line without growing headcount as fast as they might have done without AI. Is that something you're finding too? So any ROI productivity or hiring stuff you can provide there would be useful. Jody Ford: Sure. And given we're kind of at the top of the hour, brief answers, I guess, I'd say overall, the types of questions, what it's allowing is customers to get reassurance, things that they kind of like just didn't know how to -- is this ticket valid on this train? And they would then go and try and find station staff or ask a friend or start reading very detailed conditions. And AI is doing a really great job of that. It wasn't that they were necessarily going to customer service. But where you're going is right, I do think it allows efficiency. It allows our customer service teams to work on the higher value questions, if you like, because it filters out a lot of the ones that can easily be handled by AI. And I think, yes, where you're pushing right, it does lead to kind of greater productivity. As it relates to what we're doing internally, the lots of good stuff and yes, in terms of using the kind of copilot style tools, in terms of helping engineers code and that is definitely seeing kind of productivity improvements. And I think the spirit is to be able to do more with our existing employee base is absolutely how we're looking at it. And then just allowing other things here, we have an experimentation GPT, right, which has got now all of the experiments that we've kind of almost ever done over the last few years in one place, which can be accessed by a UX or a product or an engineering or commercial really quickly versus having to frankly call 9 different people and try and find out, which is what happens in most companies up to this point. And so we're increasingly finding those use cases, which are driving a more cohesive workforce and allowing us to kind of better pull that knowledge and be quicker in the development. So I think again where you're going, delivering more with our existing base is very much how we're thinking about it. Thank you very much for the questions, James, and thank you all for listening today. That's all we've got time for. To recap, we've had a strong first half, delivering a robust operating performance and improving profitability. And in turn, we have today improved our guidance for the full year and see sizable growth opportunities across all 3 of our business units. And I look forward to speaking to you all again soon. Thank you.
Operator: Welcome to Oncopeptides' Third Quarter Earnings Call for 2025. [Operator Instructions] Now I will hand the conference over to CEO, Sofia Heigis; and CFO, Henrik Bergentoft. Please go ahead. Sofia Heigis: Hi, everyone, and welcome to the presentation of Oncopeptides report for the third quarter of 2025. My name is Sofia Heigis, and I am the CEO of Oncopeptides. As we have increased our shareholder base in the last quarter, I wish to welcome old as well as new shareholders to this earnings call. This is our standard disclaimer. As usual, I'm joined by our CFO, Henrik Bergentoft, and together, we'll present our financial and operational performance for the third quarter, which is concluding that we are still on track towards becoming a profitable company by the end of 2026. The third quarter was a strategically important period for Oncopeptides, as we knew we will have to demonstrate resilience in execution given the vacation period. Net sales reached SEK 20.2 million, representing a 174% increase year-over-year and marking our fourth consecutive quarter-over-quarter growth. In July, we delivered an all-time high, which was followed by another all-time high in September. In between, we saw a seasonal slowdown typical during the European vacation period. And all in all, we saw a quarter of growth, which is a stronger result than the same period 2024. So even though we are still sensitive to seasonal effects, this is a sign of how we have strengthened our position and advanced our launch. Our cash position at the end of the period was SEK 147.9 million, reflecting the successful completion of a rights issue of SEK 150 million, which was oversubscribed by 157%. The strong investor interest underlies confidence in our long-term strategy and provides the financial flexibility to continue building momentum while advancing our partnering discussions, including ongoing negotiations in Japan. On the scientific side, Pepaxti continued to gain credibility and recognition, and following its inclusion in the EHA/EMN clinical guidelines earlier this year, new independent publications and real-world presentations at the IMS Annual Meeting have further reinforced Pepaxti's efficacy and tolerability in real-life use. We also saw continued commercial traction in all our key European markets, with Italy leading the growth, Spain reaching full regional access, and Germany demonstrating more resilience than previous year in the same period. In short, a resilient and strategically important quarter that positions us well for a strong finish to 2025. I'll now hand over to Henrik for a closer look at the financials. Henrik Bergentoft: Thank you so much, Sofia. So let's start with the financial summary for the third quarter of 2025. As said, net sales increased to SEK 20.2 million, a 174% growth compared to last year, excluding the milestone payment from the South Korea licensing deal in 2024. This demonstrates significant top-line momentum. The gross profit reached SEK 19.9 million, reflecting a robust gross margin of 99%, which underscores the strength and scalability of our business model. Operating expenses decreased by about 3% for both the quarter and the 9-month period, showing our continued focus on cost control. As a direct function of sales growth and cost control, our EBIT improved from minus SEK 61.3 million last year to minus SEK 47.1 million this quarter. The net profit amounted to minus SEK 60.9 million, highlighting that this includes net financial items that were impacted by the noncash fair valuation of warrants amounted to minus SEK 10.6 million. Overall, these results demonstrate strong revenue growth and improved cost efficiency despite ongoing investments in our operations, altogether taking us towards the next platform of being profitable by the end of 2026. Looking at operating expenses. Our quarterly sales and marketing costs increased from SEK 29.8 million in 2024 to SEK 31.9 million in 2025. This reflects our expansion efforts with the completion of our organization in Spain and Germany last year and the establishment of our Italian organization this year. General and administrative costs rose just slightly from SEK 18.4 million to SEK 19 million this year. Research and development costs decreased from SEK 21.9 million to SEK 17.3 million as we currently have no ongoing clinical studies. However, we are still advancing our preclinical portfolio. All combined, the cost trend shows our commitment to strategic cost-conscious growth while maintaining discipline in our R&D spending. Turning to liquidity. Our cash position at the end of Q3 amounted to SEK 148 million following the successful rights issue in the third quarter, which was oversubscribed at 157% and injected approximately SEK 150 million before issue-related costs. Our liquidity is now estimated to last until we reach cash flow positive at the end of 2026, assuming continued sales growth. We certainly are proud to have attracted such an interest from both existing and new shareholders in the rights issue. So ending up with some key takeaways from the financial perspective. The company is delivering rapid revenue growth and maintaining exceptional gross margins. Cost control measures are yielding results with operating expenses trending down meanwhile revenue is growing. Liquidity is strong, and recent capital raise provides a runway for continued execution and growth. The business is well-positioned to achieve cash flow positive by the end of 2026, assuming our ongoing sales momentum. That concludes the financial presentation, and I hand over back to you again, Sofia. Sofia Heigis: Thank you, Henrik. Let's now turn to the commercial side, where we continue to build strong momentum across Europe and make progress towards our long-term goal of profitability. We have seen a strong growth trajectory in the last 3 quarters, and our European business continues to grow, supported by positive clinical experience and peer-to-peer recommendations. Looking back, the third quarter is always affected by the vacation period, which is why it is encouraging to see growth and increased demand now in Q3 2025. It's a clear sign of more markets contributing to our revenue stream. Following the inclusion of the EHA/EMN guidelines in July, Pepaxti has gained further recognition from leading myeloma experts. This type of validation has a tangible effect in the field. It strengthens awareness, drives clarity on positioning of Pepaxti, generate confidence among HCPs, which leads to new prescribers through peer-to-peer recommendations. All these factors are critical to our launch success, which support us to make a real difference for more and more patients, which, in turn, of course, drives uptake to generate shareholder value. We continue to build on peptides around the European opportunity for Pepaxti, which we estimate at roughly SEK 1.5 billion annually. There are, however, patients in need for Pepaxti also in the rest of the world. And we are working with current partners and to find new partners to address that unmet need and add revenue streams. The long-term value will be generated from our pipeline, which we are advancing in the preclinical setting with several exciting assets getting closer to clinic. Outside of Europe, our focus remains on concluding a partnership for Japan. Discussions are advancing well, but takes time, a lot due to internal processes and governance, and we are still in late-stage due diligence phase. The structure of the potential agreement follows market practice, including upfront and milestone payments and double-digit royalties, with the partner assuming all costs related to regulatory and commercial activities in Japan. Japan represents a market roughly the size of Germany with a well-defined path to approval agreed with the Japanese regulatory authorities, and key opinion leaders supporting their need of Pepaxti. To close the Japanese partnership will be a landmark event for Oncoenptides, unlocking significant long-term value for both patients and shareholders, and we are focused on concluding a deal that is a win-win for both us and our partner, which naturally will be a win for patients in Japan. Let's move to an update on our European key markets. Regarding market access, we have seen some very positive progress for Irish HCPs. We have an early access program open to ensure HCPs could gain experience to assess if they will support the unmet need for Ireland. This support is critical to be able to get into a price negotiation. Ireland is a small and centralized market. And in a very short time, we have seen 12 patients being included in the AAP program. The data that has been submitted to the payer authority is very encouraging, and KOLs are supporting the need, which is once more confirming that Pepaxti [indiscernible] beyond expectations in real life. We are discussing with HCl publishing a very encouraging data that they have generated, which can support launches also in other markets. We are hopeful that the strong evidence leads to access, but having said that, it commonly takes time and is usually very difficult to gain on Ireland. We expect to know more within the coming quarters. As already mentioned, we hit all-time high demand in July, followed by all-time high demand in September. The vacation period in Europe with a primarily very August, is temporarily affecting net sales growth. I will get more into details per country in a short while. Important to note is that by the end of Q3, more than 550 patients have been treated since launch, and we are now really making a difference to many patients in Europe. The rare disease launch is not only the effort of the company, but all launches are dependent on peer-to-peer recommendations. These can originate from own experience, published real-world data, or guidelines are some of the most important sources for such recommendations. And as already mentioned in the last quarter, we saw great progress in these areas. We have 2-woretsublished and presented at the International Myeloma Society. We got the inclusion of Pepaxti in the updated EHA/EMN guidelines in July, and we got a strong recommendation in our [indiscernible], which is great as these guidelines are now being referenced across Europe. One more important aspect for the mid- and long-term delivery of the launch is to close evidence gaps. That appears due to how the treatment landscape evolves, and that can support differentiation and inform treatment decisions over time. As a small company, we don't see the return on investment in setting up our own studies to close these gaps, but we do invest in ideas that fit our strategy coming from external investigators. This type of study is very cost-effective for us and generates scientific engagements, which is also important to the launch. Here, we do see increased interest from KOLs to generate data on the PDC platform, and we now have investigator-initiated trials contracted in all markets. Here is a map illustrating the sales growth across Europe in Q3 compared to previous quarters. I will now get into more details per market. Germany remains our largest market. It's the market most affected by the vacation period. And when we look at our segments, we can conclude by sales data that the vacation period is affecting the overall multiple myeloma market, and we do see a decline in demand in August. This is also the case for capacity. We anticipated this and are looking to catch up in Q4. Given the slowness in the market, it's important and encouraging to see how we are continuously broadening the prescriber base. Increased experience in Germany has led to several R&D projects being generated currently. And on the topic of scientific progress, we recently signed our very first investigator-initiated study, which we investigate the impact of Pepaxti on systemic inflammation that is ongoing in multiple myeloma patients, the effect on T cells, and further how Pepaxti is diffe5rentiated from other activators by not only affecting the nucleus DNA but also the mitochondrial DNA. These are important scientific questions that will advance our scientific understanding and fuel our launch. [indiscernible] several proposals under review from German KOLs, which is demonstrating the increased interest in Pepaxti and the PDC platform, which we actually lacked at launch. So very encouraging signs as these studies have the potential to close important evidence gaps that can support our launch mid and long term, and also support our pipeline development. Finally, we do see good progress in awareness, which was confirmed by and boosted by the annual German-speaking Hematology Congress taking place now in October. Majority of companies are focused on immunotherapy and earlier lines of treatment. And our symposium, which was focused on the real patients that are more old and in the clinical trials, attracted so many participants as we had to use the overflow room to accommodate everyone. This is a sign that there is a great interest and need to discuss the target patient profile of Pepaxti, and that there is a need to complement immunotherapy. As mentioned, it's encouraging to see that quarter-over-quarter grow our prescriber base. And what we can conclude is that there is still a lot of room to continue this trend, both through our own activities and through peer-to-peer accommodations. The heat map for Germany is visualizing how we are broadening sales of Pepaxti, even though Germany is a scattered market and we have many customers, focusing on the highly populated areas is of importance. And these areas are the most crowded with many pharma companies working to build awareness, and at the same time, many physicians starting to restrict access to pharma. The challenge for us is that we are a small company and the only company launching PBC, while there are many companies launching [indiscernible] opportunity, how we are unique. We have a unique product that really delivers in real life. And as physicians gain experience, they appreciate Pepaxti and they continue to use. We have resiliency, and we are continuing to capture potential step by step. Italy is the second largest market and was the strongest contributor to demand growth in the third quarter. Italy is an excellent example of how better understanding and awareness of Pepaxti gives positive clinical experience already ahead of launch and with a more centralized prescriber base can directly translate into change of prescribing behavior when physicians now get access to Pepaxti. In the third quarter, we reached 90% access at hospital level, and we now only have one high-potential region left to fully unlock. Looking at the strong collaboration between our local field team and prescribers continues to drive performance, confirming that Pepaxti is making a meaningful difference for patients, with encouraging real-world data from Italy presented at the IMS Annual Meeting. This data is highlighting Pepaxti's effectiveness and tolerability in heavily pretreated patients, further supporting uptake in peer-to-peer advocacy. In Italy, we have several investigators from our clinical development program. And already now, we have one investigator-initiated trial ongoing to close an important evidence gap. To conclude on Italy, we have a strong start of the launch and a very promising foundation to build on. [indiscernible] and is demonstrating the evolution on the Italian launch. We sold the first vials already in Q1 ahead of plan. We started to gain regional access in Q2, and we now have a fairly broad base of prescribers already in Q3. Spain stands out as modular scalability for our commercial approach. We now have full regional access across the country. This means we have seen orders from all the regions in multiple myeloma patients, and this is another milestone achieved. Also in Spain, we see scientific progress and launch supporting activities progressing. The real-world data from Spanish investigators presented at the IMS Annual Meeting is the first of its kind, as all patients are previously treated with a bispecific antibody. And given that this drug class is recently launched, we don't have data from our clinical program on how these patients respond to Pepaxti, which is why it is so important and very encouraging to see that also in this patient group, Pepaxti [indiscernible] is confirmed. Just like in Italy, we have an investigator-initiated trial running. And in Spain, the focus is not only on Pepaxti, but also generating evidence in the preclinic for our PDC platform, which can support our partnership discussions for other PDC. Spanish [indiscernible] full coverage of the country, and now it's about increasing the number of prescribers and ensuring more patients are getting Pepaxti, already in fourth line to continue to accelerate the sales for Spain. Moving to partnerships. In addition to the ongoing negotiations with Japanese partners, we continue to explore other deals. In fact, earlier this week, I attended Europe, where we had many interesting and promising first discussions with different types of partners for both Pepaxti and our pipeline. To share a very brief summary and reflection, there is an increased interest to look into NK cell engagement as a result of that the T cell space is being becoming crowded. In addition, indications with extremely high unmet needs like glioblastoma, is of interest to many companies. That this is not only us finding our pipeline strategic interesting, but also many partners are showing interest and want to understand the many opportunities we have at Oncopeptides [indiscernible]. Discussions will continue, and we will keep the market posted. Our current partnerships in South Korea, our partners SCBIO, has a program for Pepaxti, providing full financial support to patients with triple refractory multiple myeloma patients. The program [indiscernible] in Asia beyond the clinical development program, with the first patient being treated at St. Mary Hospital. This initiative not only broadens Pepaxti's global footprint, but also underscores its recognition as a meaningful treatment option for patients with few remain [indiscernible]. The next stage in South Korea is a regulatory submission, which our partner is working towards. We continue to build our PDC platform with Pepaxti leading the way, serving as a proof of concept for the technology. In parallel, we are advancing our SPiKEs platform, focusing on NK cell engagement for oncology, hematology, and autoimmune disease. Both programs illustrate our broader strategy to grow geographically, to partner smartly, and innovate purposely. I will not elaborate more on the pipeline right now as I will get more into details in our upcoming Capital Markets update next week. And before I conclude, I would like to remind everyone about this event, which is on November 13 from 9 to 12 Central European time. will be an online event broadcast here from Stockholm featuring leading myeloma experts, key stakeholders of Oncopeptides, and myself, who will give an update on the future of Oncopeptides, focusing on opportunities beyond what is our core today. If you haven't already, I encourage you to register via our website. It will be an insightful session on both our commercial progress and scientific road map. To summarize, we have a growth momentum. We are now delivering the fourth consecutive quarter of double -- of growth, tracking towards profitability by end of 2026. We have a strong European foundation. Pepaxti is fully approved and reimbursed in key markets, representing about half of the total European opportunity estimated at SEK 1.5 billion per year. We are expanding globally, advancing negotiations ongoing for Japan, and with established partnerships already in South Korea, Africa, and EMEA. We are demonstrating scientific progress with real-world data publications, guideline inclusion, and investigator-initiated trials in all markets, which are strengthening Pepaxti's position. We have an innovative pipeline with next-generation PDC SPiKEs platform that offers long-term growth potential in oncology, hematology, and immunology. And with solid execution, disciplined cost management, and growing market endorsement, Oncopeptides is well on track to deliver sustainable value creation. That concludes the presentation, and I would like to open up for questions. Operator: [Operator Instructions] The next question comes from Richard Ramanius from Redeye. Richard Ramanius: I have a few questions. I'll take them one by one. The first one is how do vacations impact sales exactly? Is that due to sales representatives being on holidays, since I assume patients who are sick are going to continue being treated and doctors continue treating them? Sofia Heigis: Thank you for the question. So it's actually a mix of several different aspects. One is just as you said, that we are, of course, committed to give our teams vacation. So our activity is reduced during certain periods over summer time like in all businesses. But it's also important to note that when the HCPs go on vacation, and in particular in Germany, where you have office-based clinics, there are quite many times quite few HCPs seeing these patients. So they are having fewer patient visits basically. And of course, if multiple myeloma patients are progressing and they will still get treatment. And that is, of course, why we still see growth because the physicians have learned to identify the patients for Pepaxti better, also without us being there as frequent. But I would argue that those are the 2 main factors. So it is really relating to less in the offices and of course, lower activity for Pepaxti. Richard Ramanius: Then I had a question about costs, which decreased quarter-over-quarter. Is this going to carry over into next quarters? Or are Q1 and Q2 more representative of future costs? Henrik Bergentoft: Thank you, Richard, for the question. So what we have said is that we have established an organization that is in place to take us towards profitability next year. And the benchmark we have set out is really the cost base for 2024 that, that will more or less continue onwards to give just to repeat what we have said before. But answering more directly to your question, Q1 and Q2 is more representative for the final quarter because Q3, by natural reasons, contain less activities as compared to the fourth quarter. Richard Ramanius: Yes. I understand. I also looked at the heat maps that Sofia presented from the various countries. And I noticed, especially Italy seems to have a higher growth trend than Spain and -- or uptake and Spain higher than Germany. Would you agree to this? And this trend, you could extrapolate into 2026? Sofia Heigis: I would definitely agree to that. That's a very good analysis made of you. And it comes, of course, with the experience ahead of launch in the different countries where we have previously said that both Italy and Spain, they have more experience from our clinical development program. In Spain, we have the chance to have quite a few patients in early access because luckily price negotiated [indiscernible] experience in this current treatment landscape is really giving the prescribers confidence from the very start. Then another aspect that I mentioned many times before, but I think it can be repeated is that [indiscernible] and Italy are commonly faster uptake in multiple myeloma due to that they have a more centralized prescriber base. So they have pure hematologists, specialists on multiple myeloma prescribing, meaning that every physician see more patients. When it comes to Germany, that is a more scattered market where we have office-based physicians, and they see all the different oncology and hematology indications, and fewer patients per prescriber. And that is together with basically no chance to prepare the launch based on where the Oncopeptide financial situation when the price is then making Germany stand out to be a slower market if you look at the launch uptake from the very start. Italy is for sure the strongest and then Spain. Operator: [Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Henrik Bergentoft: Thank you. And there are a couple of written questions. The first one is, can you comment on October sales? Sofia Heigis: I almost anticipated that question as we actually did comment on July sales in our last report. And we did that due to that we had the rights issue, and we wanted to be as transparent as possible. So what I can say to October as we are not really assessing sales or sales per month per quarter. But as I shared throughout my presentation, we have a very strong momentum in our markets. During the month of October, we have had all the annual hematology site meetings take place both in Spain, in Italy, and in Germany during this month. Late September we had [indiscernible], and in the annual meetings, you have the top [indiscernible] in the countries, but also many prescribers. And that gives us a great opportunity to really pressure test where we stand, gain insights, and also engage, of course, a lot with these physicians. And all in all, the outcome of those meetings and symposia mentioned in Germany, where we had to use the overflow, which is actually quite rare, is very positive. So we are seeing in October that really -- as I mentioned, we're seeing how the guidelines are starting to kind of kick in, and we are seeing a very good sentiment in the markets. Henrik Bergentoft: Question on timeline for [indiscernible]. Sofia Heigis: Yes. So when it comes to the SPiKEs platform, we are -- it's a very -- as many of you know, NK cell engager, that's novel, it's innovative, and it's new. And that is why it requires more work in the preclinic because the preclinical data will inform how you go about in the clinic, which is a much, much higher investment. So you want to do the right studies in preclinic to inform your clinical program to really ensure that you make the right investment at that stage. So we are currently still in preclinic. We also need to do formulation work because these are new assets. And when it comes to the timeline, I would refrain from comment on that because it actually has to do with finances, either if Oncopeptides will be able to finance or if a partnership would be able to finance. And when it comes to partnerships, we have interesting discussions. But as we know both from Oncopeptides and other companies, these type of discussions takes time. So I would like to refrain from commenting on when we can enter because it really comes down to both the preclinical efforts we are making to build kind of a good direction for the clinic, but also the financial situation. Henrik Bergentoft: And speaking of timeline, last question, do you expect that Japan [indiscernible]. Sofia Heigis: So like I mentioned, the discussions are advancing well. We still are advancing with the partner we have been talking about before, but we also have interest from several other partners that we are discussing with to ensure that at the end of the day can conclude the best possible deal. When it comes to the timeline, it's a lot due to the internal processes and governance on the Japanese partner side because Oncopeptides is a small company and we operate with what would be argued a fair speed. But in Japan, there is a culture and [indiscernible] so where they have a lot of committees and where they seek consensus, and they need to go through these committees, we are not controlling the timeline. What we are controlling is that we are progressing, ensuring that we are working towards the best deal possible. Henrik Bergentoft: With that, the Q&A session is concluded, and you want to give some final remarks, Sofia? Sofia Heigis: Yes, sure. So first of all, thank you, everyone, for joining us and listening to us [indiscernible] today with 4 consecutive quarters of strong growth, increasing scientific recognition, and the strengthened financial foundation, we are now entering the final quarter of 2025 with both focus and confidence. We continue to execute with discipline. We will continue to work to expand access to Pepaxti across Europe and in the rest of the world, and we are still progressing towards our profitability target for 2026. And I am looking forward to seeing many of you again at our Capital Market update next week on November 13. So thank you so much, and have a great day.
Operator: Good day, and welcome, everyone, to the WideOpenWest Third Quarter 2025 Earnings Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Andrew Posen, Vice President, Head of Investor Relations. Please go ahead. Andrew Posen: Good morning, everyone, and thank you for joining our third quarter 2025 earnings call. Earlier this morning, we issued a press release with our financial and operating results for the third quarter of 2025, which is now available on our Investor Relations website. We also published a trending schedule with additional historic and financial and operating metrics. On August 11, 2025, we announced that WideOpenWest entered into a definitive agreement under which affiliated investment funds of DigitalBridge investments and Crestview Partners will acquire all of the outstanding shares of common stock of WOW!, not already owned by Crestview and its affiliates. In light of this pending transaction, we will not be making any comments on our results this quarter. However, we will take questions related to this morning's earnings release. I'm joined this morning by our CEO, Teresa Elder; and our CFO, John Rego, who are here to answer questions. I would like to remind everyone that we may make some forward-looking statements about our expected operating results, our business strategy and other matters relating to our business. These forward-looking statements are made in reliance on the safe harbor provisions of the federal securities laws and are subject to known and unknown risks, uncertainties and other factors that may cause our actual operating results, financial position or performance to be materially different from those expressed or implied in our forward-looking statements. You are cautioned that to place undue reliance on such forward-looking statements. We disclaim any obligation to update such forward-looking statements. For additional information concerning factors that could affect our financial results or cause actual results to differ materially from our forward-looking statements. Please refer to our filings with the SEC, including Risk Factors section of our Form 10-K and most recent 10-Q filed with the SEC. As well as the forward-looking statements section of our press release. In addition, please note on today's call and in the press release we issued this morning, we may refer to certain non-GAAP financial measures. While the company believes these non-GAAP financial measures provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics for our historical reported results can be found in our earnings releases and our trending schedules, which can be found on our website. Operator, are there any questions in the queue? Operator: Yes. We do have one question from Frank Louthan at Raymond James. Frank Louthan: So when you guys are looking out at -- in the market, where are you seeing competition from -- who's kind of reared up? Is it more fixed wireless? Is it the cable companies or fiber? I mean how should we think about who you guys are up against? And I'm talking more about your legacy markets versus the Greenfield builds. Teresa Elder: Well, thanks, Frank. Yes, this is Teresa. And in our legacy markets, we have been since the day we first started at WOW!, a challenger brand. So we really challenged the cable companies, Comcast and Charter are our primary competitors in our legacy markets. We certainly also have competition from fixed wireless. What we have seen, though, in this last quarter is that we've been able to have strong HSD ARPU growth and our churn is near record lows. But we're very pleased with how we continue to compete in our markets. In Greenfield, we actually have been on a tear. We are also competing with the traditional cable companies, new fiber entrants as well as fixed wireless. And in those markets, we've added over 15,000 homes in this last quarter, bringing our total Greenfield homes to 106,000 and the penetration keeps growing at a robust rate. We're maintaining that 16% in Greenfield, even though we're adding so many homes. Also in Legacy, of course, we have long had an Edge-out strategy and we added another 3,700 homes in our legacy markets and the '25 vintage is already near 30%, and the former vintages also continued to perform extremely well. and that information is in our trending schedules. So it's somewhat the same mix of characters, but I think customers really resonate with our no contract, no data caps, reliable network, high-speed, very best value with our simplified pricing. So that mix has continued to work for us. Frank Louthan: All right. Great. And are Charter and Comcast really leaning into their mobility product? I mean is that their main thrust to their marketing in your territories? Or is it something different that's having them get a little bit more traction? Teresa Elder: You probably have to ask them. So I would just say it looks like they're doing a lot of national advertising that's consistent within our markets as well emphasizing mobile. But we have found that the simple approach that we've had with all-in pricing, with an optional price lock has really cut through so customers don't have to be confused by how many mobile lines versus this versus that, they have to have without -- With WOW!, you always get that same clear value at high speed without having a bunch of other strings attached. Operator: There are no further questions. Teresa Elder: Perfect. Thank you so much. As always, we appreciate all of you joining our call. And as always, I would like to thank the people of WOW! who continue to wow our customers every day and provide the value to our customers and appreciate the time on this call this morning. Thank you. Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, hello, and welcome to the bpost Group Third Quarter 2025 Analyst Conference Call. On today's call, we have Mr. Philippe Dartienne, CFO. Please note, this call is being recorded. I will now hand over to your host, Mr. Philippe Dartienne, CFO, to begin today's conference. Please go ahead, sir. Philippe Dartienne: Thank you very much. Good morning, ladies and gentlemen. Welcome to all of you, and thank you for joining us. I'm pleased to present to you our third quarter results as CFO for the bpost Group. Chris, our CEO, could not make it today, and I have with me Antoine Lebecq from Investor Relations. We posted the materials on our website this morning. We will walk you through the presentation, and then we'll take your questions. As always, 2 questions each will ensure everyone gets a chance to be addressed in the upcoming hour. I'll start with the quarterly financials, then move on our financial outlook and provide an update on our key transformation initiative for 2025. As you can see on the highlights on Page 3, our group operating income for the third quarter amount to EUR 1.030 billion, remaining broadly stable year-on-year and almost at constant scope as Staci has already contributed for 2 months in the same period last year. As usual, the summer quarters show some seasonal softness, but beyond this, we saw a mix of different factors. At Radial U.S., we continue to see the expected impact for the 2024 contract termination, but even more this time, the materialization effect of those announced earlier this year. As a reminder, these are the same ones that led us to take an impairment at the beginning of the year. Altogether, those elements more than offset the extra month of Staci contribution in the quarter. At the same time, we continue to see good volume growth in Asian cross-border activities. While in Belgium, the domestic mail volumes declined, this was partially compensated by a decent volume growth in Parcels. Our group adjusted EBIT came at minus EUR 3 million, representing a year-on-year decrease of EUR 16.3 million, mainly driven by Radial U.S., where despite sustained margin action, the revenue shortfall due to the anticipated churn and seasonal softness did not allow full absorption of fixed costs in the quarter. More broadly, at bpost Group level, the results we are presenting today are in line with our expectations, and we reconfirm our EBIT outlook at around EUR 180 million for the year 2025. On Slide 4, you will note that the EUR 14 million decline in net profit mirrors the EBIT evolution as in the same period last year, the acquisition of -- the acquisition debt was already on balance sheet and the financial results remain broadly stable. Let's move now to the details of our 3 segments. I'm on Page 5 with BeNe Last Mile segment. We see that the revenue declined by EUR 9 million, amounting to EUR 512 million. Domestic Mail recorded around EUR 16 million decline in revenue, of which EUR 10 million stemmed from transactional and advertising mail and EUR 6 million from press. Excluding press, mail volume contracted by 9.4% in the quarter compared to only 6.7% last year, which had benefited from the election uplift in September 2024. The decline in mail volume had a negative revenue impact of around EUR 20 million, of which was partially compensated by half through a positive price and mix effect of EUR 4.7 million or roughly EUR 10 million. As a result, domestic mail revenue were down by 4.6% or minus 10% year-over-year. On Parcels, revenue increased by EUR 4 million or 3.2% year-on-year, reflecting a volume growth of 2.8% and a slightly positive price/mix effect of 0.5% in this quarter. On the volume side, the reported 2.8% actually corresponds to an average growth of 4.4% per working day. Over the past months, this momentum has been mainly supported by the outperformance of marketplace, notably boosted by sales events and continued strength in the apparel segment. Let's move to the P&L of Last Mile on Page 6. Including some higher intersegment revenues from inbound cross-border volumes handled in the domestic network, our total operating income was slightly down by 1.4% or minus EUR 8 million. At the same time, on the cost side, our OpEx, including D&A, remained broadly stable and mainly reflects 2 effects: lower FTEs resulting from lower volume and efficiency gain, notably from the reorganization of our distribution rounds and retail offices, which are progressing in line with plan, and on the other hand, higher salary cost per FTE around up to 2% year-over-year following the March '25 salary indexation. In contrast with the first half of the year, when EBIT had contracted sharply by almost EUR 64 million year-on-year, mainly due to the end of the press concession in June '24, we see that despite structural mail decline, parcel growth and initial projects of -- sorry, and initial effects of our reorganization are helping to attenuate EBIT erosion. Moving on to 3PL on Page 7. 3PL revenues were broadly stable overall as 2 offsetting events affecting -- came into play. First, effect. 3PL Europe, where revenue increased by EUR 62 million, we benefited from 1 additional month of Staci revenue in the quarter, along with continued commercial expansion of Radial and Active Ants in Europe. That said, sales from existing customers or the famous same-store sale remained soft and even negative in certain geographies during the quarter. As a side note, since we are 1 year after the acquisition of Staci, there will be no further consolidation impact going forward. As we are now advancing in the integration of Staci, Radial Europe and Active Ants, we are really starting to operate as one single business unit as explained at our Capital Market Day in June. Our P&L is being increasingly managed together, this means that from now on, we will only report on 3PL Europe as one single business and gradually phase out stand-alone reporting from individual entities. Second effect, in 3PL North America, revenue decreased by EUR 58 million. At constant exchange rate, this corresponds to a decrease of 24%, mainly driven by revenue churn from contract announced in 2024 and even more so from those announced early '25, partially offset by in-year contribution of new customers, around 60% of which are Radial Fast Track customers as we presented to you at our Capital Market Day. While we are seeing positive and encouraging signs on that front, and I'll come back to that on a moment, we are still feeling the impact as expected of the churn. We continue to execute our sales development plan, and we are confident that these efforts will pay off, but it needs a bit of patience. Let's move on to the P&L of 3PL on Slide 8. With this, the total operating income slightly increased by 1.1%, while our operating expense and D&A increased by 4.8%, primarily driven by in Europe, Staci consolidation impact and one-off reorganization costs, including site closures and relocation of customers to further accelerate 3PL Europe integration and cost structure optimization. In North America, lower variable OpEx in line with the revenue development at Radial U.S., and sustained variable contribution margin close to record high level. The EBIT evolution at Radial U.S. is certainly one of the key highlights of this quarter performance and also the main reason for the gap versus market expectation. Despite 1 additional month of Staci contribution, the minus EUR 30 million EBIT decline in 3PL from plus EUR 1.7 million last year, indeed clearly reflects the situation at Radial U.S. After 3 consecutive years of contraction, revenues are now about 45% below their peak level in Q3 2022. In this quarter, the combined effect of churn and seasonal softness limited our ability to fully absorb fixed costs despite strong VCM discipline and tight cost control. Ironically, we are now at a point where revenue have reached their lowest level ever, and yet our VCM margin stands at all-time high. Looking ahead, the solution lies in top line recovery, and on that front, we are executing our plan and making good progress. Moving on to cross-border on Page 9. Cross-border Europe revenue increased by EUR 11 million or plus 14% year-over-year. This growth was driven by strong volume increase from Asia across all major destinations, notably Belgium, fueled by large Chinese platform and U.S. Across-border North America, Landmark Global continues to face the broader tariff environment that is weighing on existing business and delaying new opportunities. However, this was offset by strong domestic volume in Canada, resulting in an overall plus 1.4% revenue increase for North America, including a 6% negative FX impact. Overall, our cross-border operating income increased by roughly $12 million or 8.7%. As shown on Page 10, our OpEx and D&A increased at the same time by 9.6%, mainly reflecting higher transportation costs linked to the volume growth I just mentioned. EBIT slightly increased to above EUR 17 million with a margin of 11.5%, reflecting a slight dilution from commercial products. Moving on to Corporate segment on Page 11. Adjusted EBIT improved by EUR 1 million to minus EUR 9 million as cost containment measures across spend categories helped offset higher payroll driven by more FTEs and March '25 salary indexation. Then we move to the cash flow on Slide 12. The net cash outflow for the quarter amounts to minus EUR 16 million, representing an improvement of EUR 275 million year-on-year, mainly reflecting the acquisition of Staci last year, which was partially funded in cash for a bit less than EUR 300 million. Besides that, the remaining items to flag are the following: Cash flow from operating activities before change in working cap stood at EUR 71 million and decreased by EUR 7 million year-over-year, mainly reflecting higher corporate tax payment. Change in working capital and provision amounted to EUR 17 million. The plus EUR 16 million variance is primarily explained by the settlement of some terminal dues and some client balances. The net cash outflow from investing activities totaled EUR 28 million, driven by our CapEx for international e-commerce logistics, parcel lockers and capacity expansion. Also, our domestic fleet was considered into this EUR 28 million. This item constitute the main variation in our free cash flow. The net cash outflow for financing activities amounted to minus EUR 776 million and mainly consisted of lease liabilities outflows, while we had on top of the acquisition debt last year. This brings us now to the outlook and our strategic priorities of 2025. Outlook 2025. We presented our group EBIT outlook of the range EUR 150 million to EUR 180 million back in February, and during the Q2 results in August, we indicated that we were targeting the upper end of the range. With a year-to-date EBIT of EUR 97 million, the results we're presenting today are broadly in line with our plan, now allowing us to confirm our full-year outlook at around EUR 180 million. This implies achieving an EBIT of around EUR 80 million to EUR 85 million in Q4 compared with EUR 80 million in the same quarter last year -- sorry, compared to EUR 84 million last year, which we are cautiously optimistic about. Based on current assumption and expectation, we believe this is achievable, particularly thanks to our preparation and readiness for an efficient peak execution across the group. In North America, we validated client volume capacity plan. We have secured to hiring over 4,100 seasonal workers to ensure full site coverage and put peak incentive plans in place. In BeNe Last Mile, beyond the usual measures, we have implemented additional productivity initiatives, including tracking performance at each distribution offices and site and setting up a national tool to further optimize interim and reinforcement of the planning. Of course, we remain vigilant amid challenging market conditions, notably as volume development and the phasing out of end of year peak volumes in Belgium and internationally remain uncertain and partially beyond our control. To wrap up on our outlook, we are also updating our CapEx guidance with a downward revision from EUR 180 million to EUR 140 million. This reflects our disciplined approach to spending in Belgium and in the U.S. and a strategic phasing towards 2026. Overall, we remain focused on prioritization and value creation, ensuring that every euro invested is where it has the highest impact in the group. Finally, as we usually do, I take a few minutes to walk you through the progress we've made on our transformation plan over the last months as part of our Reshape2029 journey we presented to you at the Capital Market Day. When it comes to the update on the strategic initiative, bpost continues to accelerate its transformation, shifting firmly towards becoming an international logistics and parcel operator. Let me walk you through the tangible progress we've made across our segment. I'll start with BeNe Last Mile. Following 2 successful pilot phases, we launched our 9 delivery service on October 15. As new B2B service consisting in a 9-time delivery solution targeted at technician and field workers that helps eliminate detours from central depots and save up to 1.5 hours per day for these technician and field workers. In practice, parcels are collected by bpots until 6:00 p.m. on working days, sorted overnight and then delivered before 7:00 a.m. to selected parcel lockers of our network across Flanders, Brussels and Wallonia. The service is exclusively available for B2B shipment, internal deliveries or business-to-business exchanges requiring high level of reliability. Meanwhile, still in Belgium, our bbox network of parcel lockers continue to expand strongly. We have now around 2,000 active units with 800 more contracted, most of them located in prime location and high-traffic venues like supermarkets. As announced recently with Lidl, we target to have 240 lockers by the end of this year, which represents nearly 10% of the targeted APM capacity. We currently install up to 12 new lockers per day, and by the end of this year, we intend to have 2,500 lockers installed in Belgium. On our future operating model, one of the pillar is bulk rounds, consisting in dedicated parcels round in bulk, serving pickup and drop-off points, including lockers. Here as well, after a successful pilot phase, this model is now fully operational across all sorting centers, servicing 26 distribution offices and handling over 12,000 parcels a day. Before end 2025, we will extend to 29 offices with a capacity close to 21,000 parcels a day. This bulk model is set to become a cornerstone of our 2026 peak strategy capable of managing nearly half of the out-of-home volumes. Let's shift to 3PL Europe. We are entering into a new chapter in leadership with Rainer Kiefer taking over as CFO of 3PL Europe and Staci Americas as of January 2026, succeeding Thomas Mortier, who announced earlier this year its intention to step down at the end of the year and will move into a part-time advisory role starting January 2026. Rainer brings extensive experience from DSV and DB Schenker with a strong track record in transformation and scaling across Europe. This appointment reflects our ambition to accelerate the transformation of the 3PL business, strengthen our European footprint and drive value creation across the full spectrum of contract logistics, fulfillment and omnichannel solutions. With Thomas supporting this transition and Rainer taking a help, we are confident that the business is well positioned to execute the next phase of our growth strategy. In parallel, the integration of Staci remains firmly on track. As cost synergies start to materialize in the second half of the year, we expect to overdeliver on our 2025 synergy targets. The 2026 targets are already secured, fully in line with what we presented to you at the Capital Market Day. In 3PL U.S., our Radial Fast Track rollout is ahead of our plan. 16 customers are already live and 2 more are set to launch in the fourth quarter 2025, each contributing an average ACV between EUR 4 million and EUR 5 million. The in-year revenue from Fast Track is already exceeding internal targets, providing strong momentum in U.S. and validating the scalable potential of the model. As Chris mentioned it last time, there's still a lot of work ahead of us, and the first results are not always immediately visible in the P&L. This is notably the case this quarter in the U.S. That said, we are confident that we are on the right track and focused on doing the right things to deliver sustainable results. We are now ready to take your questions. Again, questions each will allow every one of you to be addressed in the upcoming hour. Operator, please open the line for questions. Operator: [Operator Instructions] The next question comes from Frank Claassen from Degroof Petercam. Frank Claassen: My 2 questions. First of all, on Radial, minus 25% organically in Q3. Could you split the minus 25% between, let's say, the negative same-store sales and the impact of the churn? Is this, let's say, and what can we expect going forward? Is this the bottom? Or do you expect an improving trend in the coming quarters? That's my first question. My second question on Staci. I understand that you don't break down the EBIT anymore or give the separate EBIT. Could you elaborate on how the profitability is developing? Is it according to plan? I recall that you had a sort of guidance or, let's say, target of 10% to 12% EBIT for Staci. Is that still valid? Could you elaborate on that? Philippe Dartienne: Okay. Thank you for your 2 questions. Let's start with Radial. Indeed, we observed a severe decrease in the current quarter, which is mostly explained by the churn. Again, the churn coming that was announced in 2024 that has a full-year impact in 2025 and some churn that were announced at the beginning of the year, and then they're only materializing now. I have one very specific example in mind where the customer said, we're going to stop 1 of the 2 warehouses in the first -- sorry, in the third quarter, so meaning now. This is part of the explanation and this is the bulk of it. Same-store sales evolution is not positive, but nowhere near what we observed in the recent quarters. If you recall, we had a terrible sequence of -- if it's in 2024, minus 4 at the beginning of the year, we peaked, wrong word, but it's a high amount, even it's a negative one, around 9% in the fourth quarter 2024. The beginning of the year was also in negative territories, lower than the minus 9%. Now we are slightly negative, but it's not what it mainly explains the different impact on the EBIT. Simply why? Because the basis at which it applies is also by far lower. This being said, very important to notice that the variable contribution margin has been extremely high, again, sustained quarters-after-quarters, which is a positive sign. That's for Radial. Sorry, and there was a subset in your question about what is the trend. The trend for us is twofold. We have launched in the first quarter of this year, our new product offering or service offering, which is Radial Fast Track that aims at offering solutions which are more flexible, standardized, easy to onboard type of solution, also very asset-light in terms of CapEx and automation, and it's picking up. It's picking up. We have signed 16 customers. We will onboard another 2 between now and the end of the year. Also, important to note is that we will be onboarding customers nearly close to the peak, which is -- which shows how flexible this solution is to onboard new customers. Historically, it was taking roughly 12 months to onboard new customers at Radial because of the high level of customization in the processes and also in the IT systems. In terms of trends, we are optimistic about the product that we have launched because we see it's picking up. There is traction on the market. On the other hand, we need to be realistic. When we are losing customers average size between EUR 50 million and EUR 70 million, while the ACV of the Fast Track typical customers is around 5. You can do the math as well as me. It takes time to be able to compensate this churn. We are also not aware of any new customers who have announced their departure in the near future. That's for Radial. For Staci, it's going according to plan. Yes, it's going according to plan. The EBIT margin is a bit on the low end of the range this quarter, which is mostly explained by the fact that, as I said it, and again, we already announced that there is no news in that one that we want to operate on a geographical platform as one entity, one go-to-market. We have several territories, like Belgium, the Netherlands, U.K., Germany, Italy, where we're really operating as one. The local managers there, they look at their portfolio of customers, what is their needs, what is the solution, the operational solution available to serve those customers and also the footprint. Some movement has been already initiated to relocate customers where they better fit with the requirement of the customer and also optimizing the footprint. It's also the case in the U.S. where one warehouse has been shut down and customers have been transferred to a new site. In Germany, the former site of Staci Germany in Boston has been shut down and customers has been transferred to a former Radial site in Halle. In the Netherlands, in the Active Ants portfolio, we have decided to close 1 of the 2 warehousing in Nieuwegein and those customers have been transferred to Roosendaal. This cost -- these transfers demonstrate that we really want to operate at a local level as one, but it has, unfortunately, on the short term, some cost. There is cost attached to shutting down warehouses and to move customers. It's all for the better. It's to serve the customer in the best possible way and the most efficient way on those territories. Operator: [Operator Instructions] The next question comes from Henk Slotboom from The Idea. Henk Slotboom: One question from my side. We've been hearing a lot about levies on Chinese goods. The French want to do it unilaterally. The Dutch have already said, they might follow the French maybe already as soon as the 1st of January of next year. Now personally, I don't think that EUR 2 per parcel will stop the avalanche of parcels to Europe. It will simply be relocated. What does the situation look like in Belgium? I don't know, if they have similar ideas to do things unilaterally. Well, could it be the case that you benefit from it if stuff is not flown at Schiphol Amsterdam Airport, but at Liège or Brussels instead provided, of course, there are no drugs over there. Philippe Dartienne: Thank you for your question, Henk. Indeed, the situation in Belgium is that the government is thinking of putting EUR 2 per parcel levy. Now it leads to a lot of questions. There is also who's going to collect this EUR 2, which is a very practical problem, and there is no answer to that. Of course, we are not -- we are there to carry the parcels. We are not there to collect this kind of surcharge or taxes levies, whatever you name it. There will definitely be a question of implementation. Interestingly enough, we had a discussion yesterday with one of our Board members who is coming from the Nordic, who faced a bit the same situation, and it took more than 12 months to find a technical solution to implement it. It's still an intent at this stage. There is no implementation date decided. Indeed, it will be difficult to implement. Your comment about, of course, if other countries are deciding for the levies, let's say, in the Netherlands, France, Germany, it could lead to additional volumes in Belgium, but anyway, it would only be a temporary solution. At this stage, it's a very good question, but it's a big question mark when it comes to the implementation date and also the practicalities behind it. Henk Slotboom: Can I ask an add-on to that, Philippe? Philippe Dartienne: Sure. Henk Slotboom: If I look at, for example, Austria Post or Polish Post and that sort of things, they've been entering alliances with, for example, Temu and Shein, who want to move part of their logistics and then I'm talking about warehousing and that sort of things to Europe. You have a fantastic network of fulfillment centers with Radial Europe, with Active Ants, with Staci. Is anything there being discussed with the large Chinese platforms? Philippe Dartienne: Again, a very good question from Henk, as usual. There are movements indeed, we see the Chinese are coming closer to Europe. They are also thinking of implementing themselves in Turkey, which is also close to Europe. Indeed, it's a movement that we see in the market, but I will not comment any further at this stage. Operator: The next question comes from Marco Limite from Barclays. Marco Limite: I've got 2 follow-up questions. One is on Radial U.S. Do we have to think about Q4 as the last quarter of year-over-year decline in revenues, and therefore, we should expect growth from next year? It’s the first question. Second question, on Staci Europe, I mean, if I look at the Q3 numbers, it feels like that most of the decline year-over-year is coming from Radial U.S. At the same time, you've got 1 month more of Radial Europe in the base now. We basically have got 3PL Europe being flat despite growth and despite an additional month. On top of that, you are also talking about synergies being ahead. Just the math doesn't work for me why year-over-year, things are flat despite tailwinds from synergies and an additional month. If you can clarify. Philippe Dartienne: Good. I'll start with Radial. No, in 2026, there still might be some decline in top line because there will be the full-year impact of the customer churn that we observed in 2025. Of course, the one announced in '24 will be over in '25, but there are some of them that will have an impact in 2026. This being said, what is really important for us to look at is the profitability and the cash generation profile and the quality of the portfolio. I really want to remind what we said at the Capital Market Day, not only we want to go for the mid-market, not to have big customers dependent on 2 big customers are requiring huge investment in terms of customization of system, high automation. We want to move out of that one, and they will be gradually phased out. We want to reinforce ourselves our presence in other type of customers. ACV of Radial Fast Track is in the range of 5 million, so totally different, but also and equally important in my eyes is also the portfolio itself in terms of the number of verticals where we want to operate in. In the past, it was focused on only 2. We really want to broaden that one, and we see first signs of result -- positive result going into that direction. Again, as I said, and again, I'm also repeating what we said at the time of the Capital Market Day, it's a long journey. It's not a 1- or 2-quarter journey. It's a long journey to move from big anchor customer focused or very capital intensive and focused on 2 verticals to something which is more nimble and flexible going forward. Again, the math plays against us when it comes in terms of timing. There will be a delay between the moment we could see growth again to be totally honest, transparent, but also totally aligned with what our forecasts are. There is nothing -- no news on that one. There is no change of strategy. There is no acceleration or degradation of the situation. It's happening as we had planned to do it. Marco Limite: Can I just follow up on this one? Is there a risk that more or other large customers are going to, let's say, leave Radial U.S. in the future because you are moving type of strategy and type of service? Philippe Dartienne: The risk is always there, Marco. This being said, interestingly enough, very interestingly, in our Radial Fast Track customers, we have 16 of them that we have new ones, but there is also 2 of them that were former old solution type of customers moved to Radial Fast Track. This also demonstrates that we have now with this solution, capabilities to address their demand. Marco Limite: Europe or 3PL Europe? Philippe Dartienne: Yes, I didn't forget. Don't worry. On Staci, the math add up, but there were maybe -- we need to remind all the elements of the equations. First one and is the vast majority, it's all about the costs relating to the optimization of the operations in different geographies in the U.S., in the Netherlands, in Germany, that explains the chunk of the fact that indeed, when you do the math, you don't see a growth when you come to Staci. There is also, but to a lesser extent, some softness in certain territories, and I'm mostly thinking about France, where the same-store sales has been negative in the quarter. On the other hand, as a positive note, in France, we are not seeing the departure of any customers. Operator: The next question comes from Marc Zwartsenburg from ING. Marc Zwartsenburg: I also have a bit of a follow-up on Radial U,S., because I think you mentioned you will also see a significant decline still in Q4, and that fits also with the story with the mentioning of the churn of the larger accounts. I think originally, there was a sort of a guidance of minus 10% to 20% a bit on the full-year top line, which would indicate still, say, mid-single-digit double digit, let's say, 15% maximum year-on-year decline if you plug in, say, minus 20%. Is that still an applicable guidance that we're looking at still a double-digit decline of around 15% for Q4? Just to get a bit of more feel on the movement of Radial because it's quite big numbers we're talking. That's my first question. Philippe Dartienne: You want me to take it immediately. It's more in the range of 15% to 20%. Marc Zwartsenburg: Q4, we're talking about? Philippe Dartienne: Yes. Marc Zwartsenburg: Then on the parcel volumes, so the working day adjusted number is plus 4.4%. That's a slight improvement from Q2, but how do you -- was that stable through the quarter? How are you looking to the big season? Do you already have a bit of an indication on the big events for Q4, what you expect there? Because I think also here, the guidance was more like a mid-single-digit to high single-digit growth. It looks now more like on the low end of the mid-single digits. What are your thoughts there? What kind of trends do you see? Philippe Dartienne: In fact, there is one very important element. It's not that it's totally new this year, but we see -- and typically in Belgium, we see more-and-more before the peak was very -- excuse me, very focused on 1 or 2 days. By the way, in Belgium, we have the peak, but with also Christmas and Sinterklaas. In fact, it's the month end of November and the month of December, which are, in fact, higher months. Unlike what we see in the U.S., when you see the peak, it's a couple of days. It's more spread all over that period, combined with the fact that we see more-and-more our customers, the one selling directly to the customers or through platform, offering throughout the year, promotion, discount and this kind of stuff. It's very difficult to predict how it will look like. But for sure, we see it's become that higher activity is spread over more days or weeks than it was in the past. Marc Zwartsenburg: Do you see September, October trending higher than the 4.4%? Philippe Dartienne: In that range. Marc Zwartsenburg: It's rather stable. That's currently the trend. Philippe Dartienne: Yes. Marc Zwartsenburg: Then lastly, I know you're not disclosing it, but could you give a bit of an indication of the EBIT contribution of Staci, because it's still important to model that properly also through the quarters because we saw quite a miss on the consensus on particularly the 3PL division and whether that's Staci or whether that's Radial U.S. or whether that's the extra cost, it would be helpful to have a bit more granularity. Can you help us there? Philippe Dartienne: I can help you in repeating what I told you is that the big chunk of the fact that it doesn't grow is linked to this optimization, cost optimization, operational optimization, which is the majority of the variance and the rest coming from same sourcing. You could count on. Marc Zwartsenburg: Staci have no growth on the revenue side and a bit of impact from the fine-tuning of the optimization of the warehouses. Is that how we should see it? Philippe Dartienne: Yes. Marc Zwartsenburg: How long will that take that optimization of the warehouses till when should we pencil that in that the margins may be a bit more at the low end? Philippe Dartienne: I would say -- in fact, the more the people will start working together and depending on the customer need, it might lead to additional ones. This one were the obvious one. I would say, in the next 2 quarters, I'm not expecting any site closures or major site closures now, but It's an ongoing process. Marc Zwartsenburg: For 2 quarters -- yes, exactly. We will see a little bit of double running costs in the meantime. Then after that, we should see the efficiencies coming through. Philippe Dartienne: I hope it will come faster, but it's not to be excluded that we might decide here or there to restructure on another warehouse. There is one that was already planned in the U.S. By the way, it was a journey, nearly 3 years journey at the time of the acquisition of Amware by Staci, they looked at the portfolio, and we were totally aware of that because it was an element that was shared with us at the time of the acquisition. They knew that they had a plan to restructure 3 warehouses. They have done 1 in '24. There is a second one in '25, and there will be the third one in '26. Marc Zwartsenburg: Then thinking about '26, we should see a higher EBIT than what we probably will see in 2025. Is that? Philippe Dartienne: Yes. Marc Zwartsenburg: The path towards your long-term outlook to see a higher EBITDA? Philippe Dartienne: Don't drag me into a budget discussion and a guidance for '26. We will come to you on that one when we publish the Q4, but I give you some element. I have the impression of painting an impressionist painting with dots of colors, some quantities. I'm doing some quantities on the U.S., but don't drag me where I don't want to be dragged. Marc Zwartsenburg: It's the time of the year budget. Operator: The next question comes from Marc Zeck from Kepler Cheuvreux. Marc Zeck: Two, if I may. First one on -- again, Radial U.S. Could you give us a bit of more color or feeling about, let's say, the top 5 customers at Radial U.S., how much of sales is that broadly speaking? For these customers, is there kind of a contract renegotiation period upcoming end of '25 or early in '26? Or is these contracts mostly locked in for a longer period of time? That would be my first question. Second question also on, let's say, the broader U.S. business. I believe we've seen quite a bit of pull forward buying into the U.S. imports for the first 9 months of the year were pretty good, I believe, into the U.S., but we see container imports or container arrivals at U.S. ports dropping quite sharply now in Q4. Is your business in the U.S. mostly related to ocean freight? Should we expect a bit of a negative business development on same-store sales as well for Radial U.S.? Or are you kind of air freight exposed from a product category where we still see quite good numbers, I would say, in the overall market? That's my 2 questions. Philippe Dartienne: Okay. Let me start with the second one. It's a bit of both. Of course, all your comments are valid. We are exposed to air freight and ocean freight. I give you a very practical example. In one of the customers that we have onboarded with Radial Fast Track is a fashion brand coming from Australia, who wanted to be implemented in the U.S. They wanted to have fulfillment there. We are hearing from customers, some other customers that they want to be in the U.S. rather than systematically air freighting stuff. By the way, it's no different than what we are seeing with the Chinese platform now. Let's refer to the comment or the question earlier on the Chinese who want to be implemented -- to implement themselves in Europe to avoid tariffs is the same that we are seeing in U.S. We have a very practical example, as I said, of one who really has decided to come physically in the U.S., and there, we have definitely a role to play and a good service offering. When it comes to Radial, I also want to -- do we have big renewal in the pipe for the coming quarters? The answer is no. We already have renewed some of them in the course of 2025. There, I want to reiterate something which is extremely, extremely important. In the past, what we saw at Radial, especially with the big customers, the situation was the following. They were asking for a lot of customization, a lot of automation that typically are passed on to the customer over a period of 6 to 8 years, while we were having contracts of roughly 4 years. At the same time, we had also our warehouses locked for a period of 7 to 8 years. In many instances, what we saw is the customer left or didn't renew the contract, and we were there even if there was some provision in the contract with unamortized portion of own developments and the liability linked with these warehouses. Since the last 18 months, all renewal or all new contracts signed are [indiscernible] with the lease of the warehouses. It's also important to look at what could be the impact of the customers. In fact, the Radial situation we are in right now is absolutely not the same as the one we saw years ago. Operator: Ladies and gentlemen, there are no further questions. I will hand it back to Philippe to conclude today's conference. Thank you. Philippe Dartienne: Thank you very much, guys, for your intense question session. Antoine is always there to do the follow-up with you in the coming days and weeks. Let's stay in touch. Next time, we'll see, we'll be able to demonstrate that we have executed the peak in a qualitative and efficient way. Thank you very much. Have a good day. Operator: Thank you for joining today's call. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin and I will be your conference operator today. At this time, I would like to welcome everyone to the Corteva Agriscience Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Kim Booth, Vice President of Investor Relations. Please go ahead. Kimberly Booth: Good morning, and welcome to Corteva's Third Quarter 2025 Earnings Conference Call. Our prepared remarks today will be led by Chuck Magro, Chief Executive Officer; and David Johnson, Executive Vice President and Chief Financial Officer. Additionally, Judd O'Connor, Executive Vice President, Seed Business Unit; and Robert King, Executive Vice President, Crop Protection business unit, will join the Q&A session. We have prepared presentation slides to supplement our remarks during this call, which are posted on the Investor Relations section of the Corteva website and through the link to our webcast. During this call, we will make forward-looking statements, which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, included, but not limited to, those discussed on this call and in the Risk Factors section of our reports filed with the SEC. We do not undertake any duty to update any forward-looking statements. Please note in today's presentation, we'll be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in our earnings press releases and related schedules along with our supplemental financial summary slide deck available on our Investor Relations website. It's now my pleasure to turn the call over to Chuck. Charles Magro: Thanks, Kim. Good morning, everyone, and thanks for joining us. Before we get into our solid third quarter results, I'd like to address our October 1 announcement on our intent to separate into 2 public companies. This proactive strategic decision is rooted in our belief that separating our Seed and Crop Protection businesses now allows both to be better positioned to achieve their maximum long-term growth potential in the future. Bringing these businesses together 6 years ago, was undoubtedly the right thing to do as demonstrated by our strong track record, including this most recent quarter. We have clearly been among the market leaders, but we have an obligation to look ahead past the short term and ensure both companies are able to pursue their distinct opportunities to the fullest extent. So it's not that we believe things aren't going well today. They are. It's that we believe things could be even better in the future as 2 separate companies. It's really that straightforward. As we said last month, the seed genetics landscape is changing due to new technologies like gene editing and artificial intelligence, which opens new markets and opportunities for companies with scalable ag science capabilities. At the same time, rising pest and disease pressures and changing weather patterns have driven a shift from single to multiple modes of action in crop protection, including biological solutions. As a result, the market has gradually transitioned away from integrated proprietary models to more open-source licensing with collaborations now driving innovation success. As a result, industry players are increasingly open to working together, which also allows them to share resources and reduce risk. And importantly, it allows us to get affordable top technologies into the hands of farmers. So we are looking ahead with excitement and optimism, comforted by the fact that both of these businesses are leaders in their markets today and will remain so in the future. It's early days, but the process remains on schedule for a second half 2026 separation. Our Board has initiated a global CEO search for Corteva and we will provide updates on the separation along the way, but our goal right now is to deliver a strong 2025 and 2026. So let's now move to our current financial performance. Our results for the third quarter were largely in line with our own expectations, with the exception of outperformance on our controllables and strong early safrinha seed demand in Brazil. Operationally, we continue to execute well with double-digit operating EBITDA gains in both businesses, and we're now expecting to deliver over $600 million in controllable benefits this year, a notable improvement from our prior estimate of $530 million. In fact, this year's 9-month earnings performance is already ahead of full year 2024. Our Seed business is performing well again this year, including $200 million of productivity and deflation benefits as well as $90 million in royalty improvement, reflecting our leading position in North America corn and progress in soybean out-licensing in Brazil. Importantly, we now expect to cross double-digit trade penetration for Conkesta next year in Brazil, the largest soybean market on the planet. Capturing price for value in most regions as well as meaningful share gains in North America is a testament to the high return on investment our technologies provide to farmers. In 2026, we will roll out several hundred new hybrids and varieties around the world, once again, helping farmers increase yield and productivity. Finally, let me remind you that seed is the only crop input that gets better and better every year, allowing the farmer a solid return on their investment. The Crop Protection business has also delivered solid earnings and margin growth so far this year. Led by demand for our differentiated technology, we are expecting full year EBITDA to be up high single digits this year. We continue to see volume gains and we remain committed to our strategy of focusing on differentiated and new technologies, which carry a premium in the market. Today, we're also announcing a brand name for our new next-gen insecticide active, Varpelgo, for chewing pests in fruits and vegetables, row crops and rice. Expected to launch in the early 2030s and cross $750 million in revenues at its peak, this represents the latest addition to the Corteva portfolio of trusted crop protection active ingredients inspired by nature and globally recognized for their more environmentally friendly profiles. Included in our $9 billion Crop Protection Technology pipeline are billion-dollar product families and biologicals in all 3 chemistry indications as well as what we view to be a significant value unlock in our Seed Applied Technology business as a result of the separation. In like seed, our Crop Protection business is generating substantial value through its focus on controllables which drove over $250 million of benefits in the first 9 months of the year. From an industry perspective, the overall ag market fundamentals remain mixed. We're still seeing record demand for food and fuel and major crop inventories are within normal ranges despite large crops in Brazil and North America. Farmers continue to prioritize top-tier seed technologies while managing tighter margins. In the crop protection market, although we continue to experience competitive pricing dynamics in some major markets, underlying farmer demand in terms of applications remain on track with historical levels. In other words, when farmers have crop problems, they spray with the best solution they can find. So what does all this mean for the remainder of the year? We are raising our full year operating EBITDA range to $3.8 billion to $3.9 billion, which at the midpoint translates to 14% growth versus the prior year. This update reflects growth of our new technologies, our outperformance on controllable levers, a more favorable currency impact and our latest expectations on our fourth quarter performance in Brazil. One quick note. We look at our business by halves, not quarters. It's one reason why we don't provide quarterly guidance. Farmers plan their purchases and business by halves and weather or other uncontrollable factors often move orders, sales and shipping between quarters. Looking at this year, the halves really do tell a story. In the first half of this year, our operating EBITDA was up 14%, while our second half is expected to be up 17%, both really strong performances. On full year EBITDA margin, we're now expecting improvement of over 160 basis points and a solid step towards our goal of 24% at the midpoint by 2027. A quick reminder. When Corteva launched in 2019, our margins were below 15%. Finally, it's also important to note that we're still expecting a free cash flow conversion rate in the range of 50% for the year as well as $1 billion in share repurchases this year. Now let's move to the first look at how we're thinking about 2026. From a macro perspective, we're anticipating a continuation of record demand for grains, oilseeds, meat and biofuels. On-farm demand is expected to remain steady, and farmers will continue to prioritize top-tier technologies in order to maximize their yields. A farmer seed selection is particularly critical and is nondiscretionary when compared to other crop inputs. Given the high corn area in the U.S. this year, it's logical to assume we'll see a couple of million acres shift back to soybeans in 2026. With the overhang of global trade uncertainty, it would be premature to discuss how large a shift might be, but we do not consider it to be disruptive to our planning assumptions given our market-leading position on both crops now. Global trade discussions remain dynamic. However, last week, China committed to buying 12 million metric tons of soybeans this season, followed by at least 25 million metric tons per year for the next 3 years. We will continue to monitor the situation, but this should be welcome news for U.S. farmers. Perhaps most notable is that we are now expecting low single-digit growth in the crop protection industry including high single-digit growth in biologicals. This would be a good first step in the overall return to a healthy CP market. With the exception of Latin America, where we expect competitive pressure to keep prices flat to modestly down, we see overall CP market pricing stabilizing in 2026. Turning back to Corteva. What continues to set us apart is the strength of our portfolio, a continued focus on execution and increased investment in innovation. The introduction of hundreds of new products is expected to continue to drive solid returns for farmers and thus, a premium in the market and contribute to our volume growth. We're also expecting a continuation of sizable productivity benefits in both businesses, a defining characteristic of our margin enhancement journey. Overall, when considering the market backdrop in 2026 as well as the growth opportunities we have in motion, we're currently anticipating full year operating EBITDA in the range of $4.1 billion which translate to mid-single-digit growth year-over-year, and we'll provide a more detailed view in early February when we issue formal guidance. Let me wrap up by saying that we built a foundation of strength that gives us the ability to shape the next chapter of value creation on our own terms. Our intended separation is about sharpening focus, accelerating innovation and unlocking value that's been earned through performance. And we are committed to delivering results like this past quarter throughout this transition period. And with that, let me turn it over to David. David Johnson: Thanks, Chuck, and welcome, everyone, to the call. Let's start on Slide 7, which provides the financial results for the quarter and year-to-date. Sales and operating EBITDA for both the quarter and year-to-date were up versus prior year driven by continued execution on controlling the controllables and an early start to the Latin America safrinha season. Briefly touching on the quarter, organic sales were up 11% compared to prior year with gains in both Seed and Crop Protection. Value capture remains steady overall as improved execution in seed was balanced by continued pressure in Crop Protection. Third quarter volumes were up 12%. We see gains in Latin America and EMEA, coupled with Crop Protection volume growth led by North America and Latin America. Top line growth and meaningful cost improvement translated into positive operating EBITDA in the quarter versus a loss in prior year and over 600 basis points of margin expansion compared to prior year. Focusing on year-to-date, organic sales were up 6% over last year, again, with growth in both Seed and Crop Protection. A continuation of the price for value strategy along with increased corn acres in North America and Latin America drove seed price mix and volume gains of 3% and 4%, respectively. Crop Protection price was down 2% year-to-date as expected, driven by competitive market dynamics, mostly in Brazil. Crop Protection volume was up 7%, but gains in nearly every region. Notably, new products and biologicals delivered double-digit volume gains compared to prior year. Operating EBITDA was up 19% over prior year, operating EBITDA margin of over 25% was up about 320 basis points driven by organic sales growth, coupled with significant benefits from lower input costs and productivity. Moving on to Slide 8 for a summary of the year-to-date operating EBITDA performance. Operating EBITDA was up more than $550 million to just over $3.4 billion. Price and mix, volume gains and cost benefits more than offset currency headwinds. Seed continues to make progress on its path to royalty neutrality with about $90 million in reduced net royalty expense. This improvement was driven by increased out-licensing income in North American corn and lower royalty expense in soybeans. By the end of the year, we expect our net royalty expense position to be around $120 million. Season Crop Protection combined to deliver over $500 million in productivity and cost benefits, including lower seed commodity costs, raw material deflation and continued productivity actions. Year-to-date SG&A was up compared to prior year, driven by higher commissions and compensation expense. The increased investment in R&D aligns with our target and is on track to reach 8% of sales for the full year. As expected, currency was roughly $170 million headwind on EBITDA, driven by the Brazilian real, Turkish lira and Canadian dollar. Both Seed and Crop Protection continue to have an impressive year-to-date performance, expand on their double-digit EBITDA growth while providing meaningful margin expansion over prior year. In addition, free cash flow has improved over $917 million from the prior year. This was driven by our increased EBITDA, lower cash taxes and lower capital expenditures. With that, let's go to Slide 9 in transition to the updated outlook for the full year. Our updated '25 guidance reflects the strength of our year-to-date performance and continued confidence in delivering the fourth quarter. As a reminder, in the second half of 2024, we delivered $425 million of EBITDA, with all of that earned in the fourth quarter when we achieved $525 million, largely due to a near record crop protection quarter. This year, that risk is reduced as a portion of those earnings have already been realized in the third quarter. For the second half of 2025, we still expect approximately 17% growth over prior year. As Chuck mentioned, we now expect operating EBITDA in the range of $3.8 billion to $3.9 billion, representing 14% growth at the midpoint. This increase is driven by broad-based organic sales growth and incremental cost improvement benefits across both businesses. As a result, we now expect operating EBITDA margin expansion of approximately 165 basis points. We are also raising our operating EPS guide to $3.25 to $3.35 per share, up 28% at the midpoint versus last year. This reflects stronger EBITDA performance and lower-than-expected net interest expense and foreign exchange losses. Finally, we are reconfirming our free cash flow guidance of approximately $1.9 billion with cash conversion rate of about 50%. This improvement is primarily driven by earnings growth. With that, let's go to Slide 10 and summarize the key takeaways. First, while we still have an important quarter of the year left to go, we delivered a strong third quarter and year-to-date performance ahead of expectations. Organic sales growth was driven by our leading corn portfolio in North America and Latin America, combined with broad-based volume growth for Crop Protection. We delivered about $500 million in cost savings from lower Seed and Crop Protection raw material costs along with productivity gains. The combination of organic sales growth in both business units, $90 million in net royalty improvement and enhancements in product mix contributed to about 320 basis point margin expansion over prior year. In addition, free cash flow has improved over $970 million from the prior year. This was driven by our increased EBITDA, lower cash taxes and lower capital expenditures. With that, let's go to Slide 9 in transition to the updated outlook for the full year. Our updated '25 guidance reflects the strength of our year-to-date performance and continued confidence in delivering the fourth quarter. As a reminder, in the second half of 2024, we delivered $425 million of EBITDA. With all of that earned in the fourth quarter when we achieved $525 million, largely due to a near record crop protection quarter. This year, that risk is reduced as a portion of those earnings have already been realized in the third quarter. For the second half of 2025, we still expect approximately 17% growth over prior year. As Chuck mentioned, we now expect operating EBITDA in the range of $3.8 billion to $3.9 billion, representing 14% growth at the midpoint. This increase is driven by broad-based organic sales growth and incremental cost improvement benefits across both businesses. As a result, we now expect operating EBITDA margin expansion of approximately 165 basis points. We are also raising our operating EPS guide to $3.25 to $3.35 per share, up 28% at the midpoint versus last year. This reflects stronger EBITDA performance and lower-than-expected net interest expense and foreign exchange losses. Finally, we are reconfirming our free cash flow guidance of approximately $1.9 billion with cash conversion rate of about 50%. This improvement is primarily driven by earnings growth. With that, let's go to Slide 10 and summarize the key takeaways. First, while we still have an important quarter of the year left to go, we delivered a strong third quarter and year-to-date performance ahead of expectations. Organic sales growth was driven by our leading corn portfolio in North America and Latin America, combined with broad-based volume growth for Crop Protection. We delivered about $500 million in cost savings from lower Seed and Crop Protection raw material costs along with productivity gains. The combination of organic sales growth in both business units net royalty improvement and enhancements in product mix contributed to about 320 basis point margin expansion over prior year. Given our strong year-to-date performance and continued confidence in the fourth quarter, we raised our full year 2025 outlook across our key financial metrics. And finally, we remain on track for $1 billion of share repurchases in 2025. This, along with the dividend, translates to roughly $1.5 billion of cash returned to shareholders during 2025, a testimony to the strength of our balance sheet and cash flow outlook. With that, let me turn it back to Kim. Kimberly Booth: Thanks, David. Now let's move on to your questions. I would like to remind you that our cautions on forward-looking statements and non-GAAP measures apply to both our prepared remarks and the following Q&A. Operator, please provide the Q&A instructions. Operator: [Operator Instructions] Your first question comes from the line of Chris Parkinson of Wolfe Research. Christopher Parkinson: Chuck, I thought you guys have a pretty interesting setup between Slides 25 and -- through 27. In terms of the why now and your preliminary remarks even on this call, what do you think is the most missed of what you've laid out? Is it the baseline CPC pipeline where you've got the new actives? Is it the balance between the plant health and biologicals? Is it the Spinosyn franchise as a percent of the insecticides, which has been pretty successful? I mean what would be the things that you would say like, "Hey, this is what the independent company actually needs to focus on and further differentiate itself from both a growth and a margin perspective on a go-forward basis?" Charles Magro: Chris. So look, I think we've been pretty consistent with our messaging. If you look at the last 5 years, our Crop Protection business has been among the leaders. We're up about 200 basis points. I'm rounding, I think it's about 160 basis points, a little bit more after the third quarter now. And we have one of the best and the deepest R&D pipelines out there, and we put the number out actually at our last Investor Day of $9 billion. And then we just announced today some new products, some new actives coming into the marketplace. And if you referenced Spinosyn. So Spinosyn is a franchise product for us. It's still growing. It's a microbial and it will get close to $900 million in revenue this year. And so we like that product a lot. But we also have these newer products that are really driving the landscape, I think, for our business. But look, I think that it's more of the same. Our strategy for Crop Protection was defined 4 years ago. And it was really simple, right? It was really to drive differentiated technology in the hands of farmers. And so we made decisions back then to reduce the more commoditized part of our portfolio. We exited some geographies. And I think the proof has been pretty evident of the results there. As a separate independent company, so to get to your question, what we think will happen now is that there's simply going to be more doors that will open for this business. And the example that we gave even on my prepared remarks this morning is on Seed Applied Technology, which is a $0.5 billion business for Crop Protection. But we know that there will be some more seed companies that will do business with our Crop Protection -- independent Crop Protection business when they separate. The other thing I would say is that when you look at how we go to market with the different channels, we think that there'll be more retailers and co-ops around the world that will do more business. So the strategy for Crop Protection will not change. The formula is working, and we're winning when it comes to that formula. But I think there'll simply be more opportunities. And then when it comes to margin, as I mentioned, we're already up a couple of hundred basis points, and we've already committed in terms of 2027 to have that business at 20% EBITDA margins. And then just before we separate, there's going to be 2 Investor Days, one for each business. And I would expect at that meeting, we will give you kind of a margin trajectory post 2027 for each business, and we would expect continued growth. But don't forget, this is an innovation company, and we're also committed to keeping our R&D at that 6% to 7% of revenue because we think that, that has been a winning formula. So hopefully, that helps you. Operator: Your next question comes from the line of Vincent Andrews of Morgan Stanley. Vincent Andrews: Maybe just sticking on Crop Protection and ahead of the separation next year. Chuck, do you think there's any further pruning of the AI portfolio that you want to do? Or is there anything you want to maybe add into it? Whether it be on a wholly owned basis or a JV basis? Or just are you comfortable with everything that you have at this point or areas that you'd want to add to or subtract from? Charles Magro: Yes. So good morning Vincent. We like our portfolio a lot. We've invested in it heavily. I think if you look at what's been coming into the market with our new products, Rinskor, Arylex, Reklemel, these are all new actives within the last few years or so and then the new products that we're bringing into the market in late this decade, early next decade. But look, we're always looking at partnering with other companies whether that's full M&A or collaborations or R&D relationships in terms of joint ventures because I think that more is needed in the industry. And I've said that many times that this is an industry that needs to work together because, look, we've got real issues when it comes to disease and insect resistance in terms of what we're seeing around the world, and it is getting more expensive to bring new actives into the marketplace. So collaborations help everyone. They help each company and they actually help the farmer in terms of bringing affordable next-generation technology to the marketplace. So we would be open, but that's not because we don't like our portfolio. In fact, we think that our portfolio, as I've mentioned already this morning is quite strong. Operator: Your next question comes from the line of Kevin McCarthy, Vertical Research. Kevin McCarthy: Chuck, can you discuss how credit market conditions are evolving for growers in Latin America and what that means for Corteva in the industry? One of your peers highlighted this issue recently, and I'd love to get your perspective on it. David Johnson: Yes, this is David. I'll probably take that call. So when you look at overall, and I'll say, Latin America, primarily Brazil and Argentina, we are seeing an industry that's seeing higher cost to borrow and leverage customers, and there are increased bankruptcies. I think when you look at Corteva, we're managing this risk very well, and our losses have been very minimal. So when you look at our past dues, for instance, this year versus last year, as a percent of AR, we're actually a couple of hundred basis points better than we were last year. And we've also spent a lot of time really de-risking our overall AR balance. So when you look at our exposure to folks like the national distributors is very minimal compared to perhaps the industry. And then in addition, we're a pretty big user, and I think we have a very robust barter system, which helps us yet again reduce our exposure and about 40% of our total sales in Brazil is on the barter system. So I think when you look at the mitigation actions we've made, I think our exposure and our actual, so far, our performance has been very strong. Charles Magro: Yes, Kevin, maybe if I could. So I think David hit these points, but it's worth saying again, I think our go-to-market strategy, especially in Latin America, as well as how we barter to risk manage. I think those are 2 differentiating factors for Corteva that we found as part of our overall risk management framework for that part of the world. Operator: Your next question comes from the line of Joel Jackson of BMO Capital Markets. Joel Jackson: Maybe a 2-parter. Have you had any time or ability to get or better take on what your dis-synergy cost -- dissynergies might be? I think you projected early on, maybe a sub-hundred million dollars dissynergies. And then have you thought about what you might do into the split? Might you look at what you may do for buybacks, would you continue the current rate in the first half of the year or into the split -- next year into the split? What are you thinking about that? Or do you want to keep the balance sheet sort of, I don't know, stable is the right way to say up until the split? David Johnson: Yes. So this is David. Maybe I'll handle the second question first. When you look at our expectations for cash flow this year, we said $1.9 billion. I would say, as a lot of people know that it's really that fourth quarter that's critical to see how our full year ends up. And I would say that if we end up having a typical credit mix situation in this year vis-a-vis other years, we'll likely be north of that $1.9 billion number. So again, strong cash flow, strong position. I think whenever it comes to any capital deployment items for 2026, we'll update everyone during our February call when we go into more detail around our guide for 2026. And I think it's reasonable to expect. We'll also want to make sure that we have the proper capital structures for both businesses as we go into the split. When you look at where we are regarding our separation, our separation management team is up and running. So we have numerous teams looking at every function. And again, looking at exactly detailed plans around what those dis-synergies might be, our initial estimates were, as you pointed out, $80 million to $100 million. And the teams are working very hard to make sure that we minimize that number. So again, we'll be providing more details in February. And again, that's only because we'll have much more detail at that point in time to share with everyone. Charles Magro: Yes. And then, Joel, just on the 2025 share buyback, we're committed to complete the $1 billion that we communicated earlier this year. Operator: Next question comes from the line of David Begleiter of Deutsche Bank. David Begleiter: Chuck, just on biologicals, they will be a key part of the new CP story. Year-to-date, your sales are up about 7%. So why are they growing faster for you guys right now, do you think? Charles Magro: Yes. So David, thanks for the question. First of all, I'd say we're very pleased with the growth and the progress in biologicals. When we first entered the market and when we did the M&A, we were in that neighborhood of about $400 million of revenue. And I think this year, it's going to be closer to $600 million of revenue. So very strong growth considering the overall market backdrop in crop protection. The other thing that we're very pleased with is that some of these products now are moving nicely around the world. And we've just launched the biologicals business in a branded way in North America, and this spring was the first year that we've done that, and we're seeing really good success, I think, for U.S. farmers trying this new technology. And then also progress with some new technology actually going into Brazil and in Europe. So I think it takes a little bit of time to move these products around the world, and that probably is some of the reason why we've seen the growth rates the way they are. But overall, I'd say we're very pleased with our biologicals performance, what farmers are seeing on the field and how we're moving these products around the world. So we would expect to see next year continued strong, high single, low double-digit growth rates in biologicals for the foreseeable future. Operator: Your next question comes from the line of Josh Spector of UBS. Joshua Spector: I was wondering if you could just dial in a little bit on crop chems and pricing specifically. So you relative to your peers, it doesn't seem like you're changing your expectation on crop chem pricing in the second half. So I wanted to confirm that first. And then second, just thinking about your comments around '26, is it too early to call that we're going to see low single-digit growth in crop chemicals? Or why do you have the confidence to be doing that now? Charles Magro: Okay. I'll have Robert talk about second half pricing, and then I can come back with 2026. Go ahead, Robert. Robert King: Yes, second half pricing is, as you've seen, year-to-date, where we are down low single digits. We expect we'll finish about there overall as we finish the year. But the big driver in the second half is Brazil. And actually, there's an improvement or good news story happening here because we expect Brazil to be mid-single digits in the rest of the year and that's in comparison to high single-digit loss last year. And so continuing to improve there, and we expect to continue to do that as it gets into '26. By and large, the rest of the regions are running about flat. And so thinking about crop price into the future, we think these trends continue to move in that direction as we continue to get more and more new products into the channel, as Chuck talked about. Charles Magro: And then just, Josh, on your question on '26. So yes, look, it is a little early. We need to finish 2025 in Latin America. But here's how we're viewing it. I guess it's an early look on Crop Protection globally. '25 we expect to be flat, which is better than the last few years. Robert already mentioned. So LatAm, Brazil specifically, probably down mid-single digit, but that's much better than being down high single digits the year before. And then next year, as we move into 2026, we expect Brazil still to be down, but low single digits. So the trend line is improving. Overall, though, for the Crop Protection market for 2026, we think it's going to be better than 2025, and it's really going to be driven by volume growth with pricing stabilizing everywhere around the world, perhaps except for Brazil, which we've already talked about. So what gives us confidence? It's a really good question. And the way I think about this is, look, on-farm applications around the world are strong. We can see it. We can see the product coming out of the channel consistently around the world. And channel inventory is more or less are in healthy normal ranges. And then China. So China from a generic or commoditized product perspective, prices have been stable now for some time. So there is stability in the crop protection industry. The area that gives us less confidence, we've already called it out, is Brazil, in Brazil pricing. Volume has been pretty healthy because there's been new acreage put into production and farmers have a need for the product, and they're using it. We just need to see the trajectory on pricing sort of stabilize and hopefully return to some sort of positive growth in the future. So when we put it all together, I think it's -- right now, it's a reasonable assumption to say that 2026, the global crop protection industry will return to, we'll call it, low single-digit growth. Operator: Question comes from the line of Jeff Zekauskas of JPMorgan. Jeffrey Zekauskas: Diamide pricing is falling and your insecticide pricing seems to be moving lower. I'm wondering about how do you see the effect of price pressure in chemicals like Rynaxypyr affecting your Spinosyns. And how do you see that price pressure affecting your volumes? Did Spinosyns grow this year in volume terms? And is that the area where you're most worried about price pressure next year in crop chemicals? Charles Magro: Yes. So maybe Robert can talk about volume and then I can come back and give you some thoughts on sort of the pricing dynamics. So go ahead, Robert. Robert King: Jeff, good question in relation to how our portfolio fits into the overall market and specifically insecticides. We've had some setbacks this year around weather in some areas and our portfolio is not immune to pricing pressures, albeit it's a premium products. And when you think about the generics, right, they set the floor. And so we do feel pricing pressures, but our volumes continue to grow. And some really good things happening in this area that I'll call your attention to and you brought up Spinosyns. We expect Spinosyns to finish up near $900 million for a single molecule this year. That's a 5% organic growth in a market that's flat. And so we continue to see good things out of our Spinosyns. Specifically for Spinosyns versus some of the other generics is, it's a rotation partner. Resistance builds quickly in some of these areas. And so the demand for Spinosyns, we expect to continue because of that. A few other things happened in this area that I just should bring your attention to. New products at Pyraxalt, Reklemel, these things are up a 30% combined on a year-over-year basis year-to-date. And we expect these things to continue from a growth in our insecticide portfolio, and Spinosyns will lead the way. Charles Magro: Yes. Jeff, just a few more comments. So I think Robert covered it well. If you think about what happens on the field, the diamides and the spinosyns are actually complementary. Farmers usually rotate them because of insect resistance issues. So we don't really think that there are competitive products. Now Robert said, our Spinosyns business is growing, and we like the trajectory. But from a pricing perspective, the floor is set by more commoditized insecticides. So we're not immune to that dynamic. But the one interesting thing about spinosyns to just differentiate it from some others, this is a microbial. It's not chemical. So what that means is it's a living organism, and it's very difficult to replicate. In fact, if you don't have the strain, you would have to go find the strain inside of nature, and it won't have the same efficacy because we've been engineering that microbial for almost 20 years. So even though that this product family has been off patent, we've been able to command a premium into the marketplace because it's a microbial that's used in a rotational application usually for farmers around the world. So hopefully, that helps. Operator: Question comes from the line of Laurence Alexander of Jefferies. Daniel Rizzo: This is Dan Rizzo, on for Laurence. You mentioned that free cash flow is being driven by earnings growth. I was just -- going to ask how we should think about working capital and particularly as maybe a percent of sales over the long term kind of on an annual basis? David Johnson: Yes, it's a good question. And when you look at so far, our performance this year, you will see that a lot of our year-over-year improvement has been driven by working capital. You'll see a little bit more increase in receivables, obviously, due to our volume and sales increases and then the little decline in inventory. Typically, in Q4, we will end up building some inventory, and we expect that to be again this year. And that's why we're in that $1.9 billion, perhaps north of that for our free cash flow. When you look at the overall working capital as a percentage of sales, I would say that if you take probably an average over the last couple of years is a pretty typical area for us to be. Maybe if you go back further than that, it isn't. So I would say if you take the last couple of years, the working capital sales is a good indication of what our plans will be going forward. Operator: Your next question comes from the line of Duffy Fischer of Goldman Sachs. Patrick Fischer: Question on seeds. Now that we're kind of through the season, I was hoping you could give me a view on how you did market share-wise in the northern hemisphere on the big crops: corn, soy, cotton, canola. And then I thought I heard you make a comment about Conkesta in Latin America, but I missed that. How fast is that growing? Or how big do you believe that will be next year? Charles Magro: Go ahead, Judd. Judd O’Connor: Yes. Thanks, Duffy. So from a market share perspective, we do feel very confident that we were able to pick up some share. At the same time, we held price mainly through mix here in corn, did that across brands and feel very good about our product performance going into '26. On soy, we picked up even more share than we believe we did in corn. We need to finalize all this yet with acres. But directionally, we're very confident that we've had a strong year. And it's really based on germplasm and the performance of our products. Now in terms of Conkesta, as we think about where we're at with that today in 2026 -- or 2025, 8% to 10% of the market; 2026, we're going to get we're going to get into double digits; and as we get to 2030, we could be 1/3 of the market in Brazil with E3 and Conkesta. So like the growth, like what the next few years looks like in that space. Operator: Your next question comes from the line of Arun Viswanathan of RBC Capital Markets. Arun Viswanathan: I guess just focusing on the margins. It looks like you've had very strong performance. When you started this journey, you were in the mid-teens across both businesses and then we hit the high teens and low 20s and now you're kind of mid-20s across the whole company with up to 30% in Seed. So I guess, do you see continued margin growth as you move into '26? And what will be driving that? Is it kind of across the board price volume and cost gains? Or would it be mostly driven by cost? And maybe you can also weave in if there's any royalty considerations we should take in there? Charles Magro: Yes. Thank you. Yes, look, we're very proud of the margin journey. It's been a company-wide effort and initiative for several years. And just to get to the point of your question, we do think that the journey will continue. In fact, we've set public targets out to 2027 of about 24% at the midpoint. So we still got some room to go. We've been on that trajectory of, I'll say, at 100 to 150 basis points per year, and we think that's as good of approximation as we can give you. It will be across both Seed and CP. And the drivers are sort of spread. Our new products, whether it's new seed hybrid and varieties or if it's new products in Crop Protection will be a major driver. I'd say seed out-licensing as well, very high-margin opportunity in business. And as we move towards royalty neutrality and then royalty income post 2028, we think that will be a major contributor to our margins over time. And then cost and productivity. When you think about -- when we laid out our targets for 2027 of $1 billion of EBITDA growth in 3 years, about $700 million with cost productivity and deflation, and we're trending a little better than that, and we probably will do better than the $700 million on a net basis. So I think that, that is also a major focus for the company. And one of the core competencies that I think we have as an organization is to always strive for improved cost efficiencies across the company. Operator: Your next question comes from the line of Aleksey Yefremov of KeyBanc. Aleksey Yefremov: So you're showing in your CP business, 65% of the portfolio is differentiated. Could you talk about the remaining 35%? How are these products competitively positioned in this possibly more competitive world? Robert King: Yes, Aleksey, thanks for the question. The portfolio, as you know, we started in 2022, beginning to work on getting it to where we are today with about 2/3 of it differentiated. And that does drive a premium in the market, and it's higher technology that's adding value to the farmers. The balance of that is what we call not differentiated, but that doesn't mean it's commodity generic. It is still a formulated product that is normally in the price ladder, brand ladder type of setup to where it's sometimes a lower price point, not the premium product, but it still is bringing value on the farm. So our overall scheme for our portfolio and how we shape it is we don't intend to play in the commodity generic type molecules. We want to play in that upper end because as an innovation company, that's how we fit into this overall agricultural economy. So I'll leave it there. I hope that helps a little bit. Operator: Your next question comes from the line of Kristen Owen of Oppenheimer. Kristen Owen: Nice dovetail into a more strategic question that I wanted to ask you. Just ahead of the split next year, I did want to talk about maybe some of the digital assets that you've compiled over the last several years, whether it's the things that you've built yourself like CARL or the ones that you've acquired and built on like the granular assets. How integrated are those platforms when we think about seed versus CP? And are there investments that you need to make in your digital infrastructure over the coming 6 to 9 months to support those stand-alone businesses? Charles Magro: Yes. Thanks for the question, Kristen. So yes, this is a very good focus area for us. Our digital support systems are integrated. And so we are going to have to -- and it's part of the $80 million to $100 million of dis-synergies that David has already called out, but a percentage of that will be to separate those businesses to ensure -- to separate that business to ensure that both Seed and CP have the AI and the digital support that they need because I think one of the major reasons we've been able to drive productivity and cost reduction as well as the speed of innovation and the high return on investment we have with our R&D dollars is because we've made strategic investments in this area, and we don't want to lose that capability. So right now, inside of Corteva, that is in one group, and we'll have to separate that quite carefully. We're confident we've already done a lot of work in this area, and it is included in the $80 million to $100 million of dis-synergies, but it will be an area that we'll have to make sure that before we launch both companies, that they have the digital assets that they need to continue with their strategic journeys that they're both on. Operator: Your next question comes from the line of Matthew DeYoe of Bank of America. Matthew DeYoe: Two ones for me, I guess. First on CP. Even if we assume pretty chunky margins for price/mix, it seems like incremental margins on volumes for chems were really strong. I guess why may that -- I guess, why would that be? And then I have a feeling -- I know how you're going to answer this, Chuck. But if we look like, I don't know, call it, 15 years down the road for seeds, given the lower barriers to entry with gene editing, is it possible that the seed company business model just looks over time more similar to like a CPG company like L'Oreal or Pepsi that becomes an acquirer and marketer of smaller technology brands? And like how do you -- or how does that kind of jive with R&D and how you think about budgeting, but I'll leave it there? Charles Magro: Yes. Matt, so we only caught -- sorry, the second part of your question on gene editing, which I can certainly answer. Was there a CP question before that? Matthew DeYoe: Yes. I was just looking at the incremental margins in -- for volumes because obviously, CP EBITDA was up a lot and price/mix was a bit of a headwind, but it seems like the volume incrementals are big? Charles Magro: So let me take the gene editing question, I'll have Robert deal with the incremental margin volume question. So look, looking 15 years out, for me, is very exciting when it comes to this technology. In fact, we put a slide in the appendix of our first gene-edited corn hybrid, which we call a disease super locus on Slide 29. I'd encourage you all to have a look at it. This is just scratching the surface, I think, on the full power of the technology. But we do not think that it will become a disruptive technology beyond sort of what can be done inside of the lab. What do I mean by that? If you look at what is going to be needed to be successful, the gene editing capability, we believe, will be readily available. In fact, we license our gene editing tools to many companies around the world, and we encourage that kind of competition. It is important from an innovation perspective. I think where the differentiation will be will be on the germplasm because you need something great to edit. And so the capability to gene edit plus the germplasm, plus if you think about how we go to market around the world, we have to be able to produce seed in every region around the planet where we're going to sell. And that capability is really expensive and very difficult. And so when you start thinking about this, where I think that this leads is that there could be great new technology that's being invented, and we really hope that there is. But then what it will lead to is probably more partnerships because of access to germplasm and then just the sheer supply chain production capability that's going to be required. But it is going to be, I think, a very powerful technology in the future. And I think it will transform how farmers actually farm and what we're able to do to help farmers. So that's the question on gene editing. Maybe Robert, on incremental margin volume, if you can answer that. Robert King: Yes, thanks. Our journey, as Chuck stated earlier, started back in 2022 when we began to change our strategy and focusing in on profitability and overall financial health of the CP business. And we've had some great inroads there of improving the financial health of this business to where it is today. And that was on the backs of a couple of areas. One, you touched on it of mix, price volume trade-offs and what that -- how that impacts us. And I'll draw your attention to 2 areas there that we've talked about quite extensively around our growth levers, but let me go into how that impacts margin. Our new products and our biologicals portfolios is 2 areas that typically have a 10% to 15% margin advantage over your traditional portfolio. And these are areas that are growing faster than the rest of our business. They're both in the double-digit growth year-to-date. And as Chuck talked earlier about biologicals into the future, we're excited about the continued growth there. And then our new products that we've recently put into the market, Rinskor and Arylex are growing at a rapid rate. These 2, just to put in perspective, will be larger than Enlist. In 2027, we expect the 2 combined to be about $1 billion in revenue, and that's not their top side. So when you look at our mix of the portfolio, that will continue to help our margins because of this differentiation that we supply and that price for value that we're adding to that farmer. The second thing around it is just the great work, the operations teams and the network optimization that has been taking place when we talk about our footprint optimization, year-to-date, we'll have delivered about $200 million in productivity for this year alone. And that work has a work plan that will carry us out past 2027, and we are on track to deliver the commitments that we gave Investor Day for the cost savings as well. So you put those 2 together and those compound to get to the bottom line of impacting that margin and continue to grow our EBITDA, and we're excited about the future of it. Operator: Your next question comes from the line of Patrick Cunningham of Citi. Patrick Cunningham: Could you provide an update on hybrid wheat or double cropping systems, whether it's progress in commercialization, expanded pilot programs or any milestones that we should be modeling over the next 1.5 years? Charles Magro: Yes. So as you know, we're pretty excited about our hybrid wheat technology. And the way I think about this is this could certainly be the third leg to our stool. We're already market leaders in corn and soybeans. And if you add wheat over the next decade or so, it's a pretty powerful combination. We have said that we believe this is a $1 billion revenue opportunity in the next decade. So this is kind of the year 3 of our plant trials. I'd say all systems go for a launch in 2027. We're seeing consistently a 10% to 15% yield improvement, which will be really exciting for farmers. And don't forget that the first hybrids we put into the market will probably be the worst ones we put into the market because they're coming first into the pipeline. So what I'd say is that there'll be, I think, small amounts of availability in 2027 ramping up. But as we get out to the next -- the middle of next decade, we think that this will have a similar margin profile as corn and soybeans for us. So pretty exciting for us, a yield improvement for farmers overall. And this is an important crop, right? It's the largest row crop in the world, and it still accounts for 20% of the calories we consume. So very important for society when it comes to food security. Operator: Your next question comes from the line of Edlain Rodriguez of Mizuho. Edlain Rodriguez: Chuck, so as farmers are likely to shift some acreage from corn to soy, can you please remind us of the potential impact on Corteva? And do you feel that you're well positioned to easily offset any headwind from there? Charles Magro: Yes. Sure, Edlain. So the sensitivity that we've normally given is about $10 million of EBITDA for every 1 million acres that shifts from corn to soybeans. It's included in our thinking of the $4.1 billion. It's a little too early for us to say exactly how many acres are going to shift because we've got lots of time here for farmers to make that choice. But it would be logical to assume that from the 98-or-so million acres of corn, we're going to see less than that in 2026, assuming the trade routes and the export markets still stay open. So there's still some uncertainty there. But overall, what we've given you in terms of our first look when it comes to 2026 EBITDA, that's all factored in, but it's about $10 million of EBITDA for every 1 million acre shift. Operator: Your next question comes from the line of Ben Theurer of Barclays. Benjamin Theurer: Just coming back to the spin. And obviously, we've talked about the seed business and the opportunities from growing through gene editing and M&A, et cetera. But when we look at the Crop Protection business, how would you see -- with biologicals within that segment, how would you see the opportunities and the likelihood of you being as well active here on potentially M&A to add to the portfolio without just sticking to the internal pipeline? Charles Magro: Yes. Very good question. So this is an area where I think we have been active over the last couple of years in terms of M&A. The biologicals industry just as a whole is more fragmented, and there are smaller companies doing really great things. It could be that we would get more active from an M&A perspective and just outright acquire them or it could be either commercial or R&D collaborations because we already do a lot of that through our R&D and our commercial organization. So all of those options are on the table. I would suspect that as the company separates, they will even be more focused on growing their biologicals portfolio because it's been such an important part of that business that I think you're going to see all of these things kind of accelerate over time, M&A and technological and commercial partnerships. Operator: There are no further questions at this time. And with that, I will turn the call back to Kim Booth for closing remarks. Please go ahead. Kimberly Booth: Great. Thanks for joining and for your interest in Corteva, and we hope you have a safe and wonderful day. Operator: Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.
Operator: Good morning, everyone. Thank you for joining Acacia Research's Third Quarter 2025 Earnings Conference Call. My name is Kelly, and I will be your conference facilitator for today. [Operator Instructions] I would like to remind you that this conference call is being recorded today and also is available through audio webcast on Acacia's website. [Operator Instructions] I would now like to turn the conference over to Mr. Brent Anderson of Gagnier Communications. Mr. Anderson, you may begin the conference. Brent Anderson: Thank you, Operator. Leading today's call are MJ McNulty, Acacia's Chief Executive Officer; and Michael Zambito, Acacia's Chief Financial Officer. Before MJ and Mike begin their prepared remarks, please be reminded that certain information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts, and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives, and expectations for future operations and are based on current estimates and projections, future results, and trends. Actual results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see the risk factors described in Acacia's most recent annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC. Earlier this morning, Acacia issued a press release disclosing its third-quarter 2025 financial results. The press release may be accessed on the company's website under the Press Releases section of the Investor Relations tab at acaciaresearch.com. The company also posted its Q3 2025 earnings presentation to its website, which includes detailed GAAP and non-GAAP financial disclosures and can be found under the Quarterly Results tab. On today's call, the team will discuss certain non-GAAP financial measures, including adjusted EBITDA for the company and each of its operating segments. Information regarding the comparable GAAP metrics, along with required definitions and reconciliations, can be found in the press release disclosing third quarter 2025 financial results available under the Press Releases section of the Investor Relations tab at aaciaresearch.com. I'll now turn the call over to Acacia's Chief Executive Officer, MJ McNulty. Martin McNulty: Thanks, Brent, and thank you to everyone for joining us for our third quarter 2025 earnings call. Acacia delivered good results in the third quarter with significant increases sequentially and year-over-year across many key metrics. Despite persistent macroeconomic and geopolitical headwinds, our team executed well against our disciplined and operationally focused strategy. While our businesses are not immune to these headwinds, we're using this as an opportunity to accelerate our value creation plans swiftly and decisively across our portfolio. These include the implementation of pricing strategies, cost savings initiatives, operational efficiencies, and plant consolidations to mitigate tariff pressures and to position our companies for continued growth. These ongoing initiatives and the team's consistent execution drove our strong quarterly results with Acacia delivering total revenue of $59.4 million, up 16% sequentially and up 155% compared to the prior year quarter, the year-over-year comparison primarily driven by our third full quarter of Deflecto. The company's total company adjusted EBITDA was $8 million, and Operated segment adjusted EBITDA was $12.6 million, while free cash flow for the quarter was $7.7 million, with the net result being a GAAP loss of $0.03 a share or a loss of $0.01 per share on an adjusted basis. Book value per share at the end of the third quarter was $5.98, and book value per share to Acacia, excluding our noncontrolling interests, was $5.57, both essentially flat versus last quarter. Acacia's performance in context, in spite of the macroeconomic and geopolitical headwinds, the businesses we own are still delivering attractive return characteristics. As you've heard me say before, Acacia is focused on identifying and acquiring underloved, under-managed, and undervalued businesses where we believe we can leverage our significant capital base and experienced leadership teams to streamline operations, materially improve performance, and drive long-term growth. As a result of our actions on a year-to-date annualized basis, Benchmark is generating a roughly high teens free cash flow yield. Deflecto is generating a high single-digit free cash flow yield prior to the impact of our in-flight operational improvement initiatives, and Printronix is generating a high teens free cash flow yield. With strong and improving cash yields at each of our operating companies and disciplined cost control at the parent, we believe we're creating significant equity value, which is not yet reflected in our share price. As we approach the end of the year, we remain focused on driving revenue, EBITDA, and free cash flow growth at each of our operating businesses, while at the same time, growing our extensive pipeline of actionable M&A opportunities. With approximately $332 million in total cash, equity securities, and loans receivable at September 30, our strong balance sheet positions us well to pursue accretive organic and inorganic growth opportunities across our businesses to create differentiated value for our shareholders. I'd now like to discuss our operating segments. Within our energy operations, we continue to view Benchmark as an attractive platform to allocate capital within the oil and gas industry. As you may recall, we acquired the business in 2 steps. First, through our partnership in November 2023 with McArron and the company on a small package of wells; and second, through the acquisition, the Revolution assets in Q2 of 2024. At that time, we underwrote the business based on acquiring existing flowing production at a high teens discount rate, and we continue to evaluate comparable opportunities within our existing geographies. Since our acquisition of Revolution, the Western Anadarko Basin has seen a meaningful increase in investor interest. As a result of the renewed interest in the basin, we've seen high-quality, well-capitalized operators enter the basin with rig counts increasing despite declining rig count activity in many other plays. This has pushed the value of high-quality producing assets in the basin back towards historical evaluation metrics. While this is positive for the value of our business, it does mean that we need to be more cautious on valuations for additional producing assets we may want to acquire, and we have focused those efforts on asset packages where we can maximize strategic overlap with our existing fields. To that end, as you may remember, in addition to the large producing acreage we acquired as part of the Revolution acquisition, the deal came with a significant undeveloped acreage position in an emerging play called the Cherokee, which you've heard us discuss in the past. This year, we've continued to strategically develop this position within the Cherokee, most recently highlighted by 2 small but very strategic acreage acquisitions. As we continue to build our undeveloped acreage position, we're actively considering additional monetization opportunities as well as potential capital partnerships to finance a targeted drilling program for our acreage in this play. During the quarter, Benchmark continued to perform well with stable operated production and strong cash flow. While oil and natural gas prices remain at low levels, Benchmark's hedging strategy continues to perform as expected. As a reminder, benchmark hedges over 70% of its operated oil and gas production with hedges currently in place through the beginning of 2028, protecting a significant amount of our cash flow from downside price risk. Further, our diversified production profile provides us with significant optionality as we're able to prioritize projects that are more gas and NGL focused in a weaker oil price environment. As of the third quarter, approximately 52% of Benchmark's LTM commodity revenue and 78% of LTM production on a BOE basis was driven by gas and natural gas liquids, which have remained much more resilient from a pricing perspective. Looking ahead, we see a variety of ways to create significant value in expanding our oil and gas platform, and we're fortunate that our operations in the Anadarko Basin provide us with access to some of the highest quality reserves and management team in the country. We remain excited about the value generation opportunities at Benchmark, and I look forward to keeping you updated as we continue to scale this business. In our Manufacturing segment, Deflecto delivered another quarter of sequential revenue growth and improved adjusted EBITDA versus last quarter. We're continuing to progress our operational initiatives at Deflecto, including strategic price increases across each business unit, reshoring and consolidation of certain manufacturing operations, overhead and G&A cost reductions, and improving go-to-market motions, all of which are aimed at creating a more streamlined business positioned for future growth. While the current tariff and macroeconomic environment has impacted several of Deflecto's end markets, I'm encouraged by the strong progress and significant improvements we have made across the business. To address some of the trends we're seeing across Deflecto's business units, I'll start with the Class 8 truck market, which continued to experience demand headwinds throughout the third quarter. Recent industry data indicates that Class 8 net orders for September represented the weakest September since 2019. We expect the Class 8 market to remain under pressure in the near term. Further tariff and macro clarity, along with lower interest rates and gradual fleet capacity normalization into 2026, should support a rebound in activity. Moreover, Deflecto remains focused on selling essential nondiscretionary products such as mud flaps and emergency warning triangles that are mandated by key regulatory authorities, which puts the business in a strong position when the cycle turns. Within the office products business, tariff and global trade uncertainty has caused many customers to pause or delay purchasing decisions. While we expect these headwinds to persist in the coming quarters, our operational initiatives are helping to mitigate these impacts and position the business for future growth as macroeconomic conditions normalize. As a reminder, the Deflecto office products business sells basic necessities for everyday use, such as sign holders, document organizers, and flomats for the home and commercial office markets. Within the Air Distribution business, our sales have remained resilient in the face of a soft construction market, largely a result of interest rate pressures, which we believe will subside in the coming quarters. We continue to work to offset tariff cost pressures in this segment through product line relocations, pricing actions, and working with our distribution partners to optimize delivery routes. Within this business unit, Deflecto's core product offerings include dryer vents, air ducts, and air vent deflectors, all of which are essential in nature. Very excited about Deflecto's long-term growth potential, supported by its substantial market share, diversified customer base, and industry-leading products. Turning now to our Industrial segment. Printronix continues to deliver strong performance, and we're seeing positive momentum across the business. Our operational improvements over the last 12 to 18 months have resulted in an attractive mix of hardware and higher-margin consumable revenue streams that generate consistent free cash flow. The team continues to use our advantageous channel position and market share to add new product lines, which we expect to provide incremental contributions over the coming quarters. Now to our Intellectual Property segment. We recorded $7.4 million in total paid-up revenue from multiple settlements and licenses during the third quarter, which resulted in total revenue and adjusted EBITDA of $7.8 million and $3 million for the quarter, respectively, a significant increase sequentially and year-over-year. In the year-to-date period through September, our IP business generated $78 million in revenue and $44.2 million in adjusted EBITDA versus $19.4 million in revenue and $6.3 million in adjusted EBITDA in the prior year period. As a reminder, the quarterly fluctuations within the IP business are largely the result of the episodic nature of the business and timing of future settlements. With that, I'll pass it over to Mike to discuss the details of our financial results. Michael Zambito: Thank you, MJ, and hello, everyone. Acacia recorded total revenue of $59.4 million during the third quarter. Our energy operations generated $14.2 million in revenue for the year -- revenue for the quarter compared to $15.8 million in the same quarter last year, reflecting a softer oil price environment year-over-year. Manufacturing operations generated $30.8 million in revenue for the quarter, representing a third consecutive sequential increase compared to $29 million in the second quarter. Given we acquired Deflecto in October of last year, there is no comparable prior year period. Our industrial operations generated $6.7 million in revenue during the quarter compared to $7 million in the same quarter last year. Our intellectual property operations generated $7.8 million in licensing and other revenue during the quarter compared to $0.5 million in the same quarter last year. Total consolidated G&A expenses were $16 million during the third quarter compared to $11.2 million in the same quarter of last year. The increase was primarily driven by the addition of Deflecto as part of the company's new manufacturing operations. Deflecto G&A expense for the third quarter of 2025 was $4.6 million, which declined from $5.1 million in the prior quarter. Of the $4.6 million of Deflecto G&A expenses, approximately $1.1 million was related to depreciation of fixed assets and amortization of intangibles. Our energy operations G&A expense was $1.2 million for the third quarter of 2025, compared to $1 million for the prior year quarter in 2024. G&A at the parent level increased by $0.5 million year-over-year from $6.1 million to $6.6 million in the quarter ended September 30, 2025. Parent G&A on an adjusted basis decreased by $0.6 million year-over-year from $5.2 million to $4.6 million in the quarter ended September 30, 2025. The company reported a third-quarter GAAP operating loss of $6.4 million compared to a GAAP operating loss of $10.3 million in the same quarter last year. This was primarily due to the inclusion of Deflecto in 2025 with no comparable operating income in 2024, along with a lower GAAP operating loss in the IP business in 2025 compared to the prior year. Energy operations contributed $1.1 million in GAAP operating income during the quarter, which included $3.8 million in noncash depreciation, depletion, and amortization expense, and does not reflect the realized hedge gain of $1.2 million during the quarter. Adjusted EBITDA for our energy operations was $6.1 million in the quarter and $21 million year-to-date. Free cash flow for our energy operations was $4.3 million in the quarter and $11.9 million year-to-date. Manufacturing operations contributed $1.1 million in GAAP operating income during the quarter, which included $1.1 million in noncash depreciation and amortization expense and $0.3 million in nonrecurring transaction-related expenses and severance costs as part of our operational initiatives at Deflecto. Adjusted EBITDA for our manufacturing operations was $2.6 million in the quarter and $6.3 million year-to-date. Free cash flow for our manufacturing operations was $2 million in the quarter and $3.7 million year-to-date. Industrial operations contributed $0.3 million in GAAP operating income during the quarter, which included $0.5 million in noncash depreciation and amortization expense. Adjusted EBITDA for our industrial operations was $0.8 million for the quarter and $2.5 million year-to-date. Free cash flow for our industrial operations was $0.7 million in the quarter and $4.1 million year-to-date. GAAP net loss attributable to Acacia Research Corporation in the third quarter was $2.7 million or $0.03 loss per share, compared to a net loss attributable to Acacia of $14 million or a $0.14 loss per share in the prior year period. This decline in net loss was primarily due to the significant year-over-year increase in revenue and EBITDA, in addition to gains from our public equity portfolio and lapping the legacy legal fees from the prior year period. Included in GAAP net loss for the third quarter was $0.9 million in unrealized gains related to changes in the fair value of equity securities at September 30, 2025. Adjusted net loss attributable to Acacia in the third quarter of 2025 was $1.1 million, or a $0.01 loss per share. Further details on these adjustments can be found in our press release. Now turning to the balance sheet. Cash and cash equivalents, equity securities measured at fair value and loans receivable totaled $332.4 million at September 30, 2025, compared to $297 million at December 31, 2024. The parent company's total indebtedness was 0 at September 30, 2025. On a consolidated basis, Acacia's total indebtedness as of September 30, 2025, was $94 million, consisting of $58.5 million and $35.5 million in nonrecourse debt at Benchmark and Deflecto, respectively. Since closing the acquisition of the Revolution assets in April 2024, Benchmark has paid down approximately $24 million in total debt, underscoring the strong free cash flow generation of the business. Additionally, since acquiring Deflecto in October 2024, the company has paid down approximately $13 million in total debt. These capital allocation decisions have significantly reduced our consolidated debt and interest expense, providing further operational flexibility. More information on Acacia's third quarter results, please see our press release issued this morning and our quarterly report on Form 10-Q, which we will file with the SEC later this week. I'll now turn the call back over to MJ. Martin McNulty: Thanks, Mike. Just as a reminder, we've got a Q3 earnings presentation and an investor presentation on the website that goes through the reconciliations that Mike just talked through, and I think is helpful disclosure. But just in conclusion here, as you've heard, despite ongoing tariff headwinds, Acacia delivered solid financial and operating results in the third quarter and for the first 9 months of the year. Looking ahead, our near-term focus remains on leveraging our diverse portfolio and developing targeted pricing strategies and cost savings to mitigate the ongoing impact of tariffs and related uncertainties and drive value creation for our shareholders. While our approach remains measured and thoughtful, we're not letting volatility in the market stand in the way of building our pipeline and identifying opportunities for organic and inorganic growth across our businesses. The inherent value of our assets is strong, and I'm confident that our value-oriented strategy and experienced management team will enable us to continue to build our momentum across our business through year-end and into next year as we continue to generate long-term value for our shareholders. With that, I'll turn it back over to you, Kelly. Operator: [Operator Instructions] Your first question is coming from Anthony Stoss with Craig-Hallum. Anthony Stoss: I wanted to focus on -- Deflecto was a bit better than what we were modeling, even in a tougher environment. MJ, when you look at a so-called normal environment down the road, what percent of free cash flow do you think you'll use to pay down debt? And where do you think those EBITDA margins can go to? Martin McNulty: I mean in terms of the amount of free cash flow that we use to pay down debt, we paid off some debt this quarter as a capital allocation decision, really to bring the leverage down, create more -- even more flexibility as we look at a handful of initiatives, and also to reduce the interest drag. We like to have leverage in our underlying businesses; just given our cash balance, it's not entirely necessary, but there is some strategic benefit to having credit facilities in place there. And so we decided to bring that down a little bit. In terms of EBITDA target percentages, I would think about it in like kind of a low to mid-teens type margin. We are going through a lot of operating initiatives in all 3 of those selective businesses that should help to drive that. But look, we're in a pretty tough part of the cycle in the safety business. It's still performing. But with the changes that are being made there as that cycle normalizes and kind of runs back up, the margins there should be really attractive. Our air distribution business is doing well. And then the office products business, kind of the same type of target. Anthony Stoss: And then on the benchmark side of the business, especially on the Cherokee properties, can you maybe update everybody where you stand on that? How -- I guess, how many oil heads have been tapped? And what are your plans going forward over the next year or so? Martin McNulty: Yes. I mean -- so if we look at the base business, it's performing -- our operated production is performing how we want it to perform. Commodity prices could be stronger, but we've got the hedges in place, which is exactly why we did that. So we are protected to a large extent from the hedges. In terms of the Cherokee, what I can say is that we have not yet drilled any wells. We have spent a considerable amount of time optimizing our acreage position through, as I mentioned earlier, 2 small but really strategic acquisitions and some land swaps and non-op working interest swaps that get us to great blocks that we think are very attractive to monetize. Operator: Your next question is coming from Brett Reiss with Janney Montgomery Scott. Brett Reiss: Very impressive, the increase in the free cash flow on Deflecto in a challenging environment. But just another free cash flow question. In Printronix, the first quarter, you had $2.5 million of free cash flow. Is that a seasonality thing? Or that seemed kind of an aberration? Martin McNulty: Yes, it is a seasonality thing. Brett Reiss: I have a question. The valuation of the AMO Pharma, when you poke around their website, they have a Phase III drug in trial, Phase II. Can you refresh my recollection? What do we -- what is our carrying value on that? And when you look at the total addressable markets that AMO Pharma talks about on their website, it just seems that could, in the future, be a possible positive potential surprise for us? Martin McNulty: Yes. I mean, so we don't disclose the carrying value of it. We do think that -- it's attractive. The company has -- just as a reminder, this is a drug for myotonic dystrophy. It's actually a pretty novel drug. There's a reasonable amount of interest in this space right now. There's a couple of research reports out there and some commentary on 2 companies, Dyne and Avidity, that target a similar end market. Those are probably worth taking a look at, Brett. We continue to work with the company. They're making good progress with the regulatory authorities in terms of working towards an approval. We inherited these businesses, and so we continue to work them. But these are early-stage biotech companies. And so we're pretty -- we're cautiously optimistic, I would say. Brett Reiss: TP Link systems seems to be in some sort of embroglio with the United States government. Does anything that's going on between them and the U.S. impact the value of our patent portfolio in that area? And also, does that change the timing on collecting our judgment we have against them? Martin McNulty: Yes. So that's a great question. Obviously, there's a lot of geopolitical tension around -- not that in particular, but around the nations. I would say one thing, the U.S. appears to be more IP-friendly in the new administration than it was previously. So I think that's a positive. We are -- we have been awarded the judgment in the TPLink case. The next step there is that the Federal Circuit wants to hear some oral arguments because TPLink is trying to exercise all of their legal rights here. And so we still feel really good about it. I think the process is a little bit longer than we had hoped, but it doesn't change our views on the prospective outcome here. Brett Reiss: Last one for me. There were some pretty high-profile bankruptcies recently in the private equity space. Do you think these are canaries in the coal mine with more to follow, or these are one-offs? And I ask that because if there are canaries in the coal mine, you may hold off on buying anything in the private equity space, or if they're one-offs, will you be more aggressive in pursuing acquisition opportunities in private equity? Martin McNulty: Yes. I mean I think you're talking about First Brands and Tricolor, which they are certainly one-offs for different reasons. I think it's drawing more attention to the private credit space than it is in the private equity space. We are seeing different developments in the private equity space, for example, and a handful of other industries. But this is why we keep our leverage low at Acacia. We come from private equity backgrounds. We've all put significant amounts of leverage on businesses. And this type of an environment is exactly why we are very cautious and judicious with leverage. We are seeing an increasing number of private equity businesses being marketed because they have high levels of debt. We are starting to see multiples come down relative to the highly elevated multiples that sponsors were buying assets at 4 in, call it, 2021, 2022. So I think the price discovery is getting better. We still have a lot -- there's still a lot of uncertainty. Interest rates are still high for guys that are putting 5, 6, 7 turns of leverage on businesses. And it's still unclear for a lot of these companies what the current administration and some of the trade policies mean for those businesses. So we are being very cautious about what we evaluate and how we evaluate it. We're seeing a lot of deal flow, and we've kind of dug in on a handful of deals that maybe we're not fully there on price discovery, but where our expectations and sellers' expectations were 4 to 5 turns a year, 18 months ago, maybe we're within a turn, 1.5 turns, maybe 2. So it does feel like it's getting to a more normalized environment. Operator: Your next question is coming from Todd Selter with 88 Management LLC. Todd Selter: Well done in Q3. Leveraging off Brett's question, in terms of the IP portfolio, we noticed a settlement after Q3 on Vantiva. I think it happened somewhere in Q2 in the second week of October. Would that number be reflected in our Q3 patent $7 million to $8 million top line or no? Martin McNulty: Yes, that's part of that $7.4 million settlement, Todd, that I mentioned earlier. Todd Selter: I thought it might be. Great. So Brett did expound on a couple of thoughts that I had. And what I really want to discuss with you, gentlemen, now is really proud of the operating job everyone is doing, but so disappointed and disturbed at the lack of any reach out from the IR team to try to generate some interest in what we all consider a very attractive undervalued equity. Why has there been such little initiative put forward in that area? And what do you guys plan on doing moving forward to try to raise Acacia's profile amongst the appropriate buy-side vehicles out there that might be involved or interested in investing in microcap value? Martin McNulty: Yes. Look, Todd, it's a great question, and we were actually very deliberate in the way that we approached this. When -- roll back a year ago, we didn't want to put our hands up in the air and say, "Hey, look at us, look at us. Here's what we're going to do." And so we held off on IR, admittedly, so that we didn't look like Carnival Barkers. Subsequent to now Benchmark with some quarters under our belt, Deflecto with some quarters under our belt, Printronix having been turned around, showing you all that we can manage the parent company G&A to a level that allows us, with each incremental acquisition, to really scale that and scale the earnings over the parent company G&A, we have started reaching out. So we're having a lot of conversations with new investors. We presented at a couple of conferences. We're continuing to get scheduled on the conference circuit to go tell the story and meet people. And we found that having conversations in person, even more so than over Zoom, really engages people. And like you, people are interested in the story. It just takes a little bit of time with them in person to help them understand it. So we've been allocating a lot of time to that initiative, not just through conferences, but through Todd, folks that you know that you think would be interested in the story, other shareholders. And so we do talk to existing shareholders a lot. We actually spent a lot of time talking about ideas with them for new acquisition opportunities. And we've gone on a pretty good outreach journey here to tell the story to new shareholders. Todd Selter: That's encouraging. Now how about on the sell side? How far are we away from maybe onboarding 1 or 2 other analysts from other firms to try to get a better sense of who we are, so they could also communicate our story and gain some more momentum in this direction? Martin McNulty: Yes. We're -- we've talked to several research groups about the story. What we don't want to do is force it because we want to make sure that it's a natural fit. People are excited to pick us up. But there are -- there are a handful of folks that we're talking to about that. As you know, with research, there's -- our stock has some volume in it, which is great. I think our volume is bigger on an average daily basis than it was certainly a year or 18 months ago. But those guys want to get paid just like anybody else. And so we're working through that. Michael Zambito: Yes. The ace in the hole that we have, MJ is the Starboard relationship since they own 60-plus percent. You would think that some of these sell-side firms would want to maybe engender some goodwill, and the Acacia Starboard Association should serve our best interest in that area. Martin McNulty: We're arm and arm with our brothers over at Starboard on that point. Todd Selter: MJ, you guys are doing a great job on the operating side, but as shareholders, we're suffering. Martin McNulty: We're working on that for you, Todd. Operator: Your next question is coming from Shelley Anthony with Formidable Asset Management. Shelley Anthony: I'm filling in for Adam this morning. So we actually have a somewhat tangential question about your stake in AMO Pharma. The company AMO has recently announced several positive advancements and results in the last few months. And in light of that, can you tell me if that has changed your estimated valuation in any way or prompted any interest from outside buyers? Martin McNulty: That's a good question. Great. So we've not changed our valuation as a result of the news. I agree with you that AMO has been active publicly on helping people understand the positive developments in the company. We have not changed our valuation. As I mentioned earlier, I think we're cautiously optimistic. We've been around the biotech space, and we've seen things work, and we've seen things not work. I think AMO has a really interesting and necessary drug for a patient group that doesn't have a lot of other options, and both safety and efficacy of their product are great. There -- as I mentioned earlier, there's some news out there around Dyne and Avidity, which have similar solutions. And so that makes us cautiously optimistic as well. But all in all, we share the excitement, but we're not marking our asset up as a result of that excitement. Shelley Anthony: And so can you tell me if there's been any interest from potential outside buyers? Martin McNulty: No, I can't. Operator: There are no questions in the queue at this time. I would now like to turn the floor back over to MJ McNulty for closing remarks. Martin McNulty: Thanks, Kelly. Thanks again to everyone for joining us this morning. We look forward to talking to everyone after Q4. Operator: Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Operator: Good day, everyone, and welcome to the Third Quarter 2025 Parsons Corporation Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. Now it's my pleasure to turn the call over to the Vice President of Investor Relations, Dave Spille. Please proceed. David Spille: Thank you, Carmen. Good morning, and thank you for joining us today to discuss our third quarter 2025 financial results. Please note that we provided presentation slides on the Investor Relations section of our website. On the call with me today are Carey Smith, Chair, President and CEO; and Matt Ofilos, CFO. Today, Carey will discuss our corporate strategy and operational highlights, and then Matt will provide an overview of our third quarter financial results as well as a review of our 2025 guidance. We then will close with a question-and-answer session. Management may also make forward-looking statements during the call regarding future events, anticipated future trends and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ materially from those projected in the forward-looking statements due to a variety of factors. These risk factors are described in our Form 10-K for fiscal year end December 31, 2024, and other SEC filings. Please refer to our earnings press release for Parsons' complete forward-looking statement disclosure. We do not undertake any obligation to update forward-looking statements. Management will also make reference to non-GAAP financial measures during this call, and we remind you that these non-GAAP financial measures are not a substitute for their comparable GAAP measures. And now I'll turn the call over to Carey. Carey Smith: Thank you, Dave. Good morning. Welcome to Parsons Third Quarter 2025 Earnings Call. This quarter, we continued to deliver strong performance in a dynamic global environment as an advanced and differentiated technology leader that's aligned to the administration's and global priorities in national security and infrastructure, our portfolio is strategically positioned to continue to capitalize on long-term macro environment trends. In addition, we operate with speed in delivering operationally relevant solutions at a time where our customers need companies that can deliver rapid results. During the quarter, we continued to achieve industry-leading organic revenue growth, excluding our confidential contract, significantly expanded our adjusted EBITDA margins, exceeded our cash flow expectations and won strategic contracts. In addition, our win rates and hiring retention remained strong and we completed another accretive acquisition after the quarter ended in the fast-growing and profitable water market that strengthens our capabilities and enhances our Florida presence. Turning to our third quarter financial results. Our adjusted EBITDA, adjusted EBITDA margin, and cash flow results exceeded our expectations, and our total and organic revenue growth rates, excluding the impact from our confidential contract remained strong at 14% and 9%, respectively. This includes 18% total revenue growth in critical infrastructure and 9% in Federal Solutions. This strong growth in both segments highlights the strength and synergies of our diversified portfolio, our strong hiring and retention, the successful integration of our acquisitions and our alignment to priority spending areas. During the third quarter, we also delivered 60 basis points of margin expansion to 9.8%, $163 million of cash flow from operations and reported a book-to-bill ratio of 1.0x for the quarter and trailing 12 months. This continues our streak of having a quarterly trailing 12-month book-to-bill ratio of 1.0x or better since our 2019 IPO. Finally, we are reiterating our 2025 adjusted EBITDA and cash flow guidance ranges at the midpoint and we're modifying our revenue outlook to reflect delays in sole-source task order awards products and material procurements. In addition to delivering solid financial results, we won 4 contracts over $100 million in the third quarter with 2 representing new work. Significant third quarter contract wins included a new large 10-year single-award task order contract as an exclusive subcontractor for design and modernization on the Holston Army ammunition plant government-owned contractor operated contract. We booked $50 million on this contract during the quarter. This win continues our success of winning industrial-based upgrades as per the $18 billion modernization plan and is our fourth contract win supporting the Army customer that's valued at more than $100 million. A 6-year $133 million authorization to continue serving as the lead designer for the Georgia State Route 400 Express Lanes. This project will add new Express Lanes and use state of-the-art traffic, incident management and digital twin systems. As a Tier 1 focused state for persons, this expands our Georgia Department of Transportation presence with the state of Georgia expected to spend more than $20 billion over the next 5 years. We were awarded 2 new multiyear single-award defense and security contracts by Middle East government customers. One contract valued at more than $100 million represents new work to lead the design review and project and construction management of national security infrastructure. While the second contract is to design border security infrastructure and facilities. These contracts reflect the strength of Parsons synergistic portfolio and our ability to bring comprehensive national security, critical infrastructure protection and program management capabilities to our Middle East and critical infrastructure customers. And during this quarter, we booked $107 million for these 2 contracts, MPA delivery partners, a joint venture of 3 companies, including Parsons is the managing partner was awarded a $665 million, 4.5-year contract extension by the Gateway Development Commission to continue managing the successful delivery of the Hudson Tunnel project. This project will build a new two-tube rail tunnel under the Hudson River and rehabilitate the existing 115-year tunnel as well as 9 miles of new passenger rail track between New York and New Jersey. We were awarded an $88 million task order under the Air Base Air Defense contract. Parsons will provide integration, upgrades procurement and training across the Europe and Africa areas of responsibility for the United States Air Force. This contract includes a 1-year base period and two 1-year option periods, and we booked $82 million during the quarter. For the first 9 months of 2025, we've been awarded over $190 million in task orders on this IDIQ vehicle. Air Based Air Defense is increasingly important around the globe to safeguard military operations and Parsons is an industry leader in this domain with innovative solutions designed to rapidly detect, alert, deny or defeat threats, ranging from low-cost unmanned vehicles to sophisticated hypersonic weapons. Parsons was also awarded 3 PFAS contracts with a collective value of $23 million. These wins span both our Federal Solutions and Critical Infrastructure businesses and expand our portfolio in the highly strategic and rapidly growing PFAS market. Year-to-date, we've won nearly $70 million in PFAS contract awards, and the PFAS market represents a $40 billion addressable market for Parsons. These wins represent revenue synergies with our TRS Group acquisition. In addition to these large and important wins, we continued our successful track record of acquiring strategic companies in high-growth markets that strengthen our portfolio and have revenue growth and adjusted EBITDA margins of 10% or more. After the third quarter ended, we acquired Applied Sciences Consulting, a Florida-based engineering firm that specializes in water and storm water solutions for cities, counties and water management districts across the state. Water is our fastest-growing and most profitable market within our North America infrastructure business unit. This acquisition positions us to capitalize on Florida's significant investments in water infrastructure, resiliency and quality. We continue to deploy capital across both business segments to take advantage of the significant tailwinds in our markets and 4 of our last 6 acquisitions have been in our Critical Infrastructure segment. During the quarter, the company was recognized as one of the world's best companies by TIME and one of the best led companies by Glassdoor, we're particularly pleased with the Glassdoor rating since we were selected by our employees. Parsons also received the prestigious Diamond Award in the Structural Systems category from ACEC New York for our work on the Brooklyn Bridge Rehabilitation Project. Looking forward, we are excited about our growth opportunities. Our relentless focus on strong program execution and our delivery reputation provides customers with the confidence they need to choose Parsons as their contractor of choice for their large, most complex and mission-critical challenges. In addition, our unique and synergistic critical infrastructure and Federal Solutions portfolio which consists of 6 growing, profitable and enduring end markets is expected to drive mid-single digit or better organic revenue growth, excluding the confidential contract for the foreseeable future. This growth outlook excludes the FAA brand-new air traffic control system contract. Regarding this opportunity, we believe a decision is imminent, and we felt we offered a compelling bid given we're the #1 program manager in the world offered a transformational approach strategically partnered with IBM, have strong past performance and assembled a team that is vendor-agnostic and understands the FAA. In Critical Infrastructure, we continue to win some of the largest and highest priority projects in our geographies and are expanding into high-value adjacent markets by leveraging our entire portfolio with long-term tailwinds and 20 consecutive quarters of greater than 1.0x book-to-bill. We expect continued growth into the next decade. In the United States, our focus on hard infrastructure such as roads and highways, bridges, airports and rail and transit is aligned to spending priorities. The infrastructure investment and Jobs Act provided states with the confidence they needed to move forward with major infrastructure projects and discussions on the next surface transportation bill are underway. This bill is expected to provide additional budget for increased U.S. infrastructure spending. Our Middle East infrastructure business also continues to excel. Our more than 60-year history in the region, outstanding reputation and Saudi joint venture has positioned us as a trusted partner to our customers and is a competitive advantage in the region. We see significant demand for our engineering and program management solutions across the region as governments implement their strategic visions and prepare for upcoming world events. In addition, our expansion into the defense, security, hospitality and industrial manufacturing sectors has contributed to our recent growth as these markets are receiving major investments. In Federal Solutions, Parsons has a strong position and differentiated capabilities in aviation modernization, integrated air and missile defense, space superiority, counter unmanned air systems, cyber operations, electronic warfare, industrial-based modernization and border security with a strong alignment, the administration's priorities and budget Parsons is well positioned to immediately capitalize on opportunities in these areas. In summary, I am very pleased with our strong execution. We continue to deliver industry-leading growth with 14% total revenue growth and 9% organic growth, excluding our confidential contract. We expanded margins by 60 basis points, exceeded our cash flow expectations, won defense contracts in the administration's priority areas, and our Critical Infrastructure segment continues to hit on all cylinders by delivering double-digit organic revenue growth and adjusted EBITDA margins. Our win rates and hiring and retention remains strong, and we continue to leverage our balance sheet for strategic accretive acquisitions. We also have a total backlog of nearly $9 billion, of which 72% is funded, approximately $11 billion of contract wins that we have not yet booked, a $58 billion pipeline that includes more than 115 opportunities of contracts worth $100 million or more and 15 opportunities worth $500 million or more. We believe our healthy forward-looking metrics, strong operating teams and industry tailwinds positions us to outpace industry growth rates and continue to deliver significant long-term shareholder value. With that, I'll turn the call over to Matt to provide more details on our third quarter financial results. Matt? Matt Ofilos: Thank you, Carey. Q3 financials were highlighted by strong revenue growth, adjusted EBITDA margins and free cash flow ahead of expectations. In addition, we continue to leverage our balance sheet and completed our third accretive acquisition of the year in the strategic water market. Turning to the details of our third quarter results. Excluding our confidential contract, total revenue grew by 14% and 9% on an organic basis. These increases were driven by double-digit growth in our critical infrastructure protection, transportation and urban development markets. Total revenue, including the confidential contract decreased 10% from the prior year period and was down 14% on an organic basis. SG&A expenses for the third quarter increased 6% from the prior year period. This increase was primarily driven by the inclusion of recent acquisitions and focused investments in bid and proposal activity and critical hires in support of our large strategic pursuits and pipeline aligned to the administration's priorities. Adjusted EBITDA margin expanded 60 basis points to 9.8%, driven by improved program performance and accretive acquisitions. Adjusted EBITDA of $158 million decreased 5% from the prior year period, driven by the revenue decline on our confidential contract. I'll turn now to our operating segments, starting first with Critical Infrastructure, where third quarter revenue increased by $129 million or 18% from the third quarter of 2024. This increase was driven by organic growth of 13% and inorganic revenue contributions from our BCC and TRS acquisitions. Organic growth was driven primarily by the ramp-up of recent contract wins and growth on existing contracts in both North America and the Middle East. Critical Infrastructure adjusted EBITDA increased 83% from the third quarter of 2024, and adjusted EBITDA margin increased 360 basis points to 10.3%. These increases were driven primarily by improved program performance, the ramp up of recent awards and our accretive BCC acquisition. Moving to our Federal Solutions segment, where third quarter revenue increased 9% and 5% on an organic basis, excluding our confidential contract. These increases were driven by growth in our critical infrastructure protection, transportation and space and missile defense markets. Total Federal Solutions revenue, including our confidential contract, decreased 29% from the prior year period and 31% on an organic basis. Federal Solutions adjusted EBITDA decreased 40% from the third quarter of 2024 with an adjusted EBITDA margin of 9.2%. The adjusted EBITDA was primarily impacted by lower volume on the fixed-price confidential contract. Next, I'll discuss cash flow and balance sheet metrics. Our net DSO at the end of Q3 2025 was 62 days, an 11-day increase from the prior year period but still favorable to historical averages. This increase was primarily driven by lower volume on our confidential contract and the timing of collections in the Middle East. During the third quarter of 2025, we generated $163 million of operating cash flow, which was better than expected and drove free cash flow conversion of 135% for the quarter. Capital expenditures totaled $13 million in the third quarter, relatively consistent with the prior year period. For fiscal year 2025, CapEx is expected to remain in line with our planned spend of approximately 1% of annual revenue. Our balance sheet remains strong, and we ended the third quarter with a net debt leverage ratio of 1.4x. During the quarter, the remaining $85 million balance on the 2025 convertible senior notes was settled with cash on hand. Additionally, we repurchased approximately 323,000 shares in Q3 at an average price of $77.36 for an aggregate purchase price of $25 million. On a year-to-date basis, we have repurchased approximately 966,000 shares at an average price of $67.28 for an aggregate purchase price of $65 million. Turning next to bookings. For the third quarter, we reported contract awards of $1.6 billion, representing a book-to-bill ratio of 1.0x on an enterprise basis. which continued our streak with a trailing 12-month book-to-bill of 1.0x or greater in every quarter since our IPO. In Critical Infrastructure, we achieved a book-to-bill ratio of 1.1x which is the 20th consecutive quarter with a book-to-bill ratio of 1.0 or greater. In Federal Solutions, we reported a book-to-bill ratio of 0.8x. Our backlog at the end of the third quarter totaled $8.8 billion, a 1% increase over Q3 2024. Additionally, our funded backlog is the highest since our IPO at $6.4 billion, a 10% increase year-over-year. In terms of our guidance, we are reiterating the midpoint of adjusted EBITDA and operating cash flow. However, we are updating revenue guidance to reflect the impact of federal customer capacity constraints impacting timing of sole-source task order awards, products and material procurements, and the inability to recover in Q4 due to the extended government shutdown. We expect total revenue to be between $6.4 billion and $6.5 billion. This guidance represents total revenue growth of 14% and 10% on an organic basis, excluding the confidential contract. Including this contract, total revenue is anticipated to decline 4% at the midpoint of the range and 8% on an organic basis. Adjusted EBITDA remains between $600 million and $630 million. At the midpoint of our revenue and adjusted EBITDA guidance ranges, our margin increased to 9.5% from 9.3%, this represents adjusted EBITDA margin expansion of 50 basis points from 2024 and a 100% -- a 100 basis point increase since 2023. Operating cash flow is expected to be between $380 million and $460 million. While the midpoint remains the same, we did want to widen the range to incorporate any potential impacts from the extended government shutdown. Other key assumptions in connection with our 2025 guidance are outlined on Slide 11 in today's PowerPoint presentation located on our Investor Relations website. With that, I'll turn the call back over to Carey. Carey Smith: During the third quarter, we delivered double-digit revenue growth, excluding our confidential contract, 60 basis points of margin expansion, free cash flow conversion of 135% and we completed a strategic acquisition while maintaining our strong balance sheet, which will enable us to make future accretive acquisitions. We remain optimistic about our future, given our team's proven execution, the tailwinds we have in both segments, our strong total and funded backlog and the robust pipeline of large opportunities we have to pursue. With that, we'll now open the line for questions. Operator: [Operator Instructions] Our first question comes from Sangita Jain with KeyBanc Capital Markets. Sangita Jain: So Carey, and Matt, just -- it looks like there was some revenue from the confidential contract in 3Q. I know it was a much smaller number than the previous run rate. So I was kind of wondering if there was some included in your 4Q guide as well or if you're still presuming that it's going to be 0? Carey Smith: Yes, there was some revenue included in our third quarter guidance. At this point, it's very small and immaterial. The program is in a wind-down state, so we're basically demobilizing. Sangita Jain: Got it. And on C&I margins, it's three quarters in a row now that you've done 10%-plus margins. I know you were expecting a softer second half as you close out some legacy projects. So kind of I just want to get some more color on what may have driven the 3Q strength and if we should expect a 10% to 10.5% as the new run rate heading into '26. Carey Smith: Yes, I'll start, and Matt will jump in. But I would say, first and foremost, critical infrastructure has had outstanding program execution. We'd always indicated that we expected this business to be double-digit margins, and we weren't sure how quickly we could get there. And obviously, we've had 3 consecutive quarters to your point. So I would say continuing that solid execution looking forward. We've got some higher-margin business that will be coming in as we have been winning some new bids based on the demand that's out there, both in North America as well as the Middle East and then any acquisitions that we do are going to be accretive as well. Matt Ofilos: Yes. And to give some numbers on a year-to-date basis, to your point, CI is at 10.4%. So really great performance out of the CI business. Q4, we have modeled in kind of the high 9s, low 10s for a total year in kind of the low 10s, as I mentioned, but again, to Carey's point really strong margins out of the CI business, north of 10% throughout the year. And so really excited about the stability throughout the calendar year. Operator: Our next question is from Andrew Wittmann with Baird. Andrew J. Wittmann: I wanted to ask about the top line here in the quarter and in the fourth quarter guidance. I think maybe it was a little bit lighter than you expected in the third quarter. I was wondering if you could Carey, talk about what was the variance there? And then just as it relates to the fourth quarter guidance, I heard your comments in the prepared remarks, you talked about federal customer capacity, some things about the material. I just thought maybe you could elaborate on some of that. When you talk about like materials procurement, was that like you couldn't procure because the government was shutdown? Or was there something else behind that? When you talked about customer -- federal customer capacity, is that again shutdown related? Or is there something else behind it? I think just understanding kind of what's changing or what you're seeing in the top line performance is an important topic for today. Carey Smith: Yes. Thanks, Andrew. I appreciate the question. So first, our challenge in this quarter was strictly due to timing. So we've had things move to the right. These were actually on contracts that were already awarded to us. Most of the work was our Air Base Air Defense contract had a task order that was awarded later than anticipated. And then we're still awaiting on some of our defensive cyber threat hunt kit awards, and that is impacted by the shutdown. We indicated in Q2 that we did -- we knew we had a second half that was going to be higher than the first half. And that we were optimistic that things will get moving. But I would say, unfortunately, we are still seeing delays and so we wanted to make sure that we were going to achieve our guidance. And so setting for the rest of the year, we had to assume that the shutdown may last as long as until the end of the year. Matt Ofilos: Yes. And Andy, I'd just add, if I look at Fed and I'll talk excluding the confidential contract, call it, 9-ish percent growth for Q3, we are forecasting about 15% for Q4. So to Carey's point, some was a slide to the right from Q3 to Q4. We do expect acceleration in Q4, just with the government shutdown, the timing on task order awards, approvals on material purchases, things like that. All those things are kind of impacting our ability to recover before the end of the calendar year, but should be obviously first half next year. Andrew J. Wittmann: Got it. Okay. Great. And then I guess from my follow-up, I wanted to just drill in and get a little bit more from you on FAA. Obviously, the government has shutdown. This one notionally had a October 31 award target date. Obviously, the government controls that and can slide. But I was just wondering, you said imminence on the call. Like are the contracting personnel at the FAA on staff? Is there a dialogue happening there? What can you tell us a little bit more detail on that one in particular? Carey Smith: Yes. Fortunately, the FAA brand-new air traffic control system is not impacted by the shutdown and an award is imminent. This program, again, is going to use the $12.5 billion of funding that was awarded under the reconciliation bill. This is a critically important program to our country. We need to improve the safety, reliability, redundancy and efficiency of the National Aerospace System. And in parallel, we have to transform that for the future. I feel that our team has offered a very compelling offer. Parsons, again, as the #1 program manager ranked by Engineering News-Record. This is the type of work we do for a living. We partnered with IBM as our strategic technology partner, and both we and IBM have very deep system engineering expertise. We also have the right team and a team that knows the FAA and has excellent past performance with the FAA. I mean, our motto has been right team, right time. We're ready now. We certainly look forward to partnering with the FAA on this brand new air traffic control system and achieving the results by December 2028. Andrew J. Wittmann: Got it. So just as an addendum to that, then, I think in the past, you've talked about like the dollar amount of awards that you're awaiting notice on. I think in the quarter, this one, among others, many others, went in as awards that you're awaiting notice on. What does that metric stand out here at the end of the third quarter? Matt Ofilos: Yes. So awaiting notice of award right now is just under $10 billion, Andy. And that compares to prior years of an average between 4 and 6. So obviously, a big part of that is FAA, but all in all, just under $10 billion awaiting notice of award. So bids submitted awaiting adjudication. Carey Smith: Yes, I'd also highlight the strength of our pipeline. $58 billion is a record pipeline for the company. And the number of awards that we have potentially greater than $500 million being over 15 is also a record for the company. So we're really seeing a lot of needs and demand for our business across both segments. Operator: Our next question is from Tobey Sommer with Truist. Tobey Sommer: Given the slightly lower top line exiting the year, I'm just wondering how we should think about modeling next year based on the midpoint of the new top line guidance, it looks like consensus is around 8% total revenue growth, which I know wouldn't necessarily be an organic number, but any color you could provide there without specific guidance, of course, at this stage would be helpful. Matt Ofilos: Yes. Obviously, we'll provide full year 2026 guidance during the February call. But to your point, solid run rate in Q4 positions us well for 2026. We've said previously mid-single digit or better organic growth, excluding the confidential contract. So that's the number that we're holding to. That would exclude any what I'll call binary large items, think FAA or others that Carey mentioned, Southern border or Golden Dome that are obviously large items. So mid-single digit or better organic, excluding confidential contract and supported by a solid Q4 run rate. Tobey Sommer: And Matt, what would the total contribution this year be from confidential contract just so we have that math equation squared away? Matt Ofilos: Yes. It's about $350 million, so just 5-ish percent. Tobey Sommer: And Carey, you highlighted water as an area with the recent acquisition in critical infrastructure, you talked about the growth, et cetera. Are there any verticals within critical infrastructure that you would like to sort of further fortify or maybe gain exposure where you might not have it currently? Carey Smith: I would say water and environment, which is one of our 6 end markets has been rapidly growing. We expect this year for that market to be around $650 million. And I mentioned the water portion of that is also our most profitable. So we have been kind of doubling down there. The acquisition of Applied Sciences Consulting was critical for us because Florida is spending billions of dollars and making sure that they have resiliency. And this company is very well positioned to help us capitalize on it by combining our collective capabilities. So it has been an area of focus for M&A. Tobey Sommer: Okay. And then during the shutdown, there's been kind of a new wrinkle with the administration halting funding of various things in states. Have you seen any impact from this particular facet of the shutdown. And in particular, maybe a comment on Gateway would be interesting. We have our offices nearby and it looks like there's plenty of equipment and workers still plugging away, but would love your perspective. Carey Smith: Yes. And you're absolutely right there, Tobey. So the Gateway program continues, as I mentioned on the call, we were awarded $665 million follow-on effort for that. We have 5 major construction projects that are underway on the Gateway program as we speak and the state funding that's available for Gateway is $5 billion. So we continue to work. Operator: Our next question is from Gautam Khanna with TD Cowen. Gautam Khanna: I was wondering if you could comment on the EBITDA contribution from the confidential contract in Q3 and for the year, just so we have a sense for what the comp to overcome is in '26? Matt Ofilos: Yes. Round numbers, Gautam, when you think about this as a fixed price international contract. So it would be accretive to our Fed business, I think kind of low double-digit margin. Gautam Khanna: Okay. And then I know on the FAA modernization opportunity, there was -- it sounded like there were just 2 bidders yourselves and Peraton. And there's some anecdotes that there might be some risks associated with the terms of the contract. I just wanted to get your view on how to kind of insulate the company from some risk? And how you may have gone about that bid in a way that doesn't -- is a good thing if you win it as opposed to something we should be concerned about? Carey Smith: Yes. First, as a company, we will not take that business. And the FAA brand-new air traffic control system is not a bad contract. It's a good contract. There are only 2 bidders. There were various reasons for that. I think we got off the dime very quickly, announced our partnership with IBM back in June. We tend to be a very agile company that delivers operationally relevant solutions. And so we kind of got out pretty fast. And I think some of the competitors were worried about that. Other competitors dropped out due to potential organizational conflicts of interest because if you want to provide systems, it's kind of hard to sit in an integrator role where you may be selecting and evaluating and acquiring those systems. So we're very excited about the FAA contract. It's going to be a good contract, and we look forward to an imminent announcement. Operator: Our next question comes from the line of Mariana Perez Mora with Bank of America. Mariana Perez Mora: You highlighted space and missile defense as a growth driver for FS. I was wondering if you could talk a little bit more about that, [indiscernible] what can you expect [indiscernible]. Carey Smith: Yes, you're breaking up a little, but I think I caught the gist of it. So space of missile defense being a growth driver. First, I would start with our missile defense contract. We are the system engineer and integration contractor for the Missile Defense Agency on the team's contract. That work will lead into Golden Dome efforts, and we are starting to ramp up in anticipation of that. We expect some of the Golden Dome funds, there was $25 billion in the reconciliation bill to start hitting around the December time frame, and we've been closely working with the Missile Defense Agency on areas like architecture. Relative to our space business, we're involved in space situational awareness, an area that's seen uptick as there's been a lot more activity going on in space, we're also involved in space ground systems. We've delivered over 170 different ground systems for a variety of customers. And then an area of space we're particularly excited about would be our assured position navigation and timing solution. We've partnered with Globalstar. We're using their constellation and our software-defined radio capability to be able to get location information in the case of GPS' jam. A great example is we just deployed it over in the Ukraine and European theater and our timing results and location results were better than anticipated and additional units have now been purchased for the INDOPACOM region. So exciting business. We have seen growth there, and that's an area that we project to continue to be strong, particularly as it relates to the Golden Dome program. Operator: [Operator Instructions] Our next question is from Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu: Maybe if we could talk about 2 questions. First on FS growth. How do we think about the FS growth given the order decline in the quarter? How much of it was attributable to the shutdown? And I know, I think, Matt, you said mid-single-digit growth outlook for '26. How we could think about the order flow and the pipeline selling together to get that growth outlook? Carey Smith: Yes. I'll start. Matt will jump in. So on the growth, how much attributed to the shutdowns, it's a little hard to tell because we're -- I think we're dealing with 2 things at one time. One is federal contracting capacity. There's been some delays in getting things signed off. And the second is the shutdown, which I would say the big impact there that we saw was kind of limiting our recovery in the fourth quarter not knowing how long the shutdown is going to continue. So we plan for it to continue for the rest of the year. But the big issue for us has been material procurements on existing contract awards. I want to reiterate this is not new business we have to go win. It's not about any program losses. It's strictly a timing issue. Matt Ofilos: Yes. And the only thing I'd add, Sheila, if I look at total year 2025 Fed, excluding confidential contract, the outlook is high single-digit growth, 11% total growth. So it's a -- the business is performing quite well. If we can kind of maintain that run rate, it's kind of above market and taking share. So we're happy with those kind of rates. Sheila Kahyaoglu: Got it. And then maybe if I could ask one on CI, please. The performance there has been pretty good. Margins are now hitting this 10% stride, what's driving that? How do we think about mix going forward? Carey Smith: Yes. CI definitely has had an excellent year, I'd say on all fronts, winning new business for the last 20 quarters, also the strong margins throughout the year. And we're -- this quarter to be able to do 18% total and 13% organic is excellent. We're seeing strong growth in both North America and the Middle East, and that growth is going to continue for as long as we can see. The IIJA, again, funding has not peaked yet. It won't peak until the 2028 time frame. It's going to have a 6- to 8-year tail after that. The next surface transportation 5-year bill is expected to be passed by November of 2026. So that's going to be additive to what we're seeing. In the Middle East, our expansion there continues. We've had 4 years of double-digit growth in the Middle East. We've not just been growing in our core market of urban development and transportation, but we've now moved into 3 new markets, which are receiving significant investments, defense, security and tourism and hospitality. So critical infrastructure, we've got great long-term tailwinds. We've been able to capitalize on it with very strong win rates, both in North America and in the Middle East. When you look at split between the businesses, though, I would have to say the real large jobs are in the federal business as you look to the near future. We talked about the $12.5 billion that the FAA is receiving for the reconciliation as we await that imminent award. There's $25 billion for Golden Dome. We're well positioned, not just in the area I mentioned earlier for system engineering and integration, but we also have nonkinetic effects capability and command and control capacity. There's $25 billion for Pacific Deterrence -- or I'm sorry, $25 billion for more for border security, $161 billion in total, but a lot of that's addressable to us. We do border security all over the world. So we've got currently 2 very large opportunities that are in bid within the border security area. And then Pacific Deterrence got an additional $12 billion in new funding and we're well positioned there with our presence on Kwaj and Guam, and that we're able to capitalize on that from the Federal group. So CI rapidly growing, I'd say the big game changer opportunity is largely in federal. I should mention one that kind of passes both groups too, which would be rebuilt. We expect to be involved in Syria, first in eliminating the chemical weapons and then the rebuild of Syria, which is being very much supported by the Gulf countries. We're looking at the rebuild of Ukraine and also the rebuild of Israel Gaza. And then a final area just to hit that I put in that game changer category is our position in critical minerals and leveraging our processing and refining capabilities as we start to onshore our critical minerals in the United States. Operator: Our next question is from Louie DiPalma with William Blair. Louie Dipalma: Following up on your recent answer, it seems you've made significant progress with providing defense services to some of your Middle East customers. What types of solutions are gaining traction on the defense side? And what's the long-term outlook there? Carey Smith: Yes. So I'd say the areas that we've gotten into are kind of a combination leveraging our entire portfolio. So we're basically doing work for the Ministry of Defense that is infrastructure work due to the proprietary nature of it, I can't go beyond that. But if you think about infrastructure builds for the Ministry of Defense. Also on the security side, we're doing border security work. We've been involved in border security for a long time through our work with Defense Threat Reduction Agency Armenia, Lebanon, Georgia, other locations. We do work with customs and border protection down on the southern border, we've been involved a little bit with immigration and customs enforcement, and we do the counter nuclear smuggling detection and deterrence program for Department of Energy. So we've been able to take those competencies now and expand them, and we were awarded a job through the Ministry of Interior for border security in Saudi Arabia. Louie Dipalma: Excellent, Carey. And in addition to the FAA brand-new air traffic control systems contract that you're pursuing, you already have an existing FAA facilities contract and should that contract also benefit from the reconciliation bill funding? And related to this, are you starting to already receive awards in October? Or did you receive awards in October that were funded from the reconciliation bill funding? Is that funding starting to flow? Carey Smith: Yes. So I would say, to your first question, that contract will also benefit. That contract's technical support services contract. We've supported the FAA for 50 years as a company. We've been on the TSSC contract for 24 years, excellent past performance. And it will benefit from the brand-new air traffic control system separate from our integrator work that we're looking forward to receiving. As far as reconciliation funding, I would say it's going to start to flow, we think this month and next. Matt Ofilos: And Louie, just the numbers on your question around FAA. As we've mentioned previously, that is a growth driver for us. I mentioned transportation is a key driver. We're expecting that FAA contract to grow 25% to 30% this year in 2025. So to your point, it's a great growth driver for us with or without. Operator: Our next question comes from Jonathan Siegmann with Stifel. Jonathan Siegmann: So maybe just back on the shutdown, you've made some really helpful comments on that. But maybe if you could talk a little bit about the other side, when the government is open, can we expect a surge of activity? Or is the backlog so great at this point that we might still be talking about capacity problems next year assuming the government opens in the next couple of weeks? Carey Smith: Yes, thanks. And one thing I should mention is 50% of our business, again, is not impacted by the shutdown because 50% of our business is not federal government-related work. But I would say as far as when the government's open, I do expect that we're going to see a surge because they are backlogged with contracting actions. Matt Ofilos: Yes. And so as I mentioned earlier, John, as I think about almost $10 billion of awaiting notice of award typically in the Middle East, processes quickly. So the majority of that is within the Federal group, that being 40% or 50% above the norm is evidence that there's a building backlog and hopefully, they'll transact quickly so that we can get working on these jobs. Carey Smith: They almost have to when you look at the reconciliation funds and the fact that the government would like to spend those upfront over the next few years. So to be able to accomplish things if you look at the brand-new air traffic control system, as an example, we need to achieve those milestones by December 2028 with no excuses. We've got to deliver. And when you look at the -- a lot of the other funding that's in that build, there's a lot of milestones that have to be achieved. So I think things are going to have to get moving forward. Jonathan Siegmann: As we think about next year, you've already quantified the headwind from the confidential contract. Is there anything else that you'd highlight today that we should be thinking about maybe a larger recompetes in the classified area that we should be contemplating as we think about next year? Carey Smith: No. Fortunately, going into next year, our recompete rate is about 6% to 7%, so it's pretty small and there are no major contracts that are in that recompete. We secured our 4 contracts that are greater than $2 billion in July of 2021 is when the last one was won. So those have been secured for the next 7 to 20 years, respectively. That would be the 2 mine jobs, the FAA TSSC job in the Missile Defense Agency system engineering and integration job. So our big recompetes are still a ways out like 2029 time frame. Operator: And our next question is from Noah Poponak with Goldman Sachs. Noah Poponak: Matt, can you just level set me or remind me the numbers on Federal Solutions organic growth, excluding confidential. What was it in the first half? What was it in 3Q? And what do you now have for 4Q? Matt Ofilos: Yes. So first half, we're looking at -- the total is just about 10%. Second half, we're looking at 12%, driven by Q4 at almost 15%. So a little bit of a ramp in Q4, but something as I mentioned, a lot of the things that slipped from Q3 are on track for Q4. So that's really what's driving the Q3 to Q4 sequential. Noah Poponak: Okay. Yes, I guess, how did you think about building that? I mean it's 1 quarter, but just given how that's progressed? how did you think about building that acceleration in 4Q versus 3Q or first 9 months in a government shutdown? Matt Ofilos: Yes. Obviously, we went through -- we don't take lowering top line guide without a lot of effort going into exactly what the outlook is. So we went through line by line, every program, material that's been ordered, timing on those deliveries products. So I would say we're highly confident in the midpoint. I would say, if we see an extended government shutdown through the end of the calendar year, as an example, Noah, I would say it would be biased towards the lower end of the guide. But I think a lot of the story we're hearing is, over the next couple of weeks is likely to come out of the shutdown. Noah Poponak: Okay. And Matt or Carey, I guess, we've been in this environment with lower outlays in some of your government customer markets, but you've still had that 10% federal core. If next year, some of the things that have gummed up the system get better, can that core accelerate? Or is that too optimistic just given the overall backdrop? Carey Smith: I would say that we have the opportunity to accelerate. I mentioned the very large programs that we have in front of us, and I feel we're well-positioned. Noah Poponak: Just curious if I was sort of thinking of that, excluding like putting FAA aside or -- maybe you have so many large opportunities that putting them aside, is not a relevant question, but excluding any one large program totally changing the growth rate, just thinking more about the diversified core FS ex-confidential? Carey Smith: Yes. So this year, we'll deliver for federal for the full year, about 8.3% organic growth, again, which is industry leading. So I would say we're in all the right markets, not even talking about any of the game changer programs, and we've indicated that we would deliver mid-single-digit or better, excluding the confidential contract as we go into next year. That's excluding game changer contracts. Noah Poponak: Okay. Can you frame for us for whoever wins FAA, approximately how large it could become on an annual revenue basis and then what the margins would look like roughly? Carey Smith: Yes. Unfortunately, because we're in a competition and the award is imminent, I can't share financial information at this time. Noah Poponak: Okay. Last one, Matt, just on the FS margins because you had talked about confidential was accretive to the margin. And then as that came out, the margins came down a bit, but back up sequentially here nicely in the third quarter despite that. So as we move forward, what's your latest thinking on where the FS margin lands? Matt Ofilos: Yes. So if I look at Q3 specifically, cost type represents about 60% of the federal business. So in an environment where cost type is greater than 50%. There's always going to be a little bit of pressure on the margin, so we're comfortable in kind of the high 8s, low 9s, Noah. Acquisitions will help with long-term expansion as we always target 10-plus percent EBITDA on our acquisitions, a shift to fixed price. We haven't necessarily seen it as of yet. We're obviously open in a lot of cases to that. And so I think high 8s to low 9s is a good a good target based on the existing mix. And we do have some great opportunities. We've talked -- Carey mentioned in her script a little bit about the Joint Cyber Hunt kit, things like that, where a little bit more product, a little bit more materials that are accretive could also benefit. In Q3, we did have that benefit from the incentive fee that we talked about in Q2 and then Q4 will help from the products. So all those things add up to kind of a high 8s, low 9s is a good number, opportunities around expanding products and acquisitions. Operator: And ladies and gentlemen, this is all the time we have for your questions. I will pass it back to Dave Spille for final comments. David Spille: Thanks again for joining this morning. If you have any questions, please don't hesitate to call, and we look forward to talking to many of you over the coming days. Have a great day. Thank you. Operator: And this concludes our conference. Thank you for participating. You may now disconnect.