加载中...
共找到 14,741 条相关资讯
Mui Lian Cheng: Good morning, everyone. Thanks for joining us this morning for MIT Second Quarter and First Half Financial Year '25-'26 Results Briefing. MIT has released its results today after market closed. We have the management team to present the key highlights of the results. Ms. Ler Lily, CEO; Ms. Khoo Geng Foong, CFO; Mr. Peter Tan, Head of Investment; Ms. Serene Tan, Head of Asset Management; Ms. Chng Siok Khim, Head of Marketing. I'll pass to Geng Foong to bring us through the results highlights. Geng Foong Khoo: Good morning, everyone. Thanks for joining us today. So for second quarter FY '25, '26, year-on-year, our net property income decreased due to loss of income from the divestments of 3 industrial properties in Singapore, which we have completed in August. Lower contributions from the North American portfolio from nonrenewal of leases, weaker U.S. dollar. These were partially offset by the higher contribution from acquisitions we did end of last year, as well as the completion of final fit out works in May '25. Borrowing costs decreased due to repayment of borrowings with the divestment proceeds, lower interest on unhedged floating rate loans and effects of weaker U.S. dollar. These were partially offset by higher borrowing costs we took for the Japan portfolio. Distribution declared by joint venture decreased due to higher borrowing costs from repricing of matured interest rate swaps as well as pre-termination of lease at one of the joint venture properties in prior year. So overall, our distribution to unitholders decreased 5.3% to $90.7 million, and our distribution per unit increased 5.6% to $0.0318. This prior year, we also distributed about $3.3 million of divestment gain from divestment of Tanglin Halt. So if we exclude that, our DPU would have decreased 2.2% instead. So for first half, most of the reasons are quite similar, so I'll skip that. So for quarter-on-quarter, our net property income decreased due to loss of income from the divestment of the 3 industrial properties in Singapore. Full quarter impact of end of lease amortization for the fit-out works at one of the property in Singapore portfolio, higher operating expenses at North American and Singapore portfolio. These were partially offset by the full quarter contribution from the final fit-out works at Osaka Data Center. So on borrowing costs is lower mainly due to repayment of borrowings with the divestment proceeds and lower interest on unhedged floating rate loans. Overall, our distribution to unitholders decreased 2.7% to $90.7 million and DPU decreased quarter-on-quarter 2.8% to $0.0318. From a capital management perspective, our total borrowings reduced to $3.1 billion, largely due to the repayment of loans with the divestment proceeds. Accordingly, our aggregate leverage ratio decreased to 37.3% and our interest rate hedge ratio increased to close to 93%. With a lower leverage ratio, this provides us with ample debt headroom to capture any potential growth opportunities. Our average borrowing cost for the quarter reduced slightly to 3%, largely due to repayment of higher cost debt with the divestment proceeds and lower interest rate on the unhedged floating rate loans. Having said that, we do have interest rate swaps coming due every year. So for this financial year as well as next financial year, we do have about $600 million of IRS due or coming due, which we expect to have impact on borrowing costs. Even these interest rate swaps were previously locked in when interest rates were lower. So overall, the borrowing cost for this financial year, we expect to be around 3.1% to 3.2%. And for next financial year, the interest cost will be about 3.3% to 3.4%. Our debt maturity profile remains well staggered. No more than 24% of total debt maturing in any single year and average debt tenure of 3 years. On the FX front, as much as feasible, we try to draw local currency loans to provide natural hedge for our overseas investments. This helps to protect FX fluctuation on our NAV and DPU. So for example, about 50% to 52% of our portfolio are funded with loans. So while our exposure to the U.S. by AUM is about 47% of onshore borrowings, our distributable income exposure to U.S. dollar is about 25% to [ 20% ]. This means that in terms of sensitivity for every 5% depreciation in dollar impact to our distributable income is only about 1.5%. So for the remaining of the foreign currency, we enter into FX forwards to hedge the income into Sing dollar. So we have about 86% of our next 12 months distributable income is hedged or derived in Sing dollar. Now to Lily to go through [Technical Difficulty]. Lily Ler: I will cover the operational performance. So if we can start off with the occupancy of the portfolio, I think that's something that above our [indiscernible]. On a portfolio basis, the occupancy rate has, I would say, remained relatively flattish. So we are looking at 91.3%. If you look at the Singapore portfolio, pretty resilient. We have managed to keep the occupancy flat, right? For North American portfolio, we do see a bit of slightly marginally down to 7.8%, and that's largely because of the expiry of lease at San Jose, which is something that we have spoke about in the last quarter. On the Singapore side, something which I missed out just now would be the progress of the Kallang Way property. I think that one, we have managed to improve the committed occupancy to 64.4%. So there is about a 1 percentage point improvement from the last quarter we have reported. I think this quarter, we have also seen quite a bit of new leases and renewal that we have actually executed. To date, we have executed about 184,000 square feet of the space in North America. This is about 2.6% if you look specifically at the North America [indiscernible]. Of this 184,000 square feet, we have about 20% -- 20% to 23% of these leases actually pertains to empty units, which were previously vacant. So we are able to fill up some of the vacant units. The rest of it are basically just renewals. So it's not going to -- it basically means that we are able to extend the lease period, right? I think if you look in terms of some details for lease renewals, weighted average revision comes up to be about 3%. I think if you look at the range of the revision, we are talking about from a low single of 2% to a double digit like 10%. And on lease renewal also for a relatively long period, so about 5 to 11 years. I think maybe I just also want to highlight that these are -- a lot of these leases or most of these leases, we will be taking effect only in FY '26, '27. That means the next financial year. I mean these are actually forward renewals that we have entered into. The lease commencement actually starts next financial year. So we will see the effect. I think the current financial numbers does not include the effects of these leases, not significant [indiscernible]. The rental revision in Singapore continues to be quite positive. I think we are looking at a weighted average of 46.2% on the average. Of course, if you look in terms of greater details, the general industrial buildings continue to see encouraging rental revision at about 8%. We do have a little bit of a negative revision in the Hi-Tech building and business space, specifically, that is more on the business park, where we have one particular tenant. I would say, not very sizable, but it's not your usual typically 1,000, 2,000 type of spaces. So we have actually defended the occupancy by taking a lower rental rate. So that accounts for the negative rental revision that you see. I think then if you look at the lease expiry -- in terms of the WALE, we will see that there is a slight improvement in terms of the overall portfolio. Last quarter, we reported 4.5 years. So this quarter, we actually reported a 4.6 years. Of course, you also understand that every time you move 1 quarter, naturally, this number will drop, but we have actually managed to improve it, and that is mainly because of one of the renewals that we -- which was one of a renewal, which I've mentioned earlier on that actually take effect towards the end of the financial year. So that has basically lengthened the WALE. If you look in terms of the profile for FY '25, '26, in total, we have about 4.6% of our total portfolio expiring. If we look specifically at the North American data center, that would be about 1.8%. And of course, I think we have spoke about this last quarter as well [indiscernible] 1.8%. There is also 1.2% that is largely due to the vacant unit. The office spaces that was given up by one of the data center tenants in 250 Williams. So I think whatever that is left in the remaining of the financial year, we are quite positive in terms of the renewal and backfilling. Okay. So for next financial year, '26-'27, of course, the large part of the expiry for the North American portfolio continues to be the San Diego. So that is something that we are keeping an eye on as well. I think in terms of some of the investment divestment activities, we have completed our divestment -- the Singapore divestment of the 3 properties. So that takes place -- that took place on 15th August. I think that is also why this quarter, we see some effects of the loss income coming from the divestment [indiscernible] through the financial numbers, right? With this, I think we will continue -- we will still continue to look at our divestment for the portfolio. But I think this -- the focus will be more on the North American side. I think that is something that we have always been looking at as well, right? So I think we probably will be looking at another $500 million to $600 million of divestment for the portfolio. In terms of investment activities, I think since our divestment, we have managed to bring our leverage ratio down. So that does give us some headroom in terms of looking at acquisitions. So I think we have -- we are seeing quite a few transactions in the market, say, in the Europe and more recently, in fact, I would say, a little bit more on the Japan side. So Europe and Asia will continue to be our focus. And of course, the 50% stake that the sponsor is still holding it will continue to be something that we want to look at. I think if you look at this portfolio specifically, it is a good portfolio, which can help to improve our quality of the quality of MIT's portfolio overall. And of course, we also know that, that is the one, where the hyperscalers facilities forms a large part of it. So it will be an interesting pipeline for us. So with this, I think we hope to be able to recycle the seeds that we have obtained from the divestment. And of course, with further divestment that can come through, that will also help to give us more gun powder in terms of the acquisitions. So looking ahead, I think our priorities will remain very much centered on improving the occupancy at both the Singapore and the North American sites. We have been getting some traction in recent times. So we are quite encouraged by that [indiscernible] continue doing this. We are still in talks with a few potential renewals or new leases in the North American side. So that is something that we hope we can continue to provide some good news next quarter. right? I think in terms of the interest rate side, as Geng Foong has said, we do have some repricing replacement that needs to be managed. So we need to be very nimble, and we can just adjust the hedge ratio and keep a lookout for any opportunities. So I think as we move along, there may be some transitional impacts on our results. Some of these -- as I said, some of these renewals that we are looking at are actually forward renewals. So we are actually paving the way going forward. So that's something that I hope you guys will understand. I think with this, that will end our presentation. I'll pass it back to -- I'll pass the floor back to Mui Lian. Mui Lian Cheng: [Operator Instructions] Terence, would you like to ask the first question? M. Khi: This is Terence from JPMorgan. Just wanted to ask a bit more on the backfilling of the U.S. data centers. Could you share a little bit on what -- how do you see progress? Or how should we expect backfilling for 250 Williams and the AT&T next year Lily Ler: I think for 250 William, we have -- as you will probably note that for the past few quarters, we have been able to lease out some of the office space. Although, as I said, these are not very big significant type of areas that we can go -- that we can fill up immediately, but we have been making some progress, and we are actually quite encouraged by that. There have been still quite a number of -- we are still seeing quite a few inquiries, some people coming to view, et cetera. So I think it seems like while the office space continues to still be quite weak in terms of the demand, there seems to be some slight recovery that is coming back. So we hope that we are able to continue this traction. In terms of the AT&T, we are still -- we are actually talking -- we are still kind of -- we need to talk to them and see actually what is their plan because if you remember, for AT&T, there is a further options to -- for them to extend another 5 months. So that's something that we will get some clarity -- we want to get some clarity from them. And of course, the efforts for us to release the building, repurpose the building or even to do a divestment for the building continues to be something on the card that we [indiscernible]. I hope that answers your question. M. Khi: Yes. So is that -- I mean, to give a sense, is there any details on whether we should expect that 5-month extension? Lily Ler: There's no clarity at this point actually. M. Khi: Okay. Great. Could I ask about the FX hedging? What is the hedge rate for U.S. dollar ForEx into the second half of the year? And how should we see the FX hedging for next year? Geng Foong Khoo: So for the income hedges, we have hedged about 53% of our USD income stream for the next 12 months. The average rate is about [ 1.28, 1.29 ]. Hopefully, it's for the next 12 months. M. Khi: And maybe a final question for me. Any thoughts? Could you share a little bit more on the acquisitions? I understand that you're looking at both the sponsors, 50% and also Europe and Asia. Maybe a bit more details in terms of cap rates and how you are seeing any preference? Lily Ler: I think now with the current interest rate environment, where the rate seems to be easing off, it is something -- it is a development, which will, I guess, help in terms of the acquisition cases. I think at least in terms of the yield spread that can start to make sense or make better sense for some of the projects that we are looking. So I think in more recent time, we have been seeing transactions that is coming up from the Europe, from the Japan and I think even from the U.S. for that matter. I think for us, it is very -- we do recognize that it is something that we want to -- that we will want to keep on pursuing in terms of the acquisition because at the end of the day, now that we have divested a bit of the -- relatively significant portfolio from the Singapore side, it is something that we will need to be able to replace at least if not part of the income that has been lost. So that is something that the team will have to continue to work on. So I think if you look in terms of the numbers or that, I don't think the numbers very, very far out from what you're seeing in the market. So Japan, you typically will still be looking at around 4%, sometimes maybe a bit sub-4%. But I think the interest rate side, I think there is still some -- I'll say that the increase doesn't seems to be so coming in so strongly. So I think in terms of the yield spread, it still quite makes sense. So I think we probably can be looking at a yield spread of around, say, 1.5% to 2% type. And you'll probably see a similar type of yield spread across the other regions as well. So basically, when your cap rate is there, your cost of funds tends to follow it as well. M. Khi: And in terms of timing, how should we think about timing? Is there a time or target for acquisitions? Lily Ler: In terms of what, sorry? M. Khi: Sorry, timing of acquisitions? Lily Ler: Well, I guess the thing with external acquisition is you either get it or you don't get it, right? So we have evaluated. We have tried -- we have done some submissions, et cetera. So I think we hope that we're able to get something quite soon as well. But as I say, this is something that we will have to continuously be in the works. Of course, what would be easier within which will be the 50% stake that we can look at. So I think that is something that we are always in continuous discussion with the sponsor. If they are looking to sell, I think it's something that we want to look at it seriously as well. Mui Lian Cheng: Can we have [indiscernible] to ask the next question. Unknown Analyst: Can I ask about the next $500 million to $600 million of divestment? Is that something that we can expect over the next 6 to 12 months? And also, is this sufficient to fund for your acquisition? Or are you also open to equity fundraising? Lily Ler: Okay. Let's address the $500 million to $600 million. I think that is generally the part of the portfolio, which we think that we want to do a recycling. As for the timing in terms of $500 million to $600 million, it is not it's not small, okay? So I think if you look at the U.S. trending so far, those properties that we have been selling are generally on individual basis relatively small, right? But this -- I think we do expect that perhaps we hope that for this financial year, we can do about $100 million to $200 million, right? But to fully divest the entire $500 million to $600 million, I think it will probably take some time. 12 years might be a bit too much. 12 months might be a bit too short for us. So you'll probably take, say, maybe about 1 or 2 years or so. Unknown Analyst: Funding for acquisition? Lily Ler: Sorry. So whether we will consider EFR, of course, it's never a case of I must do a divestment before I do an acquisition, right? It very much depends on the attributes of the projects. And if the market is conducive, we would want to do a bit of equity fundraising. That is that can basically help us in terms of managing our balance sheet as well. So I think it will also depend on the sizing of the -- the size of these acquisition targets. Unknown Analyst: Okay. Got it. Second question is on debt hedging. Can you explain why is it at 90% currently? And what's the comfortable level for debt hedging? Geng Foong Khoo: We pay down loans with the divestment proceeds. So what we have done is, of course, we paid down the unhedged portion. So that brings our interest rate hedge ratio to close to 93%. But we do have IRS coming due remaining financial year. So by March, we'll see this closer to about 80% back to the normal level. Unknown Analyst: And the target is to maintain it at 80%. Geng Foong Khoo: By year-end, it will be 80%. But of course, I mean, but over the next few years, we'll see the interest rate environment and recalibrate the hedge ratio. Mui Lian Cheng: Do we have Derek from Morgan Stanley to ask the next question? Jian Hua Chang: Can you hear me now? Mui Lian Cheng: We can hear you. Jian Hua Chang: All right. Perfect. I just want to ask on the upcoming lease expiry in FY '27 for U.S., how much is U.S. account for FY '27? And of that, how much is the AT&T lease? Lily Ler: Okay. So you're talking about FY '26-'27, right? Jian Hua Chang: Yes. Lily Ler: In total, if you look at the total portfolio, it's 19.2%. Specifically for North America, that would be about 5.5%. Of course, the majority will be for San Diego. I think San Diego generally contributes about 2.4%. Jian Hua Chang: 2.4%. Geng Foong Khoo: 2.5%. Jian Hua Chang: Sorry, 2.4%. Geng Foong Khoo: 2.5%. Jian Hua Chang: 2.5%, 2.5%. Okay. So 2.5%, that one is more -- that one visibility is much lower, but the remaining 3 percentage points that shouldn't be an issue? Lily Ler: I think it's something that we are continuously looking at. That's why I think if you look at some of the leases that we have signed this quarter or to date, some of these are actually pertaining to the '26, '27. So we would be able to -- I would say, the significant lease is actually more on the San Diego one. Jian Hua Chang: Understood. The ones that you signed, which also pertains to FY '27, those came at reversion of 3%, right? Lily Ler: Weighted average 3%, yes. I think in terms of the range, which is a wider range. So you're talking about the low 2% [ of ] 10%. So it's about 2% to 10%. Jian Hua Chang: 2% to 10%. Okay. And just on, I guess, San Jose, is there any updates on your power studies over there? Lily Ler: The power study has been done. We understand that the current facilities can take up to 7 megawatts, although I think previously, it was running at about 3 megawatts, right. if we want to bring the facilities up to a 20 megawatt, it is possible, but I think it will -- means that you need to put in the power supply -- the power supplier will need to put in additional CapEx to bring -- I think they need to build a new substation and put the new cabling through. So there will be cost involved in getting the 20 megawatts. And of course, that also means that it will take some time. Jian Hua Chang: So are you angling towards just going ahead with 7 megawatts without having to build power station? And how soon would you expect the lease-up of that asset? Lily Ler: Yes. So I think with this, what we have actually done is we wanted to -- with the power study in Japan, we wanted to actually sell the properties. I think the response is not as expected as what we expected. We do note that there is quite a number of requirements, those that come to look at it, the requirements tends to be more for the immediate power. So I think some of them are not prepared to wait 3, 4 years for the additional powers to come in. So I think this is something that we will have to continue to engage the prospect. Jian Hua Chang: Okay. So there's no timing per se that you can guide for at this point in time? Lily Ler: I think we are currently in the progress of actually trying to reach out to the prospect and maybe also to expand the marketing program. Jian Hua Chang: Okay. Understood. And are there any other power studies for other assets or it's just San Jose for now? Lily Ler: We have done one for Horton. And I would say that it is quite positive, right? So we are able to bring in much higher power as compared to San Jose, right? So I think that Horton is currently still leased. The lease will end probably next financial year. So that's something that we're also talking about talking to a tenant about the re-leasing -- sorry, the renewal of it. Jian Hua Chang: This is the -- this is in FY '27? Lily Ler: This is in FY '26, '27, the next financial year. Jian Hua Chang: How much does it account for that 5.5% for U.S., the Horton one? Lily Ler: I think it's about 1.2%. Jian Hua Chang: 1.2% Okay. Okay. So you're in the process of renewal and if that doesn't come through, you would use the power studies and increase the IT capacity for the [Technical Difficulty]. Mui Lian Cheng: Derek from DBS has the next question. Derek Tan: Can you hear me? Just a few questions from me. First one is on your rent reversion that you achieved for America, right? I'm just curious whether the leases were likely renewal or backfilling. I just want to get a sense whether there's possible improvements in occupancy. Lily Ler: Those -- the rental reversion we talked about is only for the [Technical Difficulty]. So we're talking about backfilling as in us trying to fill up additional empty spaces. I think just now I mentioned out of the 184,000 square feet that we have signed to date, about 23% are actually, I would say, backfilling of empty units. So yes, you'll see some contributions towards the occupancy. But I think we will also [Technical Difficulty]. Derek Tan: Then my next question is on your comments on acquisition, right? You're mentioning that you are scanning -- you're potentially divesting. But if you look at, let's say, opportunities that you're keen to execute, right, what -- how will you rank the 50% stake will be ranked the highest in our view? Lily Ler: Well, I think it's a difficult question. Derek Tan: Easy as I know, but... Lily Ler: [indiscernible] question I ask Peter to address, okay? Che Heng Tan: Yes. I mean, what Lily mentioned earlier, the 50% stake, those are very good properties and a good portfolio add-on to improve our quality of our portfolio. But we also -- we are also seeing a lot of other decent opportunity that is coming on our table. So we will have to assess it, but it kind of at least give us some leeway to choose, which is the assets or which are the portfolio that we wanted to add on to MIT. Lily Ler: It's not a very easy decision, I guess. Che Heng Tan: To add on is like [indiscernible] we have to choose. Lily Ler: I guess if we are able to get in other [ draw free ], it will also help in terms of the diversification for the portfolio, right? Notwithstanding that, the acquisition of the 50% stake will also increase our exposure to the hyperscalers. So I think that is something we have to evaluate when the transaction comes so forth. Derek Tan: Okay. Okay. Got it. But you're saying that you're also looking for Asia and Europe, anything that you believe is very -- that will rank quite soon because I'm just thinking about it from a new spread, right? I mean, Europe and Asia will be higher. Lily Ler: I think there is quite a number of transaction that potentially can be coming out. So that will be something that we'll be quite keen to pursue. So -- and you're right. I think in terms of the U.S. spread, maybe initial might be similar, but I think the difference also lies in terms of the built-in escalation, right? So I think typically, if you look at Europe, you'll be around 2% to 3%, which is quite similar too. I think Japan, generally, we are seeing some between the 1% to 2%. So that's something that we have to take into consideration as well. Of course, transactions varies from one another. So it really depends on what is the attributes, so. Mui Lian Cheng: We have Rachel from Macquarie to ask the next question. Lih Rui Tan: Maybe my first question is on the interest cost. I think at the start of the year, there was like $597 million of IRS that's due this year. And then now there's $600 million due this year and next year. Can you give us a breakdown in terms of how much has already lapsed and has been included in the interest cost? And then how much are we expecting the rest of this year? And how much are we expecting next year? Geng Foong Khoo: Thanks, Rachel. So okay, it's a bit difficult to -- because we do like some of the earlier renewal of -- mention of the hedges. So early this year, we have about close to $600 million IRS, right, coming due this financial year. But of course, all these were progressively due over this financial year. But having said that, whenever interest rate [Technical Difficulty] slightly, we will try to lock in a bit. So to date, we have locked in about maybe about $200 million IRS. So we still have about $400 million to go. But having said that, like I mentioned earlier, our hedge ratio is quite high. So we will -- this $400 million floating rate and then so that the hedge ratio will be about 80%. But net-net per annum impact, if you look at it, per annum impact all these replacement hedges for IRS is due this financial year, [ NIM ] is about $9 million to $11 million, but most of these are in U.S. dollar. onshore. So we have a bit of tax shield there. So net of the tax shield may be about $7 million, $8 million. And so you see the full year impact probably next year. This year, maybe half year impact. Lih Rui Tan: So meaning the net impact, $7 million, $8 million this year is half of that the impact and then next year will flow through. Geng Foong Khoo: Yes. Lih Rui Tan: Okay. And then the remaining [ 400 ] hedges that is expiring this year, you will drop it off. But next year, is there any more IRS? Geng Foong Khoo: Yes. So like I mentioned earlier, we have another $600 million IRS coming due next year. Similarly, we will see impact from these replacement hedges. But having said that, the average interest rate for those IRS coming due next year will be kind of slightly higher than this year's IRS due. So we'll see some impact, but not as much as this year. Lih Rui Tan: So -- okay, sorry, the next year one is also $600 million. Yes. So the $600 million this year and next year, $600 million, roughly. Okay. Okay. Then my next question is in terms of the San Jose, if I were to follow up, now that the tenant, I think you mentioned that the tenant want a higher power, right, but you are still talking to the tenant. So any intention of you putting in CapEx now that you're talking to a tenant? Or you will still walk away from putting in additional CapEx? And are you able to sell these assets? Che Heng Tan: Yes. I mean, just really to clarify, were you referring to San Jose or the one that we mentioned about, we're talking to existing tenant, which is Horton? Lih Rui Tan: No, no, the San Jose one. Che Heng Tan: So San Jose, the tenant have vacated earlier already, but we did complete the power study. So we are now just exploring whether with potential prospects to divest the property essentially. Lih Rui Tan: Okay. I see. So okay, right, to divest the property completely, right, with potential tenants, okay. Okay. Got it. Yes. And then maybe just squeeze in one. I remember in terms of acquisitions last quarter; you were actually more positive on like EU in terms of acquisition. But somehow rather this quarter seems the narrative seems to have changed a little bit. Can I just understand, has something changed along the way? Lily Ler: No. I'm still keen on Europe. I think at the end of the day, we do recognize that it will be good to have Europe, which is one of the -- which is one of the largest data center market globally. So Europe is definitely something that's on our radar. Similarly for Asia as well. I think in more recent times, we are -- I would say, in more recent times, we are seeing a little bit more transaction coming out from Japan. I think Europe, there is a few. So no, our radar is still on these 3 -- on Europe, Asia and potentially the 50% stake. Lih Rui Tan: Okay. Got it. Yes. And are you -- do you still intend to acquire bigger data centers in terms of the size? Che Heng Tan: I think in terms of the size, of course, we have done a range of transactions from $100-plus million, $500 million to about, say, $1-plus billion. So the range remains similar. Of course, considering where we are, it will be very hard for us to do a 1 gigawatt or 100-megawatt type of data center, but probably $1 billion-ish or so or from $100-plus million to $1 billion-ish remains on our radar. Mui Lian Cheng: We have from [ Yew Wong from CLSA ] to ask the next question. Unknown Analyst: I just have one question focusing on the 50% balance from the sponsor. Can you share more details about this portfolio in terms of performance, right? So if we look at your U.S. data center portfolio has been trending down over the past few years. Was -- does the 50% mirror similar trends? And also, secondly, what is the NPI margin as well for -- do you see the similar NPI margin decompression trend that you have with your existing portfolio? And how much of the 50% balance, right, has exposure to hyperscaler and also like megawatt capacity? Anything that you can share? And lastly, does the valuation of the portfolio, right? Is the cap rate similar to your existing cap rate of your U.S. data center portfolio? Lily Ler: Okay. For the 50% stake, that portfolio, a large part of it, I would say, about 60% of it is actually the hyperscaler that you see here. So the balance of it, most of them are colo providers, right? I think the issue that we are seeing with some of -- with our current portfolio is more of the facilities that were previously occupied by the enterprise user. So I think I mentioned previously before that when it comes to enterprise user, they are fixed in terms of the location, they are fixed in terms of how they allocate the space and how they design, the data centers fit-out, et cetera, may not be as efficient as what a data center operator was. So that kind of makes the re-leasing a little bit more difficult, right? But you don't have that in the 50% stake portfolio. Unknown Analyst: So the margins will be better as well and the occupancy will be arguably higher? Che Heng Tan: Okay. I think from a margin perspective, because they do have triple net leases and gross leases and so on. So ultimately, we will probably be looking at very similar cap rate currently about 5.5% to 6%. And I think in terms of -- sorry, your second question is the occupancy, yes. So for this 50% portfolio, the occupancies are generally pretty very strong. So we have always seen it as more than 90-plus percent currently and going forward. Unknown Analyst: Okay. So it did not really come down to the 80s, mid-80s as seen in your portfolio? Che Heng Tan: Not yet. Yes. I think… Unknown Analyst: not yet. Or is it -- you don't expect it to come down? Che Heng Tan: No, we think that it's probably quite pretty resilient or you will be more than -- you will be more [indiscernible]. Lily Ler: Yes. And this is actually locked in for quite long term as well. I think maybe just for this portfolio, if you recall, in one of the quarters, we [ said ] that we have a tenant who has vacated one of the buildings in Tampe is that. So I think that one, we are in the progress of backfilling it. We think that there shouldn't be any problem. Unknown Analyst: Okay. Okay. Yes. And any idea on like power capacity? Che Heng Tan: Yes. So I mean, for the 3 hyperscale data centers that we have in Northern Virginia, those [ carry ] between about 60 to 70 megawatts. And then the rest would be spread. Each asset is probably about 3 to 4 average. So total -- but the 3 to 4 are mainly our power shell assets. So -- but in terms of IT load, you're talking about, including the Northern Virginia ones, probably about 90 to 100 megawatt. Unknown Analyst: Okay. So total will be -- you're talking about the 50% that is from the sponsor, right? Che Heng Tan: Yes, yes, correct, correct. But all is on the entire 100 all the buildings -- is on the building, it's not proportionate. Lily Ler: Maybe just to add, so for the [ MRODCT ] portfolio, right, there's 2 parts, the power shell and the data hyperscale data center. So the 3 data hyperscale data centers, they are actually located in Northern Virginia, a very tight market at the moment. For the [indiscernible] data centers, right, actually, the WALE are fairly long. They are looking at maybe around 7 to 9 years. So for this particular portfolio, right, actually, we see trending maybe above 95%, 100% is about 94%. Unknown Analyst: And then -- and sorry, slip in one more question. So if you were to fund it using U.S. debt, right, what's the current debt that you can get in the market today? Geng Foong Khoo: For USD today, maybe about all in U.S. dollar funding, maybe about 4.4%, 4.6%. Mui Lian Cheng: We have Jonathan from UOB Kay Hain to ask the next question. Jonathan Koh: My first question relates to divestment. You mentioned you will focus on North America. And the size you indicated is quite large, $500 million to $600 million. Can I ask if you are like looking at like divesting a basket of data center in North America that will help you achieve that sizable goal? Are you looking at selling a few of them in a portfolio. Is that what you're looking at? Second question relates to your guidance of cost of debt going higher to 3.3% to 3.4% for FY '27. What's your assumption in terms of rate cut going forward for -- to get that 3.3% to 3.4%. And does that include or doesn't include the JV, the interest rate that you have mentioned? Lily Ler: Okay. I think in terms of the divestment portfolio; I think the approach is something that is not fixed. It doesn't mean that I will just group every one up because the moment you group everyone up, it becomes pretty sizable. So it may not be that easy to sell. And I think because the portfolio is actually quite spread out in terms of the location, et cetera, so depending on the individual local situation, sometimes it's better for us to just sell it as asset by asset or we also may look at bundling up some of the assets together as a portfolio to sell. So the approach that we are taking is not a very -- it's not something that is fixed at. I'll just package everything and go, right? So given the different attributes and the different local situation, demand and supply situation in the market, we will want to take the approach that can give us the best value. Jonathan Koh: Okay. So not cast in stone... Che Heng Tan: Yes. Maybe to add on, we do have -- okay, I won't say it's cast in stone, but we do have really identified how do we want to divest all those assets. Some of them are single asset transactions, some of them are on a portfolio basis. So you'll see a mixed bag. It won't be like, say, we want to sell 10 properties for $600 million or so. Geng Foong Khoo: Okay. So on the interest rate for FY '26-'27, the guidance 3.3% to 3.4%. Basically, we have assumed that the whole 600 million IRS coming due next year will be refinanced with, let's say, a 5-year USD [Technical Difficulty] about 3.4%, 3.5%. So as you're aware, we cut the base rate. So now it's around 3.75% to 4% range. So if because various banks have various expectation or forecast for next financial year -- for next year. So if the floating rate come down to around 3%, we may be able to so-called adjust that hedge ratio and accordingly, we price this at a lower level [Technical Difficulty]. And yes -- so just to clarify, all our capital management positions include our JV. Jonathan Koh: Okay. So you do factor in rate cuts in that forecast. Geng Foong Khoo: No. We have not factored in so-called the rate cut. We have assumed this 5-year pricing, a 5-year interest rate swap today instead of floating rate. Jonathan Koh: Okay. That is the rate today that you get. Geng Foong Khoo: For 5-year interest rate swap. Mui Lian Cheng: We have Vijay to ask the last question. Vijay Natarajan: A couple of questions from me. Firstly, in terms of the operating costs, I think operating costs for this quarter seems to have gone up a bit because of maintenance and utilities. Are there any one-offs? And moving forward, what should we expect in terms of margins? Geng Foong Khoo: I think in the set of numbers for this quarter, we do have some training contracts, which was renewed. So that one, we do see some inflationary increase in terms of the contract price. So that kind of explained it. But I think we basically I would say, tranche out our contracts. So we don't renew every one at one go, right? So the effect will be more muted that way. But I think in terms of the margin, the NPI margin, we should expect it to be somewhere similar to what we have this quarter. Vijay Natarajan: My second question is in terms of potential portfolio, I mean, possibly if you add on U.S. assets and Europe assets, I think over time, your Singapore exposure is going to go less and less below 40% or closer to the mid-30s, et cetera. Are you comfortable with that because I don't see any pipeline also in Singapore? Lily Ler: I think we would love to be able to add on more to Singapore. Our -- while we are doing a lot of acquisitions in terms of the data center global Singapore remains our home ground, and that will still be one of the focus. The only thing is at this point, acquisitions opportunities are actually quite limited. So I think if you look at it in terms of, say, data center in Singapore, the market is very tight. So we would love to be able to add something on. But it is also very limited in the sense that the government has been -- is putting on quite a bit of control in terms of the power acquisition -- sorry, the power allocation, right? So I think -- and in order for us to apply for all these power allocation, there are certain criteria that needs to be met. And some of these actually has to be -- it's more -- is something which an operator will be able to achieve, like you need to have a PUE of at least 1.3x, et cetera. So we are -- it is not -- the opportunities for us to do the acquisition in Singapore is not easy. And of course, if you look at other industrial properties that we see in Singapore, that continues to be something that we will be keen to look at and we will continue to look at. The only issue is when you look at the Singapore industrial property, a lot of them comes with the short land tenure. So that proves to be a bit something that can be -- well, I think that makes our decision much more harder because the moment you buy, say, 25 years underlying lease, in 5 years' time, you start to see the valuation of that property dropping simply because of the shortening land tenure. So that is something that we are also quite careful about, right? Of course, what we can do in terms of the Singapore properties is that we continue to look out for opportunities where we can do, say, build-to-suit projects, so getting land allocations from the governments together with the tenant that they like, right? Or we can also look at redeveloping the existing properties that we have on hand. I mean, if someone comes along, happy for us to take up some of the space if we were to redevelop, that can actually be a potential trigger for us to go to the government and see if they are able to extend the underlying land lease. So these are some of the things, which we hope that we can execute, and we will continue to scan the market for such opportunities. Vijay Natarajan: Got it. Just one last question, if I can. Can you give some color in terms of business park demand and Hi-Tech demand in the Singapore market at this point of time, which still seems a bit soft looking at the reversion in your portfolio? Lily Ler: Yes. I think Hi-Tech space and business park space are definitely still a weaker link at this point of time, and we have been seeing this for the past few quarters. Generally, I think when we look at the demand that is coming through there continues to be demand. So it's not a case of totally nobody even wants to look at it. There continues to be demand, except that the demands are not for the bigger space. So this tends to be the smaller areas. So if you take, for example, our development at Kallang Way, we started off [Technical Difficulty] redevelopment, we started off hoping that we are able to lease up floor by floor, which is relatively huge floor plate, right? But the demand aren't' really there. So we actually start to cut them out into smaller units, and that is where we start to see a bit more traction. So I think if you track our progression so far, last quarter, we managed to improve the committed occupancy by 3 percentage points. This quarter, 1 percentage point. So I think the -- I would say the transactions continues to be there. We are still continuing to be able to cross some of these inquiries into contracts. So this will be more for the smaller space. And for business park, I think we also know that there is quite a lot of competition in the vicinity. If you -- right now, we have already -- we have -- we had 3 business parks. Now -- and we divested 2. So I'm just left with the one in Changi Business Park. But if you look at Changi Business Park, specifically for our building, while the business park demand may not be so good, we have been able to hold up to the occupancy rate for Changi Business Park pretty well. right? Right now, I think you are looking at about 83%, 85% occupancy, right? If you look at some of the buildings in the vicinity, similar buildings in the vicinity, the occupancy is definitely not there. So I think that is also the reason why we want to make sure that we are able to defend that. And I think that was also the point that I made where we decide that for a tenant, where you have a slightly bigger size unit, okay, we are prepared to go down a bit just to defend the occupancy. I think the rest of the renewals that possibly can be coming up for the Changi Business Park smaller floor units. So that is something that we think we still can hold. Mui Lian Cheng: Maybe we can have Donald to ask the last question and end the session. Donald, are you there? Donald Chua: Can you hear me? Okay. Just a couple of quick clarifications. First is on the interest rate question. Do you mentioned -- so if U.S. rates -- swap rates come down by around 50 basis points, you mentioned about 3%, you can -- are you able to -- you can get some savings? Would that mean that your WACC is likely to come down if we -- if U.S. rates come off by 50 basis points in FY '27. Geng Foong Khoo: Yes. So for next [indiscernible] I think I want to like clarify that when Fed cut rates is on the floating. When we look at the interest rate swaps replacement, we look at the long-term rates, the 5-year long-term rates, which is today maybe 3.5%, right? So when they cut it, it doesn't mean that your 5-year rate will be lower? So… Donald Chua: Sure. So maybe put it another way, at current rates, you're expecting your interest cost -- all-in interest cost to go up in FY '27. By how much must rates come down for you to see your all-in interest costs come down? Yes. Geng Foong Khoo: Let's put it the other way around. If let's say, this $600 million now, I assume 3.5%, right? But in -- come next year, if the floating rate for U.S. dollar is 3%, we have the loans hedged. So I see that for [Technical Difficulty] 50 bps on that $600 million. Donald Chua: Sorry, you broke up a little bit. So if floating rate gone up by to 3%, you will see a neutral level. Is that what to take away from that? Geng Foong Khoo: You will still see some impact because all the interest rates were locked in when it was quite low, right? So average maybe 2%, 2.3%. So you still see why you have a bit of savings. Donald Chua: And then the second question about the MRO DCT portfolio. Any indication of what's the valuation and the ticket size at this point? Che Heng Tan: [ SGD 1 billion ]. Donald Chua: SGD 1 billion for the 50% stake, is it? Che Heng Tan: Right. Donald Chua: Okay. And is there any under-renting in the colo leases or hyperscale leases at this point? Che Heng Tan: Under-renting I wouldn't say it's under-rented [indiscernible]. Donald Chua: So pretty, quite near -- pretty much at market. Che Heng Tan: Yes, that's correct. Mui Lian Cheng: [Technical Difficulty]. If you have any questions, please reach out to us. Thank you.
Richard Cathcart: Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the quarter ended September 30, 2025. Thank you for joining us. I'm Richard Cathcart, MercadoLibre's Investor Relations Officer. Today, we will share our quarterly highlights on video, after which we'll begin our live Q&A session with our management team. Before we go on to discuss our results for the third quarter of 2025, I remind you that management may make or refer to, and this presentation may contain forward-looking statements and non-GAAP measures. So please refer to the disclaimer on screen, which will also be available in our earnings materials on our Investor Relations website. Please note that this call is being recorded and a replay will be made available on our IR website as well. Our quarterly product updates video will now be released after earnings instead of alongside our conference call. So watch out for this coming into your inboxes in the weeks after our results disclosure. With that, let's begin with a short message from our CFO. Martin de Los Santos: Hello, everyone. This quarter, we continue to invest to capture the immense growth opportunities that are ahead of us e-commerce and fintech. We are exceptionally well positioned to drive financial inclusion, the offline to online retail shift in Latin America. Revenues grew by 39% year-on-year, marking the 27th consecutive quarter of growth above 30%. Our consistent top line growth comes as a result of the investments we have made across our ecosystem. The recent reduction in the free shipping threshold in Brazil has already delivered strong results with both GMV and items sold accelerating in the quarter. We also saw a strong growth in buyers with improved conversion rates, retention and frequency of purchase. Seller's are also benefiting from the increase in demand of the lower threshold is generating. More sellers are coming to our platform and the number of listings has increased sharply in the BRL 19 to BRL 79 price range. Higher transaction volumes helped us reduce unit shipping costs in Brazil by 8%, with slow deliveries enabling us to leverage on the unused capacity. Brand preference scores reached new record highs across the region, helped by our marketing investments and preshipment policies. We had a great quarter in Mexico with GMV growth accelerating and unit shipping costs in fulfillment continue to fall. Mercado Pago had a stellar quarter. Monthly active users growth accelerated as our NPS hit record highs in Brazil. This is the result of continued efforts to deliver the best value proposition to our users through UX improvements, our credit card and remunerated account products. This strong growth in asset under management and credit portfolio reflect the potential of Mercado Pago. Our credit card, which plays a key role in NPS and principality is growing very rapidly, driven by higher users and share of wallet. We have grown our loan portfolio without compromising credit quality, all-time low first pay defaults and more credit cards are reaching maturity. In Argentina, growth of GMV, buyers and TPV remained resilient in Q3, but trends slowed through the quarter due to the challenging macro backdrop. This impacts not only growth but also pressures our EBIT margin. Despite the headwind Argentina continues to be a very profitable market with strong long-term growth perspective. Operating income of USD 724 million, grew by 30% year-on-year. This demonstrates our ability to balance growth investments and profitability and the power of scale, which should continue to play in our favor. Our strategic investments in free shipping, logistics, 1P and credit card continued to deliver strong top line growth while putting some margin pressure. At the same time, this growth has enabled us to scale key OpEx lines such as product development and G&A expenses. We will continue to invest with discipline, focusing on the long-term potential and scale of our ecosystem. Thank you for your continued support. We will now move on to Q&A. Operator: [Operator Instructions] And today's first question comes from Andrew Ruben with Morgan Stanley. Andrew Ruben: So maybe a question on Argentina, you cited some macro challenges on GMV, TPV, higher funding costs. So I'm curious to understand first how these items evolved over the course of the quarter? And then second, on a related note, we know you've been through political cycles, but I'm curious following Sunday's election to hear your latest views on the Argentina economic outlook. And how this feeds into your plans for growth investments in the country, fulfillment centers, credit cards or otherwise. Martin de Los Santos: Andrew, it's Martin here. Thank you for your question. Yes, as you know, Argentina continues to be a very important market for us, not only because of the size of the opportunity, but because of the leadership position that we have in the country. So we, as always, we remain much more focused on continuing to improve the value proposition. As we always said, more than macro, the important thing about our business is what we do with our users and our platform. So we continue to invest in Argentina. We opened the second fulfillment center this quarter. We launched the credit card. So we are optimistic about the prospects for Argentina in the long term for our business. In the first half of the year, as you know, we had a very strong -- we saw very strong growth in both commerce and fintech. And in Q3, due to macro instability related to the midterm elections, we saw some slowdown of growth and some increases in interest rates will affect the consumption and increased our funding cost. Having said that, despite macro, we saw solid growth in Argentina, revenues grew by 39% year-on-year in U.S. dollars, 97% in local currency, items also grew by 34%. We had a very tough comp last year. Our credit book, even though we took a more cautious stance, grew by 100% year-on-year, and we maintained very solid healthy portfolio and very solid metrics in terms of NPLs or bad debt. So we are used to managing volatility. I think this quarter as an example to that. And then looking ahead, we think that hopefully some of the volatility will go away after the results of the elections. I will continue to be very optimistic in Argentina for the long term. It continues to be a very profitable market with a lot of growth potential for us in the future. Operator: Our next question today comes from Irma Sgarz with Goldman Sachs. Irma Sgarz: Can you talk a bit about the impressive growth in the active user base that you had. When you look at the 6 million to 7 million new quarterly active users that you added from the second to the third quarter, can you break down increase by brand-new users versus those that were previously active users, but perhaps not at each and every quarter and that just increase this frequency? And what are the demographics of the new users you're attracting? Is there -- is there -- potentially -- and I'm asking this because if there's a potential risk of those new users being a little bit more promotion focused so that it might churn if you were to pull back on any measures around couponing or marketing spend. And perhaps in that context, if you can talk about how we should think about marketing spend as we progress into next year, and whether we can come back to some degree of dilution to the investments that you're making there right now. Ariel Szarfsztejn: Ariel here. Pleasure to hear you. So we had an amazing quarter in terms of our user base. We grew the total unique buyers in our platform, very, very fast this quarter, reaching the 75 million active buyers that you are referring to. Out of those, more or less 4 million were new buyers to the platform. And then the others, there were buyers that did buy at some point in MercadoLibre, we believe both the total number of buyers and the number of new users are -- is very healthy, and it's a great testament of everything we are doing in MercadoLibre by improving the value proposition, both in Brazil, where we are lowering the free shipping threshold, take rates and so on, which you know, but also in the other countries, we had a great quarter in Mexico. We had a great quarter in Chile, Colombia, Argentina, which Martin was referring to. So we are excited with everything that is happening with the vibrancy that we are generating in our platform and the engagement and frequency that we see from those users that we're bringing into the platform. Martin de Los Santos: And Irma, it's Martin here. In terms of marketing spending, I think if you look at this particular quarter, it was represented about 11% of revenues, which is in line with what we saw last quarter in Q2. As we mentioned last quarter, we were stepping up a little bit of investment in user acquisition in terms of performance plus our affiliate channel. We invested more in our affiliate channel, which grew by 4x year-on-year, this is the way to attract new segments of the population, in particular, younger people and has been a very effective way of bringing more volume to our platform. So I think going forward, will continue with a similar range of investment. And as we said in the past, we are acquiring users. We have a very sophisticated methodology to acquire users to make sure that those users that we bring are actually contributing to profitability and are adding to the volume sold on our ecosystem. So we're very confident that the level of investment is the right one to support the growth that we are delivering quarter after quarter. Operator: Our next question today comes from Bob Ford of Bank of America. Robert Ford: Congratulations on the quarter. Ariel, can you comment on merchant adherence to your recent relative value notice in Brazil, the implied changes to the search algorithm and the qualification for promotional support. . And as competitive dynamics intensify, particularly in Brazil, how should we be thinking about cost structure and ancillary revenue streams? Ariel Szarfsztejn: Bob, Ariel here. So let me touch on price monitoring and seller adherence. Let me first start saying that this short-term initiative that you are starting to test for a handful of months as we -- as our competition is also testing their own initiatives for the same period. So as we said consistently over time, we want to have the best possible value proposition for buyers and sellers in our platform. We want to present users the best speed, the best prices, the best payment alternatives available for them, and we want them to buy more. And when they buy more, they will generate more demand for our seller base. And we believe it's natural for us to put in our storefront, the items that do generate the best experience for the customers. And with that to generate higher sales for our consumers. And that's why we are introducing this system in order to make sure that our buyers always see the most competitive offering and the best experience generating items in the MercadoLibre platform. Of course, this initiative is coming alongside our record investment levels, meaning faster logistics, more free shipping, lower shipping charges, discounts, lots of promotions and lots of coupons that we're going to invest during our Black Friday campaign. So we expect adherence to be high because this is the real way to improve the proposal for buyers and for sellers. As you know, our on-site real estate and our ability to invest is limited by nature. And for that reason, is that we want to make sure we make the best use of those limited and available resources for the merchants who are providing and the items that are providing the best experience for our customers. So it's too early to discuss results of that one, but we think this simple system will generate the right proposal for our buyers and for our sellers as well. Operator: Our next question today comes from Marcelo Santos with JPMorgan. And it appears we're not receiving any audio there. Let me get to our next caller, and that will be Josh Beck with Raymond James. Josh Beck: Yes. I wanted to ask a little bit about the unit costs on the shipping side. I believe you said it was down 8% year-over-year. I assume a lot of this has to do with better utilization and particularly some of the slow shipping efforts that you have. I don't expect a specific answer, but I'm curious how much headroom you think you have on this utilization angle? And then related to that, how much are you investing in robotics and automation on more of a mid- to long-term opportunity? Martin de Los Santos: Josh, it's Martin here. Let me just first clarify that the number that we disclosed is the lowering of the cost of shipping in Brazil is 8% Q-on-Q. So that's a decrease in cost of shipping in local currency sequentially. And the reason for that is because as we mentioned, the extraordinary growth that we're seeing in volume is helping us dilute fixed costs of our logistic operations has also enabled us to use spare capacity and be more efficient in the way we run our operation, in addition to the things that we do on a day-to-day basis in terms of improving efficiencies. So I think that's, for the most part, the main explanation for the lowering of cost. There is some room to continue optimizing the low shipping method in the future, but that will take some more time. I think for the most part, the decrease in cost is related to scale. Ariel Szarfsztejn: Yes. Just to complement, Ariel here. So the decline in cost per shipment, 8% Q-over-Q in Brazil, it's a great result for us. Bear in mind that this is not only impacting slow shipments, but this is a decline of the total cost per shipment in a country in which we are operating and dealing with strong pressure from -- coming from the extra volume. We believe that unit shipping costs should trend downwards over time, although this might not be a straight line. So there will be future gains that we will be able to capture through productivity and process improvements, but we need to continue iterating adjusting our systems, implementing technology. So to the second part of your question, we are deploying robotics. We are deploying technology in the different warehouses, we are testing and learning with different technologies in different places. And we're optimistic. We see great results in productivity, both and put away in picking and packing every time we deploy some type of technology around the people that work in our warehouses. Operator: Our next question today comes from Craig Maurer with FT Partners. Craig Maurer: I wanted to ask on the profitability of the credit card business, specifically the cohorts from last year. I believe you said they had been approaching breakeven, but I wanted to understand if that could become a tailwind going into next year? Osvaldo Giménez: Craig. So what we have been consistently saying is that cohorts that are older than 2 years old are profitable, and that continues to be the case. So the profitability of the overall portfolio of credit cards in a given country depends mostly on the mix of cohorts we have. And -- but that continues to be the case that for cohorts of 2023 and older than those in Brazil, they are already profitable. Operator: Our next question today comes from Vinicius Pretto with Itaú BBA. Vinicius Pretto de Souza: We've been discussing a lot to trade-off between GMV growth and profitability in Brazil. And this quarter, we saw the first response with GMV accelerating significantly, but contribution margin was one of the lowest levels in the past couple of years. When we think about these margin levels, do you view the margin investment made so far as sufficient to achieve your aspirations in terms of growth and market share given the recent developments in terms of competition, would you be willing to go below these levels in terms of margins to accelerate market share gains? Martin de Los Santos: Hi Vinicius, it's Martin here. I think, first, when we talk about margins, let's put this in context of growth. I mean we are -- we see a huge opportunity to grow not only in commerce, but also in fintech. And as we have consistently said, the main priority for us is to make sure that we capture those growth opportunities that we have ahead of us, and we will continue to invest behind those opportunities as we have done in the past, right? Last year, you saw when we invested on credit card, it requires some margin compression -- resulted in margin compression. But now as Osvaldo mentioned, the credit card is starting to mature and that turns around. This quarter, we invested significantly on the lowering of free shipping. As you can see, we had very strong results related to that with not only GMV, but if you look at items sold in Brazil, it accelerated from 26%, last quarter to 42% this quarter. So very strong acceleration of items and volume, new users, more engagement, better conversion rate. We have all-time high NPS levels in Brazil because of this measure. So I think it's important to put that in context. We are not managing the business for short-term margin. We are managing for long-term value creation. And we think that if we continue to sustain the levels of growth that we are delivering, we are in the right track. As we said in the past, we are not going to hesitate to invest behind that even if we put some short-term margin pressure. But in the long term, we continue to be very optimistic about the margin profile of our business as we continue to scale the business and as some of the investments that we're making continue to mature, such as the case of the credit card and 1P investments and many other things that we're doing throughout the ecosystem. Operator: Our next question today comes from Trevor Young of Barclays. Trevor Young: Great. Just on NIMAL, should we expect the same seasonal dynamics to play out in the coming quarters, such that 4Q should be up sequentially before we step down again in 1Q? And then as we head into next year, should we assume NIMAL remains pressured as you ramp up credit card issuance in Argentina and face potentially the same higher funding costs that you flagged this quarter even as those older cohorts in other countries get more profitable. Osvaldo Giménez: Hi Trevor, let me tell you a little bit of what has happened lately with NIMAL. I would say that the -- what we have seen is that change in terms of mix basically. We saw a reduction in the last quarter of NIMAL, mostly coming from when you look at the overall credit market, and then I will double-click on credit card. But overall credit, what we saw was a reduction of NIMAL, coming mostly from Argentina and driven by the increase in funding cost we saw last quarter, which was significant because of some instability in the market. But I would say that is rather constrained to that in Argentina, pretty much everything else was working similarly to prior quarters. Now when it comes to credit cards, what we're seeing is Brazil is getting to a point that we have enough older cohorts that nearly 50% of the volume of cards we have issued and TPV is already profitable. And so it will depend on the speed at which we continue issuing cards in Brazil, but that is a country where we should see in the medium term, I would say, the overall credit cards becoming profitable. That is not yet the case in Mexico when we started significantly later and still we are issuing cards at a volume that is very significant compared to the legacy we have. And when we look at those cohorts that are 2, 3 years older are a smaller part of the overall portfolio. And yes, as we mature in Brazil and eventually in Mexico, we will be accelerating the issuance of cards in Argentina, where we're just starting. So definitely, we'll be investing there for the next several years. Martin de Los Santos: As to complement in terms of seasonality, it's typically a little bit of seasonality in Q4, which is a little bit better than Q1, is weaker for collection. But I would say, for the most part, the fluctuations that you've seen over the last several quarters is related to mix, as Osvaldo mentioned, not so much for seasonality. Operator: Thank you our next questions today comes from Deepak Mathivanan with Cantor Fitzgerald. John Halpert: This is Jack on for Deepak. Kind of sticking with the Argentina credit card topic. Can you just provide any like early engagement metrics on the new credit card launch there? Maybe how is the adoption curve compared to Brazil? Is there any reason to think that, that kind of 2 years to breakeven stat that you guys have called out would be any different in Argentina? And then lastly, kind of where are the penetration rates you're targeting over the next 12 to 18 months? Osvaldo Giménez: So I'd say it's still very early to tell. We only launched a credit card in Argentina towards the end of the quarter. So there is not yet enough information. It's too early to comment on its performance. We -- as we have said in the letter, we are very confident that this will be a successful product because we have a huge user base in Argentina, and they are very engaged with Mercado Pago. And on top of that, because Argentina is a country where most of the credit card, nearly all of the credit cards charge a monthly fee, and we don't. So we believe that, that's a huge plus for [ uncard ]. And also it has good offers in the MercadoLibre ecosystem for those reasons and on our current cost network. So for all of these reasons, we are encouraged and we are excited about the opportunity, but I'd say it's still very early to comment on results because it was like only for a couple of weeks during the quarter. And we cannot comment on -- we cannot give guidance on 12 or 18 months, but we are very bullish with the product. Operator: Our next question today comes from Neha Agarwala with HSBC. Neha Agarwala: On the fulfillment centers, you mentioned that there's been a big increase in the number of shipments, would you require to add more fulfillment centers than what you already had on the road map? And if you can give us a bit more color on the further investments that we can expect in the coming quarters in Brazil, especially? And my second question is on the credit side of the business. In Mexico, there's a lot of competition coming in. What are the early trends that you're seeing? Which products have been doing very well with the Mexican consumers? And what kind of asset quality are you seeing in Mexico specifically? Ariel Szarfsztejn: Neha, this is Ariel. So before jumping into the answer to your question, let me rewind a bit and make one small comment on an answer that I gave to Irma before. So total number of unique buyers in the marketplace this quarter was indeed 75 million, but new buyers was actually 7.8 million -- million people, sorry, new buyers was 7.8 million. I did bring up the number of something like 4, which is the number for Brazil, but total LatAm, new buyers was 7.8 million, sorry, guys, if I mixed it for you guys. So going back to the question on fulfillment. Indeed, we saw a 28% quarter-over-quarter increase in volume in Brazil, which naturally puts pressure in our network capacity. Still, we were ready to manage that. Of course, having part of the volume in the slow method does help us manage the volume flowing through the different parts of the value chain. So to -- specifically to your question, we did not open any new fulfillment center that was not planned. And as you probably know, it's not so easy to open any warehouse of this type and this size from 1 quarter to the other. So we are not changing the super short-term plans, we feel that we have the capacity that we need to deal with the volume that is coming. But of course, we are always reevaluating the mid- to long-term capacity that we need to deal with the volume that we're bringing. And as part of that ongoing evaluation, we will, for sure, build the required capacity as to deal with the volume that will create. As we said over and over, fulfillment is strategic having speed fast and reliable network turns to be strategic for us in order to continue serving our customers to increase their retention, to increase their NPS and we'll continue investing behind logistics as we need to serve our customer. Osvaldo Giménez: And then when it comes to credits in Mexico, I think that we are very encouraged by what we're seeing about, by the size of the opportunity, we believe that we have a few advantages. One is the strength of our ecosystem in Mexico which gives us a huge distribution channel and also a lot of insights and that lets us issue cards and issue credits with a very small customer acquisition cost. When we look at the market in general, we already -- including banks, we are already the second largest financial institution in terms of monthly active users. Already #1 in terms of monthly downloads. So we are seeing how we are gaining a lot of traction in the Mexican market, both in consumer credit and in credit cards. And if you recall, during the first part of this year, we decelerated a little bit the additions of credit cards, but we have been reaccelerating again, and we are encouraged by the results we are seeing. So I'd say I'll summarize that we believe we have a flywheel where MercadoLibre facilitates a lot of what we do with regards to credits in Mexico. Operator: Our next question today comes from Jamie Friedman with Susquehanna. James Friedman: I wanted to ask about principality. You have these interesting call-outs in the shareholder letter on Page 2. You show that there's an 11-point increase in Brazil and 2 points in Mexico. I'm just wondering, one, how you're defining principality. And two, are there any services that you currently don't offer that you may contemplate offering financial services in order to further escalate the principality or do you have the things that you need? Osvaldo Giménez: So, I would say that we are excited by the growth in principality, which you mentioned, mostly in Brazil, but to some degree also in Mexico. The way we measure or we try to estimate principalities with some principality, if at least 50% of the income of a given client passes through Mercado Pago. And this, in some cases, we're able to assess to surveys and in other cases, with open banking data. And I would say we have already put in place the 2 of the most important things. And those are yielding account and a strong trade offering. And we -- what we don't have yet is the ability to collect your salary in the Mercado Pago account, in the case of Mexico, this is because we are not yet a bank. We are in the process of obtaining a banking license and that is a requirement. And in the case of Brazil, some people collect salary in Mercado Pago, mostly through portability. But this still is fairly small, and we believe there's a large opportunity there. Operator: Our next question today comes from João Soares with Citi. Joao Pedro Soares: Hi Martin and Ariel, Osvaldo. I wanted to double-click on an earlier question, and I think is important. I mean you are in the midst of an investment cycle, but at the same time, you're also gaining -- you're achieving operating leverage, especially on the product and development lines. So just wanted to understand, I mean, are you currently satisfied with the investment level that you're making. Is there any -- are there any areas -- additional areas that you could think use additional resources or should we think about this continued operating leverage across certain OpEx lines. I mean I just wanted to understand where you are at, at the current stage of investment? Martin de Los Santos: Hi João, it's Martin again. Yes, I think obviously, as I mentioned before, we are extremely satisfied with the results of the investment that we did. We actually announced it last quarter, right? Remember, last quarter, we showed only 1 month of investment. Now we're seeing the full effect of investment in the full quarter. So we're very excited about the results. The impact on the market place is really enormous. We talked about volume growing, but also a number of sellers and items listed on the range of BRL 19 to BRL 79 are growing very rapidly as well. So the supply side is also benefiting from this. So we're extremely happy. And on top of that, as we mentioned, we lowered the shipping costs, but still, this is a longer-term process where we're going to optimize the slow shipping layer of our logistic network. So we are optimistic about the investments, the results that we're seeing. And then on top of that, we continue to make investments in other areas of the ecosystem. 1P, as we mentioned, I think, on the letter, grew very rapidly this quarter as well. It continues to improve profitability, but still requires investments. The credit card, as Osvaldo mentioned, is still is very profitable the other cohorts. However, we continue to invest, and we are launching it in Argentina. There are some smaller initiatives that we continue to invest. We're opening new fulfillment centers. We increased our capacity -- capacity by 41% year-on-year, that required investments as well. So I think a lot of moving parts on that front. On the flip side, we mentioned in the letter, we're going at 39% year-on-year. As I said, 27 consecutive quarters of growth above 30%. This is something that no other public company has delivered of this time frame at the scale that MercadoLibre is doing it. So that obviously is helping us dilute fixed costs and we saw this quarter strong dilution on G&A and product development. So when you put all that together, I think we're optimistic about the long-term margin trajectory for our company. As I said before, we are very much focused on continuing to deliver growth in both fintech and commerce, and we will make the investments that are required to capture that those growth opportunities. As we have done in the past, we will continue to do with discipline, but we'll continue to invest. Ariel Szarfsztejn: Just to reinforce Martin's point, Ariel here. So we have amazing growth higher frequency from our buyers, record conversion rates, record retention rates for new buyers and record retention rates for existing buyers. We have more new buyers, we had our record high NPS in Brazil. We have more live listings and more sellers than what we had before. So indeed to Martin's point, we are very encouraged by the impact that we see -- we are having -- and this gives us great optimism about the foundations we are building as we look to be the driving force between shifting physical retail into e-commerce. And at the end of the day, that's our goal, right? We want to -- we know that the opportunity ahead of us is huge we need to continue reducing frictions of buying online and bringing more people into our platform. And while we do that, we need to continue finding efficiencies in order to fund that process. But definitely, we are excited and encouraged and very positive with the results we had this quarter. Operator: Our next question today comes from Marvin Fong with BTIG. Marvin Fong: I'd like to start with a few developments in recent months. I think you announced a B2B initiative as well as a partnership with Casas Bahia. And I just wanted to see if you could help dimensionalize the potential impact for that, not necessarily to your business per se. I know you won't speak to that specifically, but just kind of frame the opportunity for us. And how we should be thinking about the ability to drive future GMV growth? And then secondly, on the credit card, just overall, I noticed that the average loan size has been growing. And I know that you have a risk discipline to kind of start with small loans. So even though you're growing the issuing of new cards still continues to rise. So I just wanted to understand better like how are you loosening up or extending more credit to your borrowers from the outset? Or are you still kind of maintaining the same levels of underwriting and credit quality as you have been. So I just want to understand what's driving that dynamic. Ariel Szarfsztejn: Marvin, Ariel here. So let me start touching on Casas Bahia. So this is an exciting opportunity for us. I mean, while our 1P business continues to perform extremely well, we grew 1% year-over-year on FX neutral. Our strategy with 1P has always been to fill the gaps in selection or price competitiveness that 3P sellers were unable to fill. And as many times I've said, I think, in this call, we are a 3P preferred companies. And Casas Bahia is a seller that is able to bring more selection competitive prices to a category where we are under-indexing in market share. So our penetration in the total market for heavy and bulky items, white goods, in particular, is definitely below our average market share. So we are excited, we think -- and by the way, Casas Bahia not only brings selection and prices, they also bring some expertise in dealing with the logistics of those complex items to ship. So we are excited. We think this is complementary to everything that we are doing, both in 1P and 3P, and we believe this is another opportunity to continue improving the 2 sides of our network. I think to B2B, this is a multibillion-dollar opportunity for the super long run. For now, we are making the first steps into it. It will be long. We need to learn, we need to adjust. But again, we think it's another way to serve our customers and our seller base. Osvaldo Giménez: And Marvin, with regards to the credit card, I would say that we are definitely maintaining the same underwriting discipline that we had in the past, whenever we saw that there were worsening of NPLs, we were more cautious as we were towards the end of last year, early this year in the case of Mexico. And then as we saw that we were able to improve our models and continue to grow with NPLs under control and continue to increase the number of cards we issue, but always maintaining the same repayment target. We were more willing to issue more cards and that has been the case. In this process throughout this time, not only have we created new generations of credit models in each of the markets, roughly twice a year. But also, we have been able to improve the technology we use which allows us to upsell customers more frequently. And therefore, when we start working with someone and if they pay us back according to plan, we are able to every month or every couple of months, being able to increase the line if we deem that to be appropriate. So I would say we are comfortable. We have been able to accelerate the issuance of cards, and we are comfortable that we are doing this, maintaining the underwriting discipline that we had. Operator: Our next question today comes from Kaio Prato with UBS. Kaio Penso Da Prato: I have a question on the payment business, please. Can you talk a little bit about the pace of growth of the acquiring TPV in the ecosystem and more specifically about Brazil. Because in the country -- in the industry, we are seeing which is lower growth, at least on price TPV. And looking to your numbers, it implied a significant market share gain, which potentially accelerated actually this quarter with growth of around 28% year-on-year. So just wonder if you can share with us the drivers behind that and how sustainable is it going forward? Osvaldo Giménez: Absolutely, Kaio. So I think that you're right. What we're seeing is that we are both accelerating and growing faster than the market in Brazil. If you recall, a couple of years ago, we decided to pretty much change all of our go-to-market strategy in Brazil with regards to in-store to POS, and we were relying a lot on third party. We started building more on old sales force. We started building more our direct-to-consumers -- direct to consumers, both via MercadoLibre and via our own Mercado Pago. And those resulted in acceleration that started, I would say, over a year ago and has remained growing faster than the market for some time now. We are comfortable with that. And sort of the same thing has been happening in online payments. We also see an acceleration, particularly when it comes to credit card acquiring. We were more selective towards the beginning of this year when it comes to Pix acquiring because in some cases, we were working with very, very thin margins, and we decided that some customers were not having those price points, but we're really focused on credit card, and we have been able to gain share. And one more thing I'd like to point out is that this has been also the case in all of the other top markets. This has been the case in Brazil, in Mexico, in Argentina and Chile. So we're really comfortable with how we have been able to gain share in all of these markets. Operator: Our next question comes from Marcelo Santos with JPMorgan. Marcelo Santos: My question is regarding the other countries where you had very strong metrics across the board GMV revenues, TPV margins, which just disclose a bit of the initiatives that you are doing in these markets? If this was like MediLED or market-led and what to expect going forward? Ariel Szarfsztejn: Marcelo, Ariel here. So yes, we are extremely satisfied with the performance of the other countries. Let me give you some colors on the consolidated numbers for the commerce side. So GMV growth in Chile accelerated for the third consecutive quarter, while Colombia growth picked up more than 10 percentage points Q-over-Q, both trends driven by successful items. So we are increasing market share in both markets, particularly in Chile, the gain of market share has been stronger. So I would say there is no silver bullet to explain what's happening over there. It's more fulfillment, better logistics, lots and lots of work in selection strong work in demand generation, promotional activity and so on. NPS is higher Q-over-Q in Chile as well. So we are very pleased with the performance we had because it shows that what we are building is a very solid way -- a very solid base in which we can continue to grow, to bring, again, off-line retail into online and to continue consolidating our leadership in each market. Osvaldo Giménez: Let me add to that, Ari. If you want, on the fintech side, the 1 country where we had to focus the most, the new country we have focused most over the last couple of years has been Chile. And really, we are seeing the results of that. Our user base, our monthly user base is growing at 75% year-over-year. The yield in account is growing a lot, too, and we see an acceleration in the number of products our clients are using. So we are very excited about the results we are seeing in Chile. There are products still to be launched there, but we are very encouraged by the results we already saw. Operator: Our next question today comes from Pedro Caravina with [ Exxon ]. Pedro Caravina: Congratulations on the results. If I may, I wanted to hear from you how you are thinking about OpenAI's recent move into e-commerce? The launch its browser and partner with players such as Shopify, Walmart, and I was wondering how you're seeing potential opportunities or threats here? And could there be something similar in South America? Ariel Szarfsztejn: Pedro, Ariel here. So before jumping into OpenAI, let me say that we are extremely excited about the potential of agentic AI to enhance discovery, service and productivity within our ecosystem. There are several examples of things that we are doing on that regard. We just launched our own seller assistant, which is a conversational tool that gives sellers personalized advice and recommendations on how to manage data activity in our platform. In fintech, as you probably know, we just launched our first AI assistant that can help our users with a wide range of tasks like making or scheduling money transfer through a conversational platform, asking for questions on the user's operation and so on. But this is the first step of many to come for Mercado Pago and for MercadoLibre. I think to the specifics of your question, the key message there is that we need to continue to focus ourselves in building the best agentic experience within our platform, and that will give us optionality on what to do next and how to move forward. I think it's early to make comments on OpenAI and their partnership with Etsy, Shopify, and so on. We need to understand how this will develop in the long run, what role agentic AI will play in the relationship with consumers. And eventually, decide if there's something different that we need to do for sure. We need to put the technology in place in order to have an agentic experience in MercadoLibre and in Mercado Pago in the near term. Operator: And our final question today comes from Geoffrey Elliott with Autonomous. Geoffrey Elliott: You've talked a lot about what you're doing in Brazilian e-com and how you're growing, you're picking up share. But can you talk a bit about the competitive environment? Do you think that your competitors are behaving rationally? Or do you see any signs of irrational competition in the market? Ariel Szarfsztejn: Geoffrey. How are you? So let me start by saying something that I've said before here in this call that Brazil has always been an intensely competitive market. And I think the reason for that is that it's very attractive, large population, 1 of the 10 largest economies in the world, e-commerce penetration is still well below the global standards or benchmarks from the U.K., U.S. or China. So over the last 26 years, we've built a business with a formidable value proposition for buyers, for sellers, and this has put us in a position of market leadership. Our own market share in e-commerce has tripled since 2014, it has doubled since the pandemic, but we are still very, very small when you compare our sales in the country with the total retail sales. So the position that we've built with record of NPLs, record and preference, record retention, record conversion. This is something about the strength of everything we've done. And we are very confident that we can successfully compete against the different players in Brazil in the exact same way that we've been competing with many of them over the last 26 years. I can't speak for other players in the market, but we do not believe that anything we're doing is irrational. Just look at the results we are seeing from the lower free shipping threshold. That is a very rational move that significantly strengthens our competitive position, our ability to bring people in the online world that were driving satisfaction. We're driving retention. So as long as we maintain the strategy that served us in the past, which is to be always focused on the user and not on our competitors. We are confident that we will be able to be the platform of choice -- of choice, sorry, for buyers and for sellers in the long run. Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Martin de los Santos for any closing remarks. Martin de Los Santos: Thank you all for joining the call today and for your questions. As you heard, we're very excited about the results of Q3, in particular, with the results of the strategic investment that we're making the lowering of the free shipping threshold in Brazil has enabled us to accelerate growth in the marketplace and to continue to gain market share, which, by the way, grew by double over the past 5 years. The investment that we're making on credit, the credit card specifically, as Osvaldo mentioned, is maturing and helping us with profitability in addition to principality, which is very important for our fintech initiatives. So these investments have enabled us to continue to deliver growth, we delivered 39% year-on-year growth. As I mentioned earlier, that marks the 27th consecutive quarter of above 30% year-on-year growth, which is something remarkable really at the size of MercadoLibre today. So we are very excited about that. And again, looking forward to getting in touch with you once again in February when we deliver Q4 results, in the meantime, the Investor Relations team is available for further questions. Once again, thank you very much for your interest and good night. Operator: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.
Operator: Good afternoon. Thank you for attending the Guardant Health Q3 2025 Earnings Call. My name is Cameron, and I'll be your moderator for today. [Operator Instructions] And I would now like to pass the conference over to your host, Zarak Khurshid with Guardant Health. You may proceed. Zarak Khurshid: Thank you. Earlier today, Guardant Health released financial results for the quarter ended September 30, 2025. Joining me today from Guardant are Helmy Eltoukhy, Co-CEO; AmirAli Talasaz, Co-CEO; and Mike Bell, Chief Financial Officer. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items, additional information regarding material risks and uncertainties as well as the non-GAAP financial reconciliation to most directly comparable GAAP financial measures are available in the press release Guardant issued today as well as in our 10-K and other filings with the SEC. Guardant disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events or otherwise, except as required by law. The information in this conference call is accurate only as of the live broadcast. With that, I would like to turn the call over to Helmy. Helmy Eltoukhy: Thanks Zarak. Good afternoon and thank you for joining our third quarter 2025 earnings call. Starting on Slide 3. Q3 was an exceptional quarter for Guardant with broad-based growth across our business. Oncology volumes grew 40% as year-over-year volume growth continued to accelerate driven by Guardant360 Liquid, Guardant360 Tissue, and Reveal. Our biopharma business grew nicely year over year with positive CDx momentum and screening volume accelerated with a sequential increase of 8,000 Shield tests. Importantly, screening has started to generate meaningful revenue tracking at an annual run rate of approximately $100 million roughly one year into the commercial launch of the FDA-approved product. Overall, we are very pleased with our performance this quarter delivering 39% year-over-year revenue growth and crossing over $1 billion in annualized revenue for the first time. Excluding screening, we reached a major milestone with the rest of the business becoming cash flow positive one quarter earlier than expected. Indeed, this quarter sets us up very well to deliver on the long-term plan that we laid out at our Investor Day last month. Lastly, we recently surpassed 1 million cumulative clinical patients tested by Guardant and as such we want to highlight one of these patients with a story that captures the profound impact our tests are having in everyday clinical practice. A 67-year-old man had gone unscreened for colorectal cancer for several years despite his physician offering colonoscopy or stool-based tests annually beginning in 2021. Each time the patient declined to be screened. In December 2024, the physician ordered a Shield blood test, and the patient agreed to complete the blood draw during the same visit. The result came back positive. When his physician explained that a positive Shield result required a follow-up colonoscopy, the patient agreed to have the procedure despite previously resisting. The colonoscopy was performed in January 2025 revealing colorectal cancer. The patient quickly began treatment, and at his most recent follow-up, he had successfully completed therapy and was doing well. This is a powerful example of how the Shield blood test can remove barriers to screening, provide a more pleasant and convenient option for patients, and ultimately improve outcomes. Now turning to top-line performance on Slide 4. Q3 revenue grew 39% year over year to $265 million with strong performance again across our oncology screening and biopharma and data businesses. Taking a closer look at our oncology business on Slide 5. Oncology revenue increased 31% to $184 million and oncology volumes increased 40% year over year to approximately 74,000 tests in the third quarter. Turning to Slide 6. We have seen a clear acceleration in volume since July of last year, following the introduction of Guardant360 Liquid on our Smart platform. Since then, we have launched 2 additional waves of applications, driving 5 consecutive quarters of accelerating volume growth and we look forward to future waves of Smart app introductions developed through the power of Infinity AI to help fuel future growth. In addition to Guardant360 Liquid, Guardant360 Tissue and Reveal volumes also experienced strong year-over-year growth. Moving on to Slide 7. As a reminder, our Infinity AI learning engine applies AI across our data treasury of over 1 million patient samples, including more than 350,000 epigenetic profiles across more than 100 tumor types to bring powerful insights and new products to market faster than ever. Infinity AI enables higher resolution mapping of tumor biology giving rise to not only entirely new products in the clinical business, but novel signatures for faster drug discovery relevant to our biopharma business and new commercial insights and decision support tools. Turning to Slide 8. To date, we’ve launched 15 groundbreaking Smart apps on Guardant360 Liquid with dozens more in development that we’ll roll out across Guardant360 Liquid, Tissue, and Reveal. Each new application builds towards what we see as a GPS for cancer care, guiding physicians with the right insights at every step of the patient journey. We believe these applications not only significantly expand the clinical utility of Guardant360 Liquid but further extend our technical leadership in the liquid CGP market. Looking more closely at some of the recent highlights within our oncology business on Slide 9. Guardant360 volume grew exceptionally with more than 30% year-over-year growth. Guardant360 Tissue also had a great quarter showing strong year-over-year acceleration following the major product upgrades released in the second quarter. Once again, Reveal contributed very nicely and continues to be our fastest-growing oncology product. In addition to the strong performance, we recently reached a major milestone with submission of our PMA application to the FDA for Guardant360 Liquid. This submission has the potential to streamline Guardant360 Liquid with a single flagship FDA-approved liquid biopsy for therapy selection, simplifying our portfolio, accelerating adoption, and further strengthening our leadership in this space. In addition, FDA approval would lay the foundation for ADLP designation which is an important mechanism for capturing the appropriate value for our expanded test offering in the future. We had a strong presence at ESMO 2025, with 15 abstracts spanning the cancer care continuum, from MRD detection and recurrence monitoring with studies such as PEGASUS to advanced stage tumor profiling and therapy response assessment. For Reveal, we’re making great progress with data generation and publications. We recently submitted our immuno-oncology therapy monitoring data package to MolDx to support Medicare reimbursement and submitted data from our chemotherapy monitoring study for publication. Turning to Slide 10 to take a closer look at our Reveal data pipeline. Over the last few months, we’ve made significant progress in MRD, generating and publishing compelling data across multiple cancer types. Earlier this year, we achieved Medicare coverage for CRC surveillance and have since submitted dossiers for breast surveillance as I just mentioned for immuno-oncology therapy monitoring. We plan to submit packages for chemotherapy and CDK4/6 inhibitor monitoring following those publications. Looking ahead, we have ongoing studies across more than 5 additional tumor types in both the adjuvant and surveillance settings. Together, this growing body of evidence will continue to strengthen the clinical utility and analytical validity of Reveal, supporting broader adoption in MRD. Turning now to Slide 11. I am proud of the progress we have made over the last few years in both driving demand and revenue growth across our portfolio. Looking ahead, we see multiple drivers across our oncology business that position us well for durable long-term growth. We will continue investing in commercial initiatives that make it easier for physicians to access our tests through portal enhancements, EMR integrations, and enhanced workflows. In our therapy selection business, transitioning to the Smart platform unlocks wave after wave of novel applications, many unique to Guardant that will help us differentiate and continue gaining market share. And in MRD, a redoubled commercial focus on Reveal supported by significantly lower COGS and Medicare coverage for CRC surveillance positions us for strong growth ahead. We’re also excited to introduce an Ultra-sensitive tissue-informed MRD assay that will complement our best-in-class tissue-free Reveal test. Looking more closely at some of the recent highlights within our biopharma and data business in Slide 12. We delivered another strong quarter with third-quarter revenue growing 18% year over year. We continue to deepen our relationships with large pharma and had 2 additional companion diagnostic approvals in Q3. In late September, Guardant360 CDx received FDA approval as a companion diagnostic to Inluriyo for the treatment of ESR1 mutated advanced breast cancer. This marks the second FDA-approved indication in breast cancer and the sixth overall CDx claim approved by the FDA for Guardant360 CDx. We also received regulatory approval in Japan for Guardant360 CDx as a companion diagnostic to Enhertu for non-small cell lung cancer patients with HER2 mutations. We now have 23 total CDx approvals across biomarker and tumor types. Our robust and growing pipeline of partnerships ensures that near-term revenue visibility remains high. With that, I will now turn the call over to AmirAli for an update on screening. AmirAli Talasaz: Thanks, Helmy. Moving on to Slide 13. We delivered $24 million of Shield testing revenue in Q3, driven by approximately 24,000 tests. It's been incredibly rewarding to see Shield volume take off and hear story after story of patients positively impacted by this pioneering test, such as the story Helmy highlighted at the beginning of our call. Now turning to Slide 14 to take a closer look at screening highlights for the third quarter of 2025. Starting with CRC screening, given the strong performance and growing demand, we have accelerated the building out of our commercial infrastructure beyond our original plan. In addition, the breakthrough nature of the Shield brand has provided us with strategic partnership opportunities, including our recently announced collaborations with Quest Diagnostics and PathGroup. Shield continues to generate strong demand from both patients and physicians with high adherence rates. As exemplified by the patient story we shared earlier, we are seeing Shield tests get completed with blood samples received for more than 90% of ordered cases. This demonstrate the simplicity of Shield as a routine blood test for CRC screening that can be implemented into routine PCP practice. We are encouraged by the performance of our Shield CRC V2, which demonstrated solid clinical performance with improved sensitivity for stage I colorectal cancer. Turning to our multi-cancer initiatives. We are very excited to announce that Shield Multi-Cancer is now available nationwide through our clinical data collection initiative. At our Investor Day last month, we shared strong real-world performance data for Shield MCD from a study of 9,251 individuals. Specificity was 99%, consistent with earlier NCI findings and positive predictive value was 41%, meaning that when Shield MCD is positive, there was a 41% likelihood of cancer being present. Lastly, we are proud to partner with the American Cancer Society and look forward to ensuring that everyone has access to convenient and timely cancer screening so we can detect cancer earlier and provide opportunities for better outcomes. Taking a closer look at our recent strategic partnerships to scale our commercial infrastructure on Slide 15. First, we were very excited to announce a strategic collaboration with Quest to expand and accelerate Shield access more broadly in the U.S. Quest's provider clients will be able to order Shield tests and receive the results directly through the Quest connectivity system. We believe this strategic collaboration is valuable in two ways. First, it enables a better ordering experience and brings forward our nationwide EMR strategy by several years. This will gives us immediate connectivity to 650,000 clinician and hospital accounts in the Quest system. We believe this accelerated connectivity will drive our scale. We will also have access to deep logistical infrastructure, including 2,000 patient service centers, and 6,000 in-office phlebotomists in the United States. Second, Quest's promotional activities using their nationwide field force in combination with our own multi-hundred person sales force will further strengthen our competitive position in the primary care market. Quest's national commercial sales team will proactively educate primary care physicians and OB-GYNs about the Shield test, accelerating awareness and adoption among their ordering providers. We expect Shield to be available for physician order through Quest in the first quarter of 2026. We will continue to process all Shield test and control client services and billing and reimbursement operations. In addition, we recently announced our partnership with PathGroup, which expands Shield's reach to more than 250 health system across 25 states representing another exciting accelerator for physician and patient access. We are looking forward to seeing the positive impact of our growing commercial infrastructure in 2026 and years to come. We also remain confident in the potential inclusion of Shield in the American Cancer Society guidelines in near future which should be a catalyst for broader patient access. Moving on to Slide 16. Our goal has always been to detect many cancer types early when they are most treatable. With that in mind, we developed Shield as a multi-cancer detection platform. Turning to Slide 17. And as I mentioned earlier, we have now broadened access to Shield multi-cancer detection. In order for a patient to access this result report, their physician will need to opt in to receive the multi-cancer report and the patient will need to authorize the release of medical records to Guardant Health. We successfully piloted this workflow in several accounts and following overwhelming positive feedback from physicians and strong participation by patients, we expanded this offering nationwide. Moving on to Slide 18. The launch of this initiative establishes a scalable platform for clinical data generation, enables assessment of the utilization of MCD results in patient care and provides a new avenue to expand patient access to multi-cancer detection, bringing this important innovation to a broader population. This nationwide initiative is expected to reach hundreds of thousands of participants, making it one of the largest prospective evidence generation initiatives for early cancer detection. Turning now to Slide 19. With the expansion of Shield to include MCD results together with patient authorization to release medical data, we are now well positioned to further strengthen our data moat. This high-quality data serves as a regulatory grade source of truth, providing details on each patient's cancer journey that were previously not accessible. We will generate large-scale prospective evidence about the performance, clinical value and safety profile. We believe this high-resolution data will power continuous improvement of Shield MCD and also lay the foundation to potentially expand into multi-disease detection. With that, I will now turn the call over to Mike for more detail on our financials. Michael Bell: Thanks, AmirAli. Turning to Slide 20. I will now review select financial highlights for the quarter ended September 30, 2025. Unless otherwise noted, all growth rates are year-over-year. Total revenue for the third quarter grew 39% to $265.2 million driven by strong performance across all 3 major revenue lines: oncology, biopharma and data, and screening. Oncology revenue increased 31% to $184.4 million primarily driven by another quarter of accelerated test volume growth. We reported approximately 74,000 oncology tests in the third quarter, representing 40% growth reflecting continued positive momentum across the portfolio. Guardant360 Liquid delivered its fifth consecutive quarter of accelerating growth, with volumes up more than 30%, supported by the expanding clinical utility enabled by Smart apps launched over the past year. Guardant360 Tissue also had an exceptional quarter, showing strong year-over-year acceleration following the major product upgrade released in the second quarter. Reveal remains our fastest-growing oncology product, benefiting from CRC surveillance reimbursement achieved earlier this year and continued strength across both breast and lung cancer indications. As a reminder, we do not include Guardant Hereditary Cancer testing or IHC volumes in our reported totals. We continue to expect minimal revenue contribution from these new offerings through 2025. Average selling prices remained stable compared to the prior quarter. Guardant360 Liquid was in the range of $3,000 to $3,100, Guardant360 Tissue was approximately $2,000, and Reveal was in the range of $600 to $700. We also recognized approximately $5 million of out-of-period oncology revenue in the third quarter compared to $12 million in the prior year period. Our biopharma and data business continued to perform well, with revenue increasing 18% to $54.7 million, which includes milestone revenue from 2 companion diagnostic approvals achieved during the quarter. The biopharma pipeline remains solid, providing confidence in both the near-term and long-term growth prospects. Screening revenue from Shield totaled $24.1 million generated from 24,000 tests reported during the quarter. Shield ASP was approximately $880 above expectations, reflecting our continued focus on Medicare-covered patients. We also recognized approximately $3 million of out-of-period screening revenue, driven by better-than-expected reimbursement from Medicare Advantage payers for tests performed in the first half of 2025. This positive trend reinforces our confidence in both near-term and long-term expectations for Medicare Advantage reimbursement rates and overall Shield ASP targets. Turning to Slide 21. We’re very pleased with the year-over-year improvement in non-GAAP gross margin, which increased to 66% in Q3 2025 compared to 63% in the prior year period. This improvement was primarily driven by a significant reduction in Reveal COGS, which have declined from over $1,000 per test in Q3 2024 to less than $500 per test, as well as strong progress in Shield gross margin. Shield's non-GAAP gross margin improved from negative levels at the launch just over a year ago to 55% in the third quarter of 2025. This improvement reflects strong ASPs under the Medicare ADLT rate of $1,495, disciplined focus on reimbursable tests, and continued COGS reduction. Shield's non-GAAP cost per test again trended lower sequentially and continues to be below $500 per test, consistent with our operational plan. These gains reflect the ongoing benefits of increased Shield volume and disciplined cost management. Turning to Slide 22. Non-GAAP operating expenses were $228.8 million in the third quarter, an increase of 22% in line with expectations. The increase was primarily driven by continued investments to expand our screening commercial infrastructure and scale sales and marketing for Shield. As we conclude 2025 and enter 2026, we will maintain focus on these investments to maximize our first-mover advantage in blood-based colorectal cancer screening. Adjusted EBITDA loss was $45.5 million, an improvement of $10.7 million compared to a loss of $56.2 million in the third quarter of 2024. We remain disciplined in our approach to cash management. Free cash flow burn was $45.8 million, improving by $9.5 million compared to the prior year period. Importantly, excluding the screening business, Guardant generated positive free cash flow during the quarter, a significant milestone achieved one quarter ahead of our stated target. We expect the core business to remain free cash flow positive in the fourth quarter as well as for the full year 2026 and beyond. We ended the quarter with approximately $690 million in cash, cash equivalents, and restricted cash. Turning to the full-year 2025 outlook on Slide 23. Based on our strong year-to-date performance, we are raising full-year 2025 revenue guidance for the third time this year to a range of $965 million to $970 million, representing approximately 31% growth compared to 2024. At the midpoint, this represents an increase of $47.5 million versus our prior range. We now expect oncology revenue to grow approximately 25% year over year, up from prior guidance of 20%, driven by stronger-than-expected oncology volumes in the third quarter and higher expected volumes for the remainder of the year. We now forecast total oncology test volume to grow more than 30% compared to our previous expectation of greater than 27%. Our biopharma and data business remains on track to deliver mid-teens growth for the full year. We’re also increasing our Shield revenue guidance to $71 million to $73 million, up from $55 million to $60 million, reflecting higher expected volume of 80,000 to 82,000 tests compared to prior guidance of 68,000 to 73,000 tests. With continued improvement in gross margins, we’re raising our full-year non-GAAP gross margin guidance to 64% to 65%, up from 63% to 64%. As previously outlined, we plan to reinvest incremental screening gross profit to accelerate commercial expansion. Accordingly, we now expect 2025 non-GAAP operating expenses to be in the range of $865 million to $875 million, representing a 14% to 16% increase compared to 2024. Finally, consistent with our long-term financial roadmap, we remain committed to reducing cash burn each year and achieving company-wide cash flow breakeven by the end of 2027. For the full year 2025, we continue to expect free cash flow burn of $225 million to $235 million, an improvement from $275 million in 2024. Turning to Slide 24. We began 2025 with an ambitious set of strategic and operational objectives. Through our strong execution, we’ve delivered on nearly all of them, and we expect continued momentum as we close out the year. Our progress this quarter positions Guardant for sustained success in 2026 with continued oncology volume growth and strong Shield adoption. With that, we will now open the call for questions. Operator: Thank you. [Operator Instructions] The first question comes from the line of Bradley Bowers with Mizuho. Bradley Bowers: A strong performance across the businesses, but I am going to focus on Shield here. I was wondering if you could walk us through the Shield ASP dynamics exiting the year. Continued strong pricing, I don't think it's surprising given the ADLT pricing, but that $900 we’re exiting the year at. It’s supposed to walk down to $700 by 2028. I know there are some mix implications there, but is it a steady degradation? Is there a fallout expected as ADLT pricing rolls off the initial phase at the end of this year? Any color on the phasing of that would be helpful. Thank you. Michael Bell: Yes, Brad. This is Mike. I can take that. Yes, I mean, to break down the -- what's in the Shield ASP, we have the Medicare rates at $1,495 that came into play at the start of the second quarter. We’re also receiving really good payment from Medicare Advantage payers. And so, when they are paying us, they are paying us at this $1,495 rate also. And at the moment, the majority of our volume is skewed towards Medicare and Medicare Advantage. And then we have a tranche of commercial patients, and we’re effectively getting paid more or less 0 for those. And so, as we look at over the next few years, we’re very confident in the $1,495 rate -- ADLT rate going forward. And in fact, we’ve just submitted our package back to Medicare on the date of submission of the pricing over the last six months, and that should help us maintain this $1,495 rate now, at least for the next 2 years. And going forward, also, we expect Medicare Advantage to continue to be strong. In fact, we would hope that it can get stronger than where it’s today. The fluctuation over the next couple of years is going to be the percentage of commercial payer patients that we have and how quickly we can ramp up the commercial reimbursement there. And so, we’re assuming in 2028, there’s just a higher proportion of commercial patients in the mix. And it’s going to take us time to establish that reimbursement rate. But overall, we’re really happy with where the ASP is today, and we think it bodes well for as we go into 2026 and beyond. Operator: The next question is from the line of Doug Schenkel with Wolfe Research. Douglas Schenkel: So another question on Shield. You mentioned at the Investor Day, and as well as in your prepared remarks that potential ACS guideline inclusion later this year could set the stage for commercial coverage and I think, at least 10 states. And we believe Anthem and other large Blues are watching closely. So to the best of our knowledge, ACS concluded their CRC screening guidelines review earlier this month. With that in mind, is guideline inclusion at this point a real possibility by year-end with ACS? And then once guidelines are in place, how long do you think it’s going to take for that to translate into you actually getting paid? And then the final component of the question is, beyond those initial 10 or so states, there are other states like Florida and Louisiana where mandates have been brought in to include ACS as well as NCCN in addition to USPSTF. So if we think about that broader universe of states, which I think maybe gets you closer to 17, is it likely that reimbursement could occur not just in the initial 10%, but closer to 20% over the next year or so? AmirAli Talasaz: Thank you, Doug, for your question. Yes, based on what we know, it appears that ACS research team is almost done with their work. So we remain confident about this potential for Shield to be included in near future. We are monitoring the situation very closely, but we are very optimistic about that. In terms of the guide, like, it’s not part of this year guide. We are not counting on any kind of upside associated with the ACS guideline and, it’s going to take some time. When we go into the guideline, it gives us initially some upper hand, and it should have a strong -- it should have a positive impact on our appeal success rate initially. And then at some point, that would result into product coverage and contracting successes. I am proud of what our team has achieved so far on trying to broaden access to Shield. You noted Florida now through a consortium of supporters of making sure that innovative technology becomes accessible. Now, for instance, Medicaid patient population in Florida have access to tests like Shield, and we are very proud of that. And in general, we are very pleased with some of the positive and regular dialogue that even we have with the administration about their priorities around cancer screening, around prevention, around making America healthy. And I am excited that looks like both the President and Secretary are looking for ways to see how maybe the rate of cancer can get reduced in the country and how could we try to bring innovations to patients in a faster way. But we'll see what happens. But, obviously, we are not counting on any of those successes in our drive at this time. Operator: The next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: Really impressive quarter here and really strong guide. If I may, AmirAli, first one on Shield. Just growth is accelerating on volumes, rightfully so, new product and ASP is also up. How should we think about 2026 growth for Shield and any early reception details that you can talk about on the MCD side? What's the early attach rate? And for Helmy, it's been almost a decade since you launched G360 when it appeared on the market for the first time. It' really impressive to see 10 years later, this product is growing 30% plus. Maybe just talk to us about what's behind that and how should we think about the growth going forward here for the Liquid G360, which has been impressive? AmirAli Talasaz: Maybe I will make the Shield part quick so Helmy can talk to you about the oncology side. So as you have seen, we consistently raised our outlook throughout this year. We are very pleased with what we are seeing, the momentum that we are seeing. We want to be thoughtful and not get ahead of our skis. So, I think still it's too early for us to comment about 2026. At the right time, we will talk about it, but we continue to be very confident about the long-term outlooks that we shared in our Investor Day. Helmy Eltoukhy: Yes. No, we're very pleased with the performance. It's actually been 11 years and counting in from when we launched in 360 and so, to see it grow at this rate, I think at this point in the product cycle it's really pleasing, but I think it’s what we expected in the sense that many people think of this as a test and they pattern match it to other tests in the market. But it truly is an application platform. When you think about these Smart apps that we’re introducing and really the multiplication of clinical utility and ability and capabilities of this platform, this is just the beginning in terms of where liquid biopsy can go. I mean, that’s the point of liquid biopsy is you can come in, you can test many more patients, you can increase access. But you can test them longitudinally as well. And we’re still at the very, very early innings in terms of where this can go, where this technology can go just in oncology. So I think you are going to see a lot more, I think, of this trajectory in the coming years as we continue to expand on the capabilities of Guardant360 over the next decade. Operator: The next question comes from the line of Subbu Nambi with Guggenheim. Subhalaxmi Nambi: If you were to put a timeline -- if we were to put a timeline to NCD FDA approval based on Shield trajectory next year, would FDA submission for MCD in late 2027 be a reasonable expectation? AmirAli Talasaz: For MCD, we just actually broadened access, and we just actually started getting access to this clinical data that I talked about during our Investor Day and the prepared remarks. So we need to monitor it and see how quickly we can build that evidence. But we are very optimistic that potentially through the way that we are doing, we can get access to hundreds of thousands of patient data and monitor actually the impact of MCD testing in the clinical value, performance, safety. It’s still too early for us to specifically put a timeline for FDA approval. But we would monitor the situation closely and as we get more confidence, maybe we can talk about it at the right time. Operator: The next question comes from the line of Patrick Donnelly with Citi. Patrick Donnelly: Helmy, maybe one for you on Reveal. I know in the past, you've talked about driving the test per patient higher. Can you just talk about the traction there given the bigger push internally? What kind of progress you're seeing? Where can that go over the relative near term? And I know during the prepared remarks you talked about obviously the ongoing studies, the additional tumor types. Can you just talk about what we should be looking for and the key catalysts on the Reveal side here over the next couple of quarters to keep an eye on? Helmy Eltoukhy: Yes. Great question. I think we said at the beginning of the year, as we got the surveillance indication from a reimbursement point of view for Reveal that would be turning on a lot of the capabilities to be able to pull in subsequent test orders and so on. And I am pleased to report that, we’ve put a lot of those in place, and we’re seeing some of the benefits of that and the return on investment there. So we know we can pull in subsequent orders now in a very straightforward way and so that’s going to pay dividends across our blood-based portfolio as we think about the emergence and really, the place where longitudinal testing will sit in terms of management of patients in oncology with things like SERENA-6 in terms of ESR1 with the upcoming launch of our therapy monitoring based on Reveal. And then, obviously, with Reveal itself in the MRD setting, recurrence monitoring setting. So yes, really great progress. The number of tests per patient has gone up pretty nicely, and we’re still, I would say, very much in the early cycles of really capitalizing on that investment. Operator: The next question comes from the line of Tycho Peterson with Jefferies. Tycho Peterson: I would love to hear your views on the PEGASUS data and just how you think about that having any impact on just MRD-driven therapy management? And then how are you thinking about clinical utility evidence in general and NCCN guidelines? Helmy Eltoukhy: Yes, PEGASUS was a really interesting study. It was a Phase II signal finding study, and I think there are a few things that showed that I think were exciting to me, which is the fact that you could spare something like 75% of patients from chemotherapy, which meant, huge, huge reduction in terms of neurotoxicity and other toxicities related to such really harsh chemotherapy. And so I think PEGASUS was based on our previous version of Reveal. And so I think we’re really looking forward to TRACC, which is based on a newer version. And really, the field, having larger datasets to really understand exactly where the threshold should be in terms of escalation and de-escalation in terms of patients. But I think it’s clear that I think there can be a lot of benefit by using this additional data in terms of ctDNA in the adjuvant and surveillance settings. But I think this is a good foundation and one that we can build on as we continue investing in both clinical validity and clinical utility studies around our Reveal platform. Operator: The next question comes from the line of Bill Bonello with Craig Hallum. William Bonello: I just want to push a little deeper on [Suneet's] third question about the growth in Guardant360. Could you just give us some sense today? I mean, if we think about what’s out there that’s driving, there’s the underlying growth, there’s the fact that you are probably taking share. But I am also curious about where we stand today in terms of a paradigm shift to liquid first or perhaps to combination testing with liquid and solid tumor. And then to what extent were – we are seeing some of the repeat testing that you are talking about or the use of 360 for monitoring? Just trying to get a sense of what inning we’re at in terms of some of these new growth drivers and how much of that is still in front of us? Helmy Eltoukhy: Yes. Great, great question. So we’re still very early even in the penetration of liquid biopsy in terms of one test per lifetime. And so given, the capabilities of 360 right now, they are just mind-blowing to a lot of physicians just in terms of the depth, the sensitivity, the application space. We see that growth -- in just that initial setting. So that means not only market growth, but we’re seeing from what we can see, significant share gains as well as a result. Then there are other growth drivers we’re seeing. The fact that concurrent testing will likely become the standard of care of both tissue and liquid. And so that is also another growth driver and we're starting to see that really, really take off. And then finally, the test for patients. And so we estimate at maturation that we should be able to go from 1 test per patient per lifetime to something like 4.5 or 4 or 5 tests per patient per year which, obviously means more than, probably doubling of where the market is today – sorry more than a 10x in terms of where the market is today. And so that’s really exciting in terms of where things are going, and this is things like SERENA-6 in terms of ESR1, longitudinal monitoring, therapy monitoring, the data that we have with IO monitoring, with chemo monitoring, and so on. All of that will feed into essentially establishing this new paradigm of essentially monitoring patients with ctDNA. We’re already seeing our biopharma partners use this type of testing to -- in their Phase I, Phase II, Phase III studies using it to decide do they scale Phase I to Phase II, using it for dosing. And so that’s the other piece that I think is not very well appreciated is that a lot of tests you launch them they are used exactly the same way 10 years later or 15 years later and so on. They only have one function. The application space and utility of how you use the -- something like Guardant360 and Guardant Reveal is really multiplying quarter by quarter and year by year. And so, yes, this is a true platform. That word is often overused, but this is a true platform, and you are seeing what that means in terms of our volume growth and the trajectory that we laid out at our Investor Day. Operator: The next question comes from the line of Michael Ryskin with Bank of America. Unknown Analyst: This is Aaron on for Mike. I wanted to dive into Reveal volumes and specifically Reveal versus Ultra and how you guys are thinking about the R&D investment needed in both of those assets? And then the second part of that is MRD is still a fairly open space,10% penetrated, what people are saying. So I guess, how are you guys looking at the market? How are you guys looking at growth? And how should we be expecting both of those assets to grow over the next 3 years? Helmy Eltoukhy: Yes. We’re very excited about our MRD franchise. Reveal is the leading tissue-free MRD test in the market. We know that there will be essentially 2 parts of the market that will be important, the tissue-free side and the tumor-informed side of things. And we're very pleased in terms of where we sit in the tissue-free side. It’s our fastest-growing product in oncology. And the amount of data, the amount of investments, we have a 10x data generation planned as we presented before next year. And so that flywheel is really chugging away. And so we’re excited about that trajectory. And then in terms of the tumor-informed side I think we agree with you, there’s a lot of opportunity there in terms of a test that can really hit the needs of both biopharma and clinicians in terms of sensitivity that is really acquired for that setting. And, yes, we’re just very pleased with the technology that we’ve developed. If you think about it, just everything we’ve built as a company is at a really nice point. The fact that we’ve really chugging away on our tissue volumes and the capabilities we have with using very low amounts of input material, very fast turnaround times. The sensitivity we have on the liquid biopsy side and the capabilities, COGS down and the speed to results, all of that is coming together in Reveal Ultra. And I think it’s going to be a product that will, frankly, blow everyone away once we launch it. Very excited for that and making really good progress. Operator: The next question comes from the line of Daniel Markowitz with Evercore ISI. Daniel, your line may be muted. Our next question comes from the line of Mark Massaro with BTIG. Mark Massaro: The first one is for you, AmirAli. Just looking at the Shield, it’s great to see this trajectory. Is it reasonable to think in the near term that 1,000 sequential increase from the prior quarter is the right way to think about this just looking at the Q4 implied guide at the high end, it’s plus 9%. You just did plus 8% prior quarter plus 7%. Or -- so I guess I am asking if this is a reasonable run rate in the near term? Or do you think there’s obviously upside from partnerships with Quest, PathGroup, certainly guideline inclusion and potential DTC uplift? So that’s my first part. The second part is for Helmy. Helmy, can you just give us a sense for Reveal Ultra? I believe this is the tumor-informed that can go down to 1 part per million. Just give us a sense for -- maybe if you could clarify if that is commercially launched now and how we should think about the timing of CMS reimbursement and additional data readouts? Thanks. AmirAli Talasaz: Thanks, Mark. So in terms of sequential growth, like our guide, what has ended in the midpoint is like another 8,000 Q-over-Q growth in Q4. We are going to monitor the situation closely. And again, we don’t want to get ahead of our skis and see what’s going to happen and for next year, we are going to talk about it at the right time. There are a bunch of catalysts still in front of us. There’s Quest, PathGroup collaboration should be a positive thing. Guideline inclusion is definitely a positive thing. Continuous build-out of our own commercial team as we go into next year would be a positive thing. So -- and we are confident about the target that we put out there for 2028. So -- but we go at it one step at a time, and we are very excited to see what’s going to happen in Q4. Helmy Eltoukhy: Yes. In terms of Reveal Ultra, I think the nice thing is we built such strong capabilities around MRD. When you think about the R&D and all the clinical studies, tens of thousands of samples and many of those we’ve actually retained tissue. So it’s actually, not, very heavy investment for us to essentially leverage that to really come out with the Ultra technology, the tumor-informed technology we have. We’re seeing really good data, really excited in terms of where this can go. In terms of the sensitivity, we think it can bring it down to a much lower level than exists in the field or frankly, exists in the pipeline of companies we’ve seen out there. And I would say that in terms of timing, we’re keeping that close to the chest. So stay tuned, but making good progress and we wouldn’t be talking about it if it wasn’t something that was not in the too distant future. Operator: The next question comes from the line of Casey Woodring with JPMorgan. Casey Woodring: On the Shield performance in the quarter, maybe as a follow-up to Mark's question. Can you provide any KPIs around maybe average testing frequency per physician and whether volumes are coming from new time CRC screeners? And then just my second question here. Mike, if you can provide any color on gross margin for Shield and Reveal embedded in the updated guide of 64% to 65% for this year, that would be helpful? AmirAli Talasaz: Yes. Maybe some KPIs. Actually, it's exciting that the breadth of ordering continues to increase Q-over-Q. The depth of ordering continues to be very strong. So once the accounts actually start using Shield and we go through activation, the depth of ordering is very solid, which is really an endorsement of how deep this market is and mainly how many under screened cancer patients are out there in the accounts that we are going to. So we are seeing their doctors. We are successfully leading them and so forth. So the other KPI to share, which we are very excited about is we continue to see very high adherence rate when the doctors order their stuffs more than [indiscernible] gets converted to a sample received in our lab, which really gives us bunch of efficiencies in our S&M investments. Michael Bell: And Don on the gross margins which yield -- in the prepared remarks we mentioned that the Shield gross margin this quarter, Q3 was 55%. And so, ISPs are close to $900 and our cost per test now is consistently lower than $500. So we made really great progress with Shield’s gross margin. And then on the Reveal side, again we’ve made fantastic progress over the last 9 months or so. And just to bring that out a bit know how ISPs for Reveal continue to be in the $600 to $700 range. And again, since this part of the year Reveal cost per test are consistently below $500. So, we have a nice gross margin on Reveal. It’s a little bit lower than the 55% we’ve got on Shield. But there really what’s helping drive our overall cleanly gross margin and we see in that the positive impact in that we’re going from 63% in Q3 last year to 66%. So I think good progress across the board with gross margin. Operator: The next question comes from the line of Kyle Mikson with Canaccord. Kyle Mikson: Congrats on the quarter. On Reveal, is it still possible you get ADLT status and breast Medicare coverage by the end of this year? Is that more likely a '26 milestone? And then secondly, AmirAli, we had a competitor this week announced advanced adenoma sensitivity data for its colon cancer blood tests. The confidence interval lower bound was 15% and the study had a lot of very small lesions. Just curious if you think that a test with AA materially higher than the 13% for Shield would pose a threat and you would like, when they aim to improve upon your AA data still? Helmy Eltoukhy: Yes. I mean ADLT status is still a work in progress, obviously, with the government shutdown paused some of the discussions a little bit. And then we're still working in breast and IO. We've always said probably more likely early next year. And yes, we're still, I think, on track for that. AmirAli Talasaz: Regarding the data disclosures, we -- obviously, we applaud anybody who's trying to contribute in this difficult area. This is a hard science area. And we feel very comfortable with our leadership position. And our technology stack, our data, and what we are doing. We have seen similar results in this field now a few times. Again, this is a hard field. It is a hard science field. And we believe we have the best tech stack, very innovative technology at home brew that gives us confidence. We have a 3 year head start on CRC now. And know, probably even much longer on the multi-cancer side relative to some of these competitions. So we feel very good with our position at this time. And, definitely, there are some fine activities that we are working on. We will see what happens. Operator: The next question is from the line of Luke Sergott with Barclays. Luke Sergott: Just wanted to touch here on the step-up in OpEx that you guys have for the year and implied in 4Q. And really just dig in where that spend -- the incremental spend is going and where you guys think from an S&M perspective? Where you guys want to exit the year as a number of reps as you think about Shield and oncology and Reveal? And how that -- if you're able to pull forward any of those costs given the success you've had in some of these -- some of the other launches? Michael Bell: Yes. I mean for the OpEx step-up, it's pretty much all in the sales and marketing line. I think we've been consistent throughout the year, whereby we said we're going to be reinvesting any incremental gross profit in screening back into the sales and marketing line to really drive that commercial build-out. So -- and we'll continue to do that. I think it's the biggest focus for us as we look to scale. We said on the screening side, we've now got over 250 salespeople out in the field. So that's a significant ramp-up during the year, and we'll continue to look at how we build that out. On the oncology side, it's a little bit larger than that. And we've got a very sort of well-built out commercial infrastructure with oncology. But yes, as we look forward and go into 2026, I think you should expect to see a similar ramp in the sales and marketing line. We're very focused in the R&D line and the G&A line and keeping them relatively flat. And so I think that's the plan for the next 12 months. Operator: The next question comes from the line of Daniel Brennan with TD Cowen. Daniel Brennan: Congrats on the quarter. Maybe just on G360, just a couple. Maybe one for Mike and then one for Helmy. Just on the guide, I know that clinical oncology volume guide is now greater than 30. Does that contemplate like a big step down from the G360 line, which is accelerated tremendously year to date, obviously from the Q3 30%? And then B, more so for Helmy. I know you have given a lot of color on the excitement over the outlook for G360. But could you give a little more color on the acceleration you have seen year to date? Is it more share gains which you talked about? Like are you seeing like hospitals consolidate? Do you think it is more just penetration of CGP? Or do you think it is more like this test per patient pickup? Any way you can kind of dissect a little bit of this really strong acceleration? Michael Bell: Yes. Maybe I will just start on Q4 guide. So, we had a great Q3. I think our guide for Guardant360 volume and for overall oncology volume, it implies sequential growth in Q4. It implies a very strong year-over-year growth in volume. So yes, if you back into it, it’s over 30% year-over-year growth in Q4. So I think we have just continued to expect the momentum that we saw in Q3 continue to Q4. So I think for us, things are looking very strong as we get towards the end of the year. Helmy Eltoukhy: Yes. In terms of growth driver, I think what you are seeing really is the fact that it is just a very compelling test from a value proposition. So I think a lot of what you are seeing is some of the share gains from the other tests in the market from other hospitals and so on. So that’s been exciting. We are seeing a little bit of the increase in testing in terms of longitudinally, but I would say that’s a very minor part. I think that’s still a lot of -- that’s still another major growth catalyst for us in the future that we have not really tapped into. And then the third piece is this test has so many capabilities. Things like being able to determine the type of cancer, what someone who has a cancer of unknown primary, subtyping. So if you think about the long tail of cancers where liquid biopsies and even tissue -- tumor biopsies aren’t really utilized, the fact that we have this smart platform with epigenetics and so on that can give so much more insight into tumor biology. I think you are seeing penetration into some of these longer tail of cancers as well. Operator: Our last question comes from the line of Dan Arias with Stifel. Daniel Arias: Helmy, I just wanted to go back to Reveal. Can you maybe talk about where things are on the commercial side when it comes to reimbursement in colorectal? What’s a good ballpark number at this point for just the percentage of tests that are getting paid for, I guess, Stage II and Stage III patients would be the right subpopulation to ask about there? But really just trying to understand [indiscernible] side of CMS in your key indication there? Michael Bell: Yes Dan, it’s Mike here. It cut out a bit towards the end, but I think you're asking about Reveal reimbursements with CRC. CRC now is -- it's roughly 50% of our volume. It continues to be at that sort of level and the rest being made up at the moment from breast and lung and where we are getting reimbursed is for all of the -- now whenever we run a CRC test, we're getting reimbursed for all of these tests that we do for Medicare, and that's at the $1,640 rate. And we're getting good pull-through with Medicare Advantage. We're starting to see traction with commercial payers. That's improving all of the time. And so I think we're feeling good at where the reimbursement level is. And then as we look forward, we think there's continuous runway with Reveal. Again, more and more Medicare Advantage and commercial payments on the CRC side. But as we just mentioned, we are anticipating Reveal breast reimbursement. We've submitted the data package to MolDX for Reveal IO. And so hopefully, going forward, we're getting incremental Medicare reimbursement and incremental reimbursement from all of the payers as we move into '26. Operator: That was our last question. That concludes today's call. Thank you for your participation and enjoy the rest of your day.
My Vu: [Presentation] Good morning, and welcome to Höegh Autoliners Third Quarter Presentation. My name is My Linh Vu, Head of Investor Relations. And with me today, we have CEO, Andreas Enger; and our CFO, Espen Stubberud, who will walk you through the last quarter performance. We have a Q&A session at the end of the presentation, and you can ask questions by sending e-mail to our Investor Relations mailbox at ir@hoegh.com. So with that, I will leave the stage to you, Andreas. Andreas Enger: Thank you. Opening this presentation with a photo of beautiful Höegh Moonlight at the quay in Gothenburg, where we had a naming ceremony while loading cargo together with valued customers in Gothenburg. This quarter, we are once again presenting a strong result. We have a good -- have good underlying earnings and profitability driven by our strong contract backlog and an operation as previously noted, we have some more imbalances than others, but fundamentally, we're running full vessels out of Asia and are basically serving customers to the full and executing our backlog. I will open this presentation to basically respond to an issue of a slight change in the payment schedule for dividends that may require some explanation. And I want to do that by starting with reiterating how we operate as a company. We have focused a lot on creating value through the cycle by building backlog, focusing on a cargo strategy being overweight cargo. We have basically operated in the market now there is persisting market imbalances with strong growth in Asia, not so much opportunities elsewhere in the world. Charter market is starting to provide opportunities for short-term capacity, which we are using at the cost to develop our -- and be able to maintain a strong backlog. And we are now faced with, I think, a totally new level of geopolitical uncertainty coming from things like U.S. port fees and taxes and whatever. And while we are fully committed to remain -- keep our dividend policy of distributing excess cash flow, we have found that the unusual geopolitical situation is requiring a slight modification. And it's really triggered by the fact that the implementation of the tripling of the USTR fees that came a couple of weeks ago has resulted in the biggest change in our short-term cash forecast as long as I've ever been to the company. And that period includes the shutdown during the pandemic where we lost a large part of our cargo share. And adapting to a world where governments choose to introduce or increase cash payable taxes with it in reality, 2-day notice is really putting an extra requirement for securing the cash balance that has made us conclude it is prudent to do a small change. And without going into too much details, but the U.S. port fees, and we don't know exactly what's happening with them and the tripling and the retaliation from China is creating a situation where we suddenly get an additional cost of $60 million to $70 million per year effective immediately. And that is totally unprecedented, and we can have all kinds of ideas and theories of what will happen. But in our financial and liquidity management, I think we'll have to work on a worst-case scenario and basically say that we have to be prepared for these kinds of shocks in a situation where our business is drawn into a geopolitical space where we don't think we belong, but we are still pulled in. But I think I also want to emphasize that this is not reflecting a fundamental change in our business operations. I mean coming to that sort of when we have the guiding for the next quarter, but it is to make our -- make sure that we are resilient to type of shocks that we haven't seen before, not because we have any expectations that there will be further shocks, but we think it's prudent to be capable or make sure that we can handle it comfortably. And -- so what we're doing is that we are reiterating, reconfirming our dividend policy of paying out excess cash. We are adjusting the calculation method that basically results in a one-off and nonrecurbable impact to the Q3 distribution. And the way we do it is simply that instead of paying the dividends based on the running sort of outlook of cash, we are changing it to actually do it on the cash balance we are reporting at the end of the quarter -- in this case, the end of Q3. And that creates, in many ways, one quarter gap in the dividend payments. Just to remind, we have a track record of paying out dividends. We paid out NOK 1.5 billion in cash dividends since our IPO. That is more than 3x the equity value of the company at the IPO. So it's quite substantial. And again, we are committed and we have reviewed our financial resilience requirements. We have concluded that the current strategy, the current cash balance is sufficient and that we intend to continue to pay all excess cash in dividends. But we have changed the liquidity policy from a forward-looking one to ensuring that we actually have that cash balance at any time in order to be robust against those types of shocks. And that then leaves us to the headline figures, $155 million of EBITDA, slightly down. Espen will come into more detail, mostly a result of combination of the imbalances in the system and charter costs to keep up the volume. We have 2 further newbuilds at the end of the year, and we have -- so we are -- but we do -- due to our vessel sales, have a capacity gap to fill that is creating some charter costs in the near term. $132 million profit after tax, $92.3 million in gross rate. And then what we talked about, the $30 million dividend, which is then not related to this quarter's free cash, but produced out of this onetime change in the timing of payouts. We have taken delivery of one purchased previously bareboat chartered vessel, Höegh Copenhagen. It's the last one, I think now we have exercised all the purchase options, and we have a strong equity ratio of 54%. If you take into -- going into the market, I think one very important thing is that shipments from Asia continue to grow and expand despite U.S. tariffs and despite the kind of environment, I said, increased geopolitical risks. So we have a very, very strong activity. It's mostly driven out of China. And as we see it, Chinese growth and Chinese exports of vehicles and equipment is basically continuing to grow. And that is a trend that has been driving this industry for a while, continues to drive it. And Chinese share of exports from Asia or actually even the world is strengthening. High and heavy market is also after some flat years going into a good growth pattern. But again, we have a stronger market out of Asia than we have out of the U.S. and Europe. But the market is generally strong and supportive. We have, as we said, a strong contract backlog being fully booked in 2026. And we have a number of -- and we are continuing to add contracts, although I think both capacity and the market cycle, the big contract renewals for the next couple of years is -- or next year is behind us. But we have signed a long-term significant contract during September with substantial value and a 15-year duration actually. We have a contract share that is now up at 81% and a duration of the backlog of approximately 3 years. We do have rate agreements mostly 1 year fixed pricing, but noncommitted, that is a product that is mostly towards freight forwarders and secondhand vehicles. But -- and we do have sort of long-standing relationships also in that area that basically creates stability. And also reiterating that when it comes to what we call spot, it's not the kind of same cargo in the spot contract. New vehicles OEM business is almost entirely on contract and 60% of the spot volume is high heavy and break bulk, which is cargo that has a different -- has more variability in volumes and trades. Espen, should you take over on the capacity side? Espen Stubberud: Yes. On the capacity side, there is still a significant order book in the industry. Net fleet growth is up 12% in 2025 and another 8% is expected in 2026. As we've talked to a few times, we have expected the charter market to normalize in terms of pricing, and we are using that market to a larger extent than we have in the past with 5 actually short-term charters in the third quarter. We see pricing is stabilizing around $40,000 to $45,000 for a large ship at the moment. Andreas Enger: If I take in a short word on sustainability, we showed you Höegh Moonlight. We have 6 of our newbuilds now in operation. We have had an intense docking schedule, which is sort of somewhat variable, but we had a large amount of dockings of all the vessels in the 5-year cycle in 2025. We do have a committed program to use every dry docking to upgrade existing vessels for better fuel economy and efficiency. We have then taken development of delivery now in total of 6 vessels in operation of, I think, the most -- both carbon and fuel and cargo-efficient vessels on the water. And that is now also materializing in a clear downward trend on our carbon intensity. We're also continuing to use 100% biofuel and have 100% biofuel available as a product to our customers. And we have 3000 tonnes bunkered in the quarter. So we have a continued effort on decarbonization, both in improvement of our existing fleet in taking delivery on modern efficient fleets and obviously, also in our path to zero, looking at future fuel options. And that drives us into a carbon intensity -- clear carbon intensity road map. Just reiterating from 2008 to 2024, we have improved our carbon intensity more than 40%. And we do have a clear path to 0 where half of that -- the remaining voyage is on improvements to sort of non-zero carbon fuel-related improvements. The last half of this in our plans will basically have to be covered by clean ammonia and e-fuels, and we believe we are with that on track to be able to deliver zero-carbon transportation by 2040. With kind of the uncertainties creating by the delay of the IMO framework and others, I think it's also prudent to reiterate that in all our decarbonization efforts, we are ensuring dual fuel, multi-fuel capabilities. And we are 100% committed to be able to offer our customers zero carbon transportation by 2040. We are also committed to offering the option to billing customers on zero carbon transportation before 2030, but we are not underwriting the decarbonization cost of our customers. So it has to be aligned with regulations and the customer demand. And we have the ability to deliver, but we will obviously run our vessels in a matter that is economic and profitable in whatever regulatory market that exists. Then back to financials. Espen Stubberud: Yes. Turning to the financials. The [ fourth quarter ] volume came in at 4 million CBM. That's up 4% from the second quarter, but up 17% year-over-year. And we are particularly pleased with our volume development out of Asia. The first 3 quarters this year is up 48% last year, so very strong volumes. The volume we loaded out of Asia in the third quarter is the highest volume we loaded since we IPO-ed back in 2021. We talked to it a couple of times that we took on some -- a couple of large contracts at the end of last year at somewhat lower rates to add to our contract backlog. That lowered the rates that came into 2025. But we've seen very stable rates in '25 with a net rate drop of 2% from second quarter to the third quarter, mainly related to changes to cargo and trade mix. Revenues are moving flat on higher volume, quarter-on-quarter. EBITDA is down about 6% from $166 million to $155 million as our operating margin is being reduced. And as Andreas already mentioned, we talked to the increased imbalance this year, basically reduced network efficiency. We also see somewhat lower utilization of our fleet in the third quarter. That's not so unusual, particularly in August when production is closing down, so which is reducing the efficiency somewhat in the third quarter and we're also using some more charter costs as we talked to. Net profit before tax came in at $132 million in the third quarter. That includes the $20 million book gain of selling Höegh Beijing. Turning to the EBITDA bridge. In the first -- from the first to the second quarter, we added revenues of $38 million. And with that revenue followed the increased voyage costs and charter costs, but we increased EBITDA to $166 million in the second quarter. We also added volume from the second to the third quarter of $15 million in revenue. However, that was fully offset by increased voyage costs and charter costs. And with the rate net rate dropping about 2%, we come in at $155 million for the third quarter. Our balance sheet is robust with healthy ratios. We have seen net interest-bearing debt being increased over the last few quarters as our newbuilds have been delivered. No newbuilds delivered in the third quarter, so moving flat quarter-on-quarter. And as Andreas said, we're looking forward to ship -- sorry, #7, newbuild #7 being delivered now in a few weeks in December and newbuild #8 to be delivered in January, which will reduce our capacity cost going forward. Cash balance and undrawn liquidity from our revolver is moving basically flat over the last few quarters. So it's another strong quarter with strong cash generation with somewhat improved working capital, we have $173 million in cash from operating activities. We have $27 million in dry docks and CapEx, which includes $10 million newbuild installment on vessel #7 -- we have $42 million in proceeds from selling Höegh Beijing in the quarter, and we've drawn $46 million in debt, that's the $10 million for the newbuild installment, and it's $36 million for the purchase of Höegh Copenhagen. That was -- the purchase option was exercised in the first quarter, but the delivery took place in August. Then we had normal mortgage repayment and interest of $31 million, and we paid leases of $43 million, which includes the purchase of Höegh Copenhagen. And we paid dividend of $137 million, ending then the third quarter with cash of $230 million. That only leaves us with the outlook. And I think we need to have -- we need to put in the cautionary note that tariffs may, over time, lower volumes transported. I think it's fair to say that, that has so far not really happened in the sense that the Asian market has continued to grow and remains strong. But clearly, it is a friction and we'll have to look carefully at that over time. The changes to the U.S. port fees that was announced on the 10th of October with implementation from the 14th of October was, as I mentioned in the beginning, quite a substantial shock adding cost of $60 million to $70 million. And we are working diligently to mitigate the impact. We have close dialogues with all affected customers. We are basically have strong beliefs that we will both be able to get unlikely full, but substantial compensation of the U.S. port fees from customers. We will also change our trade pattern in the U.S. to optimize versus the port fees. So we are continuously working on mitigating. But given the kind of erratic, kind of decision-making in this field, it's basically hard for us to provide much guiding beyond the fact that we are clearly working to optimize around it. We are working with customers to recover the cost. And we have, as we said, chosen to have a slightly more conservative cash retention policy by changing not the amounts over time, but the timing of paying dividends to make sure that we are resilient against these types of shocks. When it comes to the Q4 performance, we expect the operational performance to be slightly below the Q3 EBITDA level and that the USTR fees are expected to be around $20 million for the quarter. And on the last one, I would also say that we don't -- we are intending through our mitigating actions to do everything we can to avoid that number being multiplied by 4 for next year. But given that it was introduced at a surprise on a 4-day notice, we obviously had cargo on the water and vessels on the way into the U.S. that strongly significantly reduces our mitigation options during the fourth quarter, but we are working on adjusting and seeking recovery to reduce the impact going into 2026. So that concludes our presentation. We have open for questions. And My Linh, is there anything to answer. My Vu: Yes, there are a few questions for the Q&A session. And the first set of question coming from analyst Jorgen Lian, DNB Carnegie. The first one on the dividend policy. With the quarter end cash balance, would simulate around $200 million based on the declared dividend in this quarter be a constant or a function of certain assumptions? Andreas Enger: Basically, we have said again that we will distribute excess cash. And with that, that is -- and I think you can -- and we have said we're going to be on the reporting quarter. So I think using that number as an anchor point is useful. And we have reconfirmed in the Board, both that we consider that cash level to be -- give us sufficient resilient, and we have reconfirmed our commitment to pay out excess cash in dividends. But I think we should also remind that we do have, obviously, and the Board has the responsibility to make a complete assessment of the total situation at any quarter, and that will obviously be the basis. But in the current environment, and we have reconfirmed our dividend policy, and we are -- but we are using the last reported quarter as a reference for [indiscernible] surplus. My Vu: Thank you, Andreas, for the clarifications. And the next set of question is about port fees. I think we already briefly touched upon that during the outlook sessions. But we mentioned the guided impact for U.S. port fees of around $60 million to $70 million for yearly -- annual impact for HAUTO. And how does this relate to the last quarter guide of around USD 30 million for full year impact, given that now the modified port fee is now 3.3x higher. Espen, you want to. Espen Stubberud: Yes. Now we guided on $30 million earlier, and then the increase in fees now is 3.3x. So when we're saying $60 million to $70 million, this is based on us optimizing our voyages into the U.S., and that's basically about minimizing number of voyages into the U.S. and looking at how we can do that from various angles. We have deep sea vessels going into the U.S., and we try to consolidate as much cargo to the U.S. as possible on those vessels. We also have activity in the Caribbean with smaller feeder vessels that are calling on the U.S. that we will look differently upon and reroute. And of course, we also need to avoid any marginal calls to the U.S. that we have done in the past. So the $60 million to $70 million is more of a -- is an estimate on the cost for the company after we have optimized the voyages into the U.S. My Vu: And it seems we also guide $20 million impact for Q4 out of the $60 million, $70 million for gross impact for the full year. So I guess for Q4, I guess, also takes into consideration the shorter lead time between the modification... Andreas Enger: Yes, yes. Basically, we have no time to optimize. So the impact will be lower going into next year is what you're saying, yes. My Vu: Yes. And the next question is asked by a few analysts as well. Another clarification on the Q4 guidance. Is it correct to assume that the underlying operational result is slightly below Q3 and that the additional $20 million port fee will be added on top of that? Espen Stubberud: Yes. What we're saying is that the performance is continuing strong, third quarter is strong, and we're seeing also good volumes into the fourth quarter. I can repeat what we said earlier, we basically have more cargo than we can carry very strong growth in Asia. So the underlying performance is strong also into the fourth quarter, but slightly below the third. And then on top of that, all of a sudden, we've had this extra $20 million that is reducing the performance in the fourth quarter. My Vu: Thank you Espen. The next question is about capacity management. Höegh Autoliners is chartering in more capacity. So what is the future consideration requirement we have for additional vessels -- additional vessels at this point? Andreas Enger: I think first, we just said we have 2 vessels coming in, in the next couple of months, which are welcome additions to the fleet. And these are large vessels, 9,100 CEU. They're much more effective. And with our attractive both cost and financing on those vessels, they will come in on -- at a capacity cost for us that is substantially lower than the charter market. So we welcome that. But beyond that, I think it's fair to say that our -- looking at the charter rates that Espen showed without speculating too much, we were selling vessels to leverage and utilize a tight charter market. And high asset valuation, that asset valuation is coming down, and I think that is probably reducing our -- the likelihood of future vessel sales. But we are in a fleet renewal -- we have a fleet renewal strategy, and we have a decarbonization strategy. So this is something we will always look at, but they will be done based on specific opportunities rather than any kind of predecided thing. But when it comes to investments in new capacity, our program is fixed. We are getting those 2 vessels now. And then there is a gap until mid-2027, where we will then from mid-2027 into 2028, get the last 4 of the Aurora class vessels then coming at as dual fuel ammonia vessels that will have the option of running zero carbon fuels. It will also have the possibility to run entirely on traditional fuels if the sort of worst thing should happen with the IMO process. I think I also want to reiterate, it's our belief that even without -- with delays in the IMO process, we believe a system will come in place. And in the absence of an IMO system, I think it's also likely that the EU's scheme will continue. It's likely that other regions will copy that and have similar, so carbon taxes in our scenario will come in the years to come. We would have preferred to get them in a level playing field in a uniformed IMO structure. We still hope that, that will get in place. But even if it is further delayed, it doesn't mean that there will not be taxes and fees and costs of emitting carbon in our trade system. So we believe that, that trajectory is still in place. But for CapEx, we don't have any additional vessel CapEx plans that are not already announced and financed and handled. My Vu: Thank you so much, Andreas. And I guess part of your answer already answered the question from one of our audience regarding the plan -- if we have any plan to sell further vessels next year. So the next question is back into the topic of U.S. port fees, and this is asked by several analysts and other investors that follow webcast as well. So how do we plan to handle the U.S. port fee or possible future -- similar future tax with our customer? And how much do you expect to recover or pass on these costs to customers? Andreas Enger: I don't think we can answer that specifically. But clearly, we are introducing those fees in full for our sort of liner business, and we are in dialogues, and we will get substantial compensation for our existing customers. But I think it's also quite clear that this is now a cost that we expect to be embedded in all future contracting in and out of the U.S. And our expectation is that these fees will gravitate to basically become an additional cost for American consumers and American exporters. So -- but there will be a transition period where we will get some compensation, but not full compensation for those fees. My Vu: Thank you, Andreas. I see this question coming in just now. The next question is about the Suez Canal and the opening of Red Sea. When do we expect -- when do we expect the reopening of Red Sea? And how will that affect our operations and earnings? Andreas Enger: I mean I think it is -- I don't think it makes sense for us, I mean, to speculate about opening. It's, again, a geopolitical issue. It's a disturbance that we believe will have to come to an end. But -- and clearly, a reopening will allow us a more efficient trade system. It will also add capacity into our system. But I think we are -- with our sales of vessels with the newbuilds with the current short-term charters, we are fairly well placed in terms of also optimizing that situation, and it gives us more carrying capacity. So in that sense, I think that is an optimization that we are fully prepared for. We have, I think, created some things in our -- a solid structure in order to deal with it, and we will deal with it when it comes. But I don't think we will try to speculate or provide any guiding on the timing. It doesn't seem to be imminent. But when you look half year out, a lot of things can happen. And if you look a couple of years out, we are assuming that the Red Sea will eventually open. But more than that, I think we will refrain from providing -- I mean, there will be not any valid insight into our speculations and that timing because that's driven by totally external factors. My Vu: Thank you for detailed answers, Andreas. I think that's the last question we have for now, and we can give around 15 to 30 seconds more to see if we have more questions coming in. I guess that's the last question we have for now. And of course, if you have further questions, feel free to reach out to us at Investor Relations mailbox at ir@hoegh.com. Thank you for watching, and we look forward to seeing you next quarter.
Operator: Good morning, and good evening. Thank you all for joining the conference call for the LG Display earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on LG Display's Third Quarter of Fiscal Year 2025 Earnings Results. Suk Heo: Good afternoon. This is Heo Suk, Leader of the LG Display IR team. Thank you for joining our third quarter 2025 earnings conference call. Joining us today are CFO, Kim Sung-Hyun; Vice President, Choi Hyun-chul, in charge of Business Control and Management; Vice President, Kim Kyu Dong, in charge of Finance and Risk Management; Lee Kyung, in charge of Business Intelligence; Vice President, Kim Yong Duck, in charge of Large Display Planning and Management; Hong-jae Shin, in charge of Medium Display Planning and Management; Park Sang-woo, in charge of Small Display Planning and Management; and [ Hong Moon-tae ], Head of Auto Planning and Management. Today's conference call will be conducted in both Korean and English. For detailed performance-related materials, please refer to our disclosure or the Investor Relations section in the company's website. Please refer to the disclaimer before we begin the presentation. Please be informed that the financial figures presented in today's earnings release are consolidated figures prepared in accordance with IFRS. These figures have not yet been audited by an external auditor and are provided for the convenience of our investors. I will now report on the company's business performance in Q3 2025. Panel shipment grew Q-o-Q across the entire OLED product line, driven by the start of seasonality and supply for new small- and medium-sized OLED products. Revenue was KRW 6.957 trillion, up by 25% Q-o-Q and up 2% Y-o-Y. Operating profit reached KRW 431 billion, improving by over KRW 500 billion Q-o-Q and Y-o-Y. The improvement resulted from the growth in shipment and portion of OLED products as well as the company's ongoing intensive cost innovation activities. The number reflects around KRW 40 billion in onetime costs related to workforce efficiency activities, excluding which the business performance stands at approximately KRW 470 billion. Net income was KRW 1.2 billion, including the impact from the foreign currency translation gain with the exchange rate rising Q-o-Q. EBITDA in Q3 was KRW 1.4239 trillion with an EBITDA margin of 20%. Next is the trend in area shipment and ASP. In Q3, area shipment fell 1% Q-o-Q despite the seasonality and growing shipment of small and medium OLED product lines. This is following reduced shipment of low-margin midsized LCD models in line with our ongoing profitability-focused product portfolio management. ASP per square meter was $1,365, up 29% Q-o-Q, slightly outperforming the guidance. It was driven by the higher-than-planned growth in shipments of small and medium OLED products. It is an all-time high, resulting in part from the rising portion of OLED. Next is revenue share by product category. Mobile and Others, which has the largest share, reached 39%, up 11 percentage points Q-o-Q, led by panel shipment growth stemming from the seasonality and preparation for new products. In IT, while revenue grew on the back of sharp expansion in shipment of OLED panel for IT, there were larger changes in revenue in other businesses. As a result, its portion fell to 37%, shrinking by 5 percentage points Q-o-Q. The TV segment's revenue share was 16%, down 4 percentage points Q-o-Q. Auto segment's share was 8%, down 2 percentage points Q-o-Q. The share of OLED products out of total revenue was 65%, up 9 percentage points Q-o-Q and 7 percentage points Y-o-Y. As we continue to expand the performance of OLED-centric business structure upgrade, its impact is further solidifying our foundation for growth and profitability. Next is financial status and main indicators. Cash and cash equivalents in Q3 stood at KRW 1.555 trillion, largely unchanged Q-o-Q. As we keep downsizing nonstrategic businesses, for example, discontinuing the LCD TV business and enhancing operational efficiency, the size of essential working capital has also decreased. Debt-to-equity ratio was 263% and net debt-to-equity ratio 151%, down 5 percentage points and 4 percentage points, respectively, Q-o-Q, further strengthening our financial soundness. Next is Q4 guidance. Continuous growth is expected in area shipment of OLED products in Q4, while LCD shipment is expected to decrease as we keep running profitability-centered product portfolio. Accordingly, total area shipment is projected to grow in low single-digit percentage Q-o-Q. And for ASP per square meter, we saw much more pronounced increase in Q3 than usual, thanks to shipment growth of small and midsized OLED driven by seasonality and preparation for new product launches. And that is also why going into Q4, we anticipate another higher level of ASP compared to average quarters. However, it is expected to decline in low single-digit percentage Q-o-Q due to some factors such as mix change in small and midsized OLED products. And now let me hand over to our CFO, Kim Sung-Hyun. Sung-Hyun Kim: Good afternoon, everyone. This is the CFO, Kim Sung-Hyun. Let me thank you all for joining us at our conference call. Q3 this year was when we saw the results of our ongoing strategy to upgrade our business structure to be more OLED-centric and our strong initiatives for cost innovation beginning to come to fruition and manifest themselves into business performance. As mentioned earlier, Q3 saw an increase in shipment coming from the seasonality, coupled with the impact of concentrated shipment of small and medium OLED for new products, it has boosted OLED product group's revenue share up to 65%. Based on this, Q3 year-to-date business performance showed revenue of KRW 18.6093 trillion and operating profit of KRW 345 billion, continuing the trend of improvement and giving more visibility to a full year turnaround after 4 years. Despite the pressure on revenue from the discontinuation of the LCD TV business, it remained flat Y-o-Y, thanks to larger portion of OLED and premium products. Operating profit year-to-date improved by approximately KRW 1 trillion Y-o-Y. It is owed to the intense and speedy execution of strategic initiatives, including cost innovation and operational efficiency along with business structure upgrade. External uncertainties and the consequent shipment volatility are expected to persist in Q4. There still remain variables in the business environment, including macro-related real demand, intensifying competition among suppliers and supply chain stability, but we plan to address these challenges by prioritizing business efficiency initiatives. OLED products revenue share is expected to be similar Q-o-Q in Q4 with the annual share projected at a low 60% level. Incidentally, we are also planning for an additional workforce improvement program in Q4 as part of our ongoing cost innovation effort. The specifics cannot be disclosed in advance, but its impact on our financial performance is considered to be more than that of last quarter. The onetime cost occurred by this workforce improvement program will be offset after 1.5 years, providing positive impact on the business performance thereinafter. Next, let me share our plans and strategies by business segment. For small mobile business, we plan to ensure more stable operations by expanding panel shipments every year based on our technological leadership and stronger partnership with our customers. At the same time, we will keep broadening our future business opportunities by methodically implementing all future-proofing activities, including R&D and investments in new technologies. For IT OLED, which is part of our midsized business, we plan to respond to the growing demand in high-end tablet market with our Tandem OLED technology. And for the anticipated shift to OLED in the notebook sector, we will closely examine the market size and pace of change and respond effectively. Overall, we will enhance our responsiveness with differentiated approaches. Leveraging our long-standing technological leadership and mass production competitiveness, we will solidify our leading position in the market. We will also proactively respond to changing environment, including market demand and customers' requests through efficient utilization of our existing infrastructure. In IT LCD business, we remain focused on reducing low-margin products while focusing on B2B and differentiated high-end LCD segments. It is encouraging that this has led to meaningful improvement in profitability Y-o-Y. We will strengthen execution of our current initiatives to deliver improved results next year as well. For large panel business, where OLED's differentiated competitiveness is well recognized in the market, we will further solidify our leadership in the premium market with a various lineup of OLED panels offering unique value based on close partnership with strategic customers. We will continuously grow our business performance and intensify cost improvement initiatives to maintain stable business operations. Last is Auto. The market outlook is more positive than other product areas, led by expanding in-vehicle display adoption and accelerating enlargement of displays. While competition is expected to intensify, we plan to maintain our competitive edge and create differentiated customer value based on our solid market position and diversified technology and product portfolio. Finally, on investment. Our principle in CapEx execution remains unchanged, focusing on investment for future preparedness and business structure upgrade. Because our investment efficiency initiatives continue, CapEx this year is expected to be at high KRW 1 trillion range below last year's level. Moving forward, we will make prudent investment decisions while maximizing the use of existing infrastructure. New investments will be executed with profitability as the top priority. Thank you very much for your attention. Suk Heo: This concludes our presentation of business highlights for Q3 2025. We will now take your questions. Operator, please commence with the Q&A session. Operator: Now Q&A session will begin. [Operator Instructions] The first question will be provided by Gang Ho Park from Daishin Securities. Gang Ho Park: Congratulations on the good performance. Now I have largely 2 questions. Now I see that in the third quarter, the performance has risen sharply, and that appears to be on the back of rising revenue from the OLED panel as well as the revenue share of the OLED panel as well. Then the question is, does the company believe that it has the kind of structure that can sustain this kind of business performance down the road? And then related to this, traditionally, the company has been sluggish in the first half because of the strategy of its strategic customer. But then given the fact that it saw a good performance in the first half of this year, then does the company believe that this marks any change in the structure of the OLED market or the OLED business? And then based on that, then what would be the outlook for next year first half and also for the whole year? And the second question is, now in 2026, it appears that the macro uncertainties will continue and also competition continues to intensify even amidst the sluggish demand in the downstream. And as a result of this, then there could be some pressure from the customer to lower the ASP. Then how does the company intend to respond if such pressure should arise? And what is the company's strategy for continuous growth for the future? Choi Hyun-chul: This is VP Choi Hyun, in charge of the Business Control and Management responding to your questions. Now allow me to respond to the second part of your question first. And thank you very much for your interest in the company. Now it is true that in the past few years, the uncertainty and volatility in the external environment have continued. But then the company have continued also to expand our business performance every year based on internal capabilities based on our push to upgrade our business structure to be more OLED-centric and also to continue with the cost innovation activities. And as a result, despite the various factors coming from the outside, we were able to improve our performance, and we intend to keep demonstrating more stable performance down the road. Now looking back to the performance in the past 2 years, then last year, in 2024, we were able to narrow the loss by a very big margin of KRW 2 trillion from the previous 2023. And then for this year, although we still have the fourth quarter to go, we have the projection that we will be able to improve profitability by another KRW 1 trillion this year for the year. Now looking ahead, uncertainties in the external environment are likely to persist. But then as explained earlier, based on the stronger business fundamentals as well as the ongoing efforts at cost innovation, we will continue to work to further improve our business performance next year as well Y-o-Y. And looking ahead, we will continue to maintain stable business performance. And now it is true that there has been sluggish demand in the display market downstream and also stronger competition, making it difficult for any company to go for both growth and stable management of profitability at the same time. Having said that, the company will continue to try to expand our revenue and solidify our market leadership by increasing the OLED product portion, focusing more on high value-add and high-end products from global leaders and also developing the new growth engines based on differentiated technologies. And now with regards to your question about the panel price, I take it that it is a question about our maintenance of the profitability. Now based on our strong partnership with our customers, we will continue to operate an optimum pricing strategy, while at the same time, upgrading our product mix and continuing with our cost innovation and operational efficiency activities at the same time so that we can continue to expand our profitability. Suk Heo: We will take the next question. Operator: The following question will be presented by Mingyu Kwon from SK Securities. Mingyu Kwon: Congratulations on the good performance. I have 2 questions, and one is about the mobile. So it seems that the -- so I'm wondering about the market reception to the launch of new models by the North American customer. Now from media reports, it seems as if the reception for the standard model is better than expected, for the air model, perhaps less so. Then what would be the implications for the LG Display? For example, will there be any changes in the expected shipments or in the market share? And then the second question is now for the smartphone panel annual shipment target and the outlook for next year. So if there is a foldable product to be launched and also given the -- so given the likely launch of the foldable product and also the intensifying competition, then what is the possibility of shipment increase in 2026? If the company believes that shipment growth in 2026 is possible, then what would be the drivers for that? And then the last question is related to the small to midsized OLED. Now because of the restructuring in the Japan Display Inc., it is understood that LG Display is now the sole supplier for the smartwatch panels. Then what will be the volume, the annual volume of supply? And also what will be the contribution to the company's revenue and profit and loss? Park Sang-woo: This is Park Sang-woo, in charge of Small Display Planning and Management. Now for the smartphone business, the company has been achieving stable performance, thanks to our stronger competitiveness with our technology and production as well as across all areas of operation. And then in terms of the response to the new models by the customer, we understand that generally, it is quite positive. But then for the different models, the actual demand could be different. So this could also translate into some changes in the shipment plan based on the market trends. And now in the first half, despite the seasonality, there was a meaningful shipment growth by over 20% Y-o-Y. And then in the second half, thanks to the diversified product portfolio and stable supply system as well as the efficiency improvement, there has been improvement in profitability as well. So for the year, we are confident that we will be able to further expand our performance from last year. Now for the company, we believe that we have already have built up the technological know-how to flexibly respond to the diversifying needs from the customer. For example, by having a stronger capability in development and mass production of smartphone panels. And also by more efficiently utilizing the current infrastructure, we will be able to respond even more speedily and flexibly to new technologies and also growth in demand for different products. And looking ahead, we will continue to create stable performance by strengthening our quality competitiveness, continuing with our cost innovation efforts and preparing for the future technologies based on our close partnership with the customer. Now about the wearable devices, they are equipped with a number of different functionalities. And also across the society, we are seeing increased interest in health overall. So it seems as if the use of these products across the consumers' lifestyle in general is going to keep going up. So we believe that the outlook for the mobile OLED product market, including the smartphones is quite positive. The company already has the best technological leadership and production capability in the smartwatch panel business. And recently, there has been a change in the supplier status in the industry, which has also resulted in the growth of panel supply volume. And we believe that this will serve to further solidify the company's position in the premium wearable market. Now in terms of the annual supply volume, revenue, profitability and other information related to them are directly related to the customer. And thus, please understand that I am not in the position to discuss the details or the specifics. But then we will continue to create stable performance in the smartwatch panel business, utilizing our technological competitiveness and leading supplier status. Suk Heo: We will take the next question. Operator: The following question will be presented by John Heekyu Yun from UBS Securities. John Heekyu Yun: I have a question on the small mobile product. Now the market expectation is that in the second half of 2026, the North American customer will be launching a foldable smartphone product. Now then what would be LG Display's strategy for foldable smartphone panel business? And can you also share with us the status of the company's readiness for the product and technology? Park Sang-woo: Now for foldable products, there is growing anticipation from the market on the possibility of opening up new market segments for its differentiated form factor and the new user experience that it provides. Now if the foldable smartphone market becomes well established, then the product can also become the vehicle for trying out new technologies as the flagship model. So the company is closely monitoring the smartphone market trends as well as the demand outlook and is preparing for potential market growth. But for now, our strategy is to maximize the supply volume for the existing products so that we can continue to heighten our performance until we can get better visibility into the demand growth as well as opportunities for the company. So the company continues with the series of activities to strengthen our R&D and acquire new technologies. Now in the smartphone areas, if we can come upon more clearer opportunities, then we will build up our supply structure and expand our business opportunities after carefully reviewing the market acceptance of differentiated product as well as the market growth pace. Suk Heo: We will take the next question. Operator: The following question will be presented by Sun Kim from Kiwoom Securities. Sun Kim: I have 2 regarding the IT business. Now first, in IT, the LCD, the competition for LCD in IT is intensifying. And also, at the same time, the profitability is worsening. Then are there any plans for the company to downsize or even exit the LCD IT business as it has done so in the LCD TV? Or otherwise, what would be the strategy for the LCD IT business? And then second, now there is also outlook for growing adoption of OLED in the IT market as well. And in response to this, the -- your peers in the market are now making investment into the 8.6 Gen OLED. So what is the company's preparation or what are the company's activities in order to be ready for this potential adoption growth of OLED in IT? Hong-jae Shin: This is Hong-jae Shin, in charge of Medium Display Planning and Management. Now it is true that the medium product market remains overall sluggish, but then the company has been maintaining intense cost innovation activities. And as a result, we have been moving closer to our targeted performance, for example, making gradual improvement on our profitability, thanks to our focus on the high-end LCD technologies and differentiated competitiveness coming from OLED. In LCD, we are maintaining profitability-centric business management by the select and focused approach centered on strategic customers. And utilizing the company's technological advantage and global customers' partnerships, we continue to maintain our business based on B2B and high-end lineups. While at the same time, downsizing the low-margin models and improving profitability and enhancing stability. And for OLED, in particular, the company is providing various solutions to our customers based on the 2-track strategy of addressing new demand and preparing for future market. Now based on the company's differentiated competitiveness, we continue to respond to the growing demand of high-end monitors like gaming. And as a result, we are also seeing increase in the shipment of OLED panels for monitors. Now in the notebook business, it is expected that there is going to be a gradual transition to OLED. But then the company believes that we need to see additional and clearer signs of the market size, transition speed as well as consumers' acceptance. As such, the company remains closely watching the OLED notebook market size, while at the same time, we will be utilizing the existing infrastructure as much as possible for the technologies that can apply to future products. And by doing so, we will steadily make preparation for future technologies and mass production. Suk Heo: We will take one last question. Operator: The last question will be presented by Won Suk Chung from iM Securities. Won Suk Chung: Now I have a simple question about the OLED TV. So the macro uncertainties continue and also there is growing competition with the LCD products. And then at the same time, there are also reports that a domestic TV set-top company is intending to expand its OLED lineup as well. So what is LG Display's strategy and mid- to long-term target for the OLED TV business? Kim Yong Duck: This is Kim Yong Duck, in charge of Large Display Planning and Management. Yes, it is true that the uncertainties in the external environment and the business environment continue. But then for the company this year, we are projecting a mid-6 million unit level of large OLED panel shipment, which is growth Y-o-Y. Now compared to the LCD, the unique value of OLED panel appears to be more and more recognized in the market. And also pricing is nearing the range of affordability, enhancing further its acceptability in the market. And as such, for next year, the company is looking forward to another growth expecting 7 million units. And in particular, the gaming OLED monitor, so the demand for the gaming OLED monitor that is produced out of the large OLED fab is seeing meaningful growth. So for the large OLED panel, so we believe that the gaming OLED monitor out of the large OLED panel shipment, the share will be around low- to mid-teen percentage this year. The company continues to strengthen the fundamental competitiveness of OLED products as we also continue to diversify our product group. At the same time, we are maintaining very intense cost innovation activities and operational efficiency activities at the same time so as to continue to improve profitability of our large panel business. Of course, I cannot mention the specific profitability of each business segment, but then the results of all these multifaceted efforts are coming together to make a bigger contribution to the overall business performance. But of course, external uncertainties persist and competition between the different products is also intensifying as evidenced by the launch of various products that are in direct competition with OLED. So in response to these changes, the company will maintain our very strong cost innovation activities and also continue to build up our partnership with global top-tier customers so that we can maintain stable business performance. And last, the company's OLED capacity is 180,000 for Generation 8, out of which we are currently utilizing 135,000 for mass production. And down the road, we intend to flexibly run the capacity in linkage to actual demand. And we also have sufficient infrastructure to flexibly respond to any additional growth in the market demand. Suk Heo: Thank you very much. This concludes LG Display's Q3 2025 earnings conference call. We thank everyone for joining us today. Should you have any additional questions, please contact the IR team. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Greetings, and welcome to the FinWise Bancorp Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Juan Arias. Please go ahead. Juan Arias: Good afternoon, and thank you for joining us today for FinWise Bancorp's Third Quarter 2025 Earnings Conference Call. Earlier today, we filed our earnings release and investor deck and posted them to our investor website at investors.finwisebancorp.com. Today's conference call is being recorded and webcast on the company's investor website, as previously mentioned. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Forward-looking statements represent management's current estimates, expectations and beliefs, and FinWise Bancorp assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements, including factors that may negatively impact them contained in the company's earnings press release and filings with the Securities and Exchange Commission. Hosting the call today are Kent Landvatter, Chairman and CEO; Jim Noone, Bank's CEO; and Bob Wahlman, CFO. Kent, please go ahead. Kent Landvatter: Good afternoon, everyone. Our strong third quarter results demonstrate that the strategic investments we have made over the past 2 years are starting to deliver meaningful results. During the quarter, we posted robust loan originations of $1.8 billion and credit enhanced balances reached $41 million. Revenue growth was solid, driven by both fee and spread income growth and disciplined expense management further supported profitability. Tangible book value per share continued to increase to $13.84 compared with $13.51 in the prior quarter, reflecting ongoing value creation for our shareholders. Following the close of the third quarter, we announced 2 additional strategic program agreements that we are very excited about. The first is with DreamFi, a start-up financial technology company that will provide financial products and services to under-banked communities. The second is with Tallied Technologies, a program manager and network issuer processor, which will bring FinWise a substantial credit enhanced portfolio balance in Q4 2025 to support both business and consumer credit card programs. As a reminder, while the credit enhanced loans acquired in the Tallied transactions will increase our balance sheet, the credit risk is low because of the guarantee provisions of the agreement supported by the cash loss reserve deposit account that Tallied must maintain at FinWise to absorb credit loss as well as the cash flows generated by the assets. We remain actively engaged in discussions with several other potential strategic partners to further expand our strategic initiatives, and our pipeline continues to be strong. Importantly, this partnership with Tallied underscores the uniqueness of our one-to-many business model, which we've outlined previously. While our model can appear lumpy as securing strategic agreements may sometimes take longer than anticipated, each completed agreement has the potential to unlock substantial value for us. These agreements can drive meaningful increases in portfolio balances and accelerate revenue growth, reinforcing the scalability and strength of our approach. As we discussed last quarter, we are carefully evaluating a measured increase in dollar balances of higher-yielding loans, particularly as our loan portfolio continues to grow. However, we will remain within the internal limits established in 2018 as our policy restricts these loans to less than 10% of the total portfolio. Overall, we are very pleased with our performance this quarter and the solid momentum we're seeing across the business. These results underscore the strength of our strategic execution and our unwavering commitment to long-term value creation rather than prioritizing short-term gains. As we move forward, we will continue to focus on disciplined growth and operational excellence, key drivers of sustained progress and meaningful returns for our shareholders. With that, let me turn the call over to Jim Noone, our bank CEO. James Noone: Thank you, Kent. The strong momentum from recent quarters continued into Q3 as evidenced by loan origination volume totaling $1.8 billion, a 21% increase quarter-over-quarter and a 24% increase year-over-year. Key drivers included a seasonal uptick from our largest student lending partner in line with the academic calendar and continued ramp and maturation from new programs we have launched over the past several years. While macroeconomic conditions and demand trends may shift intra-quarter, originations through the first 4 weeks of October 2025 are tracking at a quarterly rate of approximately $1.4 billion. This reflects the expected seasonal deceleration from our largest student lending partner and fewer business days in the quarter due to multiple holidays. We expect a 5% annualized rate of growth in originations from this $1.4 billion quarterly level during 2026 is appropriate based on organic growth right now. We are also pleased that credit enhanced balances reached $41 million at the end of the third quarter. To support the modeling efforts of these assets, let me provide an outlook for the remainder of 2025 and into 2026. Incremental organic growth in credit enhanced balances is running at approximately $8 million in October, and we are currently comfortable projecting $8 million per month in incremental organic balances for each November and December of 2025. Additionally, as previously mentioned, our recently announced agreement with program manager, Tallied Technologies, is scheduled to close on December 1. We anticipate this transaction to contribute approximately $50 million in credit enhanced balances late in the quarter. for a projected total of approximately $115 million in credit enhanced balances by the end of the fourth quarter. This compares to our prior expectations for $50 million to $100 million by the end of the fourth quarter this year. Looking ahead to 2026, we are currently comfortable with organic growth in credit enhanced balances of $8 million to $10 million per month right now. Quarterly SBA 7(a) loan originations declined 7.8% quarter-over-quarter and are up 68% year-over-year. The quarter-over-quarter decrease primarily reflects typical third quarter seasonality. Importantly, the recent federal government shutdown may impact FinWise's SBA lending operations in the following ways: First, loan approvals. While FinWise can work with applicants to prepare documentation and complete bank underwriting, all new loan approvals for the 7(a) and 504 loan programs are currently suspended. Second, loan closings. FinWise can close previously approved loans if there are no change actions requiring SBA approval, but some loan closings will be impacted until the government reopens. Third, secondary market sales. Loan sales require approval by the fiscal transfer agent, and this is currently suspended during the government shutdown. Loan servicing is not materially impacted by the shutdown, and we also do not anticipate the government closure will be detrimental to credit quality as FinWise does not need SBA approval for most of the actions we take in servicing and liquidation. While our SBA lending is impacted by the current government shutdown, this has happened in the past when Congress was unable to agree on budgetary matters. And FinWise was successful in managing its pipeline of loan applicants, loan closings and loan sales through similar periods. We continue to monitor the situation closely and remain focused on maintaining strong pipeline activity heading into Q4. During the past quarter, we continued to sell guaranteed portions of our SBA loans as market premiums remained favorable. We will continue to follow this strategy as long as market conditions remain favorable. That said, the current government shutdown may impact the amount of loans that we can sell in the fourth quarter. Importantly, our SBA guaranteed balances and strategic program loans held for sale, both characterized by lower credit risk, collectively represent 40% of our total portfolio at the end of Q3, underscoring the lower risk composition of our loan portfolio. Turning to credit quality. The total provision for credit losses was $12.8 million in the third quarter, of which $8.8 million is attributable to growth of credit enhanced balances in the quarter. This compares to a total provision of $4.7 million in the prior quarter, of which $2.3 million was attributable to growth of credit enhanced balances. As a reminder, the provision for credit losses associated with the credit enhanced loan portfolio is different from core portfolio provisions because it's fully offset by the recognition of future recoveries pursuant to the partner guarantee of an exact amount described as credit enhancement income in our noninterest income. Quarterly net charge-offs were $3.1 million in the third quarter versus $2.8 million in the prior quarter. For modeling purposes, we continue to believe that approximately $3.3 million is a good quarterly number to use. This level has remained consistent on a quarterly basis over the last 2 years, and it's in line with our expectations following the portfolio derisking initiative we implemented a little over 2 years ago. During Q3, only $3 million in loans migrated to NPL, bringing our total NPL balance to $42.8 million at the end of the quarter. This modest increase was mostly due to SBA 7(a) loans classified as NPL and compares to guidance on our prior call that up to $12 million in balances could migrate during the third quarter. The lower-than-expected migration reflects the team's proactive efforts in selling collateral, securing paydowns and receiving reimbursements on the guaranteed portions of SBA loans that have become classified. Of the $42.8 million in total NPL balances, $23.3 million or 54% is guaranteed by the federal government and $19.4 million is unguaranteed. Looking ahead, while we expect a gradual moderation in NPL migration as loans underwritten in lower interest rate environments continue to season, migration may remain lumpy. For the fourth quarter, we anticipate that approximately $10 million to $12 million in watch list loans could migrate to NPL. I will now turn the call over to our CFO, Bob Wahlman, to provide more detail on our financial results. Robert Wahlman: Thanks, Jim, and good afternoon, everyone. We reported net income of $4.9 million for the third quarter, representing a 19% increase from the $4.1 million reported in the prior quarter and a 42% increase year-over-year. Diluted earnings per share rose to $0.34, up from $0.29 in the previous quarter and $0.25 in the same quarter last year. These results reflect strong operational execution and sustained business momentum across our core segments. Our strong performance was driven by several factors, including a notable increase in loan originations and a significant rise in credit enhanced balances. These trends contributed to higher net interest income, reflecting increased average loan balances across both our held for investment and our held-for-sale portfolios. This was partially offset by the reversal of interest income on newly classified nonaccrual loans. We also posted solid noninterest income, largely driven by a substantial increase in strategic program fees and higher gain on sale of loans. As a reminder, for accounting purposes, credit enhanced income is an offset to the provision for credit losses on the credit-enhanced loan balances and net does not have an effect on net income. On the expense side, the increase in credit enhanced expenses is for the servicing and the guarantee on the credit enhanced loans, so reflects the growth in the credit enhanced loan portfolio. Excluding the credit enhanced expenses, we remain disciplined with our compensation and other operating expenses. Total end-of-period assets reached nearly $900 million for the first time in the company's history. This achievement reflects robust balance sheet expansion fueled by sustained loan growth and our disciplined approach to capital deployment. Average loan balances, including held for sale and held for investment loans totaled $683 million for the quarter compared to $634 million in the prior quarter. This increase included notable growth in strategic program loans with credit enhancements, commercial leases, residential real estate and owner-occupied commercial real estate. Average interest-bearing deposits were $524 million compared to $494 million in the prior quarter. The sequential quarter increase was driven mainly by an increase in wholesale time certificate of deposits, but we also had a modest pickup in other deposit categories, including demand, savings and money market deposits. Net interest income increased to $18.6 million from the prior quarter's $14.7 million, primarily due to an increase in credit enhanced balances and rates in the held-for-investment portfolio and the higher average balances in the strategic program loans in the held-for-sale portfolio, partially offset by higher average balances of brokered CD accounts. Net interest margin increased to 9.01% compared to 7.81% in the prior quarter, driven mainly by growth in the credit enhanced portfolio, offset in part by accrued interest reversals on loan migrating to nonaccrual during the prior quarter. As a reminder, the net interest margin can be affected by specific terms of each new credit enhanced loan program or by the mix of loan growth of existing credit enhanced portfolio. While generally, new credit enhanced agreements will expand the NIM from the current levels, some agreements could cause NIM to compress. In terms of a net interest margin outlook, for the fourth quarter, we could see some compression in the margin relative to Q3. This is primarily driven by the onboarding of a substantial volume of average balances through our new strategic partnership with Tallied. While this initiative supports overall revenue growth, the revenue contribution from these balances is bifurcated between net interest income and interchange fees. As a result, a portion of the revenue generated by this agreement will be captured in net interest income and a portion will be captured in noninterest income. As a portion of the economic benefit to FinWise will be captured in noninterest income, the resulting net interest margin from adding this program may be lower than expected. Looking beyond the fourth quarter, we suggest thinking about our net interest margin in 2 distinct ways, including and excluding credit-enhanced balances. When including credit enhanced balances, the margin is projected to increase, supported by the continued expansion of our credit-enhanced loan portfolio and strategic efforts to lower our cost of funding. This upward trend is expected to persist until growth in these balances begins to moderate. Conversely, excluding credit enhanced balances, we anticipate a gradual decline in margin consistent with our ongoing risk reduction strategy. Fee income was $18.1 million in the quarter compared to $10.3 million in the prior quarter. The sequential quarter increase was primarily driven by the substantial increase in credit enhancement income, continued growth in strategic program fees due to stronger originations and gains on sale of loans. As noted earlier, credit enhancement income is fully offset by the provision for loan losses related to credit enhanced loans and increases as we grow our credit enhanced loan balances outstanding each quarter. Noninterest expense for the quarter totaled $17.4 million, an increase from $14.9 million in the prior quarter. The pickup was primarily driven by higher credit enhancement expenses, including the servicing and cost of the guarantees on the credit enhanced loans, reflecting the continued growth in the credit enhanced loan portfolios. Importantly, when excluding credit enhancement costs, operating expenses increased only modestly with the uptick largely concentrated in other operating expenses. This was mainly due to servicing expenses associated with the balance sheet programs of our strategic programs. The reported efficiency ratio is 47.6% versus 59.5% in the prior quarter. The decline was due mainly to the increase in credit enhanced fee income and gain on SBA loan sales previously discussed. Removing the income statement effects of the credit enhanced loans, a non-GAAP measure, the efficiency ratio was 59.7% versus 65.3% in the prior quarter, implying solid operating leverage in the quarter due to strong revenue growth and disciplined expense management. Although further improvement in the efficiency ratio may be less pronounced in future periods, we remain focused on driving sustainable positive operating leverage with a long-term goal of steadily lowering our core efficiency ratio. That said, there may be periods in which the efficiency ratio may increase. Our effective tax rate was 23.7% for the quarter compared to 24.5% in the prior quarter. The decrease in the prior quarter was due primarily to the increase in deferred tax assets related to restricted stock, increased allowances for loan losses and accrued bonuses. While multiple factors may influence the actual tax rate, we currently expect fourth quarter of '25 tax rate to be approximately 26%. With that, we would like to open up the call for questions and answers. Operator? Operator: [Operator Instructions] and our first question will come from Joe Yachunis with Raymond James. Joseph Yanchunis: So as you outlined in your prepared remarks, credit enhanced loan balances are going to exceed your year-end target, largely due to receiving the tallied loans. Given your outlook for credit enhanced loans, can you discuss what level of concentration you're comfortable with in your loan portfolio? Kent Landvatter: Yes. So some of the concentration policies, Joe, really are limited by percent of the portfolio by program. And I would tell you that they top out at about 15% per program. Joseph Yanchunis: Okay. That's per program, not for loan type. Kent Landvatter: That's correct. Joseph Yanchunis: And then can you talk a little more about the net reductions in FTEs and compliance and risk functions? I understand the percent of employees in these oversight roles remained unchanged, but is there any new systems that you put in place to automate certain functions to allow fewer employees to ever see more volume? Kent Landvatter: The employee right now, the number has dropped a little bit. It's not due to any AI or what have you in the system. It's just us being very disciplined about what we're doing here. However, we are analyzing as many other banks, our potential efficiency impacts from AI. Joseph Yanchunis: Okay. I appreciate it. And then just a couple kind of clarification questions for me. And forgive me if this has already been covered, but what is the difference between credit enhancement program expenses and credit enhancement guaranteed expenses? Robert Wahlman: So we're just being more specific. What was in previous periods referenced as credit enhancement expenses is referring to the actual amount that we're paying for guarantees on those credit enhancement programs. The other component piece that's included in the expense section but is not specified was not being included in what was previously described as credit enhanced expenses is a servicing costs related to those credit enhancement loans. But that's rather insignificant relative to the guarantee amounts that are being paid. Joseph Yanchunis: Okay. Perfect. And then just kind of last clarification question for me. You talked about some accrued interest reversals in the quarter. Can you quantify that impact? Kent Landvatter: Could you repeat the question, please? Joseph Yanchunis: The accrued interest reversals in the quarter that boosted loan yields and the NIM? Kent Landvatter: Yes. That was -- the accrued interest reversal during the period was about $175,000. So that is when a loan goes nonperforming, and we have to reverse the interest that had previously been accrued on the loan when it reaches 90 days past due. That was $175,000 in this quarter compared to $514,000 last quarter. Operator: Our next question comes from Andrew Terrell with Stephens Inc. Unknown Analyst: Just thinking about kind of net growth of the balance sheet into the coming year. Jim, I appreciate the guidance you gave around the credit enhance. That's really helpful. But should we expect the entirety of your loan growth going forward to come from that credit enhanced product or products? Or should we expect growth in any areas outside of that? James Noone: I think you'll see growth across the board, Andrew. I think that would be the primary driver, though. That's where you'll see the biggest tick up. If you look at our SBA portfolio, we've kind of been selling about as much production as we're putting on, on the guaranteed portions, at least in the last quarter or 2. You're getting -- in the equipment leasing, you see upticks each quarter. But yes, generally, the credit enhanced portfolio is where the meaningful growth on the portfolio side will come from. Unknown Analyst: Okay. Got it. And then you're going to outperform this $50 million to $100 million guide. It sounds like by the time we end this year. And if we kind of extrapolate the baseline you're talking of monthly growth for 2026, it implies just a little more than $100 million of credit enhanced growth in 2026. I'm just curious what could cause you to deviate either positively or even negatively versus kind of this established baseline we're thinking about for 2026? James Noone: Yes. So yes, we're looking at about $115 million by the end of the year, and that's above previous guidance of the $50 million to $100 million. So we're happy about that. Like you mentioned, we're currently comfortable with organic growth there, call it, starting January 1 of about $8 million to $10 million based on what we're currently seeing in trends. So what would cause us to outperform that? It would be an acceleration. There's 4 live programs today, Andrew, and then there's the fifth program coming online in December with Tallied. Of the 4 live programs, 2 have kind of good established trends month-over-month. I would say 2 are still kind of lagging as far as just growth. So if you have those 2 programs start to hit more of the stride, you could have upside. On the downside, I would say, really, if you have some material weakness in performance. When we underwrite these, we stress we stress them pretty highly, both with 50% and 100% stress on charge-off rates and then we look at high watermarks. But if we have meaningful deterioration in performance there and we have to stop originations for one of those programs, that's where you would see underperformance versus the kind of trend that we're talking about $115 million to start of the year and then $8 million to $10 million of organic growth monthly throughout the year. Unknown Analyst: Got it. Okay. And if I could clarify one on the expenses. I'm looking at the credit enhancement guarantee expense of $1.720 million in the quarter compared to in the adjustment section, you're breaking out the total credit enhancement program expense of $1.968. Is the delta of that what you're referring to is the kind the incremental servicing costs that I'm assuming would be kind of variable as this loan portfolio grows? James Noone: Yes, it is. That would be the difference. Unknown Analyst: Okay. And it is variable, so increases going forward? James Noone: The servicing cost is typically stated as a percentage of the assets. And so that will vary as the program matures and grows. Unknown Analyst: Yes. Okay. And so if I look at that, that was in kind of the other expense line in the third quarter that stepped up. It essentially implies the other expense stepped up $400,000 or so in the quarter. I'm just curious, any other specific drivers to the step-up in the other expense? I'm just trying to get kind of a clean run rate. James Noone: Well, the largest one that you noted there was the servicing expenses on these credit enhanced portfolios. The other changes that are included in there is deposits are higher. So we have a little bit higher FDIC deposit insurance assessment. And then just generally, data services and software costs are included in there that also increased. Operator: And we'll go next to Brett Rabatin with Hovde Group. Brett Rabatin: I wanted to ask a question on the credit enhancement. Some of the loans that you're adding through these programs are credit enhanced and some are not guaranteed. Can you maybe break apart the decision on what you're doing with the 2 pieces there and why there's 2 buckets? James Noone: Yes. So I think you're probably looking at the table on Page 5 of the earnings release, Brett. Is that right? Brett Rabatin: Yes. Yes. James Noone: Yes. Okay. So you've got 2 kind of sub-line items there under strategic program loans, one with credit enhancement, and that's the credit enhancement program that we've been talking about, and it's been a meaningful, starting to become a meaningful growth driver of assets in the portfolio. Without credit enhancement, those are -- you can call them like full risk retention programs that we have. We have 3 -- there's 4 active programs there. Most of them were retention programs that we've been active with really over the last 4 or 5 years. Those balances have been pretty stable. We talked in the last quarter or 2 about the fact that they may start ticking up here. And so you see them -- they were pretty flat in the June quarter versus the same period last year. But you did see them tick up a little bit, $3 million or so in this quarter. And we had talked about that. In that program, you're getting full yield, but you're taking full NCO exposure as well. And so with a few of our partners, we've got anywhere from 2% to 5% retention rates. So every loan that comes through that we originate at the bank, we will hold 2% to 5% of the receivable, and then we sell 98% to 95% of the receivable to an SPV or back to the partner. And then that loan balance will stay on our balance sheet through payoff or charge-off. And so we're capturing all of the yield. We're capturing all of the credit risk, but that it's been a fairly stable number. It's starting to tick up a little bit. And I think Kent, in some of his remarks over the last quarter or 2 has mentioned that we're looking at potentially growing that a little bit here. Does that help? Brett Rabatin: Okay. Yes, that's helpful. For some reason, I was thinking that you guys were going to transfer those programs into the strategic with credit enhancement. And so those balances were going to go down instead of up. That makes sense. James Noone: Yes, difference [indiscernible]. Brett Rabatin: Right, right. Wanted to ask, you mentioned the margin down in the fourth quarter with continued derisking. Can you maybe talk about the -- how much you're expecting? And then when I look at the CDs that cost $422 in the third quarter with rate cuts, I'm wondering if the CD book might be an opportunity on the margin. Kent Landvatter: Sure. Let me tackle that one. So what I was referring to in my comments was that we have Tallied coming on and during the fourth quarter, late in the fourth quarter. And Tallied is a little bit of a different structure of transaction where the revenue is in part related to interest income, which is a -- which is going to be only part of the revenue we collect from it, and then we're also going to collect from that portfolio, the additional fees, the Interchange fees, thank you. So depending upon when that program comes on and how quickly these other programs continue to wrap up, that could result in a little bit of a toss-up in regards to whether we end up with margin increase or margin decrease during the fourth quarter. Brett Rabatin: Okay. That's helpful. And then on money rails and payments, do we have to wait to January for some, maybe some thoughts on potential revenue in '26? And if we do, okay, but I was hoping for maybe any early color you could give? And then just particularly money rails and payments, just maybe any pipeline on potential partners from here? Kent Landvatter: Sure. So as far as cards go first, we just announced DreamFi and Tallied. We actually expect DreamFi will generate some deposits for us in latter half of 2026, especially. But also, we have the standard banking behind that. So we would be moving money back and forth on money rails with them. We also have additional partners that are -- that we expect to generate not only deposits, but money rails fee income as well as some BIN opportunities as well in the pipeline right now. So does that answer your question? Brett Rabatin: Yes, that's helpful. And then just -- I don't know if you want to give any kind of early thoughts around potential revenue magnitude, but that would be helpful as we think about the coming year. James Noone: I don't think we're ready at this time, but what we said before is it will become more meaningful in the latter half of '26, and we think you'll get more of a steady state in '27 that's more predictable. But as we get more information here, we'll share that with you. Brett Rabatin: Okay. Last one for me, just around expenses. And you mentioned earlier that AI was not a driver for 3Q. But I know 36% of your FTE count is in compliance, IT, et cetera. Is that an opportunity you guys think over the next year? Kent Landvatter: That's a great question. The way we kind of think of it is we have built a platform to continue to launch partners. And we really don't look at it in terms of headcount reduction. What we do look at it as is the ability to moderate headcount, especially production-related headcount as we grow. And so that's really where we see the lift there because we do have a lot of requirements and oversight and so forth that we think we're rightsized there, but future growth is where we see the opportunity. Operator: And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
Operator: Ladies and gentlemen, welcome to the Straumann Group Q3 2025 Results Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Guillaume Daniellot, CEO. Please go ahead. Guillaume Daniellot: Thank you, and good morning or afternoon to all of you. Thanks for attending this conference call on the Straumann Group's Third Quarter Results 2025. Please take note of the disclaimer in our media release and on Slide 2. During this conference call, we are going to refer to the presentation slides that were published on our website this morning. As usual, the discussion will include some forward-looking statements. As shown on Slide 3, I will start with the highlights for the third quarter. Isabelle will then cover the financial details. And afterwards, I will share strategic updates and our outlook. We will be happy to answer your questions at the end of the presentation. Let's start with our highlights and move directly to Slide 5. I'm really proud of our teams globally for the great progress they made this quarter and how they are demonstrating agility to adapt to different market dynamics. In the third quarter, our revenue reached CHF 602 million, representing a strong organic growth of 8.3%. For the first 9 months, we achieved CHF 2 billion, which is up 9.6% organically. Building on this strong performance, I'm excited to announce the important steps in our orthodontic strategy, which includes new partnerships that will enable us to transform our clear line of business and unlock the full potential of our ClearCorrect brand. Later in the presentation, I will explain how we will accelerate innovation, increase profitability and strengthen ClearCorrect's position for sustainable growth together with our strategic partners, Smartee and Dental Monitoring. On the digital innovation side, one of the highlights of the third quarter was the launch of our new SIRIOS X3 intraoral scan. These marks another major step in strengthening our scanner portfolio across all price segments and our digital ecosystem through its full integration in our Straumann [ Access ] cloud-based platform. On the operational side, we are very pleased to announce that our new campus in Shanghai is fully operational by now and delivering first commercial products to the Chinese market. With this, we have significantly strengthened our supply chain resilience ahead of the upcoming VBP 2.0, which is expected to be announced end of this year. These achievements strengthen our foundation and create the opportunity for continued growth, supporting our confirmed full year 2025 outlook of high single-digit organic revenue growth and a 30 to 60 basis point improvement in the core EBIT margin at constant 2024 currency rates. Now turning to Slide 6 and the regional development. I would like to start by highlighting that EMEA has once again achieved an excellent organic revenue growth with 11.2%. This success was driven by a strong execution across all businesses including double-digit growth in orthodontics and strong traction from our recent innovations in our core implant segment. The Straumann brand continued to gain market share while our challenger brand, Neodent and Anthogyr also grew strongly, reflecting our ability to serve different customer segments across different price points. In North America, we delivered solid growth in a still volatile environment. Organic growth accelerated to 5.7%, reflecting strong execution and growing adoption of iEXCEL implant system and our digital solutions. From a general perspective, patient flow remained rather stable during the quarter, even if we could witness some initial pocket improvements. In Asia Pacific, the significant slowdown compared to the previous quarter reflects 2 very different dynamics. On the one hand, in China, we have seen a significant slowdown due to the initial effect of VBP 2.0. Some patients have studied postponing treatments and distributors reducing inventories. On the other hand, markets outside China continued to grow strongly, especially India, Thailand, Australia and Japan, driven by robust patient demand and expanded access to care through intensified education activities. Finally, Latin America once again delivered a remarkable performance with 18% showing double-digit growth across all segments. Our challenger brand Neodent remains the key growth driver, while the Straumann premium brands, our orthodontics and digital businesses contributed strongly. Therefore, overall, our regional performance highlights the strength of our strategy and our ability to execute with discipline and agility across markets, with each region contributing with good growth despite varied market conditions. With this, let me now hand over to Isabelle who will take you through the financial performance. Isabelle Adelt: Thank you, Guillaume, and hello, everyone. Let's move to Slide 8, where you can see the revenue bridge for the third quarter. Our reported revenue increased from CHF 586 million to CHF 602 million, which represents a 2.9% growth. The Franc exchange rate effect of CHF 30 million is still very significant, but lower than in the second quarter. Overall organic revenue growth led us to 8.3%. As already mentioned by Guillaume, EMEA, our largest region, was once again the main growth contributor accounting for roughly half of the total increase in revenue, followed by strong performance of our Latin America region, which contributed more than 20% to the group's growth. Despite the currency effect, which we still expect to have a top line impact of 470 to 490 basis points for the full year, our underlying business remains very strong, reflecting both the strength of our brands and our disciplined execution across regions. Continuing with Slide 9, let's talk about our assets to mitigate tariffs. As you know, new tariff regulations have added cost pressure to the business. To counteract this, we have continuously implemented a set of mitigating measures over the past months. In the short term, we have increased inventory levels in key markets and adjusted logistic flows accordingly to secure continuity of supply chain. Thanks to these mitigating measures, we could sustainably reduce the effects of tariffs to around CHF 20 million to CHF 25 million for the full year 2025. For next year, we are increasing the share of locally produced finished products, including local assembly and packaging lines to reduce tariff exposure and improve supply chain efficiency further. For next year, we currently expect a similar impact from tariffs of around CHF 30 million. With this, we are protecting our margins while maintaining excellent service levels. Finally, a quick reminder on our capital allocation priorities on Slide 10. Our first priority remains reinvestment in sustainable business growth. Followed by maintaining a strong balance sheet and selective M&A to accelerate strategic execution. With continued earnings growth, we also aim to maintain or increase our dividend over time. So in short, we invest where the return on capital is higher also from a shareholder perspective. With that, let me hand back to Guillaume for the strategic update. Guillaume Daniellot: Thank you, Isabelle. Let's now look at the key strategic highlights of the quarter. As shown on Slide 12, our total addressable market is estimated at around CHF 20 billion, spanning across implantology, orthodontics, digital equipment, prosthetics and regenerative solutions. We currently hold roughly 12% market share with this market, which leaves us ample room for further growth, especially with new dedicated opportunities now to play in each segment. Moving on to Slide 13. I'm very excited to share important strategic developments, which will transform our orthodontics business. To reshape our clear aligner franchise and improved performance, we are focusing on 3 pillars. First, we are building a very competitive and differentiated ClearCorrect value proposition, delivering a superior customer and patient experience. Second, we are strengthening our manufacturing capabilities to increase profitability. And third, we are prioritizing strategic markets to accelerate future growth and establish a leading position especially among general partitioners. Innovation remains at the core of our strategy to accelerate growth and improve profitability in this orthodontic segment. To achieve this, we are partnering with Smartee, a global orthodontic leader that will help us bring new solutions to market faster and with greater efficiency. Smartee is a leading clear aligner organization with more than 20 years experience, known for its innovation, quality and clinical excellence. Smartee is the ideal partner for the next phase of our orthodontic growth. It will increase the ClearCorrect value proposition through expanding indications and product options. This includes new clinical capabilities such as treatment outcome simulation tool, mandibular advancement functionality and multiple streamline options to address a broader range of clinical needs and customers. As part of the partnership. Smartee will also take over full ClearCorrect production for EMEA and Asia Pacific regions, two of our largest and fastest-growing geographies. This transition will enable faster scaling, higher efficiency and significantly lower manufacturing costs through Smartee's fully automated, state-of-the-art production facilities. The production for these regions is currently based in [indiscernible] Germany, which is planned to be phased out by early 2026. This partnership unites the complementary strength of 2 industry leaders. By combining ClearCorrect's global commercial reach with Smartee's world-class technology and production capabilities, we will achieve the scale, cost optimization and margin improvement needed to build a profitable orthodontic business. Moving to slide 14, in addition to Smartee partnership, we will further strengthen ClearCorrect's value proposition by expanding our long-standing collaboration with y DentalMonitoring. We are partnering on a unique AI-powered remote monitoring technology, which is directly and uniquely integrated with the ClearCorrect Doctor Portal. This innovation enables clinicians to monitor cases more efficiently and help general practitioners manage treatments with greater confidence and convenience. It enhances the overall experience for both practitioners and patients and supports our ambition to drive broader adoption of clear aligner treatment among general practitioners in our key strategic segment. Building on the foundation of this new value proposition and the more cost-effective manufacturing capabilities for Smartee, we have also implemented a focused go-to-market model design around the key growth markets. By concentrating resources in high potential profitable markets and aligning our ortho organization under one integrated structure, we can operate with greater agility, increased efficiency and better customer focus. This approach strengthens our engagement with general practitioners and DSOs, enhances execution discipline and support sustainable growth. With all these developments, ClearCorrect is becoming more versatile, clinically advanced and efficient, strengthening our competitiveness and supporting our ambition to achieve a leading position in the global orthodontics market in the future. Let's now move from orthodontics to implantology on Slide 15, where innovation, education and digitalization continue to drive our leadership. Let's start with our premium brand, Straumann and its latest innovation iEXCEL. This high-performance implant system is becoming one of the most successful product launches we had in our recent history. iEXCEL combines 4 implant design in one system with a unified positive platform, a single connection and a single surgical kit. This unique offering simplifies workflows, reduces inventory and especially gives clinicians true intraoperative flexibility, enabling design implant changes on the spot during surgery without changing instruments. To further differentiate, iEXCEL is also coming with [indiscernible], 2 of our unique and most advanced technologies enabling minimally invasive protocols and faster osseointegration. We are really pleased to report that we have already sold more than 1 million iEXCEL implants, which is a fantastic milestone that shows the strong confidence clinicians place in this system. This success reflects our innovation and execution strength within the Straumann premium brands, which continue to drive market share gains and new customer acquisition. One of the greatest example of a new customer acquisition with iEXCEL is the [ Mayo Clinic ] in Portugal, which recently chose to partner with us and transitions its portfolio to Straumann. The decision of this highly respected implant-focused DSO highlights how our comprehensive solutions and digital capabilities create real value for clinicians and patients alike. Together, these achievements demonstrate how our focus on innovation, digital integration and close customer partnership continues to translate into tangible market momentum. Let's move to Slide 16. Our comprehensive education activities are key to improving market access, building stronger partnerships and gain market share. In the third quarter, we continued to expand our partner education network and deliver hands-on courses, particularly in Asia Pacific. These programs allow clinicians to refine their surgical and restorative skills, gain confidence in immediate protocols and embrace digital workflows. By investing in education, we not only raised clinical standards, but also reached new customers and strengthened our market share and with this further reinforced our leadership in implantology. In addition, we engaged with thousands of dental professionals in the third quarter at major events, such as the DSO CEO Summit in Boston, where we held strategic discussions on expanding access to care and driving efficient growth through partnership. In addition, we demonstrated our latest innovation at the EAO Congress in Monaco and the international aesthetic days attended by more than 1,400 clinicians. Let's move to Slide 17. At this event, we have launched our new SIRIOS X3 intraoral scanner, which is another very exciting innovation. This new iOS is our new generation wireless scanner that combines exceptional scanning speed, accuracy and ergonomics in a lightweight compact design. Positioned in the mid-price segment, SIRIOS X3 strengthened our iOS portfolio, together with the entry level of SIRIOS and the premium TRIOS solution by 3Shape enabling us to serve the different market segments. The first reactions from clinicians have been really, really strong. Early adopters highlight the ease of use and the effortless integration into our digital platform, Straumann [ AXS ]. This launch further strengthens our position in digital dentistry and marks another important step in expanding our clinician base connected to our Straumann ecosystem. Moving to Slide 18. Actually, thanks to our competitive digital portfolio, we are then continuously growing our intraoral scanner user base who are then benefiting from our simpler, faster workflows through the cloud-based Straumann [ AXS ] platform, which will further drive growth. A good example is our fast molar workflow, which is a streamlined, simple free step approach that helps to restore a posterior case quicker and easier. The solution uses fewer parts and reduce significantly chair time by removing appointments, helping dentists with more efficiency to deliver highly reliable clinical outcome. Another one is the latest Straumann EXACT innovation, which supports the digital full-arch workflow. It significantly helps clinicians treat patients who need a full set of new teeth by guiding them through each step from the first digital scan all the way to the final restoration. It simplifies what is usually a complex process and saves time both for the dentist and most notably for the patient. Turning now to Slide 19 and our progress in China. As mentioned before, we have seen a significant slowdown due to the initial effect of VBP 2.0 as some patients have studied postponing treatments and distributors are reducing inventories. Despite this early impact, we are well prepared for the implementation of VBP 2.0 and have taken proactive steps to strengthen our local setting. First, the ramp-up of our Shanghai campus has been completed, and the site has received all necessary licenses for local production. This milestone allows us to manufacture Straumann and Anthogyr implants in China, reducing lead times and improving cost efficiency. Secondly, as you know, in the past years, our business in China has been driven primarily by our premium brand and supported by Anthogyr in the value segment. Now to be prepared for the VBP 2.0, we are continuing to broaden our implant portfolio to serve all the different price segments. Therefore, alongside our Straumann and Anthogyr implants, we are developing a new brand for the [ eco ] segment, together with a local partner, ensuring we can meet customer needs on the lower price points. In parallel, we continue investing in education and training to support clinicians in adopting digital workflows and building their implantology expertise. These initiatives will help shape a sustainable growing environment -- implantology market in China based on clinical excellence and patient trust. With these steps, we are well prepared for VBP 2.0 with the right infrastructure, brand portfolio and local capabilities to continue growing and supporting our customers in this strategically important growth market despite any VBP 2.0 decisions. Moving to Slide 20. We strongly believe that our culture is what truly sets us apart. In an environment that is becoming more complex and volatile, our culture is what enables us to adapt faster, execute better and stay close to our customers. As a company, our commitment goes beyond business. It was very inspiring to see more than 5,000 colleagues from around the world come together over several months for the Smile Movement, the global employee initiatives that unites team to make a positive impact beyond dentistry. Through local activities, volunteering and fundraising, the Smile Movement celebrates our shared purpose of unlocking people's lives by creating smiles. This year, our colleagues turn that purpose into action rising over CHF 0.5 million for the Straumann Group Foundation through their collective energy, a true reflection of passion and dedication that defines our culture. Let's now move to Slide 22 to talk about the outlook for the full year. With our diversified portfolio, strong brands and continued focus on innovation and execution, we are well positioned to keep delivering sustainable and profitable growth. Despite ongoing macroeconomic uncertainties and the impact of tariffs, we remain confident and confirm our full year 2025 outlook. High single-digit organic revenue growth and a 30 to 60 basis point improvement in the core EBIT margin at constant 2024 at currency rate. Before we close, let me highlight our upcoming Capital Markets Day, which will take place on November 25 in Basel, Switzerland. This event will give us the opportunity to take a deeper look at our market priorities, our innovation road map and our ambitions. I look forward to seeing many of you there, either in person or online, and to engage in inspiring discussions. And with this, we are happy to take your questions. As usual, we kindly ask you to limit the number of questions to 2 in order that each participants can have a chance to put their questions within the available time. Can we have the first question, please? Operator: The first question comes from Julien Dormois from Jefferies. Julien Dormois: Yes. I will limit myself to 2. Starting with China, it's obviously the key topic investors have been focused on in the past few months. So just wondering if you could try and quantify what's been the magnitude of the decline in China in the quarter. And how we should think about Q4 because this will obviously have an influence -- probably a starker influence, I guess, on your -- on the development in Q4. So interesting to hear your thoughts on that. And second one is on the U.S., wondering you have mentioned stable patient flows in the country with some pockets of improvements. How do you see that playing out in the fourth quarter and into '26. I know you had previously commented that you were expecting maybe stronger growth in 2025 versus '24? How do you think about this guidance at this point? Guillaume Daniellot: Yes. Thanks, Julien. Then I would say, first, the third quarter in China, I think you have more than 2 questions even with Q3, Q4 and 2026, but we'll try to cover that. We have seen a significant slowdown in China due to an early and initial impact of VBP 2.0 as we said, ahead of the potential lower pricing of implant treatment by the Chinese government that will be setting that potentially by the end of the year. We know that patients are starting to postpone treatment and distributors have started regency inventories and even a little bit earlier than planned, meaning that in Q3, China has been around flattish. What does it mean for Q4? It means that as the VBP 2.0 FX will increase, obviously, more patients will be postponing treatment and distributor will be continuing destocking, meaning that, obviously, the China and APAC will be moving in the negative side in the fourth quarter. Now when you look a little bit further despite the fact that we will have a -- obviously, a bit more in China and APAC, more challenging quarter, Q4, Q1, while then the VBP will be implemented, we believe that they are quite, for 2026, reason to be positive about China moving forward. First, because we are the only international premium brand with local manufacturing, all licenses and equivalents obtained for both than our Straumann brand, also our Anthogyr brand and our partner brand, meaning that if there is any aspect of the VBP that will somewhat support local manufacturing, I don't think there is any other company best place than we are. Thanks to our 4 brands, position also at the different price points. We don't know exactly how the price will be played in the VBP 2.0, but we believe that we will have all the different brands and portfolio to be able to benefit from any of the faster-growing segment moving forward. Finally, we also think from the fact that the pent-up demand from Q4, Q1 will also support the rest of the 2026 and that China is still something that we need to keep remembering, it's a very, very underpenetrated market, then we still believe that there is a lot of potential growth that needs to be unlocked moving forward, not only by the price effect that the authorities are trying to play, but also through education that we are significantly continuing to invest on. Then obviously, we see China as a future backloaded 2026, but still as being growing moving forward. Now when it comes to NAM, North America, we have been very pleased with what we have seen in the third quarter. And I would unpack that in 3 points. The first one is that the market indeed is remaining stable, even though we see some patient segment that have been willing to go for treatment more than we have seen in the past quarters. One of the aspect is also because -- and that's the second point, having the DSO making more investment to create patient traffic as we have been alluded to in the past quarter, then driving faster patient flow and faster growth in this customer segment. And this is a significant area of development versus the past quarter, and we are pretty well positioned on the DSO side in North America. And thirdly, this is also important to note that we have also improved some aspects of our sales execution, which is delivering continued market share gains. And it's a lot about leveraging our strong innovation such as iEXCEL, where we see higher growth. And we have also our differentiated workflow, which is supporting significantly practice efficiency that has been driving new customer acquisition. Then I would say there is a part of the market, which is a little bit coming better, but also some improved execution on our side that we are seeing as sustainable. And how it's going to be in 2026. I think at this moment in time, obviously, it's not easy to express because we have seen that very volatile but we see 2 positive things from our side. The first is that we have innovation that will keep us delivering above market growth. Not only on the implant side, but also, obviously, on the general side with our SIRIOS X3 and future capability to scan full launch with a very high precision that I think will be very appealing with the specialist segment. Our iEXCEL will continue to deliver growth, especially because it's going to be supported by additional portfolio line extension like BLC 4.0 that has been requested by the North American market, also new prosthetic line with specific laser technology to texture the surface differently that will continue to significantly differentiate iEXCEL as the best-in-class system out there. And I would say that finally, as you have heard, everyone expect another 25 rate cuts in the next meeting by the Fed that while it will not change yet completely the market dynamic because it needs an additional, I would say, 75 basis points, then it will send a positive message that should influence consumer confidence as we have seen, that has been one of the effect that has slowed down the market in the first half. Then all in all, yes, we believe that if it continues like this, we have a lot of very good dimensions for expecting a better NAM moving forward. Sorry for the long answer, but I hope it covered all the different points that you were asking for. Operator: The next question comes from Susannah Ludwig from Bernstein. Susannah Ludwig: I have 2, please. I guess just following up on China. Could you share whether this is more patients holding off on procedures or whether it's more a reduction in inventories? And then how many months of inventory do the distributors typically hold in China? And then second, on the partnerships within orthodontics, I guess, can you share more about your thoughts on potential economic impact? You previously noted that more scale was needed to get to profitability in that business. I guess, with these new partnerships, where do you see sort of the potential for the orthodontic profitability moving? Guillaume Daniellot: When it comes to China, I think it's -- we have seen both effects playing at the same time. And this is what we have seen also in the past VBP 1.0 where you have really this combination of effect, then you have -- at the beginning you asked, it starts by the patient starting to postpone some treatment step by step. And then obviously, when the distributors are deciding to reduce inventories, this is where it accelerates significantly because this is where they are obviously stopping ordering at the same rate, and this is obviously what is having the biggest impact at the end. Then this is what we have seen at the end of the quarter -- of this third quarter, and that's what we believe we are going to see increasing on the fourth quarter because this is what we have seen also in 2022 Q4 that has significantly impacted our last quarter of 2022. The inventory they are carrying, generally speaking, it's a 3-month inventory. Then this is what we had in the channel mid than Q3, and this is what will decrease significantly during the fourth quarter. When it comes to our orthodontic partnership, we are obviously very excited by this. We have said a couple of times that we were needing to invest significantly in increasing our value proposition as we are seeing also new competition coming in. And we have especially expressed a couple of times that we were needing to reach scale in order to be able to drive sustainable profitable growth in the future. And that's why we are really, really excited to announce the Smartee partnership because it will really help us to progress on both sides that are critical for the future of our orthodontic franchise. As expressed a little bit in the presentation, the first point of the Smartee partnership is to significantly improve our value proposition. This volume proposition is going to be increased through the Smartee technology that will allow us to have new clinical capabilities. And I think those new clinical capabilities are really significant. They are major ones. We will have, for example, CBCT integration in our planning. We are going to have different streamline options. We have a flat streamline at the moment, which are high and low, but we are going to have a scale up streamlined in the future, which is one of the major expectations of a lot of clinicians we met because this is what they are used to. We are going to expand indications in the mandibular advancement functionality as an example, which is also going to allow us then to go to more advanced users that we were not able to do before. And finally, something which is important to increase conversion rate and supporting the GPs to convert patient case, we are going to have that modern treatment outcome simulator, which is very important, obviously, to present to the patients what should be the clinical outcome. Then if you put all of this together, we are going to have a very unique differentiated value proposition. That should allow us to really accelerate significantly our shares in this segment. And the second aspect that we have really significantly highlighted is that Smartee, with being one of the leaders in this field and especially in the Chinese market, is really helping us to gain scale. Then -- we can then benefit from their scale and their automated manufacturing side in order to significantly lower our manufacturing costs. And this is what will help us obviously very quickly in the next 12 months to reduce our costs on our existing volume, especially in EMEA, in Asia Pacific. But also for all the different new customers and new business we are going to do, it will be at this new profitability side. And that's where when you combine those two, it's a very kind of an exciting transformation of what we do that will bring both top line and bottom line some significant development. Operator: The next question comes from David Adlington from JPMorgan. David Adlington: Sorry to focus on China again. But maybe just a slightly bigger picture. There's a lot of moving parts for next year with respect to obviously surprising headwinds but volumes, you're going to have some pent-up demand on potential restocking? Maybe sort of bigger picture, do you think you can grow both the China business and APAC next year? Or do you think is going to be a year of consolidation? And then secondly, in term terms of impact on margins from the shift to Chinese production, obviously, lower cost of production in China, but you are going to be left with some potentially stranded costs at your Swiss facility. Just wondering how we should think about capacity utilization there, whether you can reduce that capacity in Switzerland to offset that production utilization? Guillaume Daniellot: Yes. Thanks, David. And 2 points, yes, we believe we will grow in China next year. I think at the moment, this is what is our assumption and our belief. Now once again, as you know, there is no VBP rule out there yet. Then it will a lot depend on what VBP 2.0 then will be designed and how they will set new price and how they will try to define this new policy. Then that's the first point. And I would say it's still assumptions because, as we have seen, the rules of the VBP 1.0 are really significantly reshaped the market. Then we can only talk about what we assume some of the VBP 2.0 could be. And from our assumptions, the price cut should not be significant. It has been very significant in around 1.0. We don't expect then the authorities to do another major cut because it will also significantly challenged the profitability of clinical practices directly and it would potentially be counterproductive to what the Chinese authorities are trying to achieve, which is more access to implant therapy. The second aspect, if price are just adding a small than the cut, it's a lot about how volume obviously should grow. And we still believe that there is a significant market potential in China. There is a lot of patient expecting implant treatment. And there is a lot of dentists that are trained and are able to deliver it. And that's one of the important reason as well from that very underpenetrated nature of the China market that we believe after, the rules have been then published that we will see patient flow getting back to a good -- dynamic and a good level, and that would allow us to grow in China. And based on those assumptions, we believe China and APAC will grow in 2026. And when it comes to your questions on our Shanghai manufacturing, our assumptions right now, and the calculation is showing that we should have a 20% lower COGS on our China campus versus our Switzerland manufacturing site. That would be one of, of course, very good then the consequence of getting started now with this manufacturing side. And secondly, something which is obviously important those days, it's helping us to hedge our Swiss franc exposure by shifting a significant part of those manufacturing costs from Swiss franc in Chinese RMB. David Adlington: And will the Chinese facility be just for China? Or will you look to export from China elsewhere? Guillaume Daniellot: Yes, that's a good question. For the time being, we are really looking at China for China. But in the future, as depending on how the different supply chain will play and the different also trade deals will be implemented, I think this is also something that we could consider for the future to serve other markets in China. Operator: The next question comes from Richard Felton from Goldman Sachs. Richard Felton: Two questions from me, please. So first of all, a more general follow-up on margins. And I suppose any early thoughts that you can share on some of the moving parts on margins into 2026. You called out tariffs on the call. We know you've got VBP, maybe there's some offsets from growth from China manufacturing and the changes to orthodontics that you've announced this morning. So any early thoughts on how you're thinking and planning for margins in FY '26, please? And then the second one is another follow-up on China. Could you just remind us where your market share is in China today and how that's evolved since the first round of VBP being implemented? Guillaume Daniellot: Well, it's a bit early to talk about 2026. We have our Capital Market Day for this, but we can allude to, I think, the big margin effect has been for us, obviously, the geographical mix, and we believe that geographical mix will be then a tailwind next year because we expect North America then to be better, while China will be obviously more on the lower side when it comes to growth contribution. And then that would be a positive effect. The second thing is from a manufacturing standpoint, we are also then improving, thanks to the manufacturing site in China, which is also another positive effect. We are expecting -- well, we are expecting a very positive effect starting by the implementation of our partnership with Smartee on the ortho side. And also the fact that we are going to significantly prioritize the high-growth market, then we have significantly, let's say, be weighted on the negative side by our profitability, negative profitability of our ortho business and we are going to start seeing a significant transformation already in 2026 and even better in 2027 as we had a high double-digit million of losses on our ortho business in the past or until now, and this is going to change significantly. Finally, we hope also that on the tariff side, we can see some -- a little bit improvement if it could turn on the positive side for us. We know that there is some positive discussion in between the Brazil and the Trump administration, which would be one of the most important part of our tariff for next year as Isabelle express which is around CHF 30 million, but I would say something like a big chunk of it is coming from our Neodent import that would also significantly help. And that's why we believe that 2026 could be really interesting by driving some significant margin development on this side. Isabelle you want to add anything on this side or... Isabelle Adelt: No, perfectly covered Guillaume. Guillaume Daniellot: And the second question was, sorry? Isabelle Adelt: Market share development in China. Since we repeat [indiscernible] what market share do we have? Guillaume Daniellot: Yes. That's an interesting question. We have -- because as the market has evolved very, very significantly, and there is no official data in China. What we know is that we have a very significantly increased our share when we see the different development of many companies around us in China, we are leading by far what we could call the premium segment, and we progressed also on the challenger side. But still, on the value side, we represent a very, I would say, a pretty low share still. I think Korean companies are still having the lion share of the challenger segment together with some of the growing Chinese companies, but this is one of the way where we also expect through this very interesting new portfolio that we are developing with our Chinese partner, the possibility to have a very important inroad in the segment where we are underpenetrated. Operator: The next question comes from Daniel Jelovcan from Zürcher Kantonalbank. Daniel Jelovcan: I'm not sure actually if I haven't heard, has a Smartee collaboration, does that include any financial engagement by you? I'm not sure if I am clear on -- fully up to date. And the second question, your DSO CEO Summit in the U.S., can you put a bit more flesh on the bone for your key takeaways, which you have observed? Yes, basically, that's it. Guillaume Daniellot: Yes. Thanks, Daniel. I think actually, yes, very good question. Yes, this is a strategic partnership, then we have taken a nondisclosed share, which is, I would still say, a small share on Smartee from an equity standpoint. We want to demonstrate our commitment to this partnership. This is going to be, of course, a very important part of our ongoing strategy on the clear aligner business, then yes, we -- this is coming with financial equity participation in Smartee. The second side, when it comes to our DSO CEO Summit, yes, I think this is a very, very important meeting for us. First, to still be very, very close to this critical target group for dentistry in general and for us, in particular, as we believe that we are here trying to be much more than just a solution provider. We are really wanting to be a true business partner in supporting them achieving their goal. Then what we can say here on the DSO side is, one, it will significantly going to continue gaining share from provider care standpoint. They are continuing investing in technology. Then they are the target group, which is really supporting digitalization of dentistry, because they see the significant benefit they can get from an efficient workflow being able to help their dentists enlarging their indications and doing that also in a faster manner, still delivering high-quality outcome. Then they are a strong partner for increasing the digital penetration of entity. Secondly, they are also one of our strategic partner for growing the pie. They are the one being convinced about the fact that implant treatment is the gold standard of tooth replacement. And then they are doing all the necessary advertising and patient communication that are helping us to still bring implant as the preferred solution and increasing not only patient flow, but also treatment acceptance when they are there. And we are developing tools to help them in this perspective. And third, I would say this is also and we see more and more than very important customers that are expecting a very high level B2B service level, meaning that it's all about how we can implement a very connected and interlinked supply chain. They are also expecting very strong cybersecurity capabilities when it comes to being able to link our platforms, then DSO will continue to put barrier to entry to small organizations. Because when I see the investments you need to do to be a preferred partner to ensure not only high-quality clinical outcome with clinical evidence, but a lot in the background to support the efficiency of their supply chain, the security of their IT setup. This is really something that small organization or local or regional organization cannot do. And that's one of the reasons we are close to them, developing what it takes to lead the DSO segment and will help us to really be seen as the best potential partner for helping them achieving their goal. Daniel Jelovcan: That was very in depth. So the DSO segment in the U.S. is actually growing faster than your mom-and-pop, let's say, dentist, is that correct? Guillaume Daniellot: That's correct. And by leaps and... [Technical Difficulty] Operator: [Operator Instructions] Now we can hear you again. Guillaume Daniellot: Next question? Operator: The next question comes from Oliver Metzger from ODDO BHF. Oliver Metzger: First one is also on North America also in addition to the previous question. So obviously, there's a turn to the better, you also reported some patient flow improvement. You talked a lot about the supply side with the DSO situation is improving. How do you see it from a demand side? Can you see that actually also -- there is more flow coming from patients demanding single tooth replacement versus more complex procedures? Second question is on your strong performance in Europe. You highlighted the iEXCEL launch and with respect to success of that, can you just give us comment about how does patient volume has behaved in Europe in your view? Thank you. Guillaume Daniellot: As we expressed, the patient demand has been rather stable. And I think on all then the indication, it has been the same. We see then the single cases being done on a regular basis. But once again, not more, not less than the previous quarter. We have seen a little bit more of large indications being done in the third quarter. But once again, nothing that would support that we would say that we see a significant change in patient flow. It's still stable, but it's a little bit improving because I believe that the fear of inflation is reducing in -- among consumer. And it's not so much that -- we see for the time being, for example, a better eligibility to patient financing, we don't see that yet significantly because the rates are still not changing enough in order to open that yet. But we see a better confidence for patients to engage in the treatment in some areas. Then that's the only thing that we have witnessed in the third quarter. That's why we are still cautious in saying that it will develop from a pure market standpoint, However, we think that what is sustainable in our side is really improved execution on our side, but also all the significant traction we are getting with our innovation. We see iEXCEL having very significant higher growth rate than the rest of our portfolio. And as we are launching some additional portfolio extensions, we believe it will continue sustaining this very interesting market share gain and new customer acquisition. 20% of the iEXCEL customers are new customers that have never been customer from Straumann. And that's one of the aspects that we can really see that it ends delivering over market performance. When it comes to Europe, I think Europe has been really -- still delivering a very, very remarkable growth rate. And when you look at -- the reason for this, we expressed in the past the fact that there is, first, the affordability of implant treatment in Europe is much higher than in North America. The price level are twice less than U.S. Again, price for an implant plus crown in the U.S., it's going to be between $4,000 to $5,000 whereas in Europe, is going to be around EUR 2,000 to EUR 2,500. Then I think affordability is higher. There is more support from a reimbursement standpoint from either private insurance or social security from a national public support. Then that's a lot of explanation to -- to explain why Europe is behaving better than North America in a more kind of a challenging environment. And additionally, we have to say that iEXCEL is participating also here as gaining superior traction than the market. And all the different businesses are growing very significantly. Orthodontic clear aligner through the synergy we have with our core business around GP target group is also growing double digit. Digital is also growing significantly, then we have all the different aspects of our portfolio, which is supporting the Europe performance. And finally, something which is also important to consider, that's why we believe it's a sustainable capability to grow with all the different geographies are participating to that significant growth. As much as mature market like Scandinavia, Germany, U.K., Spain, for example, in the third quarter, but also very significantly Eastern Europe with Poland, Baltics, Romania and I can also list the distributor market that has been also very strong in the third quarter. Then it's not only one place, which is doing well, that may fade, it's the entire geographies, which is really supporting this very, very strong development. Operator: The next question comes from Brandon Vazquez from William Blair. Brandon Vazquez: I wanted to -- I'll ask two of them upfront here. The first one is just going back to the partnership with Smartee, Guillaume, you had mentioned that you're kind of in the operating losses right now. Can you talk to us, given, of course, this partnership is in part to improve profitability in this segment, what does operating profit or loss look like in 2026 as you flip that business over to Smartee? And then the second question is maybe a little bit more about North America. Encouragingly, it looks like North America actually improved a little bit despite the fact that consumer sentiment here has been pretty weak still. I know you've talked a lot about investments from DSOs? And maybe I'm curious if you could talk a little bit about what are those investments from DSOs that are improving North America results? Somewhat cautiously, I would say, the problems here are a little bit more macro, less commercial strategy, but it sounds like the partnerships that you guys and what you're seeing from the DSOs is that improving commercial strategy alone might improve North America? Guillaume Daniellot: Yes, when it comes to the Smartee partnership. And I think something that is to make it clear because we had also -- one of the question is, we will recognize revenue, obviously, because it's a distribution partnership and a manufacturing partnership because they will do that for 2 major regions of us, which is Asia Pacific and EMEA. Then yes, we had very significant operational losses because we have been investing very significantly on our technology, but also on the manufacturing side. And what we have seen that with our scale, it's very, very difficult to be able to go to profitability. Then when we say we had a very significant double-digit million losses from an operational standpoint on our ortho business, we expect this to be divided by 2 already by 2026, and we expect to be breakeven in 2027, which means that -- and obviously, afterwards, creating very positive profitability moving forward, thanks to what we are putting in place. Not only in terms of manufacturing but also on growing demand with technology and having a very sharpened go-to-market approach where we are now very structured in a clear business unit approach that would allow us to have speed but also efficiency which means that from a profitability standpoint, we expect a significant effect in the next 18 to 24 months, that should be seen on the bottom line as well. . When it comes to NAM on the DSO investment side, yes, they are doing, I would say, 3 kind of investments. The first one is then growing their network. It's still, from a DSO standpoint, a way to grow inorganically. Then it's creating new practices. There are some DSOs that are doing that by acquisition. But we see a lot of DSOs that are also creating de novo clinic because it allows you to implement all the processes and all your strategy in exactly the same way than all the rest of the network. Then you don't lose time to convert the existing clinicians to your old processes that are not used to potentially use this kind of brand of material or whatsoever, then you can standardize your approach very efficiently by creating de novo practices, and we see a lot of this ongoing and not only in North America but also in other geographies. The second investment they do then is on the organic growth this time and being able to invest into new patient flow. They are doing than advertising. And in North America, we have seen new campaigns that have been launched to create this patient demand that has been much less the case in the first half not knowing how the U.S. economy will evolve and with a big fear of inflation that would reduce the capacity for patients to pay. It seems that this is -- the risk of significant inflation is starting to reduce significantly even though no one knows exactly, but that's the perception that we have. Then there is an increased investment done in direct-to-patient communication for bringing them to the office and, of course, being able to drive patient acceptance. The third investment they do in standardization and digitalization of the entire network. Being able to drive then all the [ ultra-high ]scanning, driving workflow that will drive efficiency and especially one way of doing a procedure is helping them to have a very clear perception of the cost of one procedure and being able to have more an analytical perspective of their performance. Then we see that the investment in digitalization is now increasing and we believe that we will be able to benefit from this. There is a free kind of investment we see from DSO in North America, but also in other geographies that could help us making sure that it supports growth moving forward. Operator: The next question comes from Hassan Al-Wakeel from Barclays. Hassan Al-Wakeel: Two, please. Following up on China and particularly '26. Guillaume, when we met last month, you commented that you see double-digit growth in revenue in China is possible in '26 given low penetration, is it your current base case? How are you thinking about share gains in the mix? And what's the current price assumption on the decline? And then secondly, can you talk about iEXCEL performance in the U.S., particularly? How much did it contribute to growth given you called out the particular strength in EMEA. I think last quarter, you highlighted that iEXCEL was 15% of implant sales. How is this trending overall and by region in Q3, please? Guillaume Daniellot: Yes. Thanks, Hassan. Once again, I will express that China 2026, I think it will a lot depend on the VBP rules. And what we are looking at is, we have different scenarios, obviously, as we have been in the 2023 to prepare what the VBP can come up with. Then one of the positive scenario is obviously still having a low double-digit growth that could come out from China in case we see limited price cut which is around 5% to 10% and adding obviously, significant volume growth with a pent-up demand coming from a low Q4, low Q1 2026. And adding up to the 3 quarters of the year that we'll see a healthy patient flow and having the capability for us to keep gaining market share by adding our 4 different brands, Straumann, Anthogyr, T-Plus and our new Medentika line on the eco segment that would be able to take share and also potentially being favored by local manufacturing. . Then we have a lot -- again, as options to be able to play what the rules will be from VBP 2.0. But now being able to say we will grow double digit in China and Asia Pacific 2026, is too early to say, and we will be able to express that in our guidance based on when we will be able to say that early 2026, when the VBP rules will be out, and we will have much more visibility on how we are going to play this new regulation. But once again, there are options for us to grow low double digits, there are options also to have a lower growth rate based on what will be coming. On the iEXCEL side in North America, yes, I think what we can say globally and without having a first specific North America prism, this is representing -- iEXCEL is representing already 20% of our implant green premium sales, then we -- this is really a testament on the loyalty, the traction that we are getting with the system and the repurchasing that we're having with this. North America is also around those numbers with a very strong penetration about our existing users and our new users that are also being captured in North America. And one of the major reasons why we are growing faster than the market is the new customer position that is done through iEXCEL on the premium segment. We benefit also on new customer acquisition on the challenger brand with Neodent, but I think we are still growing faster, and we see in -- constant market share gain in North America on the premium side that we can really monitor on a regular basis and that we can confirm once again. The simple thing which I think I will highlight here that will help or that will continue to support the growth of iEXCEL is that all the evolution and innovation on the prosthetic side will be available only with the iEXCEL connection, which is the new TorcFit. That means if you would like to benefit from our new angulated screw channel on customized abutment as an example, if you would like to benefit from our new laser textured value-based for easy and efficient restoration. And especially, if you would like to benefit on our new workflow, which is the one I presented, the Fast Molar with Anatomic Healing Abutment which is allowing you to do the restoration with one Appointlet with the patient, you have to use iEXCEL because it all comes with the new connection. Then there is a lot of our strategy from future innovation that will also drive the penetration of iEXCEL and then making our customers benefiting from the latest technology. Operator: The next question comes from Julien Ouaddour, Bank of America. Julien Ouaddour: The first one, I mean, thanks for all the color on China. But just me being picky with [indiscernible], But you mentioned sort of back-end loaded growth for next year. Just wanted to confirm, is it because 1Q '26 is likely to remain negative for the market. I believe the VBP implementation at public hospitals may start only in 2Q? And also, you talked about the Shanghai Camps benefits from local production and this cost advantage probably fully offsetting the price cut for next year. But given the, let's say, the full ramp-up is expected for 3Q, could we see some gross margin pressure in H1 and a bit more back-end loaded recovery? Second question is on clear aligner. You mentioned the ambition to achieve leading position in these markets. I think today, you have 3% market share. Competition is pretty fierce. What's your mid- to long-term ambitions for ClearCorrect? And do you fear aligners becoming a kind of like commodity products and a price war could maybe slow down a little bit the margin expansion target that just set within the partnership? Guillaume Daniellot: That's 4 questions. But we'll be happy to answer. The first one, Q1 2026 China. I think, here, we cannot express phasing in 2026. It's too early from exactly Q1. When we say backloaded, is obviously, first, when you look at comparison base, we are going to have a very high comp base in the first half and a very low comp base in the second half. And first, obviously, from a growth rate standpoint, mathematically, you are going to be backloaded anyway. The second aspect also is that the Q1 will depend given a lot about the Chinese authorities communication about the magnitude of the change and especially when they are going to finally give reasons, which is not really clear at the moment. If the VBP reasons will be given, when I say reasons, it means that they will present the rules in December. The companies have to do their bidding about what kind of pricing they want to do. And then afterwards, they are publishing reasons of who is selected, who is not selected in the different category. If they are able to express it fast enough and the implementation of the new rules are going to be done during January, then the first quarter can benefit from the pent-up demand directly. If the information about the results of the VBP 2.0 will be done later in the year, which has been done a little bit the case in implementation, it has been done after the Chinese New Year in 2023, meaning that we have started to see everything being executed by the beginning of March, then that's where you have a Q1, which is rather weak because still then waiting for all the new price to be available. Then I think this is a lot depending on how this is going to be played out. And that's why it's difficult to answer exactly your Q1 perspective. But we are expecting, at the moment, from an assumption that Q1 will anyway be weak. We are going to have a Q4 and Q1 that are going to be weak because it's going to be frozen by the VBP effect, and that we will benefit from those new rules moving forward. When it comes to the Shanghai Campus, yes, I think we don't expect -- and we'll see the price decrease being bigger than our COGS gains that we are going to do. This is one of the reasons why we believe that the price cut would not then affect significantly profitability of our China business, thanks for providing everything mainly from China. But this needs to be confirmed with the VBP 2.0 rules. When it comes to clear aligner commodity, I actually don't think so. There is already a very significant competition that we see out there but as we expressed, without scale, it's pretty challenging to play in this environment. Then what we have seen in the past, we have seen a lot of small companies trying to come in and play in the clear aligner business and actually being wiped out because of the lack of scale and the lack of capability to gain significant market share. Then yes, there will be price competition that we are seeing at the moment. Yes, it will continue to become a pretty competitive market, but we still believe that I would not go to commoditization because of all the technology which is going to go with it. And we have a midterm perspective to be able to reach 10% of this market in order that we can really start to become a significant player and being able to deliver the growth that we are looking for. Operator: The next question comes from Veronika Dubajova from Citi. Veronika Dubajova: I'm going to try to keep it to 2. One, Isabelle, I was hoping you could circle back on the tariff commentary that you made at the beginning of the call. I think on this first half conference call, you sort of expressed the hope that tariffs would mitigated fully this year and then you'd have an impact as you move into fiscal '26. I know you mentioned the CHF 20 million to CHF 25 million number for this year. So should we understand that as you are no longer expecting that to be mitigated fully or at all? Is this something that's appearing in the P&L? And I guess that's a pretty meaningful headwind, obviously, in terms basis points. So I'm just curious where you are finding other opportunities to offset this to maintain the margin guidance for the year? So if you can talk through that. And then sort of CHF 35 million number for next year. I guess, is there any mitigation? Or is that including the mitigation efforts. So if you can talk through that, that would be helpful. And then I'll ask my second question because it's for Guillaume after that. Maybe we can just get the financial bit out of the way first. Isabelle Adelt: I'm happy to elaborate on that and I think excellent question. So earlier, we said we will mitigate all of those tariffs, and it will not change our guidance. And given we just reiterated our guidance, we still stand by this. So the effect of CHF 22 million to CHF 25 million still to be shown has been mitigated this year. On the one hand side, of course, we mitigated the full impact of the tariffs through all of the supply chain route changes we put into play through transferal of production activities of finished products to the U.S. for especially the Straumann Green products. But then what we're currently preparing for packaging and finishing lines for Neodent products as well to be prepared for next year. And I think as you remember from the call, we had for the half year results, we already shipped more or less all of the demand we have for this year in July and August. So we have some time to implement those mitigating measures. How are we mitigating? On the one hand side, of course, by implementing this, but then on the other hand side, by looking at different other measures to improve our profitability in terms of production, but then in terms of OpEx savings, where we have very strict guidelines and reiterated them for the remainder of the year. So all of this impact can be mitigated. Same holds potentially for next year as well. As you can see, the number we are looking at the CHF 30 million, the ballpark number we gave you is very similar to the amount we have for this year, although we will see a full year impact. So this CHF 30 million is, I would say, the worst-case assumption in case everything remains as it currently is. So major factors behind the 50% tariff on all imports from Brazil and 39% tariffs for all imports from Switzerland. And having said this, why is the amount very similar because we put all of those mitigating measures into place already. So the finishing lines for Neodent plus the acceleration of transferring Straumann branded products faster than expected to our campus in campus in Andover close to Boston. And having said this, we expect a very similar mitigating results for next year than what we see this year. Veronika Dubajova: Okay. So the way to think about the CHF 30 million, is that the gross impact and the net impact in terms of what we have to think about in the P&L is going to be substantially lower? Isabelle Adelt: Yes, potentially. Veronika Dubajova: Okay, potentially. Okay. That's very helpful. And then my second question is for you, Guillaume. And I guess, just your confidence in the China midterm growth rate. And I know I see you have a ton of uncertainty in the short term. But I'm just curious, kind of once we're through VBP, how are you thinking about that sort of growth rate in China on an underlying volume basis, I think, obviously, we've gone this year from volumes growing double digits to single digits to not growing at all. Are you confident that it's just the implementation of VBP? Is this a market that's maturing? And I would love to get your thoughts on how you think about China volume growth on a 3- to 5-year basis? And what underpins that confidence? Guillaume Daniellot: Well, the confidence in China is just based on the fact that -- on the one hand, you have a very underpenetrated market that will continue to grow. I think this is the most important foundation of the growth expectation that we have. And the second side is that we believe that we have one of the company, the best place to be able to benefit from that increased market penetration. Because we are having a strong offer on the premium side that will continue to be, I think, interested and being the only one being localized once again, but there is no other premium competitors that will have local manufacturing, which received license and equivalent, meaning that if there is a condition in the VBP to support local manufacturing companies, I think we will benefit from this. And the second aspect is that we have set now additional portfolio for then the value segment where we are significantly underpenetrated and where we should be able to also meet some significant demand growth. Then I would say that's those 2 aspects. On the one side, I think the market has the significantly capability to grow. And secondly, we are well placed to be able to take a fair share of this growth, which is making us confident about that development. Now it will obviously again depend of the external factor, which are the VBP on the one side, which are the macroeconomic factor on the other side. But if we would like to look more on the midterm, and we are going to talk now in a 3 years' time frame because this is the kind of VBP period, which is going to happen every third year. We believe that for the 2026, 2028 period, we are expecting something which is low double-digit growth, something around 10% to 12%. That's a little bit the perspective on how we are looking at it. Operator: Last question comes from Thyra Lee from UBS. Thyra Lee: Just standing in for Guillaume this morning. We have a super quick one. On North America, just given the green shoots that you guys have seen in Q3, would you expect the U.S. to be sequentially better in Q4? Guillaume Daniellot: I think this -- it's very difficult to be very [indiscernible] clear or precise on this question. We expect a good growth rate in North America in Q4. First, because we see a really good development; second, because we believe that the market conditions are helping a little bit also macro, at least from a consumer confidence standpoint. And third, we have also then comparison base, which are helpful here. Then I would say we expect North America to be a significant growth provider in the fourth quarter. Is it going to be better than Q3, at least we expect the trend to continue then to be at least equal or better is what we are expecting. Thank you for joining us today and for your continued interest in Straumann Group. We look forward to seeing you again soon and wish you a pleasant rest off today. Have a nice day, good bye from Basel. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing chorus call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Welcome to the 2025 9 months results announcement conference call for Budweiser Brewing Company APAC Limited. Hosting the call today from Budweiser APAC is Mr. YJ Cheng, Chief Executive Officer and Co-Chair of the Board; and Mr. Ignacio Lares, Chief Financial Officer. The results for the 9 months ended 30th September 2025 can be found in the press release published earlier today and available on the Hong Kong Stock Exchange's and Budweiser APAC's websites. Before proceeding, let me remind you that some of the information provided during this results call, including our answers to your questions on this call may contain statements and future expectations and other forward-looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks, uncertainties and other factors beyond our control. It is possible that the Budweiser APAC's actual results and financial condition may differ possibly materially from the anticipated results and financial condition indicated in these forward-looking statements. Budweiser APAC is under no obligation to and expressly disclaims any such obligation to update the forward-looking statements as a result of new information, future events or otherwise. For a discussion of some of the risks and important factors that could affect Budweiser APAC's future results, see risk factors in the company's prospectus dated 18th September 2019 and the 2024 Annual Report published and any other documents that Budweiser APAC has made public. I would also like to remind everyone that the financial figures discussed today are provided in U.S. dollars, unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalized in nature and unless otherwise stated. Percentage changes refer to comparisons with the same period in 2024. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Budweiser APAC's normal activities. As normalized figures are non-GAAP measures, the company disclosed the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the press release published earlier today. Further details of the 2025 9 months results can also be found in the press release. It is now my pleasure to pass the time to YJ. Sir, you may begin. Yanjun Cheng: Thank you, Rick, and good morning, everyone. Thank you for joining our call today. Our performance in China has been challenged over the past few quarters, as our results have not delivered on the full potential of our brand and organization. While the overall industry has been impacted by soft economic cycle, which had been even more pronounced in our footprint and mix of channels, we have recognized clear opportunities to enhance our route to market and portfolio execution to better align our results to our capabilities. As a company of owners who struggle every day for operational excellence with our customers and consumers, we have been working in China to rightsize inventories and allocate resources. We have a clear view of where to improve. Our priority is to reignite growth and rebuild our market share momentum. We are moving with speed, focus and discipline to ensure that our business turns stronger, more efficient and better positioned to improve over time to outperform for the long term. I will now hand it over to Iggy to provide more on our performance in the first 9 months and the third quarter for 2025. Thank you. Ignacio Lares: Thank you, YJ, and good morning, everyone. In the first 9 months of 2025, total volumes decreased by 7%. Revenue decreased by 6.6%, while revenue per hectoliter increased by 0.4%. Our normalized EBITDA decreased by 7.7%, and our normalized EBITDA margin contracted by 37 basis points. In the third quarter, total volumes and revenue decreased by 8.6% and 8.4%, respectively, with ongoing challenges in China, partially offset by our performance in India. Revenue per hectoliter increased by 0.1%, driven by a positive geographic mix in India and revenue management initiatives in APAC East, partially offset by our performance in China. Our normalized EBITDA decreased by 6.9%, impacted by our top line performance, while our normalized EBITDA margin expanded by 46 basis points. Now let me discuss some highlights for each of our major markets. In APAC West, in the first 9 months of the year, volumes and revenue decreased by 7.9% and 8.7%, respectively, while revenue per hectoliter decreased by 0.8%. Normalized EBITDA decreased by 9.7%. In China, volumes in the third quarter decreased by 11.4%, impacted by continued weakness in our footprint and on-premise channels. Revenue decreased by 15.1%, while revenue per hectoliter decreased by 4.1%, impacted by increased investments behind innovations and brand activations as well as efforts to expand our in-home presence coupled with an adverse brand mix as we managed inventories. Normalized EBITDA decreased by 17.4%, impacted by our top line performance and operational deleverage. On that note, as YJ mentioned earlier, we have a clear view of where we look to improve in China and how to achieve this. Accordingly, we are focused on improving our top line performance through the following areas: further strengthening our route to market with an elevated focus on the in-home channel across online, offline and O2O; increasing investment in our mega brands, such as Budweiser, Harbin and Corona, to win in the Premium, Core+ and Super Premium segments now and as the industry recovers; leading innovation within the industry across packaging, brands and liquids to increase category participation and develop new consumption occasions; expanding our footprint through targeted geographic expansion; and restoring our excellence in execution. We made further progress in our channel expansion strategy in the third quarter, focused on premiumizing the in-home channel as in-home consumption occasions continue to develop. In the first 9 months of the year, the contribution of the in-home channel to our volumes and revenue increased as we began to extend our distribution within this channel. On the portfolio side, we continue to invest in diverse marketing campaigns and innovations to further increase the brand power of our portfolio, connect with consumers across more occasions and increase sales momentum. Corona expanded its signature Drinking with Lime ritual from bottles to cans with the launch of a full open-lid can design, which further reinforces the brand's differentiation and appeal. This innovation is now rolling out across online and retail channels to expand Corona's reach in in-home drinking occasions. Budweiser introduced Budweiser Magnum in a 1-liter can, broadening its consumer reach with a greater in-home presence while retaining its striking black and gold design. The new packaging format further highlights the brand's distinctive brewing and aging process as well as its unique flavor. On the digitization front, the usage and reach of BEES, our B2B wholesaler and customer engagement platform, continued to expand. As of September 2025, BEES was present in more than 320 cities across China. We continue to leverage technology to further enhance our commercial capabilities, optimize our route to market and strengthen our customer relationships. While our performance in China has been disappointing, our businesses in South Korea and India have continued to deliver solid results. In India, in the third quarter, we delivered double-digit revenue growth, which translated into a strong EBITDA performance, further compounded by the lapping of additional costs incurred in the third quarter of last year on projects to enhance the digitization and integration of both financial and nonfinancial information. In the first 9 months of the year, the Budweiser brand continued to grow ahead of the industry with the volume and revenue of our Premium and Super Premium portfolio increasing by double digits. In APAC East, in the first 9 months of the year, volumes decreased by 0.5% with revenue and revenue per hectoliter increasing by 1.8% and 2.3%, respectively. Normalized EBITDA increased by 0.3%, with our EBITDA margin decreasing by 46 basis points. In the third quarter, volumes in South Korea were flattish as we continue to offset ongoing industry weakness by outperforming the industry in both on-premise and in-home channels. Revenue and revenue per hectoliter both grew by mid-single digits, driven by our ongoing revenue management initiatives and a positive brand mix. Meanwhile, our EBITDA and EBITDA margin expanded substantially supported by a strong commercial performance and commodity tailwinds. We increased our commercial investment to bolster our competitiveness in the lead-up to Chuseok, one of the key selling periods in South Korea. From a portfolio perspective, we also unveiled recently Cass ALL Zero, South Korea's first nonalcoholic beer to emphasize a 4 Zero concept of 0 alcohol, 0 sugar, 0 calories and 0 gluten. And with that, YJ and I are here to answer any questions that you may have. Operator: [Operator Instructions] Our first question is coming from Lillian Lou from Morgan Stanley. Lillian Lou: Can you hear me? Ignacio Lares: Yes, very well, Lillian. Lillian Lou: I have 2 questions. One is about China. In particular, you mentioned in-home mix has been increasing but underlying -- and I would like to get more color about the brand performance, in particular, the major mega brands' performance relatively in third quarter. And also, what's the latest trend for Budweiser, Harbin Super Premium segments? That's my first question. I will ask the second one after that. Yanjun Cheng: Okay. This is YJ, Lillian. Thanks for your question. In terms of brand performance, let's talk about it by channel. By channel, on-premise got impacted by the industry in the past few years' weakness. We also got impacted as well. And also the new trend for the channel, which is in in-home O2O, that's one we have a gap, and we are working with the vendors, retailers to build a platform to fill the gap, what we have and which linked to the brand portfolio we have. The brand portfolio we have, which the consumer knows and love, we have rich portfolio. For the -- we've also focused on innovation to meet the consumer needs by channels, for example, Budweiser, fits the in-home channel, it created a 740 ml, a bigger can, which is a quite good performance in the in-home channel. And also in terms of O2O, we also create a Bud Magnum 1-liter can to fill the gap and the channel, O2O. And for the Super Premier, we see the O2O trend, the performance is quite good. We have a rich portfolio of Super Premier as a company we are. And give example, Corona, we also developed a full open-lid can, not only bottle with lime but also able to allow the consumer to drink Corona with lime in a full open-lid can. So those are -- talk about brand linked to the channel with the innovation. See the gap we have. See the soft weakness that we have in the Premier. Those are the actions we see -- we take in terms of channel investment, cooperation and also the innovation we develop. We see good trend on this. And also for the Core+, we are working hard on it. And we do have a very good example, the benchmark in Korea. You see the cost, so priority, I think to the innovation. There's a big innovation, big best practice we're going to apply and learn within the APAC. So -- but I try to break this by channel linked to the innovation and the gap we have, the action we take, investment we take, best practice we learn from Korea to be able to answer your question. Thank you. Lillian Lou: Thanks, YJ. My next question is about Korea. In Korea, we understand that the whole industry demand is still pretty weak and Budweiser and Cass are gaining market share. I'm trying to understand what is the latest demand trending into fourth quarter and next year and reacting to that, what the competition dynamic could shift to. Ignacio Lares: No, thank you for the question, Lillian. I'll take that one on Korea. So you're correct that the total industry remains soft, right, given the macroeconomics. The demand has been soft now for several quarters. If you take a look at maybe the economic indicators, we've seen CPI stabilized, so inflation has stabilized and consumer sentiment actually has been improving sequentially over the past few months. However, by the same token, the savings rate, right, for consumers has been on the rise, and that's despite inflation being under control and actually, interest rates being cut in Korea as well. So consumers are effectively acting as if they're under some level of pressure, and they're prioritizing essential spending, which, of course, includes food and utilities within that category. So this consumer frugality trend or kind of short-term effect is currently, of course, impacting overall alcohol consumption as well as the natural structural trade up, right, that you often see from lower-priced alternatives, such as Soju, of course, into beer, which has been long standing in Korea. But even within this context, right, you still see pockets of growth within Korea. And so we see nonalcoholic beer growing. We see flavored beer growing. We see RTDs outperforming. So these are also gaining popularity as they are in other developed markets or more developed markets, right, which presents, of course, opportunities for us as well. Then from a competition perspective, the way I would look at it is, I mean, the summer and the Chuseok selling periods are usually the most active, right, in terms of promotional activity, investment innovations, and this year really has been no exception. In this context, we're very pleased with the commercial results from the South Korea team in the third quarter. They continue to gain market share in both the on-premise and in-home channels, and that was led, of course, by the Core portfolio and by Cass, which helped to offset, of course, the soft industry, right, the soft demand, as we just discussed. But I think most importantly, perhaps the fact that the brands are very healthy there, the innovation pipeline has been very effective at solving consumer needs, right, in the last couple of years. In Core specifically, of course, we've continued to increase consumer participation in the category via nonalcoholic beer, flavored beer and several other liquid innovations, including Cass 0.0, the Cass ALL Zero, of course, that I discussed in my comments earlier, and then different variants, of course, the Cass Lemon Squeeze as well, not to mention, of course, HANMAC's Extra Creamy Draft can as well. On top of that, we're still focused, of course, on continuing to lead premiumization, which we see as an opportunity as well given it remains under-indexed in Korea relative to other more developed markets. So I think as we move into this last quarter of the year and into 2026 with our brand portfolio healthy, with it being very well supported by the route to market we have there and by the very strong team in Korea, we see ourselves as ready to continue to lead beer industry growth across Korea for the future. So I hope that answers your question. Thank you so much, Lillian. Operator: Our next question is coming from Wenbo Chen from CICC. Wenbo Chen: I have 2 questions. First is about channel inventory. We have seen ongoing progress with destocking in the third quarter. So could you please share what's our outlook for the China market in the fourth quarter and the coming year? And do we expect a rebound in the selling performance? Ignacio Lares: Wenbo, no, thank you for the question. I mean you're correct. We've been proactively taking steps, right, to adjust or manage our inventory in the current business environment, and that's with the intent, of course, of ensuring the health of our route to market, right? And we've been doing that since about the late third quarter of 2024. Our inventories as of the end of the third quarter this year, third quarter '25 are now actually lower than they would have been in the same period of last year. And that's both in terms of absolute inventory and days of inventory, and we would expect this, of course, to be lower than the industry average. So we've made good progress, I think, on the inventory front thus far. Going forward, we'll continue to manage our inventory very attentively, so we don't give an explicit outlook, but we always want to make sure that we're on top of inventories and managing it very attentively. And there will be adjustments, of course, based on sell-out trend changes as we move forward. However, we wouldn't expect these to be necessarily as significant as what we have done, of course, over the past year. So I hope that answers your question, Wenbo. Wenbo Chen: Okay. And my second question is about the in-home channel. We have made great progress in the in-home channel this year, and you just mentioned our optimized product mix. Could you also share the current penetration level of the in-home channel across the business in the first 3 quarters? And also, what are the plans for the further expansion in the fourth quarter in the next year? Ignacio Lares: Yes. First, thank you for the kind words. We've been working very hard, as YJ also mentioned, right, on making progress in the in-home, which is a big priority for us. And of course, you can see that in many of our markets. Maybe the way we tackle this is, I mean, first and foremost, with increasing disposable income and market maturity across China, we would expect both the in-home channel to continue to grow and the premiumization trend to take more root there over time. And this, of course, offers us one of the largest opportunities to expand our business moving forward. When we look at the current -- to your point on penetration, current level of the off-trader in-home channel in China, it's directionally 60-plus percent of the industry. However, it only accounts for a little bit more than 50% of our channel mix, right? So we still have a big opportunity to expand our presence closer to the industry average. And we know that the in-home will continue to grow its share of industry, as I mentioned, as the market continues to mature. So we'll hopefully catch both, right? Close the percentage mix here and its weight will increase rather over time. Then from a brand and portfolio perspective, and YJ was alluding to this earlier, right, in retail, it's essential to have a full portfolio, right? And you need to have various packages at each critical price point to fulfill different consumer demands. We're very fortunate, right, to have the portfolio that we have available to us. And the brand power of that portfolio is actually significantly higher than our market share, right? So we know that it offers the potential to drive far more penetration that we have today. We have solid plans here, and we're going to continue to invest behind our mega brands with the strong mega platforms we have to achieve that. The teams also continued to make progress on the right packs, right? So it's important to have the right assortment, as we were discussing, at the point of sale and to have key price points covered. And the biggest remaining opportunity, as we've shared before and YJ mentioned earlier on the call, is really on Core+, right, which is particularly relevant in the in-home channel. Then from a route-to-market perspective, the key to successful in-home expansion is really to expand the high-quality distribution network to be able to cover more points of sale. We've been doing that over the past couple of quarters going wider and deeper even in geographies where we already have a well-established presence. So we're developing new Tier 1 and Tier 2 wholesalers to help us expand to more points of sale. This takes time, of course, as you need to recruit wholesalers and build capabilities, right, to ensure that you have the right picture of success in every in-home point of sale. But the teams are very encouraged with the progress here and maybe 2 proof points I would probably give are: one, the contribution of the in-home channel to our total volume and revenue has continued to increase, so that focus is driving us in the right direction; and second of all, when we look at the in-home channel, actually, Premium and Super Premium's contribution within in-home is now outpacing that of Chinese restaurants, right? So we're seeing the in-home channel premiumize as the teams exert their energy and their efforts there. So I would echo YJ's points, right? I would say the team has the right plan and the right initiatives in mind. There's progress already on several of the portfolio and route-to-market areas, and now there's just a lot of work to do, a lot of work to be done, right, to scale this with consistent execution in the quarters to come. So thank you so much for the question, Wenbo. Operator: Our next question is from Chen Luo from Bank of America. Chen Luo: So I've got 2 questions. Both of them are on China. The first question is about our branding strategy. Early this year, we heard about our commitment to developing the Harbin brand nationwide, and most recently, channel [ checks ] seem to suggest that we are making even further commitment to the same strategy. Considering the rise of the local and regional brands and the very niche brands in China recently, do we think Harbin is strong enough to compete, especially to compete in Guangdong province. So this is our stronghold province, but we now see big pressure of share losses to local brands. Do we believe local consumers are willing to switch from Zhujiang or Liquan to Harbin, which originated from Northeast in China? Are we going to develop some regional brands to bond with local consumers given the success of Sedrin [ Lychee ] in Fujian province? So maybe I'll stop here. Later, I will ask my second question. Ignacio Lares: Okay. No, thank you for the question, Luo Chen. Maybe let me start here. I think if we didn't have confidence in Harbin, right, we wouldn't have prioritized it for our first offering in the Core -- in the RMB 8 price point, right? So if you think about it, Harbin has been a national brand for years and has a broad presence nationwide across different channels, right? It's -- given the amount of time the brand has existed for, given the presence in multiple provinces, it's one of the few truly national brands in China. In Guangdong specifically, the brand has been there for a long time, and we've been developing the brand, particularly in the on-premise channels but also, of course, in the in-home more recently, focusing historically more on the RMB 6 price point. As we expand into the in-home, we chose Harbin Icy GD Zero Sugar priced at that RMB 8 price point [ in CR ] to kind of leverage the brand power of Harbin, both nationally but also in Guangdong, which actually stacks up very well versus other local brands. So we're, of course, bullish on Harbin overall in Icy GD, in particular, based on that starting point from a brand power perspective. And then as YJ mentioned earlier, based on the superiority framework we have in place, where we test liquid, packaging, positioning, communication and value with consumers, we know that we have a superior offering, right, one that should outperform other offerings in the market at the price point at which its being offered. So we know we have a strong horse in the race. From that perspective, the sales volume of Harbin Icy GD Zero Sugar, we also actually tested with consumers where the volume would come from. And actually, most of that volume is either sourced from existing consumers trading up within our portfolio, so moving up from RMB 6 such as Harbin Icy into RMB 8 or also successful conversions from other local competitor brands, right? And so the fact that it has both a functional benefit and a specific partnership behind it, right, with the NBA, so zero sugar plus NBA partnership, made it a superior offering, which is explaining a bit that advantage that it has against other brands. By the same token, you're right. China is a very large country, and you need more than one brand to be successful. Harbin Icy GD Zero Sugar represents our first offering in that RMB 8 price point, and it is a priority for us to capture growth opportunities with this brand, but we know that we will need a portfolio over time. In other places, we might complement our portfolio with other Harbin innovations. We, of course, have local brands that have innovation opportunities, as you mentioned as well. Beyond Harbin, of course, we've got Sedrin in Fujian, which is doing very well, and I'm sure you would have seen it during your most recent visit there, Nanchang in Jiangxi, Big Boss in Jiangsu, Double Deer in Wenzhou and so on and so forth, right? So we can also invest behind some of these local brands, and we have a very solid innovation pipeline across different regions, which is designed to be tailored for local consumer needs and should be complementary to what we're doing on the Harbin brand today. So I think from a brand and portfolio perspective, we're in a good place. I think the key element, going back to YJ's point, will be the expansion of our in-home coverage and distribution and the enhancement of our trade execution. So I think the better those 2 things are done, the more we will get it at the portfolio that I just mentioned. So lots of work to do but the teams are committed to the brands, and they're actually quite excited about the growth potential that they show at this point. So I hope that answers your first question. Chen Luo: That's very helpful. The second question is about the channel in China. Despite our progress with the in-home channel, the on-trade channel is still witnessing quite big declines. How are we going to sustain the sales momentum in the on-trade channel? How are we going to cope with the rise of the new channels amid the increasing channel fragmentation? Ignacio Lares: Well, thank you for the question. Yes. So I think there's a couple of things. It's more of a question of the magic of the and versus or, right? We need to do well in both channels. We've been somewhat conservative on our expectations on on-premise recovery because, of course, the trend for consumer occasions growing in the in-home continues, and it's been taking place at a similar rate for a while. So in terms of on-premise recovery, we haven't really seen a significant improvement yet. By the same token, we continue to sustain our investment in the channel. This is still a critical place, right, to do brand building, to have effective innovation launches, et cetera. And it's very important for the health of many of our wholesalers. It will be very important for us to continue to invest here, particularly for when the on-trade begins to recover as well. In the interim, though, we're focusing on the factors that are more inside of our control, right? We're closely working with the distributors to optimize packaging assortment, right? And so the launch of different packaging examples like the ones YJ gave before on Budweiser and Corona and also Blue Girl are tailored for that current consumption environment. We're also investing significantly in trade execution, so I think brand promoters, targeted food streets, essentially things that allow us to elevate the consumer drinking experience and promote on-premise consumption in the areas and sub-channels that have been more resilient within there. But you're right, in terms of emerging channels, right, the instant retail, O2O and e-commerce channels continue to grow. They're a big focus for us moving forward. The O2O channel actually conveniently skews more premium, which is beneficial, right, to our in-home premiumization efforts, and we benefit from having a full portfolio there. And of course, the contribution of O2O to our in-home sales mix is also increasing. So yes, we're engaged with our wholesalers to utilize these platforms to drive traffic, to promote different drinking occasions for our full portfolio and to capture growth opportunities. So I don't think we can choose one or the other. I think we need to do a good job of maintaining the on-premise, while building a stronger in-home presence, which we're doing very actively today. Thank you for the question, Luo Chen. Operator: Our next question is coming from Mavis Hui from DBS. Mavis Hui: My first one is on low-alcohol beer. On the back of rising health awareness, what could be our impending strategies on product innovation and advertising and promotion to further seize market share in low-alcohol products? And do we have some expectations on -- or the targets on the proportion of our sales coming from light beers or alcohol-free products in 5 years' time? Ignacio Lares: Thank you for the question, Mavis. Yes. So where I would start is, I mean, we constantly interact with consumers to get feedback on their needs, and then we innovate, right, to ensure that our portfolio is providing balanced choices that meet these needs. And we're seeing nonalcoholic and low-alcohol beers gaining popularity in many markets. If you look at APAC overall, the development of both nonalc and low alc is actually quite different by market. So maybe I'll cover it by country. I think if you go to China, nonalc and low-alc beer is still a niche market today, right? And consumers have many different nonalcoholic options, which can serve as great alternatives in nonalcohol-appropriate occasions. However, when consumers drink beer, they generally still prefer to consume alcohol, right? So we're here present with Budweiser 0.0, with Corona Cero as well here in China, but it's more with the intent of growing the nonalcoholic beer segment in the right way and preparing for the future as the China market matures. If you move to South Korea, it's a bit different, right? Nonalcoholic beer is gaining popularity, and we expect, of course, that momentum to continue. There, we have several nonalcoholic product innovations behind Cass, right? So we have Cass 0.0. We have the all-new Cass ALL Zero, which we mentioned earlier, and we have flavored variants, right, like the Cass Lemon Squeeze 0.0 as well. So we're seeing success with different offerings there, and all of these offerings are actually quite helpful because in both the nonalcoholic and low-alcoholic space, they're increasing consumer participation in the category. They're providing incremental volumes, right, to the team there, so they're helping us to offset some of that industry softness we discussed before. And they're actually also incremental to our profitability as well. So it kind of serves all 3 purposes. And then if we move to India, right, the beer market has been traditionally dominated by hard liquor and very high alcohol percentages, right, so 40-plus percent ABV products. Beer is growing in India and strong beer, so think 6% to 8% ABV are a big part of the India beer market today. However, there's a growing trend, right, towards lower alcohol products, which favors, of course, the growth of the beer category overall in India. And yes, within this context, nonalcohol beers have a role to play. They'll help to provide consumers in India more choices, right, to match their needs and their lifestyles. And our leading nonalcoholic offerings in India today include Budweiser 0.0, flavored Budweiser, which is Green Apple and Hoegaarden 0.0, right? So I think each of the markets is in a different place. We haven't shared targets at a -- by market level, but we have high growth ambitions across the board. It's just a question of taking advantage of market maturity to make sure we have the right offerings in the right place, and we lead the development of the nonalcoholic segment as well. Thank you for the question, Mavis. Mavis Hui: And my second question is about India. Can we have some more updates on the biggest barriers to scaling up faster in India aside from religious or cultural diversity? For example, would it be the route to market, regulatory hurdles or maybe consumer education? And where do we see the most untapped growth opportunities in the market over the next 1 to 2 years? Ignacio Lares: Thank you for the question, Mavis. Look, in India, we're focused on consistent and sustainable top line growth, first and foremost, particularly given the maturity level of our India business. And of course, we want it that to translate both to bottom line and cash flow growth as well. In India, we have strong growth momentum. The Premium, Super Premium revenue, which is roughly 2/3 of our business in India today, grew by double digits, both in the quarter and year-to-date, right, first 9 months of the year. And the Budweiser brand, of course, continues to grow ahead of the industry. Premiumization continues to be the most critical driver, right, of EBITDA performance as well. We delivered strong results with double-digit revenue growth and significant EBITDA margin improvement, which you would have seen in our APAC West results. And of course, admittedly, this was on a softer base in the second quarter last year, but we still see the benefit of strong premium growth in our quarterly results. In terms of the industry overall, year-to-date, it continues to grow, which is also helpful, of course. As you'll recall, India has very low per capita consumption, so that's what makes the opportunity so enticing long term. The industry is expected to continue growing, and that's both in volume and revenue terms, and that's actually even before we consider the impact of moderation initiatives, which we see as an opportunity to unlock an even more exciting future for India. And I mean we're encouraged by a few things we've seen in the last few quarters, right? So the number of points of sale in some states, including Uttar Pradesh, for example, have increased. In Uttar Pradesh, they actually roughly doubled the number of outlets that are allowed to sell beer, so there's more than 10,000 points of sale of beer now. Some states are experimenting with low-alcohol bar retail vans, which can serve beer or wine. And as these become allowed and they're introduced in some key cities like Noida and Lucknow, we see, of course, that picks up consumer demand. And then in Maharashtra, we've also actually seen positive changes for both excise as well as how beer distribution can be done. So we see some signs in different places that help to advance the industry moving forward. And then among things we can control even through that period, productivity is also an important driver, right, of our ambitions in India. That will help us to drive EBITDA margins. And the way we're doing it is the supply chain teams continue to make progress here by benchmarking our best-in-class small breweries in China, which are referenced, looking at initiatives that they can replicate there in India, and we see very good progress on these initiatives that are helping us to accelerate profitability. So it's a bit of these different buckets, but hopefully, that answers your question as well, Mavis. Thank you so much. Operator: Our next question is coming from Anne Ling from Jefferies. Kin Shun Ling: I have 2 questions, 1 for China and 1 for Korea and Taiwan. So first, on the China side, on the commercial investment, how do you allocate resources between the on-trade and off-trade currently? And management mentioned previously the mega platform investment in third quarter '25. So would you share with us what is the ROE when you compare to like some of the previous initiatives? And looking ahead, how do you plan to allocate ad spend or marketing spend across different channels, for example, digital platform, entertainment or sports events? That's my first question. Ignacio Lares: Okay. Thank you for the question. A few things to unpack here, so let me maybe try and break it down into components. I think the first piece on mega platforms, I think we're very fortunate, right, to have access to the mega platforms. That's one of the big benefits that we have. And these, of course, would not necessarily make sense to pursue on an individual country basis, right? So here, we're very lucky that they're relevant with consumers in many markets, and we benefit from 2 things. We benefit from, of course, a more manageable cost by taking on these mega platforms at a global level and if we undertook them, of course, ourselves for 1 or 2 markets. But then we also get the opportunity to activate them with different brands in different markets based on consumer preferences and needs, right? So that's helped a lot to make the mega platforms high ROI initiatives in general. And then, of course, good examples of that would be things like FIFA, the Olympic partnership and many music platforms, right, a good example being Tomorrowland, which we'll be doing in Shanghai, right, later in November. In terms of commercial investments by channel and how we think about them, going back to maybe the question earlier, right, we're sustaining our investment in the on-premise channels because we still see them as critical for route to market, critical for brand building. So despite, of course, the pressure on the on-premise channels, they still play a critical role. By the same token, the incremental investments that we're making are going more towards the in-home channels, right, and especially as YJ was saying before, the emerging sub-channels, so to all instant retail, e-commerce, right? So as in-home occasions continue to develop, we're putting a larger proportion of our spend in that direction. And then given, of course, the market, right, has been shifting quite a bit, we look to continue to remain agile in the context of that macro environment. So as channels recover, et cetera, we're actually in quite an easy position to increase or adjust our spend accordingly. Then in terms of marketing spend or marketing investment specifically, the brand power of our portfolio is the critical element for driving premiumization, right? So that's our reference for market share growth potential. And from that perspective, we look to continue to give differentiated offerings to our consumers and drive more value, right, for our premium brands with unique experiences. In the kind of 9 months of '25, our investment as a percentage of revenue increased, and that was driven mainly by marketing investment on our mega brands and behind our mega platforms, right? So they're the FIFA focus, right, for Budweiser, the music focus for Budweiser, the NBA sponsorship and campaigns for Harbin have been the places where we look to continue to create premium and kind of trend-setting experiences. And these need to be rooted, of course, on consumer passion points. The second piece has been around innovations, right? So launching the Budweiser Magnum 1 liter that YJ mentioned, the Corona full open-lid can as well that YJ mentioned, which give us a chance to increase category participation and develop new consumption occasions as well, right? So if you think about the Corona full open-lid can, it allows consumers to have a lime experience in a can in in-home setting, which is something that, of course, is a much nicer experience than without it. And then the third area of focus is increasing direct consumer communication, right, so with differences from media channels and points of contact, making sure we increase our consumer reach and contact frequency to deliver that innovation and that mega platform messaging in the right way. So we'll continue to invest in diverse marketing campaigns and innovations, and the goal will be to further bolster the brand power of the portfolio to continue to connect with consumers, obviously, across more occasions and then, of course, to increase our sales momentum as we move forward. Thank you for the question, Anne. Kin Shun Ling: Got it. Got it. And my second question is on -- back to the Korea and also like the Taiwan custom update. And so would you give us an update on the status on the 2 -- these 2 recent event? Number one is that the current customer tax dispute, first reported in Feb '24 and then like in June, you also have an update on that. So I would like to get an update on the Korean dispute. And the second is the impact from the antidumping duties in Taiwan for the 4 months from July. So we understand both are like small events but would love to hear some comments from you. That's all my question. Ignacio Lares: Thank you for the question, Anne. So on the Korea customs tax side, I mean, the dispute is ongoing. What I can share is what we shared via the press release, which is obviously in 2023, right, during the year ending 2023. Oriental Brewery, which is a wholly owned subsidiary in South Korea recorded USD 66 million nonunderlying charge, and that related to a customs audit claim, right, which is reported in our financial statements that year. During the third quarter of this year, right, so the period ending 30th of September of 2025, OB recorded an USD 18 million nonunderlying charge, and that was related to these same customs audit claims but for the remaining audit periods. So accordingly, the aggregate amount of nonunderlying charges that are related, right, to such claims is now USD 84 million, and we shared that the potential penalty exposure was not expected to be material to the company. As you're well aware, we continue to vigorously defend against the customs tax dispute, which, as we mentioned in the past, can be a lengthy and potentially multiyear process. And we remain committed to upholding the highest standards of compliance across all our operations as well. On Taiwan, specifically, the -- there was a provisional tariff, which, you're correct, which is more than 33%, which was announced back in June. Since then, the rate has been slightly adjusted by 2.5 percentage points down to 31.3% in the third quarter. And of course, we're closely following the situation and continue to monitor for further updates in the months to come. But that's the only update thus far, right, a small adjustment down in the tariff rate in the third quarter. I think the point for us on Taiwan is we value the Taiwan market, and our priority there is ensuring that our consumers and our customers have full access, right, without any disruption to our portfolio of beers, the full portfolio of beers, right, they choose from. So we continue to carefully assess actions to support our wholesalers and local consumers with that perspective in mind. So I think that's all I have for those 2 topics, Anne. Operator: Our next question is coming from Leaf Liu from Goldman Sachs. Ye Liu: Can you hear me? Ignacio Lares: Yes, very well, Leaf. Ye Liu: I also have 2 questions. The first one is on the product innovation in Korea. We indeed deliver quite strong results in Korea, especially with ASP up 5%. So won't you discuss how to look at your future premiumization strategy in Korea? Also, any specific color on the performance of all the great new products launched in the recent 2 years, as you mentioned, Cass Zero and -- 0.0, Cass Lemon Squeeze? And also, will we continue to see strength in ASP and product mix in Korea going ahead? Ignacio Lares: Thank you for the question, Leaf. I mean South Korea, as we discussed previously, it's one of the more mature markets we have in Asia and the Premium segment is still quite underdeveloped, right, versus other similar markets. And the price and margin ladders in Korea are historically much more compressed than in other countries, so consumers have been less aware of the reasons really to pay a premium price for premium products. And this, of course, means that the premium mix growth in the past was not as pronounced as it could be. So I mean, we've been making an extensive effort, right, to drive premium experience at an expanded price, Premium to Core. We've been doing that in the on-premise channel, leading with Stella Artois, but the rest of the Premium portfolio has been helping there, too. And you've probably seen, right, the Perfect Serve program that the teams have been executing with Stella draft. So the toolkits that we provide there to bars and restaurants make the consumption experience far more elevated than historically would be the case. They strengthened our Premium brand equity and they allow consumers to pay more, right? And so in the on-premise channel, of course, the weight of premium beer has increased as a result. And actually, more recently, Stella Artois has taken the #1 position in premium draft as well, which the team is very proud of there. So in the past 3 years, it's really been about helping consumers to see the value of premium products, and this helps to expand the price ladder for premium products moving forward. And in terms of innovation or new products, right, we share your excitement about innovation in Korea. So thank you for the kind words. HANMAC Creamy Draft, which is priced at a premium to Cass, is gaining popularity in the on-premise channel. So the teams are quite pleased with that as well, and we continue to expand its presence in bars and restaurants. In the third quarter, actually, HANMAC grew by double digits, so it's reinforcing its position within the portfolio there. We also continue to increase consumer participation, as I was saying earlier, via non-alcoholic beer and some of the other flavored innovations, so Cass 0.0, Cass ALL Zero and the different variants of Cass Lemon Squeeze are doing very well there, too. So yes, we're very pleased with the healthy brand portfolio, the strong route to market and the people capabilities we have there, and we're excited to continue to lead the beer industry growth in Korea moving forward. Thanks for the question, Leaf. Ye Liu: That's very clear. And my second question is on group level cost. So how to look at any potential cost-benefits into next year with our 12-month rolling hedging scheme? Ignacio Lares: I mean, through the first 9 months of the year, our cost of goods on a per hectoliter basis has roughly been flattish, right, remained largely flattish. In fact, it decreased by 0.4%. So we've been taking advantage of commodity tailwinds this year, right, which is a product of 2024 hedged pricing, right, versus 2023 as well as the efficiency improvements that you count on us to do, and that's been partially offset by country mix, right, with Korea outperforming relative to China -- Korea and India performing relative to China. We've not really made any changes to our commodity hedging strategy, so you can still think directionally speaking around packaging material cost trends in the context of a roughly 12-month hedging policy. If you look at spot pricing, right, for the last few months, barley has continued to decline or been softer than the previous year even if in a more muted rate, so I think more like low single-digit decline. If you look at aluminum pricing in the market, it's continued to increase in 2025 versus 2024, so that one presents a bit of a headwind. It's now sitting in the high USD 2,000s per ton, whereas it was more low to mid-2,000s, right, at kind of bottom. Energy is a bit harder to predict and to hedge, but it's been mostly neutral thus far, right? So we don't really give a guidance, but if you just took a look at 2025 pricing versus 2024 pricing and you used a fairly simple view of hedging, you'd expect probably a slight headwind, right, in commodity pricing. As, of course, given we're already late in '25, we would be mostly hedged for next year. But I think the reality is the way we structure our business, and we've said this in the past, is to leverage our efficiency improvements and cost management initiatives to be able to manage, right, these types of changes. And given commodity escalations fairly moderated, it wouldn't be a stretch for us to ask our operations, right, to do their best to offset as much of the impact of commodities moving forward. So if everything goes this way, that should leave us a premiumization as ideally the most meaningful driver or variable, right, for cost of goods escalation as we move forward and look into 2026. So thank you for the question, Leaf. Operator: In the interest of time, our final questions will come from Linda Huang from Macquarie. Linda Huang: I have 2 questions regarding China. The first one is regarding for the net revenue per hectoliter because during the third quarter, we found that it's under the bigger pressure compared to the first half. So can you give us some of the context what is driving this? And then how do you see this trend going forward? Ignacio Lares: Yes. Thank you for the question, Linda. I mean, in the third quarter, our net revenue per hectoliter decreased approximately 4 percentage points, and this was a consequence of increased investments behind brand activations and our innovations with a focus, of course, on expanding our in-home presence, coupled with an adverse brand mix, particularly as we managed inventories as well. I mean we remain very agile in our investments, and within the context of the current consumption environment, that means where, how and how much we invest. If we look at the third quarter specifically, a greater proportion of our investments actually went to through-the-line campaigns, which were designed to provide as much value as possible to our consumers, to drive traffic for the in-home and to support our route to market in that regard as well. So you would have seen a lower net revenue per hectoliter with, on the other side, kind of a reduced sales package investment at the same time. So you could think of it as a bit of a switch in kind of investment mechanisms or areas of focus, right, with maybe more above-the-line or gross profit investment and less sales and marketing or SG&A investment. Despite the increased investment, though, both behind brands and innovations, the contribution actually of our Premium and Super Premium segments to our total revenue continued to increase in the quarter. And yes, equally important, I mean, we continue to maintain pricing discipline while investing, right? So we'll look to lead and grow the category and drive value for our consumers in a disciplined way. And so yes, as we move forward, we still expect premiumization will continue to be the primary driver for both top line growth and for margin expansion as well. Thank you for the question, Linda. Linda Huang: Yes. So the second one is regarding for industry because I also noticed that the private label trend is taking off in China, and there's many retailers right now, they also have their own beer brands. So does the company have any plan to work as an OEM with those retailers? Yanjun Cheng: Yes, Linda, this is YJ. Let me take this question. In terms of OER, I think the major thing that are linked to the people who like to have retail, like to have OEM is why is the consumer want to have a differentiation of the beer. And second one is with the current industry, the extra capacity and the efficiency in the breweries. So thanks for everybody really to our Fujian market and Fujian brewery back in the week of September 15. So you already see we are the company, how a rich portfolio can provide consumers the differentiation of the brand and package. So we have a big advantage in terms of differentiation that can meet consumers' needs. And second one, see the capability in the brewery and the efficiency we have in Fujian and also linked to the new technology, linked to the high quality growth. So we do have this kind of advantage in terms of differentiation of the brand and also efficiency improvement, the excellent program and the high technology we have. So that's all the advantage we have regard to make this happen. And let me summarize what we just talked about. First, in terms of brand portfolio, we have rich -- we got to strengthen this further to the consumer. And our route to market not only on-premise but also the new channels, in-home and O2O, that are going to invest and build our platform. And third one is the most important for us, after we have a plan, we have our initiative, the key is execution. So the execution, I'm talking about across 3 R: responsibility, resources and recognition. We're going to have the team on the field to own the plan and initiative, which is a very clear target and KPI to be able to track it. In terms of the resources, we're going to further invest the channel and also the brand. So we're going to use an excellent program to develop the best practice and the toolkit to help people to be able to implement the target we have. And at the end of the day, we're going to recognize people who's better, who's not good and recognize people and to reward and consequent people clearly. So those are the 3 I talked about. We also developed a platform we call [ One Bud ] platform between commercial and the supply chain to work together to make this happen. We are on the stage to build a 1-year plan for next year, so our direction is quite clear, keep the momentum and build -- see the gap we have, build a plan and the portfolio, the route-to-market execution and to have the next quarter as a bridge to bring our performance to be stabilized and further get -- improve time by time. So I want to use this opportunity to thank the analysts, investor for your attention to our performance. We're going to speed up the speed, focus and the discipline of the execution. Thank you. Operator: This concludes our Q&A session today. I would like to turn the conference back over to YJ for the closing remarks. Yanjun Cheng: Thank you, Rick. As discussed on the call today, we recognize that our results are out of sync with the quality of our brand portfolio, route to market and people. We are actively correcting this by focus on strengthening our key portfolio offerings, speeding our in-home route to market and enhance our execution to capture future growth opportunities in China. We are pleased with the results of our business outside of China and looking forward, continue their momentum as we improve our results to be more in line with the potential of our business. Thank you all for joining us today, and I'm looking forward to speaking to you again soon. Operator: This concludes today's results call. Please disconnect your lines. Thank you.
Operator: Good morning, everyone. If you'd like to listen to this session in English, please click the interpretation icon at the bottom of screen and select English channel. Thank you very much for taking your precious time to attend Renesas Electronics 2025 Third Quarter Earnings Call. We thank you very much, indeed, for your attendance. Today, simultaneous translation is made available. Please click the translation button at the bottom of the screen and select the language of your preference. Now speakers, you are requested to turn on your video. For today's presentation, we have the attendance of President and CEO, Hidetoshi Shibata; as well as Senior Vice President and CFO, Shuhei Shinkai, as well as some other staff members. After this, we will hear some greetings from Mr. Shibata, and then Mr. Shinkai will follow with the explanation on the third quarter results, which will be followed by the Q&A session. We intend to finish the entire session in about 60 minutes. The materials to be used for today's presentation is already posted on the IR site of our home page. Mr. Shibata, please turn your microphone and begin your statement. Hidetoshi Shibata: Good morning, everyone. This is Shibata here. Today, I caught a cold. So maybe it might be difficult for you to hear my voice, but please excuse me. The temperature has come down quite suddenly, and school events, there are so many -- so much events. So there are many people around me catching cold, so please be careful yourself as well. Now the third quarter, maybe have already seen. In a sense, I think I would say the results have landed in line with the expectations. As you may recall, there might have been some upside, but we have declared to operate the business in a very diligent manner, and the numbers came in as anticipated. So the revenue came in as planned. The revenue from the channel, there were some upside. So the channel inventory is now becoming smaller. And that is the -- by and large, the highlights of the results of the third quarter. And so if things stay as is, we are not really assured. So towards that fourth quarter, we hope to further reinforce the channel inventory in the fourth quarter. So that's how we plan to manage the business. Overall, I would say, from the sell-through at the end demand. If I talk about the end demand, the sell-through, by and large, I think the performance has been flattish. There were some ups and downs depending on the elements, but by and large, it was flattish. Automotive, for some certain customers, the production and also inventory adjustment has been done. So there might be some decline on the -- there was some decline on automotive, but 28-micron and Gen 4 SoC, they are taking off steadily as planned, but the scale is still limited. And of course, the 28-nanomicron MCU, especially due to the China-specific element, we are going through some phase of adjustment. So it's not at a phase of achieving a significant growth, but we are enjoying steadfast increase. On the other hand, for nonautomotive, towards the fourth quarter, how should I put it? The outlook compared to the last time, I think, is more favorable, I would say. So -- I'm sorry for the ambiguous expression of favorable, but I think things are turning to the better. As for the industry overall, there are, of course, some ups and downs depending on each element. But overall, we are seeing a robust growth. At the third quarter, continuous after the third quarter in the fourth quarter as well, the AI infrastructure, there has been a very strong demand, and that has been continuing to be the case. And the production side, we are now making efforts on the production side rather, so that we can make sure to supply the needed demand, so we will produce and sell and produce and sell. So those are the areas that we are going to attach focus on in the fourth quarter. And consumer, consumer mobile and IoT, this segment, nothing strange. But third quarter, we have seen a significant increase. And the decrease in the fourth core, that kind of seasonality is already factored in. But there has been a share gain in this segment. So overall, we are seeing a general uptrend here. So IIoT overall, as a general trend, I think we are seeing a favorable trend. Automotive, next period, and there are some uncertainties there. But as always, we'll keep the same attitude of having a deliberate management, and we'll keep a close eye on the management, the inventory level and be cautious in our management. Especially when it comes to channel inventory management, this is some time ago already, but about 5 years ago, we have experienced a very bad situation. So learning from that lesson, we will continue to be cautious. So I would like you to keep an eye on our performance and evaluate as adequate. Then up until the last earnings call, because it's been than 1 year since we acquired Altium, so we have been listening -- we have been hearing some questions from the investors regarding Altium. So just today, I would like to give you a little bit of update on Altium. In a phased manner, we'll try to enrich our disclosure regarding the Altium. So I will just give some overview today. Just a little overview. So if you can put up the screen, please. Yes, this is Altium stand-alone. So far, as planned, cost synergy and organic growth, they are performing in line with our expectations, so steadfast progress has been achieved. So those are the 2 elements that you see on this slide here. The sales synergy takes longer time, definitely. And the so-called enterprise or the large accounts that's leading the world. The sales expansion to those clients have just started on a gradual basis. So that's what is meant by the box on the far left. Right now, we are making a focused effort to the middle section here, i.e., after the acquisition of Altium from a stand-alone basis, we are now -- that will not make sense if it's standalone. So we are now going through a major transformation. One thing, as it was already announced by Altium. And if you can look at the website, I think you'll be able to have a better understanding. So far, the PCB designer software and Octopart, those different products had been provided by Altium. But right now, we are making a transition to become a platform company. So we are in the middle of this effort. And in parallel to that, the user base is planned to be expanded. So we are now expanding our efforts to expand the user base as we had declared from before. So those efforts are now being propelled. And why Renesas? One of the pillars why Renesas is this Renesas 365. This is our own platform. And we -- the development is currently underway. And in the first half of this year, Embedded World, at that trade show, we demonstrated a demo. So by the end of the year, we plan to launch this and the progress -- the preparation is currently underway. As for the future, as you can see on the right-hand side of the slide, Renesas 365 is planned for launch within this year. At the point of launch, at that time, it's not going to be something splendid that will surprise you naturally. So in the past, Windows made a very silent debut, but then with Windows 95 made a huge takeoff with Windows 95. So that is the kind of avenue that we would like to follow with. So please expect for this Renesas 365, but not with a huge anticipation. The overall progress, as I mentioned, because we are in the middle of this major transformation, we don't want to set the KPIs everything from the beginning. So -- and because we don't want to change them later. So we are very cautious in setting the KPIs. So if things go as planned, I think we will be able to disclose what kind of KPIs will be set for this business during the next earnings call. And the progress will be reported at the Capital Markets Day next year with a more bird's eye view with more enriched data. So we would like to give you an update on the progress on that occasion. So from here, I would like to -- starting off with the Altium business and also the details of the earnings call will be handed over -- will hand over the microphone to Shinkai-san so that he can give some updates on those things that I just mentioned. Shuhei Shinkai: This is Shinkai, CFO. On the left-hand side of the previous slide, we have -- there was progress. I would like to give some more details regarding the progress so far. It's been 1 year since the acquisition. So I would like to talk about the progress thereafter. If you can look at the right-hand side, cost synergy. Cost synergy. There was the initial cost reduction immediately after the closing and also the cost suppression after that, absorbing the cost increases using Renesas resources. So we had been contemplating this 2-tiered approach. The first phase will be -- was completed by the end of the first quarter of this year. And the organic growth, the second point there. As you can see on the left-hand side, the ARR, annual recurring revenue, annual recurring revenue is the indicator that we have used here. This is based on term-based contract and subscription-based contract revenues. So the annual recurring revenues per 1 year is indicated by this indicator. So compared to third quarter 2024, we have achieved a year-on-year 15% increase in the ARR. This represents the same pace of growth prior to the acquisition. The sales synergy, we have started to see this. We are starting this with the cross sales measures for enterprises and the transformation to the platform business. Renesas Retail Supply development in addition to this line of development, in the finance and account area, as we discussed the other time, the revenue recognition policy was changed as we announced the other time -- the other day in view of this transformation into a platform business. So starting this year, we've changed the revenue recognition policy because of this. That was about the progress relating to Altium. From here, I would like to use your usual slides and explain the results for the third quarter of the year. If you can go to Page 6, please. This is the overview of the financial results. For the third quarter, if you look at the dark blue columns in the middle, revenue, JPY 334.2 billion; gross margin, 57.6%. Operating profit, JPY 103.2 billion. Operating margin, 30.9%. Profit attributable to the owners of parent, JPY 88.2 billion. EBITDA, JPY 122.5 billion, and foreign exchange, JPY 146 to the dollar and JPY 170 to the euro. Compared to the forecast, if you look at the 3 columns to the right, and I would like to explain them in more detail using the subsequent slides. That was the non-GAAP. And for the GAAP performance, I'll come back to you later. On the next page, please. This is the third quarter revenue, gross margin and operating margin and also the segment results. For the company total, first, compared to the forecast, operating revenue was 1.3% higher, 2/3 of this increase was the result of foreign exchange, a weaker yen and the remaining 1/3 is from other factors. Automotive was in line with the expectations, and the sell-through upside, we had planned for this shipment that can cater to sell-through. And sell-through was okay and shipment was almost in line with the expectation. And the IIoT compared to the forecast, we have achieved upside, AI server and PC and also memory interface, those were the major drivers behind this incremental performance. Now regarding gross margin, gross margin compared to the forecast came in 1.1% higher. The details of that. There are mix improvement and also utilization improvement. And mix improvement was due -- as I mentioned with the revenue increase, this was due to the memory interface, because they are higher in gross margin, they sold well, and that drove the growth and also utilization increase. I'll come back to this topic later, but input utilization came in higher than expected. We review the schedule and the input was increased in the -- towards the third quarter compared to the fourth quarter. OP margin, this increased by 3.9 percentage points. So the significant improvement compared to the forecast. As I mentioned earlier, because the revenue also increased and also in addition to the gross margin improvement, operating expenses also accounted for a major bulk of this improvement of operating profit. In actual numbers, operating expenses, OpEx ratio and also plus R&D, there was a reduction of JPY 6.3 billion. So almost half of this improvement was due to the timing difference of R&D projects and the remaining half has come from the net cost reduction, so the net reduction in costs. So those had a stronger impact than expected. And therefore, the timing difference of R&D because this is now postponed from the third quarter to the fourth quarter. So that has accounted for a major impact of the profit improvement. And I'll come back to this topic later. But in the second half, if you average out for the second half, I think the OP margin will reflect a more realistic number. Now on a Q-on-Q basis, if you look at the bottom box on the right-hand side, revenue came in 2.9% higher and automotive Q-on-Q decline and IoT Q-on-Q increase. Operating gross margin improved by 0.8 percentage points, on a Q-on-Q basis and mix improvement, utilization increase and cost reduction, those were the drivers behind this. OP came in 2.6% higher. OP margin came in 2.6% higher due mainly to the expense reduction and revenue growth, as I mentioned earlier. And also, I have one more thing regarding here. Regarding the segment, the -- as far as automotive is concerned, if you look at the very bottom, if you look at the OP margin there, OP margin Q-on-Q achieved a significant improvement because this -- in the second quarter, there was a one-off factor or one-off losses regarding litigation expenses. In reaction to that, there has been an increase. So on a Q-on-Q basis, it seems larger as an improvement. But the actual -- if you ask me if this is recurring, then if you even out the 3 quarters overall, then in the 9 months up to the third quarter, the automotive OP was 29.5% OP margin. So that I think, reflects the reality, I believe. As far as IIoT is consumed, nothing in particular that I have to note. So I can move on to the next page. So next is about the revenue. As a whole, year-on-year, 3.2% decrease Q-on-Q, 2.9% increase. As for by segment, this is as shown here. Next page, please. Now different trends of the different numbers. Nothing to be -- nothing remarkable. So moving on. About the inventories. Q-on-Q up and down and also the forecast are summarized here. First of all, in-house inventory. In Q3, Q-on-Q, the inventory and DOI, both of them increased as expected. In Q3, DOI was 111. Q4, Q-on-Q increase is expected. As for the work in progress, the internal production, mainly the die bank will be expanded or increased. At the same time, the strong demand for AI and data centers, we want to increase the die bank, but we are unable to do so, so far. As for the finished products at the beginning of the year, in order to prepare for the shipment at the beginning of the year, we will be increasing slightly for that. Next is the channel inventory. Q3, WOI and inventories decreased in real terms. And it was 8.9 weeks and then down to 8.1 weeks. So this is due to the higher sell-through and the channel inventory came down. Q4, overall, the slightly decrease is expected. For automotive, it will be aligned with the sell-through inventory will be flat. As for the IIoT, we will try to align with the sell-through. But for the AI data center, the sell-through will be brisk. And as a result, the channel inventory will decline. That is what we expect. Earlier, Shibata-san mentioned that we are trying to expand the channel inventory. But Q-o-Q from Q3 to Q4, sell-through is almost flat and sell-in is likely to increase. So in that sense, the channel inventory decline or decrease will be smaller. Next page is the front-end utilization. Q3, as I mentioned slightly, the expectation of 50% -- less than 50% and the actual was 50%. So slight increase of the utilization based on the input. This is not due to the fundamental, but we revisited the schedule for the holiday season and bringing the schedule from -- input schedule from Q4 to Q3. So because of that change, we expect a slight decrease in Q4. And we do not have any particular things about the CapEx. As for Q4 forecast, in the middle of the table, please refer to the dark blue. The gross margin median is JPY 340 billion -- sorry, the revenue median JPY 340 billion; and the gross margin, 57%; and operating margin, 27.5%. The ForEx expectations, dollar is JPY 150 to the dollar. JPY 175 to the euro. So this is a 3-year Q-on-Q, weaker yen for dollar and JPY 5 weaker in euro. So as for the revenue, median is JPY 340 billion. So this is the 16.2% increase year-on-year and 1.7% increase Q-on-Q. Now Q-on-Q increase, the ForEx impact is high and the device sales related is small. And the Q-on-Q for the device for mobile and IoT seasonality will lead to the decrease, but we will offset that with a strong DC, data center as well as the signs of the bottoming out of the customer inventory. As for the gross margin, 57%, it's down 59 basis points Q-on-Q, so slightly decreased. This is due to the mix deterioration. And the 338 basis points negative -- sorry, OP margin, 27.5%, down 338 basis points Q-on-Q. And from -- there was a shift from Q3. And also, there is a concentration towards the end of the term and the ForEx. So these are -- each represent 1/3 of the factors. So Q-on-Q increase of the operating expenses is JPY 11 billion. As for the 27.5% change of the OP margin in the second half -- in the first half, it was 27.7%, and there's been the improvement of the 100 basis points, and this is due to the progress of the top line and the higher expenses and others. At the bottom of the right-hand side, we added the ForEx sensitivity for the first time. The volatility of the ForEx is relatively high. And the constant currency, what would look like if the currency is JPY 100 to the dollar. So we wanted to add this so that you can see that. So what I can say here is that as sensitivity against the dollar and the euro, when there is a change of JPY 1, what will be the impact on the revenue and operating profit are shown. As for the dollars, with the JPY 1 change, JPY 1.7 billion impact on revenue and JPY 0.7 billion impact on operating profit. Based on this ForEx sensitivity, if I assume -- sorry, based upon the constant currency of about JPY 100 to the dollar and JPY 120 to euro, the forecast of the Q4 operating margin is 22.3%. And so that is from 28.5% to 23%. So going on to Page 19 in the appendix, the net income, JPY 106.3 billion Wolfspeed-related evaluation gain is included in the interest expenses, that is JPY 44.5 billion. The following page on the break down or how to think about this Wolfspeed-related number. On the left-hand side, originally, before going to the Chapter 11. At that timing, the securities that we held, we had the convertible bond and equity and the warranty for the shares. And then there was a Chapter 11 at the end of September. So these assets at the end of the quarter, we needed to evaluate that. So basically, this is equity-based assets. So we have to look at the market, the share price of the Wolfspeed, it would change. So as you can see in the middle, at the end of Q2, the market cap was the JPY 1.66 billion. And our stake for that is a JPY 0.575 billion. So after the Chapter 11, the market cap was updated. And then based upon the share price, we multiplied what we own, and we calculated the total amount. At the end of September, $28.6 was the share price, and we calculated $2.71 billion. And our stake based on that is the $0.874 billion. So in Japanese yen, that is JPY 130.1 billion. So here, we booked the gain of JPY 44.5 billion. So that is the impact on the finance up to Q3. So what would happen in the future is summarized at the bottom right. As of now, the CFIUS approval is not something that we have gained. So strictly speaking, the warranty and the share equities, those are something that we would obtain after the approval of CFIUS. So those are considered to be the similar right or the same level. But as for the CFIUS approval, we expect that this is something that we would have. But because of the shutdown of the U.S. government, the schedule of this approval is being delayed. And ultimately, this after the CFIUS approval and after getting the equity and converting the bond and so forth and about 30% is what we'll own. And let me turn this. We can separate this from the equity method, Wolfspeed financial impact. And with that, I would like to end my presentation. Thank you. Operator: Thank you. Now we'd like to move on to the Q&A session. Shibata-san, please turn on your video. So let me first explain how to raise a question. [Operator Instructions] In the interest of time, we would like to limit the number of questions to 2 questions per 1 questioner. Now first, Takayama-san from Goldman Sachs. Can you begin your question? Daiki Takayama: So let me ask a question. The first question is about the infrastructure business. Memory interface as well as NVIDIA PMIC. I think those are performing very strongly according to what I see. What are the requirements that are given to you towards next fiscal year because you said that you are not able to keep up with this demand. So what is the request from these companies? Are you receiving massive amount of orders? Or is there a very strong appetite among from these demands? And based on your position, the memory interface, your market share has come down, but is it coming up again? For NVDIA related, from 1/3, you said to 1/5. Have you been able to improve your position in the market as planned? Can you comment on those points as well? Hidetoshi Shibata: Yes. For memory interface and RDM, we keep a bullish forecast. And we -- there's no factors that will force us to change that outlook. So for the market share as well, we also maintain a bullish forecast. For power, for a specific customer, we cannot comment on a specific customer, but these matters, it's very difficult to forecast on a 1-year basis or for several quarters basis. The requirements from the market are very strong. They are giving us a very strong order amount as a request. But the suppliers that can qualify are also increasing on the other hand. So it should not be -- so reassured. For the time being, more than 1/3, I think we have an expectation that will be -- we will achieve much increases. So if I talk about the next quarter, a very high market share will likely be maintained. Beyond that, I think we cannot talk about that until we get into the next quarter. But the demand itself is quite strong. So it's all up to us whether we can execute. If we are able to execute properly, we shall be able to secure these. Daiki Takayama: All right. For the memory interface, recently, the DRAM memory, the outlook for that is quite strong recently. What was the expression you used for the January to March quarter and the April to June quarter, what is the likelihood of increase? What are the requirements or requests coming from the customers for this? Hidetoshi Shibata: Well, it's very difficult to predict up to that point. We cannot -- we don't have a very definitive number for that far out. But for -- if you look at the trends, recently, as of September end and also towards the end of October backlog, if you look at the backlog trend, as you mentioned, if I -- we are seeing a step increase like a staircase. It's not a crawl. It's a significant sudden increase. That's what we see. Daiki Takayama: All right. The second question, automotive by region. Can you talk about the performance by region? You mentioned a specific customer. I think that is about China. There might be some decline in the October-December period, but it's coming back again in January and beyond. What are the major -- the outlook for the major markets like Europe and Japan? What is the inquiries from the customers? Hidetoshi Shibata: To give you a comment on the recent performance. As far as Japan is concerned, because of the cycle, Japan is likely to be very strong. But for Europe, I think relative -- Europe I think, is relatively weaker. China. For China overall, compared to one time, we have seen a slight slowdown. Amid that, depending on the customer, there are customers who can expect a further increase or other customers that is going through an adjustment. So mixed performance when depending on the customer for China. So depending on exposure to the customer, the aggregate numbers may be affected. But overall, the market conditions, I would say, is slightly weaker, I think. That's my impression. Daiki Takayama: If I may supplement. So the overall tone, of course, the year-end profit margin may come down because of the expenses. But the operating profit bottoming out, can -- do you see signs of that towards the beginning of the year, next year? Or is that the message you want to get across? Or do you still maintain a cautious forecast? And will that stay flattish? Is that your message, Mr. Shibata-san? So what is the message, your main message today? Hidetoshi Shibata: Well, that is the point that I find difficulty with. Flattish, slight increase in terms of margin. I think if you can achieve that number, I'd be happy. I do understand the background where your question is coming from. But I, myself, we have to accelerate the investments for the longer term of the business. So if you consider that rather than continuously increasing the margin, we would like to achieve a gradual increase in line with the revenue. So that I think is the best scenario for us. Operator: Next, UBS Securities, Yasui-san. Kenji Yasui: I would also like to ask a question about the data center. That's my first question. Or GPU customers, in addition, there will be a custom ASIC increase next year. So the 1/3 or higher share and based upon the certain size, non-GPU, is that something that you think you can achieve? Hidetoshi Shibata: Well, that's a very good question. How can I say this? It is yes, but it's a custom -- so it has to do with our bandwidth. So doing everything is not possible. And if we try to do that, execution will deteriorate. So each one, choosing each socket is something that we will be doing. I will not mention the numbers, but in Q4 forecast, custom power number is coming in, and it's going to grow strongly next year. And custom platform for the hyperscalers, we have several different ones. So for example, try to do everything. Getting 50% or 100%, that is not realistic. So choosing some of them rather than 1/3 or going for a higher share. That would be our approach. Kenji Yasui: So in that sense, PMIC, digital power for different customers, I think that there will be differences? Hidetoshi Shibata: Not really, but depending on customers, the architecture that they want is different. And the generation change and the timing of that will be different. But having said that, wafers and back end, the production side would be the same. So it has to do with the capacity allocation and equipment facilities that we need, because of those factors, if you look at end-to-end, it's not just making one product and apply it to everything else. Kenji Yasui: I see. The second question is about automotive. In Q3, the gross margin is 55%. So I think this is the highest level that you achieved based on the disclosure. So do you think that this will go up further? Q3 was high. Is this sustainable? If you can comment on that. Hidetoshi Shibata: Yes. I would ask Shinkai-san to respond. Shuhei Shinkai: Yes, Q3 automotive the utilization rate increased and the production expenses coming down. So it has to do with the cost side improvements. And because of those, this is a Q-on-Q increase of 22.8%. So whether it's sustainable or not, it really depends on the utilization rate. So half of that will be changing based upon the utilization, and the remaining half will be the cost reduction, and the continuous progress of the cost reduction. Based on that, we might be able to continue. Thank you. Operator: Moving on to the next questioner. BofA, Hirakawa-san. Mikio Hirakawa: BofA, Hirakawa here. My first question. The noncore business write-off or the reorganization, what is the progress? By the media, you said that you're planning to sell timing-related business? I'm sure you cannot -- if you can comment to the extent possible, that would be appreciated. But rather than these specific names, I would like to talk about the overall progress, how that is positioned? And what kind of actions are being implemented together with the time horizon? That's my first question. Hidetoshi Shibata: Shinkai-san, can you talk about that? Shuhei Shinkai: Yes. The product portfolio review. We have an annual cycle and on a continual basis, we are reviewing this with that approach. So in that cycle, we decide whether to focus or which one to go for an alternative approach. At this point of time, it's not that we have decided everything, and this is in the portfolio for restructuring. We are looking at things on a continual basis. The criteria that we apply for that selection, is whether that is suited for our core embedded semi. How much they can offer a synergistic value inside the company, we look into that, the contribution to the core. And based on that, we decide whether to focus on the business or not to focus on that particular business. Mikio Hirakawa: Well, a follow-up question on that point. So the synergistic value, what kind of asset? So if you take the total asset of your company as 100, which -- what percentage of such -- do you have such kind of assets that can be synergistic to your core? Shuhei Shinkai: Well, it's very difficult to give a quantitative number as to this much is the synergistic asset. But we would like to conduct a continuous update and review the product line on a continuous basis. And because these changes -- these things changes on a relative basis based on these considerations. Mikio Hirakawa: All right. My second question. Relating to Altium Renesas 365. You said that you are working to expand the user base of Renesas 365. What kind of actions are you implementing in order to expand the user base? And if you can give us some quantitative indication as to the pace of increase of user base. And also, you said that you are taking a Windows-like approach. You're not going to be hasty. But when you launch this system in the end of the year, what are the features to be made available upon the launch? If you can comment on that, that would be appreciated. Hidetoshi Shibata: User base expansion has just started. It's just earlier. So we cannot comment on the pace of progress. By having this on the cloud, the pricing structure has changed significantly weak. So compared to before, for small users, I think it's easier to use. So we are going to provide an option that will make it easier for use for the smaller scale users. That's one thing. Another thing is that by region, we will apply more resources such as China and India. For those markets, we'll become more full scale, full scale in addressing these markets. So those are the 2 major pillars that we are working on in order to expand the user base of Renesas 365. And for Renesas 365, for one thing, at the Embedded World, we have demonstrated something that will serve as a benchmark for you. But beyond that, I think this is more effective and maybe not be a clear cut at site. That is about the cloud-embedded nature. Previously, we had provided many different tools. We thought that we had been providing good tools, but that can be downloaded from the website, but the version management was so complex. So we had taken that kind of classic approach. But this time around, everything will be cloud enabled from this time onwards. So when that happens, I'm sure you're using this, but Office -- if you use Microsoft Office 365, you don't have to care about the version difference of the software and all the bug fix will be done automatically. So in that way, in that kind of approach, all the latest versions are provided seamlessly through the cloud. That is the state that we would like to realize in this first phase of this product. So the functionality is not going to increase significantly, drastically. Rather, the ease of use compared to before will improve significantly. That is the first focus. And then from there, our philosophy is that we would like to work together with lead partner customers. The number of such customers will be limited. So together with them, we would like to discuss what are the futures that will -- that needs to be improved, that could be most effective for the customers. So we will work on that and then decide on the priority of our development. As you may be aware, in the cloud environment, the update cycle will change significantly compared to conventional products. So agile will be the key here. So we will constantly upgrade and update the product. So when you notice, the customers will notice that the ease of use has changed dramatically. So that is the initiative that we are contemplating. Operator: Next, Daiwa Securities, Okawa-san. Junji Okawa: Okawa from Daiwa. In the IIoT, the gross margin, the -- I think that the data center is brisk with the high profitability, but this is not growing as much as expected. So Q4, you mentioned that the deterioration of the product mix. Could you elaborate on that? IIoT and automotive, maybe it's for both. So if you can make some additional comments. Hidetoshi Shibata: Yes, Shinkai-san, please. Shuhei Shinkai: Well, first of all Q3, IIoT, there are differences. So gross margin relatively high, is for the data center, the memory interface grew. So for example, the same data center segment would have lower profitability. So we are trying to drive that mix. So right now, what is growing? And among them, the higher -- they're not always higher than the average gross margin. So there are some differences of the gross margin level. And so IIoT margin changes reflect those differences. So for example, high-density power compared with the average, gross margin is not so high. So if it grows, the overall margin will be pushed down. So margin, gross margin growth is muted, so to speak. It appears to be muted. So in Q4, the similar reason, Q3 was good. So there is a reaction from that. And as a whole, the low-margin products will grow. And as a result, the margin would come down. Junji Okawa: Second question is about the industrial prospect. Competitors, of course, they handle the different products, but the industrial, I think there are some conservative or prudent prospect by other companies. So for you, what is your prospect? And by different regions, do you see the differences of the recovery? So about the industrial? Hidetoshi Shibata: Yes. Well, maybe if I can categorize them into 3 groups. The first is traditional factory automation and energy management is another. And the third is the smart appliance or white goods. So if I categorize them into 3 energy management is strong, it appears. So by region or rather than differences by region, there are customers who are strong in energy management. And of course, there are regional differences. But regardless of the geography, energy management is strong. As for white goods, it is also quite good, quite strong. No differences of the region. Well, China is big in terms of volume. But rather than the regional differences, hitting the bottom and a recovery cycle has already started. As for the hardcore factory automation, there is a mixed view. The Japanese customers are not so strong. If you look at the world, they don't really look very strong. But in the past, there was a very difficult situation, but that is over. So gradual recovery is something that we expect. So by region, as I said, and in the short term, Japan Europe towards Q4, how can I say this, because of the comparison to Q3, the growth will be driven, but as an overall trend, it is not so strong. Operator: Now moving on to the next question. Citigroup Securities, Fujiwara-san. Takero Fujiwara: This is Fujiwara from Citigroup. I also have two questions. One, well, I'm just -- this just happened recently. So this is about the Nexperia supply issue. I just want you to remind us once again. I'm sure that you are now sorting things out at the customer side, but what is the likely impact on the fourth quarter performance according to your assumption? Or what are the potential outcome that is indicated by the customer? If you can share that with us to the extent possible. Hidetoshi Shibata: Shinkai-san, can you answer that question? Shuhei Shinkai: Yes. At this point of time, the current outlook does not factor in this impact. As far as the shipment is concerned, there won't be a significant impact according to our view because of the backlog -- in relation to the backlog. As far as the sell-through is concerned, we are anticipating a slight impact from this. We cannot rule out that possibility. Sell-through, we are going to ship things based on the sell-through. But if there's any downside to the sell-through, then the inventory may climb up. So that's a possibility that we have to foresee. But we don't have the details available. So that's the reason why we have not factored this in -- in the forecast. So the -- it's not -- unless there's a major adjustment, the October-December period will be landing as planned. And if there's any impact, you're going to adjust with the first quarter in the next year. Yes, if there's an impact in December, then we'll have to adjust and there may be a handover effect on the January to March quarter. Takero Fujiwara: Okay. The second question regarding the procurement attitude on the part of customers, if you can comment on that. Well, this year, you received many short-term orders, I believe. But when you look at the overall industry, the inventory level is quite slim. So customers are not increasing their inventory level according to what I see. So have you seen any changes in the customers' procurement attitude, if there's any indication that you can share with us towards 2026? What is the direction of customers purchasing or procurement attitude? If you can share with us, that would be appreciated. Hidetoshi Shibata: Well, a very good question. Well, at this point of time. As a general trend, the inventory buildup trend were increasing lead time, that's what we do not see at the moment. But if you think about the possibility, data center or AI-related components, some components relating to AI because they use a significant amount of certain components, like because the device die is so large, and therefore, that's the area where we have a shortage in terms of components and then our capacity. So then we cannot rule out the possibility of everybody trying to go secure that. So that may result in a longer lead time. If that is the case, then the inventory buildup trend and initially, I would say, may be difficult for us to distinguish whether that is a buildup of inventory. So we have to make sure that we have a close communication with customers and address what is happening there. So at this point of time, I would say we are not seeing any conspicuous changes. For the short term, there might be some customers narrowing down the inventory level too much and therefore, increasing, but we don't see a general trend across the board yet. Operator: We are getting close to the end. So we'd like to end the Q&A. Lastly, I'd like to ask Shibata-san to say the closing remarks. Hidetoshi Shibata: Yes. So we continue to see that strong AI and as a derivative of that, energy-related is strong, and also IoT, part of it, we are gaining market shares. And so it's strong. So those are the major parts and especially the execution, we want to make sure that we don't make any mistakes. We want to work on the internal initiatives. And as for automotive, there are some uncertainties. So we'd like to be careful, but we want to make sure that we capture the upside. So that is the attitude that we have had, and we would like to continue that. So I hope that you will continue to support us, and thank you for joining us today. Operator: So with that, I'd like to end the Q3 earnings call of Renesas Electronics. Thank you very much for your participation today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Lars Solstad: Good morning, and welcome to Solstad Offshore's Third Quarter 2025 presentation. It has been another quarter of solid operational and financial performance and with a continued high activity across our fleet. Today's presentation will be held by myself, CEO, Lars Peder Solstad; and CFO, Kjetil Ramstad. And after the presentation, we will open up for Q&A. So please submit your questions in the chat. If we take a quick look at the disclaimer before we move over to the third quarter highlights and our business update. It has been another quarter of solid operational performance for Solstad Offshore with a fleet utilization of 97% in the quarter, and that is also the number for year-to-date. So 97% utilization year-to-date. And while the long-term demand remains positive and we see several longer-term opportunities, we also see that in the short-term market, we experienced a slower or lower demand than we previously expected. And that is also in line with what we communicated in the business update in October 9. Following the Solstad Maritime's reduction in full year 2025 adjusted EBITDA guidance, we have then also updated the Solstad Offshore guidance for the year accordingly with operational guidance still intact, while the share of associated companies and joint ventures are slightly reduced as earlier communicated. If we look at this quarter and earnings. Has then been adjusted EBITDA of $29 million, and that is compared to $28 million in the same quarter last year. We have secured several new long-term contracts in Brazil, contributing to a total order intake of $222 million in the quarter, and that includes 1 Solstad Maritime vessel that will go on long-term contract to Petrobras. In addition, we signed a 3-year contract for Normand Turmalina, one of our Brazilian-built anchor handlers, for a 3-year contract starting in first quarter '26. And also our client on CSV Normand Superior exercised their option to extend the contract with 1 more year. It is also nice to mention that the Board proposes a third quarter 2025 dividend of USD 0.05 per share, totaling approximately $4 million, which is more or less equal to Solstad Offshore's share of the Solstad Maritime third quarter dividend. If we take a closer look at the market. Solstad Offshore maintains a very strong foothold in Brazil, where long-term demand for offshore energy services remains robust. And Brazil continues to offer both long-term and project opportunities for the CSV and the anchor handling fleet. Globally and in addition to Brazil, the activity is good and offers more opportunities for our fleet. In 2025, it has been the North Sea that has had lower than expected activity. And as we continue to underline, to be able to sign contracts and to be a part of the global markets, it is essential to have a local presence. And Solstad Offshore has particularly in Brazil a very, very strong position. The long-term offshore energy services remain positive globally, but we have to keep in mind that the oil price development seen in the last months could introduce some uncertainties into activity level going forward. If we look at our backlog and earnings visibility. Solstad Offshore divides its backlog in two. One is the backlog we have on the owned fleet. The other is the backlog on Solstad Maritime vessels that utilize the Solstad Offshore structure for Brazilian contracts. And both continue to strengthen. The new 3-year contract for Normand Turmalina and 1-year option for Normand Superior have increased our direct backlog this quarter. And there was also a material increase in the backlog for Solstad Maritime vessels due to a new 4-year contract for the CSV Normand Commander with Petrobras that starts early next year. So the firm backlog for Solstad Offshore vessels is $280 million, which is a doubling of the backlog compared to last year. And for Solstad Maritime vessels, it is at USD 640 million. In fourth quarter this year, we will have some vessel availability. That is due to one vessel has come off a contract and is now exposed to the short-term market, while one is at a planned yard stay. So that will influence the utilization fourth quarter '25. But looking into 2026, the earnings visibilities are very good. And we also see that for the available vessels we have, we see that there are quite a few market opportunities that we are chasing for those vessels. So Kjetil, can you take us through the financial highlights? Kjetil Ramstad: I will, Lars. So let's start with the third quarter financial highlights for Solstad Offshore. It has been a quarter with high activity in third quarter with 97% utilization for the fleet compared to 97% last year. Year-to-date, we have an overall utilization of 97% versus 96% last year. On the revenue side. For the quarter, $73 million compared to $68 million last year. Year-to-date revenue was $220 million compared to $197 million. Adjusted EBITDA for the third quarter was $29 million compared to $28 million last year. Year-to-date, adjusted EBITDA of $91 million compared to $89 million last year. The net result was for the quarter $26 million compared to $11 million last year. Year-to-date, $88 million versus $52 million last year. Firm backlog for the Solstad Offshore owned vessels of $280 million compared to $42 million last year. This, of course, excludes the vessels on bareboat from Solstad Maritime. Book equity in the third quarter of $375 million, up from $203 million last year. And it gives an equity ratio of 44% for the company. Adjusted net interest-bearing debt of $57 million compared to $206 million last year. And the large reduction is mainly caused by Normand Maximus residual claim, which was approximately $185 million. Cash position at the quarter end was $87 million compared to $60 million last year. Plan to distribute dividend of $4 million in the quarter. Then if we have a closer look at the net interest-bearing debt and lease commitments in Solstad Offshore. We see that we have the regular bank facility of $90 million. That was drawn in November '24. That has a 5-year amortization profile with the majority in November '27. And then we have the financing for our Brazilian fleet, $51 million with BNDES, with maturity between '26 and '31. The lease commitments in the debt side of the balance sheet includes the Normand Maximus bareboat charter lease of $55 million and also the purchase options that is at $125 million and included in leasing with $105 million at the present value. Other leases is mainly the vessels that Solstad Maritime bareboats to Solstad Offshore for Brazilian operations and contracts. And the operational risk for these vessels are with the shipowner, Solstad Maritime. Then if we move over to the financial investments that we have in Solstad Offshore and start with Solstad Maritime, which Solstad Offshore owns 27.3% of. There will be paid a dividend of approximately $150 million in Solstad Maritime, and the share that Solstad Offshore will receive is $4 million. Share of the result in the quarter is $9.3 million compared to $13.1 million last year. Book value of the shares is $212 million. Then if we move to Normand Installer, which is a joint venture, owned 50-50 with SBM Offshore. The vessel is predominantly utilized on SBM Offshore's FPSO projects. First half of the year, the vessel had low utilization. And in the third quarter, the vessel had a planned maintenance dry dock. We expect that the rest of the year will be fully utilized. NISA is in a net cash position. And the share of the result in the quarter was negatively $0.3 million compared to positive $0.6 million last year. The book value of the shares is $20 million. And the last investment that Solstad Offshore has is Omega Subsea, where Solstad Offshore owns 35.8% of the shares. And Omega Subsea has 12 ROVs per the quarter end and 12 more scheduled to be delivered in 2026 and beyond. Share of the result in the quarter was $1.4 million and $4.2 million year-to-date. The book value of the shares is $16 million. Then if we go to financial guidance for Solstad Offshore. As mentioned and communicated 9th of October, we adjusted the financial guiding based on the change in guidance from Solstad Maritime. So the overall guidance on adjusted EBITDA is $150 million. The operational part of the guidance was unchanged at $60 million to $70 million, $53 million year-to-date. And the share of the results from associated companies and joint ventures was adjusted to around $50 million compared to the previous of $60 million to $80 million. As mentioned, there is a proposed dividend payment in the third quarter of USD 0.05 per share, totaling $4 million. And then if we go to the dividend dates. The summons to the AGM will be 3rd of November, and then the AGM will be 24th of November. Last day of trading to receive dividend is 24th of November. The ex date will be the 25th. Record date, the day after the 26th and then distribution date will be on or about the 28th of November this year. So with that, I leave the word back to you, Lars Peder, to summarize. Lars Solstad: Yes. Thank you, Kjetil. And to summarize our presentation and the third quarter. We have had or a quarter with solid operational -- yes, sorry about that. Now we have the correct slide. To summarize the presentation, another solid quarter operationally and financially for Solstad Offshore. We have had a strong order intake that increases the visibility for 2026 and beyond. We also see several market opportunities for the available vessels we have into 2026. But as I have said already, we have to also keep in mind that the recent oil price development represents a source of uncertainty going into the coming quarter and beyond. We are also very pleased to announce that the Board proposed a dividend payment for the quarter, which is also in line with earlier indications. So all in all, a solid quarter for Solstad Offshore and also the visibility for the coming year is solid. So by that, we conclude the presentation. And let's see if there are some questions, Kjetil. Kjetil Ramstad: Yes. Let's take the first one. What is the plan for Normand Tonjer and Normand Topazio? Lars Solstad: Yes. That is a relevant question. And those are the 2 vessels that we have availability or idle time on in fourth quarter. If we take the Normand Topazio first, that is one of the Brazilian-built anchor handlers we have operating in Brazil. That vessel is on a planned yard stay at the moment that will influence the utilization in fourth quarter. It is officially known that we were on top of the list on the Petrobras auction for a long-term contract. Those discussions are ongoing, and let's see how that develops in the coming weeks and months. But we are positive to achieve a good utilization for that vessel either on that contract or on alternative opportunities in Brazil. For the Normand Tonjer, that is a vessel that Solstad Offshore owns 56% of and has been operated on a contract for TGS on seismic projects for several years. That vessel is now redelivered to us, and we operate the vessel in the -- or we are preparing for operations in the short-term market in the North Sea right now. But we are also in some discussions for longer-term opportunities for the vessel, let's say, into '26. So that's what I can announce on those 2 vessels. Kjetil Ramstad: Thank you. Then there's a general question on the market of the fleet that we have in Solstad Offshore. How do you see the rate development on the contracts that we have? Is there escalations? Do we see a development from '25 to '26? Or what to expect on the secured contracts? Lars Solstad: Yes. I think, I mean, on the contracts we have, they are sort of going on their, let's say, original terms with the natural cost escalation process included. On the rate level, we see for vessels that we have available, I would say it's quite stable on a high level, I would say. So I don't see much difference or, let's say, downward pressure on the day rates for the vessel types that we have availability on. Kjetil Ramstad: And then there is a question on Petrobras and cost cutting. Can you update on the discussion on Petrobras with reference to the exposure that we have there with the 4 vessels -- the 3 vessels? Lars Solstad: Yes. I mean, Petrobras is a large client of us and we have had discussions with them, as most other in this business. And I would say it's very constructive discussions where it's about, are there any place where it's naturally to cut cost? That could be for mobilizations or preparations for new contract. It could be on manning level. It could be on other specialties that you see on Petrobras contracts. So constructive dialogue and no sort of red light are linked to those contracts in terms of uncertainty, if that's -- yes, so I think that answers the question, I hope. Kjetil Ramstad: Yes. Thank you. And then on Normand Maximus, it's on contract to the end of 2026. Can you say something about the plans for Maximus below this? And how do you see the market for a vessel like this long term? Lars Solstad: Yes, it's correct. The vessel is still committed for another 14 months or so. We have discussions ongoing with the present client but also with some others. So this is, in a way, one of a kind, let's say, one project enabler and one of the few that has availability into '27 in the market. So the position we have on that vessel is very solid and quite confident that we will be able to secure some interesting work for the vessel also beyond '26. Kjetil Ramstad: Thank you. Let's see. We have some more questions here. In the backlog for Solstad Offshore, we are showing a portion of Solstad Maritime vessels. Can you just explain why we look at Solstad Maritime vessels on the backlog of Solstad Offshore? Lars Solstad: Yes. That is simply because Solstad Offshore is the contract holder with Petrobras or other clients in Brazil. And so the Solstad Maritime vessels are then bareboated to Solstad Offshore. So you will get, let's say, a bareboat backlog into Solstad Maritime while you will get also the, let's say, backlog into Solstad Offshore due to the structure where we in Solstad Offshore are the contract holder with Petrobras. So that's the reason. And it's a back-to-back. So the operational risk, even if it's a bareboat, lays with the vessel owner and not with Solstad Offshore on those vessels. Kjetil Ramstad: Thank you. And then let me have a look. I think that concludes the questions for today. Lars Solstad: Okay. So thank you very much for listening in, and have a nice day ahead.
Benjamin Poh: Good morning. Ladies and gentlemen, this is Ben Poh, the Head of Investor Relations at ASMPT. And today, I'll be moderating the call for the first time. On behalf of ASMPT Limited, welcome to our third quarter 2025 investor conference call. Thank you all for your interest and continued support. [Operator Instructions] During the Q&A session priority will be given to the covering analyst. Before we start, let me go through our disclaimer. Please note that there may be forward-looking statements about the company's business and finances during this call. Such forward-looking statements could involve known and unknown uncertainties and risks that could cause actual results, performance and events to differ materially from those expressed or implied during this conference call. On the call, unless stated otherwise, all references to gross profit or margin, operating profit, segment profit and net profit are on adjusted basis as described in our MD&A. For your reference, the Investor Relations presentation on our recent results is available on our website. On today's call, we have the Group Chief Executive Officer, Mr. Robin Ng; and the Group Chief Financial Officer, Ms. Katie Xu. Robin will cover the group's key highlights for the third quarter, guidance and outlook for the next quarter, while Katie will provide details on the financial performance for the third quarter. Now I will hand it over to our Group Chief Executive Officer, Robin. Cher Ng: Thank you, Benjamin. Good morning and good evening to everyone today. It is a pleasure to have you all on our earnings conference call for the third quarter of 2025. Now let's start with the key highlights of the third quarter. This quarter, we continue to experience strong momentum driven by AI. The group's Advanced Packaging and mainstream businesses continued to benefit from sustained AI adoption. The group's strong Advanced Packaging momentum has been driven by Thermo-Compression Bonding or TCB. We remain dominant in advanced logic, have made rapid inroads into high-bandwidth memory or HBM and more recently have a first mover advantage in HBM4. At the same time, AI infrastructure comprising data centers, data transmission and power management contributed to demand in the mainstream business. In China, demand was also driven by EV and high factory utilization across OSATs. Now let me talk about our technology leadership in TCB. We have further solidified our leadership in HBM. The group's HBM TCB solution have achieved better yields versus the competition. And as I said above, we are leading in the transition to HBM4. In addition, our proprietary fluxless active oxide removal technology provides superior scalability for HBM 16-high and above with the lowest cost of transition. In logic, the group's ultrafine pitch TCB for chip-to-wafer with plasma AOR solution has successfully passed final qualifications for quality and reliability at a leading foundry and is ready for high-volume manufacturing. Notably, plasma-based technology has been endorsed by this leading foundry, underscoring this technological advantage over other processes. Turning to TCB orders. Encouragingly, the group achieved recurring orders from both memory and logic customers in the third quarter. In memory, our TCB solutions for HBM4 12-high became the first to secure orders from multiple HBM players. We expect to remain as a primary supplier, demonstrating our technology leadership in the rapid transition to HBM4. In logic, the group continued to win orders as a process of record for chip-to-substrate applications for key customers. As the market transition to a larger compound dies, we are well positioned to secure sizable orders in Q4 2025 and beyond from the OSAT partners of a leading foundry. As a business, we remain confident in the outlook for TCB demand. As to the other updates, in hybrid bonding, the group continued to ship hybrid bonding tools in Q3 2025. Our second-generation hybrid bonding solutions are competitive in alignment precision, bonding accuracy, footprint efficiency and units per hour. In photonics, we continue to dominate the optical transceiver market, reinforcing our leadership as a key supplier of 800G transceivers while also actively engaging industry players on next-generation 1.6T photonics solutions. Moving to SMT. Bookings were better than expected in the third quarter, demonstrating signs of recovery in the business. SMT's AP solutions achieved strong bookings year-on-year growth in the third quarter and won sizable Systems-in-Package orders from IDMs and OSATs for RF modules for base station to support AI growth. SMT also continued to win orders for the next-generation chip [ SMT 2 ] in advanced logic smartphone applications from a leading foundry and OSAT partners -- and OSAT players. In our mainstream SMT business, the demand came mainly from EVs where we remain a leading player in China. Before I conclude this section, I want to highlight that we have delivered a profitable quarter, excluding the strategic restructuring costs from the voluntary liquidation of the Shenzhen AEC plant as announced in August. The decision was made to optimize the group's global supply chain to better align with the evolving market dynamics and customer needs. As said in the announcement, this move is expected to improve the cost competitiveness, agility and resilience of the group's global manufacturing operation for its key products and solutions. With those highlights, let me now pass over the time to Katie, who will talk about our group and segment performance. Yifan Xu: Thank you, Robin. Good morning, and good evening, everyone. Let me take you through the group financials. This slide covers the group's key financial metrics for the third quarter of 2025. The group delivered revenue of USD 468.0 million, representing an increase of 7.6% quarter-on-quarter and 9.5% year-on-year, largely driven by growth in SMT. In third quarter, the group recorded bookings of USD 462.5 million, driven by AI momentum. We recorded recurring TCV orders in memory and logic and SMT bookings were also better than expected. This marks the sixth consecutive quarter that we have achieved year-on-year growth. The group had an isolated bookings cancellation in the third quarter for its panel deposition tools from a leading high-density substrate manufacturer in response to a slower-than-expected digestion of its existing capacity. This is a one-off occurrence. And excluding this cancellation, the group's bookings in the third quarter would have been USD 486.6 million, 1.5% higher quarter-on-quarter and 20.1% higher year-on-year. The group achieved a book-to-bill ratio of 1.04 for the quarter, maintaining a ratio above 1 since Q1 2025. SMT posted a robust ratio of 1.12, while SEMI's ratio was at 0.96. The group closed the quarter with a backlog of USD 867.7 million. The group's adjusted gross margin for the third quarter was 37.7%, which is lower than our typical level. It was impacted by a larger contribution from SMT and the lower SEMI gross margin, which I will explain in the next slide. I would like to note that the group's year-to-date adjusted gross margin remained healthy at approximately 40%. The group's operating expenses were up 6.2% Q-on-Q and 5.3% year-on-year. As expected, higher OpEx was largely due to strategic R&D and infrastructure investments and foreign exchange impact. They were partially offset by prudent spending control and some benefits from restructuring. The group's adjusted operating profit was HKD 124.4 million, down 26.6% quarter-on-quarter and 30.3% year-on-year due to lower gross margin and higher operating expenses. Group adjusted net profit was HKD 101.9 million, down 24.4% quarter-on-quarter, but up 245.2% year-on-year. The quarter-on-quarter adjusted net profit, which included the fee collected from the order cancellation mentioned above was offset by the absence of tax credits recorded in the previous quarter. The year-on-year increase in adjusted net profit was driven by the fee collected from the order cancellation and a lesser negative impact from foreign exchange. The adjusted earnings per share was HKD 0.24. Now moving on to the Semiconductor Solutions segment for the third quarter of 2025. SEMI's revenue was USD 240.5 million, down 6.5% quarter-on-quarter, but up 5.0% year-on-year. The year-on-year revenue increase was driven by stronger demand for wire bonders and die bonders due to the increased needs for power management across multiple applications. Quarter-on-quarter revenue decline was due to the timing of key customers' AI technology road maps, which impacted AP demand this quarter. There was also some shipment disruption caused by a typhoon in September in China. SEMI's bookings of USD 207.8 million were down by 1.7% quarter-on-quarter and 12.4% year-on-year. Excluding the booking cancellation explained above, SEMI's Q3 2025 bookings would have been USD 231.9 million, 9.6% higher quarter-on-quarter and slightly lower year-on-year. SEMI recorded quarter-on-quarter and year-on-year growth in wire bonders and die bonders. TCB orders were up quarter-on-quarter but remained at a lower level due to the impact on AP demand, as mentioned above. As I said earlier, SEMI's adjusted gross margin was lower than normal at 41.3% for Q3 2025. Q-on-Q decline was due to a higher contribution from wire bonders, lower TCB revenue and a relatively lower manufacturing utilization in Q3 2025. Year-on-year decline was due to high base effect from TCB manufacturing ramp in Q3 2024 and a higher contribution from wire bonders this quarter. Encouragingly, year-to-date SEMI adjusted gross margin has stayed in the mid-40s and AP margins have remained stable. SEMI adjusted segment profit was HKD 82.6 million in Q3 2025, down 52.8% quarter-on-quarter and 41.5% year-on-year, mainly due to lower gross margin and higher operating expenses, as mentioned in the previous slide. Next, the SMT Solutions segment of our business. SMT delivered strong revenue of USD 227.5 million, up 28% quarter-on-quarter and 14.6% year-on-year. This was due to a robust performance in Asian markets driven by AI servers, EVs in China and the delivery of a smartphone bulk order booked in the previous quarter. However, contributions from automotive outside China and industrial remained soft. SMT registered Q3 2025 bookings of USD 254.7 million, down 5% quarter-on-quarter, but up 51.8% year-on-year. Marginally lower quarter-on-quarter bookings were due to a high base effect from the Q2 smartphone bulk order, while the year-on-year increase was driven by strong momentum across both AP and the China mainstream markets. AP bookings were supported by demand from IDMs and OSATs for telecom base stations and AI servers. China's mainstream business recorded strong year-on-year growth due to demand from EVs. SMT delivered a gross margin of 33.9% this quarter, up 136 basis points quarter-on-quarter and 163 basis points year-on-year. And segment profit was HKD 163.0 million, up 205% quarter-on-quarter and 65.6% year-on-year. Both were driven by higher volume effects. With that, let me now pass the time back to Robin for Q4 revenue guidance. Cher Ng: Thank you, Katie. Now to Q4 revenue guidance. The group expects Q4 2025 revenue to be between USD 470 million and USD 530 million. This is up by 6.8% quarter-on-quarter and 14.3% year-on-year at the midpoint, which is above market consensus. This growth will be supported by momentum in both SEMI and SMT. Looking ahead, the group's TCB TAM projection has a potential to go beyond USD 1 billion in 2027, supported by recent news about investments in the AI ecosystem. AI data centers will continue to drive demand for AP, particularly TCB for HBM4 and advanced logic where the group has technology leadership. The group's mainstream business will be supported by global investment in AI infrastructure and stable demand from China, while visibility for automotive and industrial end markets recovery remains low. While the group has not experienced any material impact from tariff policies, it acknowledges that uncertainties remain. The group's global presence will provide flexibility to navigate any potential impact, and we will continue to monitor the situation closely and adapt as needed. This concludes our third quarter 2025 presentation. Thank you, and we're now ready for Q&A. Let me pass the time back to Ben to facilitate. Benjamin Poh: Thank you, Rob. [Operator Instructions] With that, may I request Gokul to unmute. Gokul Hariharan: First question I had is on the HBM4 commentary from you, Robin. And you mentioned that you are leading this transition to HBM4. Could you explain a little bit more what exactly that is indicating? Do you think that you would have higher market share in HPM4-based TCB compared to the incumbent Korean vendor? And also your updated view on when does the fluxless TCB insertion happen for HBM? Is it happening for HBM4 or we are waiting for HBM4E for this migration to happen? Cher Ng: Gokul, have you finished? Gokul Hariharan: Yes, that's my first question. Cher Ng: I think the question is on the HBM4, right? Benjamin Poh: Leading transition to HBM4. Cher Ng: That's right. Yes, I think as mentioned in our MD&A, we believe we have established ourselves as a primary supplier for the HBM4 market. I mean we have a conviction because we have won -- we are probably the first to have won the HBM4 orders for not just 1, but 2 major HBM players. Now I think the second question is on fluxless. We believe that there is point as the industry continue to stack higher and higher and move from HBM4 to [ 4E to 5 ], in our opinion, it's quite inevitable that they have to move to a fluxless solution because the number of IOs will continue to increase, the pitch will probably narrow down, the chip gap will get smaller. So all this means that fluxless will be a better solution compared to a flux-based TCB solution. Gokul Hariharan: So just to clarify, Robin when you talk about 2 HBM vendors, does it include the biggest market share player? Because I thought they are still using the incumbent vendor, right? Cher Ng: Yes, of course, of course, as we said, we have won orders from 2 of the 3. So definitely, yes, we are talking to the leading one. Gokul Hariharan: Got it. Understood. Also maybe next question is, I think you observed some pause in AP and TCB in Q3. What is the reason for that? And given your guidance for 7% Q-on-Q growth for Q4, could you talk a little bit about how SEMI's overall and TCB within that will be growing? That would be outgrowing that 7% or it will be growing slower than the 7%? Cher Ng: I think in terms of when we talk about pause, actually, it's really largely driven by the timing of key customers' technology road map, right? So we are confident that when they launch the new architecture, we will get the orders. So it's a matter of timing in our opinion. So TCB demand, whether in terms of booking or billing will actually align with this timing as far as concerned. So it tends to be a bit lumpy, yes. Gokul Hariharan: Is that more about logic? Or is it more about HBM? And also any indications on like segment-wise too, how are we thinking? Cher Ng: Gokul, I would say both because the technology road map will drive both HBM as well as on the logic side as well. Yes. Gokul Hariharan: Okay. And Q4, any thoughts? Cher Ng: I think in terms of, if you are alluding to booking, maybe it's time for me to give you some color on booking for Q4, right? I'm sure this question will pop up during the conference call as well. Now the way we look at Q4 booking color on the group-wise in Q4, group-wise booking in Q4, we expect our bookings to be kind of flattish compared to Q3 reported number of -- Q3 reported number was USD 462 million. So going forward in Q4, we expect that to be kind of flattish on a group basis. However, we do expect that this Q4 booking for the group will be the seventh consecutive quarter of year-on-year booking growth since Q2 2024. So it's encouraging to note that we have been growing our bookings for 7 consecutive quarters. And I think Gokul, encouragingly we see SEMI bookings are expected to increase by mid-teens Q-on-Q mainly due to TCB. So I'd say Q-on-Q mid-teens and still comparing against the reported number, right? So that's for the SEMI bookings, expected to increase mid-teens Q-on-Q mainly due to TCB. So we expect TCB booking to sort of increase on Q-on-Q basis compared to Q3. And for SMT, we expect SMT to decline Q-on-Q due to the already high base effect in the prior quarter. Now baked into the Q4 booking for SEMI, I think the [ QR ] for chip-on-substrate application. And as the market moves towards larger compound die because of higher computing power -- compute requirement, we are confident of achieving a sizable TCB order for OS application in Q4 from the leading foundry OSAT partners. And these orders will be likely built in early part of 2026, which will be definitely gross margin accretive, right? So I think to sum it all in terms of Q4 and certainly beyond Q4 in terms of booking color, we remain confident that the strong AI tailwinds, including the recent news regarding investment in the entire ecosystem for AI will continue to drive demand for AP, in particular, our TCB technology leadership will position us strongly going into 2026 and beyond. So this is a bit of Q4 color and slightly into Q1 as well. Benjamin Poh: And next, I would like to request Donnie to unmute. Donnie Teng: My first question is a housekeeping question. So considering we have disposed the AEC operation in China, wondering if Katie can give us some color on how should we estimate the OpEx or OpEx ratio in the coming quarters as we have seen the OpEx ratio has been pretty high for the past few quarters. So wondering if it will be coming down after the disposal of the AEC operation and also some cost control management. And my second question is regarding to the TCB. So my understanding is that despite we have some progress in fluxless TCB, but the real volume shipment remains small into maybe fourth quarter this year. So I was just wondering if you can give us a time line where -- when exactly the fluxless TCB for memories and for leading foundries can ramp up more significantly in the future. And also some comment on the progress in China will be also appreciated. As you know that China has been aggressively increasing their AI chip production capability, including HBMs as well. Yifan Xu: I think I will take the first portion, Donnie. So you asked a question about AEC liquidation. I just want to make a correction. For AEC liquidation, as we announced, the savings was going to be RMB 150 million each year. Majority of that saving actually will be benefiting COGS, not OpEx. There will just be a little bit factories and G&A that will be part of OpEx. So that -- so on AEC, let me just spend a quick minute. The liquidation took -- sorry, the announcement took place in August, and the project has been progressing pretty well. And we do expect that the savings will benefit us going forward. And on the OpEx ratio and specifically on OpEx, there's actually no change. At the beginning of this year, we announced that we will be investing incrementally HKD 350 million in R&D, especially AP and the infrastructure of the company. So every quarter, we've been actually -- we are on the path of the investment. And because of that incremental investment, we've mentioned in prior quarters that this year's OpEx will be similar to prior year with some marginal increase. And that narrative has not changed and will not change for the year. Cher Ng: Okay. I will take on the second question, Donnie. In terms of TCB fluxless application. As mentioned in our MD&A, we have made very good progress in terms of fluxless [indiscernible] TCB for logic side, Chip-on-Wafer. I think plasma technology has been endorsed by the leading foundry. And also just to recap, Donnie we have been saying already in the past, but it's good for recap that Chip-on-Wafer demand this year, even we have won the technology battle, the Chip-on-Wafer demand will not be significant this year. We are looking into 2026 for inflection point in terms of Chip-on-Wafer application for logic TCB fluxless. Now I think that's your question, if I'm not wrong. Benjamin Poh: Yes, next question on the time line for the memory and leading foundry shipment. Cher Ng: Yes. I think in terms of fluxless, I answered the first question to Gokul already. So I think it all depends on when they will adopt the fluxless TCB for memory. As I said in our opinion, as the industry continues to step higher, the chip get smaller, more IOs in our opinion, at some point, quite inevitable that they have to move towards a fluxless TCB solution even for HBM. Donnie Teng: And any color on China's adoption of TCB or opportunities there? Cher Ng: Yes. Donnie, I think we have been saying we are -- we supply to the global customer base. I think in terms of volume, obviously, the rest of the world volume in TCB is still higher than those of China. And for sure, we -- China ambition to really step up in terms of advanced packaging. Benjamin Poh: And next, I will request Kevin to unmute. Unknown Analyst: My first question is on the TCB outlook. As mentioned on the logic side, we are already passing the qualification, right? So I was wondering how should we think about the potential business opportunity on the chip-to-wafer part as compared to chip-to-substrate, as mentioned that most of the contribution will be coming from next year. And when is it likely the timing of this contribution will start? And also on the memory side, I think we just mentioned that HBM4 we are screening order from multiple customers, right? So just wondering for the customer, are these for sample tool or for production already? Cher Ng: I can answer your first question first, Kevin, in terms of chip-to-wafer. Quite similar answers to Donnie. Chip-to-wafer in terms of volume, we expect it to be still smaller compared to substrate because substrate, I think the whole industry has moved -- almost the whole industry has moved to TCB solution. Whereas for chip-to-wafer at the moment, it's only the leading foundry leading the pudding in terms of using a TCB for particular end customer. So if more end customers adopt TCB, then you will see Chip-on-Wafer TCB solution fluxes will increase. Otherwise, it's just one customer. I think the volume will still be smaller than the substrate volume. Now in terms of HBM4, I would say they are already into some kind of a small volume production already using our tools for HBM4 production for the 2 customers that we talked about. Unknown Analyst: My next question is on the hybrid bonder side. So we are -- I was wondering how competitive are we in our Gen 2 hybrid bonder, which [indiscernible] we are already shipping? And what kind of chip order process are these for? Or this is going to be for mainly on the logic side or for the memory side? Cher Ng: Yes, Kevin, we have -- I would say we are shipping HBM -- HB, hybrid bonding solution for both logic and memory. As we speak, we are actively collaborating with other key logic and memory players and we're making good progress and all these projects are at different stages of evaluation. So we are hopeful that at some point when the hybrid bonding market takes off, we are there to compete with incumbent. Unknown Analyst: Okay. So we have already -- are we securing order from these customers already? Or this is just right now still in the evaluation process? Cher Ng: Yes, still in evaluation for some of these very key logic and memory players. We are engaging them very actively as we speak. Benjamin Poh: And next, I would like to request Sunny to unmute. Sunny Lin: Could you hear me okay? So my first question is on a high level, directionally, how should we think about the recovery of mainstream SEMI solution from here? I wonder in the last few months, now given more manageable impact from tariffs, do you think the overall client sentiment is improving or not much change for 2026? Cher Ng: Thanks, Sunny. I think in terms of mainstream, I would say quite encouraging because mainstream are now also -- I mean AI also contribute to the mainstream demand. I think as you're probably aware, China is a significant portion. So we see China volume has been picking up for the last few quarters. So that's giving -- that's supporting the mainstream quite a fair bit for both SEMI as well as SMT. Now in terms of tariff, I think the initial part of the year and initial period of the year, I think the tariff situation definitely has some impact on the sentiment of our customers. Now I think with the tariff situation a little bit more stable, I think customers are now a little bit more confident, I would say, in terms of placing orders. That's why we are also seeing -- we have good orders coming from mainstream wire bond, die bond and SMT are also seeing a mainstream application for putting chips on larger PCB boards for base stations and all that. So all these are also partly driven by the AI adoption. So in general, we see mainstream certainly coming up on the bottom. But going forward, we see mainstream stable, especially the demand coming from China provides that kind of stability for mainstream. Sunny Lin: Got it. And then I have questions on TCB. Maybe if you could remind us the lead time for you to make TCB tools nowadays. In terms of orders, should we expect the inflection point to potentially come maybe in first half or second half of 2026 for logic and for HBM? Cher Ng: I think for logic, I think we mean that sizable orders for the chip-on-substrate for larger compound die will most likely realize the revenue in the early part of 2026. For HBM, it all depends again on the timing of our key customers' technology road map. So if they accelerate, we will see revenue earlier for HBM. If there's a further delay, then our timing will also align accordingly. Now in terms of TCB lead time, actually, internally, we are efficient. We don't take a long time to assemble a TCB machine. It all boils down to material supply, right? So if we -- if customers give us more visibility, we can order materials earlier, then the lead time will be shorter. So I think that's the dynamic of the TCB lead time at this point in time. Sunny Lin: Sorry, maybe a quick follow-up. So for logic -- so on Chip-on-Wafer, any view on when the leading foundry may start to migrate to TCB? Maybe will that be in second half of next year or early 2027? And therefore, assuming if your lead time is about like 2 quarters, should we see orders starting to come through maybe from first half of next year? Cher Ng: We are hoping orders will come sooner. But again, as I say, it depends on the timing of the road map. We are confident that chip-to-wafer, we will have delivery or shipment in 2026. I don't think it will delay to 2027. Benjamin Poh: And next, I would like to request Daisy to unmute. Daisy Dai: My first question is for Katie regarding the SEMI Solutions gross margin. Katie, you previously mentioned that the closure of AEC will have a positive impact of the cost of goods sold going forward. Yes. So how we should think about the near-term and the long-term gross margin for the SEMI Solutions segment? Yifan Xu: Daisy, assuming you're kind of talking about basically the gross margin going forward, right? Daisy Dai: Yes. Yifan Xu: Okay. So first on the AEC point, is correct. We would expect the savings to come in gradually in Q4 and then full-fledged in next year. Now in terms of the overall SEMI Q4 gross margin, we do not provide guidance, but just some kind of directional pointers. Robin guided Q4 revenue probably could tell that the TCB contribution -- revenue contribution will continue to be lower, but with some have high photonics but wire bond momentum will be sustained. So therefore, we expect a slight margin accretion for SEMI's margin in Q4. And then when you look at the group level, then if SEMI and SMT mix stays similar and SMT experiences a stable margin, then we expect basically slight margin accretion for the group in Q4. Now of course, we always caveat right it's really depending on the mix going forward, especially in the midterm in kind of longer run, we -- the technology leadership in HBM and advanced logic with those leadership, we expect the TCB order in Q4 and beyond -- I'm talking about in the midterm now, would actually provide support to SEMI's gross margin. And with this liquidation that you mentioned earlier, we do expect that the SEMI gross margin will come back to the kind of the mid-40s level. Daisy Dai: It's clear. And second question is for Robin on the hybrid bond. So you are at an evaluation stage for the leading foundry and HBM customers. So for the HBM use hybrid bond, do you see that it will happen in 16-high or 20-high. Cher Ng: Since we are a dominant TCB player, we hope that they can continue to use TCB even up to 20-high. But nevertheless, we are prepared that if they have to switch to hybrid bonding, we will be there also to provide competitive solution for hybrid bonding for HBM 20-high. Daisy Dai: Yes. And also a quick follow-up for your leading foundry customer, your European peer has been a dominant supplier for hybrid bond at that leading foundry customer. So how you see your hybrid bond opportunity at this leading foundry customer? Cher Ng: Yes. We will be relentlessly knocking on their doors for sure. But I think having said that we also have been saying that because we are not the leading player in hybrid bonding, I think the advantage is that we know the pain point, existing pain points, right? So with that coming in from behind, we are relentlessly and diligently working with all the leading logic and memory players, asking them what are the current pain points so that we can incorporate features, engineering innovations to mitigate or totally eliminate those pain points using our tools. This is what we have been doing. So I think we are confident that our Gen 2 and in future Gen 3 should be able to address all the pain point and give us an entry point in all this leading key logic and memory players. Daisy Dai: And sorry, final follow-up. So in the Gokul's question, you said that you are the primary supplier of the HBM4 market and the first company won the HBM order at 2 key customers. So is it the fluxless TCB or the flux TCB? Cher Ng: It's still the flux TCB at this point in time. Daisy Dai: [ Flux 1 ]? Cher Ng: Yes. The Flux 1. Yes. Benjamin Poh: Next, I will request Leping to unmute. Leping Huang: I have another question about the TCB. So what are the current customer concentration level of your TCB equipment now? And what may look like in the future? So is it mainly still concentrated on the top 3 memory maker and the leading foundry? Or you also see some broadening of your customer to other OSAT or other foundries in the market? This is my first question. Cher Ng: I think we have definitely we have broadened our TCB fan-out to not just leading foundry, the OSATs, HBM and also globally as well. So we're pretty engaged with all top AI customers needing requiring or requiring TCB solution. I hope I answered your question. Leping Huang: Okay. The second question is about this -- you have the deposition equipment cancellation. So is it due to some the road map change of the -- in the advanced packaging? Also, I remember, is it due to the -- you have a company subsidiary called NEXX, it is from that subsidiary. Cher Ng: It is from that. It is from NEXX. I think it's a case of digestion of capacity, right? So there was a bit of a sizable capacity maybe about 2 years ago, right? So the customer take time to digest. So -- and these particular customers decided to give it up and pay us a cancellation fee. Benjamin Poh: Next, I will request Alex to unmute. Alex Chang: First question is about your margin on SMT solution. It seems like your quarterly revenue level already increased to the level similar to 4Q '23 or early '24. So I see the margin still like low 30s to -- is this the normalized margin going forward? Or you expect margin can return to high 30s level sometime in the future? Yifan Xu: Yes, Alex, this is Katie. Thanks for the question. So for -- you're kind of comparing to a few years ago where actually the SMT's end market composition were quite different. The -- few years ago, actually, automotive and industrial were running really, really strong and their contributions to SMT's revenue were much larger. And this is where we actually could command relatively higher margin. So currently, as we mentioned, the automotive and industrial end markets are relatively muted. And that's why the margins are sitting in the, call it, low 30s. Unless the end market composition changes, this kind of level will be sustained in terms of margin percentage. Alex Chang: Another follow-up question on TCB. You mentioned the TAM would reach like USD 1 billion in 2027. Do you have probably a rough split between the logic versus memory and also split between C2W applications? Cher Ng: Yes. I think it's dynamic. I would say, Alex, it's very dynamic. Again, it all depends on customer road map and all that. But generally speaking, if you take really looking further into the future, it's just intuitive that the HBM TCB demand or size or TAM will be larger than logic because of the number of stacks and also as the industry migrate from one architecture to the next generation, they require more HBM stacks per chip, right? So naturally, I think HBM demand over time, not in a particular year, not in a particular quarter, but over time, HBM demand for TCB will be larger than logic. Alex Chang: Got it. So what is the company's target market share for each application? Cher Ng: We don't go down to that kind of granular level HBM market share or logic. But overall, I think last year, we put out the TAM for TCB, our aspiration is to hit 35% to 40% market share in the entire TCB TAM. Benjamin Poh: And next, I would like to request Arthur to unmute. Yu Jang Lai: Can you hear me? So the first one, Robin, if you can -- can you share with us a high-level ballpark figure on the revenue contribution from AI? Cher Ng: This is a difficult question. I think for -- we don't share -- sorry, first, we don't share, but also this is a difficult question because we talk about AI benefiting both AP and mainstream. Well, we have better visibility on how AI benefit AP. But in terms of mainstream, it's a little bit tricky because wire bond, die bond, they are quite fungible. Today, customers may say, okay, I use it for AI-related packaging, tomorrow, they use it for others. So it's a bit difficult to really unpack, sorry. Yu Jang Lai: No problem. Because you just mentioned that you saw some power application, they start to come back and the drivers from the AI. So that's why I want to get this high-level ballpark figure. Maybe we can discuss it next quarter when we have a visibility. The question number 2 is on the cancellation from the high-density substrate. And I think Leping already touched base a little bit. So my question is, is the key component of the equipment fungible? Can you give it to the other substrate customer? Cher Ng: The short answer is yes, there's no inventory related issue relating to this cancellation. Yu Jang Lai: Because if we look into the AI business of the rack and also the key component, actually, we heard more and more PCB, HDI substrate shortage at this moment. So I'm kind of wonder, so was the client is based in Japan or in Taiwan or China? Cher Ng: None of this actually, none of this. I mean this is a NEXX business, we are saying that they supply to a few key players, high-density substrate players. It just happened that, as I said, I repeat again, it just happened that there was a big capacity ramp-up in the last 2 years. And this particular customer just say, okay, I'd rather not keep you holding on all these orders, I decided to cancel it. So I think in short, this is that kind of circumstances. Yu Jang Lai: So in the future, when we look back, this could be an isolated event. So do we think this demand for the other customer will return? Cher Ng: No. This in a way I don't -- if you are thinking is this AI related, I wouldn't say this is AI related. Yes, this is -- they are serving a particular IDM which use all this equipment for RDL and all that. So it's a particular application. I would say it's not related to AI. So don't link this cancellation with AI that we have been talking about. De-link these 2 pieces, Arthur. This cancellation has nothing has nothing to do with AI. Benjamin Poh: I think we have time for one last question. I think we have Gokul here. Gokul Hariharan: So my question is more on the margins and operating leverage. I think we are having pretty good momentum both now in mainstream and in TCB. Margin still seems to be a little bit sluggish. How do you think, let's say, next 2, 3 quarters, TCB revenues will come through given all these orders, bookings realize into revenues. What does it do to gross margins? Like is TCB still accretive to group gross margins right now? Or is it kind of similar to group gross margins? Second part of the question, again, to Katie is on operating leverage because now that we are back to some degree of revenue growth, we're still not yet seeing meaningful operating leverage come through. I'm asking because Street expectations are for very big operating leverage to kick in for next year. I think revenue growth of 10%, 15% contributing to doubling of your operating profit is what a lot of Bloomberg estimates are looking at. So just wanted to understand what is the extent of operating leverage that we can expect? I think we have seen operating margin go back to high teens to 20% at really, really peak kind of levels back in 2021. But in the recent past, we've not really seen operating margin really get beyond the mid-single-digit levels. So just wanted to understand what is the extent of operating leverage we can expect as we start some of these ramp-ups for TCB and other products? Yifan Xu: I appreciate the question. First thing, TCB, I just want to make it very clear that TCB margin has been stable and is accretive to SEMI business. Now overall, when you say operating leverage, volume has come back up, but not quite at the super cycle level. And within the volume, we always say there are a few mixes that actually impact margin. One is the segment mix. So far, as you can tell, like in Q3, for example, the SMT contribution to the group is at about 50%, right? SMT naturally has lower gross margin. Therefore, the segment mix could be different based on the contribution from the 2 businesses. The other thing is on product mix. Within SEMI, for example, it really depends on the product mix between TCB and wire bond in Q3 and as we guided for Q4, if you look at that product mix, when we have less TCB revenue, but more wire bond revenue coming from mainstream applications, the margin -- the gross margin side would not -- would be under certain pressure. But having said that, in the long run, as a few of you asked earlier, we do expect that our SEMI business will continue to enjoy the accretive margin contribution from applications like TCB. And with the AEC liquidation we mentioned, we should have savings from operation efficiency, et cetera. So that I think our conviction for SEMI gross margin to stay in the mid-40s and then gradually going up has not changed. And then so at the group level, we've been talking about the 40%, right? I think, again, I'm talking about in the long run, not a specific given quarter, I think we are comfortable that the group's gross margin will be at that level and gradually improve as we go. Gokul Hariharan: Got it. So just on the OpEx side, same, because that's something that you can control revenue harder to control, especially on mainstream. Are we going to stay around this roughly HKD 5 billion kind of level going into next year? Or we still see that OpEx will keep growing given we are investing in some of these newer technologies? Yifan Xu: Yes. So Gokul, I actually cannot answer your question very well right now. Maybe give us a quarter because the organization actually is going through the budget process. But directionally, as we have talked about before, the OpEx has been running at HKD 4.7 billion in the last few years. And this year, with the R&D and infrastructure investment, we have communicated that will be marginally higher. Though the investment is at HKD 350 million, we are doing certain restructuring projects and the cost saving projects that you probably have seen in the last few years on trying to bring it down. So this year, I think you guys can do the math, right, it's about HKD 2.8 billion. So that's kind of where we are. I think going forward, Gokul, we're not going to change our commitment in R&D investment as you guys were talking about TCB, hybrid bond, all that, that side of the conviction has not changed. We'll continue to do the right investment. On the other front, for the overall efficiency and productivity of OpEx, we'll continue to look into any opportunities we can find and trying to contain that. So again, I cannot give you a specific number. We'll probably share with you more. But I think our strategy -- our thinking on OpEx has not changed. Benjamin Poh: That will be all for the last questions. And I will now pass the time back to Robin for his closing remarks. Thank you. Cher Ng: Thank you, Benjamin. Just a couple of pointers before we officially close the call. The group maintained strong business momentum this quarter. Our AP and mainstream business will continue to benefit from sustained AI adoption. TCB solution, we secured repeat orders in both memory and logic, reflecting ongoing technology leadership, particularly in HBM4 and advanced logic. What Katie said, we are in the midst of really finalizing our budget for 2026. But certainly, I can -- at this juncture, we can give you some direction or some color on how we look at 2026. We expect a growth year in 2026 largely driven by AP because of AI and underpinned by the sustained momentum of our mainstream business. And finally, we remain confident in the total addressable market for TCB, which we believe could go beyond USD 1 billion in 2027. So thank you. With that, we will close the call and see you next quarter.
Operator: Good day, ladies, and gentlemen. Thank you for standing by. Welcome to the Rush Street Interactive Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today, October 29, 2025. I will now turn the call over to Kyle Sauers, President and Chief Financial Officer. Please go ahead. Kyle Sauers: Thank you, operator, and good afternoon. By now, everyone should have access to our third quarter 2025 earnings release. It can be found under the heading Financials, Quarterly Results in the Investors section of the RSI website at rushstreetinteractive.com. Some of our comments will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not statements of historical fact and are usually identified by the use of words such as will, expect, should or other similar phrases and are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We assume no responsibility for updating any forward-looking statements. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. We will be discussing adjusted EBITDA, which we define as net income or loss before interest, income taxes, depreciation and amortization, share-based compensation, adjustments for certain onetime or non-recurring items and other adjustments that are either non-cash or not related to our underlying business performance. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is available in our third quarter 2025 earnings release and our investor deck, which is available in the Investors Section of the RSI website at rushstreetinteractive.com. For purposes of today's call, unless noted otherwise, when discussing profitability, EBITDA or other income statement measures other than revenue, we're referring to those items on a non-GAAP adjusted EBITDA basis. With me on the call today, we have Richard Schwartz, Chief Executive Officer. We will first provide some opening remarks and then open the call to questions. And with that, I'll turn the call over to Richard. Richard Schwartz: Thanks, Kyle. Good afternoon, and thank you for joining us today. I'm pleased to report on another outstanding quarter that underscores the resilience of our business model and player-first approach. Our third quarter results demonstrate continued momentum and acceleration of growth across key markets, led by our continued outperformance in the online casino space. Before diving into our key quarterly performance, I want to highlight some important organizational enhancements to strengthen our leadership structure. We promoted Kyle Sauers to President and CFO, expanding his existing role to now oversee marketing, operations and commercial strategy in addition to finance. This change allows me to focus more deeply on innovation, online casino legalization and strategic growth opportunities, while Kyle drives cross-functional operational excellence across our existing markets. We've also elevated Rob Picard to Chief Strategy Officer, reflecting his contributions to our success. These changes position us well for continued execution as we scale our business. Congratulations to both Kyle and Rob. Now turning to our Q3 performance. Revenue reached a record $277.9 million, up 20% year-over-year, marking our 10th consecutive quarter of sequential revenue growth over the prior quarter. Notably, this growth was driven by very strong player acquisition and player engagement across our higher-value markets. Adjusted EBITDA of $36 million increased 54% year-over-year, demonstrating the operating leverage inherent in our business model as we scale. In total for North America, our MAUs increased 34% year-over-year, rising to 225,000. This represents our fastest quarterly user growth rate over 4 years and clearly off a much larger base of players. What makes these results particularly compelling is the continued acceleration of our growth in North American online casino markets, where we see the highest player value and retention. In our North American online casino markets, we delivered exceptional performance with 46% year-over-year MAU growth. This is also the second highest quarterly growth rate in over 4 years, again, achieved off a much larger starting player base. Even more encouraging, we've seen accelerating year-over-year growth in our North American online casino player base every single month since March, indicating a strong underlying momentum that extends well beyond any seasonal factors. While this rapidly growing player base is driven by our high-quality player experience and strong retention, we also had a record quarter as it relates to first-time depositors across the business, beating our prior high watermark by more than 10%, while doing so at very attractive customer acquisition rates. Turning to our performance in individual online casino markets. The breadth and scope of our success is encouraging. Delaware continued its noteworthy trajectory with 74% net revenue growth, demonstrating the sustained opportunity in this market even as it continues to mature. Michigan delivered 48% growth, its second fastest pace since Q1 2022. Even our most mature market, New Jersey, achieved 37% growth, the second fastest rate since Q1 2021, proving that established markets can reaccelerate with the right strategy and execution. Ontario grew 24%, its fastest pace since Q4 2023, while Pennsylvania delivered 15% growth, its fastest growth since Q3 2021. This broad-based acceleration of growth across markets of varying maturity levels validates our strategic approach of focusing on product differentiation and a high-quality customer experience. Our proprietary technology platform enables us to deliver unique gaming experiences that drive both customer acquisition and retention efficiently. In Latin America, we continued to build momentum with MAUs growing 30% year-over-year, climbing to a new record of 415,000 users. While Copa America in 2024 created a challenging year-over-year comparison in July, August and September both delivered over 50% growth, demonstrating the underlying strength of our LatAm operations extends well beyond major sporting events. Mexico revenue grew over 100% again this quarter, reflective of continued momentum and market share gains in that market. And in Colombia, while GGR again grew over 50%, net revenue was down 27% during the quarter due to player bonusing related to the temporary VAT tax. In Colombia, we continue to navigate the VAT tax environment. Our strategy of absorbing the tax impact while maintaining player experience has allowed us to grow our market position and continue to grow our player base at a fast pace. Our strong operational performance in Colombia positions us well for meaningful upside when normal tax conditions resume. As for the President's proposed 2026 tax reform, we continue to believe that Congress will not approve the proposed online gaming tax. Now I want to address several industry topics that I know are top of mind for investors. First, on prediction markets. We are monitoring this space closely. As a casino-first company, we see less direct competitive risk than sportsbook heavy operators. In fact, if prediction markets create tax revenue erosion concerns for states, this could accelerate online casino legalization as states seek more protected revenue streams, a development that would actually benefit RSI given our market-leading experience in online casino. The second industry topic is sweepstakes operators. The proliferation of unregulated sweepstakes products with games that look, feel and play identical to regulated online casino games presents both a challenge and an opportunity. The reality is that this online casino gaming is already occurring across the United States through these unregulated and illicit channels. These operators generally pay no taxes, are not subject to consumer protection or responsible gaming standards and often raise concerns about targeting minors. States are faced with a clear choice, continue to allow this untaxed, unregulated activity or they can legalize online casino gaming and regulate it properly, ensuring strong and consistent consumer protections for their residents and generating meaningful tax revenue for their states. We believe the right choice is obvious and the sweepstakes proliferation only strengthens the case for regulated online casino expansion. Looking ahead, our pipeline of opportunities remains robust. We're excited about our planned expansion into Alberta and anticipate launching in that market on day 1 when it goes live. This represents a significant online casino opportunity that leverages our proven success in similar markets, such as Ontario, where we continue to hit new quarterly revenue records. We are also actively monitoring legislative developments across multiple U.S. states where budget pressures and the need for new revenue sources are creating momentum for online casino legalization. As we look toward the remainder of 2025 and beyond, I'm confident in our strategic positioning. Our focus on markets that include online casino, our proprietary and innovative technology platform, our marketing efficiency and our operational excellence creates a sustainable competitive advantage that is difficult to replicate. The fundamentals of our business have never been stronger. We're growing fast, efficiently and profitably. Most importantly, we're doing so in a way that positions us for continued success in online gaming markets across the Americas. With that, I'll turn the call over to Kyle for a more detailed financial commentary. Kyle Sauers: Thanks, Richard. I'll now provide additional details on our third quarter financial performance and outlook. Third quarter revenue of $277.9 million increased 20% year-over-year, driven by exceptional growth across our North American online casino markets and partially offset by lower revenue in Colombia and some player-friendly sports outcomes in September. Once again, we see the results as demonstrating the consistency and durability of our business model. Online casino revenues grew 34% during the quarter, while online sports betting contracted 16% due to the elevated bonusing in Colombia. Regionally, revenue in North America grew 26%, while revenue in Latin America fell by 11%, similarly affected by the elevated bonusing in Colombia. Our gross margin was 34.0% during the quarter, reflecting continued improvement in mix shift to higher gross margin markets, but offset by player-friendly sports outcomes, which impacted Colombia results and bonusing and also, to a lesser extent, the increase in New Jersey gaming taxes. On the expense side, our disciplined approach continues to drive operating leverage. Marketing expense of $38.1 million was down 1% year-over-year while increasing sequentially by 5%. Richard mentioned this already, but it's worth reiterating, we had our highest North American monthly active user growth in 4 years, and we set another new record for first-time depositors for the entire company during the quarter, achieving this while further decreasing our cost to acquire players in North America by over 10% during the quarter, leading to continued leverage over our marketing investments, and this represents less than 14% of revenue. G&A expenses were $20.4 million, up 8% year-over-year, reflecting continued investment in our technology platform and operational capabilities to support our growth. As a percentage of revenue, G&A remained well controlled at 7.3%, and we continue to expect modest leverage over this line item as we scale. Adjusted EBITDA of $36 million increased 54% year-over-year, representing a margin of 13%. This demonstrates the significant operating leverage in our business model as we continue to scale. The strong flow-through from revenue growth to profitability underscores the quality of our revenue streams and the efficiency of operations. Looking at our key operating metrics, the strength of our performance becomes even more apparent. North American MAUs of 225,000 users with 34% year-over-year growth, our strongest quarterly performance in over 4 years. And more importantly, this growth is concentrated in our higher-value online casino markets. North American ARPMAU of $365 was down 5% year-over-year, which is expected given the impressive growth in the user base. As we've seen consistently, newer player cohorts start with lower spend levels and more bonusing before increasing engagement and player value over time. This is exactly the dynamic we want to see, rapid customer base expansion that will drive long-term value creation. In Latin America, MAUs reached 415,000, up 30% year-over-year despite the challenging Copa America comparison in July, the acceleration we saw in August and September with both months delivering over 50% growth and demonstrating the underlying strength of our LatAm operations. Our balance sheet remains exceptionally strong. We ended the quarter with substantial unrestricted cash of $273 million and no debt, providing significant flexibility for both organic growth investments and potential strategic opportunities. Our strong cash generation continues with meaningfully positive operating cash flow throughout the quarter. I'll also note that we have begun including our balance sheet and cash flow statement in our quarterly press release starting this quarter. Regarding our outlook, we remain confident in the momentum we've built and the opportunities ahead. The acceleration we've seen in North America online casino markets every month since March gives us confidence that this growth is sustainable and not merely seasonal. We continue to expect to maintain marketing leverage for the full year with marketing expenses growing at a lower rate than revenue. Our G&A investments are focused on areas that directly support our growth, particularly technology and product development capabilities that enhance our competitive differentiation. Looking at the fourth quarter and beyond, we believe we're well positioned to continue delivering strong performance. The seasonal strength we typically see in Q4, combined with our accelerating market trends positions us for a strong finish to 2025. We remain excited about our expansion opportunities, particularly in Alberta, where we expect to launch when that market opens. Our success in similar markets gives us confidence in our ability to capture meaningful market share quickly. In summary, Q3 represents another quarter of exceptional execution across all aspects of our business. We're growing faster, more profitably and more efficiently than ever before while building a foundation for sustained long-term success. Based on this continued strong performance, we're raising our full year revenue and EBITDA guidance. We expect 2025 revenue to be between $1.1 billion and $1.12 billion, up $35 million at the midpoint of $1.11 billion and representing a 20% year-over-year increase. For the full year, we anticipate adjusted EBITDA to be between $147 million and $153 million, up $10 million at the midpoint of $150 million, which is up 62% year-over-year. And one last reminder, our guidance includes only those markets that are live as of today. And with that, operator, we can open the line for questions. Operator: [Operator Instructions] Our first question comes from Dan Politzer with the company, JPMorgan. Unknown Analyst: This is actually [ Sam ] on for Dan. First, I think if we think about your updated guidance, it implies fourth quarter incremental margins at the midpoint of around 20%, which is below recent levels. I think you talked about some increased marketing in the fourth quarter, but is there any other color you could provide around puts and takes, maybe like a sports betting unfavorable holds from sport outcomes? Kyle Sauers: Yes. Thanks for the question, Sam. I think I'd point to, yes, the increased marketing spend. As we've pointed out in our prepared remarks, we've been having really good success bringing on a lot of new players and at attractive rates. So that's part of it. I think the other piece that I would put in there is just the ongoing VAT tax that goes through the end of the year in Colombia that's impacting gross margins and revenue growth down there a little bit. Unknown Analyst: And then there's some recent news coming out of Mexico, they're considering a potential increase in gaming tax rates. Was this something you were anticipating going into the year? And how would you kind of think about increased tax rates impacting kind of how you operate in that market? Kyle Sauers: Yes. We've been tracking that. I wouldn't say it was something that we anticipated heading into 2025, but it does appear that in Mexico, the gaming tax is likely to increase from a current rate of 30% up to 50%. There have been and should continue to be ways to reduce the effective rate below these amounts. But we'll keep you updated next year, assuming these changes get enacted and what that means for us and if there's any difference in the way we approach that market. Operator, I think we can go to the next question. Operator: Our next question comes from Bernie McTernan with the company, Needham & Co. Bernard McTernan: Maybe just to start and keeping on the LatAm theme. What should we be looking for in terms of like next steps for what's going on in Colombia and the VAT tax? And maybe, Richard, just gauge your, I don't know, probability of it going through or not, if it's still a high degree of confidence or not? Richard Schwartz: Sure. Yes. So Colombia, it is a situation where the President's tax reform does require congressional support. I think there's been some articles published over the last few weeks that sort of sometimes don't convey that clear picture that it does require congressional support, and we continue to feel there is not sufficient support by Congress to pass that. So you do -- if that doesn't pass, then the normal tax conditions should resume. That's sort of the state of things today, but November is going to be a very busy time in the political arena down there. The President remains unpopular and his party does. So it's still some work that's happening down there, but I certainly think that the current view is that the current tax reforms proposed will not be adapted. Bernard McTernan: Understood. And then, Richard, you also -- there was obviously the press release happened not too long ago, but then you mentioned on this call how there's the -- Kyle being promoted to President and allowing you to focus on more strategic, maybe bigger picture things. Just wanted to see if there's any commentary on maybe why now or if there's anything you could bring us under the -- like, the hood in terms of what you'll be focused on specifically? Richard Schwartz: Sure. First of all, I think Kyle deserves it, the opportunity -- he's done tremendous job for the company since he joined us and the support throughout the Board and colleagues, other executives and everyone in our community that follow our company, I think, has recognized how deserving it was. But ultimately, I also for myself realized that the impact to our company of having additional states legalizing online casino is very profound and very significant. And I believe, as I shared on prior calls, that there are opportunities to improve how our industry lobbies and the narrative, the messaging and hopefully, the impact of the opportunity will be stronger if I'm able to spend more time working with other colleagues from our peers to try to align folks in a way that hasn't really been aligned as much as we'd like in the past. So, I think, number one, online casino legalization requires a very strong and very dedicated effort to really try to move the needle in terms of accelerating the pace, and I think we'll be able to achieve some results with some additional time to focus on that. In addition, as we know, we hired a new CTO earlier this year. He's off to a tremendous start. And what I'm excited about is working with him and the team to continue to deliver experiences that are fun that players want to play and they can't get anywhere else. So at the end of the day, we want to continue to improve the innovation of our business and the differentiation, which has been the source of a lot of our success and why you see our ARPMAUs at such a high rate relative to others is because we have a constant flow of new ideas implemented in smart ways that consumers really enjoy and appreciate. And we have a team that loves building these fun experiences, but we need to do more of that. And I, as some of you know, have a long history in that part of the business on the product side, and I think it could be a great opportunity to kind of ensure that we have our next pipeline enhanced and coming through at a faster pace. So I'm really excited to focus on innovation as well. And then as you can also imagine, there's all these strategic opportunities in the industry, and we want to make sure that we have a proper focus on those and make sure that when we evaluate how to direct capital to get the highest returns that we're comparing all the opportunities, and there's a lot of them. So, we have to sort of make sure we have the right focus on those to ensure that when we do find the right ones, we are able to act and have proper support to make sure it's successful. So those are the sort of the things that I'm hoping to focus on. Bernard McTernan: Certainly, we feel the similar sentiment towards Kyle. Richard Schwartz: Appreciated. Kyle Sauers: Thank you. Operator: Our next question comes from Jordan Bender with company Citizens. Jordan Bender: So the state reported data doesn't always tell the whole story, but it does look like you got a little bit more promotional on the sports betting side of the business later in the quarter, which we can kind of see in your handle accelerating. Curious as to what you're seeing in the market that's making you lean in? And are you seeing anything elevated from your end or the market's end as we head into the fourth quarter here? Kyle Sauers: Yes. Thanks, Jordan. I don't think I would highlight anything dramatic that's happening within the industry. Obviously, everybody has their own strategy heading into football season that they're trying to execute. And we're -- I think probably like all operators, we're continuing to refine our bonusing in all of our different markets, and each market might look a little bit different, but making sure the bonuses are getting to the right players. So really, no big change in strategy there for us. Jordan Bender: And then if I can follow up in Colombia, if I caught it right, I think you said NGR down 27% in the quarter, which, if I heard that right, would kind of represent a pretty meaningful deceleration from what you saw in the first 2 quarters of the year. I guess, like is there anything structurally different from what you're doing in that market? Obviously, it ends here in a couple of months, but just curious on why the deceleration there. Kyle Sauers: Yes. So just to be clear, I don't think I would refer to it as a deceleration because the player count growth was still super strong. GGR growth was still super strong. This was about the bonusing that we're doing to offset the VAT tax on the players. And it was a bit more painful for us in Q3 in terms of the impact on net revenue. And part of that comes from better sports outcomes. And then because of that, you have players who have a little bit fuller balances in their accounts. So there's a little more churn with deposits and withdrawals, which creates more bonusing. So that's really, how I would describe Q3 as it relates to Colombia, but not a deceleration. It was more about the bonusing. Richard Schwartz: And I would just add that the handle, the gross gaming revenues, the player volumes are generally in line with the growth we were experiencing prior to the VAT tax implementation. So we continue to see really healthy growth in that market. Operator: Our next question comes from Ryan Sigdahl with the company, Craig-Hallum. Ryan Sigdahl: Really nice results. I want to start kind of in the U.S. and then we'll move to Latin America, like everybody else. But you announced some nice payment processing partnerships, Sightline Payments for an integrated debit solution. You have BurraPay for crypto. But you guys seem like kind of a leader, first mover on a lot of that stuff. Curious how those partnerships came about? Any metrics you're willing to give from a percentage of players that are using these or have adopted? And then kind of how you think about the cost savings versus potentially even customer retention features of these. Richard Schwartz: Right. Sure. I'll take that one, Ryan. Thanks for the comments on the quarter. Yes. So it really starts off with sort of a reputation that we developed over the years, I think, as a thought leader and an innovator in our industry. And when you have to pioneer new payment methods, in particular, it's extraordinarily complicated and requires not only engineering teams, but compliance, operations and every sort of partner and all stakeholders have to sort of align together and figure out really tough challenges and how to execute on them. And I think we've done it before as we have. We're a natural company that people want to partner with because we have a track record and a history of delivering new experiences to customers in a great way. In the case of Sightline, their Co-Founder, CEO and myself have a relationship going back many years, since they launched their business, and our teams get along extremely well. And we recognize that together we could deliver an experience that is solving a need that industry has, especially for us. And so we had a very collaborative and terrific relationship, and we launched that product, and we're really excited for it. But it's still very early and I don't have any metrics to share on this call and at this time. For BurraPay, other long-time executive industry approached us, again, for similar reasons, knowing that we have a great reputation, I think, and are able to pioneer new approaches. And similar to the Sightline experience, we were able to agree on a framework to work together and collaborate to deliver great experiences. So payments are key to our industry. And when you can innovate and find ways to solve players' friction, deliver more efficient experiences for them, and -- it makes a difference. And so we tend to do that in Latin America very well, and we're doing that equally as well, I think, in the U.S. market. Kyle Sauers: Yes. And the only thing I would add, Ryan, I think you hit on it, but there's 2 reasons for these types of innovations around payments. The first is, obviously, to have a great player experience and a journey where it makes it very easy for players to feel comfortable, trust the platform, get their money on and off the platform when they want. And then the second piece is to make sure that it's improving our financials and reducing costs over time. So when we can accomplish both of those things at the same time, that's a big win for us. Ryan Sigdahl: Yes. Then switching down to Colombia. We don't need to debate or likelihood of tax reform, we'll kind of wait and see how that all plays out. But to me, it's a positive regardless, curious, your thoughts on that. There's a great outcome, obviously, that it doesn't continue into next year and you get an immediate uplift. The other option is it does in some form. But my question is, do you expect operators to change strategies, behavior? I guess, to me, it felt like everybody was operating under a temporary -- this year absorbing the VAT tax because it was going to go away. But if it ultimately becomes permanent, people likely partially or stop doing that and actually results can improve next year regardless. Kyle Sauers: Yes. I think it's a good point. I think there's -- at either end of the spectrum for outcomes, it should be a better scenario for us next year. So I mean, if you just look at some of the numbers, for the year, GGR is up a little less than 60% and net revenue is about flat. But that includes the first couple of months of the year because the bonusing and the VAT didn't go into place until late February. So if you just looked at Q2 and Q3, GGR is up almost 65%, but net revenue is down almost 15%. So it gives you just kind of a decent perspective on the headwind from the extra bonusing that we're doing along with the other large operators. So then you jump to 2026, the VAT going away is obviously going to have a very solid impact on our revenue growth given that we've seen the GGR growing over 60%. And at the other end of the possible outcomes, as you point out, we think it's likely that all the operators would decrease the bonusing, take that bonusing away, which wouldn't be great for GGR, but it should be much better for us in net revenue and profitability. And then the other piece of it is, by the end of February we're lapping the bonusing that we started doing because of the VAT tax. So both of those could be beneficial for us. Operator: Our next question comes from Joe Stauff with the company, Susquehanna International Group. Joseph Stauff: I wanted to ask, Richard, on your comments about the sweepstakes market, what states that you operate in currently do you consider to have a pretty substantial headwind in terms of sweepstakes operators operating against you? Richard Schwartz: Well, remember, there's sweepstakes across poker and across sports and across casino. So, I guess a couple of large states have been fairly effective at having the regulators sort of issue cease and desist letters and removing some of the competition. I'll mention Michigan is one example and Delaware is another example. In other states where you operate with online sports betting and some efforts to legalize online casino in Virginia, a market that does still have sweepstakes, for example, Illinois still has it as well. So it's really a mix across the country of states that have been able to sort of exit the sweepstakes and others that have not. So, it's not a very clear cut. In some cases, some of the larger sweepstakes operators leave, but there's others that still stay. So it's not a very clear image and a lot of confusion sort of what the status is in some of those individual states. Joseph Stauff: Got you. So for iCasino in particular, maybe of your more material states, Michigan, Delaware or maybe the states where it's a little bit cleaner, whereas the other ones, not so much. Richard Schwartz: Yes, I'm not actually familiar with the latest in a couple of those other states other than the ones I referenced. Joseph Stauff: Got it. And in terms of just the reinvestment you did in the third quarter and the reacceleration, for instance, especially like in a state like New Jersey, if we think about the first-time depositors, which you said was a record, was it heavier in certain states than not? Or is it more kind of across the board? Kyle Sauers: Yes. Thanks, Joe. So for sure, it is concentrated in markets that have iCasino available. So I would include Ontario and that in addition to the states that we're in. That's where we -- we haven't been shy about the fact that we feel like we have very differentiated product and an advantage there. And so that's where our marketing investments should go, and it's clearly paying off. I mean, I think our 34% growth in our monthly active users in North America is impressive. But when you get to just the iCasino markets, and it was 46% year-over-year. That tells you that's where we're investing and that's where we're having a lot of success. Operator: Our next question comes from David Katz with the company Jefferies. David Katz: First question, Richard, I think you talked about prediction markets a little bit. But I'm not sure if you said whether you would be potentially looking into offering it if it became a legalized context to do so? Richard Schwartz: I don't think I addressed that, and I predicted you might ask this question. So the truth is, is that when it comes to prediction markets, the legality of it is being debated across the federal government and state jurisdictions right now. A handful of states, as you know, are actually pushing back against prediction markets as unauthorized offerings. At RSI, our focus is on our core business, delivering sustainable growth while navigating the regulatory landscape responsibly, which means that we aren't going to be a pioneer. While we're very innovative in a lot of ways, we're not going to be a pioneer in this category. But certainly, we have to have a even playing field ultimately, depending on whatever happens. But we're certainly monitoring it closely, aware of everything that's been happening and don't expect to be pushing any limits because we certainly respect the state gaming licenses and recognize that licenses are a privilege at a state level, not a rights. And so we have to be very cautious and make sure we're compliant with those stakeholders there that feel strongly on this topic. David Katz: Understood. And if I may, as my follow-up, Kyle, if I can still address you as Kyle. I noticed that there wasn't any share repurchase in the quarter. Just curious if there are sort of other uses there or what the philosophy was behind that. Kyle Sauers: Yes. Thanks, David. I'm still going to call you, David. Yes, we didn't do any buybacks during the quarter. I continue to think about future buybacks as being opportunistic rather than programmatic. So we're going to just remain flexible on how we use the buyback authorization and make sure that we're -- we've got a lot of dry powder for new markets that come along or other opportunities as well. Operator: Our next question comes from Jed Kelly with company Oppenheimer. Jed Kelly: Just on the iGaming growth in some of your more mature states, what -- can you kind of dig in more to what's driving that acceleration? Is it more product exclusive content or is it something you're doing on the bonusing or are you just getting share gains from other competitors? Kyle Sauers: So Jed, I'll start and maybe Richard will jump in here. But I think it's everything. So obviously, when you look at the monthly active user growth, that's not just about getting new people to the platform. That's having a great product and a differentiated experience and giving people a reason to come back every day. When it comes to bringing, like, people to the platform, which obviously we're doing quite well given that this quarter was a record for first-time depositors at the company, I think 10% higher than our previous record, which happened to be last quarter, and we're not spending any more money doing that. I think that tells you a lot about the quality of our marketing team and our marketing programs. We've done a lot to continue to add resources to that team, and they keep getting better and better. But the good news is that there's a lot of things we can still do better than we are today. But I think the fact that we're adding so many new users and then keeping them around says a lot about the momentum we have in the business. I think you probably heard it in the prepared remarks, but our year-over-year growth in monthly active users accelerated every quarter or every month sequentially since March through September. So that's -- I think that's pretty impressive, and we're very excited about that. Jed Kelly: And just as a follow-up, what do you think is more of a catalyst for further iGaming legislation? Is it prediction markets or sweeps? Richard Schwartz: Sure. I think both have a meaningful role to play, because in one case, prediction markets is reducing the sportsbook revenues potentially that states will be obtaining from the sports betting statewide frameworks that exist. If that happens, certainly, online gaming is a safer, more protected category of casino revenues that would be sustained. It certainly helps that online casino generates a 4x the tax revenues of sports betting. So as states have more financial pressures, and I think as the big federal bill starts to get implemented in the next couple of years, you're going to have increased financial pressures on states. And as we've seen some stakeholders in the discussion recognize online casino represents one of the very most available, accessible, proven, reliable opportunities for states to have a meaningful additional source of tax revenue. So, it's a financial element on sweepstakes, certainly, the fact that the size of that industry is not to be underappreciated. It's a multibillion-dollar industry, and there's a whole large volume of customers that could be online casino regulated customers that are right now playing these sweepstake sites. And I think it's interesting that when you do have folks opposing online casino being regulated, you don't have the same effort usually applied towards operating the sweepstakes market that already exists today. So certainly, the existence of it and the fact it's not taxed, and as I said in the prepared remarks, not tax doesn't protect consumers, really add no value to a state in any way. It just has a negative consequences versus the online gaming regulatory process and legalizing it adds a lot of value to states by protecting consumers and generating taxes and creating opportunities to fund resources to local causes and public services that need that sort of support. So I do think that these things are going to help plus the financial needs of states. And as I said earlier, having better alignment in our industry is really important. And as I have more availability, I hope to be able to focus on these things, I'm hoping to be able to deliver some accelerated efforts in some of the key jurisdictions that are important for us in the future. Operator: Our next question comes from Chad Beynon with the company Macquarie. Chad Beynon: I feel like we covered everything on iGaming. For sports betting, maybe wanted to ask one just in terms of how the customers have reacted just with in-play. So we have heard that there was, obviously, customer-friendly outcomes for American football and for soccer, I think, in September and for October, so that probably hurt hold. But just in terms of the in-play percentage helping hold, does that continue to look or does that continue to grow from a year-over-year perspective? And if we see normal outcomes, that could lead to a year-over-year increase in hold? Kyle Sauers: Yes. Thanks, Chad. So we have continued to see improvement in the percentage of betting that goes both to parlays, SGPs and to in-game. That's been an initiative for us for quite some time. So those trends have been positive for us. Interestingly on the hold, absolutely, there were some player-friendly outcomes, as you pointed out, and it's well publicized, particularly in September. So that did create some headwind. But I will point out that our sports hold in the U.S. actually hit its highest point in our history in Q3, even with those tougher outcomes. So I think that's a pretty good reflection of how our team has been able to continue to improve the product and the offering and drive players to a better mix of bets. Chad Beynon: And then on Colombia, again, I think previously, you've talked about the VAT tax representing roughly a low double-digit hit to EBITDA. You're doing things to offset it and you laid that out for the third quarter. But as we think about the guidance increase and maybe the outperformance in Q3, is it fair to say that maybe the beat -- I guess, some of it is probably coming from the MAU growth. But was there any type of a beat against that originally expected VAT impact? Kyle Sauers: So not positive. I understand the question exactly, but I'm going to answer and you can tell me if I got you here. I think when you look at Q3 and the guidance raise, it's probably -- it's more about continued acceleration in MAUs, so more players, outperformance in North American iCasino, actually really good operational performance in Latin America, but more pressure from the bonusing in Q3 than maybe we would have anticipated, and that's partly because of those good player or the player-friendly sports outcomes, I should say. Did that get to your question? Chad Beynon: Yes, answered like a President, thank you Kyle. Congrats. Kyle Sauers: Thanks. Appreciated. Operator: Our last question comes from Mike Hickey with the company Benchmark. Michael Hickey: Richard, Kyle, congrats on the quarter. And Kyle, congrats on the promotion. I dropped myself, guys early in the call. So this question seems obvious. But on the prediction market in states where you have market share, call it, Delaware, are you seeing any pressure from Kalshi, soon to be Polymarket in that state or states? And I have a follow-up. Richard Schwartz: Thanks, Mike. Yes, I'll answer that. No, the truth is we have not seen an impact to date from -- that we've noticed in those states where we operate the sports betting. So, we're still looking for that and certainly monitoring it, but we haven't seen much of an impact. Michael Hickey: Richard, do you see anything on the prediction platforms in terms of innovation that you would potentially integrate into your online gaming products, OSB products? Richard Schwartz: That's a good question. We have people look at it closely. I think we're still just trying to appreciate that while it's often described as a peer-to-peer experience, what we're seeing is that there are some large companies that are taking positions on one side of the equation and essentially almost replicating what a sportsbook is from, I guess, the house. I think when you start to -- I think the BFS industry had a lot of really smart pioneering things they did that sportsbooks could and should embrace as well in terms of how you communicate that propositions to players. And I think you're going to see which types of markets gain momentum in the prediction. And some of the things you might not expect will be the popular markets, and it's been up for companies like us to identify how we strengthen our own book. So I think the things we'll be paying attention to. But I would say it's almost still premature to really see a lot because, so far, what's been happening is that the prediction markets are less regulated than we are. And so perhaps you will start and are self-certifying in many cases, you start to see things happening in the future maybe that are worth us paying attention to. But what you've seen so far is really that industry trying to replicate sports betting and starting to say, well, we have same game parlays, so how can they do same game parlays. So I think right now, the direction is more of them trying to replicate what exists in our business. But at some point, I could see if that market was to exist, although obviously, it's a long way to know that's going to happen, then you certainly would start to see cross-pollination of ideas in the other direction, too. Michael Hickey: Last question from us. Does the -- do you think the Trump fight with the Colombian President, does that -- is that creating more or less support in Colombia for the President in his potential tax change? And then I guess, broadly speaking, kind of a mess in Colombia. I mean, does that sort of take down a little bit, I guess, your appetite to expand further? I mean, Brazil, Ecuador, Chile, Argentina, all really interesting regions, I think you're looking at maybe unlocking. But the sort of the mess in Colombia, I guess, sort of pull back in your desire to put capital to work in other countries in Latin America? Richard Schwartz: Yes. Maybe I'll take your second question first, and the answer is no, it doesn't really dampen our interest. It's a lot of effort to get experience right for Latin America. We believe those markets are at the infancy of growth. And as we see in our growth ourselves, there's lots of opportunity there, and it's a very large population across Latin America that are in the process of or will be legalizing online gaming in the future. So we certainly remain very excited for it. And frankly, some of the things that are happening in these regions are also happening here in United States across the different footprints here. So I don't think anything is -- anything is possible these days, it feels like with anywhere in the world. So I think certainly, we are excited for the LatAm market and think we will be able to control the things that we can and execute where we can and influence when we're able to in terms of how we sort of want frameworks to exist in a way that's viable. But I think we're excited for the future in LatAm. In terms of the Colombia question, we certainly haven't heard or seen any evidence of anything impacting us. Certainly, we've been a great citizen down there, continue to be very respected in that industry and feel really confident about the taxes we generate and the quality of the business that we run down there. So I think the answer would be no to your question. Operator: At this time, there are no more questions registered in the queue. I'd like to pass the conference back over to our hosting team for closing remarks. Richard Schwartz: Well, thank you for joining us today. We're excited about the road ahead and look forward to sharing our continued progress when we report our fourth quarter and annual results next year. Operator: That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.
Operator: " Mark Wilson: " Chris Chong: " Malcolm Bundey: " Rahul Anand: " Morgan Stanley, Research Division Paul Young: " Goldman Sachs Group, Inc., Research Division Lachlan Shaw: " UBS Investment Bank, Research Division Glyn Lawcock: " Barrenjoey Markets Pty Limited, Research Division Kaan Peker: " RBC Capital Markets, Research Division Ben Lyons: " Jarden Limited, Research Division Jonathon Sharp: " CLSA Limited, Research Division Mitch Ryan: " Jefferies LLC, Research Division Unknown Analyst: " Robert Stein: " CLSA Limited, Research Division Matthew Frydman: " MST Financial Services Pty Limited, Research Division Lyndon Fagan: " JPMorgan Chase & Co, Research Division Operator: Thank you for standing by, and welcome to Mineral Resources Analyst Call covering today's release of its September 2025 Exploration and Mining Activity Report. Your speakers today are Mark Wilson, Chief Financial Officer; and Chris Chong, General Manager, Investor Relations. A bit of admin before we kick off. [Operator Instructions] This call is being recorded with a written transcript being uploaded to the MinRes website later today. I will now hand over to the MinRes team. Mark Wilson: Thanks, Josh, and good morning, everyone. My name is Mark Wilson. I'm the CFO of Mineral Resources, and welcome to our quarterly call for September. In the office with me this morning, I have Chris Chong, Investor Relations. And today, we're joined on the line by our Chair, Malcolm Bundey. As usual, I'll first run through some highlights from the quarterly, which was released this morning, and then we'll be happy to take questions at the end. Beginning with the key highlights. I'm pleased to advise we've delivered another strong quarter across the business and as a result, confirm that we're on track for our volume and cost guidance for FY '26. Onslow Iron was a key highlight in the quarter. We shipped 8.6 million tonnes on a 100% basis in the quarter, which was a commendable performance from the team, noting that road upgrades were being conducted through almost all of the quarter. Project also operated at its full 35 million tonne per annum nameplate capacity between August and October, which, as announced this week, triggered a $200 million Morgan Stanley Infrastructure Partners payment, which we expect to receive in coming days. Securing that contingent payment is a strong financial outcome that rewards the operational excellence we're seeing at Onslow Iron. And I want to take a moment to thank the entire team for a huge effort to get us to that point. This range from the construction team to our approvals and heritage teams through the commodities and mining services teams. On the Board renewal front, Mel commenced as Chair on the first day of the quarter. We also announced the appointment of 2 new independent nonexecutive directors in the quarter, being Lawrie Tremaine and Ross Carroll. And after quarter end, we were pleased to advise the further appointments of Colin Moorhead and Susan Ferrier as independent nonexecutive directors. Turning to safety. The 12-month rolling TRIFR was 3.35, which was a 13% improvement quarter-on-quarter. That's a solid outcome and reflects less recordable injuries following the wind-down of construction activity at Onslow Iron. In terms of corporate, our liquidity remains strong and steady at $1.1 billion at 30 September, with net debt at $5.4 billion and importantly, net debt to EBITDA continuing to fall. I believe we're now past peak net debt, and we continue to see a clear pathway to deleveraging through the operations. As we've said previously, as Onslow Iron ramps up, our EBITDA is expected to increase, and our net debt to EBITDA will continue to decrease organically. The Onslow Iron carry loan, which to remind everyone, is the receivable from our JV partners for funding them into the project, is now being repaid with interest, with balance at the end of the quarter of $714 million. That's a decrease of over $50 million over the quarter despite some additional spend adding to the balance. Subject to commodity prices, we expect that balance to reduce more quickly in coming quarters. As foreshadowed during the quarter, we successfully refinanced our USD 700 million May '27 notes, extending the maturity out to April 31 at our lowest coupon rate of 7%. This represents the smallest spread over treasuries we've achieved, and I believe it reflects the bond market's understanding of our diversified business model and the improved quality of cash flows being generated in the business. In terms of Mining Services, quarterly production volumes were 81 million tonnes, steady over the prior quarter and notably representing growth of 19% year-on-year. Volumes were driven by the ramp-up of Onslow Iron to nameplate and were partially offset by reduced volumes at Mt Marion and a couple of the client sites. At Onslow Iron, we have -- sorry, we have incurred additional costs as a result of the use of contracted trucks, but we've also benefited from higher rates, which were designed to protect us through the first 15 months or so of operations. Those rates are now back to long-term rates. In terms of the broader market for mining services, third-party demand remains strong, and we see good growth opportunities with Onslow Iron being a great showcase of our capability. For Mining Services, we remain confident of hitting our guidance range of 305 million to 325 million tonnes for the year, implying 13% annualized growth. In terms of iron ore, total attributable shipments were 7.6 million tonnes over the quarter, up over -- sorry, up 30% over the quarter. The average quarterly realized price across both hubs was USD 90. That represented an 88% realization. We continue to see strong demand for our Onslow Iron product. I do, however, want to point out that realizations at our Pilbara hub are likely to reduce over the next 2 quarters as the contribution of ore from One Mana decreases ahead of Lamb Creek's ramp-up in Q4. As I flagged last quarter, with iron ore prices solid and the curve relatively flat, we've prudently hedged out about 1/3 of production to the end of calendar year '25, given the first half weighting of CapEx. We're currently assessing our strategy for the next calendar year. In terms of iron ore at Onslow, as I said, team is delivering excellent performance there. We've loaded 44 oceangoing vessels this quarter. And as of today, we've loaded a total of 136 vessels, and continue to be very pleased with the way the transshippers are performing. We have had an issue with the bouruster of one of the transshippers since the 7th of October, which means that for the last 3 weeks, we've been operating with 4. That bouruster is being repaired and expected to be back online early next week. Sixth transshipper was launched from China in the quarter, and we expect it to be commissioned by around June next year, as we flagged previously. Over the quarter, we had 202 -- on average, 202 road trains operating, 118 of the MinRes jumbo trucks, and 85 contractors with over 31,800 trips to port completed. With the private haul road upgrade completed, we're now operating unconstrained at normal speeds, and all the contracted road trains are now solely using our road. We do have the full fleet of jumbo road trains on site, and we're progressively reducing the number of contracted trucks being utilized in line with contract arrangements. We'll be able to continue to operate at the 35 million tonne per annum nameplate rate, but do expect some seasonality impacts through the typical cyclone season from November through to April. On the costs at Onslow, I've said previously that I feel like we have a pretty good grip on those. They came in -- the costs came in at $54 a tonne at the bottom end of guidance. And just confirming there were no capitalized operating costs as we had declared commercial production from 30 June. In terms of the Pilbara Hub, we shipped a total of 2.7 million tonnes, which was another strong quarter. PB costs came in at $83 a tonne, reflecting a higher contribution from Iron Valley. We do expect those hub costs to fall back within guidance over the year as we transition from One Mana to the lower-cost Lamb Creek operation in the second half. Turning to lithium. The lithium pillar continued the strong operational performance we've reported over recent quarters. Production across Mt Marion and Wodgina was 137,000 dry metric tonnes on an SC6 equivalent basis, with sales of 142,000 tonnes SE6. That's up 23% quarter-on-quarter. Average realized quarterly prices across both sites was USD 849 dry metric tonne on SE6 equivalent basis. That's up 32%. Wodgina delivered sales of -- sorry, 88,000 kilotonnes of SE6. That was helped by a ship that was scheduled for June slipping into early July. Production was up 6%, driven by improved recoveries of 67%. That followed the plant improvements that I mentioned last quarter, including the successful commissioning of high-intensity conditioning dewatering cyclones on the second and third processing trains, which is now complete. We achieved a FOB cost for Wodgina, SE6 equivalent basis of $733 per tonne. I just want to point out that we expect that cost number to rise in the second half. Essentially, we're moving from higher or upper levels of Stage 3 down. And as we do that, we're feeding ore that we'll see a little bit more dilution and lower recoveries through the plant, but we will then get to deeper and higher quality ore. In terms of Marion, Q1 sales were 55,000 on an SC6 equivalent basis, in line with the prior quarter, the cost coming in at $796 a tonne. Those costs are lower than guidance. And again, I just want to point out that we expect them to rise in the second half. We're transitioning from the central pit to the north pit. So the grade changes and the mining costs increase. Finally, to finish with energy, we did receive an independent resource certification for the Lockyer-6 well in October, post-quarter end, and we've now received $41 million for that as a final payment under that arrangement with Hamrock. Having completed those comments, I'm now happy to hand back to Josh to queue questions. Thanks. Operator: [Operator Instructions] Our first question today comes from Rahul Anand from Morgan Stanley. Rahul Anand: Look, I've got 2 questions. Firstly, in terms of Mining Services, you did talk about the 15-month rates coming off and the rates being lower. But then I guess, to offset that, you do have contractors going off the road. And I understand year-on-year, there's going to be a bit of a lower margin in terms of EBITDA per tonne. But how should we think about that margin progressing into next year? And how should we basically square the circle of these 2, I guess, opposing forces for the margin side of things? And I'll come back with the second. Mark Wilson: Yes. Thanks, Rahul. We generally talk in terms of the $2 a tonne number, and we said that we think that's a reasonable guide going forward. There is a little bit of up and down in the first half with the movements that you've described. We do get the benefit from that additional rate through the first quarter. So it might be a little bit up and down. But yes, generally, $2 over the year still seems right for us. Rahul Anand: And then, look, I just wanted to touch upon the lithium business. Obviously, very strong performance this period. And I guess the market is there to be able to supply as well. Two quick ones there are just around -- is there potential to sweat the assets a bit harder to kind of make use of this strong market in terms of volumes? And then any sort of progress update on that lithium business potential sale, as well, that's previously been talked about? Mark Wilson: I think that makes 3 questions in total role, but I'll answer them both. In terms of the lithium, we're very pleased with the way that business is performing. It's been performing well for quite some time now. We have pulled back on production, as we've said previously, we're running Mt Marion a little bit slower. And Wodgina, we're running a little bit over 2 trains on average over the period. We can push that third train on with relatively short notice when we choose to do so. But what we've said is that we won't be at clean ore to be able to feed 3 trains consistently until around November -- around this time next year. So there is capacity to go harder. We don't have any plans to push it harder at this point. In terms of any sort of process around lithium, I'm not going to comment specifically on lithium as such. What I will say is that Chairman in his letter to shareholders expressly referenced a willingness to consider inorganic deleveraging, and you should assume that's something that we're continuing to do. As we've said before, we've got a history of doing that. We've been doing that for the last 5, 7 years, and we'll continue to evaluate options. Operator: Our next question comes from Paul Young from Goldman Sachs. Paul Young: First of all, really strong operating performance. So well done on a good quarter. First question is on Onslow and with respect to actually costs, which were really, really good considering you're still running the contractor fleet. But I noticed the strip ratio was really low, only 0.3:1. So as you unwind the contractors, you're going to benefit there. But just on the strip ratio, maybe just over the near to medium term, how are you seeing that profile? Mark Wilson: Yes. So I just want to make it clear. Thanks, Paul. Nice to talk. Just want to make it clear for everybody. Those contractor costs don't come through that fog number. Those contractor costs sit in the mining services business because they have a mining services business has effectively a mine-to-ship contract. So the MineCo, Onslow Iron enjoys the benefit of a fixed price contract. And so that number of 54 reflects that price. So those costs have effectively reduced the margin in Mining Services, albeit, as I said earlier, offset by higher rates. So hopefully, that clarifies that. In terms of the strip, it is true that the strip at Onslow is low. It will revert in the short to medium term to 0.6. We are actually pulling tonnes now from Upper Cane, which actually has a strip of 0.1. So we expect to see low cost going forward, and we don't see upward pressure on that $54 into future quarters. Yes, we still think we'll be between guidance of 54 to 59. Paul Young: And second question, just on the hedging strategy, which has been great so far. I mean you hedged at 30 volumes at the end of the year. The market is tight. You can see that through your realizations. What is the hedging strategy next year? I know you said you're assessing it, but I would have thought that it'd be pretty compelling to hedge more at -- under the current structure into next year? Mark Wilson: Yes. We are considering it. There are a range of considerations that we're weighing up. We actually have locked a few tonnes away in January. We're using the same sorts of structures, zero cost collars with a floor -- the ones this year -- this calendar year, between a floor of 100 to 101 and a cap of around 106 to 108. We can get probably slightly better numbers in January, which we have in place for a small number of tonnes. We're looking at now extending that out. The market has moved a little bit over the last week, as you know. So it's something we're watching closely. But it is attractive at these prices, particularly as we move through this deleveraging phase. Operator: Our next question comes from Lachlan Shaw from UBS. Lachlan Shaw: So 2 from me. I suppose I just wanted to check with Onslow. So the August run rate, 38 -- in excess of 38 million tonnes per annum. And obviously, TSB 6 arrives within sort of 12 months. Just interested in how you're thinking about the ability of the asset to sort of sweat or push above that 35 million tonne per annum run rate sort of post '26. And I'll come back with my second question. Mark Wilson: Thanks, Lachlan. We're very pleased with the way the assets performed or the projects performed over the quarter. We have benefited from comparatively calm weather through the period. We have lost a number of days, but this is a quarter we would expect to do well. As you would expect from us, we're constantly looking at ways that we can improve productivity. We're searching for minutes literally in every aspect of the operation. What we've said consistently is the sixth transshipper should give us the capacity to go to 38 million tonnes per annum. We are trialing and have been trying for the last month or 2 channel passing of our transshippers, and we see the potential to possibly increase throughput by another 5% as a result. But we'll -- possibly, we'll see how we go through -- we'll continue running those trials over the coming months. But I think the headline number that we've got to remains unchanged that we see us getting up to 38 million with the sixth transshipper. Lachlan Shaw: And look, my second question, so just on the lithium side of the business and the MineCo, and obviously, reports around and being open to, I suppose, capital recycling. But I wanted to ask, can you help us understand -- I mean, how do you think about this business, and I suppose the optionality embedded in being exposed to the potential for fly-up pricing in lithium, there will be another cycle. We know that, versus obviously, a key motivation for doing or looking at this sort of transaction will be at the gear. But can you help us understand how you think about -- I mean, how do you sort of weigh all that up? Because I do know, obviously, spot prices are looking better. You're realizing a better price this quarter, and perhaps things are looking a little better into next year. So just interested in how the business thinks about those trade-offs. Mark Wilson: So what I'll say is I'll just repeat, Chairman's expressed very clearly an intention to consider inorganic deleveraging. Management is assessing a whole range of different possibilities. You should assume that anything we do on any of the assets, we will only transact if we see real value there. So we don't need to do a transaction today. We're really pleased with the way the business is performing. We're pleased with the cash it's generating. We can see that, as I said earlier, that clear line of sight to deleveraging through the performance of the business. Just to emphasize, we won't do anything unless we can see very strong value, both financial and strategic for doing something. I don't know that I can say much more than that. Operator: Our next question comes from Glyn Lawcock from Barrenjoey. Glyn Lawcock: Just if you could maybe help a little bit on the realizations for iron ore, 85% of Pilbara and 90% at Onslow. How much of that was due to the hedging you put in place? And just how much is that maybe quality as you start pushing Onslow because it was -- you were getting more like 80% realization? Mark Wilson: Yes. So Glynn, almost no impact from the hedging. We had maybe a couple of percentage points impact through prior period adjustments, but not substantial. Really, what we've seen is the whole market has tightened in terms of low-grade discounts over the quarter. There's been a shortage of supply into China, and we're seeing as the mills become more familiar with the Onslow product and figure out how to blend and optimize it through the plant, continuing to see very strong demand for that product. And really, they would take as much as we could give them. So very pleased with the way that's performed. But as you pointed out, even in the Central Pilbara, the discount has been tighter. So I think that's reflected in general market conditions. And we're seeing that continue into the early stages of this quarter. Glyn Lawcock: And then maybe just any update you can provide on discussions with the Pilbara Port Authority over the dispute on charges for Onslow? Mark Wilson: We've got a great relationship with the Port Authority. We work with them in a number of areas. I can't comment specifically on that matter because it's before the courts. Operator: Our next question is from Kaan Peker from RBC. Kaan Peker: Just on the parallel channel passing, just wanted to get an understanding of how the trials have gone. What needs to be seen to be rolled out? And why only 5% upside in capacity? A bit more detail around that? And I'll circle back with a second. Mark Wilson: Thanks, Kaan. The trials are performing well. We have to trial with each of the vessels. We have to trial with the different shifts. We have to trial with day and night. We have to trial with the different crews. So there's a whole number of elements that need to be trialed over a period of time. We're also working with the Chevron vessels passing in the channel and so on. So it just -- it's a process that we've agreed with the port authority. It takes time over a period of months. In terms of the 5%, we've modeled it out. We're taking a view. We can't assume that we can do that for every movement of the transhippers. So to get to that number, we've taken a view on the percentage to see how frequently we can utilize that opportunity. Kaan Peker: And then maybe the commentary around flotation at Mt Marion. You've sort of mentioned it before, but I think it's the first time seen a date of 1Q '27. Just wondering the CapEx for that and if that's been included in FY '26 guidance. Mark Wilson: In terms of the float, that's something we're still studying. So we're doing some -- we are doing a little bit of design work on it, design engineering work. We're working with our joint venture partners to understand what that looks like. But the actual work itself is not underway. When I say the work itself, the construction, we haven't taken a decision to do that. That's something that we'll talk with the Board about and with our JV partner about as we work through our updated capital allocation framework. Operator: Our next question comes from Ben Lyons from Jarden Securities Limited. Ben Lyons: First question, just on Onslow. Congratulations on a very strong quarter, obviously. And I understand your comments around the channel passing trials, et cetera. Just specifically on one of the transshippers, though, Montebello doesn't appear to have moved since very early in the month of October. So just wondering if there's any maintenance issues or operating issues or crew availability or whether you just don't have sufficient capacity to run all of those transshippers simultaneously at present. Mark Wilson: The Mondi is the vessel that I was referencing earlier when I said that one of the transshippers had a bowruster issue. So the portside bowruster was lost in operation. And just to be prudent, we basically moor it up whilst we repair it. And that's down from the 7th of October. As I said, we expect it to be back in service early next week. So it's not a capacity issue or anything like that. It's just an unplanned maintenance. Ben Lyons: Apologies, I did miss the first part of the call. And this one might have already been asked as well, but just on the iron ore hedging, just whether you've disclosed the rough pricing you've hedged away that sort of 33% of volumes for fiscal '26. Mark Wilson: Yes, no problem. One of the things I said earlier, and you might have missed it, was that we've only hedged out through calendar '25. So we haven't hedged the full financial year. We're actually waiting to see and understand better the impact of the change to the 61% index. So we've hedged the third out to the end of December. We've done that with a series of 0-cost collars with a floor of somewhere between 100 and 101 and a cap of $106 to 108. We've also got a few 0-cost forward sales, $102 to 105. So that's out to December. I also said that we've been able to hedge just a small volume of tonnes into January, and we're just reassessing what we might do through that first quarter next calendar year. Operator: Our next question comes from John Sharp from CLSA. Jonathon Sharp: Chris, congratulations on the ramp-up of Onslow, quite impressive results. And just the first question there around that, and a similar question to Lockheed sweating the assets, but more to do with the road trains. You've said that you're confident that you'll maintain the 35 million tonnes per annum as contractors come off. But are there any improvements that you see there with the road trains, whether it's cycle times, loading of trucks, anything that you're seeing there where you can improve? Or is that not a concern because maybe the transshippers are more of the concern? Mark Wilson: I think we've been consistent in saying that ultimately, the transshippers are the bottleneck. We did have some inefficiencies through that first quarter just because of the use of the public road at times, the use of large numbers of contracted trucks, which impact productivity when they're unloading, and so on. So we expect to see greater efficiency over the coming months, but we don't see the haulage as being the constraint. Jonathon Sharp: And just a question on the progress towards autonomous haulage. Can you just give us an update there? Is there any regulatory sort of certification that needs to be done, or anything to update us on there? Mark Wilson: Thanks, John. The benefit -- or one of the benefits of having the road upgrade completed is now that we can move back to trialing of the autonomy, which is now underway. So we are trialing a number of trucks with the autonomy. That's a process that we said is going to take some time. We need to collect all the data and do the analysis, and working closely with the regulator to satisfy ourselves and then the state of those systems. So we've said that that's going to be a second half of next year sort of thing before we can really know with certainty how it's tracking. But at this point, we're still very confident in terms of how it's shaping up. Operator: The next question comes from Mitch Ryan from Jefferies. Mitch Ryan: Just wondering on within the lithium business, if I look at on an SC6 basis, there was a divergence between the ASP at Mt Marion and Wodgina. Can you help us understand this, please? Mark Wilson: Sure, Mitch. So a couple of things I'd point out. We're very, very happy with the price performance, in particular of Wodgina. And so we sell on spot. And obviously, in part, it depends on timing of sales and cargoes and the like. But I'd say that Wodgina's sales performance has been very strong through the quarter. So I think that, that delta between the 2 is possibly exaggerated to an extent by that. And the demand for that Wodgina product continues to be very strong, reflecting of the grade that we put through there. Marion, we tend to sell as a parcel with a combination of the higher grade and the lower grade. And so historically, the difference between the 2 has been about 5%. This quarter, it's 10%. I'd say it's in part due to the strength of the performance of Wodgina. There is a 10% discount applied to the S3 product, the 3.5. Mitch Ryan: And then staying at Marion, total tonnes mined were down materially quarter-on-quarter. How do we think about strip ratios and material movements in the mine plan going forward? Mark Wilson: Yes, it's a good pickup and consistent with what we're saying -- one of the benefits of Marion is we operate out of a number of pits. So we don't just have a single pit. So you shouldn't be -- and you haven't suggested this, but I'm talking about the market generally. I shouldn't be worried that we're high-grading or anything like that. We're just reshuffling, resequencing our mine planning. And you're right, we were able to benefit from lower strip at Marion through the quarter. And we did that in part to help manage CapEx. We've said before that we're conscious about the way that we're managing our capital through the business. And so we are going to sequence back to higher strip pits, and the life of mine average at Marion is 10 to 11. So that's one of the reasons why I called out costs going up in the second half as we do that. But just to emphasize, we still see costs for the year falling within guidance. Operator: Our next question comes from [ Hayden Burlow ] from [indiscernible]. Unknown Analyst: Really good result. Just a couple of questions from me. Mark, just on mining services. Just keen to get your sort of thoughts on external volumes and whether that you see some opportunities to grow, I guess, more into next year than this year, but just keen to see where that's at. And also in the Pilbara Hub, do we assume then lower volumes in this in the next quarter, just as you transition and get Lamb Creek going in Q4? Mark Wilson: In terms of the first question, mining services, as I said, I think the external market, the demand for the services is strong. The industry is generally strong with the others in the industry, not that we have any true competitors the way we operate, but others are focused on gold. We see significant pipeline of opportunity into calendar year '26 and beyond. So very comfortable with the outlook and prospects for that business. In terms of the volumes out of the Central Pilbara, it's more a shift between the mines. As the market understands, one of the challenges with the Iron Valley product, even though it's a great product, it's very high. And so we do need to blend it. Wonmana is there, but the grades are falling. And so that's one of the reasons why I called out lower realizations over the next 2 quarters as we do that blending with reducing grades before we get Lamb Creek on. And then Lamb Creek, we'll see the grade stabilize and the blended grade stabilize. It will also see the cost improve because of the strip is quite low. Operator: Our next question comes from Robert Stein from Macquarie. Robert Stein: Quick one on just CapEx, the $400 million. I assume that's front-end weighted into the first half of the year, and obviously, because guidance is still intact that we can expect a slower second half run rate? And I've got a follow-up. Mark Wilson: Rob, yes, that's an accurate assessment. Robert Stein: And then secondly, just the Hancock payment. So the $41 million that was results to date, the issue with the well being capped basically getting another drill rig back on site, and then the other remaining part of the contingent consideration is still accessible once you're able to access or drill that -- the second part of the well? Mark Wilson: No. So the Hancock arrangements now concluded with that payment of $41 million. The well that we referenced in the quarterly was another exploration well, and we weren't able to determine commercial volume to be able to take it to production. So we've got a program of drilling planned with Hancock. They're going to drill some material for opportunity for themselves, and JV will do some work over the coming months, but we have no intention to go back to that well. Operator: Our next question comes from Lyndon Fagan from JPMorgan. Our next caller is Matthew Frydman from MST Financial. Matthew Frydman: A couple of questions on mining services, please. Firstly, you mentioned in the release a bit of a reduction in third-party or client contract volumes. That sounded pretty minor. But is there anything you can do to quantify the drivers there, or whether that's a temporary or lasting impact? Mark Wilson: Yes. Happy to explain that a little bit better. We had an external site finish last quarter, and we had a new one start this quarter, and they didn't balance out. We did more volume with the terminating contract and the new contract through its start-up phase. So that's a timing thing. And then we had 1 or 2 sites where the client wasn't able to provide us with the sort of volumes that we would normally expect. But again, not significant in any sense. So just a temporary thing, I think best described as. Matthew Frydman: And then maybe following up on Hayden's earlier question, just, I guess, trying to quantify the next opportunity in mining services. I mean simple maths will tell us that even to grow volumes by a fairly modest 10%, it needs to be a 35 million tonne per annum contract. So what does the next opportunity in mining services look like? Is it partnering on more onslowsized developments? And I guess what sort of timeline do you expect in terms of yes, achieving some of those opportunities? Mark Wilson: I think you've identified that -- I mean, the business has got a fantastic track record of growth over many years. And I think you've identified one of the challenges, which is to continue to support that sort of growth rate for a number of years into the future. So it is something we talk about internally. We do think about how we allocate resources. We've got -- we do have -- we've got a wonderful team, but we've got a certain number of people. We need to make sure they're pointed to the right opportunities. And so we need to work with management and with the Board to make sure we're thinking about that capital need going forward. I can't talk about specifics as you would appreciate. But what I would say is that the market better understands the capabilities of that business as a result of the success of Onslow, and I'll probably leave it at that. Operator: We're going to try Lyndon Fagan again. Lyndon Fagan: Look, just wanted to check in again on Wodgina Train 3. I'm not sure if this got covered off, but given a better outlook for the market, what do you need to see to ramp it up? Mark Wilson: So the answer is that we've sought to be disciplined with supply. We have pulled volume out of the market. We do run that third train from time to time. We haven't set a hard number as such. We obviously track the market every day with the calls that we're making around sales. So we've got a pretty good view and feel for the market and what that outlook looks like in the short term. It's a JV asset as well. So any decision that we take around that needs to take into account the views of Albemarle. What I would say is we still -- we're holding to the guidance for this year. I think that's the best way to put it in terms of where we think sales production will be. Lyndon Fagan: And I guess if you decided at the end of this year, the market outlook was sufficient to bring it on, when -- how quickly could you go from that decision to Train 3 at nameplate across the whole operation? Mark Wilson: I think one of the interesting parts about that question is it highlights the optionality that sits inside the business generally. Specifically with respect to Train 3, we can turn that on overnight, and we can produce. In terms of having clean, consistent feed to support all 3 trains, that will be 12 months from now. We would be able to deliver production from 3 trains next week. But what we would see would be recoveries would fall, costs would be a little bit higher because we'd be dealing with more contact ore, and we'd have some dilution impacts on the plant. So on the mining and through the plant. So it's a choice that's available, but to get to nameplate with clean ore is going to be 12 months. Operator: [Operator Instructions] Our next question comes from Lachlan Shaw from UBS. Lachlan Shaw: Just a couple quick ones. So firstly, great result with the recent debt refinance. I'm just wondering, though, corporate spreads are pretty tight right now. You might be tempted to go early again on the next bond due November 27. Mark Wilson: We were very pleased with the market reaction when we came to market. There was a lot of appetite both out of Asia and out of the U.S. The bond -- the next bond has a call premium of $1.04 effectively. So it's a little bit expensive to go now. That will step down shortly. It's a broader conversation in terms of how we think about the capital stack and what we're doing. So we don't have any hard plans to go, but that's an option we're continuing to monitor. Lachlan Shaw: And then just a final one from me. So obviously, the haul road Donslow repair is complete, a really good outcome. As we're coming into the wet season and you sort of look at how that's all gone, are you comfortable that the sort of the risk areas along the road in terms of river crossings and potential for ling water to impact? Are you comfortable that's all being sufficiently addressed, and you've now got pretty reliable and resilient pathway through the wet season? Mark Wilson: One of the benefits of the somewhat painful experience earlier this year was that we got a better understanding of where the water sat and how it moves live as opposed to the modeling. And so you can assume that we've studied that. We've worked with that, and we've tried to address that in the work that we've done through that period up to September. So yes, I'm confident that the team has done that work. Operator: Our next question comes from Mitch Ryan from Jefferies. Mitch Ryan: Previously, you had disclosed plans to take Onslow well beyond 35 million towards 50 million tonnes with the deleveraging in sight. Is there any information to dust those plans off? Or what would you need to see to dust those plans? Mark Wilson: Mitch, thanks for the question. We're not changing our position. We see a potential to go to 38 with the sixth transhipper. We know that there's a huge amount of resource out there, but there's also a lot of work that will be needed to be done both on the resource and on port infrastructure to go materially higher. So that's something you can assume that we're talking about because we always have the medium to long term in mind. But for the short to medium term, there's no plans to change what we're saying. Mitch Ryan: And just with regards to the study of reintroducing float at Mt Marion, does that potentially use the existing float equipment there? Or will it need new equipment? Mark Wilson: There's potential to reuse some of it, but it will be largely new. And just we've talked about it a little bit today. Yes, the benefits of the float are clear in the sense that it would allow us to have a single product, and it should take -- subject to what the study -- final study says, we estimate it could take up to $100 a tonne out of the all-in sustaining cost of the operations. But ultimately, it's a capital investment decision. We have to take that through management and through the Board once we finish our analysis. Operator: There are no further questions. That concludes today's call. Thank you for your time, and have a great day. Please reach out to the MinRes team if you have any follow-up questions. You may now disconnect.
Operator: Greetings, and welcome to the Tenable Q3 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Erin Karney, Vice President, Investor Relations. Thank you. You may begin. Erin Karney: Thank you, operator, and thank you all for joining us on today's conference call to discuss Tenable's third quarter 2025 financial results. With me on the call today are Co-Chief Executive Officers, Steve Vintz and Mark Thurmond; and Chief Financial Officer, Matt Brown. Prior to this call, we issued a press release announcing our financial results for the quarter. You can find the press release on our IR website at tenable.com. We will make forward-looking statements during the course of this call, including statements relating to our guidance and expectations for the fourth quarter and full year of 2025, growth and drivers in our business, changes in the threat landscape in the security industry and anticipated shift towards preemptive security approaches, our competitive position in the market; growth in customer demand for and adoption of our solutions, including Tenable One, our exposure management platform, our ability to expand integrations with third-party tools and data sources and grow our ecosystem, planned innovation, research and development investments and new products, services and initiatives and our expectations regarding long-term profitability and free cash flow. These forward-looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements. You should not rely upon forward-looking statements as a prediction of future events. Forward-looking statements represent our beliefs and assumptions only as of today and should not be considered representative of our views as of any subsequent date, and we disclaim any obligation to update any forward-looking statements or outlook. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our most recent annual report on Form 10-K and subsequent reports that we file with the SEC. In addition, all of the financial results we'll discuss today are non-GAAP financial measures with the exception of revenue. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their closest GAAP equivalent. Our press release includes GAAP to non-GAAP reconciliations for these measures. I'll now turn the call over to Steve. Stephen Vintz: Thanks, Erin. Before we get started, I want to welcome Matt Brown to the Tenable team. Matt comes with tremendous experience and has hit the ground running since he joined us in August. With that, let's get into the quarter. In Q3, we exceeded all of our guided metrics, delivering 11% year-over-year revenue growth and 23% operating margin. We continue to see strong growth from Tenable One, our exposure management platform, which represented approximately 40% of new business during the quarter. We added 437 new enterprise platform customers in the quarter, a 13% increase compared to Q3 of 2024. Notably, half of all those customers are landing with exposure solutions with strong momentum globally. We believe our strong new platform traction reflects a fundamental shift in cybersecurity away from detection and response technologies and more toward a more preventative and preemptive approach. The reactive approach to cyber is where the tools, the budgets, compliance priorities have lived for many years, simply trying to detect breaches. In fact, more than 95% of all cybersecurity spend today is on post-breach technologies. So consequently, less than 5% is spent on preemptive security. Now the good news here is that, that mix is expected to change significantly over the ensuing years, and we're starting to see signs of that shift with Tenable One. The obvious question is, why is this happening now? The short answer is AI. AI is dramatically reshaping the threat landscape as attacks have become faster, more automated and more sophisticated, exposing the limits of traditional reactive defenses. The takeaway here is that it's no longer just about firefighting, it's about fireproofing and exposure management is helping customers make that shift. Market-leading exposure management starts with unified visibility, but it's more than just seeing assets, domains and systems across your environment. It demands intelligence, context and the ability to mobilize that insight into action. It's not just about knowing that a vulnerability exists, but understanding that it's on a critical asset that is actively exploited and sitting on a direct attack path to your crown jewels. It's also about using AI not simply to find flaws, but to anticipate how an adversary may move through your environment and to see your organization the way an attacker does and moreover, to mobilize before attackers do. We believe Tenable One is uniquely positioned to win in this next phase of security in this new AI world, given our roots in our strategic direction. Our foundation in vulnerability management gives us the data, the scale and credibility to lead the shift toward exposure management. And we're building on that strength with focused investment and innovation. Notably, R&D is up over 20% year-to-date, reflecting significant investments in Tenable One that unify visibility, insight and action across the full attack surface. In Q3, we launched Tenable AI Exposure, leveraging technology from Apex to give CISOs visibility into and control over the risk associated with generative AI. The solution helps organizations discover AI usage across their environments, understand how it impacts their attack surface and identify potential exposure stemming from AI-enabled applications, code and user behavior. It is a powerful example of how we continue to extend Tenable One to stay ahead of emerging threats. We also surpassed 300 validated integrations in the Tenable One platform, underscoring our progress in creating the most open and the most interconnected exposure management platform in the market. This open ecosystem is a key differentiator. These integrations go beyond technical connectivity to unified visibility and insight across tools and data and teams. By breaking down silos between vulnerability management, cloud security, identity, OT operations and the broader ecosystem of third-party tools, we are advancing how customers unify data, apply contacts and orchestrate faster in a more coordinated way. As we continue advancing this vision, we are building a platform where connectivity drives action, where customers don't just see risk, they can act on it. Finally, we advanced our vulnerability priority rating across different domains, allowing for higher levels of smarter orchestration and mobilization for exposure management. This gives organizations even sharper precision in determining which risks demand immediate action. Most enterprises are flooded with findings, and the challenge is not just seeing vulnerabilities, but knowing which ones matter. By combining real-world threat intelligence, contextualized asset data and AI-driven analytics, our enhanced VPR helps customers focus their remediation efforts on the exposures that matter most. We believe that these innovations across visibility, insight and action, combined with our growing open integration ecosystem and our focused investment on preemptive security and R&D are what differentiate Tenable among the many vendors now laying claim to the exposure management space and are core to why customers are turning to us. I'd now like to turn the call over to Mark to discuss how customers in the industry are responding to the shift to exposure management and how we are leading them through this change. Mark Thurmond: Thanks, Steve. We believe Tenable is leading the transformation to exposure management, and the industry is taking notice. We were recognized as a leader in exposure management by 2 of the industry's top analyst firms during Q3. In July, Tenable was named a leader in the Forrester Wave for Unified Vulnerability Management solutions. In August, we were recognized as a leader in the IDC MarketScape for exposure management platforms. And in September, IDC again reported Tenable ranked #1 in its latest market share report. As Steve mentioned, one of our defining strengths and what shines through in every customer story is Tenable One's ability to unify visibility, insight and action across the modern attack surface. We're now extending that power to include both Tenable native and third-party data, giving customers an even more complete view of risk. But exposure management is more than a technology. It's a journey that requires a new mindset. We're listening closely to our customers by helping them chart that path step by step. Our exposure management Leadership Council and our exposure management maturity model have become critical guides in that journey. The Leadership Council, which launched this quarter, brings together some of the most forward-thinking CISOs and security leaders to share insight and best practices from their own exposure management transformations. Their feedback helps shape our platform road map and ensures we're focused on solving the challenges that matter most. Our new exposure management maturity model gives organizations a framework to assess where they are today and what it will take to advance in their exposure management journey. It helps them measure progress, identify gaps and prioritize the investments that will have the greatest impact. Together, our exposure management Leadership Council and maturity model are helping customers turn exposure management from an abstract goal into a disciplined strategy for the future. Through these initiatives, we're helping customers evolve their approach from managing vulnerabilities to embracing a true preemptive security mindset. It's how they move from reacting to risk to staying ahead of it. That's what Tenable One is designed to deliver, the clarity, intelligence and context to see threats before they strike. As Steve highlighted, we're leading the way with the most comprehensive exposure management platform in the market, helping our customers build stronger, smarter defenses for the AI era. Let me give you some real-world examples from the quarter. First, we captured a major new logo with a global commercial real estate investment services firm, displacing the top cloud security provider and an incumbent vulnerability management player to consolidate onto the Tenable One platform. Like many large enterprises, this customer faced growing complexity of a hybrid environment with assets spread across on-prem infrastructure, multiple cloud providers and third-party systems. Tenable One was selected for its superior technical capabilities across cloud security and vulnerability management. It was also chosen for its ability to unify data and context across their entire ecosystem. This consolidation immediately filled critical visibility gaps, streamline operations and reduce the cost and complexity of managing risk across a fragmented landscape. We also had another major win this quarter with a national electric utility provider in EMEA to accelerate their critical infrastructure transformation. Like many in the energy sector, this organization is navigating the growing convergence of IT and OT environments with operational technology increasingly coming under the responsibility of the CISO. They selected Tenable as their exposure management partner for our ability to integrate complex technical requirements and deliver a cohesive, scalable OT security framework across their national distribution network. By unifying visibility and context across IT and OT assets, Tenable is helping them eliminate silos and protecting critical infrastructure at a national scale. We also secured a 6-figure expansion with a leading technology provider serving the public sector, converting them from our stand-alone crowd product onto the Tenable One platform. This is a strategic shift for the customer, driven by their need to unify visibility and control across a complex hybrid environment, supporting sensitive government workloads. This multiyear agreement enables them to consolidate on to Tenable One over time, simplifying operations, reducing vendor sprawl and strengthening compliance across both commercial and public sector deployments. These customer wins reinforce that our strategy is absolutely working. We are earning larger, longer-term commitments by delivering strategic value and deeper integration into our customer environments. At the same time, we believe these wins reflect the broader industry shift that is now underway from reactive post-breach defense to preemptive security. As this shift accelerates, we believe Tenable is exceptionally well positioned for sustainable growth with exposure management becoming the foundation of modern cybersecurity programs worldwide. With that, I'll turn the call back over to Matt to dive deeper into the results for the quarter. Matthew Brown: Thanks, Mark. I want to thank everyone for the warm welcome, and I'm really excited to be here. I look forward to seeing new and familiar faces over the next couple of months. With that, I'll jump into the results for the quarter. We're encouraged by the strong third quarter exceeding the high end of the range on every metric we guided to for the quarter. Revenue was $252.4 million, representing growth of 11.2% year-over-year. The year-over-year growth in revenue for the quarter as well as outperformance relative to guidance was underpinned by a solid foundation of renewal business, strong Tenable One adoption and better-than-expected contribution from professional services. Our percentage of recurring revenue remained high at 95% this quarter. We're continuing to see solid momentum in Tenable One as customers are increasingly turning to our platform to bolster their preemptive security programs. The strength in new platform growth in the quarter drove calculated current billings, or CCB, to $267.5 million, a year-over-year increase of 7.7%, while short-term remaining purchase obligations, or CRPO, grew 12.9%. These measures are beginning to diverge due to changes in upfront billings patterns and increasing contract durations, which we expect to persist in the midterm. Net dollar expansion rate was in line with expectations at 106%. Non-GAAP gross margin was 81.6% for the quarter, an increase from 81.4% in Q3 2024. We're encouraged by our ability to slowly but steadily increase non-GAAP gross profit year-over-year, both on a quarter and year-to-date basis. Year-to-date non-GAAP gross margin was 81.8% compared to 81.3% for the 9 months ended in the prior year. Non-GAAP income from operations was $58.9 million or 23.3% of revenue compared to $45 million or 19.8% of revenue in Q3 2024. Although we continue to make targeted investments during the quarter, including growth of more than 18% in research and development-related expenses year-over-year, we were able to drive continued leverage in the business as a whole. Our investment in innovation is a result of our focus on delivering the most comprehensive exposure management platform to our customers. On a year-to-date basis, non-GAAP income from operations grew to $155.3 million or 21.0% of revenue compared to $124.8 million or 18.8% of revenue in the comparable period last year. Non-GAAP earnings per share for the quarter was $0.42 compared to $0.32 in Q3 2024, an increase of 31.3%, reflecting the increase in profitability combined with a decrease in diluted shares outstanding. Turning to the balance sheet. Cash and short-term investments totaled $383.6 million. We generated $58.5 million of unlevered free cash flow during the quarter compared to $60.8 million in Q3 2024. This brings the year-to-date unlevered free cash flow to $189.6 million, a year-over-year increase of 24.7%, putting our annual guide well within reach. During the third quarter, we repurchased 2 million shares for $60 million. In total, we have now repurchased 8.3 million shares for $300 million since November 2023 and have $250 million of repurchase authorization remaining. We intend to continue to repurchase shares, which we believe is an effective use of capital. Turning to the financial outlook for the remainder of the year. With the results of the third quarter behind us, we've gained incremental visibility into the full year. And as a result, we are raising our full year guidance at the midpoint across most of our guided metrics. Specifically, we are increasing our full year guidance at the midpoint for CCB and now expect a range of $1.040 billion to $1.048 billion, representing a year-over-year increase of 7.7% at the midpoint. We expect revenue for the fourth quarter to be in a range of $249.1 million to $253.1 million, representing a year-over-year increase of 6.5% at the midpoint. For full year 2025, we are raising our revenue guidance range to $988 million to $992 million, representing a year-over-year increase of 10.0% at the midpoint. We expect non-GAAP income from operations for the fourth quarter to be in the range of $55.7 million to $59.7 million or 23.0% of revenue at the midpoint. For full year 2025, we are raising our non-GAAP operating income guidance at the midpoint and now expect a range of $211 million to $215 million or 21.5% of revenue at the midpoint, representing a year-over-year increase of 100 basis points. We remain committed to balancing top line growth with a steady increase in profitability. We expect non-GAAP net income for the fourth quarter to be in the range of $47.9 million to $51.9 million, representing a year-over-year decrease of 1.6% at the midpoint. For full year 2025, we are raising our non-GAAP net income guidance at the midpoint and now expect a range of $185 million to $189 million, representing year-over-year growth of 17.9% at the midpoint. We expect non-GAAP earnings per share for the fourth quarter to be in the range of $0.39 to $0.43, flat at the midpoint compared to Q4 2024. For full year 2025, we are raising our non-GAAP earnings per share guidance to $1.51 to $1.54, representing year-over-year growth of 18.2% at the midpoint. In closing, we'd like to thank the entire Tenable team and our customers and partners for a great result. We're very pleased with the steady execution the team has delivered this quarter and our incremental optimism for the rest of the year as reflected in the increased guidance ranges we've provided. Mark, Steve and I thank you all for joining, and we look forward to seeing you at the UBS and Barclays conferences in the coming weeks. We are happy to open the call up for questions. Operator? Operator: [Operator Instructions] Our first question is from Saket Kalia from Barclays. Saket Kalia: Welcome Matt. Matthew Brown: Thanks Saket. Saket Kalia: I'll just keep it to one question. Steve and Mark, maybe for you. U.S. federal is, of course, a really important vertical for Tenable. Can you just talk a little bit about how that performed this quarter? And given the current situation, maybe give us a little historical context of how the business has performed around prior shutdowns as we think about any potential impact going into Q4. Does that make sense? Stephen Vintz: It does, Saket, and thank you for your question. This is Steve. We have major market leadership in public sector and U.S. federal in particular, across a wide range of three-letter federal agencies spanning civilian, defense and intel. And CRs are not new and nor our government shutdowns. We have seen that before, and we've demonstrated an ability to execute in these environments. And we're particularly pleased with the results this quarter. Public sector and U.S. federal was in line expectations, which is very notable given the seasonally high mix of U.S. federal business. So overall, a good result for us for the quarter. Operator: The next question is from Brian Essex from JPMorgan. Brian Essex: And Matt, congratulations on the new role from me as well. Looking forward to working with you again. And nice consistency out of the gates as well. So certainly appreciate that. I guess maybe to follow on Saket's question for you, Matt. I was down in D.C. last week and that was at CISA, and it was clear that things were going to get incrementally uglier this week as agencies run out of money, particularly for essential employees where CISA is focused. But would love to hear from your perspective, given that I guess, deceleration that's baked into the 4Q, like just basically what's implied by your full year guide, the deceleration of revenue in 4Q. What are you contemplating within guidance? And what kind of scenarios might lead for upside to your expectations for the quarter and for the year? Matthew Brown: Yes. I think the first thing to note is just the steady execution that we had in Q3 under the current environment of uncertainty. And keeping in mind, Q3 is a higher proportion of Fed for us relative to other quarters in the year. So with that backdrop, we look ahead to Q4, which seasonally is a smaller Fed quarter for us and see relatively minimal exposure. Now of course, there's a couple of million dollars that could be at play here or there. But generally, we feel very positive about the pipeline that we see. Renewals continue to come in very strong. We think we've got good line of sight. So we think we're not especially exposed in this fourth quarter. Brian Essex: Got it. Maybe can I sneak in a quick follow-up for Mark? Just with regard to the impact of the expiration of CISA 2015 and what that might have on CVE reporting. Any impact that you might envision for the core VM portion of your business? Stephen Vintz: Yes. Right now, based on feedback with customers and talking to a bunch of partners and obviously, our employee base, we're not really projected to see any type of negative impact right now. As it plays out, we'll obviously be monitoring it closely. But right now, based on a lot of our conversations and contacts and relationships we've got going on in the federal government, we're not really anticipating any significant downside there. Operator: The next question is from Mike Cikos from Needham & Co. Michael Cikos: Congratulations to you, Matt. Looking forward to working together. Before I ask my second question, which is more tied to the billing, I just wanted to ask Matt, since this is your first earnings call here with the firm, can you help us think about if there were any changes to guidance philosophy or what you're bringing to the finance function here, now that you had a couple months in the seat? Matthew Brown: Yes. I think generally no substantial changes to our approach to guidance. I will say I was just extremely pleased to come in and see a very high functioning team, not just within finance, but across the entire organization. I feel like we're really focused on the right things and the team is all growing together. So I would say, no major shifts in the way that we're approaching guidance. Michael Cikos: Okay. And then the follow-up is again on that billings guide. Just trying to get a better sense of the different puts and takes here, right? If we have the, call it, $3 million-ish of upside this quarter versus where people were expected, we're nudging up the low-end of the guide by $2 million. You guys are talking about increased visibility into year-end. Can you just discuss how you guys thought about putting out this range and some of the different puts and takes there as it pertains to that visibility you're talking to? Matthew Brown: Sure. I think the very brief takeaway is, as we sit here today, we're feeling incrementally more positive about the year than we were 3 months ago. That's as a result of a strong Q3, but also visibility into Q4. So it represents a small guidance increase at the midpoint for CCB of $1 million, but that flows down too. So taking up the guidance to revenue and taking up the guidance in op income, all those things are things that we're happy we're able to do, which is as a result of us feeling better about the year on balance. Operator: The next question is from Rob Owens from Piper Sandler. Robbie Owens: Steve, really enjoyed the discussion upfront on fireproofing versus firefighting in terms of where things are going. To that end, if I look at your enterprise adds versus your 100,000 ACV customers, maybe you can parse what's going on there. And are you just -- are you seeing more new customer additions upfront and you're starting to see just velocity increase on that front as some of these trends are changing? And if that's the case, maybe you could add some color around the 100,000 ACV customers. Stephen Vintz: Sure. Well, as you noted, our mix of business can change from quarter-to-quarter. This quarter has higher concentrations with U.S. Federal. And as we mentioned, we were very pleased with the results there. We're also very pleased with a strong quarter for new business for us. We added 437 new enterprise platform customers, which was one of our strongest quarters, I would say, to date. And look, on a year-to-date basis, too, new lands have been strong. We're also, as we've talked about on the prior quarters is that we've demonstrated an ability with our exposure management platform to transact larger deals. We're delivering incremental value to customers. Transaction sizes and deal sizes are getting larger and on average, anywhere from 50% to 90% plus in comparison to stand-alone VM. So overall, we're pleased with the velocity of lands this quarter. We're pleased with our ability to continue to do larger deals. And there's always some interplay from one quarter to the other. And I think it really speaks to the continued momentum of the platform and the ability to help customers sort through all of this fragmented visibility, this overwhelming noise and alerts and all this manual remediation to help them unify visibility, insights and action to reduce risk. And so it's certainly something that we're pleased to see with the continued traction of the platform. Operator: The next question is from Meta Marshall from Morgan Stanley. Meta Marshall: Maybe a couple for me. Just first, in terms of noted commentary on the OT market. Just wanted to know if there's efforts underway kind of either with R&D or go-to-market to kind of better take advantage of some of those opportunities? And then second, just kind of noting the 18% increase in R&D, just in terms of kind of the answer to the previous question of trying to simplify kind of environments for customers. Just what are some of the other investments, whether that's professional services or go-to-market? Are you making to kind of help simplify the offering for customers? Mark Thurmond: Yes. Great question. I'll take the first part on the OT market and what we're seeing, and then I'll pass it over to Steve to talk about some of the investments from a research perspective. So we are seeing a dynamic in the market, and it's been happening really all year, but it's happening, I think, at a bit of a faster pace where you're seeing this convergence of the OT market and the CISO getting a lot more responsibility and visibility over those OT assets. And one of the deals that we referenced in the earnings announcement was that consolidation story. So we're seeing a lot of not only our installed base customers wanting to look at and be able to ingest those OT assets into Tenable One, but also new customers where they're saying, we don't want to have two distinct products and technologies, one looking at traditional IT assets and then another one looking at OT assets. So you're seeing that convergence and it is speeding up. When you also look at some of the market dynamics around the AI data center build-out, that is a big area for us. We're seeing a lot of demand. When companies and organizations are building out data centers, they need operational technology to monitor all of those different asset types. And we're starting to see significant pipeline growth in closing deals in that area. So we were very pleased and have been pleased all year with our OT performance, and we will continue to focus in on it from a go-to-market perspective. I'll pass it over to Steve now to talk about some of the R&D question. Stephen Vintz: Yes. With regard to R&D and the investments we're making, they're paired with increased confidence in our ability to execute in this big market that we call exposure management, and it's really centered around three things. Number one is the ability to unify visibility and in particular, ingest data from other security providers so we can help customers see any asset, whether it's on their factory floor, in their network or even in their cloud environment. And then moreover is the ability to normalize and dedupe all of that to tie it to mobilization and orchestration on the back end, so we can help customers reduce risk. And that's -- and then last, I would say, and really important is helping customers secure their AI attack surface and leveraging AI in a way where we're able to deliver greater insights to customers. And AI adoption of applications has dramatically expanded the attack surface and certainly made us all more successful to exploit. And Tenable plays a really big role there as we're able to discover all AI applications, whether they're internally developed or even shadow AI. And then we're able to assess those for risk, including determining vulnerabilities and misconfigs. And now with AI exposure, we can go and inspect and control at the prompt level the AI applications that enterprise use the most. So we have a lot of traction with AI. Pleased with the innovation we've done to date, but there's certainly a lot more to do. And we believe principally, the real winners in this new AI world will be companies that can assess a wide range of domains, ingest data from other security providers and then really combine all that proprietary exposure data with AI to anticipate tax, not simply to respond to them. And that's a foundational change in the security market, shifting away from detect and respond more towards preactive and preventative approaches. Operator: The next question is from Jonathan Ho from William Blair. Jonathan Ho: Congratulations on the strong results. Can you give us a sense of what percentage of your total base is now on Tenable One? And it seems to me like there would be some opportunity to upsell more into the base once they've adopted the platform. So can you also talk about maybe the potential for uplift going forward on the platform? Stephen Vintz: Yes. As you know, we have roughly 40,000 customers -- 40,000-plus, should I say, and approximately, we'll call it, 18,000 use one of our enterprise offerings. And of those, 3,000-plus are using Tenable One. So we've got good traction to date. It's 40% of our total new sales. And so there's a significant opportunity not only to expand within the existing customers who have adopted Tenable One, but moreover to continue to see further traction within our customer base. Operator: The next question is from Joseph Gallo from Jefferies. Joseph Gallo: Matt, congrats on the new role. Looking forward to working together. It was great to hear the exposure management momentum. As we start to get ready for next year, in your combos with customers, where is the prioritization for exposure management in their budgets? And then historically, I think you gave some sense of following your billings in 3Q. Just any commentary on what billings can look like in '26 or confidence in sustaining the current levels would be helpful. Mark Thurmond: Yes. I'll take down on the budget question from the customer perspective, from exposure management. I think one of the bright spots that we're really starting to see is we talked about all of the different analysts that are starting to cover the exposure management category. And coming out as the leader and the #1 player in that category has given us lots of visibility, especially at the CISO level. And so now when we're sitting down with customers, we're not actually having to educate a lot of the CISOs what exposure management is and how it is so different from vulnerability management. They're hearing about it, they're seeing it. And so you're starting to see budgets being allocated that way. You're starting to see budgets in regard to consolidation, which is really one of the biggest motions we have in regard to going after and talking about exposure management and justifying it is really looking at that consolidation play. So that momentum is there, and it's gaining traction, and that continues to play out in the market, not just with customers, but we're also seeing our resellers and our partner community around the globe start to build out exposure management practices and gain visibility there, too. Matthew Brown: Yes. And I can answer your second question. So what we're really happy about is that there is this move, in particular, to Tenable One, roughly 1/3 of our business now is in Tenable One. Increasingly, we're seeing new customers adopting Tenable One. That's exactly what we're focused on. And we think that sets us up well for the long term in going and really capitalizing on this exposure management environment. With respect to 2026, we're really focused on 2025 and closing out and continuing to execute there. And it's just too early to talk about 2026 at this point. But importantly, we feel like we're doing all the right things to put us in the right spot. Operator: The next question is from Patrick Colville from Scotiabank. William Vandrick: This is Joe Vandrick on for Patrick Colville. Steve, I think you mentioned earlier that there's a lot more to do on AI innovation. I was hoping you could expand a bit more on that. Maybe talk about how you're thinking about the road map, how you're planning -- and how you're planning to add these new AI security products or solutions? Would it be organically or through M&A? Stephen Vintz: I think we would certainly consider both and successful companies pull both levers here. And I think it's centered around the fact that the threat environment that we're experiencing today is unlike anything we've seen before. Adversaries are moving with incredible speed, scale and sophistication. And leveraging LLMs and AI to create flawless hyperrealistic phishing e-mails that bypass both human suspicion and traditional e-mail filters. We're also seeing executive cloning -- cloning of executive faces and voices for socially engineered attacks. So certainly, bad actors are moving with incredible speed. We're seeing the weaponization of AI, which is resulting in the discovery of more vulnerabilities. And perhaps more concerning is not just more vulnerabilities in this all new digital world of AI, but it's the exploitation of those have become much faster. Meantime from vulnerability, discovery to vulnerability exploitation has compressed dramatically. So this necessitates a completely new approach to security. Today, $0.96 on every dollar in cybersecurity is spent on detect and respond technologies. Consequently, 4% is on proactive security. Gartner estimates over the next 5 years that, that mix will change dramatically. And so we'll see a disproportionate amount of spend more towards proactive security. And the goal here is to move Tenable. Our role in this world is to evolve from not just providing visibility, but to be able to correlate vulnerabilities with threats and exploit chatter with criticality of those assets. So we can highlight likely path of exploit. So organizations can look at their enterprise through the lens of adversaries, and they can identify attack paths that are most meaningful to them. So exposure management is really at the epicenter of all of that. And it's a category that continues to grow. And we've received recognition from IDC and some of the others that Mark talked about earlier, given our traction with exposure management, and we're super excited about what's ahead for us. Operator: The next question is from Roger Boyd from UBS. Roger Boyd: You talked about the longer and more strategic deals, and it seems like that's been a consistent trend over the past couple of quarters and clearly evident in the nice acceleration on RPO and bookings this quarter. Can you just further quantify what you're seeing there, what you're doing there from a sales perspective? And with these longer contracts, just what's the overlap with customers adopting Tenable One Exposure Management? Mark Thurmond: Yes, you bet. I mean it's a really phenomenal dynamic that we're seeing, right? The great part of this, and you see it in the RPO numbers is we have customers not only new customers, but our installed base that want to get longer-term 3-year commitments, right? They're seeing the road map. They're seeing how we're evolving exposure management, right, how we're building this technology and building Tenable One on the platform. And when we are able to articulate that and explain to them where we're headed, the customers are buying in and they're buying it aggressively, and they're making long-term commitments. And so we're very, very focused on the installed base that Steve identified going after those 18,000 to 20,000 commercial and enterprise customers. Anyone that's on VM, getting them upsold to Tenable One, that is our motion. We are driving that aggressively. And then for the new logos, one of the very cool things when we identified, which is an extremely high number, 437 new logos in the quarter, a very significant portion of those customers were Tenable One, right? So that is a pretty cool trend. And we'll be able to then upsell those customers over time. And so I think that when you see customers willing to sign up for long-term contracts when they understand where you're headed and you're truly building an enterprise scale platform, that's an extremely positive sign for us. Operator: The next question is from Joshua Tilton from Wolfe Research. Joshua Tilton: Matt, it's good to hear your voice again. Two for me. First one, hopefully, kind of easy, more of a clarification. Is there any way you can just help us understand what the inorganic contribution to billings was in the quarter and how we should think about the inorganic contribution to billings for the full year? And then I have a follow-up. Matthew Brown: Yes. Very insignificant, Josh, for both the quarter and the year. Joshua Tilton: Okay. Very helpful. And then maybe just a follow-up, and I preface the question with not here to hold you to any numbers, but I think part of what was great about you in your previous role is you had a pretty predictable playbook on how you want the financial profile of the business to kind of unfold on an annual basis. And I think investors really appreciated that. So again, not here looking for numbers, but maybe how do you think about your ability to leverage some of the playbook from your previous role to kind of deliver or help deliver a more consistent message around the durability of the financial profile for Tenable going forward? Matthew Brown: Oh man, that is quite a setup. So I mean, here's the way that I look at it. Tenable has a really incredible business and is getting only better and more strategic with our move to exposure management. So when you look at the underlying fundamentals and the fact that 95% of revenue is subscription and recurring. There is an opportunity to make sure that we can continue to grow top line while also continue to add profitability. And I think there are some spots in the P&L where we've done that already over the past couple of years, but we'll continue to do that going forward into the future where we can continue to get more leverage out of the business. So I think there's a lot of opportunity to do some of the same things that I've done before. Operator: The next question is from Adam Borg from Stifel. Adam Borg: Of course, welcome and congrats to Matt. Maybe just on the macro, we talked a lot about the Fed is great to see in line with expectations. Any other color you could share just demand environment overall, be it at the upper end of the market, the mid-market, geography vertical? Any other color would be really great. Stephen Vintz: No, I think demand was pretty even really across the board. We talked about seasonally high mix in U.S. Federal, and we were pleased with the results there. I talked about strength in new lands and new logos, 437. And obviously, the continued traction with the platform. And I think that's really the highlight of the quarter here. The one takeaway is that the ability to close platform sales, the ability to assess a wide range of domains, the ability to unify action, unify insight and deliver increased visibility from both the things that we assess -- assets that we assess as well as ingest data from others is resonating. It's a big market opportunity. We believe we're the clear leader there, and it's good to see the validation and recognition from our customers. Operator: The next question is from Jonathan Ruykhaver from Cantor. Jonathan Ruykhaver: I'm curious to hear how conversations might be changing with the pending with Google deal? How much of a concern is multi-cloud support? And then just broadly looking at Tenable Cloud Security, how is it performing? I mean it does look like a market that is increasingly competitive. But when you look at your positioning relative to the broader exposure management opportunity, it seems like that could be a differentiating factor. So maybe you could just elaborate on those two questions. Mark Thurmond: Yes, you bet. No, absolutely. And yes, it is definitely an active conversation without a doubt, right? So a lot of CISOs are really looking at it. And we mentioned this on a couple of previous calls once the announcement was first out there, but you're really starting to see it pick up because now it's becoming a reality. Now customers are getting a true sense of how they're going to come together within Google. And we are doing a significant amount of presentations, demonstrations and POVs in Wiz accounts. When we look at Q3, we had a bunch of deals that we were able to go in and actually do displacements. One of the deals we highlighted on the call was a displacement of not just a Wiz account, but also an incumbent VM player. So to the point that you brought up in the question, this consolidation story around a platform that centers around exposure management, right, being able to ingest multiple different assets into a hybrid platform, so both on-prem and in the cloud and in OT and in identity and other areas, that absolutely resonates. And so we are -- I use the term getting invited to a significant amount of more dances, and we continue -- and we will continue to expect that to happen throughout Q4 and going into next year. So we are very, very optimistic about our cloud business centered around Tenable One. Operator: The next question is from Todd Weller from Stephens. Todd Weller: In the past, we've talked about kind of the growth equation to drive top line acceleration. I wanted to see if you could just kind of revisit that and give us an update. Continued momentum with Tenable One and exposure management is great, and that's much higher growth and then you have like the traditional VM piece. So how are you thinking about those components? How are you thinking about the VM kind of sustainable growth? And is it really just a math equation and time of the exposure piece continuing to get bigger? Or is there anything that can happen on the VM side that could drive kind of improved growth there? Matthew Brown: Yes. I think you've hit on the main components there. So we're 100% focused on Tenable One and driving customers to Tenable One. And our belief is that once they're there, they will continue to expand. So whether they're doing pretty much as core VM there today, we're seeing opportunities where they then expand within Tenable One to take on more EM-type activities. So that's encouraging. When you zoom out from Tenable One and you look just at VM versus EM, EM is obviously today a smaller part of our business, but it is growing much faster. So our expectation is that over time, while VM is a stable grower, EM is growing much faster, and that helps drive that growth algorithm overall. Operator: The next question is from Junaid Siddiqui from Truist. Junaid Siddiqui: You highlighted now supporting over 300 validated integrations. How are these integrations contributing to deal velocity and deal sizes? Stephen Vintz: Yes. Well, the -- it's centered around this belief that no one security company can secure all domains, all assets across the attack surface. We have today's attack surface is a sprawling ecosystem of traditional IT devices, cloud environments, identities, both human and machine as well as OT industrial control systems that power a lot of our critical infrastructure. So over the years, the attack surface has expanded, right? No longer about securing servers in a data center or laptops in an office. And so we think exposure management is really centered around this belief of assessing things that are foundational, like traditional IT devices, like cloud environments, both pre and post production, like OT assets and even looking at the important context around the identities of those, but also the ability to ingest data from others. We believe -- in an open platform, we believe we should be able to partner for this kind of data to deliver this kind of insight to customers, all centered around this notion of unified visibility and insight and action. So it's foundational to what we do. We think the connections matter. We think it gives us certainly more breadth, the ability to deliver more insights and more importantly, the ability to help our customers mobilize and orchestrate fixes on the back end, and correlate vulnerabilities with exploit chatter, with asset criticality. That's really important to do that in a very cohesive way. Operator: The next question is from Shrenik Kothari from Robert Baird. Shrenik Kothari: Congrats and welcome, Matt. So Mark, Steve, you cited Tenable One at 40% of new business, of course, improving ASPs and deal sizes. And it seems like the platform growth as a percent of new business is growing near that 40% mix. Just what do you think are going to be the biggest unlocks to further accelerate this platform mix as a percentage of new business? Are you thinking something along the lines of like pricing packaging, exploring something like Flex? Are you also thinking more sort of field enablement and increased S&M investments? Just curious and then a follow-up for Matt. Mark Thurmond: Yes. So you highlighted a couple of great areas right there, right? And so those are areas we're looking at. But I think one of the best things we've got in front of us is we've got the opportunity to expand in that installed base, right? So as Steve kind of highlighted the numbers, we've got phenomenal opportunity to go expand within our huge massive installed base. So that is like the #1 focus for us is getting that expansion. When you then look at the innovation that we've done around third-party ingest, right, we're now seeing here in Q4, a bunch of quotes going out to Tenable One deals that have third-party asset types, right? So we'll be able to monetize that third-party asset type. So that will start taking off. We talked about our AI strategy and what we did with Apex and how we'll be able to start monetizing that in Q4 and especially going into 2026. Now that is on the back of some of the things you highlighted, right? So obviously, evaluating pricing and packaging strategies and marketing strategies. Those are all things that we're very much on top of. But there is very tangible specific things that we're doing today that to get the growth and the expansion within Tenable One, and we're going to continue to march down that road. Shrenik Kothari: Great. Very helpful. And Matt, just very quickly from your perspective in terms of what you have seen so far. Like, how do you plan to now kind of balance all the priorities that just laid out versus incremental operating leverage just in terms of your strategy, your priorities, how should we expect 2026? Matthew Brown: Yes. I think we expect to continue to both grow top line and add incremental margin. And so when we look at places on the P&L where we can expect to go get that margin, it's a little bit like what you should have seen in this quarter's results actually, where you're going to get a little bit out of gross margin, you're going to get a little bit out of sales and marketing and G&A, and we are going to probably give a little bit back in R&D because we're continuing to invest in the platform. So -- and we're going to -- there's going to be, obviously, one quarter is going to be exactly like the next. We're going to continue to invest in sales capacity as well. But the point is as you grow revenue, you're able to just get a little bit more leverage. Operator: The last question is from Gray Powell from BTIG. Gray Powell: Okay. Great. A lot of good questions have been asked. Maybe I just had one on my list that has not. What kind of traction are you seeing with the Apex acquisition and AI exposure? And I'm not sure if you said this, but how should we think about it impacting ASPs with Tenable One or potentially driving just incremental adoption of the platform? Stephen Vintz: Sure. And so that's an acquisition that we announced, I think, the last quarter, several months ago. And really the plan from an integration perspective was to natively build those capabilities in the platform. And then come to market with a more expansive AI offering, which we're pleased to see us do at Black Hat. So we did that over the summer, we brought to market AI exposure. AI exposure gives us the ability to not only discover AI applications and shadow AI, but now gives us to -- the ability to inspect at the prompt level usage of AI. It is a foundational piece in our broader AI strategy, and the AI strategy is really centered around a couple of things. Number one, contextualize risk with AI, which we've been doing for some time, and we continue to do, and that's generate risk-based prioritization. That is really dynamic and constantly updated. So AI really is this risk copilot. The second thing is really a journey that we've been on, which is autonomous remediation agents. And right now, we're able to integrate bidirectionally with the CMDBs and the ticking systems. And the focus is really on generating tickets with precise remediation steps to orchestrate patch deployments and enforce configuration baselines. But really the goal here over the course of time is this continuous learning and adaptation and use AI as a means not only to deliver greater insight, but have customers benefit from this network effect of 40,000-plus customers, the global telemetry that we've collected over the last 20 years to do safer auto remediation. And so we can not only just -- not just respond to threats, but also anticipate them. So we're super excited about our place in this world with AI, EM. Exposure management is taking on greater importance. Obviously, we expect continued growth there and continued traction with the offering itself. Operator: This concludes the question-and-answer session and today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Welcome to the Intrum Q3 2025 Report Presentation. [Operator Instructions] Now, I will hand the conference over to President and CEO, Johan Akerblom; and CFO, Masih Yazdi. Please go ahead. Johan Akerblom: Good morning, everyone. Thank you for listening. It's great to have you back for another quarterly earnings call. Today, we have a new setup. I am obviously in the new position, and I also want to sort of say hello to Masih, who's been with us now for, what is it, 8 weeks, roughly, almost? Masih Yazdi: Yes. Johan Akerblom: And yes, we will go through the Q3 results. In normal order, we will take you through the presentation, and then we'll open up for Q&A at the end. If we start with the quarterly, I think the quarter as such, it is a bit messy when you start looking at it. But a few things to highlight. I mean, on the underlying, we have a higher servicing income. The underlying business is, in general, performing well. The adjusted EBIT has been increasing 30% year-on-year, and we continue to report net profits. This is the third quarter in a row. And the leverage ratio is going in the right direction, and the investing volumes are increasing if we compare to Q1 and Q2 earlier this year. On the servicing side, we have now reached the 25% on an adjusted EBIT margin rolling 12 months. And on the investing side, I think the collections, they are slightly above the forecast again. However, the income is down, but I mean, that is on the back of the lower -- the book that we have, which is now at SEK 22.5 billion. If we go to the servicing a little bit more specific. I mean, this is the first quarter where we have an organic growth since 2022. I think it was Q3 2022, the last time. So, we're now actually not only improving the margins, we're also having a top line that is going in the right direction. We did grow in 10 out of 16 servicing markets. The pipeline is increasing. So, we've had a lot of focus on the top line. I think we discussed this earlier with you, and we continue to now see hopefully a bit of results from that. We're working closely with the entire sales organization. We're adding new people. We are upgrading. We are working with target lists, pipeline. We're working closely with churn. And the good thing is that there's still potential from our pricing program that should trickle through going into 2026. And we also see that the margin that we get on the new deals is higher than the current margin. On top of that, we also have now started, and that will be something we'll probably speak about a little bit more when we get to the Q4, what kind of ancillary business is there -- out there and what's the growth potential. Moving to the investing side. I think here, it's a bit of a -- I mean, the good thing is it's a quarter where we see the investments increasing. So, we're now at SEK 303 million. The IRR remains at a very high and comforting level. And I think for us, it's very important that the discipline on price is always going to be more important than the volume as such. Of course, we want to increase the volumes, but we will never increase the volumes on the back of being undisciplined on the pricing. We see that we are successful in smaller deals. But on the bigger deals, I think there is an overall market pressure on the downward side, and we have not gone all the way to meet that where the market is. We'll see where the market takes us going forward. And we're also working closely with Cerberus. So, half of the -- more than half of the deals has been done with them. And we now have deployed SEK 2.9 billion since we started in total. And the good thing is, I mean, we continue to extract value out of the portfolio. So, performance index remains above 100%. And if you compare to the original curve or original forecast, we're now at 109% in the quarter. I think, with that, I'm handing over to Masih, who will take us through the financials in a little bit more details. Masih Yazdi: Yes. Thank you, Johan, and good morning to everyone. I thought I'd start with going through all the one-offs we have. I think it's natural, both me and Johan, new in our positions to do a thorough analysis of the balance sheet, and what we've tried to do here is to apply a more conservative approach as well as trying to minimize items affecting comparability going forward. So, therefore, this quarter, we have a pretty messy quarter in terms of write-downs of impairments and goodwill and also some one-off tax items. So, as you can see, the reported EBIT is almost minus SEK 600 million. If you move that to the net income to shareholders, that has impacted by the gain we had on recapitalization of SEK 2.3 billion, and we have underlying financial expense of SEK 838 million. We had a couple of one-off tax items and underlying tax of SEK 158 million, which takes you to the almost SEK 400 million net profit. Then we have a goodwill impairment related to Spain, where the development has been more negative than was assumed in our goodwill calculations, and therefore, we have that impairment. And then we have some other impairments mainly of client contracts on the balance sheet that we have now written down. So, overall, a messy quarter, a lot of one-offs. But as I said, we have taken a conservative approach on the balance sheet, and we're hoping that you'll see much less of IACs going forward. If I move to the next slide, Slide 9, and look at the key financials for the group. As you probably have seen, income is down 3% compared to a year ago. More than half of that is FX related. At the same time, the cost trend continues to be positive, as you can see, and the cash generation has improved compared to a year ago. The leverage ratio has been restated. Again, here, a bit more conservative approach. We're looking at the nominal value of debt rather than the book value, which means that the leverage ratio is higher than it otherwise would have been had we used the old definition. With the old definition, it would be at 4.4. And I should also mention that full year 2024, without the discontinued operations, it would have been at 5.3. So, we are moving in the right direction in terms of leverage, but obviously, we want to move this even further going forward. If I move to the next slide and look at the underlying cost trend, you can see that we've had a strong cost discipline also in Q3, the run rate is now SEK 12.5 billion in terms of costs and costs are down 10% compared to the same quarter last year. And that is mainly driven by a reduction of FTEs, down about 1,000 people compared to a year ago. Moving into servicing. As Johan said, encouraging to see that we have organic growth in the quarter. The total income is flat, but that is completely driven by FX of a 3% negative effect, offset by organic growth of 3%. A lot of the one-offs is in the servicing business, so the EBIT is distorted by that. But if you look at the adjusted EBIT, it's up 27%, and it's also up 30% so far in 2025 versus the same period in 2024. We want to double-click on the leverage we have. What's happened in this company the last couple of years is a quite large shift in the composition of the business. If you look at the bars, you can see that 2 years ago, 24% of the cash generation was coming from the servicing business that has almost doubled to 43%. In our view, I think the general conception is that servicing is less risky than the investment business, which means that the cash flows generated from that business should be able to cope with a higher leverage. Here, we have assumed that our investment business has an LTV of 80% that should be financed by debt of 80%. And if we assume that the remainder of the debt on the balance sheet is in the servicing business, you can see that the leverage ratio for the servicing business is actually coming down quite a lot, especially the last few quarters, given the fact that the cash generation from the servicing business has improved quite a lot. I think if anything, this chart shows that we want to, going forward, take into account the riskiness of our business when we set our leverage targets so that it takes into account if we continue to derisk and have a larger share of our revenues and profit coming from servicing. Moving into next slide, Slide 13, investing. You've seen this, but the income is down. This is partly FX, but largely due to the lower investments compared to the amortizations we have. So, a smaller book value leads to lower income. We are collecting well on this portfolio, which means that income is down slightly less than the book value. Nevertheless, as Johan said before, we have done more investments this quarter. We want to do even more going forward, but we want to strike a good balance between pricing discipline and volumes. Moving to Slide 14. Looking at the debt and maturity profile. You can see that net debt is now at just below SEK 45 billion. We have about SEK 5 billion of cash, SEK 2 billion of that is restricted. It could be used to buy back bonds. The remaining cash is free will. And you can see the maturity profile with about SEK 12 billion of maturities in 2027, of which about half is the new money notes we've issued. I think with that, I'll hand back to Johan, and he'll do a couple of final remarks before we open up for Q&A. Johan Akerblom: Okay. So, I think, first of all, the quarter is a quarter where we see the underlying business performing well. It is positive to see a servicing top line year-on-year organic growth. I mean, I think we discussed and talked about this a lot. We are really emphasizing the top line, and we are putting a lot of effort in making sure that we get new business into the group. However, I think servicing business as such is a slow-moving business. It comes with RFP processes, there's onboarding, there's ramp-up, et cetera. But there's definitely an ambition to keep this top line growing. And the investing volumes, as we said, we will continue to have a balance between volumes and returns, but it's always good to see volumes going up when the returns remain high, and we will continue to focus on developing the partnership with Cerberus. The one-offs from the recapitalization and impairments, I'm sure we'll get a lot of questions on, so I'll leave that for the Q&A. And we have now reached a 25% margin. I think everyone expected us to reach it, but it's always good to reach a goal that everyone expects you to reach. So, it's a tick in the box. And we will come back when we present our full year results with the strategic review and also updated financial targets. So, I think with that, I think we can open up for questions. Operator: [Operator Instructions] The next question comes from Jacob Hesslevik from SEB. Jacob Hesslevik: So, my first question is on the adjusted EBIT margin for servicing, which reached 25% in Q3, which is up from 18% a year ago. It seems to be driven primarily by cost reduction. How sustainable is this margin expansion? And what portion came from operational improvements versus onetime efficiencies? Johan Akerblom: I can start here. I mean, I think that the margin has proven to be sustainable. It's been proven to increase quarter-by-quarter. Given the focus that we now have on growing the top line, I think we will have to strike a balance between how much more margin improvements we want and how much do we want to actually put into our commercial proposition in order to grow the top line. And if you ask me, on the balance, I would say, I'm quite happy with 25% margin if I can grow my business at the same time. Jacob Hesslevik: All right. Perfect. And then, if we move to investing side, collection performance was 101% in this quarter, slightly better than a year ago at 98%, but cash EBITDA from investing still declined to SEK 1.35 billion from SEK 1.5 billion a year ago due to a smaller book. When should we expect cash EBITDA to stabilize or grow again given your stated intention to increase the investment pace? Johan Akerblom: I mean, it's a very tricky question to answer because I cannot predict how much we will invest over the next quarters. But the ambition is clearly that we want to get the investing business to flatten out. So, if you think about the decay, we've had over the last years in terms of portfolios going down, investment volume going down, now it's time to turn that around and stabilize. But we also said that we have a SEK 2 billion target. Let's make sure that we reach the SEK 2 billion target first, and then we'll get sort of to the next level. And by then, I think also we will have our, let's say, Q4 report, and we'll give more guidance on where we see a future portfolio. Jacob Hesslevik: Okay. And just finally, on your updated financial targets, you mentioned focusing on improving profitability, driving growth and strengthening the balance sheet. These can sometimes conflict with each other. So, which takes a priority if you face trade-offs? For example, would you sacrifice near-term growth investment to the 3.5x leverage target faster? Or how should we think? Johan Akerblom: I think in -- I mean, we need to address our leverage. That's the main priority. But then doing that, I think it's also important to always strike a balance between sort of short-term sacrifices and long-term gains. But I think we will give you more clarity on that when we talk again in 3 months' time. Operator: The next question comes from Patrik Brattelius from ABG. Patrik Brattelius: Can you hear me? Johan Akerblom: Yes. Patrik Brattelius: Perfect. So, my first question is to Masih as he comes in with a little bit of a new outsider's perspective. So, in your new role and given that you're new, can you talk a little bit how you view a sustainable and long-term capital structure in Intrum? And how do you think that should look in terms of leverage ratio? Masih Yazdi: Thanks, Patrick, for that question. A sustainable balance sheet is a balance sheet that is in better shape than the current balance sheet. I think that's clear for everyone. We'll come back with actual targets on that when we present the Q4 results. But generally, I would say that we need to take into account what the composition of the business will be in the future depending on how we grow our servicing and investing business, and we will take the different levels of riskiness of those 2 different business lines into account when we set new leverage targets. That's the hint I can give you in addition to what I started with saying that we need to be in better shape in the future than we are today. So that's the main priority of this company. That's going to be my main priority of -- myself as well, obviously. So yes, you need to give it some time. We'll come back, but the direction is clear. We need to be in better shape. Patrik Brattelius: Okay. And speaking of the balance sheet, you have some new money notes given out in connection with this restructuring. And to my understanding, those will partly be used to buy back bonds. So, can you talk about how much you aim to buy back with this? And when should we start seeing that these actions being taken? Masih Yazdi: Yes. I mean, we can use that money to buy back. We'll do that if we believe that, that's good for the company as a whole. We can't give you any timing of that. We will do that when we think that the timing is right, if we do it. But the whole purpose would be to make sure that we deal with the maturities we have in the sort of short term, the 2027s. But again, it's an opportunistic action tactics from us. So, we can't give you any timing on it. But if we feel that it's going to address the balance sheet to some extent, we'll do that. Patrik Brattelius: Okay. And servicing, it's growing with 3%. It's, however, below a little bit the old target level. Do you see that you need to invest more in the cost side in order for this to ramp up? Or is there anything you can do that wouldn't drive increased cost in the short term to ramp up income on this side? Johan Akerblom: I mean I'll start here and then Masih can add. But in servicing, I think the cost trend will always be sort of, on a relative basis, going down. We need to become more efficient. We need to be more automated. We need to be -- we basically need to build on a scalable platform. Are there short-term investments we need to grow -- we need to do to grow the servicing business? Nothing that is material from my perspective. But then, I think one of the key questions that we have that we will have to address in the sort of strategic review is also how -- what's the ancillary business that we can grow? Because right now, we are involved in some very important processes with our clients, and there could be opportunities to grow ancillary business out of that, that would be sort of a nice add-on to the business we run today. But -- and that could require CapEx. But I think that's something, again, we will have to come back to when we have done our own homework. Masih Yazdi: Yes. I mean if I add what's, I think, interesting with the servicing business is that there's a lot of legacy in that business, not just with Intrum, but with the whole business. And really improving the offering has a lot to do with becoming more cost efficient. So, it's actually the case that the more cost efficient we become, the more automated we are in that business, the better the offering will be to our customers and the more deals we will win at better margins. And so, in that business, it is not really a conflict between investing more and you seeing more higher cost in our P&L and winning business. I mean we are hiring salespeople now, but we're talking about 30 people, and we have almost 7,000 people working with collections within servicing. So, it's nothing compared to the base we have to work with in terms of becoming more efficient. Patrik Brattelius: Given that you were at the other seat of the table when you -- in your previous job, do you see any immediate actions that the Intrum could do in order to improve their -- the top line growth within servicing to win new inflow from, for say, banks? Masih Yazdi: There are things we're looking at in terms of how we price deals. We have a fairly large, fixed cost base. And obviously, the more servicing revenue we have on the platform, the smaller is the fixed cost base per deal, so to say. So, we are making some changes to how we price new deals. And I hope and we think that that change in financial steering will make us more competitive in new deals and still uphold or maybe even improve the margins from current levels. So yes, there are things we can do, and we're looking into it, and we're trying to apply it as quickly as possible. Patrik Brattelius: A very last question from my side is just on Slide 12. You -- on that changed composition of cash flows, you showed the total leverage. Can you -- the dotted line there, the servicing leverage, which we don't see a number for. Can you please share the detail what that level would be in Q3 '25? Can we get a reference? Johan Akerblom: Yes. I think if you look at where that dash line was a year ago, so it was above 10x, and now it's around 7x. So, it's a pretty strong deleveraging if you allocate some of the debt to the servicing business. So, it pretty much follows obviously the improved cash generation from that business. Operator: The next question comes from Ermin Keric from DNB Carnegie. Ermin Keric: I'll continue on Slide 12. Thank you for that, I've asked for a long time, so appreciate it. And just to hear a little bit how you're reasoning with the 80% LTV you're assuming on the investment. I suppose on the Cerberus Project Orange, you had 60%, if I remember correctly, on the Intesa SPV, it was 60%. Why do you feel 80% would be the kind of fair level to assume for investing? Johan Akerblom: I mean, you can argue whether it could be 60%, 70%, 80% or 90%. I don't think that's the main point. I think the main point is to show that irrespective of how much you allocate to it, if you allocate the remaining debt we have on the balance sheet to the servicing business with stronger cash generation in the servicing business, you would have seen a declining leverage for that business. I mean, coming from the banking world, a comparison I would make is that if you have a bank that is only doing consumer lending and then a few years later, it's only doing mortgages, you should probably view that bank as being less risky and therefore, would be allowed to have more leverage. And I think this is a -- it's a fair comparison with our business as we are more and more moving towards servicing, which we believe is less risky and therefore, should be allowed to have a higher leverage on. This doesn't mean that we will set leverage targets in the future that are less ambitious than the ones we've had, we just think it's important to take into account how the composition of our business changes. Ermin Keric: But if I can follow up on that, maybe I'm thinking about it the wrong way, but [indiscernible] the opposite. If you are a bank, when you have a lending book, you can have some leverage. If you just have commissions, you would have less leverage. Masih Yazdi: Well, I would -- yes, I mean, if you take a bank, it's typically the case that you have risk weights for the lending business and the riskier the lending is, the higher is the risk weight and therefore, the more capital you have to have. That's the way I would look at it. Johan Akerblom: Yes. And I wouldn't compare -- I mean, remember, when we do the servicing business, I mean, the contracts that we run are usually sort of 3 to 5 years. It's a long-term relationship, and it's also -- it creates quite a lot of stickiness. So, I think that's where we're coming from. Whereas on the investing side, in the end, it very much depends on what's your investment appetite and how much can you invest to continue to either replenish your portfolio, increase your portfolio or decrease your portfolio. So, it's going to be more sensitive in the short run in terms of your investment appetite. And then also, there's always a, I think, a question mark, at least from the market when you invest into these type of portfolios, will they actually yield the returns that you put up when you made the investment. Ermin Keric: Fair enough. Then moving over to the servicing side. Organic growth, now you're back to organic growth again, which I think is, of course, highly positive. Is -- around the 3%, is that a new baseline we should think about? And maybe extending the question a little bit, I suppose getting back to organic growth has been a focus for several years. Why have you tweaked now that's making it possible to do that while also doing it in a profitable manner? And maybe lastly on that question, the SEK 1.8 billion pipeline you mentioned, how should we think about that? What's your typical win rate? I suppose that's a gross number. How should we think about the underlying churn you have? So how much from that SEK 1.8 billion should we think about adding to your future income? Johan Akerblom: If we start with your first question, which is, is this a new sort of baseline? I think that one we will have to refer to when we come back in Q4. Then we will try to -- if we articulate something, it will be then hopefully answering your question. I think there were many questions in one. But churn, I mean, in general, we tend to manage churn in a good way. So, we actually don't lose that many contracts. And then there might be always -- I mean, contract could also be amended. So, there could be parts of what was in scope before is not in scope in the future. I mean a lot of clients, they usually use 2 or 3 providers to have benchmarks. So, the composition might change. When it comes to new business, I mean, as I said, we have a very high focus on this. And this is now about sort of moving the organization from a very margin sort of focused type of effort to something that is much more forward leaning and thinking about new business. So, coming back to your question around the pipeline, a lot of this business -- a lot of those tenders will materialize in Q4. It doesn't mean that that will bring income from the 1st of January. It means that we will start ramping up the new contracts during 2026. And for bigger contracts, the ramp-up period can be as long as 6 to 12 months, especially if it's with the banking client where you do sort of gradual steps. So, I think that the SEK 1.8 billion should be just seen as a -- there's a big amount out there. We're trying to get the biggest share out of it as possible. But I wouldn't sort of -- I wouldn't expect that, that just means that we suddenly add all these revenues from the 1st of January on top of what we have today. It's a bit more complicated than that. Ermin Keric: Got it. That's helpful. Then, just one final question. On cost, how much more is left to be done there? And I suppose common costs looked very strong this quarter, down almost SEK 100 million quarter-on-quarter. Is that a sustainable level that we should think about going forward? And I suppose generally with cost, have you compromised the servicing quality to an extent? Or have you been able to add more technology usage already now? Masih Yazdi: Yes, I can start with that. I think there is a lot more to be done on the cost side when I'm talking about the mid-to-long-term, and that has to do with applying new tech and making the manual processes more automatic. So, I think this business over time should have a clearly lower cost base than it has at this point. How quickly that goes obviously depends on how quickly we apply best practice from different markets we work in but also use tech in a higher degree than we have today. In terms of the central costs, I think that most of the work there has been done, but I still think that there is some more to be done. I would also add that if you look at the impairments we've taken in the quarter, those will just in itself lead to about SEK 300 million less cost in 2026 than otherwise would have been the case. So, we are obviously moving into '26 with a positive momentum on the cost side given the FTEs we have today compared to a few quarters ago. And we think that this is a long game where the cost trend should be downwards in the mid-to-long term. Then the question is, to what extent do you use that to reinvest in your business and grow top line even more? And to what extent do you allow it to improve margins. And that's a balance we need to sort of try to strike in the future. Operator: The next question comes from Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: So, I had one -- starting with one technical question. The gains you're making on the debt that you -- that has been written down, it seems like there is an element of mark-to-market of the outstanding debt. Is that something new or -- because you did write it down by SEK 3.5 billion, right? Masih Yazdi: Yes. It is a mark-to-market, which happens when you do the recapitalization. So, you use the bid price basically that establishes just after the recapitalization and the difference between that nominal value of the debt and the bid price leads to a gain for us as the bid price was lower than nominal level. Johan Akerblom: Exactly. Exactly. So, it's like a fair value adjustment. Markus Sandgren: Okay. But that is not going to be fair value going forward from here? Johan Akerblom: No. Markus Sandgren: Okay. And then secondly, I was thinking about the aging back book in investments. What's your take on the collection performance over time when the portfolio gets older? Is it kind of constant or is it gradually degrading? Johan Akerblom: I mean if your question is, if we will continue to collect according to our forecast or better, I think we have taken in -- I mean, when you do the portfolio and you put out the forecast, you obviously take into account the decay. And we have an ambition to continue to collect above the index. But I mean, any portfolio -- well not any, but most portfolios, they have a higher collection rate in the beginning rather than the end. But that's also why I think we emphasize that our investment pace should continue to increase because we need to replenish. Markus Sandgren: Okay. And then lastly, regarding the market. Now we've been through a rate hike cycle and rates are coming down. What's your feeling on your markets that -- I mean, how much should we expect the market to grow when rates are much lower now in the coming years? Johan Akerblom: You're talking about the servicing business? Markus Sandgren: Yes, servicing, yes, right. Johan Akerblom: I mean, I think there's a -- I mean, there are a few trends in the servicing business. I mean one is obviously the macro has an impact on, especially banks, utilities, telcos. But there's also a lot of new kind of business verticals that has had an impact on the market as such. I'm thinking about Buy Now Pay Later, the steady state of increase of consumer lending, new entrants, all of that. And then you have -- in many parts of Europe, we also have some of the traditional business that we see in the North, it doesn't even exist. So, I think we will continue to see this market sort of growing but not growing massively. And then, as I said, I think in the previous interview, when we plan, we have to plan for a normal business cycle, which means that we cannot plan for another euro crisis, real estate crisis, financial crisis. That's when things sort of shift around. But we should be able to replenish and grow the servicing business, just basically capitalizing on the fact that we are in every country, we meet every different dynamics. And then, on top of that, we hope we can also figure out what's the next step when it comes to ancillary business because we are closely tied to many clients, and there are services that we don't provide today that we can probably provide tomorrow. Operator: The next question comes from Angeliki Bairaktari from JPMorgan. Angeliki Bairaktari: Just 4 questions from me as well. First of all, with regards to the servicing pipeline of SEK 1.8 billion that you mentioned, can you give us some color on where those clients -- those new clients could be coming from in terms of sort of industry? Are we talking mostly about banks or other type of clients? And secondly, with regards to the organic servicing revenue growth, can you break the 3% down into regions like Northern Europe, Middle Europe and Southern Europe, like you've done in the past? Johan Akerblom: So, yes, on the first one, I think some of the bigger clients or potential clients in the pipeline are bank related because that's usually when you have sort of bigger size. But it is a mix, but the bigger contracts are bank related. I think when it comes to the growth, I don't have the numbers in my head. I don't know if you remember, Masih, but I think we -- I have -- yes, we need to -- let us come back to that. We'll just get the numbers. Angeliki Bairaktari: And if I just may ask a couple of questions on the leverage ratio and the debt. So, first of all, you mentioned, I think, in your remarks that you have restated the debt and the leverage ratio to now take into account the market value of the debt. Can you give us some more details? Maybe I misunderstood that. And why are you doing that? Because I thought the typical definition of leverage ratio for every company is just the nominal value of the debt divided by the 12 months EBITDA. So, if you can just give us some more color with regards to the restated calculation? And then second question on the debt. How do you plan to refinance the 2027 maturities at the moment? I appreciate that this may change, but based on where we currently stand, what would be the plan? Johan Akerblom: Yes. We haven't used the market value when it comes to the leverage ratio. So, we are using nominal value. The market value was referring to the effect of the recapitalization and that net gain we had. So, when calculating the leverage ratio, we do it exactly the way you described it. We look at the nominal value and the 12-month running cash EBITDA. On the refinancing, the 2027, obviously, we have a few quarters to go before we need to deal with that. The whole purpose is to put the company in a better position so that refinancing goes well. So, it's about continuing to improve the business, generating more cash, improving the top line, continuing to reduce costs. So, we can only sort of focus on the company and how we're doing operationally to put ourselves in a good position before we need to deal with that maturity. Angeliki Bairaktari: If I just may come back to the leverage ratio... Johan Akerblom: On the growth, just to answer your question, most of the growth is from Middle Europe, but we also have some growth in selected markets in the South, in particular, Italy. And then the North is fairly sort of neutral. Angeliki Bairaktari: Sorry, just to come back to the leverage ratio because I think you mentioned in the beginning that you have obviously reported 4.7, consensus was looking for 4.5. And I think you mentioned that under the old definition, it would be 4.4. So, I'm not sure what you have changed. If you can just explain what you have restated, if there's something that has been restated in the calculation. Johan Akerblom: Yes. So, now we are looking at the nominal value of the debt, whereas with the old definition, it was the book value, and the nominal value is a higher number. And therefore, the new definition leads to a higher leverage ratio than would have been the case with the old definition. Angeliki Bairaktari: Right. And are you -- is that because in your covenants, you have to use the nominal value of the debt? Or what is the reason behind the change? Johan Akerblom: Well, it is more in line with the covenants. So, it's not a perfect, but it's a very, very close proxy to how the covenants are set up. And we also did change because if we would have done the old method, we would basically take benefit out of this accounting adjustment, and that's why we say with the old definition, it should have been 4.4, but we think it's more right to actually look at the nominal value and then talk about 4.7. Operator: The next question comes from Alexander Koefoed from Nordea. Alexander Koefoed: Can you hear me? Johan Akerblom: Yes. Alexander Koefoed: Just coming back again there to the leverage ratio. Sorry if you get tired of it. But this view that you can lever the company more on service as opposed to investing. I think that has -- some would challenge that view, although I agree and appreciate that lower risk, everything else equal, would be possible to finance. But again, yes, I think Ermin alluded to it as well, having investable assets on balance sheet would also be financeable. So that view, has any of that been cleared with creditor group out of curiosity? Or is that strictly your own view? That would be my first question. And then maybe secondly, if I can ask on your non-recurring items and I think SEK 2 billion in one-offs related to restructuring. Is there any of that actual payments, bills you need to pay from that, that -- how much of that is a hit? And when is those costs expected to be completely over and done with also in your cash flow statements? Johan Akerblom: Yes. If I start with the first question, as I said before, this analysis of looking at the leverage for the different parts of our business will not mean that we will set a leverage target in the future that is less ambitious than we otherwise would. We just think it's fair for ourselves to look at the riskiness of the business when we do set that target. So, I think we're just basically alluding to that we will probably look at having different leverage targets for the 2 types of business that we operate. What that lands in terms of aggregate leverage, whether that's going to be a target that's at the 3.5x that we have today or what it's going to be more ambitious than that and what the time frame of that will be, we'll come back with it in Q4, we just think for ourselves and how to operate the business, it's good to look at different targets for the different business lines that we operate and take into account how we think that those business lines will develop going forward a few years from now. On your second question, yes. Anne Eberhard: Yes. It's Anne here. On your second question regarding the costs that went through from cash in the third quarter, around SEK 550 million went through as cash. And then I think you also asked about the tail, if there's anything more to come through. It's very, very small. I don't think there's anything material. Johan Akerblom: Yes. I mean, I would say, as for Q3, the recap is closed. And yes, going forward, it's sort of business as usual. Alexander Koefoed: Okay. No fine. I was just curious on it. So, appreciate that. Maybe a third question, if I can. And so just it appears that my interpretation of what you're saying is that growth ahead might be a tad difficult for you, I mean, also on lower FTE base that for you to capture any growth, maybe underlying growth seen in Europe for you to really capture that, you need to sort of invest in automations, et cetera, to actually release capacity with your employee base to actually capture this top line. Otherwise, it will be more or less a lost opportunity for you because there's not too much capacity left with the current FTE base. Is that a fair way to say it like that? Johan Akerblom: No. I mean, I think what we're saying is we have room to grow with the current capacity. We think that if we can be even more efficient going forward, we will naturally win even more business. So, part of the -- sort of by being the more efficient you are, the more attractive value proposition you have. So, I think we have a different take on that. I mean, today, we can grow. We have capacity to grow in every market. But the more efficient we become; the higher likelihood is that we can grow even more. Alexander Koefoed: Yes. Okay. That's fair enough. Understood. I think there is some comments in the market that Buy Now Pay Later loans are perhaps seeing particular growth. Would you capture any of that? Or would this bank-related clients coming in, would that be more to your larger ticket items, maybe not to the same growth? Or would you comment on that? Johan Akerblom: I think Buy Now Pay Later is a very interesting segment, and we're already working with it, and we have been successful to actually onboard more Buy Now Pay Later volumes just in the last 2 quarters. And it's a segment that we will continue to target. And I think it's a segment that, in particular, fits with our digital collection platform. And yes -- so, yes, I don't see any -- it's a big opportunity. Operator: The next question comes from Rickard Hellman from Nordea. Rickard Hellman: Hi, can you hear me? Johan Akerblom: Yes. Rickard Hellman: So, to start with, yes, to be sure, looking at the cash flow, you have very high interest paid in Q3. And I assume this is related to accumulated interest from the capitalization. And you said that we're more or less done with all the cash flow now. Is that also [ for ] interest? So, we will not see any more tails out of this on the financial side? Johan Akerblom: Yes. All the accrued interest was paid in Q3. Rickard Hellman: Super. We talked a lot about the growth in frequency. Just a follow-up on that also. Have you seen any changes from your bank customers around handling non-performing loans in terms of volumes and signs of earlier collections or earlier divestments of portfolios? Johan Akerblom: No, nothing that is particular for the quarter. I mean this continues to evolve differently depending on market, depending on the situation. I mean, for now, now we have a situation in Germany where you see the Stage 2 is going up. So, it's very -- there's no sort of a coherent trend across Europe. Rickard Hellman: Okay. I see. And then, of course, also, I'm not sure if you would like to answer, but -- and it has been discussed a lot around this Page 12 about leverage. But if you would have a fully service business, I mean, without any investing vehicle at all, what would you say a total leverage would be for such business? Johan Akerblom: I think -- again, I think that's something we will leave for the future. I think the point we're trying to make is not that -- I think the point -- we're just trying to show that our business has fundamentally changed. And the 2 legs, they have a very different type of business profile. And we will have to come back to this when we come with our Q4 strategic review and explain more how we see the future. But all things equal, we definitely have an ambition to become a much more resilient company when it comes to leverage. But we don't have a number for you. Rickard Hellman: So, fully understand. But as you also understand, I mean, this -- all this kind of discussion around leverage probably we have a lot of attention among investors and analysts. Johan Akerblom: Of course. So, I think the message that we -- if we want to conclude one message, it's that the leverage has to go down. I think it has to continue to go down and it needs to be sustainable. And we will tell you more in Q4 how we will make it happen. Operator: The next question comes from Wolfgang Felix from Sarria. Unknown Analyst: Hello, can you hear me? Johan Akerblom: Yes. Unknown Analyst: I have 2 remaining really, only. One is regarding the SEK 2 billion target that you were mentioning earlier in the context of your investment division bottoming out. I'm not really sure what target you were referring to there. If you could just repeat that again, that would be fantastic. And then obviously, you've just restructured. And if you're looking across to your competitors, say, in the U.K., for instance, after the restructuring can be before the restructuring. And so, I guess if you're looking at your own balance sheet and given your restructuring has also just been a very light restructuring, despite the complexion perhaps, how would you rate your options today to manage liabilities perhaps a little further? Johan Akerblom: First one, I mean, we have -- I think we've mentioned before that we have an ambition to invest SEK 2 billion per year, so roughly or SEK 500 million per quarter. That's the SEK 2 billion I'm referring to. And then I think on your question on leverage, I think Masih did answer that before. I mean the way we see is that we need to continue to operate our business in an improving fashion. We need to continue to become more efficient. We need to continue to improve our servicing business and adding top line growth. And then on the investing side, we need to, at the first instance, reach the SEK 2 billion per year as replenishing. And then we'll see what the next step is in terms of investment volumes. And that's the organic path on how we can delever. Unknown Analyst: And so, you're not currently looking at anything -- we shouldn't be expecting anything inorganic, so to speak, over the next, say, year? Johan Akerblom: I mean when we do a strategic review, we will look at all options, and we will see which one creates the most value. But the base case is obviously always that we move on organic path. Operator: The next question comes from Ines Charfi from Napier Park. Unknown Analyst: Hi, can you hear me? Johan Akerblom: Yes. Unknown Analyst: Just going back to the one-off. So, can you talk about the impairments, the goodwill impairments and what kind of -- what does that mean basically for the future? Johan Akerblom: Yes. I mean there are a few different impairments. The big one is the goodwill impairment we have done for Spain. As I said previously, it's related to what we thought would happen with that business and the actual performance, and we could see that the actual performance had been worse in the short term. And therefore, we felt that it would be conservative to do a goodwill impairment there. The other impairments mainly relate to client contracts we've had on the balance sheet, where you do the same kind of assessment of what kind of revenues you think you're going to generate from those customers going forward. And again, we've taken a conservative approach and have a lower assessment on those revenues, and therefore, we've done impairments there. And the remaining impairments relate to software we've had on the balance sheet that we've written down. And as I said before, what this means is that D&A will be lower than otherwise would have been the case going forward. And for 2026, we're talking around SEK 300 million lower D&A expense. Unknown Analyst: Okay. But just to understand that a bit more, does that mean -- like, should we expect kind of less -- I was trying to understand the impact of the -- in terms of collections, et cetera, going forward. Like would the impact be for the short term as in like next quarters? Or like how should I think about that? Johan Akerblom: There is no impact on collections. It's just an impact on the cost line, which will be -- everything else equal will be lower in Q4 and also lower in 2026. But this is not related to how collections will perform going forward. Unknown Analyst: Okay. And then, just looking at the maturity profile, Page 14. So just to be clear, you still have outstanding in 2025? Johan Akerblom: That's a term loan that we're paying back to some extent, and it's been -- it has been extended. So, it's not a -- yes, so it's nothing you need to be concerned about. Unknown Analyst: So that has been extended? Anne Eberhard: We're currently in negotiations on that. Johan Akerblom: Well, it should be done fairly short -- fairly soon. And it's not fully being -- I mean, it's partly being paid, partly is extended, and it's just to give us a bit more flexibility going forward. Unknown Analyst: Okay. So, I guess it will be dealt with... Johan Akerblom: Before we -- when we announced Q4, it's fully dealt with. Unknown Analyst: So partly extended and partly paid down. Johan Akerblom: Correct. Unknown Analyst: And just looking at the RCF, so what's the drawn amount as of 3Q? Johan Akerblom: RCF. Anne Eberhard: Sorry, say that again? Unknown Analyst: What is the drawn amount of the RCF? Anne Eberhard: It's around 11 point…. Johan Akerblom: 10 point -- yes, I mean it's almost fully drawn. Operator: The next question comes from Wolfgang Felix from Sarria. Unknown Analyst: One follow-up question really quickly. Can you give us some guidance on your sort of speed of collection going forward? Are you going to maintain the same rate of collection? Do you think you're going to maybe slow it down a little bit? What should be sort of a stable case from here, all else equal? Johan Akerblom: When you talk about our collection rate, in what context? Are you thinking about our investing portfolios or...? Unknown Analyst: Yes. I'm sorry, only the investing portfolio. Johan Akerblom: I mean the investing portfolios, they will -- it's hard to predict, but we've -- historically, we've been collecting slightly more than our forecast. And I think that's the ambition going forward as well. And then obviously, the amount of collections depends on the size of the book and the profile. Unknown Analyst: Yes. So, if -- I'm trying to picture it like this. If you are maintaining as many people as you were before, but you have a smaller book, then you would be churning that book or turning it over a little bit more quickly. Is that the idea? Or is the idea to shrink your collection engine, if I can call it like that, to maintain the same speed of working out the smaller book? Johan Akerblom: I mean, we're always trying to collect as much as possible. And then at the same time, we're trying to be more efficient in every collection. So, I think your analogy is not really the way it works in reality. But of course, if you have lower volumes, you need less people. But I mean, out of our 7,000 people working in collections, serving our own portfolios is just one part of it. I mean we have a much bigger book with our clients where we operate. Unknown Analyst: Yes. No, that I understand. So -- but I think I understand your answer. Operator: There are no more questions at this time. So, I hand the conference back to the speakers for any closing comments. Johan Akerblom: So, thank you for a lot of questions today. I hope we've been able to clarify what is a little bit of a difficult quarter to understand, given all the one-offs. But I think as we pointed out, we're happy with the underlying. We're making progress. We're deleveraging. Cost continues down. We see a bit of servicing income growth and the investing portfolios are collecting slightly better than planned. And the investing volumes are higher than before. And, obviously, we want to further improve going forward. And we hope to see you when we present the Q4 and talk more about the way forward. Thanks a lot and have a great day.
Operator: Good morning. Thank you for standing by, and welcome to Pluxee Fiscal 2025 Results Presentation. [Operator Instructions] I advise you that the conference is being recorded today, October 3. At this time, I would like to hand over the conference to Pauline Bireaud, Head of Investor Relations. Please go ahead, madam. Pauline Bireaud: Good morning, everyone, and thank you for joining us today for Pluxee's Full Year Fiscal 2025 Call. I'm Pauline, Head of Investor Relations at Pluxee, and I'm pleased to be here with all of you today for our second set of full-year financial results as a stand-alone listed Group. So today, I'm pleased to be joined by our CEO, Aurelien Sonet; and our CFO, Stephane Lhopiteau. Before we begin, let me quickly walk you through today's agenda. Aurelien will start with the highlights and key figures for the full year, followed by a focus on the main achievements in executing our strategic road map. Stephane will then take you through our financial performance in detail, as well as the evolution we are introducing to our capital allocation policy this year. And finally, Aurelien will conclude with our outlook for fiscal 2026 before we open the floor for questions. And with that, I will hand over to Aurelien. Aurélien Sonet: Thank you, Pauline, and good morning, everyone. I'm very pleased to be with you today. Fiscal 2025 was another very strong year, in which we executed our strategy with discipline and delivered above expectations across all key metrics. I want to sincerely thank our teams for both their commitment and excellent execution, which made these results possible even in a challenging environment. Let's look at the key highlights of the year in a nutshell. First, we continue to see strong momentum in new client acquisition with a growing contribution from SMEs year-on-year. Second, despite weaker portfolio growth, reflecting current macro uncertainties, we maintained a net retention rate of 100%, in line with our midterm objective. Lastly, our recent M&A transactions, a core pillar of our growth model, are already delivering positive revenue contributions. This translated into first, solid top-line organic growth, supported by continued strong momentum in Employee Benefits. Second, robust margin expansion, primarily fueled this year by operating improvements, underscoring the operating leverage of our model and the headroom for further margin gains. And third, an outstanding cash generation and conversion. Consistent with our disciplined approach to capital allocation and our commitment to revisit regularly our shareholder return framework, we have decided, with the support of the Board, to further enhance shareholders' returns for fiscal 2025. In addition to a higher dividend, we will launch a EUR 100 million share buyback program, reflecting our strong fiscal 2025 performance and reflecting our confidence in Pluxee's future prospects. Let's now take a look at our fiscal 2025 performance against our objectives on Slide 5. As just mentioned, we delivered across our 3 key financial objectives in fiscal 2025. We recorded a plus 10.6% organic growth in total revenues, fully consistent with our low double-digit objective. We achieved a significant expansion of plus 230 basis points in recurring EBITDA margin compared to plus 150 basis points previously. This demonstrates both the operating leverage of our platform and our ability to drive efficiencies. And finally, we delivered 89% recurring cash conversion, well above our target of above 75% on average for fiscal 2024 to 2026. So in short, we are clearly well ahead of our initial plan. In addition, I would like also to highlight that our free cash flow engine has expanded very materially from circa EUR 290 million in fiscal 2023 to EUR 417 million in fiscal 2025. This is a step change in the group's financial profile. These strong results have enabled us to revisit our shareholder return for fiscal 2025, as we will detail on Slide 6. Indeed, we have decided to introduce greater flexibility in our capital allocation policy for fiscal 2025 through a combined shareholder return approach that includes: first, a dividend of EUR 0.38 per share, up plus 9% compared to fiscal 2024 and representing a total dividend distribution of approximately EUR 55 million, subject to shareholder approval at our general assembly end of December; and second, a EUR 100 million share buyback program, leveraging our record cash flow generation and significant increases in our net cash position to further enhance value creation for our shareholders. Stephane will provide more details on this in his section. Before we go into the details of the strategic milestones reached in fiscal 2025, I'd like to take a step back and look at what the group has already delivered financially over the first 2 years of the plan, moving to Slide 7. Putting the group's financial performance over the past 2 years into perspective, there are really 2 key takeaways. First, it highlights the structural strength of our model and its strong conversion capacity. Consistent top-line growth translates into remarkable profitability and cash generation with recurring EBITDA CAGR at plus 14% reported and free cash flow CAGR up plus 20% over the past 2 years. Second, it demonstrates how resilient our model is. Even amid currency volatility across several of our core markets, we have been able to absorb over 7 points of ForEx impact on revenue in fiscal 2025, while continuing to deliver solid results. Now let's zoom on our strategic road map execution on Page 9. Pluxee has maintained strong business momentum through fiscal 2025, winning new clients and delivering solid commercial results even amid persistent macroeconomic headwinds across countries. Starting with new client development. We have once again outperformed our objective, generating EUR 1.5 billion in annualized PBV from new clients in fiscal 2025, well above our EUR 1.3 billion annual target. Our net client retention rate also remained consistently at 100%. This was achieved through a combination of improving client loyalty, further increase in face value, and steady cross-selling while absorbing end-user portfolio evolution, on which I will come back to. Looking more closely at the face value driver, which supports net retention, it contributed an incremental EUR 1.1 billion in business volume issued over the fiscal year. This means that we have already reached 80% of our EUR 3 billion target over 3 years. In addition, we are quite confident for the year ahead given the recent announcement in terms of increases in sales value legal cap in several countries. We will now take a closer look at each of these growth levers in the following slides, beginning with product offering on Slide 10. Over the past year, we have stayed focused on enhancing our offering, expanding both its breadth and depth to better serve our clients and consumers. Building on our strong Men food foundations, we have significantly broadened our portfolio to support consumer lifestyle, health, financial, and mental well-being alongside an expanding range of employee engagement solutions. At the same time, we are bringing all these benefits together in a single unified experience through Pluxee global consumer app. The programmatic rollout of the app is well underway. We are progressively expanding it across our key markets while accelerating the launch of new features and benefit integration to ensure continuous innovation for clients and our end users. The key strength of our global solution lies in its payment flexibility, being fully payment agnostic, it integrates the most popular digital payment options such as Google Pay, Apple Pay, and QR code solutions to ensure maximum convenience. Innovation drives our growth with AI being a key accelerator of both efficiency and creativity. In France, for example, our AI-powered chatbots already filter and direct requests to ensure that each user receives the right level of support at the most relevant stage of its journey. Together, this initiative strengthened our commitment to deliver a richer, intuitive, and seamless experience to our customers across our 28 countries. Product offering lies at the heart of our value proposition to clients. Let's look at how it fueled our commercial performance, starting with new client acquisition on Slide 11. The sales momentum has remained very strong over the year, allowing us to deliver more than EUR 1.5 billion in new client development with a positive contribution from our 3 regions. It has been sustained by several structural drivers, namely, first, the full activation of our high-performing commercial engine, powered by a strong sales discipline, advanced data-driven marketing, and an omnichannel client engagement. And second, a growing contribution from SME. As we continue to accelerate the penetration of this segment. Automation enables us to scale SME acquisition, which now represents 31% of total new business, highlighting the success of our digital self-service journey and our distribution partnerships. Let me briefly highlight 2 key contract wins that illustrate what I've just mentioned. First, our Brazilian team won a major employee benefits contract with Energisa, a leading energy provider in Brazil. This success was achieved through the full activation of our partnership with Santander, serving more than 20,000 additional end users. Second, we won a nationwide benefits program with Randstad, covering over 8,000 workers in Italy. I would like to take this opportunity to make a brief side comment on Italy. Following intensive efforts from our local sales team, we successfully managed to almost entirely absorb the regulatory change impact on merchant commissions. This was achieved by renegotiating with our clients to restore a sustainable balance between all the stakeholders. Looking ahead, supported by a solid and diversified pipeline, we are confident in our ability to deliver on our EUR 1.3 billion target in fiscal 2026. Let's now turn to how we are unlocking the full potential of our existing client portfolio on Slide 12. Over fiscal 2025, Pluxee continued to deliver strong performance across its existing client portfolio. Client loyalty improved by plus 20 basis points, and the group continued to demonstrate strong engagement to optimize existing client portfolio through further sales value increases and cross-selling. However, tougher macroeconomic context has translated into hiring increases and, in some markets, workforce reductions, especially in some European countries such as France and Mexico as well. This has progressively put a growing pressure on our end-user portfolio, which turned negative in H2. Despite this headwind, it has been another solid year in terms of net retention, maintained at 100%, demonstrating the strength and resilience of our business model. One notable example worth highlighting is the renewal of our long-standing partnership with Capgemini. We successfully won a major tender, resulting in a long-term strategic contract serving more than 68 active users across 9 countries. Beyond the business volumes, this renewal reinforces our position as a global trusted partner for our clients. It also offers strong potential for future value growth, supported by Capgemini's continued expansion and its increasing focus on employee engagement and retention. Altogether, this performance reinforces our confidence in the strength of our value proposition, our market positioning, and the resilience of our growth drivers even in a fast-changing macroeconomic context. Now that we have discussed organic growth, let's move on to our M&A strategy and how we've been progressing with recent integration on Slide 13. Since the spin-off, we have completed 8 transactions, comprising 1 strategic partnerships and 7 bolt-on acquisitions, including the most recent one signed in early fiscal 2026. We have been and we will remain guided by our clear strategic framework centered on 3 key priorities: expand business volumes to consolidate the group's market share, broaden our offering and product portfolio to deliver more value to both employers and employees, and enrich our technology capabilities to accelerate innovation, scalability, and end user engagement. Step by step, we are strengthening our track record in sourcing and acquiring targets while demonstrating our ability to successfully integrate them and generate growth synergies. Looking ahead, our M&A pipeline remains strong and diversified, spanning multiple geographies and deal sizes, consistent with our global strategic road map. Let's now take a closer look at how we are integrating these acquisitions and the tangible impact that they are already having on our strategic positioning and performance on Slide 14. All these recent partnerships and acquisitions are progressively delivering incremental value, including through initial synergy. Starting with Brazil, where our strategic partnership with Santander is showing strong traction. While Ben's integration has been seamless, maintaining a high level of client loyalty, the distribution agreement is now fully activated, allowing us to leverage the 4,500 Santander sales team, with around 22% of them having already sold at least one Pluxee solution. In less than a year, monthly business generated through the Santander distribution network has doubled year-on-year, confirming the value of this alliance as a growth accelerator. Still in Brazil, the acquisition of BenefÃcio Facil further enhances our multi-benefit offering by internalizing the employee mobility benefit. Integration is well advanced with 95% of the streams completed, and commercial traction is already picking up, driven by strong new client acquisitions, notably through Santander's distribution network. Turning to Spain. The successful integration of Cobee has propelled Pluxee to the #1 market position. It is built on our best-in-class multi-benefit platform, which offers a broad and diversified product range from health insurance to training, and our proven ability to engage employees through a fully digital, intuitive, and flexible experience. The results are tangible. Employee opt-in rates have increased by 50% on the client migrated, demonstrating both the appeal of the Cobee model and the success of our integration. Beyond growth, our ambition is also to generate sustainable profitability, as we'll see on Slide 15. One of the key pillars of our value creation journey is the group's strong potential for margin expansion. There are 2 main drivers behind this margin expansion. First, operating leverage generated by our highly scalable business model and our increasingly global operating model. This effect has been further amplified by the increased contribution of our latest M&A transactions and by the near full digitization of our business, with around 94% of our BVI now being digitized, including France, up to 90% at the end of the fiscal year. Second, efficiency gains driven by the normalization 18 months after the spin-off of our cost structure, combined with tight cost discipline and rigorous portfolio monitoring, constantly assessing product and country performance. This disciplined approach led, for example, in fiscal 2025 to the decision of exiting from Indonesia. The key point is that in fiscal 2025, the bulk of the EBITDA margin increase came from operating EBITDA of plus 235 basis points. This shift is particularly important as it shows that our margin expansion is now coming from structural operational improvements. Looking ahead to fiscal 2026, this trend should continue to intensify as Float revenues are expected to remain stable and therefore, dilutive to overall EBITDA margin expansion. Now before giving the floor to Stephane, I'd like to briefly touch on our sustainability road map, in which our strategy is fully embedded on Page 16. Our sustainability road map is built around 4 core values, each supported by clear measurable targets. First, Pluxee acts as a trusted partner, with 98.7% of our employees being trained in responsible business conduct. Second, we empower individuals while promoting diversity, with 40.6% of women currently holding a leadership position. Third, we strengthened local communities with EUR 7 billion in business volumes reimbursed to small and mid-sized merchants. And finally, we reduced our environment impact with the current 23% reduction in carbon emissions compared to our 2017 baseline. It is also worth noting that in fiscal 2025, we achieved an EcoVadis rating of 78 out of 100 and obtained our first CDP score of B, both reflecting the strong recognition of our sustainability performance. And with that, I will hand over to Stephane to go in more details on our financial performance. Stephane Lhopiteau: Thank you, Aurelien, and good morning, everyone. It's my pleasure to be with you today to present our fiscal 2025 results in more details, starting as usual with our business volume bridge on Page 18. The sustained growth in business volume issued or BVI has been one of the key growth drivers to Pluxee's top-line growth over fiscal '25. Over the year, total BVI reached EUR 24.5 billion. It was fueled by Employee Benefits BVI, which reached EUR 18.7 billion, up plus 7.6% or plus 8.5% when excluding the one-off effect related to the purchasing power program in Belgium. Such growth in Employee Benefits BVI was driven, as Aurelien already mentioned by: first, strong new client development across both large accounts and SMEs. Second, the net retention rate maintained around 100%, supported by enhanced client loyalty, further increase in face value, and steady cross-selling. And third, the positive contribution from recent M&A transactions through both growth synergies and favorable scope effect. However, performance was also affected by persistent macroeconomic headwinds, leading to increased pressure on end users portfolio across an expanding set of markets, notably Continental Europe and Mexico, and within sectors like temporary staffing, consulting, and manufacturing. On its side, BVI from other products and services remained stable in fiscal '25 at EUR 5.8 billion, a decline versus fiscal '24 due to the Public Benefit segment, reflecting the discontinuation of large programs during the year, primarily in Romania and Chile, the latter being fortunately partially renewed from March 2025 onwards. Let's now see how the BVI organic growth fueled our solid revenue organic growth on Slide #19. Total revenues reached EUR 1.287 billion in fiscal '25, up plus 10.6% organically, fully in line with the group's low double-digit growth target. On a reported basis, total revenues growth reached plus 6.4% year-on-year, including, first, a negative currency translation impact of minus 7%, coming mainly from operation in Brazil and Turkey, and to a lesser extent from Mexico. And second, a positive scope effect of plus 2.8%, primarily reflecting the integration of the Santander Brazil Employee Benefits activity as well as the acquisition of Cobee in Spain, Portugal, and Mexico, and of BenefÃcio Facil, in Brazil. Fiscal '25 total revenues were made of EUR 1.125 billion in operating revenue, up plus 10.3% organically, and EUR 162 million in float revenue, up plus 12.6% organically. This strong performance in fiscal '25 underlines Pluxee's ability to deliver sustained top-line growth in an increasingly challenging and volatile environment. In this context, we also managed to deliver a strong fourth quarter with total revenues growing by plus 9.6% organically, excluding a plus 2% scope effect and a minus 4.8% currency impact, and driven notably by strong performance in Latin America. Let's now take a closer look at the underlying trend behind both Operating and Float revenue, starting with Operating revenue on Page 20. The momentum in Operating revenue was driven by Employee Benefits, which reached EUR 963 million in fiscal '25, up plus 12% organically, excluding a minus 7.4% currency impact and a plus 3.3% scope effect. Strong business momentum in Employee Benefits was driven by a solid organic growth in business volume issued, particularly in Latin America and Rest of the World as anticipated, and the quick progressing of circa plus 20 basis points year-on-year to 5.1% on average. In Q4 '25, Pluxee generated operating revenue of EUR 265 million in Employee Benefits, delivering plus 11.6% organic growth, confirming the ongoing positive momentum. On other products and services generated operating revenue of EUR 162 million in fiscal '25, showing flat growth year-on-year, with the fourth quarter being slightly negative. This trend reflected the discontinuation of large public benefit contracts in Romania and temporarily in Chile, as well as the ongoing repositioning of Pluxee's offering in the U.K. and the U.S. As mentioned, operating revenue organic growth was mainly driven by Latin America and Rest of the World. Let's take a closer look at this on Slide 21. Turning to geographies. Regions delivered strong double-digit organic growth in fiscal '25, namely Latin America and Rest of the World, while Continental Europe was tempered by a challenging macroeconomic environment and a high comparable base. Starting with Europe. Operating revenue reached EUR 506 million, up plus 5.1% organically for fiscal '25 with a Q4 organic growth of plus 2.2%. While the group continued to benefit from solid momentum in Southern Europe, particularly in Spain, supported by the Cobee acquisition, growth was tempered by several factors in the region, including: first, the increasing challenging economic and political environment across the region. Second, adverse impact from public benefit program, especially in Romania, following postponed ordering or reduction linked to budget deficit measures. And third, a high comparison base from 2024 one-offs, such as the Belgium purchasing power program and the Paris Olympic Games. In Latin America, operating revenue reached EUR 429 million for fiscal '25, up plus 14.5% organically, excluding a plus 4.7% scope effect and a minus 13.3% currency impact. In Q4, organic growth in the region accelerated significantly to 19.8%. This strong performance was driven primarily by Brazil, notably fueled by the fully operational Santander partnership and the further penetration of the market, especially among SMEs. Commercial momentum also remained strong across Hispanic LatAm, particularly in Chile, where the [indiscernible] public benefit program was renewed from March 2025, even if with distinct economic terms. However, Mexico continued to face headwinds linked to U.S. policy changes. In Rest of the World, operating revenue totaled EUR 190 million in fiscal '25, up plus 14.2% organically, excluding a minus 7.7% currency impact, mostly due to the Turkish lira devaluation. Double-digit organic growth in the region was driven by Turkey, where the group continued to unlock increased sales value from existing clients and to penetrate further the benefits market through new contracts. As expected, performance in U.K. and U.S. remained below group standards, still affected by the ongoing business repositioning in both markets. Complementing operating revenue, let's now move to the float revenue performance analysis on Page 22. Fiscal '25, revenue growth slowed down compared to fiscal '24, even if still above initial expectations. Gross revenue reached EUR 162 million, up plus 12.6% organically, excluding a plus 3.4% scope effect and a minus 11% Q translation impact. In Q4, it continued to gradually decelerate to plus 7.6% organically. Organic growth in revenue over fiscal '25 was supported by higher business volume issued in nonrestricted cash, particularly in Latin America and rest of the world. However, this trend was not reflected in the overall float position remaining stable at EUR 2.7 billion at year-end due to the less dynamic trend in programs issued in restricted cash. The overall positive trend in volumes was reinforced by a higher average investment yield year-on-year, reaching 6% in fiscal '25 compared to 5.7% in fiscal '24 as a result of the group's efficient investment strategy tailored to local financial market conditions and the high interest rates in Brazil and Turkey. This section on top-line performance, let's now turn to profitability, starting with recurring EBITDA on Slide 23. Recurring EBITDA rose strongly, up plus 22.2% organically to EUR 471 million, up plus 9.4% on a reported basis. Recurring EBITDA margin reached 36.6%, up plus 202 basis points, including currency and effect, driven by solid operating profitability gains across all 3 regions. This robust performance was primarily supported by the inherent operating leverage embedded in the group's business model. It was further enhanced by the initial positive contribution from certain recently closed acquisitions, largely commented by Aurelien. The margin expansion also reflects efficiency gains achieved through: first, the strict cost base monitoring; second, our constant portfolio rationalization efforts; and third, the end of one-off effects related to the spin-off. Altogether, this translated into a plus 235 basis points organic expansion in recurring operating EBITDA margin, I mean, excluding [indiscernible]. It was further supported at the recurring EBITDA level by favorable flow-through from still growing flow of revenue, notably in Latin America and rest of the world. This strong growth in recurring EBITDA fueled solid performance further down the income statement, all the way down to adjusted net profit, as we can see on Page 24. Let me walk you through the key items below the recurring EBITDA line, starting with recurring operating profit, which stood at EUR 361 million, up plus 5.7% includes minus EUR 110 million of depreciation, amortization and impairment charges in fiscal '25 compared to minus EUR 89 million in fiscal '24, an increase mainly reflecting the amortization of intangibles acquired through the Santander partnership and the Cobee and BenefÃcio Facil business combination. Other operating income and expenses amounted to a net expense of minus EUR 26 million in fiscal '25 compared to minus EUR 92 million in fiscal '24, reflecting the expected normalization post spin-off, notably once the H1 '25 residual ISI [Indiscernible] cost had been accounted for. Net financial expenses totaled minus $17 million in fiscal '25 versus minus $20 million in the prior year. Gross borrowing costs declined slightly, driven by the nonrepetition of spin-off refinancing costs and more favorable financing conditions. Income tax expense amounted to minus EUR 100 million in fiscal '25, corresponding to an almost normalized effective tax rate of 31.4% compared to 39.5% in fiscal '24 due to the spin-off, including carve-out and other related one-off costs. Adjusted net profit group share reached EUR 221 million, up plus 8.4% year-on-year, while the adjusted basic EPS came in at EUR 1.52. This performance demonstrates a strong acceleration in growth and profitability throughout the P&L. We will now look at how these elements also translated into the strong cash generation and conversion that we delivered once again in this fiscal year on Page 25. We are indeed once again very pleased with our cash flow generation this year, up plus 10% year-on-year. We delivered a record recurring free cash flow of EUR 417 million compared to EUR 379 million in fiscal '24, resulting in a cash conversion rate of 89%, well above our 3-year average target of 75%. Let me detail the main factors contributing to this solid performance beyond the strong recurring EBITDA. CapEx amounted to EUR 98 million, representing a temporarily lower 7.6% of total revenue, mainly due to the finalization of the IT carve-out during the first half of fiscal '25. Nonetheless, the group maintained a strong investment focus over fiscal '25 in data and payment capabilities, technology innovation, and infrastructure, as well as cybersecurity, all essential to underpin future growth and efficiency improvements. Change in working capital, excluding restricted cash variation, stood at plus EUR 128 million, while fiscal '24 change in working cap was boosted by positive one-off effects, including the impact from the regulatory change in Brazil and from the Paris Olympic Games in France. Income tax paid decreased to minus EUR 86 million, reflecting the near normalization of the effective tax rate following the spin-off, as mentioned earlier. This strong cash generation and high cash conversion clearly demonstrates the group's disciplined execution, sustained operational efficiency and enhanced financial flexibility. This strong cash generation was also a key driver to fuel the further increase in the group's net financial cash position in fiscal '25, as we see on Slide 26.  The group's net financial cash position increased by plus EUR 108 million, up to EUR 1.163 billion of net cash as of year-end. It was mainly driven by the positive inflow from the EUR 417 million of recurring free cash flow, as we have seen. Main outflows over the year included, first, minus EUR 148 million linked to the payment and related impact of the acquisition completed in fiscal '25, notably Cobee, which was partly offset by the disposal of the nonconsolidated investment in Cobee.  And then these outflows included minus EUR 65 million related to dividend distribution to both shareholders and noncontrolling interest, minus EUR 5 million of other impacts related mainly to the cash out from other income and expenses, and the purchase of treasury shares, and minus EUR 47 million of currency effect on cash position, excluding [indiscernible] net cash position is also reflected in our BBB+ rating from S&P.  The strong [ Tepi ] net cash position allows us to actively deploy our capital allocation strategy, which I will review on Page 27 before handing over back to Aurelien. Since January '24, we have consistently reiterated that our capital allocation strategy relies on 3 central pillars: investing for future organic growth through CapEx, pursuing targeted and value-accretive M&A opportunities, and returning capital to shareholders.  First, we maintain our ambitious investment policy targeting to remain below 10% of total revenues in CapEx to support sustainable organic growth. Although this year's ratio was temporarily slightly below target, our investment focus remains strong, particularly in technology and data.  Second, we continue to deploy our targeted and disciplined M&A strategy. As Aurelien  highlighted earlier, all our recent acquisitions have fully met expectations, clearly evidenced by their progressive positive contribution to growth once integrated.  And lastly, we remain fully committed to returning value to our shareholders. Initial step in our shareholder return policy is the dividend. The shift last year to adjusted net profit as the basis for dividend payout sent a clear and confident signal to our shareholders. Accordingly, we are proposing this year to increase the dividend from EUR 0.35 to EUR 0.38 per share, representing a plus 9% uplift. In addition, we have a strong and accelerating free cash flow generation as well as a higher year-end net cash position in fiscal 2025.  As we are confident that this will not compromise our investment capacity for growth, we have decided a EUR 100 million share buyback program. This is a testament to our focus to shareholder returns and our confidence in the group's future outlook. And with that, I will now hand it over back to Aurelien , who will take us through our financial objective for fiscal '26 and the conclusion.  Aurélien Sonet: Thank you, Stephane. Let me now wrap up this presentation with our outlook. Back in January 2024, we set ourselves ambitious medium-term financial objectives. And over the first 2 years of the plan, we can clearly say that we have delivered and even outperformed on them. That said, the environment in which we operate is no longer the same. A more challenging macroeconomic context has created headwinds in several markets, making us enter fiscal 2026 with caution. However, we remain strongly confident in our structural growth drivers and in the significant potential for further margin improvement and robust cash generation.  Consequently, we are now committed to delivering for fiscal 2026, first high single-digit total revenue organic growth. This will be driven by solid momentum in Employee Benefits operating revenue, while other products and services are expected to remain dilutive to overall group growth, and float revenue should stay broadly stable in value based on the latest forward curves.  This high single-digit growth in fiscal 2026 would translate into a 3-year CAGR of at least plus 12%, firmly within the low double-digit range. Second, plus 100 basis points recurring EBITDA margin organic expansion, upgraded from the previous plus 75 basis points, backed by the group's significant potential for continued margin enhancement. This should translate into an overall margin expansion exceeding 500 basis points, well above our initial 250 basis points 3-year target. Third, above 80% recurring cash conversion on average over fiscal 2024 to 2026, representing a second upgrade from our initial 70% objective.  Now, before opening the floor to questions, I'd like to highlight once again that fiscal 2025 has been another very strong year. As we enter fiscal 2026, we look ahead with confidence, supported by solid fundamentals, a loyal client base, and a strong commercial pipeline, but also with prudence given the challenging environment that we face in several of our markets. Building on our strengths, we remain fully committed to executing on our long-term value creation road map. And with that, Stephane and I are very pleased to answer your questions.  Operator: [Operator Instructions]. The first question is from Julien Richer from Kepler Cheuvreux, Research Division.  Julien Richer: So 2 questions for me, please. The first one, you posted a low double-digit organic revenue growth in '25. '26 guidance is for revenue to grow high single digit. What proportion of this will be volume versus sales value increases? And how sustainable are these drivers if macro conditions soften? Second question on Cobee. Could you please elaborate on the cross-sell potential between your platform and Cobee, the impact of Cobee on your average revenue per user, and any early signs of scalability to other geographies, please?  Aurélien Sonet: So I'm going to start with your question regarding Cobee, Julien, and Stephane, you might answer the first question of Julien. So regarding Cobee, as we are mentioning, we see 2 very positive effects when we migrate our existing Pluxee clients on the Cobee's platform,  the first one is, as I was mentioning, is the activation of users because in Spain, it's not always collective benefits. It's more a salary sacrifice model. And so we see a boost in the level of activation. So this is the first driver. And the second one is the amount converted by the end user into benefits. And we see that the budget is increasing because the full range of benefits bring much more satisfaction and answers much more to our clients' employees. So those are the 2 strong synergies. And this is still the start, and it was our plan, and we see that we are meeting our initial plan. Now, in terms of expansion and rollout plan of our Cobee offering, we are already working in Portugal and in Mexico. And in both countries, we are seeing very encouraging signs. The market is answering quite positively, and for the moment, we really want, I mean, Spain, Portugal, and Mexico to be successful. So those are our top priorities for '26. Stephane, regarding the first question?  Stephane Lhopiteau: So, regarding your question about how much the high single-digit growth is going to be fueled by average face value versus volume. So, as a reminder for everyone, average face value increase is a key contributor to the growth in business volumes. But you're right, within this business volume, there are some factors like this increased average face value versus new client gain or some potential losses that we try to avoid as much as possible. So what I can tell you in terms of average face value contribution we are fully on track with our initial commitment, which was to deliver EUR 3 billion of increase in average face value over 3 years, and we have delivered more than EUR 1 billion in fiscal '24 and once again in fiscal '26, and we are targeting even though this is not a guidance, but we are targeting the same magnitude of increase in average face value in the coming fiscal year '26.  Operator: The next question is from Estelle Weingrod from JPMorgan.  Estelle Weingrod: On regulation, first, both France and Brazil, just where do we stand now? And what is your best guess on timing? The second one on the outlook as well. You're guiding for another strong year in terms of margin expansion. Can you just elaborate a bit more? What is it driven by? Have you identified new efficiency gains?  Aurélien Sonet: So starting with the regulation for France and Brazil. So France, at the moment, the main topic is about the 8% taxation measure that was introduced by the government on the all employee benefits. Quite recently, an amendment related to this measure and related to the cancellation of this measure was passed at the social committee level. So this is, I mean, a very good news for the 21 million French worker that would be impacted by this kind of measure.  Now discussions are still going on at the first chamber before going to the second chamber to the higher chamber. So we still remain vigilant regarding this topic, but it's a positive evolution.  Regarding the meal benefit platform, which has been our topic for the past almost 2 years, as you can imagine, for the moment, this is not the current priority of our existing government. But even though we don't have the visibility on the timing when the discussion will resume, I remain optimistic that this topic will be rediscussed first. And regarding the content of this reform, I would expect that it would contain similar measures, given that the past 3 governments came out with the same conclusion and recommendation. So from a timing standpoint, we don't have a clear visibility yet.  So, back to Brazil. So over the last months, the macro environment has been marked by still a relatively high level of inflation. So Lula government has been put under strong pressure to find solution to reduce the food inflation and to enable access to food for all consumers and to face or to help the government face the challenge, we remain in constant dialogue, both with the Ministry of Labor, but also the Ministry of Finance to discuss ways to enhance the meal benefit system the path and to do it over the long term.  So we do share a common objective, which is to ensure the sustainability and the extension of this program. And when we look more precisely at the different measures, so regarding portability and interoperability, so the decree that is required for this implementation is still pending on the portability, and we shared this during the last call. We've been actively engaged to establish the appropriate framework and based on the proposal that we submitted through our association. But there is no specific update since then.  And regarding other possible measures. As previously discussed, we are also closely monitoring the situation. And we'll come back to you in due time when there is a significant evolution, which has not been the case over the past months.  So this is for the regulation. And regarding how we plan to deliver 100 basis point margin expansion. First, we will continue to fuel our platform model with steady business volume growth, both organically and inorganically to fully capture the benefit of our operating leverage. Second, as mentioned by Stephane during the presentation, we continue to strengthen our cost discipline.  We are also implementing additional efficiency programs that includes process simplification, more selective investment allocation, and further digitalization of our processes. And indeed, these measures are designed to offset the impact of the slower top-line growth in order to sustain our EBITDA margin. And third, we've been reviewing our portfolio to ensure that our capital is deployed where we see the highest potential. And we share with you Indonesia. So this could include exit from smaller or less strategic markets or products.  Operator: The next question is from Justin Forsythe from UBS.  Justin Forsythe: I appreciate the 2 questions here. So the first one, I wanted to come back to the guidance a little bit. So I just wanted to first confirm that, that was only tied to the macro impacts that you were flagging.  And does that mean that we'll be back at low double digit once we've lapped or grown through these macro impacts? And it also sounds like face value developments have been quite positive since the last results, and more broadly. So I suppose it's fair to assume also that the benefit from face value is quite meaningfully offset by macro, maybe more so than before. Also, I wanted to talk a little bit about the SME penetration. I think you gave some color around the Capital Markets Day back in 2021 around where we sat different geographies. I believe France was 10%, Brazil was 20%. Maybe you could just update us on penetration levels today, because you seem to continue to flag the continued penetration of SME increasing. Aurélien Sonet: Okay. Thanks, Justin. Stephane, maybe you want to -- you take the first question regarding the guidance. Stephane Lhopiteau: So regarding the slight shift because it just a slight moving from low double digit to high single digit, which is still an exciting organic growth that we are targeting for fiscal '26. There are a number of factors that need to be considered. The first one is the change in the float growth. So, this is not a guidance because we are just guiding on total revenue. But as said by Aurelian during the presentation and clearly stated in the press release, we are guiding -- we are adding some color on the float revenue growth, and we are seeing it to remain stable in fiscal '26. And so, this means that the float revenue organic growth is going to be dilutive to total gross revenue. And if you do the math compared to fiscal year '25, you would see that this is going to hit the organic growth by 150 basis points approximately. So, this is the first factor. The second factor is this macro headwind that we are seeing basically in all the regions, which is going to drive lower growth from all the regions, even though it's going to remain with a good momentum in Latin America and rest of the world, but with a lower growth in Continental Europe for the reason we already shared and notably, this lower or even sometimes negative end user portfolio growth, which is going to weigh on our organic growth. And then on top of this, while the overall the Employee Benefit segment is going to remain very dynamic, we are facing some changes in other products and services we refer to these changes or headwinds during the presentation. The first one is that because of the macroeconomic environment, there are some public benefit contracts which are not renewed, which are postponed, and which is going to weigh on this from public benefit to the total revenue organic growth. And at the same time, we are repositioning ourselves in the U.S. and the U.K., which is temporarily weighing as well on this organic growth. And then something that we should not forget as well is that we delivered very strong growth in fiscal '24 and fiscal '25, which is creating a high comparison base, notably in Q4. If you look at the presentation again and what we delivered in terms of organic growth in Q4, which is a fantastic outcome result as part of what we are getting from this Santander partnership. Yes, this is creating a very high comparison basis. And in Q4 of '26, we might face lower growth, which is also contributing as well to a lower growth in fiscal year '26 versus fiscal year '25. So overall, in order to make it short and in terms of segment, we are still committed to deliver very high organic growth in terms of employee benefits, but lower for other products and services, which is going to be dilutive to the organic growth. Don't forget the impact of the float. I think that's it. We are not going to share more color for what is going to come further in '26. We are right now fully committed to deliver our 3-year plan, and we'll see later what we plan for '27. Aurélien Sonet: And then regarding your question on SME, so we shared with you the performance this year. I mean 31% of our total new business is coming from SME. This remains a top priority for our largest markets. And all of them contributed to this performance. So, we see the good traction. We mentioned this commercial engine. I mean and the processes and the end-to-end digital journey that we put in place this was implemented in all those markets. The momentum is good. But still, it's fair to say that we -- in some countries such as France, we see a slowdown due to the macroeconomic context because this uncertainty weighs on the decision of those small or mid-sized companies. And sometimes it could even have an impact on their own future. So, we still expect a strong contribution, but it's likely that there's going to be a slowdown in specific market. Having said this, regarding the penetration and just, I mean, more macro view, even though we did -- we delivered a great performance, there is still a high level of potential. The level of penetration remains still low. So overall, we still have a very good potential to capture. Justin Forsythe: Stephane, I think you said 150 basis points impact from the float growth change. By my math, that's roughly $19 million, $20 million impact tied to float. Is that the right math there? Stephane Lhopiteau: If you simulate 0 organic growth in float in '25, compared to the 12.6% that we delivered, you will end up with 150 -- a little bit more than 160 basis points impact overall. And so, this is what I was trying to explain. This is a way to assess it applying to fiscal '25, what we are sharing with you in terms of color for fiscal year '26. If you do it again, you will see that we have 100 -- a bit more than 150 basis points impact in our organic growth for '25. Operator: The next question is from Andre Juillard from Deutsche Bank. Andre Juillard: First, congratulations for this strong fiscal year '25 results. One question for me in reality. Just looking for more clarification about the capital allocation. You have a very strong cash net position of EUR 1.16 billion. You announced a share buyback of EUR 100 million this morning. That means that you will keep a very comfortable position with a cash net position. What do you plan to do with this cash? Is there a very strong pipeline of M&A? Or could we expect further good news in terms of return to shareholders? Aurélien Sonet: Stephane, do you want to answer? Stephane Lhopiteau: So regarding capital allocation, which has remained unchanged, we have a fully consistent calculation that we unveiled at the time of the Capital Market Day, and the purpose of which is to feed the organic growth with further CapEx to accelerate even more our organic growth by seizing opportunities in a disciplined and very targeted manner in terms of M&A and returning value to shareholders. So, we truly believe that there is a strong potential behind M&A opportunities in order, as I was saying to capture this highly underpenetrated market is there, and by seizing M&A opportunities, we could accelerate, expand our offering, acquire new tech, increase our market share. So, this really remains a very strong pillar in terms of development for Pluxee, even though we are very disciplined, cautious in order to make sure that every time we acquire a new company, this is for creating new value. So as Aurelien said, we have a strong pipeline that we will remain disciplined. That being said, we always said that we will be agile and that from time to time, we might accelerate return to shareholders. This is what we decided to do with strong support from the Board for this fiscal year '25. This is a step. We'll see. We'll see. There is no commitment at all. This is, I think, very good that some companies like Pluxee are highly performing, and companies are able to return value to their shareholders. This is one of our commitments.  Other commitments like growing as much as we can and as quickly as we can, by investing in CapEx, and seizing M&A opportunities. So I think this EUR 100 million share buyback program is really fully consistent and fully aligned with the request we also received from many investors, as well, that we are listening to our shareholders.  And to finish my answer, this is a very good sign of our confidence in the Pluxee potential. And we are aware of where the stock price is currently trading, and versus the value we consider we are able to create from this company. And so this is also a sign we wanted to share with the financial market.  Andre Juillard: So, as a summary, the message is step by step.  Stephane Lhopiteau: As always.  Operator: The next question is from Pravin Gondhale from Barclays. Pravin Gondhale: Firstly, you flagged that Q4 organic growth was impacted by the postponement of ordering of some large programs in Europe. Could you please offer more color on the potential size of those orders? And when do you expect it to resume? And then on free cash flow conversion guidance, which is about 80%, now you delivered close to 90% in the last 2 years. So next year, how should we be sort of thinking about it? Can we expect some catch-up CapEx there, given it was lower this year? And any other moving parts to that guidance, that would be helpful.  Aurélien Sonet: Stephan, do you want to answer Pravin's question regarding the free cash flow guidance and potentially the organic growth impact, I mean, from the program in Q4?  Stephane Lhopiteau: In terms of our free cash flow guidance, we delivered very strong cash conversion in fiscal year '24 and fiscal year '25, which is a good basis for improving our commitment to deliver over 3 years now 80% of cash conversion remaining, aware of the potential for working capital. We always made it very clear that good business is the strength of our business model. As long as we deliver growth, we have some positive effect on our free cash flow from the working cap variance.  However, this could be hit positively or negatively by some changes in some regulations, as this happened in '24, '23 with Brazil, and it was a positive effect. And we could also have some negotiation, notably related to the public benefit contract, where we could have some hit on the working cap. So this is why guiding you on an 80% average over the 3 years, this is another step-up in our guidance that you should take very positively. And this is over 80%. So, on average, over 80%. So we are not guiding on an 80% achievement, we are guiding on over 80% growth. Regarding the organic growth and the impact from the large programs, public benefit programs. So I don't have in mind the impact in terms of basis points.  But yes, there are some countries, especially in Western Europe, like Romania or Austria, for example, where some decisions were taken by the state, and because of some budget constraints, to suspend or to reduce some of these programs. So these programs remain very attractive because we are always very selective in this kind of program, making sure that they are accretive to our profitability. But they are weighing at least temporarily, and we'll see further on our organic growth, notably because we did good, very good in '24 and '25 in this segment, creating a high comparison base.  Operator: The next question is from Sabrina Blanc from Bernstein.  Sabrina Blanc: I have 2 questions from my part, please. The first one is that you have not mentioned a lot of cross-selling this morning. Can you come back on the evolution and potentially how it represents compares to the meal voucher? And my second question is regarding the retention, which went to 100%. Could we have more color on the different aspects of the retention compared to 2024 to understand where it comes from, the limited slowdown this year compared to last year?  Aurélien Sonet: Okay. Regarding the net retention, I mean, most of the evolution between '24 and '25 came from the evolution of the end user portfolio, which was contributing quite significantly in '24. And as we mentioned in '25, I mean, even on H2, it turned negative. So this is the main explanation that supports this decrease between '24 and '25.  And regarding the cross-selling evolution, we still see, I mean, a positive improvement, and actually, it translates our multi-benefit strategy. We mentioned Cobee, for example, which is definitely paving the way to a much stronger multi-benefits approach and a way for us to activate the full value from our existing clients.  Having said this, we know that we have much more potential. And so for us, it's going to be one of the drivers that will help us not only keep but boost our net retention for the coming years.  Sabrina Blanc: But could we have an idea of the weight of the, let's say, the solution which are not a milk voucher compared to the milk voucher in the operating revenues, for example?  Aurélien Sonet: What I would say is that the contribution coming from the cross-selling in percentage is higher than the overall growth.  Operator: The next question is from Joanne Jordan from ODDO BHF.  Joanne Jordan: Also, 2 questions from my side. First, can you share some comments on the early start of the gift card season, please? And second question, regarding the evolution of the take rate, it's up 20 basis points in '25. What are the main drivers behind this increase? Is it mostly coming from merchants or the client fee?  Aurélien Sonet: So, regarding the Christmas campaign, it's too early to give you, I mean, color. But I can tell you that, I mean, the teams in many geographies are on it as we speak. And for us, Q1 will be the moment when we will be in a position to give you a much more precise color. But to date, it's too early. But it's part of our plan. It's embedded into our growth trajectory. And again, I mean, more to come in the Q1 announcement. Regarding your second question on the take-up rate, Stephane?  Stephane Lhopiteau: So, regarding the take-up rate, there is a global trend over the last 4 years, and there is one happening in fiscal '25. So overall, as a reminder, and over the last 4 years, we have improved our take rate of 50 basis points and with a vast majority of this improvement coming from the increase in the client commission. And then from 1 year to another, there might be some slight changes. And when we compare '25 to '24, there is a bit of an increase on the merchant side as well, as long as we are able to deliver more value to the merchants, offering them new services, and having them notice how much we can bring to them. And there is also the mix effect.  So, we were not expecting an increase. If you remember last year when we guided you, we shared some color on the take rate, and we didn't have a specific target in terms of increasing the take-up rate, but this is the outcome of all the initiatives we took with some merchants with our merchant network in order to provide them with some additional services.  But again, I think the big trend is what you have to keep in mind over the last 4 years, we have increased our take-up rate by 50 basis points, with the vast majority of this change coming from the client side.  Operator: There are no further questions registered at this time. I will now hand it over to Aurelien Sonet.  Aurélien Sonet: Thank you, and thank you all for your attention this morning. In closing, I would like to reiterate our confidence in the future, supported by the strong performance delivered in fiscal 2025. Looking ahead, we remain deeply committed to establishing Pluxee as a sustainably profitable growth group over the long term. And with that, I wish you all a very good day.  Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Welcome to the Intrum Q3 2025 Report Presentation. [Operator Instructions] Now, I will hand the conference over to President and CEO, Johan Akerblom; and CFO, Masih Yazdi. Please go ahead. Johan Akerblom: Good morning, everyone. Thank you for listening. It's great to have you back for another quarterly earnings call. Today, we have a new setup. I am obviously in the new position, and I also want to sort of say hello to Masih, who's been with us now for, what is it, 8 weeks, roughly, almost? Masih Yazdi: Yes. Johan Akerblom: And yes, we will go through the Q3 results. In normal order, we will take you through the presentation, and then we'll open up for Q&A at the end. If we start with the quarterly, I think the quarter as such, it is a bit messy when you start looking at it. But a few things to highlight. I mean, on the underlying, we have a higher servicing income. The underlying business is, in general, performing well. The adjusted EBIT has been increasing 30% year-on-year, and we continue to report net profits. This is the third quarter in a row. And the leverage ratio is going in the right direction, and the investing volumes are increasing if we compare to Q1 and Q2 earlier this year. On the servicing side, we have now reached the 25% on an adjusted EBIT margin rolling 12 months. And on the investing side, I think the collections, they are slightly above the forecast again. However, the income is down, but I mean, that is on the back of the lower -- the book that we have, which is now at SEK 22.5 billion. If we go to the servicing a little bit more specific. I mean, this is the first quarter where we have an organic growth since 2022. I think it was Q3 2022, the last time. So, we're now actually not only improving the margins, we're also having a top line that is going in the right direction. We did grow in 10 out of 16 servicing markets. The pipeline is increasing. So, we've had a lot of focus on the top line. I think we discussed this earlier with you, and we continue to now see hopefully a bit of results from that. We're working closely with the entire sales organization. We're adding new people. We are upgrading. We are working with target lists, pipeline. We're working closely with churn. And the good thing is that there's still potential from our pricing program that should trickle through going into 2026. And we also see that the margin that we get on the new deals is higher than the current margin. On top of that, we also have now started, and that will be something we'll probably speak about a little bit more when we get to the Q4, what kind of ancillary business is there -- out there and what's the growth potential. Moving to the investing side. I think here, it's a bit of a -- I mean, the good thing is it's a quarter where we see the investments increasing. So, we're now at SEK 303 million. The IRR remains at a very high and comforting level. And I think for us, it's very important that the discipline on price is always going to be more important than the volume as such. Of course, we want to increase the volumes, but we will never increase the volumes on the back of being undisciplined on the pricing. We see that we are successful in smaller deals. But on the bigger deals, I think there is an overall market pressure on the downward side, and we have not gone all the way to meet that where the market is. We'll see where the market takes us going forward. And we're also working closely with Cerberus. So, half of the -- more than half of the deals has been done with them. And we now have deployed SEK 2.9 billion since we started in total. And the good thing is, I mean, we continue to extract value out of the portfolio. So, performance index remains above 100%. And if you compare to the original curve or original forecast, we're now at 109% in the quarter. I think, with that, I'm handing over to Masih, who will take us through the financials in a little bit more details. Masih Yazdi: Yes. Thank you, Johan, and good morning to everyone. I thought I'd start with going through all the one-offs we have. I think it's natural, both me and Johan, new in our positions to do a thorough analysis of the balance sheet, and what we've tried to do here is to apply a more conservative approach as well as trying to minimize items affecting comparability going forward. So, therefore, this quarter, we have a pretty messy quarter in terms of write-downs of impairments and goodwill and also some one-off tax items. So, as you can see, the reported EBIT is almost minus SEK 600 million. If you move that to the net income to shareholders, that has impacted by the gain we had on recapitalization of SEK 2.3 billion, and we have underlying financial expense of SEK 838 million. We had a couple of one-off tax items and underlying tax of SEK 158 million, which takes you to the almost SEK 400 million net profit. Then we have a goodwill impairment related to Spain, where the development has been more negative than was assumed in our goodwill calculations, and therefore, we have that impairment. And then we have some other impairments mainly of client contracts on the balance sheet that we have now written down. So, overall, a messy quarter, a lot of one-offs. But as I said, we have taken a conservative approach on the balance sheet, and we're hoping that you'll see much less of IACs going forward. If I move to the next slide, Slide 9, and look at the key financials for the group. As you probably have seen, income is down 3% compared to a year ago. More than half of that is FX related. At the same time, the cost trend continues to be positive, as you can see, and the cash generation has improved compared to a year ago. The leverage ratio has been restated. Again, here, a bit more conservative approach. We're looking at the nominal value of debt rather than the book value, which means that the leverage ratio is higher than it otherwise would have been had we used the old definition. With the old definition, it would be at 4.4. And I should also mention that full year 2024, without the discontinued operations, it would have been at 5.3. So, we are moving in the right direction in terms of leverage, but obviously, we want to move this even further going forward. If I move to the next slide and look at the underlying cost trend, you can see that we've had a strong cost discipline also in Q3, the run rate is now SEK 12.5 billion in terms of costs and costs are down 10% compared to the same quarter last year. And that is mainly driven by a reduction of FTEs, down about 1,000 people compared to a year ago. Moving into servicing. As Johan said, encouraging to see that we have organic growth in the quarter. The total income is flat, but that is completely driven by FX of a 3% negative effect, offset by organic growth of 3%. A lot of the one-offs is in the servicing business, so the EBIT is distorted by that. But if you look at the adjusted EBIT, it's up 27%, and it's also up 30% so far in 2025 versus the same period in 2024. We want to double-click on the leverage we have. What's happened in this company the last couple of years is a quite large shift in the composition of the business. If you look at the bars, you can see that 2 years ago, 24% of the cash generation was coming from the servicing business that has almost doubled to 43%. In our view, I think the general conception is that servicing is less risky than the investment business, which means that the cash flows generated from that business should be able to cope with a higher leverage. Here, we have assumed that our investment business has an LTV of 80% that should be financed by debt of 80%. And if we assume that the remainder of the debt on the balance sheet is in the servicing business, you can see that the leverage ratio for the servicing business is actually coming down quite a lot, especially the last few quarters, given the fact that the cash generation from the servicing business has improved quite a lot. I think if anything, this chart shows that we want to, going forward, take into account the riskiness of our business when we set our leverage targets so that it takes into account if we continue to derisk and have a larger share of our revenues and profit coming from servicing. Moving into next slide, Slide 13, investing. You've seen this, but the income is down. This is partly FX, but largely due to the lower investments compared to the amortizations we have. So, a smaller book value leads to lower income. We are collecting well on this portfolio, which means that income is down slightly less than the book value. Nevertheless, as Johan said before, we have done more investments this quarter. We want to do even more going forward, but we want to strike a good balance between pricing discipline and volumes. Moving to Slide 14. Looking at the debt and maturity profile. You can see that net debt is now at just below SEK 45 billion. We have about SEK 5 billion of cash, SEK 2 billion of that is restricted. It could be used to buy back bonds. The remaining cash is free will. And you can see the maturity profile with about SEK 12 billion of maturities in 2027, of which about half is the new money notes we've issued. I think with that, I'll hand back to Johan, and he'll do a couple of final remarks before we open up for Q&A. Johan Akerblom: Okay. So, I think, first of all, the quarter is a quarter where we see the underlying business performing well. It is positive to see a servicing top line year-on-year organic growth. I mean, I think we discussed and talked about this a lot. We are really emphasizing the top line, and we are putting a lot of effort in making sure that we get new business into the group. However, I think servicing business as such is a slow-moving business. It comes with RFP processes, there's onboarding, there's ramp-up, et cetera. But there's definitely an ambition to keep this top line growing. And the investing volumes, as we said, we will continue to have a balance between volumes and returns, but it's always good to see volumes going up when the returns remain high, and we will continue to focus on developing the partnership with Cerberus. The one-offs from the recapitalization and impairments, I'm sure we'll get a lot of questions on, so I'll leave that for the Q&A. And we have now reached a 25% margin. I think everyone expected us to reach it, but it's always good to reach a goal that everyone expects you to reach. So, it's a tick in the box. And we will come back when we present our full year results with the strategic review and also updated financial targets. So, I think with that, I think we can open up for questions. Operator: [Operator Instructions] The next question comes from Jacob Hesslevik from SEB. Jacob Hesslevik: So, my first question is on the adjusted EBIT margin for servicing, which reached 25% in Q3, which is up from 18% a year ago. It seems to be driven primarily by cost reduction. How sustainable is this margin expansion? And what portion came from operational improvements versus onetime efficiencies? Johan Akerblom: I can start here. I mean, I think that the margin has proven to be sustainable. It's been proven to increase quarter-by-quarter. Given the focus that we now have on growing the top line, I think we will have to strike a balance between how much more margin improvements we want and how much do we want to actually put into our commercial proposition in order to grow the top line. And if you ask me, on the balance, I would say, I'm quite happy with 25% margin if I can grow my business at the same time. Jacob Hesslevik: All right. Perfect. And then, if we move to investing side, collection performance was 101% in this quarter, slightly better than a year ago at 98%, but cash EBITDA from investing still declined to SEK 1.35 billion from SEK 1.5 billion a year ago due to a smaller book. When should we expect cash EBITDA to stabilize or grow again given your stated intention to increase the investment pace? Johan Akerblom: I mean, it's a very tricky question to answer because I cannot predict how much we will invest over the next quarters. But the ambition is clearly that we want to get the investing business to flatten out. So, if you think about the decay, we've had over the last years in terms of portfolios going down, investment volume going down, now it's time to turn that around and stabilize. But we also said that we have a SEK 2 billion target. Let's make sure that we reach the SEK 2 billion target first, and then we'll get sort of to the next level. And by then, I think also we will have our, let's say, Q4 report, and we'll give more guidance on where we see a future portfolio. Jacob Hesslevik: Okay. And just finally, on your updated financial targets, you mentioned focusing on improving profitability, driving growth and strengthening the balance sheet. These can sometimes conflict with each other. So, which takes a priority if you face trade-offs? For example, would you sacrifice near-term growth investment to the 3.5x leverage target faster? Or how should we think? Johan Akerblom: I think in -- I mean, we need to address our leverage. That's the main priority. But then doing that, I think it's also important to always strike a balance between sort of short-term sacrifices and long-term gains. But I think we will give you more clarity on that when we talk again in 3 months' time. Operator: The next question comes from Patrik Brattelius from ABG. Patrik Brattelius: Can you hear me? Johan Akerblom: Yes. Patrik Brattelius: Perfect. So, my first question is to Masih as he comes in with a little bit of a new outsider's perspective. So, in your new role and given that you're new, can you talk a little bit how you view a sustainable and long-term capital structure in Intrum? And how do you think that should look in terms of leverage ratio? Masih Yazdi: Thanks, Patrick, for that question. A sustainable balance sheet is a balance sheet that is in better shape than the current balance sheet. I think that's clear for everyone. We'll come back with actual targets on that when we present the Q4 results. But generally, I would say that we need to take into account what the composition of the business will be in the future depending on how we grow our servicing and investing business, and we will take the different levels of riskiness of those 2 different business lines into account when we set new leverage targets. That's the hint I can give you in addition to what I started with saying that we need to be in better shape in the future than we are today. So that's the main priority of this company. That's going to be my main priority of -- myself as well, obviously. So yes, you need to give it some time. We'll come back, but the direction is clear. We need to be in better shape. Patrik Brattelius: Okay. And speaking of the balance sheet, you have some new money notes given out in connection with this restructuring. And to my understanding, those will partly be used to buy back bonds. So, can you talk about how much you aim to buy back with this? And when should we start seeing that these actions being taken? Masih Yazdi: Yes. I mean, we can use that money to buy back. We'll do that if we believe that, that's good for the company as a whole. We can't give you any timing of that. We will do that when we think that the timing is right, if we do it. But the whole purpose would be to make sure that we deal with the maturities we have in the sort of short term, the 2027s. But again, it's an opportunistic action tactics from us. So, we can't give you any timing on it. But if we feel that it's going to address the balance sheet to some extent, we'll do that. Patrik Brattelius: Okay. And servicing, it's growing with 3%. It's, however, below a little bit the old target level. Do you see that you need to invest more in the cost side in order for this to ramp up? Or is there anything you can do that wouldn't drive increased cost in the short term to ramp up income on this side? Johan Akerblom: I mean I'll start here and then Masih can add. But in servicing, I think the cost trend will always be sort of, on a relative basis, going down. We need to become more efficient. We need to be more automated. We need to be -- we basically need to build on a scalable platform. Are there short-term investments we need to grow -- we need to do to grow the servicing business? Nothing that is material from my perspective. But then, I think one of the key questions that we have that we will have to address in the sort of strategic review is also how -- what's the ancillary business that we can grow? Because right now, we are involved in some very important processes with our clients, and there could be opportunities to grow ancillary business out of that, that would be sort of a nice add-on to the business we run today. But -- and that could require CapEx. But I think that's something, again, we will have to come back to when we have done our own homework. Masih Yazdi: Yes. I mean if I add what's, I think, interesting with the servicing business is that there's a lot of legacy in that business, not just with Intrum, but with the whole business. And really improving the offering has a lot to do with becoming more cost efficient. So, it's actually the case that the more cost efficient we become, the more automated we are in that business, the better the offering will be to our customers and the more deals we will win at better margins. And so, in that business, it is not really a conflict between investing more and you seeing more higher cost in our P&L and winning business. I mean we are hiring salespeople now, but we're talking about 30 people, and we have almost 7,000 people working with collections within servicing. So, it's nothing compared to the base we have to work with in terms of becoming more efficient. Patrik Brattelius: Given that you were at the other seat of the table when you -- in your previous job, do you see any immediate actions that the Intrum could do in order to improve their -- the top line growth within servicing to win new inflow from, for say, banks? Masih Yazdi: There are things we're looking at in terms of how we price deals. We have a fairly large, fixed cost base. And obviously, the more servicing revenue we have on the platform, the smaller is the fixed cost base per deal, so to say. So, we are making some changes to how we price new deals. And I hope and we think that that change in financial steering will make us more competitive in new deals and still uphold or maybe even improve the margins from current levels. So yes, there are things we can do, and we're looking into it, and we're trying to apply it as quickly as possible. Patrik Brattelius: A very last question from my side is just on Slide 12. You -- on that changed composition of cash flows, you showed the total leverage. Can you -- the dotted line there, the servicing leverage, which we don't see a number for. Can you please share the detail what that level would be in Q3 '25? Can we get a reference? Johan Akerblom: Yes. I think if you look at where that dash line was a year ago, so it was above 10x, and now it's around 7x. So, it's a pretty strong deleveraging if you allocate some of the debt to the servicing business. So, it pretty much follows obviously the improved cash generation from that business. Operator: The next question comes from Ermin Keric from DNB Carnegie. Ermin Keric: I'll continue on Slide 12. Thank you for that, I've asked for a long time, so appreciate it. And just to hear a little bit how you're reasoning with the 80% LTV you're assuming on the investment. I suppose on the Cerberus Project Orange, you had 60%, if I remember correctly, on the Intesa SPV, it was 60%. Why do you feel 80% would be the kind of fair level to assume for investing? Johan Akerblom: I mean, you can argue whether it could be 60%, 70%, 80% or 90%. I don't think that's the main point. I think the main point is to show that irrespective of how much you allocate to it, if you allocate the remaining debt we have on the balance sheet to the servicing business with stronger cash generation in the servicing business, you would have seen a declining leverage for that business. I mean, coming from the banking world, a comparison I would make is that if you have a bank that is only doing consumer lending and then a few years later, it's only doing mortgages, you should probably view that bank as being less risky and therefore, would be allowed to have more leverage. And I think this is a -- it's a fair comparison with our business as we are more and more moving towards servicing, which we believe is less risky and therefore, should be allowed to have a higher leverage on. This doesn't mean that we will set leverage targets in the future that are less ambitious than the ones we've had, we just think it's important to take into account how the composition of our business changes. Ermin Keric: But if I can follow up on that, maybe I'm thinking about it the wrong way, but [indiscernible] the opposite. If you are a bank, when you have a lending book, you can have some leverage. If you just have commissions, you would have less leverage. Masih Yazdi: Well, I would -- yes, I mean, if you take a bank, it's typically the case that you have risk weights for the lending business and the riskier the lending is, the higher is the risk weight and therefore, the more capital you have to have. That's the way I would look at it. Johan Akerblom: Yes. And I wouldn't compare -- I mean, remember, when we do the servicing business, I mean, the contracts that we run are usually sort of 3 to 5 years. It's a long-term relationship, and it's also -- it creates quite a lot of stickiness. So, I think that's where we're coming from. Whereas on the investing side, in the end, it very much depends on what's your investment appetite and how much can you invest to continue to either replenish your portfolio, increase your portfolio or decrease your portfolio. So, it's going to be more sensitive in the short run in terms of your investment appetite. And then also, there's always a, I think, a question mark, at least from the market when you invest into these type of portfolios, will they actually yield the returns that you put up when you made the investment. Ermin Keric: Fair enough. Then moving over to the servicing side. Organic growth, now you're back to organic growth again, which I think is, of course, highly positive. Is -- around the 3%, is that a new baseline we should think about? And maybe extending the question a little bit, I suppose getting back to organic growth has been a focus for several years. Why have you tweaked now that's making it possible to do that while also doing it in a profitable manner? And maybe lastly on that question, the SEK 1.8 billion pipeline you mentioned, how should we think about that? What's your typical win rate? I suppose that's a gross number. How should we think about the underlying churn you have? So how much from that SEK 1.8 billion should we think about adding to your future income? Johan Akerblom: If we start with your first question, which is, is this a new sort of baseline? I think that one we will have to refer to when we come back in Q4. Then we will try to -- if we articulate something, it will be then hopefully answering your question. I think there were many questions in one. But churn, I mean, in general, we tend to manage churn in a good way. So, we actually don't lose that many contracts. And then there might be always -- I mean, contract could also be amended. So, there could be parts of what was in scope before is not in scope in the future. I mean a lot of clients, they usually use 2 or 3 providers to have benchmarks. So, the composition might change. When it comes to new business, I mean, as I said, we have a very high focus on this. And this is now about sort of moving the organization from a very margin sort of focused type of effort to something that is much more forward leaning and thinking about new business. So, coming back to your question around the pipeline, a lot of this business -- a lot of those tenders will materialize in Q4. It doesn't mean that that will bring income from the 1st of January. It means that we will start ramping up the new contracts during 2026. And for bigger contracts, the ramp-up period can be as long as 6 to 12 months, especially if it's with the banking client where you do sort of gradual steps. So, I think that the SEK 1.8 billion should be just seen as a -- there's a big amount out there. We're trying to get the biggest share out of it as possible. But I wouldn't sort of -- I wouldn't expect that, that just means that we suddenly add all these revenues from the 1st of January on top of what we have today. It's a bit more complicated than that. Ermin Keric: Got it. That's helpful. Then, just one final question. On cost, how much more is left to be done there? And I suppose common costs looked very strong this quarter, down almost SEK 100 million quarter-on-quarter. Is that a sustainable level that we should think about going forward? And I suppose generally with cost, have you compromised the servicing quality to an extent? Or have you been able to add more technology usage already now? Masih Yazdi: Yes, I can start with that. I think there is a lot more to be done on the cost side when I'm talking about the mid-to-long-term, and that has to do with applying new tech and making the manual processes more automatic. So, I think this business over time should have a clearly lower cost base than it has at this point. How quickly that goes obviously depends on how quickly we apply best practice from different markets we work in but also use tech in a higher degree than we have today. In terms of the central costs, I think that most of the work there has been done, but I still think that there is some more to be done. I would also add that if you look at the impairments we've taken in the quarter, those will just in itself lead to about SEK 300 million less cost in 2026 than otherwise would have been the case. So, we are obviously moving into '26 with a positive momentum on the cost side given the FTEs we have today compared to a few quarters ago. And we think that this is a long game where the cost trend should be downwards in the mid-to-long term. Then the question is, to what extent do you use that to reinvest in your business and grow top line even more? And to what extent do you allow it to improve margins. And that's a balance we need to sort of try to strike in the future. Operator: The next question comes from Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: So, I had one -- starting with one technical question. The gains you're making on the debt that you -- that has been written down, it seems like there is an element of mark-to-market of the outstanding debt. Is that something new or -- because you did write it down by SEK 3.5 billion, right? Masih Yazdi: Yes. It is a mark-to-market, which happens when you do the recapitalization. So, you use the bid price basically that establishes just after the recapitalization and the difference between that nominal value of the debt and the bid price leads to a gain for us as the bid price was lower than nominal level. Johan Akerblom: Exactly. Exactly. So, it's like a fair value adjustment. Markus Sandgren: Okay. But that is not going to be fair value going forward from here? Johan Akerblom: No. Markus Sandgren: Okay. And then secondly, I was thinking about the aging back book in investments. What's your take on the collection performance over time when the portfolio gets older? Is it kind of constant or is it gradually degrading? Johan Akerblom: I mean if your question is, if we will continue to collect according to our forecast or better, I think we have taken in -- I mean, when you do the portfolio and you put out the forecast, you obviously take into account the decay. And we have an ambition to continue to collect above the index. But I mean, any portfolio -- well not any, but most portfolios, they have a higher collection rate in the beginning rather than the end. But that's also why I think we emphasize that our investment pace should continue to increase because we need to replenish. Markus Sandgren: Okay. And then lastly, regarding the market. Now we've been through a rate hike cycle and rates are coming down. What's your feeling on your markets that -- I mean, how much should we expect the market to grow when rates are much lower now in the coming years? Johan Akerblom: You're talking about the servicing business? Markus Sandgren: Yes, servicing, yes, right. Johan Akerblom: I mean, I think there's a -- I mean, there are a few trends in the servicing business. I mean one is obviously the macro has an impact on, especially banks, utilities, telcos. But there's also a lot of new kind of business verticals that has had an impact on the market as such. I'm thinking about Buy Now Pay Later, the steady state of increase of consumer lending, new entrants, all of that. And then you have -- in many parts of Europe, we also have some of the traditional business that we see in the North, it doesn't even exist. So, I think we will continue to see this market sort of growing but not growing massively. And then, as I said, I think in the previous interview, when we plan, we have to plan for a normal business cycle, which means that we cannot plan for another euro crisis, real estate crisis, financial crisis. That's when things sort of shift around. But we should be able to replenish and grow the servicing business, just basically capitalizing on the fact that we are in every country, we meet every different dynamics. And then, on top of that, we hope we can also figure out what's the next step when it comes to ancillary business because we are closely tied to many clients, and there are services that we don't provide today that we can probably provide tomorrow. Operator: The next question comes from Angeliki Bairaktari from JPMorgan. Angeliki Bairaktari: Just 4 questions from me as well. First of all, with regards to the servicing pipeline of SEK 1.8 billion that you mentioned, can you give us some color on where those clients -- those new clients could be coming from in terms of sort of industry? Are we talking mostly about banks or other type of clients? And secondly, with regards to the organic servicing revenue growth, can you break the 3% down into regions like Northern Europe, Middle Europe and Southern Europe, like you've done in the past? Johan Akerblom: So, yes, on the first one, I think some of the bigger clients or potential clients in the pipeline are bank related because that's usually when you have sort of bigger size. But it is a mix, but the bigger contracts are bank related. I think when it comes to the growth, I don't have the numbers in my head. I don't know if you remember, Masih, but I think we -- I have -- yes, we need to -- let us come back to that. We'll just get the numbers. Angeliki Bairaktari: And if I just may ask a couple of questions on the leverage ratio and the debt. So, first of all, you mentioned, I think, in your remarks that you have restated the debt and the leverage ratio to now take into account the market value of the debt. Can you give us some more details? Maybe I misunderstood that. And why are you doing that? Because I thought the typical definition of leverage ratio for every company is just the nominal value of the debt divided by the 12 months EBITDA. So, if you can just give us some more color with regards to the restated calculation? And then second question on the debt. How do you plan to refinance the 2027 maturities at the moment? I appreciate that this may change, but based on where we currently stand, what would be the plan? Johan Akerblom: Yes. We haven't used the market value when it comes to the leverage ratio. So, we are using nominal value. The market value was referring to the effect of the recapitalization and that net gain we had. So, when calculating the leverage ratio, we do it exactly the way you described it. We look at the nominal value and the 12-month running cash EBITDA. On the refinancing, the 2027, obviously, we have a few quarters to go before we need to deal with that. The whole purpose is to put the company in a better position so that refinancing goes well. So, it's about continuing to improve the business, generating more cash, improving the top line, continuing to reduce costs. So, we can only sort of focus on the company and how we're doing operationally to put ourselves in a good position before we need to deal with that maturity. Angeliki Bairaktari: If I just may come back to the leverage ratio... Johan Akerblom: On the growth, just to answer your question, most of the growth is from Middle Europe, but we also have some growth in selected markets in the South, in particular, Italy. And then the North is fairly sort of neutral. Angeliki Bairaktari: Sorry, just to come back to the leverage ratio because I think you mentioned in the beginning that you have obviously reported 4.7, consensus was looking for 4.5. And I think you mentioned that under the old definition, it would be 4.4. So, I'm not sure what you have changed. If you can just explain what you have restated, if there's something that has been restated in the calculation. Johan Akerblom: Yes. So, now we are looking at the nominal value of the debt, whereas with the old definition, it was the book value, and the nominal value is a higher number. And therefore, the new definition leads to a higher leverage ratio than would have been the case with the old definition. Angeliki Bairaktari: Right. And are you -- is that because in your covenants, you have to use the nominal value of the debt? Or what is the reason behind the change? Johan Akerblom: Well, it is more in line with the covenants. So, it's not a perfect, but it's a very, very close proxy to how the covenants are set up. And we also did change because if we would have done the old method, we would basically take benefit out of this accounting adjustment, and that's why we say with the old definition, it should have been 4.4, but we think it's more right to actually look at the nominal value and then talk about 4.7. Operator: The next question comes from Alexander Koefoed from Nordea. Alexander Koefoed: Can you hear me? Johan Akerblom: Yes. Alexander Koefoed: Just coming back again there to the leverage ratio. Sorry if you get tired of it. But this view that you can lever the company more on service as opposed to investing. I think that has -- some would challenge that view, although I agree and appreciate that lower risk, everything else equal, would be possible to finance. But again, yes, I think Ermin alluded to it as well, having investable assets on balance sheet would also be financeable. So that view, has any of that been cleared with creditor group out of curiosity? Or is that strictly your own view? That would be my first question. And then maybe secondly, if I can ask on your non-recurring items and I think SEK 2 billion in one-offs related to restructuring. Is there any of that actual payments, bills you need to pay from that, that -- how much of that is a hit? And when is those costs expected to be completely over and done with also in your cash flow statements? Johan Akerblom: Yes. If I start with the first question, as I said before, this analysis of looking at the leverage for the different parts of our business will not mean that we will set a leverage target in the future that is less ambitious than we otherwise would. We just think it's fair for ourselves to look at the riskiness of the business when we do set that target. So, I think we're just basically alluding to that we will probably look at having different leverage targets for the 2 types of business that we operate. What that lands in terms of aggregate leverage, whether that's going to be a target that's at the 3.5x that we have today or what it's going to be more ambitious than that and what the time frame of that will be, we'll come back with it in Q4, we just think for ourselves and how to operate the business, it's good to look at different targets for the different business lines that we operate and take into account how we think that those business lines will develop going forward a few years from now. On your second question, yes. Anne Eberhard: Yes. It's Anne here. On your second question regarding the costs that went through from cash in the third quarter, around SEK 550 million went through as cash. And then I think you also asked about the tail, if there's anything more to come through. It's very, very small. I don't think there's anything material. Johan Akerblom: Yes. I mean, I would say, as for Q3, the recap is closed. And yes, going forward, it's sort of business as usual. Alexander Koefoed: Okay. No fine. I was just curious on it. So, appreciate that. Maybe a third question, if I can. And so just it appears that my interpretation of what you're saying is that growth ahead might be a tad difficult for you, I mean, also on lower FTE base that for you to capture any growth, maybe underlying growth seen in Europe for you to really capture that, you need to sort of invest in automations, et cetera, to actually release capacity with your employee base to actually capture this top line. Otherwise, it will be more or less a lost opportunity for you because there's not too much capacity left with the current FTE base. Is that a fair way to say it like that? Johan Akerblom: No. I mean, I think what we're saying is we have room to grow with the current capacity. We think that if we can be even more efficient going forward, we will naturally win even more business. So, part of the -- sort of by being the more efficient you are, the more attractive value proposition you have. So, I think we have a different take on that. I mean, today, we can grow. We have capacity to grow in every market. But the more efficient we become; the higher likelihood is that we can grow even more. Alexander Koefoed: Yes. Okay. That's fair enough. Understood. I think there is some comments in the market that Buy Now Pay Later loans are perhaps seeing particular growth. Would you capture any of that? Or would this bank-related clients coming in, would that be more to your larger ticket items, maybe not to the same growth? Or would you comment on that? Johan Akerblom: I think Buy Now Pay Later is a very interesting segment, and we're already working with it, and we have been successful to actually onboard more Buy Now Pay Later volumes just in the last 2 quarters. And it's a segment that we will continue to target. And I think it's a segment that, in particular, fits with our digital collection platform. And yes -- so, yes, I don't see any -- it's a big opportunity. Operator: The next question comes from Rickard Hellman from Nordea. Rickard Hellman: Hi, can you hear me? Johan Akerblom: Yes. Rickard Hellman: So, to start with, yes, to be sure, looking at the cash flow, you have very high interest paid in Q3. And I assume this is related to accumulated interest from the capitalization. And you said that we're more or less done with all the cash flow now. Is that also [ for ] interest? So, we will not see any more tails out of this on the financial side? Johan Akerblom: Yes. All the accrued interest was paid in Q3. Rickard Hellman: Super. We talked a lot about the growth in frequency. Just a follow-up on that also. Have you seen any changes from your bank customers around handling non-performing loans in terms of volumes and signs of earlier collections or earlier divestments of portfolios? Johan Akerblom: No, nothing that is particular for the quarter. I mean this continues to evolve differently depending on market, depending on the situation. I mean, for now, now we have a situation in Germany where you see the Stage 2 is going up. So, it's very -- there's no sort of a coherent trend across Europe. Rickard Hellman: Okay. I see. And then, of course, also, I'm not sure if you would like to answer, but -- and it has been discussed a lot around this Page 12 about leverage. But if you would have a fully service business, I mean, without any investing vehicle at all, what would you say a total leverage would be for such business? Johan Akerblom: I think -- again, I think that's something we will leave for the future. I think the point we're trying to make is not that -- I think the point -- we're just trying to show that our business has fundamentally changed. And the 2 legs, they have a very different type of business profile. And we will have to come back to this when we come with our Q4 strategic review and explain more how we see the future. But all things equal, we definitely have an ambition to become a much more resilient company when it comes to leverage. But we don't have a number for you. Rickard Hellman: So, fully understand. But as you also understand, I mean, this -- all this kind of discussion around leverage probably we have a lot of attention among investors and analysts. Johan Akerblom: Of course. So, I think the message that we -- if we want to conclude one message, it's that the leverage has to go down. I think it has to continue to go down and it needs to be sustainable. And we will tell you more in Q4 how we will make it happen. Operator: The next question comes from Wolfgang Felix from Sarria. Unknown Analyst: Hello, can you hear me? Johan Akerblom: Yes. Unknown Analyst: I have 2 remaining really, only. One is regarding the SEK 2 billion target that you were mentioning earlier in the context of your investment division bottoming out. I'm not really sure what target you were referring to there. If you could just repeat that again, that would be fantastic. And then obviously, you've just restructured. And if you're looking across to your competitors, say, in the U.K., for instance, after the restructuring can be before the restructuring. And so, I guess if you're looking at your own balance sheet and given your restructuring has also just been a very light restructuring, despite the complexion perhaps, how would you rate your options today to manage liabilities perhaps a little further? Johan Akerblom: First one, I mean, we have -- I think we've mentioned before that we have an ambition to invest SEK 2 billion per year, so roughly or SEK 500 million per quarter. That's the SEK 2 billion I'm referring to. And then I think on your question on leverage, I think Masih did answer that before. I mean the way we see is that we need to continue to operate our business in an improving fashion. We need to continue to become more efficient. We need to continue to improve our servicing business and adding top line growth. And then on the investing side, we need to, at the first instance, reach the SEK 2 billion per year as replenishing. And then we'll see what the next step is in terms of investment volumes. And that's the organic path on how we can delever. Unknown Analyst: And so, you're not currently looking at anything -- we shouldn't be expecting anything inorganic, so to speak, over the next, say, year? Johan Akerblom: I mean when we do a strategic review, we will look at all options, and we will see which one creates the most value. But the base case is obviously always that we move on organic path. Operator: The next question comes from Ines Charfi from Napier Park. Unknown Analyst: Hi, can you hear me? Johan Akerblom: Yes. Unknown Analyst: Just going back to the one-off. So, can you talk about the impairments, the goodwill impairments and what kind of -- what does that mean basically for the future? Johan Akerblom: Yes. I mean there are a few different impairments. The big one is the goodwill impairment we have done for Spain. As I said previously, it's related to what we thought would happen with that business and the actual performance, and we could see that the actual performance had been worse in the short term. And therefore, we felt that it would be conservative to do a goodwill impairment there. The other impairments mainly relate to client contracts we've had on the balance sheet, where you do the same kind of assessment of what kind of revenues you think you're going to generate from those customers going forward. And again, we've taken a conservative approach and have a lower assessment on those revenues, and therefore, we've done impairments there. And the remaining impairments relate to software we've had on the balance sheet that we've written down. And as I said before, what this means is that D&A will be lower than otherwise would have been the case going forward. And for 2026, we're talking around SEK 300 million lower D&A expense. Unknown Analyst: Okay. But just to understand that a bit more, does that mean -- like, should we expect kind of less -- I was trying to understand the impact of the -- in terms of collections, et cetera, going forward. Like would the impact be for the short term as in like next quarters? Or like how should I think about that? Johan Akerblom: There is no impact on collections. It's just an impact on the cost line, which will be -- everything else equal will be lower in Q4 and also lower in 2026. But this is not related to how collections will perform going forward. Unknown Analyst: Okay. And then, just looking at the maturity profile, Page 14. So just to be clear, you still have outstanding in 2025? Johan Akerblom: That's a term loan that we're paying back to some extent, and it's been -- it has been extended. So, it's not a -- yes, so it's nothing you need to be concerned about. Unknown Analyst: So that has been extended? Anne Eberhard: We're currently in negotiations on that. Johan Akerblom: Well, it should be done fairly short -- fairly soon. And it's not fully being -- I mean, it's partly being paid, partly is extended, and it's just to give us a bit more flexibility going forward. Unknown Analyst: Okay. So, I guess it will be dealt with... Johan Akerblom: Before we -- when we announced Q4, it's fully dealt with. Unknown Analyst: So partly extended and partly paid down. Johan Akerblom: Correct. Unknown Analyst: And just looking at the RCF, so what's the drawn amount as of 3Q? Johan Akerblom: RCF. Anne Eberhard: Sorry, say that again? Unknown Analyst: What is the drawn amount of the RCF? Anne Eberhard: It's around 11 point…. Johan Akerblom: 10 point -- yes, I mean it's almost fully drawn. Operator: The next question comes from Wolfgang Felix from Sarria. Unknown Analyst: One follow-up question really quickly. Can you give us some guidance on your sort of speed of collection going forward? Are you going to maintain the same rate of collection? Do you think you're going to maybe slow it down a little bit? What should be sort of a stable case from here, all else equal? Johan Akerblom: When you talk about our collection rate, in what context? Are you thinking about our investing portfolios or...? Unknown Analyst: Yes. I'm sorry, only the investing portfolio. Johan Akerblom: I mean the investing portfolios, they will -- it's hard to predict, but we've -- historically, we've been collecting slightly more than our forecast. And I think that's the ambition going forward as well. And then obviously, the amount of collections depends on the size of the book and the profile. Unknown Analyst: Yes. So, if -- I'm trying to picture it like this. If you are maintaining as many people as you were before, but you have a smaller book, then you would be churning that book or turning it over a little bit more quickly. Is that the idea? Or is the idea to shrink your collection engine, if I can call it like that, to maintain the same speed of working out the smaller book? Johan Akerblom: I mean, we're always trying to collect as much as possible. And then at the same time, we're trying to be more efficient in every collection. So, I think your analogy is not really the way it works in reality. But of course, if you have lower volumes, you need less people. But I mean, out of our 7,000 people working in collections, serving our own portfolios is just one part of it. I mean we have a much bigger book with our clients where we operate. Unknown Analyst: Yes. No, that I understand. So -- but I think I understand your answer. Operator: There are no more questions at this time. So, I hand the conference back to the speakers for any closing comments. Johan Akerblom: So, thank you for a lot of questions today. I hope we've been able to clarify what is a little bit of a difficult quarter to understand, given all the one-offs. But I think as we pointed out, we're happy with the underlying. We're making progress. We're deleveraging. Cost continues down. We see a bit of servicing income growth and the investing portfolios are collecting slightly better than planned. And the investing volumes are higher than before. And, obviously, we want to further improve going forward. And we hope to see you when we present the Q4 and talk more about the way forward. Thanks a lot and have a great day.
Hanna Jaakkola: Dear all, warmly welcome virtually to Helsinki, and thank you for tuning in for Kesko's Q3 2025 Release Call. Results improved, positive development in all divisions is our headline. We also updated our guidance and are giving some outlook regarding next year. Our agenda today is the following: President and CEO, Jorma Rauhala, will give the Q3 presentation. We have here with us our Business Division Presidents, Ari Akseli for Grocery Trade, Sami Kiiski for Building and Technical Trade; and Johanna Ali for Car Trade; as well as CFO, Anu Hamalainen. After Jorma's presentation, it's time for questions, both by phone and via chat function. All materials related to Q3 can be found at our website, kesko.fi under Investors. My name is Hanna Jaakkola. I'm responsible for IR at Kesko. I will be at your service after the presentation for your questions and discussions. But now without further ado, Jorma, the virtual stage is yours. Jorma Rauhala: Thank you, Hanna. Ladies and gentlemen, welcome also on my behalf to this release call. I am Jorma Rauhala, and I have now the pleasure to present Kesko's Q3 results. Result improved. Positive development in all business divisions is our headline. And what we do mean by positive development. For Grocery Trade, we saw a turn for better in Grocery Trade's market share and the rolling 12 months EBIT margin was 6.6%, which is definitely clearly above 6%. Also, grocery volumes in the market increased, which is positive. We saw also demand for quality products and services increasing. In Building and Technical Trade, the market was challenging, but we saw positive sales development in Denmark, Poland and Baltic countries. Also, Onninen sales in Finland increased for the first time in 2 years. In Car Trade, both sales and operating profit increased clearly. But now, I will give an overview of our business performance and open up elements behind the result. In the end, I'll present the updated guidance for 2025 and outlook for 2026. And after that, we are ready for the Q&A. Summary of Q3 2025. Kesko's result improved clearly and net sales grew in all 3 divisions. The result was actually better than we expected for Grocery Trade and Car Trade, but construction cycle improvement has still been slower than anticipated and the result in Building and Technical Trade was comparable or slightly below our expectations. The sales in Building and Technical Trade were in line with our expectations, but the sales margin was lower due to continued tight price competition in a challenging market. In Grocery Trade, net sales increased and comparable operating profit was at a good level. Sales development for grocery stores were close to market pace. In Building and Technical Trade, net sales increased supported by acquisitions. Also comparable operating profit increased. In Car Trade, net sales increased and comparable operating profit grew clearly. Kesko's history's biggest ever construction project, the shared Onninen and K-Auto logistics center Onnela was completed on schedule and below the original budget. Kesko updates its 2025 profit guidance, and we are now estimating that its comparable operating profit will be in the range of EUR 640 million to EUR 690 million. We estimate that in 2026, operating environment and result will improve in all divisions and in all operating countries. Net sales in Q3 totaled over EUR 3.2 billion. It was up by EUR 201 million. Net sales increased in all businesses. Rolling 12 months net sales increased to almost EUR 12.3 billion. In Q3, comparable operating profit was EUR 208.1 million and operating margin was 6.4%. Comparable operating profit increased by EUR 6.5 million. Kesko Senukai reported in the third quarter, its joint venture result for the whole 9-month period, and it was EUR 7.4 million. Excluding Kesko Senukai's January-June figures, operating profit increased by EUR 6.6 million. Comparable operating profit increased in Building and Technical Trade and in Car Trade and decreased in Grocery Trade. Rolling 12 months operating profit was EUR 651.2 million and operating margin was 5.3%. Return on capital employed was 10.6%. Return on capital employed increased in Car Trade, was down in Building and Technical Trade and in Grocery Trade compared to the year-end. Financial position. The amount of net debt was impacted by investments in store site and acquisitions. Cash flow from operating activities were at the last year's level despite the change in the Food Market Act in 1st of July, which shortened the payment terms. The estimated negative impact of the payment term change to Grocery Trade cash flow was approximately EUR 100 million. Capital expenditure totaled EUR 141 million. I'll open up investments on the next page. Net debt-to-EBITDA was 1.8. It increased, but is well below our maximum target of 2.5. Capital expenditure totaled EUR 141 million. We continued the investments in growth and the main CapEx in Q3 were store site investments in Grocery Trade and the constructions of Onnela, Onninen and K-Auto shared logistics center in Hyvinkaa, Finland. Expenses. Expenses have increased mainly due to acquisitions. Expenses, excluding the acquisitions, were up by only 1.3%. This is a good achievement taking into consideration the salary increases. Now to Grocery Trade, where we saw increased sales and a turn for the better in grocery market share development. In Q3, net sales totaled over EUR 1.6 billion and increased by EUR 36 million. Kespro's net sales declined by 0.2%. Rolling 12 months net sales totaled EUR 6.4 billion. In Grocery Trade, comparable operating profit for Q3 was EUR 117.5 million, and it declined by EUR 1.2 million. Profitability was strong, 7.1%. Kespro's operating profit declined by EUR 0.8 million. Rolling 12 months operating profit was EUR 424 million and operating margin was 6.6%. In Grocery Trade, net sales increased and comparable operating profit was slightly down. K Group grocery sales were up by 3.6%. Kespro's net sales were down by 0.2%, which was close to market pace. K-Citymarket non-food sales were up by 3.2% and profit improved. Customer flows continued to grow, thanks to the price program and campaigns. Online grocery sales were up by 9.9%, especially Click & Collect and fast deliveries increased. Online sales is 3.9% of total grocery sales for the whole 9 months period. General grocery price inflation in Finland was approximately 2.7%, but the price development in K Group stores was only 1.2%, especially thanks to our price program. Total grocery market grew approximately 3.9%, so the volumes in the market increased in Q3. Market share development for K Group grocery stores has strengthened during the year and was close to market pace in Q3. In the hypermarket segment, K-Citymarket won over market share in January, September, and I'm very pleased with this development. Even though Grocery Trade market remains price driven, there are signs of demand growing for higher quality products and services. Our measures are yielding results. Market share development for grocery stores is positive. I have been asked if our price program is enough to turn the market share. No, it is not. We need all these 3 elements: quality, price and network. If we look at the network, our main focus is on growth centers, and we are developing all our formats. In September, we opened a brand-new K-Citymarket in shopping center in Lempaala close to Tampere. The next one to open is K-Citymarket Paavola in Lahti, replacing the first ever hypermarket in Finland opened 1971. In '25 and '26, we are opening 6 K-Citymarkets, 12 K-Supermarkets and 20 K-Markets to strengthen our network and market position. Annual investments are expected to be around EUR 200 million to EUR 250 million in the whole grocery store site network in upcoming years. After Suomen Lahikauppa acquisition in 2016, our network in smaller format is extensive, and we have not opened hypermarkets in recent years. Much of the planned CapEx will be directed to hypermarkets. By 2030, the store site network will be updated in the right locations and meets upcoming legislative requirements. We announced this morning great news about new hypermarket opening plans in Helsinki metropolitan area. Getting new suitable locations in Helsinki area is very difficult, and I'm very pleased to announce these new hypermarkets. We will open a new K-Citymarket in shopping center ready in Kalasatama next to our headquarters. New store will open latest in 2028 and replace the current K-Supermarket. The area has grown fast and is expected to grow further quite heavily in the future. Shopping center Redi will be our fifth hypermarket in Helsinki and the second close to the city center. We have also acquired the majority of shopping center Tikkuri in Vantaa and have plans to start building a new K-Citymarket towards the end of the decade. Tikkuri is in the heart of Vantaa. This store will be the sixth in the city of Vantaa after Kivisto. Vantaa too is fast growing. In Espoo Kesko's, new zoning is now in place and construction works for the new K-Citymarket have started. The store is expected to open in 2028 and will be the third K-Citymarket in the growing and affluent city of Espoo. The common factor for all these new stores is urban shopping center location with great traffic connections for both public and private traffic. Price program launched in January removes obstacles for buying. The price program includes affordable everyday products. Prices have been cut on total 1,200 popular products. There are also relevant campaigns and personalized targeted benefits. Results have been promising, good sales development with good profitability. Customers have found the products with reduced prices well. Customer flows and average purchase has developed well. Also, daily basic purchases have increased, not only campaign sales. We will continue the price program with a long-term focus while keeping the profitability at a strong level, clearly above 6%. Quality is in our DNA, and the quality work is never ready. Raising the bar in quality offers significant sales growth potential. K-retailers and store-specific business ideas are our key competitive advantage. We have many excellent stores, but there is still too much variation between the stores when it comes to quality. It is critical to choose the right retailers to right locations. Rotation is normal. There are some 140 retailer changes each year. Key actions to increase quality is further sharpen each store-specific business idea. Also, we are focusing especially on renewing certain departments like bread and fruit and vegetables as well as K-Citymarket non-food. Extensive relevant selections are created by data and AI and digital services are being developed to make everyday life easier, both for customers and K-retailers. Now to Building and Technical Trade. Cycle is recovering, notable strengthening in technical trade sales. In Building and Technical Trade, net sales increased by EUR 106 million to over EUR 1.2 billion. The increase was supported by the Danish acquisitions. Net sales improved in comparable terms by 1.3%. In comparable terms, technical trade net sales improved by 3% and building and home improvement trade declined by 0.2%. Rolling 12 months net sales were over EUR 4.5 billion. Comparable operating profit for the Building and Technical Trade division totaled EUR 71.7 million and operating margin was 5.8% Operating profit increased by EUR 1.6 million. Kesko Senukai reported its whole January, September figures in Q3. Excluding Kesko Senukai joint venture result for the first half, the operating profit increased by EUR 1.7 million. Rolling 12 months operating profit was EUR 170.4 million and operating margin was 3.7%. Comparable operating profit increased, thanks to positive profit development in technical trade and Kesko Senukai reporting its joint venture result. In Building and Technical Trade, Q3 net sales increased and profit improved. Market demand was again weaker than anticipated, especially in new residential construction. Technical trade sales increased significantly, while profit declined compared to the last year. Building and home improvement trade net sales grew, thanks to acquisitions, but declined in comparable terms. Despite the increase in division sales, sales margin weakened due to continued tight price competition in a challenging market. In Finland, K-Rauta building and home improvement trade sales decreased slightly year-on-year. In Finland, Onninen sales increased for the first time in over 2 years. Norway, sales increased for Byggmakker and Onninen also profit improved. Denmark, Davidsen sales development was strong and integration of acquired companies is proceeding as planned. Sweden, ramp-up of converted K-Bygg stores continues, and it impacts negatively sales and profit development. Credit risk is well under control. Write-downs of overdue trade receivables totaled EUR 1.2 million. In Q3, Kesko Senukai reported its joint venture result for the whole January-September period. In Kesko's Q3 reporting, Kesko Senukai's joint venture result was EUR 7.4 million. Kesko Senukai did not report January-June quarter separately. Kesko Senukai's joint venture result for the first half was EUR 0.1 million negative due to inventory write-down. As we commented in July, in operational terms, performance was roughly in line with the previous year, and Kesko Senukai's joint venture result for the first quarter is typically negative. We have showed this picture many times already. And here, you can see now the Q3 development. We can see K-Rauta's and Onninen sales development in Finland since 2019 in this picture. Both have strong market shares. K-Rauta is the market leader in building and home improvement business in Finland and Onninen in technical trade. K-Rauta sales declined somewhat in Q3. Onninen, on the other hand, performed well and the sales increased for the first time since spring 2023. Here, we can see Onninen's main customer groups in Finland. Onninen serves extensively various construction segments. Technical contractors represent about half of the sales. These are, for example, plumbers and electricians. This technical contractor segment can be divided 50-50 into new construction and renovation and maintenance. 20% of sales goes to industry segment, which includes also shipyards and other industrial construction. Infrastructure represent also 20% of sales. The market in infrastructure has been better than in other forms of construction. And the remaining 10% is wholesale to retailers and other B2B customers. The fact Onninen's presence is so wide helps in different situations and cycles. The much discussed share of new residential construction is currently only about 1/4 of sales. But of course, when the cycle gets stronger, the share of new residential construction will increase. At the moment, nearly 60% of Building and Technical Trade division sales come outside Finland and the pace of construction cycle recovery varies between countries. In the map, we can see the sizes of the businesses in each country and how net sales in comparable terms have developed in Q3 compared to Q3 a year ago. There is a clear improvement in the southern part of the map, Denmark, Poland and Baltic countries reporting strong growth figures. Finnish sales I already presented. In Norway, Byggmakker sales have increased and Onninen were at the same level as last year. In Sweden, we still have work to do in our performance, getting the sales of converted stores up. Also, the market has been difficult in B2B business. But we see cycle turning even if the turn is lower than thought earlier. And now some words about Onnela logistics center. The center serves mainly Onninen, but also K-Auto spare parts. Construction was completed in August, and the move and ramp-up phase is happening during the quiet winter season. The center is fully operational at the end of Q1 next year. K-Rauta central warehouse, which is currently outsourced, will move to Onninen's former warehouse, which is also located in Hyvinkaa. This gives us synergies, for example, in staff resourcing. Onnela logistics center enables growth once the market strengthens and will bring efficiency benefits as volumes grow. The timing of this project was excellent. Original cost estimate was EUR 300 million and the actual cost was less than EUR 250 million. Onnela enables future growth. The center is clearly bigger and has more automatization than the previous warehouse. And there is possibility to expand the center in the future, too. And now to Car Trade, where strong profit development continued. In Car Trade, net sales for Q3 increased by EUR 60 million and were EUR 355 million. Net sales increased in new cars, used cars and services, but decreased in sports trade. Rolling 12 months net sales were over EUR 1.3 billion. The comparable operating profit totaled EUR 22.7 million and increased by EUR 4.9 million year-on-year. Operating margin was 6.4%. Rolling 12 months operating profit was over EUR 82.5 million and operating margin was 6.1%. Net sales and comparable operating profit grew clearly despite the market remaining challenging. Market demand for new cars continue to be still muted. Q3 first registration of passenger cars and vans up by 2.5%. First registration of brands represented by Kesko, up by 18.2% in Q3. This is a great achievement, and we gained heavily market share in new car segment. Good development is a result of attractive new car models and constantly improving operational excellence. Market trend in sales of used cars from dealerships to consumer was down by 0.1%, and our used car sales were up by 25%. Also, service sales increased. We are targeting to grow, especially in damage repairs and the servicing of cars 5 years or older. In sports Car Trade, net sales and comparable operating profit decreased, but market share grew. And now, specified profit guidance for 2025 and outlook for 2026. Profit guidance for 2025. Kesko Group's profit guidance is given for the year 2025 in comparison with the year 2024. Kesko's operating environment is estimated to improve in 2025, but still remain somewhat challenging. Kesko's comparable operating profit is estimated to improve in 2025. Kesko estimates that its 2025 comparable operating profit will amount to EUR 640 million to EUR 690 million. Kesko previously estimated that the comparable operating profit would amount EUR 640 million to EUR 700 million. The updated profit guidance is based on the results for January, September 2025 and the slower-than-anticipated cycle recovery in Building and Technical Trade in the third quarter. Key uncertainties impacting Kesko's outlook are developments in consumer confidence and investment appetites as well as geopolitical crisis and tensions. Outlook for 2026. The operating environment for Kesko is estimated to improve in 2026 in all divisions and all operating countries. Kesko's comparable operating profit is also estimated to improve in 2026 in all divisions and all operating countries. In Grocery Trade, B2C trade is estimated to pick up and the foodservice business to remain stable. In 2026, the comparable operating profit -- operating margin for the Grocery Trade division is estimated to stay clearly above 6% despite the investments in price and the store site network in line with Kesko's strategy for 2024-2026. In 2026, the comparable operating profit for the Grocery Trade division is estimated to improve on 2025. In Building and Technical Trade, the cycle has not improved in 2025 as expected at the start of the year. In 2026, the cycle is expected to improve moderately from an exceptionally low level. In 2026, the comparable operating result for the Building and Technical Trade division is estimated to improve on 2025 in all Kesko operating countries. In Car Trade market, new car sales are expected to remain muted compared to long-term levels, but to nonetheless grow compared to 2025. In 2026, the net sales and comparable operating profit for Kesko's Car Trade division are estimated to improve on 2025. To summarize, the result was good, and there was positive development in all divisions despite the challenges in Kesko's operating environment. In Grocery Trade, strategic measures are yielding results. Market share development for grocery stores has taken a turn for the better. Kesko's market share is strong. Consumer sentiment is moving to better direction and Grocery Trade market is showing signs of picking up. In Building and Technical Trade, sales were clearly up in Denmark, Poland and the Baltic countries. Technical trade sales grew. Construction cycle is strengthening, but at a more moderate pace than previously anticipated. In Car Trade, there was a good sales development in new and used cars and services. Sports trades outperformed the market. All 3 divisions are well positioned for market strengthening in 2026. Thank you. This was my presentation. I guess it's time for questions now. Hanna Jaakkola: Thank you, Jorma, for the presentation. Let's go to the Q&A now. So I will turn first to the conference call line, please. Operator: [Operator Instructions] The next question comes from Maria from Wikstrom. Maria Wikstrom: This is Maria from SEB. I still have a few questions. I would love to have a little bit more color. I'm starting with the 2026 outlook. And especially if we look at the Grocery Trade division, you are guiding for an adjusted EBIT to pick up in '26 from '25. And already, I mean, '25, we have a quite high level. So could you discuss a bit about your confidence on the earnings growth in Grocery Trade division next year? And what are your assumptions behind this growth assumption at this point in time, please? Jorma Rauhala: Okay. Thank you, Maria. All in all, about Grocery Trade, of course, we have now seen that, for example, now last quarter, Q3 was quite strong, also volume increase in the Finnish grocery market and also our performance when it comes to sales, market share and EBIT was quite nice. So we believe that more and more consumers are a little bit more confident. They are now buying more, let's say, very high-quality ready meals and fish and fruit and vegetables and things like that. So all in all, we think that the Finnish grocery market will increase next year. And also, we believe that our performance will be quite strong when it comes to market share. So no doubt about that, that what we stated that the EBIT on Grocery Trade will be clearly about 6%. Maria Wikstrom: And coming back to the market share question, I think you earlier have said that even you have lost the market share on the total Grocery Trade division, you have gained market share with the hypermarket concept. What is your view on the market share development in Q3? And if, I mean, do you think -- I mean, in order to facilitate faster market share growth that you would need to initiate new pricing actions? Or would this -- what you did in the beginning of the year be enough, I mean, for now? Jorma Rauhala: Yes. All in all, like I said, Q3 was very good when it comes to market share development. And the total market growth was 3.9%, and our growth was 3.6%. So we were very close on the market pace. And in hypermarket sector, we have gained market share whole year, which is very, very positive. And also now kind of supermarket segment, we were very close when it comes to market growth pace. We are losing market share on the smaller side, those neighborhood like K-Market. And biggest reason for that is that our store network has -- we have less stores, let's say, now. But all in all, I'm very confident that now Q3 was very much better than Q1 and Q2. And next year, especially, I believe that the next year will be the year that we will gain market share, and we will continue with this price program and the whole program kind of includes our pricing system. So no -- any big changes needed on that one. But I hope this opened a little bit more that. Maria Wikstrom: And then finally, I know this is a kind of a small thing in a big picture, but still wanted to get a little bit more insight on the turnaround and rebranding of the Swedish Building and Technical Trade business to K-Bygg, as you mentioned separately that, that was still eating into the profitability this year. So when do you expect I mean to reach the black numbers? And what is kind of the leeway that you see or trajectory that you see in the Sweden going forward, please? Jorma Rauhala: Yes. Okay. Thank you. Sweden and K-Bygg, Sami, you can take that one. Sami Kiiski: Thank you, Maria. So first of all, of course, we see the market a little bit recovering also in Sweden and more from B2C side. So consumer business is better than B2B. And of course, we need to remember that when we did this strategic move or change to concentrate our business to K-Bygg, it's mainly B2B business. So it's 80% B2B business. And of course, that is also affecting. But yes, we see that the market is getting better. And also, we see that our performance is getting better, particularly, of course, with the, let's say, old K-Bygg and then these converted K-Rauta stores are also gradually picking up now. And of course, it's a hard job to build up the B2B business. We need to be very close with the customers and also build up our offering to that direction. But I see already positive signs also. Jorma Rauhala: Continue a little bit good to understand also that is it something like 50 stores we have in Sweden, something like that. And now we are talking about 7 or 8 stores, which we have this a little bit problem, let's say, so. Sami Kiiski: Exactly. Jorma Rauhala: Yes. Maria Wikstrom: And then my final question is that, I mean, given that your leverage ratios were up slightly on the -- after the Q3. What is currently your appetite, I mean, for further acquisitions? I think we talk now about the Building and Technical Trade segment. Jorma Rauhala: Yes. Our strategy hasn't changed. So still, we are seeking growth also through acquisitions. And also, we have stated that very clearly that Sweden is the most critical one that we want to grow our business and in this Building and Technical Trade to make big changes through acquisitions. So we still are looking good targets in Sweden. Also, other countries could be possible, but clearly, Sweden is priority #1. Operator: The next question comes from Fredrik Ivarsson from ABG Sundal Collier. Fredrik Ivarsson: I've got 3 questions. I'll take them one by one. So first, if we could start with the slight margin contraction in BTT despite some like-for-like growth. What was the key drivers behind the slightly lower margin in B2B, please? Jorma Rauhala: All in all, maybe, Sami, you can take this one. But of course, it is still a weak market situation. And when the market situation is weak, the competition is very, very tight. And let's say, so that the volume is maybe not the biggest problem now. The gross margin is kind of a challenging one. But Sami, maybe you want to continue your... Sami Kiiski: Yes. Of course, that is quite natural that this kind of environment and also this kind of, let's say, market, it's natural that the price competition is, let's say, very hard in all the markets where we are in. And of course, particularly in technical trade, we see that also. And particularly, we see that, for example, only in Finland, business setup is good. It's working well. We see more price competition, of course, in this kind of project businesses. But our model is also so that we -- a big part of that is a service business. We have wide Onninen store network here in Finland, 60 -- almost 60 stores. And we see that there, we have a very good pace also. But of course, like I said, this kind of market, the price competition is hard. Fredrik Ivarsson: And then on the EUR 200 million to EUR 250 million store site investments, was that only in grocery or for the full group? I didn't catch that. Jorma Rauhala: Grocery. Grocery, yes. Fredrik Ivarsson: And can you remind us how this sort of stand in relation to historical levels? I recall, I guess total CapEx has been around EUR 300 million in grocery, but how much of that has been store site investments? Jorma Rauhala: How about colleagues, do you remember the figures? I remember that 2020-2021, we have much less what comes to those store site investments. But Ari, do you remember Ari Akseli: Yes. Exactly during this COVID time, it was the lowest level ever during my time in Kesko. It was something like EUR 100 million yearly. But typical level is between EUR 150 million to EUR 200 million yearly. Jorma Rauhala: Yes. Fredrik Ivarsson: So this is a slight acceleration, I would say? Jorma Rauhala: Yes, we can say yes, that's true. Hanna Jaakkola: To add, we have been saying this EUR 200 million, EUR 250 million for quite some time now. So this was not news this time. But to reminder that, that is the level. Jorma Rauhala: And also those 3 new super -- K-Citymarkets we announced this morning includes on those EUR 200 million to EUR 250 million. So no any extra investment because of those. Hanna Jaakkola: Yes, exactly. Fredrik Ivarsson: And then last question on my side, on the 2025 guidance, what do we need to see in order for you to reach the high end of the guidance? I guess, midrange implies around 8% EBIT growth. But in order for you to reach the high end, what do you need to see during the last 2 months of the year? Jorma Rauhala: Okay. So a couple of 3 months still to go or 2 months, let's say, so that, of course, all the businesses has performed better than we expected now. And of course, Christmas is there. If there would be an excellent Christmas, especially for K-Citymarket, and that would be -- but also it needs that the Building and Technical Trade market should recover a little bit faster. I would say those 2 are the main opportunities on that one. Hanna Jaakkola: Thank you, Fredrik. Anybody else on the line? Very good. There's one coming. Operator: The next question comes from Calle Loikkanen from Danske Bank. Calle Loikkanen: Just a couple of questions. If I start with the Kesko Senukai, I was just wondering about the inventory write-down that could you elaborate a bit on the reasons for this and also how big the impact of this write-down was in terms of euros? Jorma Rauhala: Yes. Anu, you can take that one. Anu Hamalainen: Thank you, Calle, for your question. If I put it like this, in July, we told that Kesko Senukai's Q2 figures for this year were according to last year at the same time. And it was according to that with the management report that we received. So the management report didn't show anything special. So what we did not receive back then was all figures. And for example, inventory, which is the reason why we couldn't report Kesko Senukai figures in Q2 as we need to calculate the Kesko Senukai inventory according to Kesko's inventory valuation principles. As such, I want to emphasize that this is normal and the inventory valuation could show pluses or it could show minuses, and we haven't opened this up earlier. So we have had both pluses and minuses during the previous years as well. So there is nothing special on that side. Why we wanted to open this up was that the inventory valuation will just tell you that the Kesko Senukai is operationally doing well. So there is nothing special on that side. So the inventory valuation could be something else during the last quarter this year. So we don't want to open up, unfortunately, these kind of valuations. Calle Loikkanen: But in terms of euros, I guess it was something like EUR 6 million or in that ballpark? Anu Hamalainen: Well, let's say, it was negative. Calle Loikkanen: And then secondly, I was wondering about the price competition in the technical trade business. And I was wondering that have you seen price competition accelerating now during this year? Or has it just continued to be that way, but you just now started kind of talking about it? And also, are you expecting any changes in the price competition now in Q4 and more importantly, in 2026? Jorma Rauhala: Okay. Sami, you can take that one. But if I understand right, it hasn't accelerated. It has been like that, let's say, at least this year, not any big changes on that one. And I think it's like say, quite normal on this time when the market cycle is very, very weak. And when the market will improve, I think that also that won't be so big problem. But Sami, is that something else you want to add? Sami Kiiski: Exactly. Like you said, we saw that it started, let's say, quarter 4, 2024. And like I said already, it's a little bit connected to these projects, which I think everybody are fighting for, I mean, our customers also more when the market is like this. So it's a very price-driven market in that, let's say, segment in a way. And there, we see this price competition to be quite heavy. But other than that, it hasn't changed a lot in the big picture. And like Jorma said, we are waiting that it should gradually go, let's say, better direction when the market is recovering also. And we need to remember also that this is also availability business. And it's not only the prices, it's also that you need to have good warehouses, you need to invest like we did now with Onnela, and this is much more than prices also. So in the long term, availability matters also. Operator: The next question comes from Miika Ihamaki from DNB Carnegie. Miika Ihamaki: This is Miika from DNB Carnegie. My first question is, you're noting here Davidsen sales development was good, creation of acquired firms proceeded as planned. I was wondering, did you realize any synergies during the quarter? If not, when are you expecting to realize them? And can you give any ballpark and naturally talk about a little bit how the integration is proceeding in Denmark overall? Jorma Rauhala: Sami, you can take this one. Denmark, yes. Sami Kiiski: Yes. I -- was it the Denmark market also, first of all or? Hanna Jaakkola: Yes. And how the integration is proceeding. Sami Kiiski: Thank you, Miika. Good question. And like we have told, so this the closing of these 3 companies were during the 2025. And of course, we started in February, as we all remember, and then the last one came in, in June. So the integration has actually went pretty well, I would say, or at least I'm very happy that it has been a big project. As we all understand, it's a big acquisition for us. Integration has been going well. We have been keeping our most important customers also happy. IT platforms are in place. The new branding is there. So we are really the national-wide player there and ready to expand also the business. So the platform is good. When it comes to synergies, I believe we don't open up the synergies so much. But of course, there's always synergies when we have -- when we are becoming, let's say, the big player and the national player and particularly when we are talking about B2B business and this heavy building materials. And of course, one big in a way, improvement and maybe also you can call it synergy is that we have much better logistics when it comes to growing areas like [ Zealand ] and Copenhagen area where we see more activity also now. So that's maybe to summarize of Danish business. But we are very happy to see that we are performing there and better than market also as a whole. Miika Ihamaki: And then my next question is that what is your expectation on specifically Finland Building and Technical Trade profits into next year on the basis of housing market recovery? So I would like to understand how much do you -- how much is your profit recovery dependent on the housing market in Finland? Jorma Rauhala: Sami, would you like to have this one? Sami Kiiski: Yes. We see also that, of course, we are also closely following what is happening with our customers and also what is happening with the housing market. I believe the message from the market has been also that it's gradually getting better, the market. And also it was, I believe, very well also opened up in Jorma's presentation that our business is not only depending of the new residential or new housing construction business. But of course, let's say, so that we are also waiting for that the market, let's say, come back or gradually improve. So then we will see, of course, that the effect will be there. It's 1/3 of our, for example, Onninen business is, in a way, connected to new housing market, and we can, of course, serve and sell much more equipment and technical and HVAC equipment and products there. So maybe to summarize, we believe that the market will be better. Also the forecast what we are having from euro construction also is showing that the [ for a contract ] it's going to be a better market. But maybe not the first part of the year. It's going to be better when we go a little bit further 2026. Hanna Jaakkola: No more questions from the conference call line. I have one question here coming from the chat. You mentioned already in Q2 report that construction recovery has been slower than expected during '25. And now in '26 outlook, you comment that it will be more moderate than previously anticipated. Has the view on construction recovery weakened further since the summer? Is the question. Jorma Rauhala: Thank you. Yes, we say that Q3 was weaker than we expected in summertime. But I think that in '26, we didn't say that it would be more moderate than previously anticipated. We say that it will be moderate growth, but no change, of course, because we haven't commented earlier '26. But the change was when it comes to Q3 was weaker than we expected on July. Hanna Jaakkola: Exactly. Jorma Rauhala: Yes. Hanna Jaakkola: But no more questions from the chat function, no more questions from the conference call line. I would like to thank you for very good comments and questions. And if you have any further discussion needs or questions, don't hesitate calling me. But I'd like to thank you from -- on behalf of the whole group here. Thank you. Jorma Rauhala: Okay. Thank you.
Diego De Giorgi: Good morning, and good afternoon, everyone. Thank you for joining us today. First, I will take you through our third quarter results. After this, I will be joined by Bill, who is dialing in from our Dubai office today, and we will be happy to take your questions. In my remarks, I will be comparing the third quarter underlying performance year-on-year at constant currency, unless otherwise stated. It has been another strong quarter. We delivered 9% growth in profit before tax on the back of a 5% increase in income. Our growth engines have continued to deliver consistently with a record quarterly performance in Wealth Solutions and Global Banking. As a result, we are upgrading our 2025 income growth guidance to be towards the upper end of the 5% to 7% range at constant currency, excluding notable items. We had previously guided this to be at the lower end of the range. And more importantly, we now expect to deliver a return on tangible equity of around 13% in 2025. This exceeds our previous guidance of approaching 13% in 2026 and accelerates our delivery by a year. As Bill set out in the press release this morning, performance has been broad-based and is a testament to our sharper strategic focus on servicing our clients' cross-border and affluent banking needs. Looking now at the numbers for the quarter. The group delivered operating income of $5.1 billion, which was up 5%. This was underpinned by the strong performance in Wealth Solutions and Global Banking in the quarter. Operating expenses were up 4% and credit impairment was $195 million. As a result, profit before tax was up 9% to $2 billion, and our tangible net asset value per share was up $1.75 year-on-year. Now let me take you through the performance drivers in details. NII was up 1% on a quarter-on-quarter basis, largely driven by volume growth. Lower rates in Singapore led to a reduction in NII, but this was partly offset by improved WRB pass-through rates in Hong Kong as HIBOR rebounded. We have continued to manage our pass-through rates assertively. And although they remain above our medium-term expectations in CIB, we expect pass-through rates to reduce over time. Putting this all together, we still expect our 2025 NII to be down by a low single-digit percentage year-on-year. As usual, we have updated our currency weighted average interest rate outlook in the appendices to this presentation. This shows that we now expect a 55 basis point headwind in 2026, slightly higher than the 44 basis points when we last reported. Our non-NII engines continued to drive strong growth, and I will talk to each product driver in the segment section. Now turning to expenses. Operating expenses remained well controlled and were up 4% year-on-year, mainly driven by business growth initiatives and investments, which were partly funded by Fit for Growth and efficiency saves. We have achieved $566 million of run rate savings from our Fit for Growth program and have taken $454 million of restructuring charges since inception. Our 2026 total expense guidance remains unchanged at below $12.3 billion on a constant currency basis, which would be $12.4 billion at current FX forward rates. Credit impairment for the quarter was $195 million with an annualized loan loss rate of 24 basis points. WRB impairment was down in the quarter, largely due to optimization actions in our unsecured portfolios. In CIB, we took an impairment charge of $64 million, included within this is an additional precautionary $25 million overlay for clients who have exposure to Hong Kong commercial real estate. You will see more details in the appendices as usual, but nothing has materially changed since we last spoke to you. Our high-risk assets were up around $650 million quarter-on-quarter. This was driven by a sovereign downgrade into early alerts, partly offset by a reduction in the credit grade 12 portfolio. We continue to monitor our credit portfolio closely, and we are not seeing any new significant signs of stress emerging across the group. Underlying loans and advances to customers were up 1% or $2 billion quarter-on-quarter with the increase largely coming from wealth lending and mortgages. We have seen 4% underlying growth year-to-date, driven broadly across Global Banking, Wealth Lending and Mortgages. We continue to guide to low single-digit percentage growth in underlying customer loans and advances. Underlying customer deposits were up 2% or $11 billion quarter-on-quarter with growth largely from WRB. Turning now to capital. Risk-weighted assets were down $1 billion in the quarter. The increase in asset growth and mix was offset by a $1 billion reduction in market risk RWA and another $1 billion impact from FX. I would highlight that the annual operational risk or RWA increase, which is mechanically calculated from historical income, will take place in Q4 2025 rather than Q1 2026, bringing us into line with most other U.K. banks. We closed the quarter with a CET1 ratio of 14.2%, up 32 basis points quarter-on-quarter, excluding the impact of the $1.3 billion share buyback we announced in July this year. Now let's look at our business segments. CIB income for the quarter was $3 billion, up 2% year-on-year. This was driven by an impressive performance in Global Banking with income up 23%, supported by strong origination and distribution volumes and a solid performance in our financing, capital markets and advisory businesses. Transaction Services income was down 6% due to falling rates and margin compression in payments and liquidity, although it was up slightly when compared to the second quarter. Within our Global Markets business, Flow income was up 12% as we continue to support clients across the footprint. Episodic income was softer due to a lower level of market volatility relative to Q3 last year. On the next page, we have shown a long-term view of our Flow and Episodic income trend on a 12-month rolling basis since 2019. As a reminder, Flow is the larger part of our global markets income and primarily relates to client hedging activity. As such, it tends to be recurrent and programmatic. You will see that our Flow income is growing consistently at a double-digit CAGR as we illustrated at our CIB seminar. This growth has been driven by the investments we have made over the years in digitizing and expanding our product and geographical offering in order to drive future opportunities. Episodic income, on the other hand, is less predictable quarter-to-quarter as it tends to be event-driven. But as you can see from the chart, it has been a meaningful contributor to our Global Markets income over time. Looking forward, Flow income will continue to be a larger contributor to our Global Markets income, and we will continue to support our clients episodically as market opportunities present themselves. Moving to WRB. Q3 income was up 7% to $2.3 billion with another record quarter in Wealth Solutions, where income was up 27%. This was largely driven by structured products and managed investments, helping to increase investment products income by 35%. Bancassurance income was up 5%. Our affluent net new money in Q3 was $13 billion with a higher proportion of wealth sales than in the previous quarter as clients showed a higher propensity to buy Wealth Solutions given conducive markets. This brings total net new money year-to-date to $42 billion and puts us well on track to our $200 billion medium-term target for net new money. We onboarded 67,000 new-to-bank affluent clients in the quarter, continuing the trend of onboarding over 60,000 clients each quarter. Our affluent business benefits from our high levels of customer satisfaction as demonstrated by the fact that we now rank #1 in Net Promoter Score across 8 of our top 9 affluent markets as we continue to invest heavily within the affluent space. So to conclude, Q3 was another strong quarter as we continue to deliver consistently. Q4 has also started positively. We are upgrading our 2025 income growth guidance to be towards the upper end of the 5% to 7% range at constant currency, excluding notable items. We continue to track towards the upper end of this range for the 2023 to 2026 income CAGR. We now expect our return on tangible equity in 2025 to be around 13%, reaching our target a year early. But there is still much more to do as we reinvest into our differentiated areas of strength, delivering income growth and more importantly, improving returns. We will present updated 2026 return on tangible equity guidance at our full year results in February next year, and we will provide more details on our medium-term financial framework at our investor seminar in May. With that, I will hand over to the operator, and Bill and I can take your questions. Thank you. Operator: [Operator Instructions] And now we're going to take our first question, just give us a moment. And the question comes from the line of Joseph Dickerson from Jefferies. Joseph Dickerson: Great set of results here. Can you just discuss in the Wealth Business, the type of -- if you're able to, the type of margin pickup you get on the wealth investments? Because clearly, that's -- if you look at the year-on-year attribution of net new money, you're getting about 80% of the year-on-year growth now from wealth. I suppose some of that is as you say, linked to the markets, but could you discuss the type of margin pickup there? And then secondly, on capital, I note the reduction in your capital requirement by 22 basis points. I presume that that's not going to change your operating range number. But if you could comment on still the preference would be to do buybacks or I guess, how you think about returning excess capital? And then on the op risk point, I guess linked to that, is the op risk point going to have much of an impact on capital in Q4? William Winters: That's great, Joe. Thanks very much for the questions. I'm going to turn to Diego for both, but just a couple of high points. First is to note that the Wealth Business has demonstrated the net new money that comes into the bank via deposits is migrating at more or less the pace that we've always suggested would be the case into wealth products, and that's a good thing. Second is that the deposits themselves are profitable for us. But of course, you're asking about the margin pickup, which we can address in a little bit of detail. And third is that the leading indicators continue to be strong, which is new clients who are bringing new money into the bank. And as Diego mentioned in his opening comments, the fact that we continue to receive top marks in terms of customer satisfaction is a big driver there. Maybe just quickly before handing to Diego, I'll say I'm in Dubai for amongst other things, we're hosting what we call a leadership network of about 150 of the wealthiest families in our network. Last year, we did it in Hong Kong, this year in Dubai. Dubai is an up-and-coming booking center for us and wealth coming out of this region is an incremental driver beyond what has been driving wealth so far, which has been a broad range of our client base, but most specifically, as we called out, global Indians and global Chinese. The growth opportunities for us ahead are very, very strong. And the willingness of people to fly all over the world to spend a couple of days with us is a key indicator of that. So I just -- at the moment, building on some good feelings that's been building up for the past decade or so, feeling very good about this business. But over to Diego to expand on that and also talk to the capital point. Diego De Giorgi: Thank you, Bill. So on Wealth Management and margins, Joe, you will have seen that -- you are right, our return on assets has picked up a bit this quarter. You will also remember that we had a large conversion from assets under custody to assets under management a few quarters ago in the region of $40 billion, so a meaningful number on our total of assets under management, and we had signaled at the time that, that would reduce the return on assets for some time as they slowly find their way into Wealth Solutions. That is happening, and hence, that pickup. I think that as the business continues to shift towards Wealth Management and as the situation unfolds with highs and lows in the market, return on assets will continue to fluctuate like on many other metrics. I know I sound like a broken record. I always caution not to look at things too much on a simple quarterly basis. But it's true that the trend from that point of view is good, and it's certainly something that we encourage in terms of our actions as much as we can. 22 basis points on Pillar 2A indeed does not change our calculations in and by itself. And the op risk change in terms of moving it to the fourth quarter of this year, neither does that affect it in any way. It's just to get us more in line with how other U.K. banks are reporting. And the basis for calculation and everything else remains absolutely the same. So it's just a matter of timing. It doesn't impact our numbers in any way. Operator, next question, please. Operator: And now we're going to take our next question. And it comes the line of Kunpeng Ma from China Securities. Kunpeng Ma: Congratulations to this very strong quarter. I have a relatively long-term question for Bill. When we're looking for the next 5 to 10 years, I think it's going to be quite different than -- a bit different with the past 5 to 10 years. A lot of things have changed and will continue to change. I think in my mind, the current momentum will continue to be strong, but the extreme volatilities will be less, both geopolitically and in terms of business development. So Bill, could you please give us some of your observations or your thinking about the future development or trends for the CIB Wealth Management business in 5 or 10 years work. I know it's hard to make the final conclusion, but any color on kind of future trends will be quite helpful. William Winters: So Kunpeng, thanks very much for the question. You were cutting in and out a bit, but I think we got the gist of it. You're looking for the crystal ball on 5 to 10 years for our bank, China, in particular, and wealth within China more specifically. So the -- and it's not an inappropriate question at all because that's actually the kind of stuff that Diego and I and the Board talk about all the time, although we don't get much of a chance to talk about it in earnings calls. We will be talking about exactly that when we get together in May, and we're getting together in May in Greater China, Hong Kong specifically, with exactly those questions in mind. So what I can say broadly is that, yes, of course, the world is going to change a lot. There are going to be a few defining, I think, trends and transitions over a 5- to 10-year period. First and probably most relevant for us is the full implementation and incorporation of AI and advanced machine learning into business models at a very structural level. And I think Standard Chartered is very well prepared for that, but we're very early in that game, and there's much to be won and lost, as is everyone else. But we're investing heavily, and I think we're on the right track. Second and more obliquely is the digitization of money. The digitization of money will become pervasive, if not ubiquitous. And it will completely redefine the infrastructure supporting finance. And this is not something that businesses or individuals are necessarily going to see or be aware of. They're going to be relying on their intermediaries to help them navigate through the changes that are associated with the digitization of finance. Standard Chartered is at the front -- the leading edge in the digitization of money, and we intend to continue to be at the leading edge of the digitization of money. Third is adapting to a multipolar world. And we had the benefit this morning of having former Secretary of State, Kerry, addressed our family office network, and he spoke to this at some length. My question to him was, is this a good thing or a bad thing for those of us in business? And of course, we could argue it either way. But I think it would appear to us that as a bank whose fundamental role is to connect people and markets through periods of change and through periods of growth, that the incremental complexity of a multipolar world, but also the incremental opportunity is a huge opportunity for a network bank, which does not have the same degree of home market that many of our competitor banks do, but we do have a real edge in that home market, which is our own, which is the globe and which is the network. So I'm feeling really, really good about Standard Chartered's positioning for the next 5 to 10 years. Now all sorts of things could happen in the world that we could hypothesize about that could be wonderful. We could have a prolonged period of global peace. And right now, we're sitting in the most peaceful time in human history. It doesn't feel that way when we're thinking about wars in the Middle East and Ukraine, et cetera. But just broadly, we're sitting at a time of extraordinary peace, and we have the possibility that, that could become pervasive. How wonderful would that be? That's really good for business, right? Second is the power of the technology tools that we're developing could be fundamentally transformative. We suspect it will be and that will be a support for our business. And then third, as I mentioned, the ongoing reconfiguring of finance. We're trying to put ourselves at the leading edge there. I think that we are, and we're certainly intending to continue to invest to be there. So China is an integral part of that. We have a strong position in China. Chinese wealth will accumulate substantially. We intend to manage an increasing proportion of that off of a good base. So all in all, it's a good story. But I'd welcome any additional thoughts from Diego. Diego De Giorgi: No. I think this is terrific. Operator: Now we're going to take our next question, and it comes from the line of Aman Rakkar from Barclays. Aman Rakkar: I had two, please. I just wanted to interrogate net interest income, if I could, please. Your low single-digit expectation for the full year leaves a wide range of potential outcomes for Q4. I think it could be anywhere kind of from down 4% Q-on-Q to kind of up 1% Q-on-Q. So I don't know if you could help us there in terms of what a more realistic outturn is for Q4? And as part of that drivers, please, I'm interested -- I suspect you're not going to give us a guide on '26, but just interested in what you see as the kind of moving parts on net interest income, particularly the balance of deposit and volume momentum versus things like interest rates and pass-throughs, which might be a headwind? And then the second question was just around Wealth Solutions. Again, a really, really impressive print, not the first quarter. The investment products line, I just wondered what element of brokerage sits within that revenue. So clearly, the performance in Q3 in terms of brokerage revenues would have been supported by things like the Hang Seng turnover levels that were elevated. So could you just give us a sense of that element of the kind of revenue print in Q3? It's just to kind of get a clean read on wealth from here ex the kind of transactional element of it. William Winters: Thanks very much for the question, Aman. Diego was really hoping you were going to ask the question on NII. So I'm going to go straight to him, and he can carry through on the wealth question as well. Diego De Giorgi: Splendid. Thank you, Aman. So let me help you unpack the near term and slightly longer term into 2026. First of all, on 2025, so we get to the end of Q3 and we enter Q4 clearly in a better position on NII than we were expecting only 3 months ago, right? A number of things. We never take forecast on rates, et cetera, but we had indicated on the forwards. HIBOR ended up performing a little bit better than what the forwards were indicating. So we get here in a slightly better place. And I appreciate your point that depending on where you put yourself in that low single-digit guidance range, you get to a substantially different result for your quarter-on-quarter NII number. What I would tell you is that Bill and I are optimistic about the way that the quarter looks and optimistic about the way that net interest rate is developing. We're optimistic because we are managing it well. I'll come more to it when I talk to you about 2026 in a second. But we're managing it well from a point of view of PTRs because we are focused on it and because the quality of our liabilities matters to us a lot. And we are -- it's working well because the world post April 2 became a more liquid world more generally. It is not just us, it's our clients that tend to keep more liquidity, that liquidity is both in dollars and in local currencies. And in a market where liquidity is high, we can be more discriminating in terms of what deposits we take and what we don't and how we manage our PTRs. So generally speaking, a lot of optimism for Q4 of 2025 still within our guidance that we are giving. If we unpack 2026, let's start from the top. First and foremost, if you look at Page 17 on our currency weighted forward curves, as always, you will see that the rate impact that we are expecting now is a little bit worse than what we were expecting only a quarter ago, not a lot, but 11 basis points. So overall, we have some rate headwinds. This particular quarter, you have seen that our volume performance has been better than the negative impact of our rates and margin, as you see on Page 4 of our presentation. And the question is what will happen in 2026. We will have -- undoubtedly, as rates continue to decrease, we will have a positive impact in terms of volumes. We are up 4% year-to-date in terms of customer loans and advances. So we are somewhat ahead of what we would have expected. Will that continue in 2026? No crystal ball. But so far, things look relatively good from that point of view. Will we continue to manage PTR assertively? For sure. But as interest rates go down, managing them more assertively becomes more difficult. And so -- and we'll see also what happens to the general levels of liquidity in the market. Fourth impact. So rates, PTRs, volumes, fourth impact mix, we continue to remain focused. We are focused on high-quality liabilities. We are focused on high-quality liabilities coming from WRB over liabilities coming from CIB. And we are very focused on making sure that within those, we are focused on CASA rather than TDs, although as always, I would caution you, we like TDs in Wealth Management because as Bill said before, they are just the first step in then converting them into net new sales of Wealth Solution products. And in general, of course, we will continue to privilege deployment into client assets versus deployment in treasury. Last, more minor point, remember, the impact of our WRB market exits that we had indicated to you as $100 million roughly between now and the end of -- between when we announced them and the end of 2026. So these are the moving pieces for 2026. And we will see and we will continue to update you as the year starts and progresses. On Wealth Solutions, yes, it was an impressive print undoubtedly. It was very good to see that as we had signaled in Q2, as Bill said before, money moved from deposits into Wealth Solution products. I would tell you, it was a pretty bold move. It's true that equity was important. But when you think about equity, don't think that much about equity brokerage. We have mentioned it many times. There is no doubt that there is a component of equity brokerage. But remember that we are laser-focused on affluent customers and particularly the globally minded affluent customers. And those customers are long-term savers. They have mortgages with us. They have life insurance with us, and they have investments with us. Those investments tend to be stickier. And so yes, we benefit from a little bit of volatility and from optimism in the market, for sure. But you can see in those trends a large component of structural trends. I hope it's helpful. Operator: Now we're going to take our next question, and it comes from the line of Andrew Coombs from Citi. Andrew Coombs: If I could have a follow-up on NII, please, and then one on costs. So on the net interest income, as you say, better-than-expected result in the third quarter, and you've specifically called out the assertive pass-through management on your deposit book. At the same time, you reiterated the medium-term range of 60% to 75% in CIB and 35% to 50% in WRB. So can you just provide us some context what was the pass-through percentage in Q3? Do you then expect that to slightly reverse out in Q4 and 2026? Kind of what are the moving parts here and your thoughts on deposit pricing? That's the first question. Second question on Fit for Growth. We're almost 2 years into the plan now. You've done $0.6 billion of the $1.3 billion that you're guiding to by end '26, $1.5 billion total. You've taken almost $0.5 billion of restructuring charges, but a lot of the Fit for Growth is really happening next year, a lot of the additional cost saves, a lot of the additional restructuring charges. So can you just give us a feel for what's the step change between the last 2 years and next year in terms of deriving those Fit for Growth cost saves? William Winters: Thanks, Andy. Straight to Diego. Diego De Giorgi: Thank you, Bill. So from the top on NII, I'll give you a little bit more, but I think in the answer to Aman, I gave you already a lot of the moving pieces. So where is our pass-through rate today for CIB? Above our range, undoubtedly, and it's inside our range for WRB, by the way. The impact per percentage point of pass-through rates, roughly speaking, is in the region of $30 million, okay, in terms of the impact, if you're trying to model it in some way. Where do we go? I think we're reverting to the range is the answer. I did specify before that it's partially our own assertive management of it. It's partially the market conditions and the flash liquidity dollars and otherwise that currently is pervasive around our footprint. Does that continue into 2026? I don't know. I don't think that -- I hope that these long-term views about a better world do come to pass. But in the near term, I do think that we remain in a relatively fragmented and complicated world. So it's possible that, that elevated liquidity remains. I think if you have to take some assumptions, my assumptions are, as always, look at our long-term trends and think of a reversion to mean because deviations don't last forever. And you have some sense in terms of the sensitivity per point of PTR. On costs -- so on Fit for Growth, same guidance as before, really. We are happy with where we are for 2025. We will get to the objectives that we have set ourselves for 2025. We will not spend money in Fit for Growth beyond 2026. There will be no CTA beyond 2026. We are mindful of how we spend. And the bulk -- indeed, the bulk of the results will be in 2026, like we've always expected, 1 year fundamentally to get the program going, 1 year to get it running and then results accelerate. Some of the impacts, as you mentioned, will be felt beyond 2026. And if I take the question from FFG to the first word you mentioned, i.e., costs, the cost cap will remain exactly the same, $12.3 billion at constant currency or $12.4 billion at current FX. Andrew Coombs: I guess if I word it a different way, why have you felt the need to wait 2 years to implement these big restructuring charges now given that the Fit for Growth program was introduced a couple of years back? Diego De Giorgi: So I think we've told you before that the phasing of the spend is far from linear. And some of the bigger -- although the program is very well spread out over many different subprograms, it's clear that the bigger rocks take more time to be mobilized and more time for the money to be deployed. Nothing in particular there other than an irregular phasing of the spend. Operator: Now we're going to take our next question. And it comes from the line Kendra Yan from CICC. Jiahui Yan: My first question is regarding to CASA ratio. We've seen the CASA ratio of other major banks in Hong Kong actually increased Y-o-Y due to falling interest rates and ample liquidity. However, Standard Chartered's CASA ratio appears relatively stable. May I ask the reason for that? And do you have a strategy to increase the CASA ratio amid the medium to high interest rate environment nowadays to lower our future cost of liabilities? And my second question is regarding to the credit impairment. I see that on the presentation, Page 6, it mentions high-risk assets up from sovereign-related exposures. Could you please elaborate on which regions are primarily experiencing these risks? And are there any potential risks behind this change that we should pay special attention to? William Winters: Great. Thanks, Kendra. Just a quick comment from me and then I'll hand to Diego. Keep in mind that our Hong Kong business is relatively weighted to affluent customers. And the affluent customers, as we've discussed a couple of times in the context of our Wealth Business, are moving their money out of deposits into investment products, which is net-net a good thing. We're very liquid in Hong Kong. We've been quite disciplined in terms of our deployment of those deposits into the asset side of our balance sheet, including into mortgages. And so we're not -- not only we're not concerned about the quantum of CASA or proportion in our book, but it's something that we're actively managing. But Diego will have more color on both, I'm sure. Diego De Giorgi: Yes. So definitely 2 considerations there. First of all, we always have the ambition to reduce the cost of our liabilities and CASA in Hong Kong plays an important role. Remember that even though deposits in Hong Kong have gone up this quarter, when we attract deposits in Hong Kong, there is a large component of it that is Wealth Management deposits. So the fact that we continue to increase deposits and that we like the time deposits that we get from our customers before they get converted into Wealth Solutions is the reason why as long as they continue to grow and in general, they are good sources of funding for us. With the overall objective of increasing CASA, we are very happy with what we have achieved in Hong Kong this quarter and over the course of this year. By the way, it's been an excellent year for our business in Hong Kong, up 16% in terms of revenues this year. So all very good from that point of view. On your questions on sovereigns, they are obviously sovereigns in our footprint. I would really not read too much into it because we have had sovereign upgrades, and we had sovereign downgrades during this quarter that end up ending in different buckets. Neither of the 2 are particularly large or overwhelming. And by the way, they don't compound each other, but they offset each other. I would also tell you, which I think is probably more helpful in terms of broader thinking about sovereign exposures that sovereign exposures at a time when the dollar is not exactly strong, where interest rate in dollars are trending down and where liquidity in dollars is absolutely flush in the financial system. These are all indicators that go against stress in sovereign credit. And in fact, we haven't seen any particular signs of stress in sovereign credit. So to your point, to your final question, is this something that is warranted of special attention? The answer is definitely not. Operator: And now we'll go and take our next question, and it comes from the line of Amit Goel from Mediobanca. Amit Goel: Two questions from me. So one, I thought it was good the reiteration of the positive cost income jaws each year, so for next year too. When I'm looking at the kind of the $12.4 billion, it implies a couple of percent of potential cost growth. So I guess, basically, the message there that off of the very strong revenue print and obviously, even with the -- notwithstanding the net interest income headwinds, you expect revenue growth next year, at least in the kind of low single digits off of this base. So I just wanted to check that. And so obviously, it implies pretty good non-net interest income revenue growth. And then secondly, just on the Fit for Growth. So I guess, I mean, it's still running in terms of actual kind of integration costs -- or sorry, implementation costs a bit below the guide. So I mean, is there a bit of a pickup then into Q4? And the '26 cost guide, it seems to then be fairly independent of that spend. So I just wanted to, again, just to probe that a little bit more. William Winters: Great. Thanks, Amit. And maybe to repeat a little bit, but then I'll hand over to Diego. We've got 4 key pillars of our earnings growth and earnings driver, which are banking and financial markets, transaction banking. And all of these are performing well. As Diego mentioned earlier, the momentum is good in each case. Obviously, the transaction banking is affected by the interest rate trends. But when we look at the underlying operating trends, they're also good. And banking has been stellar this year. Financial markets has been very strong and then wealth, which obviously continues to be strong. So with a good base and good momentum in each of those that we think can carry through to next year, we feel obviously in a good position to reiterate our positive jaws. I think we've been cautious as well in terms of some of the guidance that we've offered. But I can tell you, Diego and I, and the rest of the team, we're completely focused on meeting and then if we can, if it's possible for us, to exceed that guidance. But for now, we focus on what we can do and focus on performance. But Diego? Diego De Giorgi: So very little to add to that. Between what Bill said and the picture you painted, Amit, it's exactly the right picture. It's all within our guidance. And yes, we are committed to both the cost cap and to positive jaws. And you are right that if we flag that with the fact that we have no guidance for 2026 NII and that we have pointed out all of the 5 moving parts in the discussion that we had before with Aman, it is true that non-net interest income will grow faster than net interest income. Those are powerful engines of growth as Bill has just expanded on. So no need to say more there. Yes, you're right. By indicating that we are going to be fine for our targets on Fit for Growth in 2025, we are implying that there is a pickup in Q4. And in terms of the independence of our commitment for 2026, I mean, it's difficult to say that they are completely uncorrelated, but it is true that the cost cap is a key commitment, and we are committed to the cost cap at $12.3 billion on constant currency, $12.4 billion at current currency, so undoubtedly. Operator: Now I would like to hand over to Manus Costello for any written questions. Manus James Costello: We have a couple of questions on RoTE online. The first comes from Rob Noble. Rob asks, your guidance is for around a 13% RoTE and to progress thereafter. Should we expect an increase in RoTE specifically in 2026? Or is the progress a more general comment? William Winters: Just quickly before I hand to Diego, it's a general comment, but one in which we have high conviction. But Diego, you can give the breakdown on minute by minute on the RoTE conversion. Diego De Giorgi: We have strong conviction. We are going to give you a return on tangible equity target specifically for 2026 when we give you full year results. And the way to look at it, it's a medium-term comment, but trends remain positive. So stay positive. Manus James Costello: Second question on RoTE comes from Gary Greenwood. Gary says, you've guided to a RoTE of around 13% for the full year and have delivered an annualized RoTE of 16.5% in the first 9 months, which implies you think the Q4 RoTE will be around 3%. So why do you expect such a big reduction in performance in the final quarter? William Winters: Thanks, Gary. We are singularly focused on building on the momentum coming out of Q3 and that we've indicated a couple of times through the early part of Q4. And to the extent that we can continue to capitalize on that momentum, market allowing and our own performance allowing, then we would hope to be able to do better. And I can tell you that's a singular focus. But our guidance is our guidance, and I think we want to be cautious in terms of how we adjust our guidance through time and really looking forward to stepping back in February and giving some fully refreshed guidance on 2026 and then a lot more context for the broader business in our May session. But Diego, any additional thoughts, most welcome as always. Diego De Giorgi: Nothing to add. I'm the cautious CFO, and we are cautious on guidance, and it's all going well. Manus James Costello: We'll go back to phone questions, please. Operator: And now we're going to take our next question. And the question comes from the line of Perlie Mong from Bank of America. Pui Mong: Can I just ask about Ventures? I think your guidance for cumulative loss for '25 and '26 is less than $200 million. But this quarter alone is over $110 million, if I'm looking at the numbers correctly. And this year so far is already running at $70 million, including the gain on sale last quarter. So I guess it implies a very large step-up in profitability in Ventures going forward. Just wondering where that's going to come from? Is it going to come from costs? Or is it going to come from maybe some disposals that you have in mind? So that's number one. And number two is, I just noticed that tax rate has been very low this quarter as well. I think running at about maybe 26%. Half 1 was also in the mid-20s. And that seems to be quite a bit below where you previously talked about maybe in the high 20s. So just wondering how we should think about that going forward? William Winters: Thanks for the questions, Perlie. On Ventures, we've seen continually improving operating performance in our digital banks. And of course, we're still in the investment phase. We're rolling out new products and services, including wealth and digital assets and other things, which are going quite well. But we would expect to see just in terms of the narrowing of the gap in the generation of returns from all the things you mentioned. Yes, I'm going to add income growth to the top of the line. We'll have ongoing expense management as we've had. And while lumpy and less predictable in terms of the timing, we'll see gains on sale as well. So we remain committed to our cumulative loss target in Ventures over the planning period. But Diego, why don't you add any color you'd like to that one and then pick up the tax rate question. Diego De Giorgi: Sure. Nothing to add other than I remind you, Perlie, that Mox and Trust do turn profitable during the course of -- in 2026, and that is an important part, an important component. On ETR, look, on ETR, one, first little caveat. Don't look at things too much on a quarter-by-quarter basis, but it's right that we are on a good path. And we are on a good path for a good reason, which is we are driving for a lower ETR. We just can drive for a lower ETR on a specific quarter-by-quarter basis. This particular quarter, a number of moving pieces, beneficial mix in terms of where we recognize, where we had profits, lower unrecognized U.K. tax losses, lower nondeductibles, some U.S. tax adjustments, lots of different small pieces that end up driving to a lower ETR. And yes, if I think of the ETR for this year, given we sit already at the end of the third quarter, does one think that within our long-term guidance that we are trying to lower ETRs to the high 20s, we are probably going to be in a good position within that context. The answer is yes. What you have to take from us is that it's an important priority of ours. It's something where whenever something is under our control, we do something about it. And sometimes, unfortunately, it's not completely under our control, and that's what introduces quarterly volatility, why I suggest to look at it on a relatively slightly longer-term basis. Thank you for the questions, Perlie. Operator: And we're going to take our next question, and it comes from the line of James Invine from Rothschild & Redburn. James Frederick Invine: I wanted to ask about growth in the affluent business, please, specifically net new money. So you've done over $40 billion so far this year. So you're kind of tracking ahead of your $200 billion target over 5 years. But you've got this big target to increase the relationship manager numbers by 50% or so. I presume that most of those people aren't even in the door yet. So why is your $200 billion target still the right one? Why isn't the net new money collection going to steadily increase as all these new relationship managers and the new wealth centers come online? William Winters: Well, that's a great question because we're certainly optimistic that we can continue to drive in this direction. We also know that the environment at the moment is extremely attractive. We know that the Wealth Business, like other businesses that we're in, has an element of cyclicality. And this cyclicality is linked, amongst other things, to optimism about the investment markets and the optimism in investment markets is very high at the moment. So that's a cyclical trend. But the underlying trends, you're absolutely correct. And we've had a good run this year. We are -- as we're finding, as we try to hire and are succeeding in hiring these relationship managers that we're an extremely attractive destination for RMs. It's not because we pay a premium. We don't. We pay a fair wage, but we give them a better platform off of which to deal, which obviously means that there are masses that they're going to make more money for themselves if they perform well off a platform that's easier to deliver strong results. And as Diego mentioned early on, the strong Net Promoter Score, the full breadth of products that we offer, the fact that we're an extremely attractive distributor for the world's best manufacturers, asset managers, insurance companies, et cetera, is a huge advantage. We don't compete with them because of our open architecture. So these are all things that are supportive of our ability to achieve the target that we set out, right? It's not a target actually. It's guidance that we've given. Let's make the distinction between the 2. And is there upside? Yes, absolutely. It will depend on a lot of things. But the execution part of that is going quite well. The market part of that, we can't control. But maybe a final note on that is that the diversity of products that we offer and the fact that we're targeted, of course, at the Private Bank segment, which is growing very well and has generated nice returns for us. Our sweet spot is the one notch below the ultra-high net worth, so the affluent, still substantial AUM, but they tend to be less competitive in terms of the number of banks that they're dealing with. And our products and our advice is highly suited to that client segment and our deployment of technology, AI and otherwise, is also highly suited to that cohort and it's higher margin than the ultra-high net worth segment, which is also attractive, right? So yes, I'm kind of answering your question by saying I agree with your proposition, but our guidance is our guidance, and it seems like an appropriate target at the time that we made it. And if we ever choose to update it, you'll be the first to know. Operator: And now we're going to take our next question, and the question comes from the line of Alastair Warr from Autonomous Research. Alastair Warr: I've got two questions, please, one on retail and one on the CIB side. In Retail, the ECL charge is down quite a bit on the run rate from really the last year or 2. So could you just give a little bit of color there on whether there's something improving on an underlying business basis that we can extrapolate from or if there's anything that's one-off in the quarter in there? And just on the CIB side, could you give a little bit of color on what the pipeline is looking at on the originate to distribute business? William Winters: Yes. Real quick, and I know Diego will add color as well. We have changed the structure of our bank. We've sold a number of our mass market consumer credit businesses. We've also refined our underwriting standards. So especially in markets that have experienced some periods of stress, Hong Kong and China, for example. So part of this is a deliberate shifting in the nature of the business. And that comes from a basic business model call, which is that we really -- frankly, we've got too much good stuff going on to feel the need to like bet on black or bet on red in terms of the overall consumer credit sentiment. Like we don't want to play beta in these markets. We want to play alpha in everything that we do. And we found it hard to generate alpha in unsecured consumer credit. And as I say, we would rather liberate the beta capital and deploy it in the things where we can play alpha. So there's an element of structural to it, for sure, which reflects the decisions that we've taken in terms of where we position our business. But we've also -- we're seeing, I'd say, a slight improvement across our markets in terms of the market-wide credit losses like beta in the markets where we operate. But that's -- Diego, feel free to -- you can contradict me on this one because we have not had that specific discussion in the last 16 hours. Diego De Giorgi: No contradiction at all. It's deliberate management actions and you see it quarter-by-quarter. You see it also across our network. It's tuning some of the CCPL ventures in China, for example, at times, selling a portfolio of credit cards in India. It's deliberate and it's in action. William Winters: And the CIB pipeline, the CIB pipeline is looking really good. We've said for several years now that we intend to significantly increase our pace of origination and that we intend to distribute the bulk of that, and we have, hence, the very active RWA management. You've seen the results in banking in the first 3 quarters of this year, which are very strong, and the pipeline continues very strong. So that's public capital markets, it's private capital markets, it's O2D, it's very important partnerships we've got in private credit, which we're continuing to expand on. It's the ongoing growth in our sustainable finance business, which is setting new records every quarter. Despite the shift in sentiment in some parts of the world, the bulk of the markets where we operate continue to be very focused on financing and transition to a low-carbon economy, and they see us as a very natural place to turn to for that kind of business. So pipeline is good in short answer to your question. Operator: And now we're going to take our next question, and it comes from the line of Ed Firth from KBW. Edward Hugo Firth: I just have two also. The first one was just about revenue guidance for this year. Because if I take your -- I think you said towards the upper end, but actually, if I just take the upper end of 7%, then unless my math is wrong, that's about $20.7 billion, which would imply -- I mean, you've done $16 billion already. So that would imply sub-$5 billion for Q4, which, I mean, I think I have to go back to '23 to see a quarter as poor as that. And yet all your talk on the call is about a strong start, a great pipeline, everything going well. So I'm just checking, should we just broadly ignore that as a guidance because it doesn't seem to really fit with anything else you're saying. So that would be my first question. And then the second question, in terms of RWAs, so I get that right, too early in the morning. I think you're saying again, single-digit growth for this year, but I think you're already up 5%. And I think you said op risk is going to come into Q4 as well. So are we -- is that sort of like an ex op risk? Or are we going to get a big reduction in market risk -- risk-weighted assets in Q4 as we've had in the past? Is that the way we should think of it? So those are two questions, if that's all right. William Winters: Thank you, Ed, and you're quite sharp for such an early time in the morning. So you should never ignore Diego, but you can listen to me as well, which is to say that we feel very good about the momentum in our business. We've had a good start to Q4. Our guidance is our guidance. And I think we've tended to err on the side of caution. But I can tell you, when we exit this call and go back to work, we're not focused on the guidance we've given or the corporate plan or the budget or what's implied in our share price. We're focusing on how to take a really good business with a really good pipeline and make a lot more money. And we feel quite good about that. So you'll put that into the pipe and decide which parts of it you want to smoke and which parts you want to leave in the ashtray. I'll just turn it over to Diego since you laid into him directly, and we'll pick it up from there. Diego De Giorgi: So I'm going to say nothing else because my CEO has come to my help, and I am grateful for that on the first question. Nothing else to say there. On RWAs, let me say, it's something that I think is important. Once again, no -- guidance is guidance, but do not read -- do not exaggerate the reading into what it moves, but do take care of the fact of 2 factors. One, we will deploy risk-weighted assets in the place where it makes us the highest return on tangible equity. It's not a matter that we think of reducing market risk-weighted assets in the next quarter or we think -- this is a very organic management. We have accelerated the velocity of capital in the bank, and we continue to do that. And we manage that very actively, so actively that at times, and you've seen this in Q1 and Q2 and you're seeing it again in Q3, there are quarters where we deploy risk-weighted assets in order to propel our business, and there are quarters in which we don't need it. And instead, we deploy leverage or we do it in other ways or we do it through fees. So it's difficult to forecast where do we go. I think that low single digits remains a good guidance for the course of this year. And if I can only put in one very minor cautionary point in all of this while maintaining the sunny outlook that Bill has so eloquently put out, I do point out that Q4 is seasonally the weakest quarter of any bank, and it's a weaker quarter for us. Again, not much to read into that other than history at work. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Bill Winters, for any closing remarks. William Winters: Great. Thanks very much, everybody, as well. I know it's a super busy day, and thank you for both preparing for the call, but then asking some very good and helpful questions. Thanks for the ongoing support. I think we'll wrap it up 1 hour in on time, on budget and look forward to seeing you next time. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Good morning. Thank you for standing by, and welcome to Pluxee Fiscal 2025 Results Presentation. [Operator Instructions] I advise you that the conference is being recorded today, October 3. At this time, I would like to hand over the conference to Pauline Bireaud, Head of Investor Relations. Please go ahead, madam. Pauline Bireaud: Good morning, everyone, and thank you for joining us today for Pluxee's Full Year Fiscal 2025 Call. I'm Pauline, Head of Investor Relations at Pluxee, and I'm pleased to be here with all of you today for our second set of full-year financial results as a stand-alone listed Group. So today, I'm pleased to be joined by our CEO, Aurelien Sonet; and our CFO, Stephane Lhopiteau. Before we begin, let me quickly walk you through today's agenda. Aurelien will start with the highlights and key figures for the full year, followed by a focus on the main achievements in executing our strategic road map. Stephane will then take you through our financial performance in detail, as well as the evolution we are introducing to our capital allocation policy this year. And finally, Aurelien will conclude with our outlook for fiscal 2026 before we open the floor for questions. And with that, I will hand over to Aurelien. Aurélien Sonet: Thank you, Pauline, and good morning, everyone. I'm very pleased to be with you today. Fiscal 2025 was another very strong year, in which we executed our strategy with discipline and delivered above expectations across all key metrics. I want to sincerely thank our teams for both their commitment and excellent execution, which made these results possible even in a challenging environment. Let's look at the key highlights of the year in a nutshell. First, we continue to see strong momentum in new client acquisition with a growing contribution from SMEs year-on-year. Second, despite weaker portfolio growth, reflecting current macro uncertainties, we maintained a net retention rate of 100%, in line with our midterm objective. Lastly, our recent M&A transactions, a core pillar of our growth model, are already delivering positive revenue contributions. This translated into first, solid top-line organic growth, supported by continued strong momentum in Employee Benefits. Second, robust margin expansion, primarily fueled this year by operating improvements, underscoring the operating leverage of our model and the headroom for further margin gains. And third, an outstanding cash generation and conversion. Consistent with our disciplined approach to capital allocation and our commitment to revisit regularly our shareholder return framework, we have decided, with the support of the Board, to further enhance shareholders' returns for fiscal 2025. In addition to a higher dividend, we will launch a EUR 100 million share buyback program, reflecting our strong fiscal 2025 performance and reflecting our confidence in Pluxee's future prospects. Let's now take a look at our fiscal 2025 performance against our objectives on Slide 5. As just mentioned, we delivered across our 3 key financial objectives in fiscal 2025. We recorded a plus 10.6% organic growth in total revenues, fully consistent with our low double-digit objective. We achieved a significant expansion of plus 230 basis points in recurring EBITDA margin compared to plus 150 basis points previously. This demonstrates both the operating leverage of our platform and our ability to drive efficiencies. And finally, we delivered 89% recurring cash conversion, well above our target of above 75% on average for fiscal 2024 to 2026. So in short, we are clearly well ahead of our initial plan. In addition, I would like also to highlight that our free cash flow engine has expanded very materially from circa EUR 290 million in fiscal 2023 to EUR 417 million in fiscal 2025. This is a step change in the group's financial profile. These strong results have enabled us to revisit our shareholder return for fiscal 2025, as we will detail on Slide 6. Indeed, we have decided to introduce greater flexibility in our capital allocation policy for fiscal 2025 through a combined shareholder return approach that includes: first, a dividend of EUR 0.38 per share, up plus 9% compared to fiscal 2024 and representing a total dividend distribution of approximately EUR 55 million, subject to shareholder approval at our general assembly end of December; and second, a EUR 100 million share buyback program, leveraging our record cash flow generation and significant increases in our net cash position to further enhance value creation for our shareholders. Stephane will provide more details on this in his section. Before we go into the details of the strategic milestones reached in fiscal 2025, I'd like to take a step back and look at what the group has already delivered financially over the first 2 years of the plan, moving to Slide 7. Putting the group's financial performance over the past 2 years into perspective, there are really 2 key takeaways. First, it highlights the structural strength of our model and its strong conversion capacity. Consistent top-line growth translates into remarkable profitability and cash generation with recurring EBITDA CAGR at plus 14% reported and free cash flow CAGR up plus 20% over the past 2 years. Second, it demonstrates how resilient our model is. Even amid currency volatility across several of our core markets, we have been able to absorb over 7 points of ForEx impact on revenue in fiscal 2025, while continuing to deliver solid results. Now let's zoom on our strategic road map execution on Page 9. Pluxee has maintained strong business momentum through fiscal 2025, winning new clients and delivering solid commercial results even amid persistent macroeconomic headwinds across countries. Starting with new client development. We have once again outperformed our objective, generating EUR 1.5 billion in annualized PBV from new clients in fiscal 2025, well above our EUR 1.3 billion annual target. Our net client retention rate also remained consistently at 100%. This was achieved through a combination of improving client loyalty, further increase in face value, and steady cross-selling while absorbing end-user portfolio evolution, on which I will come back to. Looking more closely at the face value driver, which supports net retention, it contributed an incremental EUR 1.1 billion in business volume issued over the fiscal year. This means that we have already reached 80% of our EUR 3 billion target over 3 years. In addition, we are quite confident for the year ahead given the recent announcement in terms of increases in sales value legal cap in several countries. We will now take a closer look at each of these growth levers in the following slides, beginning with product offering on Slide 10. Over the past year, we have stayed focused on enhancing our offering, expanding both its breadth and depth to better serve our clients and consumers. Building on our strong Men food foundations, we have significantly broadened our portfolio to support consumer lifestyle, health, financial, and mental well-being alongside an expanding range of employee engagement solutions. At the same time, we are bringing all these benefits together in a single unified experience through Pluxee global consumer app. The programmatic rollout of the app is well underway. We are progressively expanding it across our key markets while accelerating the launch of new features and benefit integration to ensure continuous innovation for clients and our end users. The key strength of our global solution lies in its payment flexibility, being fully payment agnostic, it integrates the most popular digital payment options such as Google Pay, Apple Pay, and QR code solutions to ensure maximum convenience. Innovation drives our growth with AI being a key accelerator of both efficiency and creativity. In France, for example, our AI-powered chatbots already filter and direct requests to ensure that each user receives the right level of support at the most relevant stage of its journey. Together, this initiative strengthened our commitment to deliver a richer, intuitive, and seamless experience to our customers across our 28 countries. Product offering lies at the heart of our value proposition to clients. Let's look at how it fueled our commercial performance, starting with new client acquisition on Slide 11. The sales momentum has remained very strong over the year, allowing us to deliver more than EUR 1.5 billion in new client development with a positive contribution from our 3 regions. It has been sustained by several structural drivers, namely, first, the full activation of our high-performing commercial engine, powered by a strong sales discipline, advanced data-driven marketing, and an omnichannel client engagement. And second, a growing contribution from SME. As we continue to accelerate the penetration of this segment. Automation enables us to scale SME acquisition, which now represents 31% of total new business, highlighting the success of our digital self-service journey and our distribution partnerships. Let me briefly highlight 2 key contract wins that illustrate what I've just mentioned. First, our Brazilian team won a major employee benefits contract with Energisa, a leading energy provider in Brazil. This success was achieved through the full activation of our partnership with Santander, serving more than 20,000 additional end users. Second, we won a nationwide benefits program with Randstad, covering over 8,000 workers in Italy. I would like to take this opportunity to make a brief side comment on Italy. Following intensive efforts from our local sales team, we successfully managed to almost entirely absorb the regulatory change impact on merchant commissions. This was achieved by renegotiating with our clients to restore a sustainable balance between all the stakeholders. Looking ahead, supported by a solid and diversified pipeline, we are confident in our ability to deliver on our EUR 1.3 billion target in fiscal 2026. Let's now turn to how we are unlocking the full potential of our existing client portfolio on Slide 12. Over fiscal 2025, Pluxee continued to deliver strong performance across its existing client portfolio. Client loyalty improved by plus 20 basis points, and the group continued to demonstrate strong engagement to optimize existing client portfolio through further sales value increases and cross-selling. However, tougher macroeconomic context has translated into hiring increases and, in some markets, workforce reductions, especially in some European countries such as France and Mexico as well. This has progressively put a growing pressure on our end-user portfolio, which turned negative in H2. Despite this headwind, it has been another solid year in terms of net retention, maintained at 100%, demonstrating the strength and resilience of our business model. One notable example worth highlighting is the renewal of our long-standing partnership with Capgemini. We successfully won a major tender, resulting in a long-term strategic contract serving more than 68 active users across 9 countries. Beyond the business volumes, this renewal reinforces our position as a global trusted partner for our clients. It also offers strong potential for future value growth, supported by Capgemini's continued expansion and its increasing focus on employee engagement and retention. Altogether, this performance reinforces our confidence in the strength of our value proposition, our market positioning, and the resilience of our growth drivers even in a fast-changing macroeconomic context. Now that we have discussed organic growth, let's move on to our M&A strategy and how we've been progressing with recent integration on Slide 13. Since the spin-off, we have completed 8 transactions, comprising 1 strategic partnerships and 7 bolt-on acquisitions, including the most recent one signed in early fiscal 2026. We have been and we will remain guided by our clear strategic framework centered on 3 key priorities: expand business volumes to consolidate the group's market share, broaden our offering and product portfolio to deliver more value to both employers and employees, and enrich our technology capabilities to accelerate innovation, scalability, and end user engagement. Step by step, we are strengthening our track record in sourcing and acquiring targets while demonstrating our ability to successfully integrate them and generate growth synergies. Looking ahead, our M&A pipeline remains strong and diversified, spanning multiple geographies and deal sizes, consistent with our global strategic road map. Let's now take a closer look at how we are integrating these acquisitions and the tangible impact that they are already having on our strategic positioning and performance on Slide 14. All these recent partnerships and acquisitions are progressively delivering incremental value, including through initial synergy. Starting with Brazil, where our strategic partnership with Santander is showing strong traction. While Ben's integration has been seamless, maintaining a high level of client loyalty, the distribution agreement is now fully activated, allowing us to leverage the 4,500 Santander sales team, with around 22% of them having already sold at least one Pluxee solution. In less than a year, monthly business generated through the Santander distribution network has doubled year-on-year, confirming the value of this alliance as a growth accelerator. Still in Brazil, the acquisition of BenefÃcio Facil further enhances our multi-benefit offering by internalizing the employee mobility benefit. Integration is well advanced with 95% of the streams completed, and commercial traction is already picking up, driven by strong new client acquisitions, notably through Santander's distribution network. Turning to Spain. The successful integration of Cobee has propelled Pluxee to the #1 market position. It is built on our best-in-class multi-benefit platform, which offers a broad and diversified product range from health insurance to training, and our proven ability to engage employees through a fully digital, intuitive, and flexible experience. The results are tangible. Employee opt-in rates have increased by 50% on the client migrated, demonstrating both the appeal of the Cobee model and the success of our integration. Beyond growth, our ambition is also to generate sustainable profitability, as we'll see on Slide 15. One of the key pillars of our value creation journey is the group's strong potential for margin expansion. There are 2 main drivers behind this margin expansion. First, operating leverage generated by our highly scalable business model and our increasingly global operating model. This effect has been further amplified by the increased contribution of our latest M&A transactions and by the near full digitization of our business, with around 94% of our BVI now being digitized, including France, up to 90% at the end of the fiscal year. Second, efficiency gains driven by the normalization 18 months after the spin-off of our cost structure, combined with tight cost discipline and rigorous portfolio monitoring, constantly assessing product and country performance. This disciplined approach led, for example, in fiscal 2025 to the decision of exiting from Indonesia. The key point is that in fiscal 2025, the bulk of the EBITDA margin increase came from operating EBITDA of plus 235 basis points. This shift is particularly important as it shows that our margin expansion is now coming from structural operational improvements. Looking ahead to fiscal 2026, this trend should continue to intensify as Float revenues are expected to remain stable and therefore, dilutive to overall EBITDA margin expansion. Now before giving the floor to Stephane, I'd like to briefly touch on our sustainability road map, in which our strategy is fully embedded on Page 16. Our sustainability road map is built around 4 core values, each supported by clear measurable targets. First, Pluxee acts as a trusted partner, with 98.7% of our employees being trained in responsible business conduct. Second, we empower individuals while promoting diversity, with 40.6% of women currently holding a leadership position. Third, we strengthened local communities with EUR 7 billion in business volumes reimbursed to small and mid-sized merchants. And finally, we reduced our environment impact with the current 23% reduction in carbon emissions compared to our 2017 baseline. It is also worth noting that in fiscal 2025, we achieved an EcoVadis rating of 78 out of 100 and obtained our first CDP score of B, both reflecting the strong recognition of our sustainability performance. And with that, I will hand over to Stephane to go in more details on our financial performance. Stephane Lhopiteau: Thank you, Aurelien, and good morning, everyone. It's my pleasure to be with you today to present our fiscal 2025 results in more details, starting as usual with our business volume bridge on Page 18. The sustained growth in business volume issued or BVI has been one of the key growth drivers to Pluxee's top-line growth over fiscal '25. Over the year, total BVI reached EUR 24.5 billion. It was fueled by Employee Benefits BVI, which reached EUR 18.7 billion, up plus 7.6% or plus 8.5% when excluding the one-off effect related to the purchasing power program in Belgium. Such growth in Employee Benefits BVI was driven, as Aurelien already mentioned by: first, strong new client development across both large accounts and SMEs. Second, the net retention rate maintained around 100%, supported by enhanced client loyalty, further increase in face value, and steady cross-selling. And third, the positive contribution from recent M&A transactions through both growth synergies and favorable scope effect. However, performance was also affected by persistent macroeconomic headwinds, leading to increased pressure on end users portfolio across an expanding set of markets, notably Continental Europe and Mexico, and within sectors like temporary staffing, consulting, and manufacturing. On its side, BVI from other products and services remained stable in fiscal '25 at EUR 5.8 billion, a decline versus fiscal '24 due to the Public Benefit segment, reflecting the discontinuation of large programs during the year, primarily in Romania and Chile, the latter being fortunately partially renewed from March 2025 onwards. Let's now see how the BVI organic growth fueled our solid revenue organic growth on Slide #19. Total revenues reached EUR 1.287 billion in fiscal '25, up plus 10.6% organically, fully in line with the group's low double-digit growth target. On a reported basis, total revenues growth reached plus 6.4% year-on-year, including, first, a negative currency translation impact of minus 7%, coming mainly from operation in Brazil and Turkey, and to a lesser extent from Mexico. And second, a positive scope effect of plus 2.8%, primarily reflecting the integration of the Santander Brazil Employee Benefits activity as well as the acquisition of Cobee in Spain, Portugal, and Mexico, and of BenefÃcio Facil, in Brazil. Fiscal '25 total revenues were made of EUR 1.125 billion in operating revenue, up plus 10.3% organically, and EUR 162 million in float revenue, up plus 12.6% organically. This strong performance in fiscal '25 underlines Pluxee's ability to deliver sustained top-line growth in an increasingly challenging and volatile environment. In this context, we also managed to deliver a strong fourth quarter with total revenues growing by plus 9.6% organically, excluding a plus 2% scope effect and a minus 4.8% currency impact, and driven notably by strong performance in Latin America. Let's now take a closer look at the underlying trend behind both Operating and Float revenue, starting with Operating revenue on Page 20. The momentum in Operating revenue was driven by Employee Benefits, which reached EUR 963 million in fiscal '25, up plus 12% organically, excluding a minus 7.4% currency impact and a plus 3.3% scope effect. Strong business momentum in Employee Benefits was driven by a solid organic growth in business volume issued, particularly in Latin America and Rest of the World as anticipated, and the quick progressing of circa plus 20 basis points year-on-year to 5.1% on average. In Q4 '25, Pluxee generated operating revenue of EUR 265 million in Employee Benefits, delivering plus 11.6% organic growth, confirming the ongoing positive momentum. On other products and services generated operating revenue of EUR 162 million in fiscal '25, showing flat growth year-on-year, with the fourth quarter being slightly negative. This trend reflected the discontinuation of large public benefit contracts in Romania and temporarily in Chile, as well as the ongoing repositioning of Pluxee's offering in the U.K. and the U.S. As mentioned, operating revenue organic growth was mainly driven by Latin America and Rest of the World. Let's take a closer look at this on Slide 21. Turning to geographies. Regions delivered strong double-digit organic growth in fiscal '25, namely Latin America and Rest of the World, while Continental Europe was tempered by a challenging macroeconomic environment and a high comparable base. Starting with Europe. Operating revenue reached EUR 506 million, up plus 5.1% organically for fiscal '25 with a Q4 organic growth of plus 2.2%. While the group continued to benefit from solid momentum in Southern Europe, particularly in Spain, supported by the Cobee acquisition, growth was tempered by several factors in the region, including: first, the increasing challenging economic and political environment across the region. Second, adverse impact from public benefit program, especially in Romania, following postponed ordering or reduction linked to budget deficit measures. And third, a high comparison base from 2024 one-offs, such as the Belgium purchasing power program and the Paris Olympic Games. In Latin America, operating revenue reached EUR 429 million for fiscal '25, up plus 14.5% organically, excluding a plus 4.7% scope effect and a minus 13.3% currency impact. In Q4, organic growth in the region accelerated significantly to 19.8%. This strong performance was driven primarily by Brazil, notably fueled by the fully operational Santander partnership and the further penetration of the market, especially among SMEs. Commercial momentum also remained strong across Hispanic LatAm, particularly in Chile, where the [indiscernible] public benefit program was renewed from March 2025, even if with distinct economic terms. However, Mexico continued to face headwinds linked to U.S. policy changes. In Rest of the World, operating revenue totaled EUR 190 million in fiscal '25, up plus 14.2% organically, excluding a minus 7.7% currency impact, mostly due to the Turkish lira devaluation. Double-digit organic growth in the region was driven by Turkey, where the group continued to unlock increased sales value from existing clients and to penetrate further the benefits market through new contracts. As expected, performance in U.K. and U.S. remained below group standards, still affected by the ongoing business repositioning in both markets. Complementing operating revenue, let's now move to the float revenue performance analysis on Page 22. Fiscal '25, revenue growth slowed down compared to fiscal '24, even if still above initial expectations. Gross revenue reached EUR 162 million, up plus 12.6% organically, excluding a plus 3.4% scope effect and a minus 11% Q translation impact. In Q4, it continued to gradually decelerate to plus 7.6% organically. Organic growth in revenue over fiscal '25 was supported by higher business volume issued in nonrestricted cash, particularly in Latin America and rest of the world. However, this trend was not reflected in the overall float position remaining stable at EUR 2.7 billion at year-end due to the less dynamic trend in programs issued in restricted cash. The overall positive trend in volumes was reinforced by a higher average investment yield year-on-year, reaching 6% in fiscal '25 compared to 5.7% in fiscal '24 as a result of the group's efficient investment strategy tailored to local financial market conditions and the high interest rates in Brazil and Turkey. This section on top-line performance, let's now turn to profitability, starting with recurring EBITDA on Slide 23. Recurring EBITDA rose strongly, up plus 22.2% organically to EUR 471 million, up plus 9.4% on a reported basis. Recurring EBITDA margin reached 36.6%, up plus 202 basis points, including currency and effect, driven by solid operating profitability gains across all 3 regions. This robust performance was primarily supported by the inherent operating leverage embedded in the group's business model. It was further enhanced by the initial positive contribution from certain recently closed acquisitions, largely commented by Aurelien. The margin expansion also reflects efficiency gains achieved through: first, the strict cost base monitoring; second, our constant portfolio rationalization efforts; and third, the end of one-off effects related to the spin-off. Altogether, this translated into a plus 235 basis points organic expansion in recurring operating EBITDA margin, I mean, excluding [indiscernible]. It was further supported at the recurring EBITDA level by favorable flow-through from still growing flow of revenue, notably in Latin America and rest of the world. This strong growth in recurring EBITDA fueled solid performance further down the income statement, all the way down to adjusted net profit, as we can see on Page 24. Let me walk you through the key items below the recurring EBITDA line, starting with recurring operating profit, which stood at EUR 361 million, up plus 5.7% includes minus EUR 110 million of depreciation, amortization and impairment charges in fiscal '25 compared to minus EUR 89 million in fiscal '24, an increase mainly reflecting the amortization of intangibles acquired through the Santander partnership and the Cobee and BenefÃcio Facil business combination. Other operating income and expenses amounted to a net expense of minus EUR 26 million in fiscal '25 compared to minus EUR 92 million in fiscal '24, reflecting the expected normalization post spin-off, notably once the H1 '25 residual ISI [Indiscernible] cost had been accounted for. Net financial expenses totaled minus $17 million in fiscal '25 versus minus $20 million in the prior year. Gross borrowing costs declined slightly, driven by the nonrepetition of spin-off refinancing costs and more favorable financing conditions. Income tax expense amounted to minus EUR 100 million in fiscal '25, corresponding to an almost normalized effective tax rate of 31.4% compared to 39.5% in fiscal '24 due to the spin-off, including carve-out and other related one-off costs. Adjusted net profit group share reached EUR 221 million, up plus 8.4% year-on-year, while the adjusted basic EPS came in at EUR 1.52. This performance demonstrates a strong acceleration in growth and profitability throughout the P&L. We will now look at how these elements also translated into the strong cash generation and conversion that we delivered once again in this fiscal year on Page 25. We are indeed once again very pleased with our cash flow generation this year, up plus 10% year-on-year. We delivered a record recurring free cash flow of EUR 417 million compared to EUR 379 million in fiscal '24, resulting in a cash conversion rate of 89%, well above our 3-year average target of 75%. Let me detail the main factors contributing to this solid performance beyond the strong recurring EBITDA. CapEx amounted to EUR 98 million, representing a temporarily lower 7.6% of total revenue, mainly due to the finalization of the IT carve-out during the first half of fiscal '25. Nonetheless, the group maintained a strong investment focus over fiscal '25 in data and payment capabilities, technology innovation, and infrastructure, as well as cybersecurity, all essential to underpin future growth and efficiency improvements. Change in working capital, excluding restricted cash variation, stood at plus EUR 128 million, while fiscal '24 change in working cap was boosted by positive one-off effects, including the impact from the regulatory change in Brazil and from the Paris Olympic Games in France. Income tax paid decreased to minus EUR 86 million, reflecting the near normalization of the effective tax rate following the spin-off, as mentioned earlier. This strong cash generation and high cash conversion clearly demonstrates the group's disciplined execution, sustained operational efficiency and enhanced financial flexibility. This strong cash generation was also a key driver to fuel the further increase in the group's net financial cash position in fiscal '25, as we see on Slide 26.  The group's net financial cash position increased by plus EUR 108 million, up to EUR 1.163 billion of net cash as of year-end. It was mainly driven by the positive inflow from the EUR 417 million of recurring free cash flow, as we have seen. Main outflows over the year included, first, minus EUR 148 million linked to the payment and related impact of the acquisition completed in fiscal '25, notably Cobee, which was partly offset by the disposal of the nonconsolidated investment in Cobee.  And then these outflows included minus EUR 65 million related to dividend distribution to both shareholders and noncontrolling interest, minus EUR 5 million of other impacts related mainly to the cash out from other income and expenses, and the purchase of treasury shares, and minus EUR 47 million of currency effect on cash position, excluding [indiscernible] net cash position is also reflected in our BBB+ rating from S&P.  The strong [ Tepi ] net cash position allows us to actively deploy our capital allocation strategy, which I will review on Page 27 before handing over back to Aurelien. Since January '24, we have consistently reiterated that our capital allocation strategy relies on 3 central pillars: investing for future organic growth through CapEx, pursuing targeted and value-accretive M&A opportunities, and returning capital to shareholders.  First, we maintain our ambitious investment policy targeting to remain below 10% of total revenues in CapEx to support sustainable organic growth. Although this year's ratio was temporarily slightly below target, our investment focus remains strong, particularly in technology and data.  Second, we continue to deploy our targeted and disciplined M&A strategy. As Aurelien  highlighted earlier, all our recent acquisitions have fully met expectations, clearly evidenced by their progressive positive contribution to growth once integrated.  And lastly, we remain fully committed to returning value to our shareholders. Initial step in our shareholder return policy is the dividend. The shift last year to adjusted net profit as the basis for dividend payout sent a clear and confident signal to our shareholders. Accordingly, we are proposing this year to increase the dividend from EUR 0.35 to EUR 0.38 per share, representing a plus 9% uplift. In addition, we have a strong and accelerating free cash flow generation as well as a higher year-end net cash position in fiscal 2025.  As we are confident that this will not compromise our investment capacity for growth, we have decided a EUR 100 million share buyback program. This is a testament to our focus to shareholder returns and our confidence in the group's future outlook. And with that, I will now hand it over back to Aurelien , who will take us through our financial objective for fiscal '26 and the conclusion.  Aurélien Sonet: Thank you, Stephane. Let me now wrap up this presentation with our outlook. Back in January 2024, we set ourselves ambitious medium-term financial objectives. And over the first 2 years of the plan, we can clearly say that we have delivered and even outperformed on them. That said, the environment in which we operate is no longer the same. A more challenging macroeconomic context has created headwinds in several markets, making us enter fiscal 2026 with caution. However, we remain strongly confident in our structural growth drivers and in the significant potential for further margin improvement and robust cash generation.  Consequently, we are now committed to delivering for fiscal 2026, first high single-digit total revenue organic growth. This will be driven by solid momentum in Employee Benefits operating revenue, while other products and services are expected to remain dilutive to overall group growth, and float revenue should stay broadly stable in value based on the latest forward curves.  This high single-digit growth in fiscal 2026 would translate into a 3-year CAGR of at least plus 12%, firmly within the low double-digit range. Second, plus 100 basis points recurring EBITDA margin organic expansion, upgraded from the previous plus 75 basis points, backed by the group's significant potential for continued margin enhancement. This should translate into an overall margin expansion exceeding 500 basis points, well above our initial 250 basis points 3-year target. Third, above 80% recurring cash conversion on average over fiscal 2024 to 2026, representing a second upgrade from our initial 70% objective.  Now, before opening the floor to questions, I'd like to highlight once again that fiscal 2025 has been another very strong year. As we enter fiscal 2026, we look ahead with confidence, supported by solid fundamentals, a loyal client base, and a strong commercial pipeline, but also with prudence given the challenging environment that we face in several of our markets. Building on our strengths, we remain fully committed to executing on our long-term value creation road map. And with that, Stephane and I are very pleased to answer your questions.  Operator: [Operator Instructions]. The first question is from Julien Richer from Kepler Cheuvreux, Research Division.  Julien Richer: So 2 questions for me, please. The first one, you posted a low double-digit organic revenue growth in '25. '26 guidance is for revenue to grow high single digit. What proportion of this will be volume versus sales value increases? And how sustainable are these drivers if macro conditions soften? Second question on Cobee. Could you please elaborate on the cross-sell potential between your platform and Cobee, the impact of Cobee on your average revenue per user, and any early signs of scalability to other geographies, please?  Aurélien Sonet: So I'm going to start with your question regarding Cobee, Julien, and Stephane, you might answer the first question of Julien. So regarding Cobee, as we are mentioning, we see 2 very positive effects when we migrate our existing Pluxee clients on the Cobee's platform,  the first one is, as I was mentioning, is the activation of users because in Spain, it's not always collective benefits. It's more a salary sacrifice model. And so we see a boost in the level of activation. So this is the first driver. And the second one is the amount converted by the end user into benefits. And we see that the budget is increasing because the full range of benefits bring much more satisfaction and answers much more to our clients' employees. So those are the 2 strong synergies. And this is still the start, and it was our plan, and we see that we are meeting our initial plan. Now, in terms of expansion and rollout plan of our Cobee offering, we are already working in Portugal and in Mexico. And in both countries, we are seeing very encouraging signs. The market is answering quite positively, and for the moment, we really want, I mean, Spain, Portugal, and Mexico to be successful. So those are our top priorities for '26. Stephane, regarding the first question?  Stephane Lhopiteau: So, regarding your question about how much the high single-digit growth is going to be fueled by average face value versus volume. So, as a reminder for everyone, average face value increase is a key contributor to the growth in business volumes. But you're right, within this business volume, there are some factors like this increased average face value versus new client gain or some potential losses that we try to avoid as much as possible. So what I can tell you in terms of average face value contribution we are fully on track with our initial commitment, which was to deliver EUR 3 billion of increase in average face value over 3 years, and we have delivered more than EUR 1 billion in fiscal '24 and once again in fiscal '26, and we are targeting even though this is not a guidance, but we are targeting the same magnitude of increase in average face value in the coming fiscal year '26.  Operator: The next question is from Estelle Weingrod from JPMorgan.  Estelle Weingrod: On regulation, first, both France and Brazil, just where do we stand now? And what is your best guess on timing? The second one on the outlook as well. You're guiding for another strong year in terms of margin expansion. Can you just elaborate a bit more? What is it driven by? Have you identified new efficiency gains?  Aurélien Sonet: So starting with the regulation for France and Brazil. So France, at the moment, the main topic is about the 8% taxation measure that was introduced by the government on the all employee benefits. Quite recently, an amendment related to this measure and related to the cancellation of this measure was passed at the social committee level. So this is, I mean, a very good news for the 21 million French worker that would be impacted by this kind of measure.  Now discussions are still going on at the first chamber before going to the second chamber to the higher chamber. So we still remain vigilant regarding this topic, but it's a positive evolution.  Regarding the meal benefit platform, which has been our topic for the past almost 2 years, as you can imagine, for the moment, this is not the current priority of our existing government. But even though we don't have the visibility on the timing when the discussion will resume, I remain optimistic that this topic will be rediscussed first. And regarding the content of this reform, I would expect that it would contain similar measures, given that the past 3 governments came out with the same conclusion and recommendation. So from a timing standpoint, we don't have a clear visibility yet.  So, back to Brazil. So over the last months, the macro environment has been marked by still a relatively high level of inflation. So Lula government has been put under strong pressure to find solution to reduce the food inflation and to enable access to food for all consumers and to face or to help the government face the challenge, we remain in constant dialogue, both with the Ministry of Labor, but also the Ministry of Finance to discuss ways to enhance the meal benefit system the path and to do it over the long term.  So we do share a common objective, which is to ensure the sustainability and the extension of this program. And when we look more precisely at the different measures, so regarding portability and interoperability, so the decree that is required for this implementation is still pending on the portability, and we shared this during the last call. We've been actively engaged to establish the appropriate framework and based on the proposal that we submitted through our association. But there is no specific update since then.  And regarding other possible measures. As previously discussed, we are also closely monitoring the situation. And we'll come back to you in due time when there is a significant evolution, which has not been the case over the past months.  So this is for the regulation. And regarding how we plan to deliver 100 basis point margin expansion. First, we will continue to fuel our platform model with steady business volume growth, both organically and inorganically to fully capture the benefit of our operating leverage. Second, as mentioned by Stephane during the presentation, we continue to strengthen our cost discipline.  We are also implementing additional efficiency programs that includes process simplification, more selective investment allocation, and further digitalization of our processes. And indeed, these measures are designed to offset the impact of the slower top-line growth in order to sustain our EBITDA margin. And third, we've been reviewing our portfolio to ensure that our capital is deployed where we see the highest potential. And we share with you Indonesia. So this could include exit from smaller or less strategic markets or products.  Operator: The next question is from Justin Forsythe from UBS.  Justin Forsythe: I appreciate the 2 questions here. So the first one, I wanted to come back to the guidance a little bit. So I just wanted to first confirm that, that was only tied to the macro impacts that you were flagging.  And does that mean that we'll be back at low double digit once we've lapped or grown through these macro impacts? And it also sounds like face value developments have been quite positive since the last results, and more broadly. So I suppose it's fair to assume also that the benefit from face value is quite meaningfully offset by macro, maybe more so than before. Also, I wanted to talk a little bit about the SME penetration. I think you gave some color around the Capital Markets Day back in 2021 around where we sat different geographies. I believe France was 10%, Brazil was 20%. Maybe you could just update us on penetration levels today, because you seem to continue to flag the continued penetration of SME increasing. Aurélien Sonet: Okay. Thanks, Justin. Stephane, maybe you want to -- you take the first question regarding the guidance. Stephane Lhopiteau: So regarding the slight shift because it just a slight moving from low double digit to high single digit, which is still an exciting organic growth that we are targeting for fiscal '26. There are a number of factors that need to be considered. The first one is the change in the float growth. So, this is not a guidance because we are just guiding on total revenue. But as said by Aurelian during the presentation and clearly stated in the press release, we are guiding -- we are adding some color on the float revenue growth, and we are seeing it to remain stable in fiscal '26. And so, this means that the float revenue organic growth is going to be dilutive to total gross revenue. And if you do the math compared to fiscal year '25, you would see that this is going to hit the organic growth by 150 basis points approximately. So, this is the first factor. The second factor is this macro headwind that we are seeing basically in all the regions, which is going to drive lower growth from all the regions, even though it's going to remain with a good momentum in Latin America and rest of the world, but with a lower growth in Continental Europe for the reason we already shared and notably, this lower or even sometimes negative end user portfolio growth, which is going to weigh on our organic growth. And then on top of this, while the overall the Employee Benefit segment is going to remain very dynamic, we are facing some changes in other products and services we refer to these changes or headwinds during the presentation. The first one is that because of the macroeconomic environment, there are some public benefit contracts which are not renewed, which are postponed, and which is going to weigh on this from public benefit to the total revenue organic growth. And at the same time, we are repositioning ourselves in the U.S. and the U.K., which is temporarily weighing as well on this organic growth. And then something that we should not forget as well is that we delivered very strong growth in fiscal '24 and fiscal '25, which is creating a high comparison base, notably in Q4. If you look at the presentation again and what we delivered in terms of organic growth in Q4, which is a fantastic outcome result as part of what we are getting from this Santander partnership. Yes, this is creating a very high comparison basis. And in Q4 of '26, we might face lower growth, which is also contributing as well to a lower growth in fiscal year '26 versus fiscal year '25. So overall, in order to make it short and in terms of segment, we are still committed to deliver very high organic growth in terms of employee benefits, but lower for other products and services, which is going to be dilutive to the organic growth. Don't forget the impact of the float. I think that's it. We are not going to share more color for what is going to come further in '26. We are right now fully committed to deliver our 3-year plan, and we'll see later what we plan for '27. Aurélien Sonet: And then regarding your question on SME, so we shared with you the performance this year. I mean 31% of our total new business is coming from SME. This remains a top priority for our largest markets. And all of them contributed to this performance. So, we see the good traction. We mentioned this commercial engine. I mean and the processes and the end-to-end digital journey that we put in place this was implemented in all those markets. The momentum is good. But still, it's fair to say that we -- in some countries such as France, we see a slowdown due to the macroeconomic context because this uncertainty weighs on the decision of those small or mid-sized companies. And sometimes it could even have an impact on their own future. So, we still expect a strong contribution, but it's likely that there's going to be a slowdown in specific market. Having said this, regarding the penetration and just, I mean, more macro view, even though we did -- we delivered a great performance, there is still a high level of potential. The level of penetration remains still low. So overall, we still have a very good potential to capture. Justin Forsythe: Stephane, I think you said 150 basis points impact from the float growth change. By my math, that's roughly $19 million, $20 million impact tied to float. Is that the right math there? Stephane Lhopiteau: If you simulate 0 organic growth in float in '25, compared to the 12.6% that we delivered, you will end up with 150 -- a little bit more than 160 basis points impact overall. And so, this is what I was trying to explain. This is a way to assess it applying to fiscal '25, what we are sharing with you in terms of color for fiscal year '26. If you do it again, you will see that we have 100 -- a bit more than 150 basis points impact in our organic growth for '25. Operator: The next question is from Andre Juillard from Deutsche Bank. Andre Juillard: First, congratulations for this strong fiscal year '25 results. One question for me in reality. Just looking for more clarification about the capital allocation. You have a very strong cash net position of EUR 1.16 billion. You announced a share buyback of EUR 100 million this morning. That means that you will keep a very comfortable position with a cash net position. What do you plan to do with this cash? Is there a very strong pipeline of M&A? Or could we expect further good news in terms of return to shareholders? Aurélien Sonet: Stephane, do you want to answer? Stephane Lhopiteau: So regarding capital allocation, which has remained unchanged, we have a fully consistent calculation that we unveiled at the time of the Capital Market Day, and the purpose of which is to feed the organic growth with further CapEx to accelerate even more our organic growth by seizing opportunities in a disciplined and very targeted manner in terms of M&A and returning value to shareholders. So, we truly believe that there is a strong potential behind M&A opportunities in order, as I was saying to capture this highly underpenetrated market is there, and by seizing M&A opportunities, we could accelerate, expand our offering, acquire new tech, increase our market share. So, this really remains a very strong pillar in terms of development for Pluxee, even though we are very disciplined, cautious in order to make sure that every time we acquire a new company, this is for creating new value. So as Aurelien said, we have a strong pipeline that we will remain disciplined. That being said, we always said that we will be agile and that from time to time, we might accelerate return to shareholders. This is what we decided to do with strong support from the Board for this fiscal year '25. This is a step. We'll see. We'll see. There is no commitment at all. This is, I think, very good that some companies like Pluxee are highly performing, and companies are able to return value to their shareholders. This is one of our commitments.  Other commitments like growing as much as we can and as quickly as we can, by investing in CapEx, and seizing M&A opportunities. So I think this EUR 100 million share buyback program is really fully consistent and fully aligned with the request we also received from many investors, as well, that we are listening to our shareholders.  And to finish my answer, this is a very good sign of our confidence in the Pluxee potential. And we are aware of where the stock price is currently trading, and versus the value we consider we are able to create from this company. And so this is also a sign we wanted to share with the financial market.  Andre Juillard: So, as a summary, the message is step by step.  Stephane Lhopiteau: As always.  Operator: The next question is from Pravin Gondhale from Barclays. Pravin Gondhale: Firstly, you flagged that Q4 organic growth was impacted by the postponement of ordering of some large programs in Europe. Could you please offer more color on the potential size of those orders? And when do you expect it to resume? And then on free cash flow conversion guidance, which is about 80%, now you delivered close to 90% in the last 2 years. So next year, how should we be sort of thinking about it? Can we expect some catch-up CapEx there, given it was lower this year? And any other moving parts to that guidance, that would be helpful.  Aurélien Sonet: Stephan, do you want to answer Pravin's question regarding the free cash flow guidance and potentially the organic growth impact, I mean, from the program in Q4?  Stephane Lhopiteau: In terms of our free cash flow guidance, we delivered very strong cash conversion in fiscal year '24 and fiscal year '25, which is a good basis for improving our commitment to deliver over 3 years now 80% of cash conversion remaining, aware of the potential for working capital. We always made it very clear that good business is the strength of our business model. As long as we deliver growth, we have some positive effect on our free cash flow from the working cap variance.  However, this could be hit positively or negatively by some changes in some regulations, as this happened in '24, '23 with Brazil, and it was a positive effect. And we could also have some negotiation, notably related to the public benefit contract, where we could have some hit on the working cap. So this is why guiding you on an 80% average over the 3 years, this is another step-up in our guidance that you should take very positively. And this is over 80%. So, on average, over 80%. So we are not guiding on an 80% achievement, we are guiding on over 80% growth. Regarding the organic growth and the impact from the large programs, public benefit programs. So I don't have in mind the impact in terms of basis points.  But yes, there are some countries, especially in Western Europe, like Romania or Austria, for example, where some decisions were taken by the state, and because of some budget constraints, to suspend or to reduce some of these programs. So these programs remain very attractive because we are always very selective in this kind of program, making sure that they are accretive to our profitability. But they are weighing at least temporarily, and we'll see further on our organic growth, notably because we did good, very good in '24 and '25 in this segment, creating a high comparison base.  Operator: The next question is from Sabrina Blanc from Bernstein.  Sabrina Blanc: I have 2 questions from my part, please. The first one is that you have not mentioned a lot of cross-selling this morning. Can you come back on the evolution and potentially how it represents compares to the meal voucher? And my second question is regarding the retention, which went to 100%. Could we have more color on the different aspects of the retention compared to 2024 to understand where it comes from, the limited slowdown this year compared to last year?  Aurélien Sonet: Okay. Regarding the net retention, I mean, most of the evolution between '24 and '25 came from the evolution of the end user portfolio, which was contributing quite significantly in '24. And as we mentioned in '25, I mean, even on H2, it turned negative. So this is the main explanation that supports this decrease between '24 and '25.  And regarding the cross-selling evolution, we still see, I mean, a positive improvement, and actually, it translates our multi-benefit strategy. We mentioned Cobee, for example, which is definitely paving the way to a much stronger multi-benefits approach and a way for us to activate the full value from our existing clients.  Having said this, we know that we have much more potential. And so for us, it's going to be one of the drivers that will help us not only keep but boost our net retention for the coming years.  Sabrina Blanc: But could we have an idea of the weight of the, let's say, the solution which are not a milk voucher compared to the milk voucher in the operating revenues, for example?  Aurélien Sonet: What I would say is that the contribution coming from the cross-selling in percentage is higher than the overall growth.  Operator: The next question is from Joanne Jordan from ODDO BHF.  Joanne Jordan: Also, 2 questions from my side. First, can you share some comments on the early start of the gift card season, please? And second question, regarding the evolution of the take rate, it's up 20 basis points in '25. What are the main drivers behind this increase? Is it mostly coming from merchants or the client fee?  Aurélien Sonet: So, regarding the Christmas campaign, it's too early to give you, I mean, color. But I can tell you that, I mean, the teams in many geographies are on it as we speak. And for us, Q1 will be the moment when we will be in a position to give you a much more precise color. But to date, it's too early. But it's part of our plan. It's embedded into our growth trajectory. And again, I mean, more to come in the Q1 announcement. Regarding your second question on the take-up rate, Stephane?  Stephane Lhopiteau: So, regarding the take-up rate, there is a global trend over the last 4 years, and there is one happening in fiscal '25. So overall, as a reminder, and over the last 4 years, we have improved our take rate of 50 basis points and with a vast majority of this improvement coming from the increase in the client commission. And then from 1 year to another, there might be some slight changes. And when we compare '25 to '24, there is a bit of an increase on the merchant side as well, as long as we are able to deliver more value to the merchants, offering them new services, and having them notice how much we can bring to them. And there is also the mix effect.  So, we were not expecting an increase. If you remember last year when we guided you, we shared some color on the take rate, and we didn't have a specific target in terms of increasing the take-up rate, but this is the outcome of all the initiatives we took with some merchants with our merchant network in order to provide them with some additional services.  But again, I think the big trend is what you have to keep in mind over the last 4 years, we have increased our take-up rate by 50 basis points, with the vast majority of this change coming from the client side.  Operator: There are no further questions registered at this time. I will now hand it over to Aurelien Sonet.  Aurélien Sonet: Thank you, and thank you all for your attention this morning. In closing, I would like to reiterate our confidence in the future, supported by the strong performance delivered in fiscal 2025. Looking ahead, we remain deeply committed to establishing Pluxee as a sustainably profitable growth group over the long term. And with that, I wish you all a very good day.  Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.