加载中...
共找到 7,440 条相关资讯
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the MarketAxess Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. The conference call is recorded on November 7, 2025. I would now like to turn the call over to Steve Davidson, Head of Investor Relations at MarketAxess. Please go ahead, sir. Stephen Davidson: Good morning, and welcome to the MarketAxess Third Quarter 2025 Earnings Conference Call. For the call, Chris Concannon, Chief Executive Officer, will provide you with an update on our strategy and our trading businesses. And Ilene Fiszel Bieler, Chief Financial Officer, will review the financial results. Before I turn the call over to Chris, let me remind you that today's call may include forward-looking statements. These statements represent the company's belief regarding future events that, by their nature, are uncertain. The company's actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the company's future results, please see the description of risk factors in our annual report on Form 10-K for the year ended December 31, 2024. I would also direct you to read the forward-looking statement disclaimer in our quarterly earnings release, which was issued earlier this morning and is now available on our website. Now let me turn the call over to Chris. Christopher Concannon: Good morning, and thank you for joining us to review our third quarter financial results. As highlighted on Slides 3 and 4, our third quarter results reflect a return to more challenging market conditions and historic levels of new issue in September as well as continued revenue growth challenges in U.S. credit. Revenue was $209 million in the quarter, up slightly from the prior year. Our revenue growth outside of U.S. credit was strong at 10%. With regard to the operating environment, we are focused on providing our clients with a platform that has the right mix of protocols and workflow tools to meet their needs in all market conditions. We intend to deliver a platform that will be protocol agnostic that uses data and analytics to help clients decide the appropriate protocol for each trading situation. Our current model does exceptionally well and higher volatility when spreads are widened out and liquidity is in higher demand. Unfortunately, we have only seen limited periods of volatility over the last several years, and we continue to see fairly tight spreads. Revenue growth in U.S. credit has also been impacted by the growth of new protocols like portfolio trading, the growth of the dealer-to-dealer market and smaller-sized trades moving from RFQ to portfolio trades at lower capture rates. The good news is that we are modernizing our technology platform, while at the same time, delivering new protocols and workflow tools to help our clients be more efficient. Most importantly, we continue to gain significant traction with our new initiatives. In the client-initiated channel, we generated 10% growth in block trading ADV across U.S. credit emerging markets and Eurobonds. This strong growth continued in October with a 21% increase in block trading ADV. In the portfolio trading channel, we generated a 20% increase in total portfolio trading ADV with record U.S. high-yield ADV. In October, total portfolio trading ADV was up 25% and market share in U.S. credit portfolio trading increased 300 basis points. And last, in the dealer-initiated channel, we generated an 18% increase in dealer-initiated ADV. Again, this strong growth continued into October with a 22% increase in dealer-initiated ADV, supported by strong growth in Mid-X for Eurobonds and the addition of Mid-X for U.S. credit. As announced earlier this week, we will also be launching a new protocol introducing the concept of closing auctions to the fixed income market. Many of you are familiar with the auction protocol used in the global equity markets, now we are bringing it to the fixed income market. We believe a closing auction in the most liquid bonds will provide the market with an end-of-day liquidity solution while delivering a more organized market closing process. Protocol innovation, market data and automated solutions will continue to evolve as this market becomes more and more electronics. Before moving to the next slide, I wanted to provide some context for our October volumes. As you will recall, the prior year period is a tough comparison for U.S. credit given the heightened level of activity in advance of the U.S. presidential election. Despite this, our U.S. high-yield ADV growth in October was strong, up 9%, reflecting a strong performance of our platform with only a slight increase in volatility during the month. While we know we need to drive higher levels of share growth, we were pleased to see the improvement of market share month-over-month in both U.S. high grade and high yield and across all of our key initiatives. Slide 5 highlights the underlying strength of our global credit franchise. As you can see from this slide, our credit business is a global business and increasingly diversified. While U.S. credit trading volume is growing at a 4% CAGR in North America, our other credit products are growing double digits in North America and throughout the rest of the world. Furthermore, 36% of our global credit trading volume is now driven by clients outside of North America, up from 29% in 2020, and we continue to add international clients. This trend is supported by the over 6,000 international dealer and investor traders that are now on the platform. Slide 6 and 7 provide you with a year-to-date view of how well we are executing with our new initiatives in the 3 strategic channels as well as the strong growth we are continuing to see with automation. On Slide 7, in the client initiative channel, we continue to make strong progress with block trading globally. Our targeted block solution continues to grow in emerging markets and Eurobonds, while we see consistent growth in block trading in our U.S. credit business as well. Block trading represents the next step function to the growth of electronic trading and is an opportunity for real transformation in the fixed income markets. We are attacking the block market in two ways. First, we are leveraging automation by providing clients with unique tools that execute blocks in a more automated way. The second way we are attacking blocks is through our targeted RFQ workflow, which allows clients to target a short list of dealers for liquidity while increasing execution likelihood and reducing information leakage. Our total block trading ADV is approximately $5 billion year-to-date, up 23% across U.S. credit, emerging markets and Eurobonds. Our cumulative block trading volume since the launch of our targeted block trading solution in U.S. credit, emerging markets and eurobonds was approximately $12 billion through October 2025. The. Next, in the portfolio trading channel, total portfolio trading ADV year-to-date is running 50% above the prior year. U.S. credit portfolio trading market share was over 18%, up 210 basis points over the prior year, including a 360 basis point increase in U.S. high yield. In the dealer-initiated channel, we are continuing to see progress. Dealer initiated ADV was $1.7 billion year-to-date, representing an increase of 34%. Our new Mid-X solution for U.S. credit was launched in September. And while it is early days as we expand the number of sessions and bring on new dealers over the last 10 days, we have executed over $1.3 billion in matching volumes. So we are pleased with the recent momentum. The evolution underway in the U.S. high-grade market is highlighted on Slide 8. The average size of non-block trades are decreasing, while at the other end of the spectrum, the average block size trades are increasing. Blocks greater or equal to $5 million in trade size represent approximately 45% of trade volume in U.S. high grade, and they are largely executed over chat or the phone. This is the segment of the market that we are attacking with our targeted RFQ solution. Trades less than $5 million in size, make up the other 55% of the market in terms of volume, but approximately 98% of the ticket count. This is the segment of the market that we are attacking with our suite of low-touch automation tools as well as our portfolio trading tool. In the third quarter, 2/3 of trades executed by our largest clients were done through automation. The good news is that this business comes in at a more attractive price point and become sticky as clients convert. Part of this evolution has been the explosion in ticket count as shown on Slide 9, driving client demand for automation underpinned by our differentiated liquidity. Trades in U.S. high grade, less than $5 million in size have almost tripled since 2021. This significant increase in tickets has been driven by a couple of factors including the growth of ETFs and SMA accounts. Assets under management and SMA accounts by some estimates are expected to top $5 trillion. Other factors driving the explosion in tickets are the growth of portfolio trading and the increased usage of automation tools and fixed income. So the increase in automation is becoming more important to handle the increase in tickets in smaller-sized trades, but increasingly also for larger-sized trades. We recently profiled a very large investment manager on our platform who has invested in automation by targeting block-size trades for automated execution. In just 2 years, we trade $2 million and higher, they have gone from doing 14% of their volume and 54% of their tickets to 35% of their volume and 82% of their tickets today. On our platform, automation trade count and trade volumes are growing at a 3-year CAGR of 29% and 28%, respectively. On the dealer side, with the growth of dealer algos, execution quality and dealer responsiveness have improved with tighter bid ask spreads and higher RFQ response rates even for block trades. Dealer algos now contribute 88% of the responses and went up to 87% of trades in U.S. high grade, including 28% of the block trades. In summary, this year has been a tale of 2 very different market environments, and we believe that the protocols and workflow tools we are developing will help us grow through all market conditions. While we are pleased with the continued strong contribution from our new initiatives, we know that we have to deliver technology enhancements faster to drive revenue growth. While the time is taking to return to higher levels of growth has frustrated many of you, I assure you we are investing in the fixed income market of tomorrow while also addressing the competitive landscape of today. This is why we feel good about our positioning and our ability to return to higher levels of revenue growth in the coming quarters. Now let me turn the call over to Ilene to review our financial performance. Ilene Bieler: Thank you, Chris. Turning to our results. On Slide 11, we provide a summary of our third quarter financials. We delivered 1% revenue growth to $209 million which included a $1 million benefit from foreign currency fluctuations and diluted earnings per share of $1.84. Looking at our revenue lines in turn. Total commission revenue was flat compared to the prior year. Services revenue increased 9% to a record $29 million. Information Services revenue of $14 million increased 6% or 5% excluding the impact of currency fluctuations. Post-trade services revenue of $11 million increased 9% versus the prior year or 4% excluding the impact of currency fluctuations. Technology Services revenue of $4 million increased 20%, driven by higher license fees as well as connectivity fees from RFQ Hub. Total other income increased approximately $2 million driven by a tax credit and lower FX losses in the current quarter of approximately $4 million. This was partially offset by lower interest income and a $1 million negative swing in unrealized gains and losses on investments. The effective tax rate was 27.1%, up from 23% in the prior year, reflecting the increased accrual for the uncertain tax position reserve we established in the first quarter of this year. Slide 12 provides you with a quick summary of our KPIs. We continue to deliver strong growth across most of our KPIs, which reflects the progress we are making in our new initiatives. On Slide 13, we provide more detail on our commission revenue and our fee capture. Lower total credit commissions and lower total rates commissions revenue was mostly offset by higher other commission revenue which included the impact of RFQ-hub. Total credit commission revenue of $165 million was down 2% compared to the prior year. With strong 11% growth in emerging markets and 9% growth in Eurobond total commission revenue was more than offset by a 9% decline in U.S. high-grade and flat growth in U.S. high yield. The reduction in total credit fee capture year-over-year was principally due to protocol mix. On a sequential quarter basis, fee capture was slightly up due largely to duration in U.S. high grade. On Slide 14, we provide a summary of our operating expenses. Total expenses increased only 3%, which includes a $1 million negative impact from foreign currency fluctuations. The increase was driven principally by higher employee compensation and technology and communication costs as we continue to strike the right balance between investing to drive future growth and continuing to drive increased efficiency. Headcount was 896, up only 2% from 881 in both the prior year period and at the end of 2Q '25. We are reconfirming our full year 2025 expense guidance and expect to be at the low end of the previously stated expense range of $501 million to $521 million on an ex notable non-GAAP basis or on a GAAP basis, $505 million to $525 million. On Slide 15, we provide an update on our capital management and cash flow. Our balance sheet continues to be strong with cash, cash equivalents and corporate bonds and U.S. treasury investments totaling $631 million as of September 30. We generated $385 million in free cash flow over the trailing 12 months. We repurchased 595,000 shares year-to-date through October 2025 for a total of $120 million, including 239,000 shares repurchased during the third quarter at a cost of $45 million. As of October 31, 2025, $105 million remains on the Board's share repurchase authorization. Now let me turn the call back to Chris for his closing comments. Christopher Concannon: Thanks, Ilene. In summary, on Slide 16, we are continuing to innovate and execute with our technology modernization and we are focused on the delivery of new product enhancements and new protocols for the remainder of 2025. Our new strategic hires are already making a difference in our execution and we continue to show performance across our new initiatives for block trading, portfolio trading in the dealer-to-dealer business. Our revenue growth profile outside of U.S. credit is strong, and we are addressing our challenges in U.S. credit. And while we are pleased with the growth we are generating with our new initiatives, we are confident that we can execute faster to generate higher levels of growth. Now we would be happy to open the line for your questions. Operator: [Operator Instructions] Your first question comes from Chris Allen with Citi. Christopher Allen: Yes. Morning, everyone. Thanks for the question. Nice to see solid expense control this quarter. I have a bit of a 2-parter. One on the Mid-X U.S. launch, obviously, you see nice volumes to start. Can you talk about the pipeline to add additional dealers there? How it's interacting with PT, whether you see benefits there. And the second part, where you're seeing good uptake in new offerings like Mid-X you noted, your overall share gains have been elusive, which is leading to the investor frustration. Can you elaborate on your comments in terms of taking actions to deliver faster technology enhancements? How you're addressing competition, particularly if your legacy areas of shrink, which some are questioning whether there's been a degradation there, just so you're seeing uptick in new solutions, but overall share is moderated? Christopher Concannon: Great. Okay. Thanks, Chris. And yes, I'll try and get to all those parts of the 2-part question. First, on the recent launch of Mid-X which is our mid-market matching solution, really finally addressing that dealer-to-dealer market that has been growing over the last few years, now about 30% of the trace market is the dealer-to-dealer market. And we obviously have been engaged in dealer initiative business particularly using our dealer RFQ, which as you can see in the numbers and certainly in October, continues to grow. The dealer-initiated business in October was up 22%. And that's really without the full rollout of Mid-X, which only rolled out in late September and still early days. We are excited about those early days, though. As I mentioned in the opening comments, we're now seeing Mid-X run on a daily basis when it launched, it was running several times a week. So we have plans to increased the number of Mid-X sessions. We only run on a day today. But right now, we're on track to deliver around $2.7 billion in the month. That's the kind of run rate we're on. So we're pretty excited about that, just given it's so one session a day and off to a good start. The other important piece of that Mid-X solution is really our relationship with the dealer community who are a key ingredient to our ecosystem. And as you mentioned, it has a relationship to portfolio trading really, as dealers enter into portfolio positions, they obviously want to exit those positions in an efficient way. And certainly, the mid-market sessions that are out in the market have been very helpful to the dealer community for exiting that inventory. Unfortunately, they were priced at -- some of them were priced at quite a higher level. So part of our Mid-X offering is really to cater to the dealers' needs to get out of positions in an efficient way. And I think we've struck that balance. But again, it will lead to that lower fee per million for that Mid-X solution. So we do want to make sure people understand the connection to that volume being helpful for dealers as part of our broader partnership with the dealer community. On your second question and a very fair question around just our overall growth. The two areas, obviously, top line revenue in U.S. credit and our just overall growth of market share in U.S. credit really have been largely slower growth than we would like. And I think the way to think about what we've been doing in this area, we really made a decision, I should say, I made a decision to invest in our technology using what I call a portfolio approach. As opposed to investing in a few areas, one or two critical areas we invested in several critical areas that needed to be addressed. And first, there is the overall tech transformation that is underway here at MarketAxess. We've been investing heavily into that tech transformation. But at the same time, we had to address the competitive landscape that we sat in U.S. credit, in particular. And so we chose to make several investments not just our tech transformation, but you see us investing in portfolio trading, what we just talked about, the dealer-to-dealer business where we made sizable investments. We made investments in our algo suite or our automation suite. And we also made investments in block trading across our -- all of our products. And finally, with the recent news this week, we were also investing in our recent announcement around closing auction. So we made a decision to make a multitude of investments, all tech heavy investments to address each of those areas that needed either a competitive dynamic or it was part of our broader tech transformation that's underway. As for the tech transformation, EXPAREL has been a key ingredient to that tech transformation. So those are investments that are replacing existing UI technology with new modern technology. We've also leveraged our Pragma acquisition. And we're using that Pragma acquisition technology -- acquired technology for our automation suite, where our legacy automation suite is now migrating to the Pragma technology stack. And finally, you're seeing the first elements of the Pragma matching technology being delivered into the closing auctions. Now where those investments are working. Obviously, our portfolio trading numbers reflects a return on investment. Our dealer-initiated numbers also reflect a return on investment and automation continues to grow somewhere in 17% in Q3. So those are all up. However, both portfolio trading and dealer initiative comes in at that lower fee per million. So that revenue challenge doesn't overcome the other areas of our core business. and the growth in that core business. The core RFQ business, obviously, has been impacted by what we call the market environment. If you look at the low volatility, very tight spreads and that we haven't -- we've been seeing over the last few quarters, it presents challenges to the growth of that traditional all-to-all RFQ platform. And so we've seen that where we are competing with the phone and with chat and we're seeing a block market behavior going direct to dealer. So that's some of the overall environmental challenges. And obviously, while we've had block growth. It's been not big enough or not fast enough as we would desire. So we continue to make those investments in that box strategy. We are seeing success in our Eurobond and EM products where the block growth is growing. Where we sit today, I'd say we feel good about the momentum we're seeing in all those initiatives but we would expect to deliver higher market share growth in the quarters ahead, just given all the investments that we are making and where they are and just being rolled out to the market. So we feel pretty good that the investments we are making are yielding results in terms of volume, but we obviously want to have them yield results in terms of revenue. And look, we're not stopping that investment. We have releases going out this weekend that are targeting all of the areas I just talked about. And we have the closing auction that we just announced, which is going live this month as well. So a lot of areas of investment, some that were required for tech transformation, but most of them were required for the competitive landscape we sit in. Operator: Your next question comes from Patrick Moley with Piper Sandler. Patrick Moley: Yes. Wanted to ask about the closing auctions and the announcement that you made recently. Can you help us get a sense for just the size of that opportunity, what it could mean for data, what do you mean for your market share. And then how large a piece of the overall credit market do you think that, that sort of volume could become over time? Christopher Concannon: Thanks, Patrick. And obviously, a great question, just given how much time we've worked on the closing auction. So we're very excited to finally get that news out because it's been a sizable investment for us. It's been really an ongoing strategy over the last 4 years. We have some really great partners advising us on the project. BlackRock, State Street, Alliance and DWS have just been great partners, and there's actually more large investment managers beyond that list that we didn't disclose in the release. We've been working closely with the large investment banks and ETF market makers. They are very key ingredients obviously, the liquidity and a closing option like the one we're designed. We also have worked with the SEC, our closing auction requires filing with the SEC because it's part of our ATS. So lots of years of work and effort is finally coming to market. So we're super excited about that. First, let me tell you what it is not. The closing auction is not a mid match -- a mid-market matching session. The fixed income market has lots of mid-market matching sessions where you match buy and sell interest and just use a price at mid of the market. That's not what we've built. We've built a true option where buy and sell interest, find a clearing price and that clearing price ends up being where all the trades that are matched execute. So it's a very important difference to what is quite popular in the fixed income market. The other key ingredient to an auction is an all-to-all network that is sizable. So just given our position with our all-to-all network, we are able to allow any participant match with any other participants. So that's really a key ingredient in any auction and why we felt it was a unique position for us to be in to launch an auction of this size and this magnitude. The most important part of the strategy around this auction and where we spent the most time talking to our client partners, it's really designed to support the growing indexation of the fixed income market. If you look at our overall global market, it's a $150 trillion market. the largest asset class on the planet. 20% of that market is benchmarked to an index or held within an ETF benchmark to an index. So it's a very large portion, and that 20% continues to grow each year. Just within the fixed income ETF market, globally, that's now hit $2.7 trillion, and it continues to grow and is expected to grow over the next 5 years to somewhere close to $5 trillion. So it is designed to cater to that growing part of the fixed income market. Every index fund -- every index fund needs a closing price and every ETF needs a NAV to close its fund. And what's interesting about the indexes that those ETFs and index-based funds are benchmarked against they tend to have higher turnover than traditional equity indices. And we see that on every month end. The month end really, there's really more new issue in the bond market than there are IPOs in the equity markets globally. So you tend to have higher turnover of the index that all this money is benchmarked towards. And that's a really key ingredient. If you -- just to give you some stats, in U.S. investment-grade volumes, the last hour of the last day of the month, 25% of that day's volume is done in that last hour. So we're seeing aggregation of activity moving to closer to the close. On a normal trading day, we're now seeing almost 15% of total volume now within the last hour of the close as well. So there's been a trend line where much of the bond market is moving further and further closer to the closing time of the day. A key ingredient -- the other key ingredient other than an all-to-all network is price. The price that we are providing at the closing price has to be relevant to the index funds and the ETFs. So how do we make that relevant. You'll recall that we entered into a partnership with S&P for -- where we provide our CP+ data feed to S&P to help them input that into their evaluated pricing tool. And that's been a great partnership with S&P from just a pure data perspective. But the key ingredient is S&P also owns some very key indices, which are powered by that end-of-day price. And so one of those key indices is the iBoxx Index, which is what the HYG and LQD is based on the iShares to iShares ETFs, the two largest ETFs on the planet. So that's an important ingredient where our CP+ price is now being delivered to the S&P eval product to help support and evaluated closing price for some very key index funds, but certainly in key ETFs as well. As the closing price closing auction rolls out, we will be targeting the more liquid end of both the IG and high-yield market. and looking to form a closing price that powers our CP+ end-of-day price in those bonds. So the data piece, as you asked in your question, is a very critical ingredient to the success of the auction itself. So we're excited that we've been working on this for several years, and we are excited about all the partnerships that we've established and certainly, the S&P partnership is a key ingredient. Operator: Your next question comes from Alex Kramm with UBS. Alex Kramm: Just on the kind of laundry list of new initiatives and some of them that are running a little bit slower, maybe unpack U.S. block trading a little bit more. I know success outside of the U.S. so far, seems like U.S. block is still very early, but anything you can help us with in terms of timing of more dealer liquidity on those? And anything else where we could expect to see some uptake here? Christopher Concannon: Sure. Thanks, Alex. And certainly, we see the block market as the biggest opportunity in front of this company. It is really -- when you think about the overall global fixed income markets. Right now, the nonelectronic portion of that market globally is far greater than what is already electronics. So we see it's rare that you have a company that has a market opportunity that is bigger than the market it sits in today. So we're pretty excited about the block opportunity globally. But particularly here in the U.S. Overall, as you saw in some of our numbers, our block growth rates in Q3 across all the products was about 10%. But in October, we saw that jump to 21%. So we are seeing the block initiatives yield some results. I'd say in U.S., as you point out, it's not at the levels that we would want just to give you some stats in U.S. IG in October, we did see it jump to 30% growth. So our block activity in October is up. But as you can see in our share, it's up slightly. We'd like it to be up much further. I think the key ingredients are really still content. So we have made huge inroads in the content that we share with our clients, both in U.S. credit, but certainly in EM and Eurobonds where we have pretty robust content. We are also constantly delivering new features. So we're excited about new offerings rolling out just in another week that will help address some of the key ingredients to block solutions and block trading where we want our bank partners -- our large investment bank partners to be able to share their [ acts ] content directly with our clients. That's a key ingredient for the block market to take hold. So where we have content, we're seeing success. And now we're delivering with the rollout of EXPAREL in Europe, we're now delivering just a better workflow for that block trading content in Europe. Certainly, in the U.S., we're making regular changes to our block solution. So we're excited about the coming months and some of the changes that we're delivering. Operator: Next question comes from Benjamin Budish with Barclays. Christopher O'Brien: This is Chris O'Brien on for Ben. I wanted to ask a broader question about the environment. We're seeing continued lower credit spreads, lower volatility. Just curious how you're thinking about growing through this kind of environment if it were to persist? And is there anything that you could see that would maybe make a meaningful shift in the environment that we've been seeing over the last several months? Christopher Concannon: Sure. Great question. Certainly, over the last several years, we've seen generally lower volatility, tightening of spreads. And certainly, that has had an impact on some of our core offerings. We did see return to volatility in the second quarter. So we're happy and pleased with that second quarter spike of activity, but much of that was short-lived, and we can see how quickly volatility comes and goes in the marketplace. I'd say in the current month, we are seeing higher levels of volatility. Obviously, you're seeing VIX above 20%, and we're seeing spreads widen in the current environment. certainly, in November, the market is reflecting higher levels of volatility. TRACE in -- is up 46% in investment grade and it's up about 25% in high yield. So we're seeing in the current month activities that would suggest a little bit of unlocking to that lower spread and lower volatility. But as you point out, it's been -- if you look at the summer months, in the third quarter, there was very little spikes of volatility or volatility activity. So challenging environment. But certainly, both in October and now in November, we're seeing higher levels of volatility and a little bit of spread widening, which makes our all-to-all liquidity that much more attractive. Ilene Bieler: And then I would also just add, if you think about market expectations for Fed rate cuts this year, they remain sort of at the 2% to 3% with a possibility of a third cut in December, having declined a bit as we heard post Powell's remarks last week. But there's still a more likely than not probability of a December cut but perhaps with less conviction. Having said that, the curve is still trending towards a gentle steepening but the front end is being fairly anchored. The belly largely holding and the long end remaining sort of sticky. So in other words, if you think about short-term yields could fall when the Fed cuts and long-term yields not falling maybe as much and if such a scenario plays out, this should be positive for liquidity, secondary turnover or things like that. And you could see more willingness to buy longer-duration bonds. And I think, as you might have imagine, right, we saw just, for instance, in -- on our platform during the quarter, we saw that the weighted average years to maturity moved up to about 9.1 years. From the 8.5 year level we saw the prior quarter. And all of that said, as Chris just said, we are seeing some interesting movement in November. And even just in the first few days, we've seen weighted average years to maturity. And that was only the first 2 days. So you have to keep that in mind, but we did see weighted average years to maturity up to about 10 years, let's call it. So there are some other factors to keep in mind as well when you think about the macro environment. Operator: Next question on comes from Michael Cyprys with Morgan Stanley. Michael Cyprys: Maybe just continuing with the last question, macro backdrop, clearly, moving your way in November as you just answered with the last question. But if that proves short-lived and macro backdrop returns to a bit more challenging backdrop like we've seen for some time. I guess, what's the scope to returning to higher levels of growth parts of the business do you see as perhaps the most meaningful contributor to that? I know you mentioned some tangible progress on new initiatives, some of which are lower fees. So just curious how you're thinking about that as you look out over the next 12 to 18 months? Christopher Concannon: Sure. Great question. As we mentioned in our opening remarks, a key ingredient to our strategy going forward is being what we call protocol agnostic. We need to deliver protocols that our clients choose at times of high volatility or at times of low volatility. So when I think about low vol environment, the things that tend to stand out in the market are portfolio trading, the dealer-to-dealer mid-market sessions, things like Mid-X, which we've just rolled out. And you see higher levels of block activity move into the market where spreads are stable and tight our investor clients tend to move back to going direct to dealers. They don't leverage that unique liquidity in the all-to-all marketplace that we run. So really, the key ingredient is providing those protocols seamlessly to our clients, but then using our unique proprietary market data to help them decide which protocol to choose from. It gets complicated to decide whether to do a portfolio trade or to do a list and just go out to all via RFQ. A lot of our data can help traders decide which protocol to use for any given environment. And that's kind of the key ingredient of the strategy going forward is that protocol agnostic approach where we can provide things like block trading tools directly to the client where that client can trade directly with a dealer that has an act or has content or more importantly, we can help that client select the dealer based on their activity in the market that we see. So all of the key initiatives, the block portfolio trading and the dealer-to-dealer initiative are really designed for lower vol environment, whereas our key liquidity solution, the all-to-all network is certainly robust in the volatility that we're seeing in today's week and the last couple of days. Operator: Our next question comes from Simon Clinch with Rothschild. Simon Alistair Clinch: Again, sort of thinking about the market environment. I was wondering, Chris, if you could give us some thoughts around the mix of volumes in credit and just the real reasons why and sustainability or the surge into the size of trades at the block end side and then the sort of shrinking of the size of trades to the other end. And I kind of -- and really, what we're seeing like month in month out seems to be a squeezing of that -- the dealer to client portion of the market. And I just wanted to get a sense of is that just a trend that's going to be going for you? Or do you think that is a cyclical element here versus -- but any thoughts that would be useful. Christopher Concannon: Sure. It's a great question because it's certainly the stats that we shared in our slides are unique, where you see the smaller trades get smaller and the larger trades get larger, that you don't see that too often across an evolving marketplace. With regard to the smaller trades getting smaller, we are absolutely well positioned to capture the efficiencies that are required to handle all of those trades and all of those trade sizes, that is clearly driven by one portfolio trading. Remember, portfolio trades are big notionally, but each of the line items are quite small. So part of the growth of that -- those tickets in the market that we shared is the growth of portfolio trading over the years. The other key ingredient to the growth of the smaller tickets is obviously the growth of SMA in the fixed income market. That's been a real driver of asset allocation among our biggest clients and will continue to be a driver as it collects more and more assets over time. And so those are certainly where we see the largest use of our automation tools are coming from clients with very large SMA, and we're happy to report that some of our biggest clients are continuing to invest in SMA either through acquisition or just overall investment in the SMA investment. So we're expecting the smaller tickets to grow as a percent of the overall trade market. we think we're well positioned. The other reason why we think they'll grow is larger trade sizes are going to be broken into smaller trades. We're already seeing that in our algo suite, where clients are taking advantage of our credit algos where they are able to trade large blocks of 20 in sizes of $1 million or $2 million at a time and that's yielding very good returns in terms of execution quality and reducing information leakage. So we have every expectation that the overall trade will see more tickets growing. With regards to the block market going through its growth where those tickets are getting larger. I think that is really when I look up and look at the trend line and the volatility in the market, we've really been at historically low vol and historically tight spreads over the last few years relative to prior market environments. And I think that has led to block side being a little bit more of an attractive tool in exchanging risk. Dealers are certainly willing to trade that block size and take that risk. And obviously, clients are looking to move a lot of volume at any size they can that's efficient. So I do think that we'll end up in a world where when vol returns to a more normal level, those larger blocks get broken up, but we will continue to see like any electronic transformation the tickets will explode. Large box will get broken into smaller sized tickets, and that will be the trend line going forward. For both, I think we've positioned ourselves to solve portfolio trading solve the small ticket automation growth. And obviously, we're trying to solve the block solution as well. Hopefully, that answers your question. Operator: Your next question comes from Jeff Schmitt with William Blair. Jeffrey Schmitt: So there have been a lot of growth in industry share portfolio trading through last year. It seems to have stalled out at around 11% or 12% of credit volumes. You've still been able to grow share nicely. But what do you think is driving that pause that protocol matured? Or do you think it can continue to grow? Christopher Concannon: It's a great question because we've been watching that share portfolio trading share. Remember, it's a sizable part of the market. It's a key tool for our investors. From a market opportunity, it's quite small from an overall revenue opportunity. But because it's a critical tool for our clients, we continue to invest in it. The -- we're seeing kind of an equilibrium, I call it, in the IG market from a portfolio trading standpoint. I know some people predicted it would go to 20%. But it's really, as you point out, has really flatlined anywhere from 10% to 12% of the overall market. However, that said, where we have seen growth is in the high-yield market. That market, even in November, is up closer to 15% of the overall market. whereas just a few years ago, it was closer to 5% and 6% of the overall market. So we are seeing a number of our clients using the high-yield portfolio trading tool as a way to access liquidity. What's interesting is, as you point out, in IT, the flatness of the growth that is not for lack of dealer liquidity. We have seen more and more dealers move into the dealers place -- space for providing liquidity on portfolio trades. So there is ample liquidity in that portfolio trading market to support a higher percentage of the market. I just think the market is quite comfortable at the levels that they're hitting, which is anywhere from that 10% to 12%. The only time that we see it spike up is when we see what we call a mega portfolio, something greater than $1 billion in a single portfolio. And we've seen those be anywhere from $1 million to $11 billion in size. And those are obviously rare and just come once in a while. But yes, I think -- I do think we've hit some level of equilibrium in IG, but we are seeing this -- the growth in high-yield our high-yield market share of the portfolio trading market share has grown dramatically. We've been quite proud. We obviously talked to the dealers a lot about how we're doing in that one asset class. And we're certainly in a what we call a leadership position in high-yield PT right now. So we're excited about the investment we've made there and the returns that we're seeing. Operator: Your next question comes from Dan Fannon with Jefferies. Ritwik Roy: You have Rick Roy on for Dan today. But I'm sure you're going to be excited for a third follow-up to the macro environment. But just on that, we see duration and yield to maturity, at least measured on the bond index, creeping up month-to-month, your charge for that as well. I was hoping you could provide an updated outlook on maybe where you think the curve could land from that perspective and maybe the updated impacts to fee per million based on that? And then separately, with the expense control that you guys have demonstrated year-to-date and the reaffirmation of guidance today, I get to kind of an implied sequential increase in 4Q that seems a bit elevated relative to historical seasonal patterns. So if you're able to quantify which line items might be driving this increase? And if I'm so lucky to get a little bit of insight into 2026, that would be helpful as well. Ilene Bieler: Okay. Let's unpack your questions. And let me take them in turn. So if I start with the macro and the weighted average years to maturity, look, it's really -- I think I kind of laid out when I spoke before about what we're seeing in the environment in terms of the rate environment. and how things could play out in the scenarios depending on where we end up with a rate cut. And I did talk about how we're currently -- and remember, we're talking 4 trading days here. So we've got to understand that we've got to see where this lands. But we're seeing about 10 years weighted average to maturity on the platform. And in terms of yields, we actually saw yields out a little bit, although still in significantly from the prior year time period. So I think we're going to have to wait and see how that goes. I think you guys all remember the sensitivities at this point in terms of where high-grade duration helps us when it comes to yield if you're 100 basis points in, in terms of yield, we can see that adding, call it, $3 to $5 on the fee per million in high grade. And obviously, we've talked about this as well, but 1 year out on weighted average use to maturity can be worth about, let's call it, $15 more or less. And so those sensitivities still hold within a high grade. Obviously, there's lots of puts and takes, and we have to look all in at the credit fee per million and the different protocols and what's happening. But that kind of gives you a sense for how to think about the high-grade duration piece of this. And let me take your expense question. It's a good question. And I think that we, obviously, you heard me continue to guide to the low end of approximately $505 million to $525 million on a GAAP basis. And if you think about the progression of expenses, that, to your point, would imply a fourth quarter expense level of around, let's call it, $134 million with an incremental $10 million to $12 million flowing through the next quarter. And this $10 million to $12 million increase in the fourth quarter expense relative to Q3 is really driven by items such as depreciation, technology, the impact from hires as well as some timing-related expenses that haven't yet come through the P&L. But I think we need to take a step back and really look at the expenses for the year. And I'd remind you that we took management actions in the beginning of the year. Those were to drive productivity, and we really wanted to do that through the expense base in a sustainable way and those actions reduced our full year expenses by an expected $17 million. And those included things like vendor management, vendor consolidation, role eliminations and really better aligning our resources to the strategic initiatives that you heard Chris talk about earlier in this call. Now those actions that we took allowed us to self fund to the tune of about $16 million of those investments in our technology, our products, our key strategic hires that we've made throughout the year. And so that's really how I would think about overall how we continue to really manage a disciplined expense base. We're really being mindful of the environment that we're in and at the same time, self-funding are really important investments. Operator: Your next question comes from Eli Abboud about with Bank of America. Elias Abboud: I wanted to dig into your growth in Open Trading. It looks like Open Trading kicked up to 39% of your credit volume in October, which is the highest level since the regional bank crisis. Usually, I know this is a protocol that does well in the volatile backdrop, but volatility was up pretty modestly in October, certainly not on par with the levels during the regional bank crisis in April's tariff disputes. So what can you share to help us make sense of the stronger Open Trading adoption lately? Christopher Concannon: Yes. Great question. And obviously, Open Trading, certainly in lower vol environments have not had the level of penetration that we would prefer. And certainly, in October, we saw Open Trading move up just from September from 30% up to 34% and change. So while there was spikes of volatility, as you point out in October, it was quite muted across the months. And we -- I think one key ingredient that we've been adding to our Open Trading liquidity is new sources of liquidity. It's coming in two forms: One, we continue to add systematic hedge funds to the platform. They certainly enjoy the benefits of all to all where they can price other clients' bond requests on RFQ. And also, we've also seen a number of very large investment managers take advantage of all-to-all as well where they are providing responses to other investors request for price. And that's actually a fairly new phenomenon here. Usually, we try to provide things like our algo suite or our auto responder to traditional buy-side clients. But we've seen one or two buy-side clients make sizable investments in their own automation tools, and we're starting to see that behavior help support the liquidity even when there's lower volatility in our OT marketplace. We also saw in where we see higher penetration is in high yield. We also saw that tick up in October up as high as 43% of that market is our Open Trading liquidity source. So again, it's part of a longer investment of both helping large investment managers use tools to provide liquidity. And it's also the new entrants into the market that are creating unique liquidity opportunities that's increasing our overall Open Trading penetration. Operator: Your next question comes from Patrick O'Shaughnessy with Raymond James. Patrick O'Shaughnessy: So the electronification of high-yield corporate bond trading isn't as far along as investment grade, but it's also seeing share gains still out by you as well as other platforms. What are some of the unique challenges to growing electronic market share in high yield? Christopher Concannon: Great question. Obviously, the -- by nature of the high-yield market, one key ingredient is liquidity. Our clients come to us and talk about the challenges of liquidity and high yield. Obviously, when there is volatility, our high-yield our high-yield all-to-all provides that liquidity and certainly jumps in terms of market share. But really, the key complaint that we hear from clients in the high-yield market is just the lack of -- lack of liquidity, sorry, in that market. The other challenging in the high-yield market is information leakage. If you're in a position and you're looking to move that position, you want to be very careful how that information is shared to move that position. So picking the right bank or the right counterparty to seek that liquidity is a critical ingredient. So we spend a lot of time on the high-yield block trading solution and a high-yield dealer content to provide our clients with that unique information so they can actually reduce information leakage by increasing the likelihood of being filled when they reach out to a dealer. We also have developed an AI tool where we help with using AI to select dealers that are more likely to respond to your request for price. So those are key ingredients that we see being deployed in that market. The other unique fact that we're seeing play out this summer and continuing into November as the growth of portfolio trading in the high-yield market. That's a new fact, that we didn't see in prior years. We've also seen it play out in higher times of volatility. Normally, portfolio trading tends to move further down as a tool when there's high volatility uniquely high yield has recently been a tool that our clients are turning to even in heightened volatility as a way and a source to get liquidity. So I think the -- obviously, the ETF market and having a very liquid high-yield ETF market is supporting the liquidity that we're seeing in the portfolio market as well. But I would say that we are seeing growth in the E part of the high-yield market. It's coming in the form of that portfolio trading tools. Operator: Your final question comes from the line of Simon Clinch with Rothschild. Simon Alistair Clinch: Thanks for the follow-up. Chris, I was wondering if you could just talk a little bit about the competitive environment as well. You were just talking about portfolio trading. And we know that there's been more competition in that space, and that's kind of reduced the revenue pool in -- are we seeing any other sort of incremental changes elsewhere that would ultimately affect the overall revenue pools in other protocols or other parts of the market? Christopher Concannon: Obviously, if you look at our fee per million, it's largely been a result of the mix. The two areas where we run lower fee per million is obviously, as you mentioned, the portfolio trading area. And that's an area of growth for us. We actually came from behind and certainly are growing against a pretty fierce competition. And then certainly, the dealer-to-dealer space, which, as I mentioned earlier, is a very large part of the market, 30% of the market is dealer-to-dealer. And it's an area that we really underinvested in that one area and made a decision to support the dealer community with better tools for exiting inventory. And so our growth in the dealer-to-dealer segment of the market certainly comes at a lower fee per million, but it's all incremental revenue. The launch of our Mid-X matching solution is brand new. It's certainly early days, but that's at a lower fee per million, but it's all new revenue to the MarketAxess top line. So we're excited to see the early days of growth and a way to address the market as we proceed. When we look internationally, obviously, the EM market is quite exciting for us. We've seen sizable growth across LatAm and APAC, and we continue to see that growth. We've launched India just recently. So we're excited about adding additional products to that overall market. And we feel very good from a competitive standpoint in that market. We have certainly years of investment and many, many sales visits to grow that market and add clients to that market. And obviously, our all-to-all network is a sizable portion of that market close to 40% of the liquidity in that market. And we're seeing consistent quarter-over-quarter growth in the EM market. So we're quite pleased with the competitive landscape there. I'm also happy that we have a portfolio trading tool that is being adopted by clients in and we've launched a Mid-X for EM as well. So we've tried to address all the areas where we've seen competition move into the market, and we'll continue to do that as we invest in that EM business because it's a sizable business for us. It's -- if you look at the overall EM market, it's about the same size as U.S. credit. So it's a very exciting market to be certainly positioned where we are in that market. Operator: There are no further questions at this time. I would now like to turn the call back over to Chris for any closing remarks. Christopher Concannon: Thanks, everybody, and we look forward to talking to you in the new year about our fourth quarter. Thanks. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Unknown Executive: Hi. Good morning, everyone, and thank you for joining us for our 2025 Third Quarter Conference Call. With me on the call today are: VitalHub's CEO, Dan Matlow; and CFO, Brian Goffenberg. After our prepared remarks, we will open up the line to questions from analysts. [Operator Instructions] Now before we begin, I'll read our cautionary note regarding forward-looking information. Certain information to be discussed during this call contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, please review the forward-looking statements disclosure in the earnings press release and in our SEDAR filings. As well, our commentary today will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not a substitute for IFRS measures. Reconciliations between the 2 can be found in our SEDAR filings. With that, I'll hand the call over to our CFO, Brian Goffenberg, to go over financial highlights for the quarter. Over to you, Brian. Brian Goffenberg: Good morning, everyone, and thank you for joining the call today. We are pleased to report results for the third quarter of 2025. I'll provide a summary of the financial highlights from the quarter and then hand it over to Dan for an update on the business. At the end of September, our annual recurring revenue was $93.7 million. Organic growth was 15% over the previous year, and total growth was 75%, including the acquisitions and foreign exchange. Total revenue in the quarter was $32 million, an increase of 94% year-over-year. Recurring revenue or term license maintenance support segment was $23.6 million or 74% of total revenue. Virtual Care Term License revenue was $2.5 million. This was the first full quarter contribution from the Virtual Care segment. Perpetual License revenue was $500,000 in the quarter, an increase from $300,000 in the prior year period. Services, hardware and other revenue was $5.5 million in the quarter compared to $2.3 million in the prior year period. Our services and other nonrecurring revenues were higher than expected due to timing of project delivery and revenue recognition. We expect our recurring revenue mix to steadily increase to historical levels. Our gross margin was 81% of revenue, consistent with the prior year period. Adjusted EBITDA for the quarter was $7.2 million or 22% of revenue compared to $4.6 million or 28% in the prior year period. We closed the quarter with $123.8 million of cash and no debt. We closed a small asset purchase in the U.K., subsequent to the quarter end for $140,000 -- GBP 140,000; and are otherwise generating cash and building on this balance. With that, I'd like to hand the call over to Dan for an update on the business. Daniel Matlow: Thanks, Brian. I'll make my remarks brief. I know we got a lot of analysts that are potentially out there and ready to ask some questions. So I think with what I have to say and the questions, you guys should be able to get a complete picture of the quarter. But yes, we're excited about the results just based on the fact that we came across the 2 large acquisitions that now represent 30% of our revenue. And both of those companies came into not meeting our profile in terms of what we want in terms of the Rule of 40, but we're working on it. But we're close to $94 million of ARR. And I always thought, "Hey, can we get this thing to $100 million", and we're really just knocking on the door of that $100 million ARR company. Services helped us a fair bit in the quarter due to a couple of factors. Both Zesty and Novari do come with a significant amount of services attached in their implementations. And so they did make a contribution to that and TREAT has always continuously added into from a services perspective. And then we had some milestones that were met on services that allowed us to recognize some services. So with the new company, services is a different element of our game, and we're excited to have that as part of our revenue mix going forward. In terms of ARR, again, contributions from all products that were coming into the equation. None that really stood out relative to the other one. We are seeing a little bit of headwinds for the SHREWD-based products in the NHS, not due to anything except that they're changing all their structures in terms of ICSs and ICBs. And while that's going on, I don't think they'll be making many purchases, although we are still selling that product in other areas of it, but that was always a big part. That will settle down at some point in 2026, and we do expect that to start opening up again and start seeing that to contribute. In terms of the integration, it's going great. We're starting to see that all coming together. We really got some great people with those acquisitions. We had a planning session last week where 50 people of the management team got together for planning, and it was just really nice to see how all these different groups are coming together, and we're excited about the synergistic aspects of how we're going to be able to integrate products and integrate sales campaigns and how these products fit into really a cohesive fashion. So we're excited to do that. We immediately after the acquisition started working on cost reduction programs, and that's in progress. There's a little bit of that in the quarter for sure. Really that would have just came in for the last month of that quarter. But we're continuing through that process, and that's going to take into 2026 until we start working that through the complete system, but we expect to steadily through the next few quarters starting to see the results of both new revenue coming in and cost reductions to get us into our profile that we're proud of and we always want to get to. We do have acquisitions in play. We continue to look at acquisitions. There's -- we've recently noticed over the last month or so, a lot more heated stuff on the smaller base stuff. And we continuously look at and explore the larger acquisitions that are out there and continue to work through. So it's still a big part of our program, and we continue to work through that every day, and we're getting to the point that we think we can be able to digest some small ones and continue to work through that. We are working through our 2026 budgets right now. We're excited about what we can do. And that's where we're at. It was really one of those bridge quarters after those 2 acquisitions, and we're excited about how we're bridging it. And I think it was better than expected for a lot of people. So we're excited about that. And I'll turn it over to any questions anyone has. Unknown Executive: [Operator Instructions] Today's first question comes from Gavin Fairweather of Cormark Securities. Gavin Fairweather: Congrats on the great quarter. Maybe just, Dan, to start, I mean, the business has now achieved a fairly significant scale, approaching $100 million of ARR. That obviously has some cash flow benefits. But curious if that's opening up other opportunities to you to be more strategic to your customers or organize or run things more differently or invest. Any thoughts on what this newfound scale opens up for the business? Daniel Matlow: Yes, I think it was exciting at that planning session where we're starting to get to the mode where we're seeing tenders and we're seeing situations where we can put multiple products into the equation to go get a more comprehensive solution. And we're also starting to being able to connect things together for more strategic-based offerings, especially in the patient flow and the patient journey, patient engagement based side. So we have customers that have agreed to and use multiple products and have agreed to integrate those products. And that's exciting from my perspective. That was always what the vision is and so forth. And that's also coming together with the Canadian products and the U.K. products. So the Novari opportunity, I think, opens up a lot of opportunities for the U.K. products in Canada, a lot more effective. And our U.K. team is definitely in a position to get Novari into the U.K. market a lot more effectively. They did close their first U.K. deal, and it got a lot of press in the U.K., and it's really a pretty strategic deal over there from us in the mental health-based world, which they do a lot of in Canada, but we don't see very much in the U.K. But we do think Novari is going to be able to get a significant amount of traction in the U.K., at least we're hoping that way. Gavin Fairweather: Helpful. And then just secondly for me, I noticed in the notes to the financials that you bought Definition Health had a bankruptcy for a pretty nominal sum. It looks like it digitized the surgical pathway. Maybe you can just discuss kind of the client base there, if you can integrate that with MyPathway and if you think you can grow it? Daniel Matlow: We really bought that for a technology purpose-based setting, and it's not the whole product. They -- it's a preoperative-based assessment, and they've done a really good job in terms of content for patients before they come into a health care setting, although the solution itself was just used by a handful of what I would call semi-implemented solutions that are out there, right? And maybe it was just a group of people making some technology. It really didn't make a lot of progress. But that was a component that we wanted in our Synopsis product, and it was really a technology decision to get added t to it. Gavin Fairweather: Helpful. And then lastly for me, just on the Attend Anywhere, we talked last quarter about how you thought that was a more mature asset. The revenue did surprise me to the upside this quarter. So wondering, as you've gotten to know that asset better, if you've kind of refined your view on the outlook for that? Daniel Matlow: Yes. We -- that solution, we immediately -- that solution is built through a development team in Australia, and we didn't get much exposure to them during the due diligence process and so forth. So we immediately went down to go meet that group, and we're extremely impressed by the industrial nature of that product and how it was really designed for a clinical-based setting. And then we looked at the usage of the product in its space, and it's pretty -- used pretty extensively. With that being said, there's -- and we knew that when we got it, that there's headwinds for it on the -- in respect to things like Teams and Zoom and things like that, although the customers that do use it seem to use it. And in fact, the usage increased during the quarter, which led to some of those financials being the way they are for it. But we're not sure that's sustainable or not sustainable. We're just going to follow it along. We do have ideas where that product can get added into some of our other products, example, maybe it can get added into the TREAT or EHR products that do have a requirement for telehealth and other areas, and we discussed that in our planning session. We're going to explore that over the last little while. And -- but it's still early to tell on that, Gavin, of where that's going to go for it. We've always been transparent that, that that was a little bit of risk profile for that acquisition. We didn't pay a big valuation for that company because of the potential risk for that, but it was more we wanted the Zesty product, but we were pleasantly surprised by, a, how it performed in the quarter; and b, on the usage of it. So we'll just keep monitoring on a go-forward basis and see what happens. Unknown Executive: The next question comes from Doug Taylor of Canaccord Genuity. Doug Taylor: Let me just pick up that last train of thought there as it relates to Attend Anywhere. It seems like from your language, it might be a more meaningful part of the future than you might have expected at the time of acquisition. You don't really call it recurring revenue. It's in a different bucket. Can you, one, confirm that and maybe talk about how we should think about that and the repeatability of that business on a quarterly basis going forward? Help us with the modeling around that. Daniel Matlow: I'll try, Doug. Yes, we don't put it in ARR because it's usage-based, and we're not 100% sure it's a very different model than our software base. It's a services solution as much as it is there. So we thought it is more appropriate to identify it by itself, and it should make life clearer for you guys and us on how it is performing. As I said to Gavin, like let's see how this thing performs in the next couple of quarters in terms of usage and so forth. It's hard to tell. In our history of it, it's been all over -- I wouldn't say all over the map, but it's been lower than the range that we had last quarter for sure, and it's been a little higher than that range on a quarter-by-quarter basis just based on what it's doing. But overall -- the overall approach has gone down over the last few years, mainly because of price reduction, not as much as from loss of customers because it just -- it was very highly priced when it was a national deal that was sold to the NHS, I guess, 5 years ago, whatever it was. So it went through a ton of price reduction to get it into a space that made sense relative to being able to compete against the other 3 products. And now I think it's holding on its own, and we've got new ideas of where we think we can use that technology in our world, which will take a while to bring to fruition. But yes, I think -- yes, it's hard to say. We can meet with you afterwards and try to go through it. But as I said, it's been lower, it's been a little bit higher and both are feasible in there. So it could come -- it's not going to be radically different than what it is, I think, on a quarter-by-quarter basis, but it could fluctuate. Doug Taylor: Okay. You mean, you said in the statement results better than I think most expected, both top and bottom line. You said you barely started with the cost savings related to some of your recent acquisitions, just a month or so into any savings and lots more to go. So I just want to make sure there aren't any other short-term or onetime benefits that flowed through this quarter, you'd call out anywhere as it relates to the margin profile, any outliers? Or is that a fair place to now start from 22.5% EBITDA margins and then [ it could go ] from there? Daniel Matlow: Yes. I think it's a fair place to start in a sense of where we're going. We're going to make more deals, which are going to come to the bottom line, and we're going to keep -- we'll keep looking for cost synergies as we continue to move along this is, right? I'm not sure it goes up in a straight line or meanders a little bit throughout the process of the next 2 to 3 quarters. But we do have a plan in place. We know exactly what we're doing and where these changes are going to be done, and we're in the middle of executing it. It's just how long will it take and the time lines that will get associated with it. But we do have a plan to get us to where we think we will be, and we do expect by the middle -- end of next year that we're going to be meeting that profile of where we want to be pretty nicely. So we've got a plan to go do it. Doug Taylor: Okay. Last question for me. You flagged some of the success with initial referral -- or Novari business being one in the U.K. There's some chatter that there's been some movement on some of the programs here in Canada. Can you speak to any successes you've had with the Novari product here recently in Canada as well to go alongside the U.K. success? Daniel Matlow: Yes, there's a significant amount of chatter going on for Novari. Our referral management is a hot topic in many geographies right now. I think that's where Health systems are really trying to integrate all the areas of care and moving that patient around and referral management is a big part of that. And Novari does a very good job in terms of that in their particular niches. And they've been doing it for a lot of years throughout Canada. And as we've seen in other areas, you sort of get things started and then government says, hey, let's just go for it and get a big chunk of this done. And we're seeing those opportunities coming to fruition. Nothing to report at this stage for sure, but there is -- there are things in play. And you're dealing with government, you never know how long these things take or what happens and do they ever follow through with these things, but we're cautiously optimistic of some things going through next year for sure. Unknown Executive: The next question comes from David Kwan of TD Securities. David Kwan: Curious about the recent acquisitions. It sounds like particularly Novari was quite R&D-heavy, especially relative to sales and marketing spend. So it seems like there could be some good opportunities there to shift a good amount of work over to Sri Lanka and this helped boost the margin. So wondering if you could help elaborate on your plans on that front and how we should think about margin uplift in Novari. Daniel Matlow: Yes. Our playbook doesn't -- has not changed, right? We are -- our Sri Lankan group is well over 200 people now in that group, and it keeps maturing year-over-year in terms of its ability to execute on many different things. We have a huge team of Sri Lankans already in Kingston to work with Novari, and we've proceeded to work on that stuff. So we continue to work that playbook, and that shouldn't be of any surprise to anyone that's what we do. David Kwan: That's helpful. And on the integration front as well, we're, I guess, past the 1-year anniversaries for MedCurrent and Strata. So curious if you can get an update there. Are the margins kind of up to where you guys were targeting and close to maybe where they were pre-acquisition? Daniel Matlow: Yes, MedCurrent has proceeded just like we thought it would do. It continues to work. And we've -- it's got into our profile, and we're happy with it, and they just keep continuing to click. Strata is not as quick as we would like it to be, although with Novari, there's definitely some synergistic value, and we hope to see some better things. But they -- we've made some changes in Strata in terms of salespeople and other aspects. We think that product is 100% very sellable. The customers that use it love it in the extremes, I think it's just a process of not being exposed to as many customers as we would like it to get exposed to. And we are seeing more activity for it just based on now that it's in our U.K. sales force and it's -- and the Novari sales force will be involved with that as well in terms of lead generation in terms of coming through to it. And we've added a more senior sales rep recently from our group onto that product. So it hasn't contributed to as much as we would like it to, but there's a really good installed base that makes money for us, and we're fine with it. We still think there's more to get out of it, and we think we will. David Kwan: One last one, just on the M&A pipeline. You kind of talked about potential for more, I guess, tuck-in deals. Curious from an operational standpoint, how you feel with the integration work that you're doing with Novari induction. Like do you still think that maybe a larger chunk of deal, especially something the size of like a Novari is probably more of a 2026 time line? Daniel Matlow: Listen, if the right deal comes across next week and it's like Novari, we would do the deal. They're not -- those things -- we're not going to walk away from a deal because we don't think we can absorb it. We're still working those deals and would be doing -- I think we could absorb it and do our things, although it might take a little bit more time to go do it, but we would do it and we would work on it. So you need to be opportunistic. If the right scenarios come across and they meet our profile, we're going to execute on those deals. So who knows if it will be '26, '27, '28 or it could be 2 months from now, if the right scenario is there, we're going to do it. David Kwan: So it sounds like you feel like you've gone up operational bandwidth. It might be pretty tight right now, but not too tight to the point where you passed it. Daniel Matlow: Yes. I think we're getting pretty good at this. And if we had to, we could do it for sure. Unknown Executive: Next question comes from Richard Tse of National Bank. Richard Tse: So I actually had a related question to that last question. Obviously, you've had a tremendous record of success here. So as you get better with each of these deals, as you learn more, is it reasonable to think that the pace of capital deployment as we look ahead over the next year or 2 should accelerate? Daniel Matlow: Yes. I don't know if that's ever -- Richard, I think it's more a question on can we get the deals done with the right profile that we need to do the deals on versus the digestion of the deals relative to it. There's a fair amount of activity out there. I think we still have been there. Are we going to -- we've done 4 deals a year in a lot of the years, right, for the last 3 years, right? So is that going up to 8 deals? Probably not relative to where we are at this stage yet. I still think it's more of the exact same thing. And it's just a question on the size of the deals and it can -- are the deals there? It's never been really a question on our capacity. It's just really been a question on the right profile of the deals to get done. We definitely walk away from a lot more deals than we do. So it's just a question on the right ones. Richard Tse: Okay. Fair enough. Just my other question has to do with sort of reading through the MD&A, and you talked about sort of cross-sell, upsell. Are there any sort of metrics that you can share with us to kind of allow us to evaluate how that success is among your existing base in terms of the ability to do that? Daniel Matlow: We haven't published any metrics relative to do that, except the narrative that we have a lot of customers that use a lot of our different products, but our customers are just all over the place, right, different naming conventions, different worlds like the NHS, you could call it a customer and it uses all of our products. But within the NHS, you have different areas and different groups that change over time that use multiple areas of products. So it is a challenge to get there. We're working on updating our sales force and our whole customer area in terms of exploration. We do have significant data on that, but it needs to be more comprehensive. So nothing that we published as of yet, but we're looking to be able to do that a lot more effectively in the future. Unknown Executive: The next question comes from John Shuter of RBC Securities. John Shuter: I appreciate the color on Strata in terms of the integration and the margin profile there. I'm curious from a top line perspective over the last year, how that's performed relative to your initial expectations and what you guys expected of that business going forward? Daniel Matlow: Strata? John Shuter: Yes, on Strata. Daniel Matlow: Yes. There's a lot of noise going on in the Referral Management business in terms of -- Strata already has a -- it has a very large footprint in Alberta, British Columbia in the Maritimes relative to it. None of us do a ton of work in the Quebec marketplace, although they do have a little bit of implementation there, and they also do have a footprint in Manitoba that we're trying to grow, [ not in ] Saskatchewan. It's really been the wildcard in Ontario, which they do have a fairly good footprint. However, there's been more focus on referrals into the hospital setting as opposed to outside of the hospital setting relative to the spending by those governments. But we do think that's going to change, and Novari is the leadership of it. Where they have seen their growth has been in the U.K. marketplace because we do see some more activity on there. I do think that product is sellable and should be sold more than it is. Has it met our expectations? Probably a little less than what we thought it would at this stage, but we're not done there yet, right? I just think it's -- I think it's not the product. The value proposition is there. We still think there's a big need for it. I think, it's just been more execution, and we're -- we think we're going to get business out of that product. But to date, it has been less than expected. John Shuter: Got it. I appreciate that. And just one more for me on -- you commented on the changes in the structures in the NHS and some headwinds for SHREWD there. So I'm curious like get to 2026, what kind of visibility you have to potential new programs and how you see yourself being positioned in that market under the new structure? Daniel Matlow: Yes. What they've done is they've got these regional bodies they've -- that they've -- instead of one region being a certain population size, they said, hey, let's combine these 2 together for a bigger population size. And while they're going through those changes, yes, they're not looking at buying new software to go through it. But our software is in a lot of those. And yes, it's going along. It goes together with the integrations, right? So there could be opportunity where one group gets integrated to another group that doesn't have our product where we could get added into that whole scenario, and we've seen those. And we do expect that. But as far as new sales, that's going to be challenging as they go through that through the first part of 2026. So that's been a bit of a challenge for us with that product. But we do expect that to settle down and the regions that do use our product love it. We were on our way for a national view of SHREWD in the U.K. and that -- and we do have a footprint of that on a product called Opal, which we built for them. So we're seeing some stuff there. But we're also starting to see activity in the other surrounding areas of Wales and Scotland and Ireland as well for SHREWD. So there -- it continues to do its thing and -- but it went through, I don't know, a couple of years of really leading the charge of our organic growth. And although it still is going to contribute, it's not going to be the leading charge probably in 2026. So we would expect that -- we think that slack will get picked up by other products. And we still will still get deals from SHREWD, but we do think through the first half of 2026, it's going to be going through that reorg structure. Unknown Executive: The next question comes from Michael Freeman of Raymond James. Michael Freeman: Actually, just following on that last question on the NHS. When we're talking about merging these regional bodies, does the -- I guess, the overall reduction of regional bodies, I guess, reduce the possible TAM for SHREWD? I guess I'm asking a question about the revenue model. Daniel Matlow: Yes, not really. SHREWD in that particular setting is sold on population size and the population size remains the same, it's just one buying entity for a larger population group. Michael Freeman: Okay. All right. Got you. And I wonder, there was a -- the NHS published a 10-year plan recently describing how it would deploy its budget. Digital health was mentioned throughout. I wonder if you could -- how you think about the opportunity with the NHS sort of after things settle down following this reorg. Do you see opportunity for VitalHub's products expanding in this new environment? Daniel Matlow: Digital health is definitely needed within the NHS. There's a lot of room for improvement, and there's still opportunities for new solutions to come into that market, and we expect to be a player in that world. And we've got a team out there that -- so, all they do is try to get those solutions into that world. It's a little bit of a complicated world in terms of how it changes and how it's structured and where money is coming from and so forth, but we've got a lot of experienced people there that know how to do that, and we expect to be a part of it for sure. Michael Freeman: All right. Now last one for me. At the top of the call, you mentioned that the last couple of acquisitions, you had to step outside your typical acquisition parameters. I wonder what motivated you to make these steps outside of your -- outside of these parameters? Would you -- are you more sensitive to staying within those parameters for next deals? Or are these barriers you're happy to cross for the right deal? Daniel Matlow: Every deal is different. I think the only one we crossed through our barrier would have been the Novari deal to a degree, definitely not an induction. And I think we paid less than 1x revenue for that base solution for it, but Novari a little bit higher. I think our basis on Novari was really just understanding where it sit in the marketplace and what that solution can do and our level of confidence of its ability to add significant ARR in the next couple of years just based on where it's based. And looking at the profile of that company and understanding what we could do to enhance its processes for development and work on cost effectiveness in a pretty meaningful way to get it into the profile that we would like. And we're -- both of those are in play, and we're really excited about that acquisition and think it's great. And the people are great, and they're solving great problems, and we're really happy to have those guys on board. Michael Freeman: Do you think Novari will be the product that leaves the organic growth charts if SHREWD is no longer holding that seat? Daniel Matlow: Yes. I think potentially, yes. I think it could. Time will tell. There's other products in our arsenal that continue to add there. We'll see where it goes. We're excited about a lot of our products, but definitely, Novari has got some footprints into next year, which we're excited about. Unknown Executive: The next question comes from Kevin Krishnaratne of Scotia Capital. Kevin Krishnaratne: Sorry, I did join the call late, so maybe this has been discussed. The -- good to see the consistent organic ARR being added. Was it -- did you talk about the areas of strength in the quarter? And then as we think about Q4, this is maybe leading on the last question. Last Q4, you had some pretty sizable strength there. As you think about Q4, how do you see ARR building? SHREWD may be less of a driver. Novari, you talked about more 2026, but do you start to see some pretty good benefit in Q4? I'm just wondering about year-over-year, you had some pretty good strength last Q4. Curious about how to think about the near term. Daniel Matlow: Yes. I think consistently, Kevin, we've had contribution from many products. We've seen a recent uplift in our Intouch With Health-based space, and you've seen some Perpetual Licenses and that comes with the recurring base as well, right? So that's added some revenue. There's still definitely some revenue that comes from SHREWD and other areas. But yes, and Zesty and Novari do add a significant amount of potential revenue that's coming from that perspective. And I do think it will -- both of those products will pick up the slack, I think, for SHREWD in the short term, and then we're hoping SHREWD comes back again towards the middle of next year when things get settled down in the NHS. So that's really how we're thinking of things on a go-forward basis. Yes, Q4 pipeline looks like other pipelines, and it's still early to tell where things get through. It's really hard to tell like we still got a lot of different ways to add ARR to us, and it's not one consistent way. So it does get hard to predict. And typically, I don't know, if you look over the last 3 years in terms of percentage of where products would come, I don't think there's one product or one quarter, like sometimes it's more about -- more or less from one product that contributes any type of quarter. But we feel confident in our mix of products. I don't know where it's going to come from, but I do think having Zesty and Novari in our mix is nice to have. Kevin Krishnaratne: Appreciate the color. Maybe just one last one for me. It's a question that is being generally brought up clients I talk to about the software vendors generally, and that's the impact of AI. I think just given the nature of your customer base, maybe it's too early. But maybe any -- if you could share any sort of thoughts there. I know your team is pretty tight with NHS, when they're going in there and having discussions -- are there any signs of experimentation on AI? Daniel Matlow: Yes, for sure. I think the biggest use case we're seeing for AI in our health care base is just the concept of scribing for doctors as they take -- or clinicians as they take notes in their systems, right? It's really more of that. And that's really in our community health-based world, the trade and the Coyote products and the CDS products in Australia. And we're well on our way with -- of getting scribing into those products, which we think will be add-on solutions for those solutions. But we -- there's other elements that we're working on such as predictive data in SHREWD, so we can predict or we can look at the dashboards and read those dashboards and just in words, give a profile of what those dashboards mean to the person that's looking at those dashboards effectively. Novari has got work going on in terms of the referral process where we do a summary of a form on a referral that can be created. So we have, I think, about half a dozen or so AI things that are being built in our product sets right now. We're really viewing those as add-ons to our solutions. the same way Copilot is getting added into all the different office-based solutions. We're looking at where add-ons can be used on our solutions using AI and how we can monetize those from a group. If we could add -- we got $93 million worth of ARR, if we can come up with AI solutions that get a 10% uplift, that's $10 million, right, worth of stuff. So it's really the -- we've challenged our product managers to come up with ideas. We put together an AI development team. And yes, we're looking on how to monetize that. Do we see that happening in the next couple of quarters? No. Could it happen towards the end of '26? Yes, maybe and definitely into '27, I think we'll be having AI products in the marketplace, which will be add-ons to our solutions, which will help our ARR growth. That's how we're thinking of it. Unknown Executive: There's no further questions at this time. So Dan, I'll hand the call back to yourself if there's any closing remarks you want to make. Daniel Matlow: Yes. I think in typical VitalHub mode is just steady as she goes. And we're excited by what Q3 was. It was a bridge quarter for us based on the acquisitions and I think we did a good job, and the team is doing a really good job of executing the plan on those acquisitions that we made up as part of the thesis for why we bought those acquisitions. And the plan is still being executed. It's going to take a while to execute it, but we're being executing it, and we really have a goal of getting back to our 26%, 27%, 28% adjusted EBITDA profile as quickly as we can, and that's what we're working on. So if anybody got more questions, Christian is available, I'm available on a go-forward basis. And I'd just like to thank everyone for joining us. I know it's earnings seasons you guys are running from call to call. And if anyone's got any more questions, feel free to put them forward. Thanks, everyone. Unknown Executive: Thank you, Dan. This concludes today's call. Thanks, everyone, for joining.
Operator: Good morning. Welcome to the Wendy's Company earnings results conference call [Operator Instructions] Thank you. You may begin your conference. Aaron Broholm: Good morning, and thank you for joining our fiscal 2025 third quarter earnings conference call. After this brief introduction, Ken Cook, Interim Chief Executive Officer and Chief Financial Officer, will provide a business update; and then Suzie Thuerk, Chief Accounting Officer and Global Head of FP&A, will review our third quarter results, share capital allocation priorities and our updated 2025 outlook. From there, we will open up the line for questions. Today's conference call and webcast includes a presentation, which is available on our Investor Relations website, ir.wendys.com. Before we begin, please take note of the safe harbor statement that appears at the end of today's earnings release. This disclosure reminds investors that certain information we discuss today is forward-looking and reflects our current expectations about future plans and performance. Various factors could affect our results and cause those results to differ materially from the projections set forth in our forward-looking statements. Also, some of today's comments will reference non-GAAP financial measures. Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measure at the end of this presentation or in today's earnings release. If you have questions following today's conference call, please contact me. I will now hand the call over to Ken. Ken Cook: Thanks, Aaron. Good morning, everyone, and thank you for joining us today. Before I begin, I want to thank our employees and franchisees for the passion they bring to the Wendy's brand and their continued commitment to unlocking its full potential. This morning, I'll provide an update on Project Fresh, which we announced in October and then review our third quarter results, which were broadly in line with our expectations. Across the globe, Wendy's continues to resonate well with our customers as we execute our globally great, locally even better approach. Our international business once again delivered strong system-wide sales growth, supported by an increase in same-restaurant sales and new restaurant openings. Momentum continues to build across our markets, and we expect international net unit growth of over 9% in 2025. I am pleased by the strong performance as we continue to prioritize accelerating international expansion. In our U.S. business, sales remain under pressure, and we are acting with urgency to return U.S. comp sales to growth. We are making meaningful progress on key actions to enhance the customer experience, and we are seeing this pay off in our U.S. company-operated restaurants, which significantly outperformed the overall system in the third quarter. On our last earnings call, I outlined 3 key initiatives: knowing our customers better, simplifying our programming and execution and working more closely with our franchisees as One Wendy's. In addition to these initiatives, we made the strategic decision to prioritize growing average unit volumes over net unit growth in our U.S. business. As part of this strategic shift, we launched Project Fresh, a comprehensive turnaround plan to drive profitable growth and long-term value across our U.S. system. Project Fresh is structured around 4 strategic pillars: brand revitalization, operational excellence, system optimization and capital allocation, designed to attract new customers to Wendy's through more compelling marketing and to increase guest frequency by providing an exceptional customer experience, which increases AUVs, improves restaurant profitability and creates value for franchisees, the company and shareholders. We began discussing these initiatives with our franchisees earlier this fall, and we have received overwhelmingly positive feedback, a great reflection of the confidence in the Wendy's brand and our One Wendy's approach. Let me take a few minutes to highlight some of the specific actions underway. The first pillar of Project Fresh is revitalizing the Wendy's brand. This is about positioning Wendy's as the freshest and highest quality choice in QSR by celebrating what makes us stand out from the competition. This includes using the highest quality ingredients like our 100% fresh, never frozen beef, our Applewood smoked bacon and our new barrel breaded chicken tenders. It's about telling our quality story with a greater focus and relevance for today's consumer. To accomplish this, we're combining our internal expertise with an industry-leading consulting firm, utilizing a proven data-driven process to strengthen our brand positioning and enhance marketing effectiveness. This starts by listening to our customers. In October, we launched a needs-based customer segmentation study that is well underway. The feedback we gather from customers will clarify which attributes drive their purchasing decisions and help us refine how we deliver and communicate value across every touch point. At the same time, we are expanding the use of advanced data analytics to deepen our understanding of customer behavior. We now have visibility to how consumers behave both inside the Wendy's system and with the competition, which will enable us to focus our media efforts on high-value audiences and allow us to adapt quickly to shifts in consumer behavior. The next 2 pillars, operational excellence and system optimization are both focused on elevating the customer experience. Operational excellence starts with putting our customers first. Our investments in people, training and hospitality are driving measurable results with U.S. company-operated restaurants outperforming the system by 400 basis points in same-restaurant sales during the third quarter. We're proud of this progress and are scaling these initiatives across the system to generate higher AUVs and deliver an even better customer experience. For example, we've enhanced our training programs, including additional training for all customer-facing employees to improve hospitality and deliver exceptional customer experiences. This has supported higher customer satisfaction scores this year, particularly in accuracy and friendliness, 2 key factors that keep guests coming back. These efforts have also helped lower employee turnover in the company restaurants, building a solid foundation for consistent, high-quality service. We've made progress with our digital and delivery business with key measures like conversion, satisfaction and App Store ratings all increasing in 2025, with corresponding declines in cancellation rates, missing items and refunds. These improvements are the direct result of enhancements we've made to the customer experience from the welcome journey in our app to using geolocation data to help with pickup location accuracy to DoorDash delivery skills to improve order accuracy. We still have work to do and are testing additional changes to create an even better experience for our digital customers, an important segment of our business with significant opportunity for further growth. And we're leveraging technology, including digital menu boards and Fresh AI to deliver more consistent, high-quality drive-thru interactions. It's improving upselling and productivity. And while still early, the results are promising for both our teams and customers. The third pillar of Project Fresh is system optimization, which is about having the right restaurant footprint in each market to maximize profitability for our franchisees and deliver exceptional food and experiences for our customers. This is a significant strategic shift that we believe will drive stronger growth over time. Let me share some details on the process. We are working with our U.S. franchisees to evaluate each and every underperforming restaurant in our system from both a financial and a customer experience perspective and developing action plans for how to improve both. For some locations, it's about making operational changes or deploying technology. For others, we're improving productivity by aligning operating hours to better match demand, particularly in the morning and late-night dayparts. In other cases, the solution will be to close consistently underperforming restaurants. These actions will strengthen the system and enable franchisees to invest more capital and resources in their remaining restaurants. Investments include new kitchen equipment to ensure the highest quality, best-tasting food and technology upgrades such as digital menu boards to enhance productivity and give our teams more time to focus on hospitality. Consistent with what we've seen in our company-operated restaurants, we expect these actions to elevate the customer experience, increase AUVs and improve restaurant economics. Also, closures of underperforming units are expected to boost sales and profitability at nearby locations. We're partnering closely with franchisees guided by a clear set of criteria to ensure a thorough review process. Together, we'll complete this assessment over the next several months with some closures expected to begin later this year and continue into 2026. We believe these actions focused on revitalizing our brand and elevating the customer experience will drive sustainable growth powered by the Wendy's core differentiators, high-quality food with fresh ingredients and authentic customer connections. And we are aligning our capital deployment, our fourth pillar, with these strategic priorities. In the U.S., capital will be directed towards initiatives that drive profitable AUV growth rather than net unit growth. Reflecting this focus, we've reduced our 2025 U.S. build-to-suit capital by approximately $20 million from the outlook we shared at the beginning of the year, and we expect to continue this approach in 2026. Internationally, expansion remains a top priority, and we'll continue leveraging build-to-suit investments to drive net unit growth in key markets, including Canada and the U.K. Turning to our third quarter results. Although we are not satisfied with our U.S. sales, overall performance was in line with the expectations we shared last quarter. Global system-wide sales declined 2.6%, driven by a 4.7% decline in U.S. same-restaurant sales, reflecting heightened industry competition and consumer pressure. As we shared on our last call, during the third quarter, we reduced programming complexity to focus on the most important initiatives. This included our Wednesday collaboration with Netflix, launching new beverages and providing relevant value to customers with our 2 junior bacon cheeseburger meal for $8. This offer includes 2 of our iconic and customer favorite JBCs with fresh, never frozen beef, 4 pieces of Applewood smoked bacon, hot and crispy fries and a drink. I'm pleased with our more focused and disciplined execution in the quarter. In September, we continued this focused approach by preparing our restaurant teams to launch a new core menu offering, chicken tenders along with 6 new sauces. Wendy's Tendys debuted at the beginning of the fourth quarter, and as expected, customers love them. Demand was so strong that some restaurants sold out even before the national media support, which fully launches next week. We're looking forward to continuing that momentum, and this is an encouraging first step as we look to reestablish our leadership position in chicken. This successful launch highlights the progress we've made in simplifying programming and strengthening execution across our system. It also reinforces the exceptional quality of our products and the improved operational execution across our system, supported by enhanced training and sufficient preparation time for our restaurant teams. It's a clear example of what Wendy's can achieve when we're focused and aligned as one Wendy's. Turning to our international business. System-wide sales grew 8.6% in the third quarter with growth across all regions. We also celebrated several milestones, including the opening of our first restaurant in Ireland and our second restaurant in Australia, which delivered the highest opening day sales in our history. This year in Canada, we remain on track to deliver our highest number of openings in the past decade. We also continue to strengthen our long-term development pipeline, having signed new agreements for more than 320 international restaurants year-to-date, including a recent agreement to open 50 restaurants in Central Mexico. Mexico remains our strategic growth hub for Latin America, where our investments in local resources, supply chain and marketing are laying the groundwork for sustained expansion across the region. International remains a growth engine, delivering 100 new restaurant openings and 77 net new units through the third quarter. Globally, we've opened 172 new restaurants through the third quarter and added 123 net units, reinforcing the growing strength of our global footprint. Wrapping up our third quarter results, adjusted EBITDA rose 2.1% to $138 million, and adjusted EPS was $0.24 per share versus $0.25 per share last year. We returned more than $40 million to shareholders in the quarter through dividends and share repurchases and over $300 million year-to-date, keeping us on pace to exceed $325 million for the full year, up more than $40 million from a year ago. Now turning to our outlook. We are maintaining our outlook for full year global system-wide sales, adjusted EBITDA and adjusted EPS. Additionally, we are increasing our outlook for free cash flow by $35 million to $195 million to $210 million, reflecting a reduction in capital expenditures and build-to-suit investments, along with tax benefits related to the 2025 Tax and Reconciliation Act. Our strong free cash flow underpins our ability to fund investments in the business and the company remains committed to our dividend and returning capital to shareholders. Finally, we are also maintaining our outlook for net unit development growth of between 2% and 3%. International development in 2025 is tracking in line with our prior expectation for net unit growth of over 9%. In the U.S., while we expect around 100 new restaurant openings for the year, we anticipate that our system optimization initiative could result in our global net unit growth coming in around the low end of the range. Before I close, I will turn it over to Suzie to provide more details on our third quarter results. Suzanne Thuerk: Thank you, Ken, and good morning, everyone. I'll start with our third quarter results, including an update on capital allocation before closing with more detail around our outlook for the remainder of 2025. In the third quarter, global system-wide sales decreased 2.6% on a constant currency basis, primarily driven by a decline in U.S. same-restaurant sales of 4.7%. This was partially offset by continued strength in our international business with 8.6% system-wide sales growth. The decline in U.S. same-restaurant sales was driven by a decrease in traffic, partially offset by a higher average check. Same-restaurant sales at our U.S. company-operated restaurants outperformed the U.S. system by 400 basis points, declining 0.7%. The stronger performance in company-operated restaurants was driven by our actions focused on operational excellence as well as stronger delivery growth and the implementation of our digital menu boards and Fresh AI automated ordering technology. As we execute on our U.S. turnaround initiatives under Project Fresh, we're planning to scale these actions across the broader system to elevate the customer experience and drive profitable AUV growth. We're also making progress scaling our U.S. digital business with sales up 14.9% compared to the prior year, bringing U.S. digital mix to an all-time high of 20.3%. Shifting to our International segment. In the third quarter, the Wendy's brand continued its strong momentum around the world, delivering system-wide sales growth of 8.6% and 3% same-restaurant sales. System-wide sales grew across all regions with some of the fastest-growing markets, including Mexico with over 18% growth and Puerto Rico with over 10% growth. Our Canadian business also continued to deliver solid results with over 7% system-wide sales growth in the third quarter and has gained traffic share in the QSR burger category for 17 consecutive quarters. These results demonstrate the strength of our global brand, enabled by the investments we are making in regional capabilities. Moving to the P&L. Total adjusted revenue was $442.5 million, a decrease of $1.1 million compared to the prior year, driven by both lower franchise royalty revenue and franchise rental income, partially offset by an increase in franchise fees. Global company-operated restaurant margin was 12.4% for the third quarter and U.S. company-operated restaurant margin was 13.1%, a contraction of 250 basis points year-over-year. The decline in U.S. company-operated restaurant margin was primarily due to cost inflation with continued pressure on both beef and labor costs as well as a decline in traffic. These were partially offset by an increase in average check size and labor productivity, which was driven by lower turnover and improved training, reflecting the benefits of our operational improvement initiatives. Adjusted EBITDA was $138 million, which was up 2.1% versus the prior year, primarily driven by decreases in the company's funding of incremental advertising spend and G&A expenses of $6.4 million and $4.9 million, respectively. These items were partially offset by the decline in U.S. same-restaurant sales. Adjusted earnings per share was $0.24, $0.01 below prior year. And turning to free cash flow, which continues to be a hallmark of the Wendy's brand. We've converted more than 100% of net income, generating $195.6 million of free cash flow through the first 3 quarters. This strength enables us to fund strategic investments while continuing to return capital to shareholders through share buybacks and dividends. Moving on to capital allocation. Our first priority continues to be investing in the business. And as we've said with Project Fresh, that means prioritizing AUV growth in the U.S. and net unit development internationally. In the third quarter, we invested $31.6 million across capital expenditures and our build-to-suit development program. Capital expenditures included $15.1 million in technology initiatives like our digital menu boards. We also invested $12.7 million in restaurant development across company-operated new builds and investments in our build-to-suit program. Our second capital allocation priority is paying an attractive dividend. And today, we announced our fourth quarter dividend payment of $0.14 per share. Our third priority is maintaining a strong balance sheet. We ended the third quarter with $326 million of cash on the balance sheet and a net leverage ratio of 4.5x, which is in line with prior quarter. Year-to-date, we have paid down $21.9 million of our whole business securitization debt principal. Our capital allocation policy gives us the flexibility to be opportunistic with our share repurchases. And during the third quarter, we repurchased $1.4 million shares for approximately $14 million. And year-to-date, we have repurchased $14.4 million shares for approximately $200 million, completing our planned share repurchases for this year. Through the first 3 quarters of the year, we have returned over $300 million of cash to our shareholders through dividends and share repurchases. We remain on track to return over $325 million in 2025, an increase of more than $40 million compared to the prior year. Now let's turn to our financial outlook. We are reaffirming our full year outlook for system-wide sales, adjusted EBITDA, adjusted EPS and net unit growth, and we are increasing our outlook for free cash flow. Our outlook assumes the dynamic consumer behavior and challenging competitive environment persists throughout the remainder of the year. For the full year 2025, we continue to expect global system-wide sales to range from down 3% to 5%. Our outlook assumes that system-wide and same-restaurant sales in the fourth quarter will be lower year-over-year than the third quarter, primarily driven by a decline in U.S. SRS given the tough prior year comparison. We continue to expect U.S. company-operated restaurant margin of 14%, plus or minus 50 basis points. This includes an updated commodity inflation outlook for the year of approximately 5%, primarily reflecting continued inflation in beef prices. We continue to expect labor inflation for the full year of approximately 4%. We now expect G&A to be between $250 million to $260 million and represent approximately 1.8% of system-wide sales for the full year. We are reaffirming our adjusted EBITDA outlook of $505 million to $525 million. We continue to expect approximately $130 million of interest expense. As a reminder, we plan to issue $400 million of whole business securitization notes in the fourth quarter. The proceeds will be used to pay $50 million of debt, which mature in December of 2025 and refinance $350 million of whole business securitization notes, which mature in September of 2026. Taking all of these items into account, we are maintaining our outlook for adjusted EPS of $0.82 to $0.89 per share. We now expect capital expenditures and build-to-suit investments to total between $135 million to $145 million, reflecting a decline of $30 million at the midpoint of the range from our previous outlook. This is primarily driven by a reduction in U.S. investments in the build-to-suit program as we prioritize AUV growth. We are increasing our expectation for free cash flow to be between $195 million to $210 million, an increase of $35 million at the midpoint of the range compared to our prior outlook. This increase is driven by the reduction in capital expenditures and build-to-suit investments, along with cash tax benefits related to the 2025 Tax and Reconciliation Act. Finally, we continue to expect net unit growth between 2% to 3%, primarily driven by the momentum we're building internationally. Our system optimization initiative in the U.S. could result in net unit growth coming in around the low end of this range. In closing, we are focused on a disciplined financial approach to advance the strategic initiatives of Project Fresh. As One Wendy's, we are taking decisive actions to strengthen our financial foundation, and I'm confident this will better position our business for long-term growth. And with that, I'll now turn it back to Ken. Ken Cook: I am pleased with the continued strong performance internationally and the progress we are making in the U.S. Our actions are focused on long-term success, and we are confident that our strategic shift toward AUV growth will strengthen the overall system. Project Fresh is underway. And together as One Wendy's, we are executing initiatives with urgency to revitalize the Wendy's brand and enhance the customer experience. While these changes will take time to deliver their full impact, we believe that the actions we are taking today will build momentum and deliver sustainable long-term growth, creating value for all key stakeholders. I'll now hand it over to Aaron to share our upcoming Investor Relations calendar. Aaron Broholm: Thank you, Ken. On November 20, we will participate in the Stephens Investment Conference in Nashville. On December 4, we will be in New York City for the Barclays Eat, Sleep and Play Conference. And then on December 11, we will participate in the Virtual KeyBanc Capital Markets Consumer Conference. If you are interested in joining us at any of these events, please contact the respective sell-side analyst or equity sales contact at the host firm. We will now transition to the Q&A part of the call. Due to the high number of covering analysts, please limit yourself to one question only. Operator, please queue up the first question. Operator: [Operator Instructions] Our first question for today comes from David Palmer of Evercore ISI. David Palmer: I wanted to ask you about franchisee cash flow and balance sheet levels today and what you're hearing from the franchisees? And importantly, what quick wins do you think you have within Project Fresh? What elements might be there to help franchisee cash flow, either from sales drivers or other operational changes that you're contemplating? Ken Cook: Thanks, David. Great question. In terms of franchisee financial health, overall, the U.S. franchisee system remains healthy, although there are pockets of more acute financial pressure. We're working with those franchisees on a case-by-case basis to figure out the best path forward. System optimization, which is one pillar of Project Fresh, is an important tool in the toolkit that we have, and we're focused on improving restaurant-level economics, taking a hard look at underperforming restaurants in our system from both the financial and customer experience perspective and working with franchisees to improve those, transfer those to another operator or potentially closing them, which will help unlock capital for franchisees to further reinvest in the system. In terms of quick wins, we're really focused on the long term. So over the past couple of months, we've taken a hard look at our U.S. business and identified the big moves that will create the most long-term value for shareholders. And the result of that work is Project Fresh. At the core, it's about making our restaurant-level economics more compelling by increasing AUVs in the U.S. So how do we do that? It starts with revitalizing the brand. Wendy's was built on having the highest quality food in QSR and using the freshest ingredients, and that hasn't changed. Revitalizing the brand is about retelling our quality story to today's consumer. It's about leveraging the things that are distinctly Wendy's to stand out from the competition, and it's about better understanding our customers and how to reach them more effectively. To help with this, we've engaged an industry-leading consultant, and we are pleased with the early progress. The next 2 pillars are really about enhancing the customer experience. Operational excellence is about bringing the quality perception to life in our restaurants by ensuring that we serve our guests great food with a great experience every time they visit Wendy's. We're seeing the results of this pay off in company-operated restaurants, where we're outperforming the system by 400 basis points in terms of SRS in the quarter. And most of that outperformance is coming from traffic, where we've seen satisfaction scores increase, friendliness and accuracy scores increased. So we'll be working on rolling that out throughout the system to help increase frequency there. And then system optimization really is about strengthening the brand, enhancing the customer experience and unlocking capital for our franchisees to reinvest in the system. The other thing I'd say is in terms of quick wins, we are very pleased with the launch of chicken tenders. So as we talked to you about last quarter, we simplified the programming calendar for the back half of this year to focus on doing fewer things better. And so far, that's been a success. We're very pleased with the launch of chicken tenders. We think that, that is going to generate momentum as we move throughout the fourth quarter and provide an important pillar for us to build on in 2026. Operator: Our next question comes from Jeffrey Bernstein of Barclays. Jeffrey Bernstein: Great. Ken, just curious, as I think about the quick service landscape, it seems like Wendy's recent underperformance came about fast. Wondering what do you think were the primary factors leading to the widening underperformance relative to your largest QSR burger peers? And if value is one of them, it really didn't get much attention on the call this morning relative to dominating most everyone else's call. So I'm just wondering whether you think peers are taking share on the value side of things. Do you think your $5 and $8 meals are enough to protect your value share in this aggressive environment? Ken Cook: Yes. Thanks for the question, Jeffrey. I would say the back half of the year is playing out as we expected on the last call. So part of this is focusing on building long-term sustainable growth instead of launching essentially buying traffic in the short term. We're pleased with the performance from a customer experience in the U.S. Specific to your question about value, we do see more pressure on the lower-income consumer. We continue to see that in the third quarter, and we expect that to continue into the fourth. We believe we have a compelling value proposition on the menu. So our Biggie Bag, you get a junior bacon cheeseburger, 100% fresh, never frozen North American beef, a 4-piece nugget fries and a drink, all for $5. That is really compelling. We know that price is becoming an increasingly important component of the value equation, which is why we launched our $8 meal deal, which included 2 junior bacon cheeseburgers, fries and a drink. We saw both of those perform well in the quarter. But using the new data analytics capability, we did take a look at the $8 JBC meal specifically, and we were able to determine that it is doing a great job bringing back some of our customers more frequently. It didn't do as good of a job as we wanted attracting new customers. So that tells me we have an opportunity to tell our value story in a different way by focusing on both price and the quality of the ingredients we get. And we'll look, we have strong equity in the Biggie Bag from a value perspective. We'll look at using that construct in new and interesting ways to help better resonate with consumers as we move forward in 2026. Operator: Our next question comes from Brian Mullan of Piper Sandler. Brian Mullan: Just a question on the system optimization initiative. Wondering if you could just put some numbers or some guardrails around how many closures you might expect next year in the U.S. even if it's just a range? And then related to that, is there anything worth considering as we think about potential impacts to your franchise rental income stream? Not sure if that's relevant here or not. So if you could just address that. Ken Cook: Yes. Thank you for the question, Brian. In terms of system optimization, based on the information we have today, I'd estimate around a mid-single-digit percentage of U.S. restaurants would end up closing. I think we'll work through a detailed and programmatic process with our franchisees to determine the best pace of that and make sure that we are making the best decisions for the long-term health of the overall system. When we look at the system today, we have some restaurants that do not elevate the brand and are a drag from a financial -- from a franchisee financial performance perspective. The goal is to address and fix those restaurants. So in some cases, that's going to mean deploying operational improvements, deploying additional technology or equipment. In other cases, it will mean transferring those restaurants to a different operator who's better suited to be successful in that restaurant. And in other cases, we ultimately will close that restaurant, which will put money back in franchisees' pockets and enable them to reinvest both capital and resources in their remaining restaurants. So we'll update you more on the next quarter call as we work through this process. I would expect those closures to start in the fourth quarter of this year, which could result in us coming in around the low end of our net unit guide for the year. Operator: Our next question comes from Rahul Kro of JPMorgan. Rahul Krotthapalli: I'm just curious on how we should calibrate around your comment on growing U.S. AUVs over development. Is this -- does this target translate to just positive AUV growth or like more than 1%? And just -- I wanted clarification around the gross or net U.S. development you're talking about. And the follow-up is, can we get a time frame of how you think about the compression between the company and franchise store headline performance and maybe address a couple of areas in more detail where typically you might have less control over one, menu pricing architecture and then two, in-store operations? Ken Cook: Yes. Thank you for the question, Rahul. We're really talking about net unit development coming around the low end of our net unit development. Gross unit development is still on track. We will continue to build restaurants in the U.S. from a gross perspective. This is really about taking a long-term view, looking forward and asking ourselves, hey, 3 years from today, what decisions do we wish we would have made? And then having the courage to make them today, which is what we're doing. We've worked closely with franchisees to make sure that they're aligned with this and they are. Response has been overwhelmingly positive there. It's about addressing the fundamentals and improving the fundamental restaurant level economics in the U.S. At the same time, by doing this, we will enhance the customer experience across the system, increasing the consistency of the customer experience, which is ultimately going to result in more demand, not less for both Wendy's hamburgers in our system and ultimately, more Wendy's restaurants as we do that. The second part of your question in terms of operational excellence, we started investing in this in a big way earlier this year. So we focused on training. We focused on making sure we have the right people in the right seats and putting in place processes to make sure we're holding ourselves accountable for delivering for our customers day in and day out. We've outperformed the franchise system for the last couple of quarters. Obviously, that differential has been growing, which has significantly increased interest from franchisees. So now this becomes a pull, not a push. They're interested. We're going to be rolling that out, and we think that will help in a big way in 2026. Operator: Our next question comes from Dennis Geiger of UBS. Dennis Geiger: Just wanted to touch on -- can you -- you kind of just touched on it a bit there, but that outperformance of the U.S. company-owned in the quarter again, just kind of the franchisee feedback and sentiment on that. And in particular, I think you talked about scaling that. It sounds like it's a '26 type of benefit. Any more sense on the timing of the scaling of the actions and the activities to kind of get the franchise system more aligned with where the company stores are? Ken Cook: Yes. Thank you for the question, Dennis. We are very pleased with the outperformance, and we think this is a very strong indication of the importance of enhancing the customer experience across the system, which is why that's one of the key pillars under Project Fresh. In terms of the timing, so we are in the process. We are working with franchisees today to scale that. We do believe that we'll see benefits from that as we look into 2026. We'll get into more specifics in terms of the cadence and shape of 2026 on our next call, but I think this is a real area of opportunity for us. And we combine that with our initiatives around revitalizing the brand, which ultimately helps bring more new customers into Wendy's restaurants, we think that creates a powerful long-term cycle that continues to elevate AUVs. I think we have room for significant AUV growth over the next few years, which will enhance franchisee level economics and then fuel the virtuous cycle. Operator: Our next question comes from Chris O'Cull from Stifel. Christopher O'Cull: Ken, can you elaborate on the work you're doing with Creed UnCo? Specifically what new insights or analytic capabilities the company is seeking to implement from their work? Ken Cook: Yes. So thank you for the question, Chris. It starts with listening to the customer. So in order to do that, we've launched a comprehensive customer segmentation study in conjunction with the Creed UnCo team. Thousands of surveys are being completed by our consumers to help us understand the attributes of Wendy's that resonate most with our consumers. We're segmenting the consumers in several different ways to make sure we have the most relevant segmentations to drive growth and how to communicate those attributes over the long term. So that -- the first step is the customer segmentation study. Then we go into relevance, ease and distinctiveness and understanding how it fits into that framework. And the culmination is a brand essence. So basically, how we want -- who we are and how we are going to tell that story to our consumers, which then serves as a filter for everything else we do from menu to marketing to social, and we think we have significant opportunity to improve effectiveness across all of those levels. One of the early learnings from this is just the importance of balancing sales overnight and brand over time. I think when we take a look back at what we've been focused on in the U.S. over the past few years, we focused on sales overnight and not enough on brand over time. So we have some work to do to reestablish Wendy's as the leader in quality and freshness in the industry. And by doing that, we're confident that we're going to drive AUVs higher. Operator: Our next question comes from Margaret-May Binshtok of Wolfe Research. Margaret-May Binshtok: You guys have talked a little bit about beverage as another pillar of the focus of the innovation pipeline. Can you give some color on the recent work you guys have done to the beverage platform, what the reception has been? And if you've seen any improvement in breakfast performance sequentially in conjunction with some of these rollouts? Ken Cook: Yes, Margaret, thank you. So we did launch some pretty exciting beverage products in the third quarter. We launched our cold brew and cold foam offerings, and we also launched a sparkling energy lineup. Those launches performed in line with our overall expectations. We did not put media behind them to prioritize the Wednesday promotion and the value promotion around the $8 JBC meal deal, but they do add some compelling reasons for folks to join us at breakfast. Overall, breakfast in the quarter continued to underperform rest of day as it has across the industry, given the consumer -- the pressure that consumers are under. But we feel good about the beverage lineup that we offer our customers today and how it has enhanced the overall breakfast offering. Operator: Our next question comes from Danilo Gargiulo of Bernstein. Danilo Gargiulo: And it's very encouraging to hear that franchisee profitability is even more on top of your agenda. I'm wondering how you're thinking about breakfast because on the one hand, it expands AUV in absolute dollars, so it's part of your plan. But on the other hand, you're talking about doing fewer things better and breakfast is the daypart that arguably is most under pressure and historically, the one that might be delivering the lowest profit margin. So will you make it optional for franchisees? Are you working with them to assess it on a case-by-case basis? Or are you going to maintain the national mandate? Ken Cook: Great question, Danilo. So breakfast remains an important part of our overall strategy, and we're committed to providing nationwide breakfast in the Wendy's system. We have worked on a case-by-case basis with franchisees who have very low sales at the breakfast daypart. And this is for several reasons. One example, as I first got out and started speaking with franchisees was, "Hey, Ken, I have a restaurant that's situated on the outer perimeter of a mall. That mall doesn't open until 10:30. I do almost no breakfast business, but I have to staff it and I have to be open at 6:00 a.m." This doesn't make sense. If you let me have flexibility and open that restaurant later, I'd be able to redeploy this labor to other dayparts, enhance customer experience and ultimately make more money for the franchisee. So we took a look at that across the system, and we did allow certain restaurants to opt out of breakfast and adjust their operating hours. In many cases, they started serving lunch earlier, have seen some positive results there. Another thing that they did is when we look at hours optimization is, okay, if we're going to open a little bit later in the morning, then maybe we stay open a little bit later at night and have seen positive gains from that. But breakfast remains an important part of the overall strategy for us in the U.S., and we remain committed to nationwide breakfast. But we will work with franchisees. And that's the other thing I'll say about franchisee profitability. As we focus on significantly enhancing franchisee profitability and putting more money in the franchisees' pockets, we believe that ultimately leads to a much stronger system, much stronger customer experience and ultimately drives demand for both our hamburgers and our restaurants. Operator: Our next question comes from Jake Bartlett of Truist Securities. Jake Bartlett: Zeroing in on the fourth quarter here. And I know there's a lot of moving pieces in October as you lap the Krabby Patty success, I think as some macro headwinds build that we've heard from others. If you can try to give us a sense of what you think your underlying momentum is at this point. Help us out in terms of -- you mentioned that the fourth quarter would be lower than the third, I think, probably considerably lower. If there's a way you can help us just maybe some guardrails around what the fourth quarter U.S. comp should be. And then lastly, within all that, the [indiscernible] launch, I think you mentioned that you're going to start the national advertising next week. Is that the kind of the big push for the remainder of the quarter? Or are there any other sort of marketing initiatives or innovation that you expect to come down the pike? Ken Cook: Thanks, Jake. Great question. So we were happy with reaffirming our full year guidance today. Like we talked about on the last call, the second half of this year was about simplifying the programming calendar so we could focus our execution on a handful of things that were going to make the biggest difference. Instead of trying to throw too much at the fourth quarter, which may have resulted in some short-term sales gain at the expense of long term, we pushed a couple of product launches out of the second half of the year into 2026. And so all that is playing out as we expected, which is why we reaffirmed our full year guidance today. That has a couple of benefits for us. So number one, significantly strengthens the marketing calendar in 2026. and then provides time now to start building up this tested cohort of ideas that we can then use to further enhance the calendar as we move throughout 2026. So this was about focusing on a couple of things. The big thing is Tendys. So we launched that at the beginning of the fourth quarter. Customer feedback has been very, very strong. We're pleased with the way that, that promotion is going. We think it will provide momentum as we move through the fourth quarter and into 2026. And that also provides us some exciting ways how we can further innovate on that new core menu offering. Operator: Our next question comes from Eric Gonzalez of KeyBanc Capital Markets. Eric Gonzalez: Related to an earlier question about closures, I think you said mid-single-digit percentage, which I believe is about 300 units. Do you still charge a closure fee to franchisees when they close their stores? And to the extent that you do, is that embedded in the EBITDA outlook this year? And maybe if you could touch on what the expectation related to those potential fees are next year? Ken Cook: Yes. So thank you for the question, Eric. I think historically, we have charged fees for restaurant closures. That is not the intent. So the intent is to make sure that we are strengthening the system for the long term. We are going to approach this on a case-by-case basis and work with our franchisees for what makes the most sense. So allowing a franchisee to close a restaurant or 2 in response for that, we're going to ask them to invest in their remaining restaurants. That can be equipment upgrades, technology, digital menu boards. There's a whole range of prioritized investments that we would ask them to make. It can also include building new restaurants. We have really good operators in the system that may have a restaurant in the trade area that has moved, a highway exit has closed or changed. And that restaurant is a financial drag on their portfolio, but they're a great operator, allowing them to close that restaurant and then open a new one the next year or the year after, that could also be on the table. But we are going to evaluate this on a case-by-case basis, working through this with each franchisee to make the best long-term decisions for the system. Operator: Our next question comes from Sara Senatore of Bank of America. Isiah Austin: This is Isiah Austin on for Sarah. Just a quick question about the 4.7% U.S. comps in the quarter. I think that was better than what was anticipated. Do you guys mind just speaking about maybe from like a concentration standpoint on what drove that, whether it was more effective marketing or the menu innovation? Or do you feel like hamburger QSR demand might have just been better than anticipated? Just curious for some color on that. Suzanne Thuerk: Yes. This is Suzie. Overall, our Q3 was in line with our expectations. As we stated on our prior call, July was down more than 5%. The balance of the quarter improvement was supported by a reduction, as Ken mentioned, in the program complexity, which allowed our restaurants to focus on the execution of Wednesday, which did perform in line with our expectations as well. And then also, as we head out of the quarter in September, we allowed time for training and preparation for our chicken tenders launch, which coming into the fourth quarter provided strong results, and we are happy and pleased with those results, not only from an execution standpoint, but also how it's resonating with our consumer. Operator: Our next question comes from Brian Bittner of Oppenheimer. Brian Bittner: You're talking about this strategic shift in capital allocation in the United States from unit growth towards initiatives that will drive AUV growth. And I'd just love for you to unpack this comment further. Like what can specifically be done with this redirected capital to improve same-store sales? Are we talking about doubling down on remodels, digital menu boards? If you could talk more about that? And does this capital -- is this franchisee capital? Or does this include capital that you'll be investing at the corporate level to support these franchisee investments? Ken Cook: Yes. So thank you for the question, Brian. So this is a strategic shift in the near term to focus on AUVs. Fundamentally, if we improve AUVs, we are going to significantly enhance the franchisee profitability, improve the overall restaurant level economics and drive better customer experience and more demand for Wendy's and Wendy's restaurants. So that's ultimately what we're after here and what we think we can achieve. From a capital deployment perspective, we are shifting capital out of the build-to-suit program and towards initiatives that will support overall AUV growth throughout the system. A couple of things that we're focused on is technology and marketing. From a technology perspective, that can include anything that makes our -- makes life easier for our restaurant teams. One example of that, that we're working on now is improving the kitchen view system that we have in back of house, basically the screens that the sandwich makers use to build our orders. We're investing in improvements there to make it easier for the sandwich makers to deliver an accurate customized burger every single time. That's one area. Another area is marketing effectiveness. So that includes the data analytics capability that we're investing in, which includes a lot of technology investment and also the outside consulting work that we've procured this year and the partnerships that we have there. So it's really taking a holistic view. We'll provide more updates about that when we give you the 2026 guide, but that's how we're looking at it. Operator: Our next question comes from Jim Salera of Stephens. James Salera: Ken earlier, you had called out company-owned same-restaurant sales outperforming, I think it was by 400 basis points. I was curious if you could maybe just give us some color among the franchisee base, if there's any characteristics or geographic tilt or tenure or anything that you can talk about your outperforming restaurants within the franchisee base? And are there learnings that you can incorporate to kind of the broader store base as you think about that mid-single-digit U.S. restaurant closing? Ken Cook: Yes. Thank you for the question. So in terms of the outperformance, there wasn't -- the biggest correlation that we saw with the outperformance was really around the customer satisfaction scores that we saw in the U.S. company. Now we have a lot of franchisees in the system that run phenomenal restaurants as good or better than the company. But we're really proud of the improvements that we've made by focusing on getting the right people in the right seats by enhancing our training and then holding ourselves accountable. 75% of that 400 basis point outperformance came from traffic growth. And so that gives us an important proof point of how important that customer experience is and the type of guest frequency that we can drive by focusing on accuracy and friendliness. Operator: Our next question comes from Andrew Strelzik of BMO. Andrew Strelzik: I had a question about how you're thinking about restaurant margins going forward. And implicitly, what that means for franchisee profitability and their willingness to invest. And so I think your U.S. company-operated margins were down about 250 basis points, even though the comps were down less than 1% and appreciating you want to get the comps at an even better level than that. It doesn't seem like beef is going to be getting any better anytime soon. And so I guess I'm just curious how you're thinking about restaurant margins moving forward? Is there anything that you're doing from an ops perspective that you've already talked about that we should think about cushioning some of that margin compression potentially next year? Any color on that would be helpful. Suzanne Thuerk: Yes. Andrew, this is Suzie. So from a margin perspective, let me just say, we did reiterate our outlook of 14% company-operated restaurant margin for the year, but we do continue to see pressures on beef. So beef drove our commodity outlook up from that 4% previously stated outlook up to 5%. And we now have 96% of our commodity basket locked for the year. So we feel good about where we'll land this year. In terms of the future, you can expect to see us finish out the year with low single-digit pricing as we've seen throughout the remainder of the year. We know that, that lower income consumer continues to remain under pressure, and we'll be disciplined about our approach to pricing. I just want to point out, too, we have a diverse menu. So while beef and our hamburgers play a huge role in our messaging, as you saw from the chicken tenders launch, we have a great chicken offering, and that's part of our brand story that we'll continue to tell here in the fourth quarter and into 2026 as tenders start to pick up momentum as part of our core offering. So it's about balancing our menu. But lastly, it's focused on that profitable AUV growth, and that's really at the heart of Project Fresh and the biggest lever to offset inflation and improve margins is focusing on that profitable AUV growth. Ken Cook: Yes, that's right. And that's why that is the cornerstone of Project Fresh -- improving profitable AUVs in the U.S. So we are laser-focused on working with our franchisees to improve overall restaurant level margins. We believe the most effective way to do that in the long term is about revitalizing the brand, reestablishing Wendy's as the highest quality and freshest food in QSR, improving the effectiveness of our marketing, which those initiatives are well underway and then deploying operational excellence throughout the system. Another area where that will help franchisee margin perspective is the system optimization. We have franchisees that are fantastic operators, and they may have 1 or 2 stores that are in bad areas that are dragging down their financial performance. So allowing them to close those will free up capital, improve their margins and allow them to invest in the remaining restaurant, which then enhances the customer experience and enables us to grow faster and increase those AUVs profitably. Operator: Our next question comes from Gregory Francfort of Guggenheim Securities. Gregory Francfort: I wanted to just ask, I think you have almost 800 properties where you own either the land or the building on your books. Can you remind me how many of those stores you have the land for and whether or not you would consider monetizing some portion of that portfolio to reinvest in the business for this brand revitalization. Ken Cook: Yes. Thanks for the question, Gregory. So we have about 645 properties where we own the land. I think in total, we're in the lease chain on about 1,600 restaurants across the U.S. That is not going to be a disqualifier for looking at these restaurants to optimize. Just because we're on the lease chain does not mean that we wouldn't look to significantly improve performance in those restaurants, including potentially closing them. And you're right, if we do close a restaurant that's on Wendy's property, then we would look to optimize and create value from that transaction, potentially selling the land under there, which creates more capital for us to reinvest in the system to accelerate the AUV and franchisee profitability flywheel. So that's something we're looking at as we work through with franchisees on a restaurant-by-restaurant basis, and we will provide additional updates on that on our fourth quarter call. Operator: Our last question for today comes from Andrew Charles of TD Cowen. Andrew Charles: Just want to understand within the 4Q guidance that sales are likely to decline -- or sorry, decelerate on a 1-year basis. What's your level of confidence on a 2-year basis, you could see some improvement just given some of the initiatives you're putting into place? Ken Cook: Yes, Andrew, we were able to reaffirm the guide because the back half of the year is playing out as we expected. I think when you look at the strategic decisions we made to pull some of the programming complexity out of the fourth quarter and push that into 2026, that does create a little bit of pressure on the fourth quarter from an SRS perspective. But we're confident that it's the right long-term decision, and we are focused on optimizing long-term value. So by pushing some of that programming into 2026, it enabled us to focus our restaurant teams on the successful launch of chicken tenders in the fourth quarter that is going to build momentum as we move throughout the back half of the fourth quarter and into 2025 and sets us up to have a much more successful 2026. So yes, the Q4 is going to be the trough. October was the month that's going to be the trough, and we look forward to continuing to improve from here as we move into 2026. Aaron Broholm: That was our last question of the call today. I want to thank everybody for joining us this morning. Have a fantastic day. Operator: Thank you all for joining today's call. You may now disconnect your lines.
Operator: Good morning, and welcome to FNF's Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Lisa Foxworthy-Parker, SVP, Investor and External Relations. Please go ahead. Lisa Foxworthy-Parker: Thanks, operator, and welcome, everyone. I'm joined today by Mike Nolan, CEO; and Tony Park, CFO. We look forward to addressing your questions following our prepared remarks. F&G's management team, including Chris Blunt, CEO; and Conor Murphy, President and CFO, will also be available for Q&A. Today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events or changes in strategy. Please refer to our most recent quarterly and annual reports and other SEC filings for details on important factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non-GAAP measures which management believes are relevant in assessing the financial performance of the business. Non-GAAP measures have been reconciled to GAAP where required and in accordance with SEC rules within our earnings materials available on the company's investor website. Please note that today's call is being recorded and will be available for webcast replay. And with that, I'll hand the call over to Mike Nolan. Mike Nolan: Thank you, Lisa, and good morning. We delivered strong third quarter results across both our Title business and F&G segment, demonstrating the power of our complementary businesses and our ability to execute in dynamic market conditions. Our Title business delivered outstanding results given the low transactional environment. I'd like to start by thanking our employees for their unwavering focus on meeting our customers' needs regardless of the environment while continuing to deliver industry-leading performance. We delivered adjusted pretax title earnings of $410 million, an $87 million or 27% increase over the third quarter of 2024, and an adjusted pretax title margin of 17.8%, up 190 basis points from 15.9% in the third quarter of 2024. These results reflect strong performance across the business, including commercial and refinance, as well as our centralized and home warranty operations. Additionally, our disciplined expense management drove strong incremental margins. Looking at our title results more closely, starting with purchase, we continue to see normal seasonality in daily purchase orders opened with an 8% sequential decline. Within the quarter's results, however, we saw daily purchase orders opened in September higher than August. This is atypical and due to the modest downward trend in mortgage rates during the quarter, which we believe is indicative of the pent-up demand for housing. Our daily purchase orders opened were, in line with the third quarter of 2024, down 8% from the second quarter of 2025, and for the month of October, down 2% versus the prior year. Refinance volumes have been responsive, as 30-year mortgage rates decreased by 30 basis points during the third quarter. This generated an increase in refinance orders opened to 1,600 per day in the third quarter, up from 1,300 in the sequential quarter. Our refinance orders opened surged to 2,100 per day in the month of September, reflecting how refinance volumes can change with moves in rates. Our refinance orders opened per day were up 15% over the third quarter of 2024, up 22% over the second quarter of 2025, and for the month of October, up 27% versus the prior year. For commercial activity, we delivered direct commercial revenue of more than $1 billion in the first 9 months of 2025, up 27% over $801 million in the first 9 months of 2024. We have a strong inventory of deals to close and are on track to deliver our third best commercial year ever, trailing only the exceptional markets of 2021 and 2022. Notably, this was our best third quarter in history, with a 34% increase in commercial revenue over the third quarter of 2024. This was driven by a 38% increase in national revenues and a 29% increase in local revenues. In particular, national daily orders opened were up 11% over the third quarter of 2024. We now have 6 consecutive quarters with double-digit growth in national daily orders opened. Local market daily orders opened were up 5% over the third quarter of 2024. Total commercial orders opened were 856 per day, up 8% over the third quarter of 2024, in line with the second quarter of 2025, and for the month of October, up 8% versus the prior year. Diving deeper into commercial. We continue to see broad-based activity across several asset classes that are driving growth, including industrial, multifamily, affordable housing, retail and energy. What makes this year even more remarkable is that we're achieving these results with minimal contribution from the office sector, which remains subdued, but is showing signs of improvement. We have also seen a 22% increase in commercial refinance orders opened in the first 9 months of 2025 over the prior year. Overall, we remain bullish on commercial, and office is a potential added element into 2026. Bringing it all together, total orders opened averaged 5,800 per day in the third quarter, with July and August each at 5,500 and September at 6,300. For the month of October, total orders opened were over 5,600 per day, up 8% versus the prior year. Overall, our Title business is performing well in what is still a low transactional environment. Our seasoned management team has a proven track record of managing our business to the trend in open orders and varying economic conditions. This discipline has generated a steady level of free cash flow, allowing us to continue to invest in our business through attractive acquisitions and technology as we manage the business and continue to build for the long term. Turning now to some updates on our technology initiatives. Our inHere digital transaction platform provides an enhanced and reinvented customer experience as it continues to scale. During the third quarter, inHere engaged 85% of residential sales transactions and reached more than 860,000 unique users, demonstrating deep integration into daily workflows. We continue to enhance our identity verification processes and technology to streamline and secure customer authentication. These initiatives help combat the rise in impersonation and wire fraud in property sales. And they complement our existing efforts to deliver the most trusted, efficient and fully digital closing experience nationwide. We have deployed AI tools enterprise-wide, integrating practical tools into daily workflows to enhance productivity and margin efficiency. With thousands of employees now actively engaging with AI through structured training, pilot programs and targeted departmental adoption, we are building a sustainable AI fluency across our organization. At the same time, we strengthened our governance, privacy and security foundation, helping to ensure that our innovation agenda continues to be executed with discipline, scalability and long-term value creation in mind. Over time, we believe that our ongoing investments in technology, combined with our robust curated data, will lead to increased efficiency and productivity in our operations that will continue to support our market-leading pretax title margin. Turning now to our F&G segment. F&G's assets under management before flow reinsurance have crossed the $70 billion milestone at the end of the third quarter and were up 14% over the prior year quarter. We remain pleased with F&G's performance and foresee plenty of opportunities to grow and increase the value of the business. On a stand-alone basis, F&G reported GAAP equity, excluding AOCI, of $6 billion at September 30 and has grown its book value per share, excluding AOCI, to $44.07, up 61% since the 2020 acquisition. With that, let me now turn the call over to Tony to review FNF's third quarter financial performance and provide additional insights. Anthony Park: Thank you, Mike. Starting with our consolidated results. We generated $4 billion in total revenue in the third quarter. Excluding net recognized gains and losses, our total revenue was $3.9 billion as compared with $3.3 billion in the third quarter of 2024. The net recognized gains and losses in each period are primarily due to mark-to-market accounting treatment of equity and preferred stock securities, whether the securities were disposed of in the quarter or continued to be held in our investment portfolio. We reported third quarter net earnings of $358 million, including net recognized gains of $176 million, versus net earnings of $266 million, including $269 million of net recognized gains in the third quarter of 2024. Adjusted net earnings were $439 million or $1.63 per diluted share compared with $356 million or $1.30 per share for the third quarter of 2024. The Title segment contributed $330 million, the F&G segment contributed $139 million and the Corporate segment had a net loss of $1 million before eliminating $29 million of dividend income from F&G in the consolidated financial statements. Turning to third quarter financial highlights specific to the Title segment. Our Title segment generated $2.3 billion in total revenue in the third quarter, excluding net recognized losses of $38 million, compared with $2 billion in the third quarter of 2024. Direct premiums increased 19% over the prior year, agency premiums increased 13% and escrow, title-related and other fees increased 9%. Personnel costs increased 11%, and other operating expenses increased 4%. All in, the Title business generated adjusted pretax title earnings of $410 million compared with $323 million for the third quarter of 2024 and a 17.8% adjusted pretax title margin for the quarter versus 15.9% in the prior year quarter. As Mike said earlier, these results were driven by strong performance across the business, as well as disciplined expense management. Our title and corporate investment portfolio totaled $4.8 billion at September 30. Interest and investment income in the Title and Corporate segments was $109 million, up 6% versus the prior year quarter and excluding income from F&G dividends to the holding company. The current period includes growth in 1031 Exchange and other escrow balances and a benefit from a legal settlement. Looking ahead, we expect quarterly interest and investment income to trend down from the $109 million in the third quarter to around $100 million in the fourth quarter and then decline around $5 million in each subsequent quarter through 2026, assuming an additional 75 basis points of Fed rate cuts over the next 9 months. In addition, we expect approximately $30 million per quarter of common and preferred dividend income from F&G to the Corporate segment. Our title claims paid of $58 million were $12 million lower than our provision of $70 million for the third quarter. The carried reserve for title claim losses is approximately $52 million or 3.1% above the actuary central estimate. We continue to provide for title claims at 4.5% of total title premiums. Next, turning to financial highlights specific to the F&G segment. Since F&G hosted its earnings call earlier this morning and provided a thorough update, I will provide a few key highlights. F&G's AUM before flow reinsurance increased to $71.4 billion at September 30. This includes retained assets under management of $56.6 billion. F&G's gross sales were $4.2 billion. F&G generated core sales of $2.2 billion, which includes indexed annuities, indexed life and pension risk transfer, and had $2 billion of MYGA and funding agreements, two products we view as opportunistic, depending on economics and market opportunity. Net sales retained were $2.8 billion compared to $2.4 billion in the third quarter of 2024. This reflects flow reinsurance to third parties, as well as F&G's new reinsurance sidecar, which was effective August 1. Adjusted net earnings for the F&G segment were $139 million in the third quarter compared with $135 million for the third quarter of 2024. F&G's operating performance from their underlying, spread-based and fee-based businesses continues to be strong. F&G continues to provide a complement to the Title business, with the F&G segment contributing 32% of FNF's adjusted net earnings for the first 9 months of 2025. From a capital and liquidity perspective, FNF continues to maintain a strong balance sheet and balanced capital allocation strategy. FNF continues to return excess cash to shareholders through share repurchases and has remained active throughout the third quarter and into the fourth quarter. During the third quarter, we repurchased 631,000 shares for a total of $37.5 million at an average price of $59.37 per share. We have returned capital to our shareholders through common dividends and share repurchases combined of $627 million year-to-date, including $172 million in the third quarter. From a capital allocation perspective, we entered 2025 with $786 million in cash and short-term liquid investments at the holding company. During the first 9 months, the business generated cash to fund our $406 million quarterly common dividend paid, $62 million of holding company interest expense, $150 million investment in the F&G common equity raise and $221 million in share repurchases, all while keeping pace with wage inflation and funding the continued higher spend in risk and technology required in today's landscape. We ended the quarter with $733 million in cash and short-term liquid investments at the holding company, up 26% from $583 million at the end of the second quarter. This concludes our prepared remarks, and let me now turn the call back to our operator for questions. Operator: Thank you. Before opening for questions, I'd like to turn the call back over to Mike Nolan for some additional remarks. Mike Nolan: Thanks, operator. We issued a press release this morning announcing that our Board of Directors has approved a change in FNF's equity ownership stake in F&G, our majority-owned subsidiary. We plan to distribute approximately 12% of the outstanding shares of F&G's common stock to FNF shareholders. Following the distribution, FNF will retain control and majority ownership with approximately 70% of the outstanding shares in F&G. This will increase F&G's public float from approximately 18% today to approximately 30% after the distribution, strengthening F&G's positioning within the equity markets and facilitating greater institutional ownership. This distribution reflects our confidence in F&G's long-term prospects and is intended to unlock shareholder value by enhancing market liquidity and broadening investor access to F&G's shares. Additionally, we view the stock distribution as a tangible and meaningful return of value to FNF shareholders, along with our announced increase in our cash dividend. Operator, please open the call for questions. Operator: [Operator Instructions] Our first questions come from the line of Bose George with KBW. Bose George: In terms of the spin of the 12% to F&G, could you have spun the whole piece out tax-free? And then does this spin at this 12% as a taxable dividend change your ability to dividend the remainder tax-free? Anthony Park: Yes, Bose, this is Tony. The short answer is, yes, we could have spun the entire company to FNF shareholders tax-free. Clearly, we didn't do that. And by dropping below 80%, that option is off the table. Having said that, other options are, certainly, we could do other distributions in the future. But you heard what Mike said, and he can add to that. But the idea is that the Board has been very pleased with F&G, and we wanted to accomplish two things: One, continue to benefit from FG's performance and the expected future performance, but at the same time, getting more shares out there so that people could buy, in a meaningfully way -- a meaningful way, they could buy shares in F&G. Mike Nolan: Yes. And I'll just add real quick, Bose. Again, to repeat what Tony said, I think it's a clear indication that the Board recognized the need to get additional float and liquidity. But I think it's also an affirmation of our confidence in the business and its future growth. And when we look at things like the movement to a more capital-light fee-based structure, that, I think, leads to a lot of opportunities for us and in some ways, starts to make F&G more like FNF from a capital-light standpoint. Bose George: Okay. Great. And then actually, just switching to the -- just the commercial business. Just given the strength there and what you guys saw this quarter and just looking out based on your pipeline, et cetera, I mean, do you think 2026 could end up matching the peak years, '21, '22? Mike Nolan: Well, it's Mike. Bose, it's a great question. I mean, certainly, when you think a range of outcomes, I would say yes. We just had the best third quarter in our history. Which is amazing. And when you look at 10 consecutive months of better open orders month-over-month in commercial, 6 consecutive quarters of double-digit growth in opens for national orders, you're building a pipeline that will go into '26. And when we look at the strength across asset classes, it continues to be led by industrial multifamily. And industrial obviously includes the data centers, and I know others in the industry have commented on that. But it's still very broad-based. And I'll make one last comment. We do a quarterly survey -- I've talked about this before -- of our 19 national commercial offices. And they rank, for the quarter, activity across the asset classes. And in this past quarter, for the first time, our 2 office categories, which is suburban and CBD, were not 11 and 12. They moved up to 7 to 8. And so relative to my comment in the opening, that could be just an additive thing to '26. And maybe a long-winded answer to say yes, there's certainly an outcome that could be a better commercial performance than '21 and '22. Operator: Our next questions come from the line of Terry Ma with Barclays. Terry Ma: Maybe just a follow-up on the FG distribution. I mean, you called out some other options, maybe just kind of outline those options? And then it also sounds like from your comments, you obviously like FG kind of longer term. Does this kind of change like -- is it your intention to kind of hold the asset kind of longer term, I guess, at the end of the day? And if so, like, why would you call out like other options kind of available to you? Mike Nolan: Well, Terry, I think we do like the asset, and we think there's still a lot of continued growth. I think it's unquestioned that under our ownership, this company has transformed and performed exceedingly well. We like to pivot to capital-light. But like any business, anything is on the table if it's a better idea at some point. And so could there be other changes? Sure. Is that the current plan? I would say not the current plan. And this was really just let's get more flow, let's unlock some value for shareholders. We think it, like I said before, as a tangible distribution of value to our FNF shareholders, along with our increased cash dividend. So I wouldn't read too much into it, other than what I just said. Anthony Park: And more shares out there, more shares of F&G out in the marketplace not only benefit FG and FG's shareholder base, but really FNF because we believe that having more float allows more upside to F&G, which obviously, as a majority owner, benefits FNF. Terry Ma: Got it. That's helpful. And then maybe just on the title margin this quarter of 17.8%. I think last quarter, you guys called out a number of things, including higher investments in security and recruiting. I guess, maybe just update us on that? Like, was there any impact to the margin from those initiatives this quarter? And how should we kind of think about the margin as we go through the end of the year and into next year? Anthony Park: Thanks, Terry. I'll let Mike talk about the margin outlook, if you will. But in terms of one-timers that we called out last quarter, I would just say we had a couple of small items that mostly offset in the current quarter. I mentioned in my comments that we had a legal settlement which boosted investment income a little bit. That was about a $7 million benefit, and we had $4 million in addition to that as a benefit in other operating expenses, all related to that legal case, which settled after many years. So that was kind of a plus 11, if you will. Offset by what we talked about last quarter, which were elevated health claims, and we also said that we expected those to run through the balance of the year. So we probably had about $6 million or $7 million of elevated health claims in the quarter as well. And so call that netting mostly offsetting each other. And so from a margin standpoint, there wasn't a lot of net positive or negative relative to the -- what we'll call those one-offs. Mike Nolan: Yes. And then, Terry, what I'll add, I mean, obviously, it was a great quarter with really, growth across multiple business segments and one of our best quarters in the last 4 years. And we had -- commercial refi was better, some of our centralized businesses, other ancillary businesses like home warranty, and we just kind of had all of them with improved margins. So that was very helpful to the quarter. But quarter-to-quarter, there's always puts and takes. And as we go into the fourth quarter, we know it's typically the weakest quarter for purchase closings. So that's a take, obviously. And then you've got to factor in, well, how well will commercial do? We expect that to do well. What's the mix with agency? How do the ancillaries perform? So that's why it's difficult for us to kind of predict with confidence, a particular margin in a quarter. We would expect the fourth quarter to be good. I think we did 16.6% last year. And we'd expect it to be a good quarter, but we don't fully know. As we think about next year, I think our base case is that we could have modestly better margins than we'll probably do this full year if we get improvement in the purchase environment. We're now in year 4 of a pretty weak purchase transactional environment. Many have been saying, look, next year, next year, and it's just tough to predict. But if we get a better purchase environment next year, we already talked about possibly a better commercial environment. And then refi is the one that's really rate dependent. And I just -- and one of the reasons why we called it out in the opener was to see open orders go from 1,300 in July to 2,100 in September with -- essentially, a 30 or 40 basis point drop in rates just shows you the power of the swings in refi volumes. And again, that will just be rate dependent. Operator: [Operator Instructions] Our next questions come from the line of Mark DeVries with Deutsche Bank. Mark DeVries: I just wanted to clarify, Tony, your response to Bose's question on the spin. Did you indicate that now that you'll be dropping below 80%, that if you were to elect to do a subsequent distribution, that, that would not be tax-free? Did I hear that right? Anthony Park: That's correct. These are taxable distributions. So this 12% is the taxable distribution. And if we were to, let's say, opt to distribute the entire 70% ownership in the future, that would not be a tax-free spin because once you drop below 80%, you've, in effect, lost your ability to do a full spin tax-free. Mark DeVries: Okay. Just given that, could you talk a little more about how you landed on 12% as being the right number, particularly since you kind of lose that optionality going forward? Mike Nolan: And maybe Chris will weigh in here, too, I think he's with us. I think it doubles the float. And so that felt like the right number. I don't know, Chris, if you have anything you'd want to add to that? Christopher Blunt: Yes. No, I mean, it will take us comfortably over $1 billion of free float. So while a small distribution from an FNF perspective, it's quite meaningful to us on the FG side. So it will take free float over $1 billion, which is great. And yet, I think still a vote of confidence in the upside of FG. Mark DeVries: Got it. And then turning to the commercial side. Mike, could you give us some perspective on -- if you think about pre-pandemic, how big of a contributor was office? And how much of a tailwind could that have to your commercial business if that starts to normalize? Mike Nolan: Yes. That's a really good question. I don't probably have a very specific answer. It's more anecdotal. But I recall in the years between 2015 and probably 2019, that it seemed like office was just one of the top segments. Particularly, I remember in 2015 and 2016, in markets like New York, there were some just major transactions and things like that. So we might be able to go back and get a better answer on that, Mark. But I don't have a number to give you, other than to say it's been so weak that anything we get is going to be additive. Mark DeVries: Yes. That's helpful. And then is there any margin difference in office compared to your other commercial businesses? Mike Nolan: No, I think it's all just about the particular fee per file revenue on transactions. So our margins in our national commercial on a pretax basis generally are north of 30% and sometimes higher. And we would expect to probably get that on office versus any other type of commercial asset. Operator: Our next questions come from the line of Mark Hughes with Truist Securities. Mark Hughes: Yes. Thanks. The earnings from equity investments were pretty good this quarter. What was that? And is that sustainable? Anthony Park: Sustainable is a good question. There is volatility in that bucket. We have some -- I won't name the fund, but we have a few funds that we invest in and have for years, frankly, and the marks there move around a little bit. But the last couple of quarters, you might have seen it last quarter as well, but the last couple of quarters, we've had some really positive results from some marks that we have on, I believe, one particular investment in that bucket. So I would say for modeling purposes, I wouldn't go with sustainable. I would think you'd keep that pretty small and then just wait for those to come through. Mark Hughes: Yes. What was the actual order count, daily count for refis in October? Mike Nolan: Yes, Mark, it's Mike. We opened just a little over 1,800 orders per day in October, which was down from the 2,100 in September, but above the average for the quarter of 1,600. So still really good, but they did come off just a bit. Anthony Park: Refi? Mike Nolan: Refi. That was the question, right? Mark Hughes: Yes, that was the question. Mike Nolan: I'm talking refi orders. Yes, hopefully, I got it right. Mark Hughes: Yes. On the -- you made a point about commercial refi. What was that point? What -- how big is it relative to the overall mix? And is there any particular trend there? Mike Nolan: I think the point is it shows that customers are getting financing. And there was concerns about -- you hear these things about wall to maturity and all this kind of stuff and that maybe people won't be able to refinance commercial properties. And I think the fact that our refi opens are up double digits over last year, I think, points to the fact that maybe the markets aren't as locked up as you might think. But I wouldn't say it's necessarily a significant overall volume, but definitely additive if you think of it that way. Mark Hughes: Yes. And then you had mentioned with inHere that 85% of orders were engaged. Could you expand on that? And is that to say that the -- in the large majority of orders, the -- it's being used, but maybe it could be used more fully if it's engaged? What's the full level of engagement? Mike Nolan: When we open an order, we invite them to inHere. And so that invites them to a portal environment, they're authenticated, and then they interact with us on that environment. And 85% of our orders had engagement from customers to that invitation. And that's an increase over where we've been in the past. And I think it just shows how this is developing and building and gaining attention. So we're excited about that. And then once they're in the platform and they stay in it to track their order through up to closing, we're taking them out of e-mail in the way they interact with us. And we believe that's a more secure, efficient, better customer experience kind of environment. And to have 860,000 unique users actually doing that in the quarter, I think it's also very -- but again, points right back to the scale. The fact that we've actually deployed this across our entire footprint, the only company in the industry that's done that, still. And so I think it's just -- we're excited about the long-term opportunities of that as sort of a transformational customer experience and more secure platform. Operator: Thank you. And this will conclude our question-and-answer session. I would now like to turn the conference back over to CEO, Mike Nolan, for closing remarks. Mike Nolan: Thanks for joining our call this morning. Together, the combined business delivered strong third quarter results, demonstrating the power of our complementary businesses and our ability to execute in dynamic market conditions. The Title segment continues to deliver industry-leading margins in a low transactional environment and is capitalizing on stronger commercial activity. F&G is executing on its strategy that's focused on balancing continued growth in the spread-based annuity business alongside the fee-based flow reinsurance, middle-market life insurance and owned distribution strategies as they continue to deliver long-term shareholder value. We appreciate your interest in FNF and look forward to updating you on our fourth quarter earnings call. Operator: Thank you for attending today's presentation and the conference call has concluded. You may now disconnect.
Operator: Hello, and welcome to the Chartwell Third Quarter 2025 Results Conference Call. My name is Regina, and I will be your conference operator today. [Operator Instructions] I'd now like to turn the conference over to Vlad Volodarski, CEO. Please go ahead. Vlad Volodarski: Thank you, Regina. Good morning, and thank you for joining us today. There is a slide presentation to accompany this conference call available on our website at chartwell.com under the Investor Relations tab. Joining me are Karen Sullivan, President and Chief Operating Officer; Jeffrey Brown, Chief Financial Officer; and Jonathan Boulakia, Chief Investment Officer and Chief Legal Officer. Before we begin, I direct you to the cautionary statements on Slide 2 because during this call, we will make statements containing forward-looking information and non-GAAP and other financial measures. Our MD&A and other securities filings contain information about the assumptions, risks and uncertainties inherent in such forward-looking statements and details of such non-GAAP and other financial measures. More specifically, I direct you to the disclosures in our Q3 2025 MD&A under the heading, Risks and Uncertainties and Forward-Looking Information for a discussion of risks and uncertainties. These documents can be found on our website or on the SEDAR+ website. Turning to Slide 3. Q3 2025 marked our ninth consecutive quarter of double-digit growth in same-property adjusted NOI and FFO per unit. These outstanding results reflect our team's unwavering focus on delivering exceptional resident experiences, driving operational efficiencies and expanding our portfolio with high-quality assets in strong markets. I am extremely proud of their accomplishments and confident in their continued successes. Looking ahead, we expect continued growth in occupancy and cash flows in 2026 and beyond, supported by robust demand and limited new supply in our markets. More importantly, this growth will be fueled by our innovative operational sales and marketing strategies. We remain committed to enhancing our portfolio through strategic acquisitions, building a future growth pipeline via development partnerships and divesting noncore assets. We're also committed to continuous improvements in how we support our residences teams, regularly reviewing our processes, implementing new technologies and automation, including a responsible use of artificial intelligence tools. We are looking forward to sharing with you more details on our 3-year strategy, Chartwell 2028, at the upcoming Investor Day next week. Today, my partners will provide you with more color on various aspects of our business. Karen will do an operating update, Jeff will dive deeper on our Q3 financial results, and Jonathan will discuss our portfolio optimization and growth activities. Karen, over to you. Karen Sullivan: Thanks, Vlad. Moving on to Slide 4. We had another strong quarter of leasing activity with a positive net permanent move-in to permanent move-out of plus 104 units with an increase in both leases and permanent move-ins compared to Q3 2024 and continued growth in occupancy in all four provinces. We held our fourth and final 2025 open house event in September with over 1,400 new prospects visiting our homes, creating a strong pipeline to support continued growth in Q4. We continue to implement property-specific marketing strategies, including focusing on each home's unique selling feature that makes them stand out in their local community. During the quarter, our marketing contact database grew by another 10,000 people with the total reaching over 175,000. We garnered a significant amount of earned media attention in Q3 based on positive local community stories and Chartwell's Wish of a Lifetime national fundraising events held this past summer. The collective efforts of our homes helped raise over $160,000, which will allow us to continue to grant wishes to seniors across the country. With an increasing number of our homes reaching 100% occupancy, we also recently introduced a waitlist strategy to keep prospects interested while they wait for a suite or a specific type of suite to become available. Turning to Slide 5. We reduced our staffing agency costs by 66% in Q3 2025 compared to Q3 2024 through our continued focus on recruitment and retention activities. I'm also very proud to say that we reached our goal of 67% very satisfied residents, according to our most recent survey results, which are conducted by Sensight, a U.S.-based company that specializes in seniors housing. This means that over 2/3 of our residents have -- gave us a score of 5 out of 5 on their overall satisfaction with their home as well as the likelihood that they will recommend their Chartwell home to others. Our combined satisfied and very satisfied score is 88%. Sensight administers surveys annually to over 77,000 residents in -- sorry, 881 homes across 21 companies. The average score in 2025 of very satisfied residents in these residences was 51% compared to our score of 67%. Finally, I want to share examples of our ongoing efforts to develop property-specific strategies in two of our Toronto homes. First, Chartwell Grenadier, which is a large 257-unit residence in Toronto's High Park neighborhood, is in the final stages of a renovation project for their 73-unit assisted-living and memory care tower. The occupancy in these units has now reached 96%. We have plans to continue to renovate the rest of the building in 2026 and 2027, to increase overall occupancy and offer a variety of service levels to meet the evolving needs of residents in this busy urban community. Chartwell Lansing, a smaller 90-unit home in North York, started the year at 75% occupancy and in September reached 100%. We have also made investments in interior upgrades to the common areas in this property, and the management team continues to focus on providing services for residents in this multicultural Toronto neighborhood. I will now turn it over to Jeff to take you through our financial results. Jeffrey Brown: Thank you, Karen. As shown on Slide 6, in Q3 2025, net loss was $5.2 million compared to net income of $23.6 million in Q3 2024. FFO grew to $73.1 million in Q3 2025, an increase of 30.8% compared to Q3 2024. Our reported FFO does not include $1.7 million or [ $0.005 ] per unit of income guarantees related to recently acquired properties. Q3 2025 FFO growth benefited from higher adjusted NOI of $22.1 million, higher adjusted interest income of $1.5 million and higher other lease revenue of $0.8 million, partially offset by higher adjusted finance costs of $3 million, lower management fees of $1.9 million, lower other income of $1.4 million and higher G&A expenses of $0.9 million. In Q3 2025, our same-property occupancy increased 470 basis points to 93.1%, and our same-property adjusted NOI increased $10.2 million or 15.8%. Slide 7 summarizes our same-property operating results for each platform. All of our platforms posted occupancy gains in Q3 2025 compared to Q3 2024, and all are now operating above 90% occupancy, which positively impacted our results. Our Western Canada platform same-property adjusted NOI increased $2.7 million or 13%, our Ontario platform same-property adjusted NOI increased $5.3 million or 14.8% and our Quebec platform same-property adjusted NOI increased $2.2 million or 28%. Turning to Slide 8. At November 6, 2025, liquidity amounted to approximately $508 million, which included $113 million of cash and cash equivalents and $395 million of borrowing capacity on our credit facilities. During the 9 months ended September 30, 2025, we raised $480.5 million of equity through our ATM program at an average price of $17.86, which helped support our transaction activity. And we continue to improve our leverage metrics with interest coverage ratio growing to 3.2x, and our net debt-to-adjusted EBITDA ratio declined to 6.9x. For the remainder of 2025, our debt maturities include $151.1 million of mortgages with a weighted average interest rate of 4.39%. As of November 6, 2025, we estimate the 10-year CMHC-insured mortgage rate to be approximately 3.89% and the 5-year unsecured debenture rate to be approximately 3.87%. I will now turn the call to Jonathan to discuss our recent acquisitions and portfolio optimization activities. Jonathan Boulakia: Thank you, Jeff. Turning to Slide 9. We continue to execute on our portfolio strategy of enhancing our asset base to generate increased quality NOI. On October 1, 2025, we acquired a 100% interest in the 449-suite Les Tours Angrignon in Montreal, Quebec for $88.5 million. The three-tower complex, rebranded Chartwell Les Tours Angrignon, offers a mix of independent and assisted-living accommodations. The purchase price was partially settled through the assumption of the CMHC-insured mortgage of $68.7 million, with the remainder of the purchase price subject to normal working capital and other adjustments paid in cash. On November 1, 2025, we acquired a 100% interest in the 376-suite Residence L'Aubier in Levis, Quebec from Batimo for a total purchase price of $128.2 million. Located in proximity to numerous local amenities, the residence boasts state-of-the-art indoor and outdoor amenities for its residents. It opened in June 2024, enjoyed a rapid lease-up and is currently 82% occupied. Chartwell has managed operations at this residence since its opening. The purchase price was settled in cash and the repayment of a $10 million loan extended by Chartwell to Batimo. A portion of the purchase price is being held back to support vendor NOI guarantee obligations to Chartwell. On November 3, 2025, we acquired a 100% interest in Residence Panorama in Laval, Quebec for a purchase price of $76 million. Residence Panorama, now rebranded Chartwell Panorama, includes 206 IL and 32 AL suites as well as 49 individually-owned condominium suites in a 31-story tower overlooking the Riviere-des-Prairies. Built in 2018, the residence offers exceptional views, state-of-the-art amenities and well-designed spacious suites. The residence is currently 98% occupied. We expect to acquire Residence Azalis located in Repentigny, Quebec before year-end. Residence Azalis, to be renamed Chartwell Azalis, includes 304 IL and 30 AL suites in a 30-story tower, overlooking the St. Lawrence River. Built in 2021, the residence offers exceptional views, state-of-the-art amenities and well-designed spacious suites. The residence is currently 97% occupied. The purchase price of $111 million, before closing costs and working capital adjustments, will be settled in cash. In addition, the previously announced acquisition of a portfolio of six senior housing communities in Ontario is expected to close once third-party approvals are in place, likely in Q1 2026. To date, in 2025, we have completed over $1 billion of acquisitions with further committed investments of $700 million for completion in 2025 and early 2026 on the heels of approximately $1 billion of acquisitions in 2024. We are also actively engaged in discussions with local and national developers across the country to restart our development program and create a meaningful pipeline of state-of-the-art assets to bring into our portfolio. We will pursue such developments in a prudent manner with a preference for off-balance sheet development, similar to our arrangement in Quebec. Further to this initiative, Chartwell announced the development of the 111-suite Chartwell Kingsview Retirement Residence in Calgary with an advance of $4.5 million of the total committed $6.5 million mezzanine financing to local developers. Chartwell will be the operations manager of the project and will have a call option to acquire the residence on stabilization. The project is in an affluent residential area of Calgary in proximity to various neighborhood amenities and will feature self-contained IL apartments and an attractive amenity package. As I've noted, we have invested significant financial and management capital pursuing acquisitions in line with our strategy and have initiated new development projects to support a strong pipeline of future property growth. We have also identified properties within our portfolio that no longer fit our core strategic focus due to their location, size, age and our service offering. These noncore properties represent approximately 5,700 suites. We intend to pursue dispositions of some or all of these properties as market conditions allow, with proceeds expected to be used to support future development and acquisition activity that's in line with Chartwell's current strategy. I'll turn the call back to Vlad to wrap it up. Vlad Volodarski: Thank you, Jonathan. Slide 10 highlights the strong fundamentals driving our industry. We believe we are at the front end of what is going to be a multiyear period of growth in retirement living in Canada. Demand for our services should continue to grow for decades driven by the senior population growth. Forecasts show that to maintain supply-demand balance, the sector would need to build 200,000 suites in the next 10 years, which is almost 3x the number of suites built in the previous 10 years. With high construction costs and aging inventory, supply shortages are likely to persist, supporting higher occupancies, rental and services rates and profitability of the existing operators. As one of the largest participants in the senior living sector, Chartwell stands to benefit from these dynamics. Turning to Slide 11. We are not just waiting for the rising tides to lift our boat with others, we are taking decisive steps to pursue operating excellence, future-proof and grow our portfolio and prudently manage unitholders' capital. Some of the examples you heard today from Karen, Jeff and Jonathan, there are many others that we hope to share with you over time. We are looking forward to sharing our Chartwell 2028 strategy, financial objectives and risk management guidelines as well as the details of our key operating investment capital and risk management initiatives at our upcoming Investor Day on Thursday, November 13, 2025, at 1:00 p.m., which will take place at our beautiful Chartwell Hub. At this event, you will have an opportunity to hear from several Chartwell leaders, participate in a Q&A session and interact with Chartwell directors -- executives and directors over a beverage of your choice. If you have not done so, please register for the event. Details are on our website at investors.chartwell.com under Press & Market Information tab. I will now close our prepared remarks with a story from one of our residences as pictured on Slide 12. At Chartwell Heritage Valley, one small act of kindness grew into something extraordinary. A resident visiting his wife in memory care asked if he could paint a few walls, wanting to help and contribute. That simple gesture sparked a wave of engagement throughout the residents. Soon, residents were volunteering across the community, helping with bingo, newsletters and events. The team created a Resident Volunteer of the Month program, and from there, two resident-led clubs were created, a choir and a drama club. Their first original play, Old MacDonald's Farm, written and performed by the residents, brought laughter, pride and connection. So much so that they took the event on the road to another Chartwell home. Moments like these remind us what Chartwell is truly about, people finding purpose, joy and belonging to a community. Thank you for your attention this morning. We would now be pleased to answer your questions. Operator: [Operator Instructions] Our first question will come from the line of Lorne Kalmar with Desjardins. Lorne Kalmar: I'm just looking at the drama club rehearsal picture here, and it looks awesome. On -- just maybe on the rent growth side of things. Now you're going to get to -- slated to get to 95%. I think you're still kind of high 3s on the rent growth side, when do you see that starting to pick up? And sort of what do you see the cadence of the rent growth looking like over the next couple of years? Vlad Volodarski: Thanks, Lorne. So items that impacted a bit the rental rate growth this quarter, in particular, was the annualization of the incentives that were put in place over the last couple of years or last year in particular and this year to help with the occupancy growth as we continue to have more and more homes reaching that 95% occupancy. Our expectation is that these incentives will be pulled out. And in fact, when we look at the new incentives granted this year, they've actually already started coming down compared to last year, and we expect that trend to continue. In terms of the kind of more longer-term rental rate growth, our expectation is that in the environment where there's demand growing and supply is not, we will have an opportunity to increase market rents at a faster pace. We will certainly limit the increases to the existing residents at a more historical level, which is inflation plus a little bit, to compensate for the increase in the labor cost that we're experiencing across the sector, but market rate, we expect them to grow faster. Lorne Kalmar: Okay. And can you maybe just give us a little bit more color in terms of what the incentives are that are kind of rolling off and where you see them going, I guess, next year? Vlad Volodarski: So today, the overall incentives are about 5% of revenue. And so as we continue to remove those incentives in the homes that are achieving higher occupancy levels, that overall number will start coming down, and that will contribute to the overall rental rate growth over time. Lorne Kalmar: Okay. Perfect. That's very helpful. And then maybe just one last one for me. Obviously, you guys had some pretty meteoric earnings growth. Has the Board talked about a potential distribution bump here? Vlad Volodarski: The -- our intent is to begin distribution increases and then maintain those increases over the year, similar to what we've been doing pre-pandemic. If you recall, I think we started our distribution increases back in 2014, and we continued growing them every year all the way up to 2020. And then during the pandemic, we chose to maintain the level of distributions. We feel like we are getting to a point where our cash flow fully covers distributions and capital investments that we need to make in our properties, and our expectation is that we will start growing distribution increases. I can't tell you exactly the timing of it just yet, but that's certainly the intent. Operator: Our next question will come from the line of Jonathan Kelcher with TD Cowen. Jonathan Kelcher: First question, just on the acquisition, you guys obviously very active this year, and you're just recharging the ATM now. How would you say the pipeline looks over the next few quarters? Jonathan Boulakia: We're actively working on that pipeline. As I mentioned, we have two kind of pipelines going. One is on the development side where across the country, we're active -- in active discussions with local and national developers, so that we can address that pipeline for maybe when the real estate cycle isn't as robust on the acquisition side. And on the acquisition side, we are seeing a number of deals, and we think we have a decent pipeline going both on the 1s and 2s type deals and also on the portfolio side. Jonathan Kelcher: Okay. And by across the country, you mean in your existing geographies, correct? Or you are looking at new stuff? Jonathan Boulakia: Correct. Jonathan Kelcher: Okay. And then secondly, you talked a little bit about renovations, given the Grenadier as an example. How do you pick homes for that? And what type of returns do you target on those investments? Vlad Volodarski: I'll take that one. So there's different levels of renovations and the ways we look at them. In some cases, we renovate properties that have been operating for a period of time and now due for renovations. And our approach to that is instead of doing sort of a little bit here, a little bit there, to renovate the whole property at the same time, sometimes it can take more than 1 year just because of the size of the undertaking, and we are trying to do it in a way that minimizes as much as possible the disruption to the existing operations and the residents. So that would be one approach. The other approach would be when we holistically look at the properties that may not need to be fully renovated just yet and looking at the potential of repositioning those properties in the marketplace. So Grenadier would be a good example of that. Over the years, we've been investing in this property. It looks wonderful already. We just feel that given its location and the potential, that property is being now under significant review for significant renovation and repositioning. Renovation of the assisted-living neighborhood that Karen talked about is completed, and there will be potentially or likely other phases of renovations for these properties, which will take quite a few years. And we will be targeting pretty good returns on these through the increase in market rates over time. And those renovations also will make the operations of the buildings more efficient, so there may be some opportunities on the expense savings over time as well. Jonathan Kelcher: Okay. So do you sort of -- it sounds like the first bucket is sort of almost a maintenance CapEx, just given the property's age, and the second one is more of a push NOI on an existing basis. Is that a good way to think about it? Vlad Volodarski: Not necessarily because when the property is completely renovated, even just because it was due to be renovated, there are still opportunities to drive higher market rate increases over time because it becomes just so much more attractive to the potential customers. It's just the timing of the execution of these projects coincided with the timing, effectively the existing sort of aesthetics getting to the end of their useful life. In some cases, we would renovate buildings even before that is the case. Operator: Our next question will come from the line of Himanshu Gupta with Scotiabank. Himanshu Gupta: On your same property occupancy, I mean, it looks like you have reached that 95% target for December. What is the next goalpost from here? I mean how do you keep the sales team hungry or motivated from there? Vlad Volodarski: Yes, it's a great question. So just to remind you, our turnover is about 30% across portfolio. So they have their work cut out for them even without the occupancy growth, there is quite a bit of units to be leased every year. Anyway, the conversations that we're having with our teams in the field and our sales teams corporately that supports them, is that the target for each individual property should be 100% occupancy with a healthy waitlist. Now we are under no illusion that this possible to be achieved across 160, 170 residences across the country. So I wouldn't want you to start putting that in your models. But certainly, everybody is motivated to drive to that number. And so we've -- and again, we'll talk about it at the Investor Day even more, but we're putting changes in place, both in the compensation side of things and the training side of things, Karen mentioned about waitlist, management strategies. So there are a number of strategies that are being put in place to help people to continue to focus on replacing units that are turning over every year and continue to grow occupancy as much as possible. Himanshu Gupta: Got it. And just to follow up there. Do you have a sense what is the occupancy for your immediate competition in your same-property portfolio? I mean, what I'm getting at is that is there still opportunity to take the market share from your competitor from here? Or do you think they are also at very similar levels or kind of... Vlad Volodarski: It's very hard to answer that question, Himanshu, because it's so local and case specific. With the current environment where there is -- demand is growing, and supply has not been, I think there's enough for everybody to run high occupancy. What we're trying to do with our portfolio through all these portfolio optimization and growth initiatives is to position it in such a way that we can continue to maintain market-leading occupancies in everywhere where we operate. And so that would be our target. Himanshu Gupta: Okay. Fair enough. Switching gears to same-property expenses here. I think it was kind of up like 4% on a year-over-year basis in Q3. Agency staffing is obviously down. I mean, good progress there. How should we think about same-property expenses into next year, like a similar 4% range or more like 3% to 4%? Jeffrey Brown: Himanshu, we think, we do have still some occupancy-related increases in our DOE this year. So we'll have some of that next year as we have the sort of annualization growth of 95%, but less so. So we think we should be able to have a lower growth level in DOE next year. Vlad Volodarski: I would mention on that, Himanshu, there continues to be some pressure on compensation costs for our employees pretty much in all of our markets. The intervention by the government during the pandemic years continues to impact or sort of lagging effect of that continues to impact wage rates across the country. So our expectation is the 2026 compensation cost will be higher than what we've got used to historically, where historically, these costs increased by 2% to 3% a year. Now we've seen several years of 4% or 5% increases, and we're probably going to see at least another year of that given the dynamics in the labor market. Himanshu Gupta: Got it. Fair enough. Last question is on the recent acquisitions. I look at Panorama and Azalis, I think both in Quebec, fully stabilized occupancy. So what kind of NOI growth do you expect on these acquisitions? Or like what kind of IRRs did you underwrite for like these stabilized acquisitions here? Vlad Volodarski: We think that these properties improve the overall quality of our portfolio. And even though they do not have a lot of room to run on occupancy growth, our ability to increase market rates over time, we think is going to be better in these homes than in some of the existing homes that we operate that are older in the similar markets, and we certainly feel and see some accretion to our cost of capital from the IRR perspective on a 10-year basis from these acquisitions. Otherwise, we would not be doing them. Himanshu Gupta: Yes. No, fair enough. And is it like more of a value angle here? Like I see all these two, three acquisitions are around $300,000 per suite or per unit. I mean, what's your estimate of replacement cost for these units? Is that the biggest rationale to go for these acquisitions? Vlad Volodarski: Yes. They're still done at significant discount to replacement costs. Jonathan mentioned that we started two development projects in Montreal -- in Quebec -- well, yes, both of them are in Montreal, Greater Montreal area, where we're building additions to the existing residences. And even though you are not building a lot of common areas, these are just unit additions. So the construction is a bit more efficient than on a greenfield development, the cost of these additions are significantly higher than $300,000 a door. Operator: Our next question will come from the line of Giuliano Thornhill with National Bank Capital Markets. Giuliano Thornhill: I'm just wondering on the waitlist that you mentioned at the beginning, kind of like how long is the waitlist there and what markets that's in? And what's kind of the gap to in-place to market rent that you're seeing for those properties? Vlad Volodarski: So again, it varies location by location. There may be more properties that have waitlist for a certain number of -- for certain type of units, they may not be having 100% occupancy everywhere, but people waiting for specific types of units, and there are some properties that have waitlist for all kinds of units. A lot of these properties located in, for example, in British Columbia, that market has been underbuilt for a period of time. And so many of our homes in that market have robust waitlists. And in those homes, market rates go up by at least high single digits, more often than not in low double digits. So that's to give you a sense of the gap between the in-place rents and market rents. Giuliano Thornhill: Okay. And is there any like cadence for the number of homes that you could provide or -- that are kind of in that -- in, I guess, fully occupied waitlist area? Vlad Volodarski: Well, in the same-property portfolio, it's close to 10 homes that are now at 100% occupancy, and there's probably another 30 homes that are between 95% and 100% occupancy. Giuliano Thornhill: Okay. And then just turning to the disposition candidates. I think last call, you kind of provided a rough estimate of 3,500. Now it's gone up to -- 3,500 to now 5,700. I'm just wondering what's the delta attributed to there? Vlad Volodarski: We continue to review our portfolio and sort of the types and the qualities of properties that we own and reevaluate our approach to determine what we consider to be noncore is also driven by the acquisition opportunity, both completed and what we're seeing out there that are potential. And so as a result of these ongoing exercises, we've increased the size of this noncore portfolio. Now it will take some time to sell these properties. It's not going to be -- unlikely to be sold all in one time. And so also, I would mention that these properties are performing properties. They're not struggling in any sense of the word. The reason that they ended up being as part of noncore portfolio is just they do not fit necessarily in our view and aspirations of what we want Chartwell portfolio to look like in, say, a couple of years' time from now. Giuliano Thornhill: Okay. So it's kind of a mix of the repositioning and whichever ones do you want to, I guess, optimize your same-property portfolio? Vlad Volodarski: The 5,700 suites that Jonathan mentioned would be eventually sold. That's noncore portfolio that we identified that we unlikely to reposition and remain in the Chartwell portfolio over the long period of time. Giuliano Thornhill: Is there a lot of properties in that bucket, which have some conversion potential into like apartments or something else? Vlad Volodarski: No. I think the hard work that we had to do when we repositioned some properties for alternative use or sold them for maybe a little lower valuations, all that work has been done. By now, we do not have even -- I cannot think of one property that's left that would be in that kind of bucket. This noncore property portfolio are well-performing properties, They just don't fit our view of Chartwell portfolio going forward because mainly of their size, their locations, their vintage, their capital requirements, things like that. Giuliano Thornhill: Okay. And then just kind of last question on that is just was there any kind of time line you can provide on a Ballycliffe quite yet? Vlad Volodarski: There's no update on Ballycliffe at this point of time. The building is open, the residents are moved in into their new environment and it's operating, and we continue to evaluate our options. It's certainly not something that we intend to hold for a long period of time. But right now, there's no impact on that. Operator: Our next question will come from the line of Pammi Bir with RBC Capital Markets. Pammi Bir: Just on the development side, you are pursuing some new projects. But are you starting to see perhaps more developers kick-start some new developments and maybe which markets are more active than others? Jonathan Boulakia: Sorry, you're asking whether we're seeing more? Pammi Bir: Yes. Yes. Are you seeing more development? Jonathan Boulakia: Yes. And I think as our asset class is becoming more and more attractive to people and people are looking for alternative uses for the land that they are looking to develop, that is becoming more of a trend. So we are getting approached frequently by local developers and more national institutional developers who are figuring out master plans in communities. And so we have a number of those that we're looking at and it's becoming more and more active. Pammi Bir: I guess if you step back and just think about the broader market, and new projects starting by others as well. In terms of deliveries, how do you -- at what point do you start to expect them to pick up? Is that perhaps more 2028? '27? Or -- just trying to get a sense of the cadence. Jonathan Boulakia: We expect to see a pickup in starts in 2026. So probably a pickup in deliveries, yes, you're probably right, '28, '29. Some of these master planned communities might take a bit longer, but '28 and thereafter. Pammi Bir: And I just wanted to reconcile some of the comments around rent growth. I think if you're putting up, let's say, overall, an average of roughly 4%, I think, this year, just given the momentum that we've all seen across occupancy in the broader market, does that look something more like 5% on a blended overall average for the portfolio in '26? Or is it still kind of hovering in that, call it, 3% to 4% range? Vlad Volodarski: Yes. For '26, it's -- we'll target something higher than 4%, somewhere probably between 4% and 5% on a blended basis, depending on turnover, it depends on a lot of other things. Also remember, part of what's included in these numbers is some government-funded beds that we have in Alberta, for example, and they would drive down overall rent increases because the government increases are not as high as what we're passing on a private basis. Pammi Bir: Got it. Okay. And then just last one for me. The leverage has obviously come down pretty nicely. The ATM has been quite effective. But as you think about the next year or 2, I think you've previously cited 7.5x debt-to-EBITDA as sort of your target, is that the right figure? I mean, is there perhaps any consideration of taking that lower just to really sort of solidify the balance sheet and insulate it from any sort of future shocks even more? Or is that sort of the level that you're comfortable with? Jeffrey Brown: Yes. Pammi, we did end the quarter at 6.9x. So that was more timing based on some of the acquisitions closing in October and November. So we are still targeting 7.5x, and it's the number we do review, but still think it's the right leverage level for the company. It does provide some good balance sheet flexibility for us for the future. Operator: Our next question will come from the line of Tal Woolley with CIBC. Tal Woolley: Just wanted to start on talking a little bit about turnover. I think, Vlad, you mentioned earlier on the call that 3 years is still typically around the average stay. I'm just wondering if you expect that to shift at all going forward? Just now that the LTC system is sort of full again, there's maybe not quite as many options. And so do you expect to see turnover increase? And then also wondering if you can sort of provide a -- what is an average rent lift you would typically see on turnover? Vlad Volodarski: On the first question, Tal, I think turnover changes will be a function of renewal of our portfolio. If we focus on more independent type of residents. So for example, the turnover in Quebec portfolio for us is about 25% and turnover in the rest of the country is between 35% and 40%. And so as we focus more on independent residents, some of the acquisitions that you saw us announcing in Ontario and BC are in that independent space then turnover will probably come down a little bit. But again, the portfolio size is such that some additions of these homes may not necessarily change that dynamic significantly. In terms of the rent gap between in-place and market, it is very building-specific. So I can't tell you what the gap is other than that our expectation is that with the declining incentives that we're required to provide to continue to maintain and drive occupancy and the properties achieving high occupancy levels more broadly, our expectation that we will be able to increase market rates significantly higher than what we would do in terms of increases to our existing residents. Tal Woolley: Okay. And then in your noncore portfolio sales, who are the typical buyers do you expect to see at the table when you put these on the market? Vlad Volodarski: I guess we'll have to see. We haven't had things in the market recently, but there are a number of private equity groups that are focused on this asset class now, interested in a more value-add play. And to the extent that they come to the table, I think those will be the more natural purchasers of these assets. Tal Woolley: Okay. And when you segment your portfolio, the repositioning portfolio, when I look forward, I appreciate it's sort of like the -- it's the least same-property like of the group -- of the segments. But should we be expecting that occupancy to materially improve? Or is that going to be a bucket that's sort of constantly changing going forward? Vlad Volodarski: Well, our expectation is that the occupancy will continue to improve in all properties in our portfolio, whether they are noncore or core. The there is no reason why it shouldn't be the case. Dynamics are similar across the board in pretty much every market where the demand is growing and supply is not. So every home should operate at high occupancy levels. The bucket itself or that portfolio composition will change. I mean we will change that on January 1, 2026, like we always do, where some of the properties that were acquired in the last couple of years will move into the same-property portfolio when they have full 12 months comparative. And some of the properties will move to a different bucket. So hold on for that, on January 1st or before, we will let you know what the composition of same-property portfolio, growth portfolio and repositioning portfolio would look like going forward. Tal Woolley: Okay. And then just lastly, I think in your MD&A, you sort of referenced that effectively like your 10-year CMHC-insured borrowing costs are pretty much the same as 5-year unsecured right now. Are you tempted to use the unsecured market more going forward? I know it's -- administratively, it's a lot easier to work with. Just curious about financing options on the debt side. Jeffrey Brown: Yes, Tal. I mean there are different tenors. So they're not exactly apples-to-apples, but we have been more active in the debenture market over the last 18 months. And so as we look and have a need for debt financing, we do look at both of those options and are picking the lower cost of the two. Operator: [Operator Instructions] And our next question will come from the line of Tom Callaghan with BMO Capital Markets. Tom Callaghan: Maybe just going back to Pammi's line of questioning on the development side. Obviously, you guys have had lots of ongoing discussion with different developers and looking at these yourselves. But just curious, looking to get a sense, cost-wise, what are you seeing? Are you starting to see some deflation trickle in on the cost side of things? And if so, is there a way to think about that deflation, say, if you were looking at that same project 12 months ago? Jonathan Boulakia: We are seeing some deflation on costs. It really depends on where, like in which jurisdiction and what buckets, but certainly on some materials and some trades, we see more availability on the trade side, and that results in some deflation on costs. And these developments, frankly, also become more feasible as rate catches up, which it has done in the last couple of years, and that's helping also with the equation. Tom Callaghan: Okay. Okay. And then on the project there that you announced with the partner in Calgary, Kingsview, I think, is there a cost per suite that we could kind of think of for that type of development? Jonathan Boulakia: Well, this development is off balance sheet for us. So we would be buying it at fair market value at the back end. Cost per suite, I'd have to get back to you on it. Tom Callaghan: Okay. No, no, yes. I understand it's off balance sheet, just more trying to get a broader sense or picture of costs for new development. Maybe switching gears just housekeeping one for me. I think earlier in the year, you had mentioned some potential for CMHC up financing proceeds. Is that still to come? And if so, how much should we be thinking about there? Jeffrey Brown: You're asking about what's left to do this year in terms of CMHC? Tom Callaghan: Yes. I think, Jeff, you mentioned maybe potentially some up-financing opportunity on CMHC like incremental... Jeffrey Brown: We still have some financings to close for the balance of the year. And sort of as we look out over the next 12 months, just close to $300 million of total CMHC financings, but the bulk of that would be refinancings of conventional mortgages on some properties. It's -- probably less than half of that is incremental new financing. Tom Callaghan: Okay. Okay. So less than half of $300 million. Jeffrey Brown: Yes. Operator: And that will conclude our question-and-answer session. And I will now turn the call back over to Vlad for any closing comments. Vlad Volodarski: Thanks, everybody, for joining us today. Just another reminder, if you have not already done so to register for our Investor Day event taking place at Chartwell Hub on November 13 at 1:00 p.m. We're looking forward to seeing you then. In the meantime, if you have any further questions, please do not hesitate to give any one of us a call. Goodbye. Operator: This will conclude our call today. Thank you all for joining. You may now disconnect.
Operator: Welcome to Onex' Third Quarter 2025 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the conference over to Jill Homenuk, Managing Director, Shareholder Relations and Communications at Onex. Please go ahead. Jill Homenuk: Thank you. Good morning, everyone, and thanks for joining us. We're broadcasting this call on our website. Hosting the call today are Bobby Le Blanc, Onex' Chief Executive Officer; and Chris Govan, our Chief Financial Officer. Earlier this morning, we issued our third quarter 2025 press release, MD&A and consolidated financial statements, which are available on the Shareholders section of our website and have also been filed on SEDAR. Our supplemental information package is also available on our website. As a reminder, all references to dollar amounts on this call are in U.S., unless otherwise stated. I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward-looking statements contained in today's presentation and remarks. With that, I'll now turn the call over to Bobby. Robert LeBlanc: Good morning, everyone. Before providing my comments on the quarter, I wanted to provide some thoughts on our pending acquisition of Convex and new strategic relationship with AIG. These transactions are a transformational step forward for Onex with the potential to meaningfully enhance long-term shareholder value. Since becoming CEO, one of my main priorities, beyond optimizing the business and focusing on those areas where we have a right to compete, has been to identify opportunities to deploy our balance sheet to create enterprise value. I truly believe these relationships with Convex and AIG, 2 industry-leading organizations that are well aligned with our own culture and principles, is one of these opportunities. In Convex, we are not only acquiring an outstanding organization and proven leader in the insurance industry, we are strategically and intentionally leaning into a business and ecosystem that we know extremely well and where we have been able to generate outsized returns. In just 6 years from its inception, the business has delivered well beyond expectations and still has excellent growth prospects. Further, the informational advantage we have built up related to Convex puts us in a far superior position, with much lower risk than if we were acquiring a business we didn't know as well. What Stephen Catlin and Paul Brand have achieved to date with Convex is truly remarkable. We'd like to thank Stephen and Paul and the rest of the employees at Convex for their efforts and results. They are one of the most talented teams in the industry and we're delighted to remain their long-term partners. In addition to the strength of the team, Convex has built a differentiated underwriting platform, one that has grown gross written premium by 22% annually since 2022. Profitability has also improved steadily with recent combined ratios in the high 80s to low 90s as the business continues to scale into its expense base. Convex has also demonstrated prudent underwriting and has had consistent favorable prior-year reserve development since 2022. Importantly, it carries no legacy insurance liabilities having been established as a de novo insurer in 2019 with the support of Onex and our LPs. Convex' efficient cost structure with no legacy technology burden and a focus on outsourcing noncore functions should allow for meaningful incremental operating leverage as the business continues to grow. As we highlighted in the investor presentation available on our website, Convex' key performance indicators clearly position it ahead of its peers, particularly on an organic growth basis. At our entry price of 1.9x Q3 tangible book value, we see meaningful upside as Convex continues to compound tangible book value through disciplined underwriting and retained earnings. As we have consistently outlined to our shareholders, we only want to deploy capital in areas where Onex has deep domain expertise and a clear right to compete. We've spent decades building experience and relationships across the insurance sector, and Convex is a great example of our deep domain expertise. Owning a property casualty insurer gives us 2 powerful engines of value creation. First, from through-cycle underwriting profits, which can be reinvested back into the business or become available for future dividend distribution. Second, as Convex' investment portfolio, which is currently around $8 billion, grows, allocation to alternative assets will grow with it, which will include Onex' own private equity and credit funds. This should drive incremental AUM growth and fee-related earnings for our asset management business. While the P&C market is not immune to cyclicality, we're comfortable with that risk given we expect to be a long-term owner of the business and Convex is still in the early stage of its growth trajectory. The business has significant opportunity to capture additional market share, underpinned by its high-quality relationships and reputations with brokers and clients. The combination of best-in-class growth and high-quality underwriting should allow Convex to compound its equity value at attractive rates through the cycle. We see that growth as a meaningful driver of Onex' future shareholder returns and a key contributor to the ongoing expansion of our net asset value over time. Turning to AIG's investment. This new relationship with one of the world's largest and most sophisticated insurance companies is an incredibly positive development for Onex. Their $2 billion commitment to our private equity and credit funds will contribute an incremental $15 million to $20 million of fee-related earnings, more than offsetting the impact of dilution. Moreover, this opens the door to a number of other benefits, including the potential to collaborate on future investments and a range of other initiatives that could prove significant over time. Overall, our relationship with AIG not only reflects a shared perspective on both the upfront value and long-term prospects of Convex, but is also an endorsement of the Onex platform and our ability to create future shareholder value. Across our existing businesses, we are also thinking strategically about how to best enhance enterprise value. Upon closing, Convex will account for 42% of our balance sheet. With the remaining $5 billion of investing capital, we will continue to grow it and deploy it through 2 key areas. First, by allocating up to 10% per fund into our own strategies while relying increasingly on third-party fundraising to scale FG AUM and related FRE. Second, by pursuing direct on-balance sheet investments. These would be in areas where we have a clear right to compete, but with differing risk-adjusted return, holding period and leverage parameters so as not to conflict with OP and ONCAP opportunities. Added to this will be a continued focus on growing fee-related earnings. We have made significant gains on FRE throughout 2025 in large part due to the work of our credit team, and we are now positioned to exit the year with a positive total FRE run rate that is ahead of plan. This growth will be accelerated by AIG's commitment to our alternative asset strategies as well as the addition of future investment into these strategies by Convex. As we work towards our objective of closing the transaction in the first quarter of 2026, we will keep shareholders updated on key developments and we'll continue to look for opportunities to provide the appropriate information to understand and value this transaction, including why we believe Convex deserves to be recognized at a premium valuation within our overall NAV. And now a few comments on the quarter. Again, credit continues to outperform our expectations this year, led by the ongoing momentum in structured credit. The team priced 22 CLO transactions through October, raising or extending $10.7 billion of fee-generating assets across our structured credit and tactical allocation platforms. The performance of our CLO portfolio continues to be top tier across important risk metrics. Our private equity teams continue to be active in Q3 with both realizations and deployments, ensuring that we continue to return capital to our limited partners while putting new investment money to work on opportunities that align with our chosen sectors. Onex Partners announced a sale of approximately 55% of its investment in OneDigital, in a transaction that values the business at more than $7 billion, which was completed at a valuation almost on top of our Q2 mark. In addition, we successfully closed the sale of our 25% stake in WestJet at more than a 40% premium to our mark. Including these 2 transactions and pro forma for the closing of the Convex transaction, Onex Partners V will have reached DPI of 0.7x, a strong achievement relative to the average DPI of comparable funds in this vintage. Following the sale of Precision Concepts in Q2, the ONCAP team successfully closed their sixth investment in Fund V, which is now approximately 50% invested. On the human capital front, we announced that Meg McClellan will join Onex as our new CFO following Chris' decision to step down from the role he has held since 2015. We are looking forward to welcoming Meg, who will assume the CFO responsibilities following our year-end call. I'm pleased that Chris has agreed to stay on in a leadership capacity to help ensure a smooth transition and provide continued guidance and support. I also want to acknowledge Tawfiq Popatia's confirmation as Head of Onex Partners. Tawfiq has always shown great leadership and strong investment acumen and is a true ambassador of the Onex culture and entrepreneurial spirit. Finally, I want to thank everyone for their condolences and support following Nigel Wright's passing. Onex lost a friend and colleague. Nigel was a gentleman in the truest sense of the word. I'll now turn it over to Chris. Christopher Govan: Thanks, Bobby, and good morning, everyone. While most of my remarks will focus on our results for the quarter, I'll also take some time to address some financial aspects of our acquisition of Convex and relationship with AIG. So let's start with our investing segment. Onex ended Q3 with investing capital per share of $121.61, up slightly from Q2 and representing a return of 7% for the first 9 months of the year. The 5-year CAGR on investing capital per share is 13%, just below our target range. Our PE portfolio was up slightly during the quarter. While Onex Partners V, the Onex Partners Opportunities Fund and ONCAP IV continued to generate positive returns across a broad range of their portfolio companies, these gains were mostly offset by losses in Onex Partners IV. As Bobby said, it was an active period for our PE teams on both realizations and deployments. In September, Onex Partners V announced the sale of 55% of its investment in OneDigital, which is expected to close later this year. We also had 2 partial exits closed since Q2: ONCAP IV's sale of approximately 80% of its interest in Precision Concepts International and OP V's sale of 25% of its stake in WestJet to a consortium of leading global airlines. The combined proceeds to Onex from these realizations will be approximately $360 million. It is worth noting that the last 13 realizations across our PE platform, dating back to 2022, have been completed at attractive values relative to their prior quarter's mark. In fact, only 1 was executed below the prior quarter's mark, and in that case, at only a 3% discount, and 5 were done at premiums of 15% or more including the recent partial sale of WestJet at a 40% premium. On the new investment front, in September, the Onex Partners Opportunities Fund announced the acquisition of Integrated Specialty Coverages or ISC. The company is a technology-enabled insurance platform that fits well within the portfolio, with our long history of successfully investing across the entire property and casualty insurance value chain, particularly in founder-led businesses like ISC. And in October, ONCAP V announced an investment in CSN Collision, a leading network of collision repair centers. As some of you will recall, ONCAP has experience investing in this industry having previously owned Caliber Collision, an investment that generated a 7.5x multiple of capital to Onex Corporation. Both the Opportunities Fund and ONCAP V are off to strong starts with investment pace on target. On the asset management side of the business, Onex ended the quarter with $42 billion of fee-generating AUM, with private equity and credit increasing by approximately 22% and 18%, respectively, during the year. The increases primarily reflect the earlier commitments made to ONCAP V and the Onex Partners Opportunities Fund, as well as the issuance of new CLOs. The asset management segment generated earnings of $20 million in Q3, of which $11 million was fee-related earnings from the PE and credit platforms. After factoring in the costs associated with managing Onex Corporation's capital and maintaining the public company, total firm-wide FRE was $1 million for the quarter and year-to-date. Credit continues its strong FRE trajectory, with an end-of-quarter run rate of $50 million. By year-end, we expect this run rate to increase to approximately $60 million, exceeding our 2023 Investor Day target. With credit FRE ahead of plan, we also expect to exit 2025 with positive firm-wide run rate FRE. As we noted in the presentation we posted last week, our forecast is to exit 2025 with firm-wide run rate FRE of approximately $17 million based on Q4 FG AUM initiatives in process. And this is before any of the benefit that we'll accrue from the $2 billion of allocations to our alternative asset strategies from AIG. At this point, we're estimating incremental FRE of $15 million to $20 million on this $2 billion of AUM. And we'd expect an increased allocation of capital from Convex to Onex strategies to be additive here. The actual FRE impact will depend on the strategies to which AIG and Convex ultimately allocate capital. But in all cases, we expect a very high conversion of management fees to FRE. As we've discussed before, we're at a point in both PE and credit where the infrastructure can manage incremental capital with very little in the way of additional costs. As the capital from AIG and Convex gets allocated, we'll continue to update our run rate FRE reporting to reflect the actual benefit. Now turning to Convex and AIG. As Bobby said, we think this is a terrific evolution of Onex, and we're confident it will allow us to accelerate enterprise value creation for the benefit of shareholders. I thought it would be helpful for me to add some color around the funding of the transaction and Onex' go-forward liquidity. Onex' funding could be affected by further PE realization and investment activities between now and closing. But at the moment, we expect our $3.8 billion investment in Convex to be funded by a combination of $1.5 billion of cash from our balance sheet, a $1 billion draw on the new NAV loan facility, rolling over our existing $700 million investment in Convex, including carried interest, and finally, approximately $600 million from the issuance of Onex shares to AIG. After factoring in cash flows from PE transactions we've already announced, we expect to have approximately $300 million of cash on Onex' balance sheet at close. In addition, Onex will have $200 million of undrawn capacity on the NAV loan. We're very comfortable that $500 million of liquidity is sufficient in the near term. And if you look out over the next 1 to 2 years, we expect Onex to generate meaningful additional liquidity, mainly from net PE realizations. As I mentioned, we expect to generate positive overall FRE going forward. And our credit business will continue to grow without the need for meaningful net new allocations of Onex capital. So that leaves our PE investing as the key driver of medium-term liquidity. Ignoring Convex, Onex has approximately $5 billion of PE investments in the ground, relative to only $750 million of unfunded PE capital commitments, of which only $400 million are to fund in their commitment period. So with that ratio, we expect meaningful net realizations from PE will allow Onex to pay down the NAV loan in relatively short order. Overall, the acquisition of Convex and strategic relationship with AIG position Onex to create long-term enterprise value. In one fell swoop, we're better leveraging our balance sheet to reduce the historic cash drag, allocating about 40% of our investing capital to an investment we know really well that will compound value over the long term, and paving the way for strong growth in FRE by demonstrating our commitment to an asset-lighter model and securing significant new AUM from AIG and Convex. That concludes the prepared remarks. We'll now be happy to take any questions. Operator: Certainly. And our first question for today comes from the line of Bart Dziarski from -- research analyst. Bart Dziarski: Great. It's RBC Capital Markets. Wanted to ask around the -- with the AIG new partnership, Bobby, would love your thoughts in terms of how you're thinking about this having the impact around fundraising. Does it change any of the outlook in terms of OP VI timing, sizing, et cetera? Robert LeBlanc: Yes. So look, I think having an organization like AIG look at where we brought our asset management business to over the last couple of years and want to invest in Onex Corp., it's a really strong endorsement. And I think it's only additive or a positive for fundraising going forward. I don't think it impacts timing of our fundraisers coming up for OP, ONCAP or credit. Specifically for OP, I would still target sort of mid-2026 as a fundraising launch date. And again, Chris mentioned it, the 0.7x DPI is a very significant stat for that platform, and it looks very, very good relative to other PE firms in that vintage. Bart Dziarski: Okay. And could you remind us, like what percentage of the fund are you in OP V? And would that be a similar percentage for OP VI that Onex invests in? Or are you thinking maybe more capital-light direction where you'd be a lower percentage of that fund? Robert LeBlanc: Yes. So for OP V, we were $2 billion, of about $7 billion. And again, we expect to be up to 10% of our various funds going forward. So it will be a much more capital-light model, if you will, from Onex Corporation's perspective and balance sheet perspective. Bart Dziarski: Okay. Great. And the last one for me is, we're hearing lots around the kind of this private credit narrative within alternative asset managers. I would love your thoughts around are you seeing anything in your portfolio? Maybe walk us through how you differentiate in terms of origination to protect the book. Any thoughts there on private credit? Robert LeBlanc: Yes. So private credit has had a couple of big blow-ups over the last couple of months. I'm happy to report that our credit team had no exposure to those blow-ups. I think Ronnie and the team have a "protect the downside" mentality. And when they see problems come up, not in those particular names, because we weren't in those names, but they tend to move very quickly when they see a problem and not wait for the problem to get confirmed. So I don't think it's systematic on what we're seeing. I think there were reasons why those credits went bad from governance, control and other reasons. But from our own portfolio, we haven't been in any of those to date, which I give again the credit team a lot of kudos for. Operator: And our next question comes from the line of Graham Ryding from TD Securities. Graham Ryding: Can you just talk about the strategic shift underway here with this Convex acquisition? So if we look out over the next 1 to 3 years and you are successful in monetizing some of your existing PE co-investments, should we expect a similar strategy going forward where you make some further concentrated investments in sort of majority type positions? And if so, what's the right mix? How many of these would you think would be the right mix to sit within your NAV? Robert LeBlanc: Yes. So again, just to step back a bit, but I'll answer that specific question, there's really 3 things that I'd like our shareholders and fellow owners to focus on in the near term. First is the acquisition of Convex, we'll own 63% of it on the balance sheet. And again, we have controlled that company for 6 years, so the informational advantage that we had going in, in terms of doing 6 years of due diligence, essentially, and the fact that AIG invested more than $2 billion in the Convex at the valuation that we had, makes me feel very good. At least initially, right? That part of our NAV ought to be looked at very differently than our NAV has been looked at going -- historically, sorry. On the asset management side, I think it's nothing but positive to have AIG and incrementally more Convex dollars coming in, I think, is going to help our PE platform, is going to help our subscale credit products that I've been talking about wanting to get the profitability to get outsized FRE growth. And just the endorsement of those organizations on our overall platform, I think, is going to be a net positive for fundraising. But you point out a very important third leg of the strategy, and that's as we become more of an asset-lighter model in terms of Onex Corp.'s balance sheet commitment to our various products, there is an opportunity, and I use the word opportunity, to redeploy, or reorient is a word I like to use, that $5 billion of capital into Convex-like transaction, that will -- my goal would be that would make perfect sense to our fellow owners in terms of where we have a demonstrated right to compete as that capital gets deployed. But think about it in terms of lower to no leverage like a Convex. It could be a junior security, it could be a control position. But we'll have enough influence in whatever we're doing to make sure that we have the ability to explain it well to our shareholders. And importantly, you're going to much, much more transparency around those types of investments. You'll notice what we put up on our website in terms of the transparency around Convex and all the financial metrics that one looks at to evaluate a company like that, you'll see that for anything that we do on the balance sheet, so again, so our fellow owners will know how to value the pieces. But I see it being very concentrated, just so you understand, maybe 1 or 2 other ones. Insurance obviously is a very natural one for you to think about. But there's other things that we really have done remarkably well over the years that we would be open to as well. But it will not be something opportunistic that isn't one of our demonstrated areas to have the right to compete. Graham Ryding: Okay. Great. And you talked about having a 6-year sort of due diligence period here on Convex. Going forward, would it make sense for you to follow a similar pattern here and look closely at your existing portfolio companies as likely candidates for further kind of concentrated investments? Robert LeBlanc: Yes. The one thing that made Convex different, because it was a de novo, it really was never a leveraged buyout, even though it had a PE return for Onex and our LPs. I think it will be very difficult for me to do a traditional PE-type deal with a huge chunk of our capital, i.e., something I need to do 5x leverage or something like that to get the appropriate return. So I see -- I don't see immediate opportunities where the next one would come from that set of opportunities, but I would never close my mind to it because you never know. Graham Ryding: Okay. Understood. On the FRE side, Chris, I just want to make sure I'm understanding the guidance correctly here. You talked about in your presentation last week of a $17 million overall FRE run rate as you exit 2025. Should I be -- or should we be expecting sort of Q4 25 FRE annualized to be $17 million? Or is it more like Q1 2026 annualized? Christopher Govan: Yes. No, not Q4, because it is a run rate calculation so there's always a little bit of a lag effect. Just -- so I would think you'd probably see us grow into that on an annualized basis, probably more in Q2 when the stuff -- the capital we raise between now and the end of the year is kind of fully online and fully fee-paying. Robert LeBlanc: And Chris, just -- sorry, shareholders, just define run rate and what it actually means, so people truly understand it. Christopher Govan: Sure. What -- in a lot of cases, when we raise capital and start earning management fees, there's just a lag associated with when the management fees actually kick in versus when the capital is allocated or invested. So we're simply looking at our fees -- or excuse me, our FG AUM that's sort of in the house and in the ground, and calculating what the management fees are on that capital sort of on a fully deployed basis. And then we also obviously just look at our expense base sort of as where we are at that point in time given what we need to spend to manage the capital that we're calculating the fees on. So it's a bit of a forward-looking calculation as opposed to backwards-looking calculation. Graham Ryding: Okay. And essentially, by Q2 2026 then, not Q4 2025, you're expecting to be delivering kind of a $4 million plus FRE in the quarter? Christopher Govan: That would make sense. But again, the run rate will again have probably grown from annualized $17 million to something much better than that at the end of Q2. But yes, I think in terms of actual reported in the period, that would be a pretty good estimate. Graham Ryding: Okay. Understood. And then my last one, if I could, just fundraising on the credit side. I always find it a little bit confusing when you make reference to sort of extended AUM and new AUM. Can you give us a bit of an update on what's the sort of new AUM fundraising in the quarter and year-to-date on the credit side? Christopher Govan: Sure. Let me just get that data pulled up for you. Robert LeBlanc: While he's looking for that, they're also having really good success on OSCO II, which is our structured credit fund; ONCAP, which is our dynamic credit fund; and again, the high yield and senior credit. The fundraising for credit has been pretty good across the board. But Chris, go ahead if you have those answers. Christopher Govan: Yes. So across credit through the end of Q3, FG AUM -- new FG AUM raised was, call it, just over $5 billion in the year. Operator: Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Bobby Le Blanc for any further remarks. Robert LeBlanc: Thank you for your time today. We are truly excited about the strategic steps we made last week with the acquisition of Convex and the new partnership with AIG. We look forward to having a dialogue with you in the coming months to answer any of your questions and make sure you fully understand exactly how we're thinking about Onex going forward. But we think it's a very exciting time. Have a great weekend, everybody. Thanks. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Welcome to the Avino Silver & Gold Mines Third Quarter 2025 Financial Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Jennifer North, Head of Investor Relations. Please go ahead. Jennifer North: Thank you, operator. Good morning, everyone, and welcome to our Q3 earnings call and webcast. To join this webcast and conference call, there is a link in our news release of yesterday's date, which can be found on our website under News 2025. In addition, a link can be found on the homepage of the Avino website. The full financial statements and MD&A are now available on our website under the Investors tab and then click on Financial Statements. In addition, the full statements are available on Avino's profile on SEDAR+ and on EDGAR. Before we get started, I remind you to view our precautionary language regarding forward-looking statements and the risk factors pertaining to these statements. And note that certain statements made today on this call by the management team may include forward-looking information within the meaning of applicable securities laws. Forward-looking statements are subject to known and unknown risks, uncertainties and other facts that may cause the actual results to be materially different than those expressed by or implied by such forward-looking statements. For additional information, we refer you to the detailed cautionary note in this presentation for this call or on our press release of yesterday's date. On the call today, we have the company's President and CEO, David Wolfin; our Chief Financial Officer, Nathan Harte; and our VP of Technical Services, Peter Latta. I would like to remind everyone that this conference call is being recorded and will be available for replay later today. Replay information and the presentation slides from this conference call and webcast will be available on our website. Also, please note that all figures stated are in U.S. dollars unless otherwise noted. Thank you. I will now hand over the call to Avino's President and CEO, David Wolfin. David? David Wolfin: Thanks, Jen. Good morning, everyone, and welcome to Avino's Third Quarter 2025 Financial Results Conference Call and Webcast. We will cover the highlights of our financial and operating performance, and then we will go over the work that we are currently doing, followed by a Q&A. I will start with a discussion on operations and overall performance and then I will turn it over to Nathan Harte, Avino's CFO, to discuss the financial performance for the period. And then Jennifer North, our Head of Investor Relations, will present an overview of the Q3 CSR/ESG initiatives. Please turn to Slide 5. Our strategic vision for transformational growth remains focused on transitioning from a single production operation to a multi-asset Mexican mid-tier producer. We have had eventful third quarter, and our performance was guided by 5 key drivers: number one, operational excellence; number two, portfolio optimization; number three, a disciplined approach to financial management and capital allocation; number four, strategic exploration and drilling to unlock further resource potential; number five, continued growth and strengthened market recognition. The first driver is operational excellence. Our team at site advanced automation and process upgrades, which has been reflected in our strong mill performance and sustained throughput. In addition, the progress at La Preciosa has been exceptional. Operations management have expanded the workforce with ongoing equipment training to support operational efficiency. Subsequent to the end of the quarter, we had started processing La Preciosa's material through Circuit #1, which is well ahead of expectations. Portfolio optimization, our second key driver, is reflected in the August announcement where we reported the acquisition of the outstanding royalties and contingent payments on La Preciosa. Acquiring these consolidates ownership, improving project economics and enhancing operational flexibility at La Preciosa. By removing third-party obligations, this reduces financial and operational complexity, strengthening Avino's overall asset portfolio. We believe that this enhances shareholder value by optimizing our portfolio and positioning Avino for sustained growth. Our third driver focuses on our disciplined approach to financial management and capital allocation. Avino achieved another quarter of strong financial performance, which is reflective of improved mill availability and consistent operational discipline demonstrated by our team. With record cash of $57 million and working capital of $51 million, our balance sheet continues to build strength. Nathan will provide a detailed overview of the financials later in the call. Fourth, we remain committed to strategic exploration and drilling to unlock additional resource potential. In August, we reported results of 4 drill holes from La Preciosa, which were drilled to twin previous drilling. The assay results from the intercepts of La Gloria and Abundancia were very positive. Highlights include from hole 2503, 1,638 grams of silver and 1.92 grams of gold over 7.9 meters of true width. Included in that is 15,352 grams of silver and 1.55 grams of gold over 0.37 meters of true width. The intercept grades are significantly higher than the average grades outlined in our current resource, highlighting the potential we aim to capture by using underground mining methods. In addition, the larger widths encountered at both La Gloria and Abundancia were a welcome surprise, underscoring that there is still much to learn about the deposit despite the 1,500 drill holes and substantial exploration investment performed by previous operators. We just released a further 4 holes on October 27, which have also returned excellent grades. The full results for both news releases are on our website under the News Release tab. Our final driver for the quarter reflects continued growth and strengthened market recognition. Avino was proud to be included in the Toronto Stock Exchange 2025 TSX30, distinguishing itself by ranking fifth among top-performing companies. For the 3 years ended June 30, 2025, Avino's share price performance increased 610% and market capitalization increased 778%. In addition to this, Avino was added to the Market Vectors Junior Gold Miners Index and VanEck Junior Gold Miners ETF, GDXJ, effective market close on September 19, 2025. These achievements underscore the decisive steps we've taken to advance Avino's transformational growth strategy and reinforce the investment case for Avino. Moving to Slide 6. We turn to Avino's Q2 2025 production results, which were released in mid-October, reflecting steady operational performance. Overall results continue to support the company's original production estimate of 2.5 million to 2.8 million silver equivalent ounces. On Slide 7, we put together various photos of recent development activity at La Preciosa. We are very pleased with the progress we are making. At this time, I will now hand it over to Nathan Harte, Avino's CFO, to present our record financial performance for Q3 2025. Nathan? Nathan Harte: Thank you, David. It is my pleasure to be presenting another quarter of strong financial and operating results to everyone who has joined us and is viewing our presentation today. Here on Slide 8, we have an overview of our financial and operating highlights and improved balance sheet with the full table on the next slide. Our third quarter results demonstrated -- continue to demonstrate profitability and the ability to grow. We generated $21 million in revenues, up 44% from Q3 of last year and consistent with the last quarter, despite lower sliver equivalent ounces sold. Gross profit was just shy of $10 million and on a cash basis was $11.1 million after removing noncash expenses. Gross profit margin was 47%, inclusive of the noncash items. This was significantly improved from the 39% we saw in Q3 of last year; and on a cash basis, this margin was 53% compared to 45% in Q3 of last year. Avino earned its highest ever quarterly profit with $7.7 million in net income after taxes or $0.05 per share in the third quarter. This was up significantly compared to Q3 of last year, where we earned $1.2 million or $0.01 per share. Adjusted earnings were $11.6 million or $0.07 per share compared to $5 million or $0.04 per share in Q3 of last year, representing a significant improvement. Cash flow from operating activities and free cash flow both improved from Q3 of last year as well. We generated $8.3 million from operating activities or $0.05 per share, and free cash flow after all capital expenditures came in at $4.5 million. Included in these capital expenditures were some development costs at La Preciosa for the third quarter. And on a stand-alone basis, free cash flow from Avino was $5.4 million. Our cash cost per silver equivalent ounce was $17.06, up 14% from Q3 last year. On an all-in basis, we came in at $24 per silver equivalent ounce sold, 9% higher than the third quarter of last year. I will discuss the increase in per ounce cost in an upcoming slide and explain how the movement in silver price in relation to gold and copper prices during the third quarter did impact our silver equivalent ounces sold calculations and added to our cost per ounce figures. Now on to the balance sheet. Our cash position was a record $57.3 million at the end of the quarter, it was up $20 million from last quarter and $30 million from the end of the year. Working capital increased by over $10 million in the quarter as a result of the increased cash offset by the deferred consideration on the royalty retirement transaction. Subsequent to the quarter end and as of today, our cash position is approximately $65 million. With our improved balance sheet and La Preciosa moving forward, Avino is in its most stable financial position in its 57-year history. With no debt, excluding operating equipment and the deferred consideration payable, we continue to be well positioned to execute on our 5-year organic growth plan and are continuing with the reviews for accelerating the time line of these plans. With La Preciosa now processing in our Mill Circuit 1 at between 200 tonnes and 250 tonnes per day, we're excited for 2026, as we embark on the transition to being a multi-asset producer with the synergies of one centralized milling location. Turning over to Slide 9, we see some other financial metrics and the significant increases compared to Q3 and year-to-date amounts in 2024. Just wanted to highlight again the per share metrics where we see $0.05 earned on a cash flow basis, $0.07 earned on an adjusted earnings basis and free cash flow generated again was $5.4 million, excluding just under $1 million spent on La Preciosa. Here on Slide 10, you can see our cost per ounce figures did increase when compared to Q3 of last year as well as last quarter, coming in again at $17.09 per silver equivalent payable ounce. For the year-to-date cash costs were $14.95, 3% lower than the first 9 months of last year. As I mentioned before, I do want to highlight that the movement in silver price did have an impact on our silver equivalent payable ounces calculation and that did also impact our cost per ounce figures. Using the prices from our forecast at the beginning of 2025 of $30 per ounce silver, $2,700 per ounce gold and $9,200 per ounce -- per tonne copper, our cash cost per ounce for the third quarter and year-to-date would have been $15.88 and $14.56, respectively, which is in line with our expectations that we set out at the beginning of the year. On an all-in sustaining cost basis, our third quarter costs were $24.06 per silver equivalent ounce, up 9% from Q3 of last year. Year-to-date, the costs were $21.64 per ounce, which were very similar to the first 9 months of 2024. Again, highlighting the silver price impact on these figures. Using the same method, our all-in sustaining cost per silver equivalent payable ounce was $22.36 for the third quarter and is fairly consistent with Q3 of last year. The year-to-date figure would be $21.08, which would have been 2% lower than last year. As we manage the first stage of growth, we are pleased that our cost structure continues to remain intact even with the increased activity arising from bringing a second mine online. We look forward to further economies of scale, as La Preciosa is now in production and it continues to contribute to our overall production profile. Coming to Slide 11, you can see our cost per tonne processed for the quarter and year-to-date continue to remain consistent, further reinforcing the points made on the last slide. Cost per tonne processed on a cash basis was $53.18, down 2% compared to Q3 of last year. On the year-to-date figures, we came in 8% lower than the comparable period as a result of better mill availability and solid mining rates. On the all-in side for the quarter, a very similar story with a 3% reduction per tonne processed for the quarter and 7% reduction overall on the year-to-date figure. Our cost per tonne remains extremely competitive for an underground operation. As shown by our profit margins, our cost structure continues to remain intact. We are poised to take advantage of the increased metal price environment, as we make the transition to being a multi-asset producer. As we touched on last quarter, tariff discussions continue to put uncertainty in the currencies in which we operate in and reducing our risk associated with costs has been top of mind over the year. There are no direct significant impacts to our operations from these tariffs. However, we are subject to movements between the U.S. dollar and the Mexican peso. Our hedging program for the Mexican peso impacted the bottom line positively by about $1 million, as we had made USD to Mexican peso hedges earlier in the year and at the end of 2024 to protect our budget. We also currently have a $1 million, $1.5 million derivative asset on our balance sheet, which represents the mark-to-market balance at the end of the quarter, as most of our hedges are still well in the money even after realizing $1 million in foreign exchange gain in the quarter. And with that, I'll turn it over to Jennifer North, Head of Investor Relations, for an overview of our recent ESG and CSR initiatives. Jennifer North: Thank you, Nathan. Please follow along to Slide 12 for an update of our ESG/CSR initiatives. Avino follows the ESG standards and aligns with the United Nations sustainable development goals, or the SDGs. Avino's efforts throughout the quarter contributed to progress on multiple SDGs, reflecting our ongoing commitment to responsible and sustainable development. During the third quarter, the CSR teams led the following strategic projects in the communities: Several school graduation sponsorships, donations of scrap material for further use in the communities, road maintenance and rehabilitation, delivery of low-cost water tanks and cisterns, organized and sponsored a second health fair that was held in the communities offering free access to specialized medical services and preventative care. This event was coordinated with the state government, civil associations, medical units and volunteers providing much needed care and services. This initiative reaffirms Avino's commitment to health equity as a fundamental right, particularly in rural areas where access to medical services is limited. Mining and historic -- sorry, mining and history museum project in Durango, a promotional video was produced and historical photographs were selected to be exhibited as part of Avino's display in the museum. This project is approaching the final delivery stage of materials for the exhibition. A new subsidized access program for construction materials, cement, mortar, roofing sheets and school footwear was introduced, facilitating access for interested families. Avino participated in an employment fair, providing 50 individual consultations to share information about the company and receive job applications from interested people. Avino continued developing activities focused on strengthening community ties, improving basic infrastructure, facilitating access to social support programs and supporting long-term institutional and strategic projects. Our CSR teams continue to do phenomenal work, and we're excited to share these initiatives with our shareholders as a reflection of how we're creating meaningful impact beyond our operations. I will now turn it back over to David to continue with the presentation providing our activities for the coming quarter. David? David Wolfin: Thanks, Jen. Moving to Slide 13. Summarizing our current and upcoming activities, I mentioned earlier, our focus on strategic exploration and drilling to realize the full potential of our resource base. This includes our recent commitment to AI integration, which is designed to improve data analysis, target generation and overall exploration efficiency. With the support of VRIFY's AI software, almost 6 gigabytes of data was compiled for analysis. Using the data, VRIFY generated 211 additional feature engineered data layers, including rock and soil geochemistry maps, vein and fault distant grids, strike field maps, lineaments, density and complexity maps. This is exciting technology, and we are looking forward to the implementation of future drill programs at Avino and La Preciosa. Over to Slide 14. At Avino, the 2025 drilling commenced in April with the program consisting of 9 planned holes from surface with 6 now completed. The objective of the ET area drill program is twofold: one, to test the down dip extension of the system below the current lowest mining level and as well as to test the extension of the system along strike to the west. The Avino vein remains open at depth and along strike and earlier results have shown comparable grades and widths to those currently being mined. Drilling continues with over 3,500 meters drilled to date. The latest results will be publicized when the assays have been received and all data has been verified. At Avino, we are currently mining and hauling from level 12.5 at Elena Tolosa; and as just mentioned, exploration drilling is ongoing on the Avino vein below the ET mine. Over at La Preciosa, a second surface drill was deployed at La Preciosa to confirm prior drill results from previous operators to improve the understanding of grade zonation close to the scheduled mining areas near the ramp. Earlier drill core from previous operators were extensively utilized to provide sample data for earlier technical reports, so remaining samples were limited. Drilling information will be utilized in underground mine planning, 3D modeling as well as an update to the resource estimate that is due Q1 2026. In addition, Avino is planning on releasing its first mineral reserve estimate at the same time. As outlined on Slide 15, I'd like to highlight the company's growth strategy. Within a 20-kilometer footprint, we have 3 key assets, including our operating mill complex, which currently processes material from Avino mine. We also have access to water, power and tailing storage, critical infrastructure that supports our ability to expand production efficiently. Collectively, our assets host 277 million silver equivalent ounces in measured and indicated mineral resources and an additional 94 million silver equivalent ounces in inferred mineral resources, providing a strong foundation for future production growth. As you can see on this slide, our goal is to scale up by 2029 through production from these 3 assets. Leveraging our existing assets and resources, we are well positioned to execute our growth plans efficiently and effectively. We concluded the quarter with more record-breaking financial metrics, which reflect the strength of our strategy and dedication of our team, both which drive our success as we pursue the next phase of growth. On behalf of leadership, thank you to our entire team for your efforts and contributions. We appreciate the continued confidence of our shareholders. With a clear vision and disciplined approach, we are confident that long-term shareholders will be well positioned to share in the success we are working hard to achieve. We'd now like to move the call to the question-and-answer portion. Operator? Operator: [Operator Instructions] Your first question for today is from Jake Sekelsky with Alliance Global Partners. Jacob Sekelsky: So just at La Preciosa, you mentioned that fresh ore is now being processed at Circuit 1. Can you just remind us what the targeted throughput rate is there from La Preciosa over the next few quarters and what that ramp looks like? Peter Latta: Yes, Jake, this is Peter here. So we're starting at 1 circuit, Circuit 1. If you recall, we have 4 independent circuits there at site and we are just filling 1 circuit and we'll be ramping up to filling 2 circuits, the 2 smaller circuits next year. Jacob Sekelsky: Got it. Okay. And I guess, are there any specific levers you think you might be able to pull here over the next quarter or 2 that might accelerate those plans? Nathan Harte: Yes, Jake, Nathan here. I think we've been messaging to the market kind of all year and before is that we want to start with Circuit 1, make sure we've got enough tonnage to get ahead of the mill for a little while to make sure we don't have to do any start and stopping and then try and run -- with the goal of running Circuit 1 and Circuit 2 for pretty much the entirety of 2026. So for now, we're just going to start with Circuit 1, and then we're continuing a lot of development, which I think we've alluded to a few times, we're developing in 4 different areas right now. So yes, the goal is really just 1 circuit for the rest of the quarter and then into 2026 will be 2 circuits. Operator: Your next question is from Heiko Ihle with H.C. Wainwright. Heiko Ihle: Excited to hear at La Preciosa ore getting processed. And obviously, I was at the site last week, it was really nice to be there. But given the strong potential of La Preciosa, can you give a bit of color on what you're seeing with the drilling there versus your prior expectations? I think it'd be helpful to just see like not just as it pertains to grades, but also how you're advancing versus your expectations, rock stability, all that kind of stuff? Peter Latta: Yes. Sure, Heiko. Obviously, we put out those drill results, those 8 holes and some of those are very significant and high grade. So what we're seeing is kind of that -- and there's a great slide in it, but we really see some hotspots in the deposit. And that's kind of what we knew or kind of what we expected, and that's exactly what we're seeing. Also, when it comes to the width, this deposit does pinch and swell. So we're seeing some significant improvements in width in some areas, but that is going to be quite variable. So intervals of beyond 5 meters, which are a typical mining width is what we've seen in some of those drill holes. So that's really positive news. With regards to ground support. This is -- we're still pretty high up in the system. So there is some oxidation, which does require a little bit more ground support, but that's something, once again, that we kind of expected, and we do expect that to decrease as we go further and deeper into the mine. Heiko Ihle: Cool. Nate, hey, earlier on this call, you mentioned accelerating some longer-term plans. I mean this got me a bit curious, what exactly could be accelerated? You have obviously the balance sheet to do it right now, but how much would it all cost? Nathan Harte: Yes. I mean hard to put a number on it right now because the plan -- there's no final plans or anything. Obviously, judging by our balance sheet, you can tell that we have a lot of flexibility moving forward. So we're just undertaking some internal studies that if we get into a position where they get a little more further down the path, we will go public with. But for now, it's -- we're just entertaining on a number of expansion opportunities either at the Avino Mill or potentially some other opportunities on both sides. That's essentially it for now. I can't really put a number on it. Heiko Ihle: I'll phrase the question differently then. What kind of number would you be willing to spend given your current balance sheet? Nathan Harte: We've been pretty disciplined, and it's nice to be in the position we're in. And we do expect to continue to generate pretty solid cash flow quarter-over-quarter, especially as La Preciosa ramps up. So I think we're going to continue to be disciplined in that approach. But if the right expansion opportunity is there and the IRR is there, then we will definitely go forward with it. Again, I don't want to put a number, again, on the call, but we can chat about it later, if you want, Heiko. Peter Latta: Heiko, just to reiterate, we've been laser-focused on developing La Preciosa and bringing it into production. So that's where we're focusing the majority of our energies as far as execution is concerned. And as Nathan mentioned, there is in the background doing some additional optimization studies. Heiko Ihle: Fair enough. Cool. And then one really quick one for Nate. You had a nice FX gain in the past quarter. What are you seeing in Q4 so far that given in a week we'll be halfway through the Q4? Nathan Harte: Sorry, can you repeat the first part, Heiko, I think I just missed that. Heiko Ihle: Yes, no worries. Yes, you had a really good FX gain in Q3, what were you seeing in Q4 so far? Nathan Harte: Sorry, again, I'm not quite sure I understand X, I can't hear it maybe. Heiko Ihle: Foreign exchange, foreign exchange, you made like $1 million... Nathan Harte: Yes. So that's -- thanks for highlighting that. And we did try and highlight that a little bit on the call. But we did -- when we put together a 2025 budget, we did some hedging on a portion between the peso and USD just to protect our cost structure. But yes, we got about $1 million in income from that. And as well, we still have a fairly sizable derivative asset on the balance sheet that will start getting realized in the fourth quarter and into Q1 of next year as well. But we've got a lot of hedges that are in the money that now we started to top up, and we're getting closer to where spot is over the last few months. But yes, moving forward, we should continue to see some more benefits from those over the next 6 months. Operator: Your next question for today is from Joseph Reagor with ROTH Capital Partners. Joseph Reagor: I guess on La Preciosa, 2 questions there. One, Nate, this is probably one for you. From an accounting standpoint, at what point or what factors will make you reach this point where you'll begin to report it as commercial production as opposed to like a CapEx offset? Nathan Harte: Yes. So that's a pretty good question. So that -- the standard of that's kind of changed, like you will -- under IFRS, so which we report on based on the Canadian standards, international standards, I guess. So we will be reporting revenue offset with costs of sales as soon as we start selling, so you don't really -- not like previously, I know with the Avino Mine, probably about 8 or 9 years back. So no, that will be -- we'll be presenting that separately in the MD&A as well to -- as soon as we can and then everything will be attributable to cost of sales. Joseph Reagor: Okay. So immediately. And then on the actual mine plan there, when will we get kind of an official either financial study or guidance or both from you guys as far as tonnes, grade, recovery rate expectations, et cetera? Nathan Harte: So I'll let Peter probably handle the study part of that. But yes, we are moving forward with that. And on the financial side, we will be putting out guidance for 2026 that includes both. And then on public studies, I'll pass it over to Peter. Peter Latta: Yes. No, we'll be looking at putting out reserves next year, I think David mentioned that in the call. That's something we're focused on, so we will have an idea of grades and recoveries and that sort of thing in that study. We won't require, just being a producing issuer, to issue any sort of financial results. That's one of the requirements from Section 22 of the technical report that's not required to issue, but we will have everything else in that report. Operator: Your next question is from Chen Lin with Lin Asset Management. Chen Lin: A great year, guys, congratulations for this; job well done. David Wolfin: Thank you. Chen Lin: Yes. Many of my questions has been answered. I just want to just drill down on La Preciosa. What is the limiting factor, the development or the mill or to limit -- and what do you see the maximum tonnage per day, you can go through process -- mine and process from La Preciosa for the next [indiscernible]? Peter Latta: Yes. Thanks, Chen. Thanks for your question. This is Peter here. So the mill is limited to 2,500 tonnes per day within those 4 circuits, those 2 smaller circuits of 250 tonnes each and then 2 larger circuits of 1,000 tonnes each. And so we are contemplating an expansion of the mill as well. But we're trying to match, obviously, the mining rate and the milling rate. And as we've just gotten into La Preciosa in the last couple of months here, this is -- we've done -- we're ahead of schedule as far as development is concerned. But it's understanding how the rock behaves and the mining rate that we can achieve on a consistent basis before we ramp that up. So that's really what we're doing and keeping in mind that we want to match that mining throughput and mill throughput. Chen Lin: Right. Do you have any -- well, what's the mining limit? Do you have some idea now with 2 circuits supposedly? Peter Latta: Yes. I mean the goal is to ramp to the -- using the 2 small circuits as of next year, as I think Nathan mentioned earlier with the question. And then there are plans that we could potentially fill the entire circuit with La Preciosa. David Wolfin: It's in our long-term mine plan, but we're going to look to shrink that. Chen Lin: Okay. Entire circuit, so I mean entire 1,000 tonnes per day, you are talking about. Nathan Harte: No, 2,500 tonnes. So we're looking -- yes, long term, there is the ability to get up to 2,500 tonnes just at La Preciosa, but as we've all kind of been alluding to, we're looking at expansion plans where we can produce from both assets at a higher rate. Chen Lin: Right. And it seems to be La Preciosa the grade is, it seems to be much higher... David Wolfin: Yes, I can speak to that. So the previous operators drilled approximately 0.5 million meters, 1,500 drill holes, but most of that was on Martha. So there's a lot of potential infill drilling and expansion drilling on La Gloria and Abundancia and some other near surface veins that we're going to go after next year. Chen Lin: Okay. Great. Finally, what's like the permit you have on La Preciosa? What's the maximum you can pull the ore out of La Preciosa from... Peter Latta: The permit isn't restricted by the throughput to pull out of the mine. David Wolfin: And we've tasked our engineers to look at further expansion, underground development for next year. So we're heading to site in a few weeks for budgeting season. I'm sure we're going to be dealing with that. And so we'll make that public once we have it. Chen Lin: Congratulations, again. David Wolfin: Thank you. Peter Latta: Thanks, Chen. Operator: [Operator Instructions] We have reached the end of the question-and-answer session, and I will now turn the call over to David Wolfin for closing remarks. David Wolfin: Thank you. With another strong quarter behind us, which included excellent operational performance, a very healthy cash position, an additional quarter of cash of over $57 million and working capital of $51 million, Avino is well positioned to capitalize on the positive market trends in the precious metals sector. We are focused and on track to deliver sustainable growth and long-term value for all stakeholders and shareholders. Thank you for joining the Avino Q3 call today. Have a nice day. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, everyone, and thanks for waiting. Welcome to the conference for the disclosure of results of the third quarter '25 of Cogna Educação. [Operator Instructions] We inform you that this conference is being recorded and will be available in the RI site of the company, www.cogna.com.br, where you can find the whole material for this result disclosure. You can also download the presentation in the chat icon even in English. [Operator Instructions] Before going on, we would like to clear that eventual declarations being made in this conference regarding the business perspectives of Cogna, projections, operational and financial targets are the beliefs and premises of the company and the management as well as the information available for Cogna. Future information are not guarantee performance, and they depend on circumstances that may happen or not. So you have to understand that the general conditions, the sector conditions and other operational factors may affect the future results of Cogna and may lead to results that will be materially different from those expressed in future conditions. I'd like now to pass on the floor to Roberto Valério, CEO of Cogna to start his presentation. Mr. Roberto, please, the floor is yours. Roberto Valério: Good morning, everyone. Thank you for participating on the conference to discuss the results of the third quarter of '25. As we always do, we have Frederico Villa, our CFO here; Guilherme Melega, the Head of Vasta. This call will last 1 hour in which we'll have a 40-minute presentation and 20 minutes for the Q&A. So I'd like to start this meeting by saying once again that we understand this is one more quarter with great results in our understanding. We keep growing with the ability of operational delivery in a quite good way. It grows in a fast pace in double digits in the quarter and in the 9 months. So we are growing almost 19% of revenue in the third quarter and 13% in the 9 months. And I'd like to say that both the core business, therefore, higher education and basic education are growing double digits, and we keep investing in new fronts and future opportunities as it is the case of our business line for governmental sales as another example with our franchise starting. So from the point of view of growth, we understand that the core has a lot of capacity to deliver results. We are growing double digits with the same assets. Since the beginning of the structure in 2021, we understand that the core business still have a lot of opportunity to grow, basically refining and improving processes and the client experience. But we keep here planting and seeding new business to grow the company. The same way, the operational results keeps growing in double digits, basically 10% in the quarter and 12.4% in the year in the accumulated of the year. So this is the 18th consecutive quarter with the EBITDA growing. I'd like to reinforce our concern with consistency and it's a structural growth. So it's been 4.5 years that we are consecutively growing operational results. From the point of view of EBITDA margin, this quarter is pressured by an increase in the PCLD regarding Pague Fácil that was something that we did in Kroton in the commercial cycle. We will explore in the next slides as well as lower margin in Saber due to seasonality. And as you know, Saber, as Somos has the fourth quarter and the first quarter as strong quarters from the point of view of results and the third quarter is a smaller one. But in this case here of Saber, it pressured a little, but we'll talk specifically about PCLD later on. Now talking about the net revenue, we had BRL 405 million in the 9 months accumulated. So in spite the delta growth in the quarter to the net income was BRL 220 million because we had losses in the third quarter of '24. And when we analyze the 9 months, the delta of the net income is BRL 450 million. Obviously, it's being fostered by the improvement in operational results that we emphasize in the quarters we are talking about, but not especially, but also due to the reduction in the financial expenses to reduce the debt and our liability management strategies that allow the cost of debt to be lower. Therefore, the operational results with the lower expenses is happening in the net income. In terms of cash generation, we reached BRL 392 million with BRL 1.9 million less compared to last year. And as we always do, we let you judge if these points are one-offs or not. But in the third quarter of '24, we recovered taxes in cash of more than BRL 115 million. Obviously, if we compare operational to operational in the recover of taxes, our growth in the GCO would be 38%, therefore, quite a strong one. In the accumulated 33% of growth, almost BRL 940 million in post OGC. So the highlight of the quarter and the 9 months is the free cash flow. We reached BRL 300 million in this quarter, BRL 583 million in the 9 months accumulated. Just to emphasize, there's almost BRL 584 million in 9 months. This is 50% more than all the free cash flow generation in the whole year of '24. So in 9 months, as we generated more cash, 50% more of free cash flow than the whole year of '24. Now going to the debt, we reduced the net debt in BRL 474 million in the 12 months. I emphasize that only in the second quarter here, our reduction was more than BRL 220 million. So the cash generation is, in fact, being used to reduce debt. And then Fred will explain that aside from the reduction, we can also have important reductions in the average cost of the debt. Regarding leverage, we reached 1.1x the EBITDA, the lowest one in the last 7 years. The last time we had this level of leverage was in 2018. Therefore, we are quite satisfied with the results and prospectively thinking for the fourth quarter into '26, we keep having the same -- we keep optimistic and trusting that we have everything to have consistent results. Now going to Slide 5, we will talk about the operational performance of Kroton. And I think I can start by emphasizing the growth in intake more than 7% in the period. I would like to emphasize specifically the growth of the presential one. That is not the first cycle of intake. It's the third cycle that we have growth in the presential. And with the growth, I'll talk later, but with the growth specifically in the high LBV, I mean the most expensive courses, which help us in the ticket. And I relate this growth and the presential to our commercial model that is fine-tuned in the campy and is allowing this growth. And in distance education with a growth of 6.4% that is specifically to the change in the regulation for GL that fostered the course, mainly the health care courses that bring not only the benefits of growth, but also the improvement of the average ticket. So in the mix, it helps a lot. Obviously, we have a lot of evolution in the team, improvement of processes, systems and commercial strategies, but I reinforce that in the presential, this fine-tuned model in the campus helped a lot and the change in the regulation of DL fostered the enrollment, mainly in the health care courses that are the most impacted by the new regulations. The student base grew 2.7% in total. But if we consider only ProUni and ex ProUni, the ones that, in fact, pay and generate cash to us, the student base grew 4%, quite important and consistent as it's been over the last years. From the point of view of average ticket I also have emphasis here in this quarter because the Kroton as a whole is growing 11.7% in 3 segments: presential, DL and on-site -- I'm sorry, KrotonMed, and we have 2 points helping the average ticket. Newcomers, as I mentioned, in on-site, we have more enrollment in the most expensive tickets and in DL, also more newcomers in the health care courses on average with a greater ticket. But I also have to mention that we can repass the inflation to the old students in KrotonMed on-site and DL. So we have both old and new students with an increase in the average ticket, which pushed this growth to almost 12 points. Now in Slide 6, talking about the net revenue. Obviously, if we have more enrollment. And I forgot to say something important here about intake reinforcing that, obviously, the volume of intake is important to us, but the balance between volume and ticket is very relevant. We are always analyzing take analyzing the revenue in the period and the revenue grew 41% in this period. When you have a new period growing the revenue, and we know that the students will be with us for many semesters. In perspective, we have quite a positive result regarding the revenue for the next months and quarters. Now talking about revenue specifically. So we grew almost 21%, growing a lot on-site and online education. So we grew a lot in both front. So to be completely transparent, even if we reclassify the discounts that, as you know, we have a complete disclosure with all the items we are using since we reclassified the discount with inactive students for IDD with a neutral impact in the EBITDA, but adjusting the revenue, this growth instead of 20.9% would be 15.9%, but even though quite a strong double-digit growth. I'm talking about the accumulated, it's the same, 17% in on-site and DL. And here, we see the effect of Pague Fácil that we'll talk later is more diluted. Therefore, the delta between the growth we see of 17.4% and the growth ex Pague Fácil is smoother. Now in Slide 7 and talking about the gross profit as a whole, it grew 21.5% with a small increase in the gross margin from 79.4% to 79.9%. And in the same way in the accumulated in the year, we had an important growth in gross profit and a slight growth in the gross margin, which shows that the growth in operation in its core that is revenue minus cost is quite positive, and we are gaining on efficiency when we analyze the 9 months. The gross margin improved 0.7% with a small reduction in the margin of KrotonMed, and it's important to emphasize that in the 18 courses that we have, the medicine courses that we have, 3 are new. And as they mature, they increase the base of cost as we hire more professors. So the amount of hours increased, the general cost increase. So it pressures a little the margin, but according to expected and completely in line with our plans. So in Slide 8, costs and expenses. As you can see when we analyze cost and expenses with the percentage of net revenue, we have a gain in performance in all lines. So corporate expenses with a small gain in performance, the operational ones gaining more than 3 point percent of market and sales with diluting 1 point percent as the cost, as I mentioned in the previous slide. So the company grows and grows keeping the costs controlled and specifically the expenses controlled, which makes us gain efficiency and diluted with the percentage of net revenue. The only difference is PCLD that I'll explore in 2 slides because in the third quarter of '24, it was 6.2% growing 7.6% going to 13.8% due to 2 factors, both the reclassification of the discounts for inactive students as well as the greater penetration of Pague Fácil, but I will talk about it in other slides. When we look at the accumulated, you see that we keep growing in efficiency with no operational expenses and marketing and cost and I'm in Slide 9. So we have more -- 2 points more of dilution and marketing, 1.4%. So gaining efficiency, we see that the operation is quite adjusted. Now in Slide 10, so that we take more time here explaining those differences in the PCLD, we made this diagram to be easier to understand. So I am on the left and considering the third quarter of '24 with the first information, you can see the net revenue, BRL 939 million, which was published in the third quarter '24. The PCLD was BRL 58 million. Therefore, the percentage would be 6.2%. With the reclassification of the discounts that is so that we didn't have a reduction in the revenue every time we renegotiated with an inactive student, we would start classifying the discounts in the PDA. So in the pro forma of the third quarter of '24, the PDA would be BRL 98 million and not BRL 58 million, but the revenue would increase from BRL 939 million to BRL 980 million. So in the pro forma comparing it, the third quarter of '24 to '25, the PDA divided by the NOR would be 13.4% and 13.8%. Therefore, an increase of 3.7% in the PDA. So I explained the first delta of the 6.2% that adjusted by the reclassification of discount would be 10.1%. And if we consider delta for Pague Fácil, that is the offer that we implemented in this quarter, the PDA would be stable. And why would it be stable? Because our inadequacy is not increasing. It's kept the same. The fact is that when we offer more offers in Pague Fácil, that is the facility to pay the first installments. We don't have the history of credit of the students. So we provision more than students that we already have their history so that you have a reference. The level of provisioning is close to 10% to the student with the history. And in this case here of the students coming with this offer of Pague Fácil, we provision 47%, therefore, a greater provision. So that's the explanation, so why the PDA is growing. So it increases in this quarter because this is when we give the offer to the student. And in the fourth quarter, we don't have the offer anymore because we don't have newcomers anymore. So you see a convergence of the PDA to the closer number of pro forma. So explaining the movements, I would like to take some minutes here for you to understand the offer itself. So with the change of the regulatory framework, many players among us started communicating that they should take the period before the regulatory framework change to enrolling courses that won't be available anymore. But during the intake process, we realized that many players were offering discounts in the monthly payment. So in practice, it reduces the LTV of the student because all the payments that we come along the life of the student will be with a lower ticket. So we decided another offer. So to keep the average ticket, but offering to pay the second -- first and second payments in July and August in our case, installment. So the student enrolls because they are making the enrollment in middle of August when classes started. So they didn't pay July and they didn't pay August. They are starting to pay from August on. So these 2 parcels were not a bonus. So we divided them installments during the period of the student course. So in this case, the students in 4 years would be divided into 46 months. So as we don't know the credit profile of the students, they are new. So we provision more with these 2 payments that we booked and we are receiving month by month. So for you to understand clearly the offer, that's it. And it makes sense because we don't give up on the average ticket. We don't reduce the LTV of the student. We simply consider installments for the payment of 1 or 2 monthly payments along their course of time. So if you have more doubts regarding that, we can discuss in the Q&A. And we have a second table that is the deadline for receiving, which shows that the default is still positive. That's why we are decreasing the average deadline from 47 to 34 days. So this is the clear proof that is the P&L because we see that the student is, in fact, generating cash. Now going to Slide 11. The consequence of all that is the EBITDA result. Therefore, the EBITDA in the quarter grew 10% in the year accumulated 15.8%. So you can see a drop in the margin between the third quarter of '24 and '25 going from 37% to 36%. So the reclassification of discounts and the additional provision of Pague Fácil is pressuring the margin because it is increasing the PDA, but all the other costs like marketing, operations, corporate is all -- they are all diluted and gaining on efficiency, and we see that clearly in the results and in the cash generation. With that, I finish the explanation of Kroton, and I'd like to pass on the floor to Guilherme Melega for the comments on Vasta. Guilherme Melega: Thank you, Roberto. I'll go on with Slide 13 on the net revenue. I'll concentrate on the graph on the right with the commercial cycle because the third quarter is the one finishing what we call the commercial cycle of Somos Educação that goes from October to September. So here, we have the total idea of how the classroom behaved and everything that happened and will -- that happened in '25. So we reached BRL 1.737 billion, which is 13.6% considering the cycle of '24. The highlight is the subscription products with the teaching and complementary solutions that grew 14.3%, reaching BRL 1.32 billion. And now the non-subscription had an increase of 17%, reaching BRL 118.6 million result of the growth of our 2 flagships all in Anglo, one in São José do Rio Preto and the Pasteur Institute also with a growth in the pre-SAT courses in the year. So we acknowledge the growth in the 2 main business lines of the company. I also emphasize the B2G, bringing a natural volatility, but we could with new contracts keep the balance in this line of revenue, also keeping a similar level to '24, reaching BRL 76.2 million, BRL 66.8 million, I'm sorry. In Slide 14, I'll show our subscription sector. So we start on the right, where we have the breakdown of the core segments that are the learning and teaching segment. The complementares, the social emotional bilingual, makers and other complementary activities to the basic subjects, our growth was quite robust, reaching 14.3% in total. But the core segments grew 12.5% and the complementary segments, 25% as we can see a faster growth in the complementary over the years. And I'd also like to emphasize something that Roberto commented that is quite important to us. That is our consistency over the years, delivering that. So on the left, we see the first ACV of Vasta that is in 2020 when we acknowledge BRL 692 million compared to BRL 1.552 billion that we are delivering by the end of this semester. It represents 2.3x more, so a figure of 17.5%. So we are quite satisfied with the performance we can reach with the gain in market share and the penetration that our products are having on the private market. Now going to Slide 15, talking about the EBITDA, we grew 10.6% in our EBITDA, focusing here also in the cycle. We reached BRL 480.9 million EBITDA, the greatest one of Vasta in the commercial cycle, representing a margin of about 28%, in line with the previous year. And here, we will decompose a little our expenses going to Slide 16. I'll talk briefly because the third quarter to Vasta is not so significant, but it is important to note when we look at the table, our recurring gain in lower provisioning of PCLD. So we had a provisioning here, a lower one as we observed in other quarters. And we have more investments in marketing and sales because we are in the peak of the campaign for '26. But when we analyze the next slide, 17, we have an idea on how our expenses behaved in a complete cycle. So here, we have our total expenses when we analyze the table with the percentage of revenue, keeping in 71% with emphasis to the gains in productivity that we have in corporate expenses, operational expenses and PDA, as I mentioned in the previous slides. We have small investments in marketing and sales that should keep the double digit of the revenue. And in costs, I call your attention to the impact of 2.1% result of a mix that comprises more and more complementary products that we pay royalties for. So they have a higher cost like bilingual and social emotional as well as the Mackenzie system that grows in a fast pace. So these products have royalty, they increment a little our costs. On the other hand, we do not deliver capital to develop the product. So when you look at the benefit that we have in the cash, it's much greater than the small points of margin that we observed in the total costs. And lastly, I would like to emphasize that we are in the peak of the commercial campaign for the cycle of '26. We are quite optimistic with this period to keep the growth and keep the history of ACV as we saw before, we will have probably quite a good '26. I emphasize that we reached more than 50 contracts and we are operating 6 units this year. Next year will be 8 as franchising with a total of 14 units and the B2G is a big path of growth that we have with a lot of prospection at this moment, and we hope to have quite a hot fourth quarter to supply the cycle of '26. Now I pass on the floor to Fred to go on the presentation. Frederico da Cunha Villa: Thank you, Guilherme. Good morning, everyone. I'll start the presentation of Saber. And remember that Saber has some businesses, the national program of didactic books, languages, other services encompassing governmental solutions and so on. So note the graph on the left that in the quarter, we grew the revenue from -- of 9.4%. So this growth was fostered by the hitting of 2 business. First of all, 17% in languages; and secondly, the growth of Acerta Brasil that is governmental solutions with a growth of about 38%. It's important to remember that in '25, this is the year of purchase for high school and repurchase for elementary school. In high school, we had a gain of 8% in market share, which shows the growth that we have in our products with the program of didactic books. However, we see that there is no representativity in the quarter. We had a displacement from the third to the fourth quarter. Now going to the graph on the right, in the accumulated, I had a reduction of 9% in 9 months comparing '24 to '25. So this reduction, as I mentioned before, is only a reflect of the displacement and the reduction of the PDA, but it's according to the fourth quarter, and we had businesses with a positive impact of about BRL 32 million in 9 months in '24. And in the year, in the 9 months, the big effect here was in the first quarter that we've had a revenue that walked back in about BRL 60 million, but our expectations, as I mentioned before, is that we will have a stronger fourth quarter with the displacement of the didactic books program. So going to Slide 20, talking about the recurring EBITDA and margin EBITDA. As we said before, this is a year to grow the margin, but with the EBITDA growing and it shouldn't mainly due to the effects of investments that we will have in the material for marketing and all the commercial part, mainly, as I mentioned before, due to the repurchase program of high school and in the accumulated of 9 months that finishing September 30, we saw a growth in our EBITDA of 16%, leaving from -- going from 67.5% to 78.5% with an expansion of margin and 4.7%. So it's a neutral semester with a growth in revenue, but without growing the EBITDA, but this is due mainly to the displacement of the PDA. Our expectation is to have quite a positive fourth quarter. Finishing the presentation of Saber, I start now Cogna. Cogna represents our 3 main businesses like Kroton and Somos and Vasta, and I just mentioned Saber. So just a brief summary going to the final presentation. We had a growth in the revenue in the quarter in Cogna of 18.9%, reaching BRL 1.523 billion. So we grew revenue in all businesses. And in the accumulated, we also reached BRL 4.816 billion with a robust growth. That going to Slide 23, we have the demonstration in the recurring EBITDA and margin EBITDA. So we grew the EBITDA in the third quarter 9.8%, reaching an EBITDA of almost BRL 423 million. And as I mentioned, we grew the revenue in our 3 main businesses in Saber. We decreased the EBITDA, but we have the effect, as Roberto mentioned before, the effect of our commercial strategy in Kroton for intakes via Pague Fácil. And the main goal here was to keep the average ticket. You can see in our release that we can keep and have even growth in our intakes, and we had an impact in the PDA. We grew with the program to pay installments in Kroton, and in this way, we grew the PDA in the accumulator of 9 months, we grew 12.4% reaching an EBITDA of BRL 1.530 billion. Now going to Slide 24 with net profit and margin. In the quarter, the third quarter of '24, we had losses of BRL 29 million, and now we reached a net profit of BRL 192 million with a growth of more than 700% and a growth in the margin of net profit. And this comes from the growth of our operational results and it grew about 10%. We had a reduction of our financial results. So with many initiatives here in liability management and renegotiation, we reduced our financial results in 13%. And the main effect here is the effect of taxes of BRL 126 million and the reason we demonstrated this continuation and the operational effects and what are these effects mainly here with the reversion in the contingency that is not going over our EBITDA and the recurrent results, and we had the condition of the income that I briefly explain means that we had a company, Saber that had the tax losses in revenue income. And we incorporated this company so that we had this benefit in this year and future benefits. So look at this year, we had accountability effect of BRL 126 million. But in the fourth quarter, we will compensate BRL 11 million in taxes. So this operation brings not only accountant benefits, but in the cash of '25 and the years to come. If the accumulated, we reached almost BRL 406 million next year -- last year, in December 31, '24, we had a profit of BRL 879 million. Just remember that part would come from a reversion of contingency and our net profit of the operation was BRL 120 million. So in 9 months, ex effect of the income taxes, we reached the net profit of the operation compared to the previous year. And finishing that, the most important to us in the company is as we manage the company and we look a lot that for getting EBITDA and now analyzing the net profit and the cash generation and free cash. So we can see that in the operational cash generation, we had a slight reduction of 12%, reaching -- going from BRL 392 million last year. And last year, we had a positive effect of BRL 150 million of receivables of taxes from the federal revenue, and we had this benefit last year. We didn't have the benefit this year, but it's part of the game. So there is no adjustment. We are not proposing that. We are just explaining. But the most important to us is the free cash flow that we grew in the free cash flow. And when I say that, it is the generation of operational cash post CapEx and debt. So we reached BRL 300 million with a growth of about 3%. I'd like to mention also that the company analyzing the risks, we kept the second quarter of '24, '25 compared to the third one or the third of '24 with the third quarter of '25, we had a risk neutral with a small decrease of about BRL 9 million regarding the second quarter of '25 and BRL 17 million compared to the third quarter of '24. So you can see that the cash -- the free cash flow is not coming from postponing the risk. We are reducing our risk. And just to finish the free cash flow, an important data is that in the accumulated, we reached BRL 584 million last year. We had a generation of BRL 395 million. So remember that our fourth quarter, as I mentioned, is strong here in the national program of didactic books, and it's also a strong quarter in Somos Educação. So we are thrilled with what is about to come to the fourth quarter. Now going to the end of the presentation, our cash position and debt, we -- in Slide 26, I would show that the important is that we are reducing the net debt. So we reached BRL 2,576 million. We finished the third quarter in a strong cash position with BRL 1.277 billion. And the message here is analyzing the amortization schedule. In '26, we don't need to do any debt, and we have no amortization for '26, which is generally a difficult year because it's the elections year. Now going to Slide 27, the last one of my presentation, I'd like to show the leverage of the company. We reached the leverage of 1.11x, our lowest level of leverage since the fourth quarter 2018. Considering the third quarter of '24, our leverage would be 1.58x. We had a reduction and more than leverage. We monitor also the net debt. So we had a reduction of net debt compared to the last year, BRL 474 million. And regarding the second quarter of '25 compared to the third one, a reduction of BRL 230 million, which shows that in the last 4 years, we are doing what we say, what we committed to hit the revenue and generate EBITDA that will do the deleverage of the company, free cash flow and reduction of net debt. And last but not least, our average cost of debt is reducing. So in the third quarter '24, we had an average cost of 1.82%. And in the third quarter, it's 1.52%. And as we understand the market and our rating that we maintain that, but with a positive prognostic. We have cost of an eventual debt for future liability management in a lower cost than this one that I mentioned of 1.52%. So we are still thrilled with more execution, more work. And I pass on the floor to Roberto Valério for the final considerations. Roberto Valério: Thank you. Now going to Slide 28. I reaffirm our pillars and growth is one of the pillars. It's not by chance, it's the first in the list. As we showed, we grow in all operations, and we are planting and developing new pathways of growth to the future. As Fred mentioned, we are thrilled to the end of the year, the fourth quarter that is generally with no news in Kroton, but given the diversity of our portfolio, we have good quarters in Vasta and Saber with a positive perspective to the year. And we see no different challenge to '26. We see the level of unemployment very low, people with good income. This is -- next year is electoral year, which benefits our businesses. We are quite positive to this item of growth. From the point of view of efficiency, it's in the DNA of the company. We have quite well designed all the processes. We are converging systems to 1 or 2 single systems to gain on synergy and speed. So we are working in improvement of processes, automation systems, implementing AI. That is something we've been doing since '23. So basically 2 years, almost 3. And this is something that is spreading in our value chain, and it will keep bringing efficiency in gross margin and reduction of expenses. So this is another front that we see opportunities. Experience, the client experience is something that is the core of our decisions. We keep improving the NPS of students and partners. So just for you to understand in this third quarter, we had 4 important awards that are related to customer experience in many segments. So it is still our focus, and we understand that we serve well to reduce the churn and improve the growth. And culture -- people and culture is an important pillar. We are investing a lot in training and development and assessing performance and skills and feedback of our workers so that they know how to develop and external trainings and courses, I think we are progressing a lot in this front. And it's not by chance that we could be in the ranking of the best companies -- Great Places to Work. So we have the GPTW, still, we've had that, but being in the ranking is very difficult, and we are there at the 12th position, and we are in the 6th position, I'm sorry. And it's quite nice and innovation, we are supporting the business areas of the company, speeding up the B2G and new ideas that are under discovery in the initial steps, but I'm pretty sure are the seeds for our growth in education that is a big segment, and our approach is not only one segment. We have a multi-segmentary strategy. We have a broad portfolio, which in fact increases the options of growth to us. From the point of view of ESG, it is still important in the agenda. We held the V Education & ESG Forum this quarter. We were acknowledged in the ranking besides being acknowledged for being the best companies in customer satisfaction by the MESC Institute and some awards among which the best legal department in the education sector. So it's said by other people, which is also more important because it's not our opinion. It's the experts in the sector saying that to us. With that, I finish our presentation, and I open for the Q&A. Thank you. Operator: [Operator Instructions] The first question is from Marcelo Santos, sell-side analyst, JPMorgan. Marcelo Santos: I have 2 questions. First, I'd like to mention Pague Fácil because you've always had the PMT. So I understand that, in fact, you increased the amount of that, but the program would be the same. So I'd like to be sure of that. And was it more focused in DL? Is it -- does it have something to do with competition? I would like to understand why it's stronger in the divisions that you showed. And I would like to know if next year, it will be more normalized. And the second question is related to the cash generation because the fourth quarter last year was very good. So is there any event, any effect to change the seasonality for this year? Or you would bet to say that it would be the same as last year? Roberto Valério: Well, Marcelo, thank you for the question. So regarding Pague Fácil, you are correct. It's the same program we already had. So the mechanism is the same. The only thing is that now we are offering to more students. In general, we would offer the benefits to the students later on in the course when they enter in August or September, and we offer now since the beginning of the intake process when we start offering the benefit beforehand, more students make use of this. So the penetration of the program increases. So it's the same program with the same -- greater penetration for newcomers, which means that looking ahead, we should then see new growth. It should be more stable when comparing the quarters because the penetration was almost absolute, let's say, quite high. Basically, all students enrolled took advantage of Pague Fácil in the period. And regarding the cash generation, Fred will say. Frederico da Cunha Villa: Well, Marcelo, thank you for your question. In the fourth quarter last year, we had a strong operational cash generation. This is the beauty of our business, the diversity that we have. So last year, we had a positive effect of the national program of didactic books and also governmental solutions. And the cash here wouldn't have anything different compared to what happened in Kroton last year. And our expectation is to have a positive cash, and it comes with the same effect that we've had last year with the national program of the didactic books. A point of attention here is that we are a little late. We would imagine that our third quarter would be stronger. The government is late. So it may bring some impact to the cash in the fourth quarter, but our expectation is not different from previous years. It is to receive in the fourth quarter. But if we don't, Marcelo, then we should receive in the first 15 days or the first 2 any -- first days in January '26. But as I mentioned, it is our daily life. Marcelo Santos: Just a follow-up in Pague Fácil, Roberto, it is more concentrated in some of the units due to the competition, it was more in DL or is it general? I would like to understand this point. Roberto Valério: Sorry, you asked this question, and I didn't answer. It's generated. It's not focused in DL, both on-site and DL and the corresponding courses of KrotonMed. Operator: The next question comes from Vinicius Figueiredo, the sell-side analyst, Itaú BBA. Vinicius Figueiredo: I'd like to discuss a little bit about this quarter because we had a more concentrated effect. You mentioned a lot PDA in Pague Fácil that reached the margin. But having that said, a good behavior of all lines in this quarter, along with the fourth quarter not being with such a strong PDD due to the lower intake. So does it make sense that this quarter was quite atypical regarding the performance comparing the margins of the years, and we would see the cycle again an expansion in the fourth quarter? And then in the context of next year, will this effect along with the investments to adequate to regulation, how is that as a whole? And the second point is a follow-up to Marcelo's question. What would you see here as the balance point to Pague Fácil? Outside this context -- this is a typical context of the second semester and looking ahead, what is the participation it should have as a whole? Roberto Valério: Vinicius, thank you for your questions. I think it is quite an important topic to us that you have it quite clear in Pague Fácil and PDD. So as basically all students came via Pague Fácil, there shouldn't have any additional impact in any other quarters. So let's consider that in the third quarter '26, if all students have Pague Fácil, the delta should be only the growth of the enrollment and not the take rate of Pague Fácil. So we have nowhere to go because basically all students took Pague Fácil, whatever grows in the PCLD is related to the intake for the future. So this is the first point. The second point, you are correct. As in the fourth quarter, we don't have newcomers. Therefore, we don't have the pressure of Pague Fácil. The trend is that PCLD comes to the average and reduces to a lower level like the inadequacy and the numbers that we have here, as Fred always mentioned, a PDA of processes of inadequacy would convert to that, therefore, remove the pressure of the PDA improving the margin trend. And you are perfect in your observation. Obviously, we cannot predict -- we cannot give a specific guidance, but this is the specification. I don't know, Fred, do you have any additional comments? Frederico da Cunha Villa: Well, no comments. It's exactly that. The comment I would make is that that as we collected more with Pague Fácil because Pague Fácil and PMT are only different commercial names, but basically, it's the same. So the important is that the PDA is high due to the payment installments if our inadequacy is in X. So this effect is in line and close to 10%. So we'll see the quarters and understand that there's nothing new because it's already provision if we improve the inadequacy and improve the dropout, we will have an upside to the future. Otherwise, the PDD is already correct. So regarding the perspectives for DL, considering the regulation, it's difficult to predict, but we can have some ideas considering 2 important aspects. One that in the beginning -- in May, when it was disclosed, how much of restriction of courses that were DL and now are semi-presential and how it could restrict the movement of the student, I mean, going from DL to on-site. So this is the first doubt. We are seeing that, yes, there is quite a positive migration effect in the first weeks, we are in the beginning of the cycle. But in the first weeks where the nursing courses are not available in DL, we don't have the regulation defined. We see quite a strong growth of the courses, especially nursing in on-site. So the first doubt, well, if the fact we don't have cheap DL, the students won't be able to study. Therefore, we won't have so many enrollments. We don't see that. We see a strong growth in the on-site, which is positive from the growth point of view with the pressures on the margin because the on-site courses have lower margin, but the nominal contribution is much greater. The final benefit to the cash generation is quite positive. So this is the first element. The second one that is in the air, and we expect to have more information in the last weeks is how the fast track of approval of the nursing courses will be and how -- from there on, how many units and colleges will offer this course, and we are quite optimistic that MEC will propose a transition rule to allow that those operating -- keep operating. But this is only an expectation. We don't have any official information. Regarding the cost impact, we keep having the same view that we've had since the regulatory framework was launched. And if you know that from the point of view of cost, we understand it's quite not relevant, both in online and semi-presential or DL. So they are prone to repasses in the average ticket of the student. As you can see, we keep repassing inflation. The average ticket is growing for newcomers and old students. So we have the same view, and we don't have elements to say that DL will have a non-manageable impact, let's say. Operator: The next question comes from Caio Moscardini, sell-side analyst of Santander. Caio Moscardini: Could you talk a little bit more of Vasta ACV, what we can expect in this new cycle? If the 14% that we saw in '25 is a good proxy? I think it helps a lot. And in Saber, just to confirm if this market share of 30% is regarding a new cycle of the PDA from '26 to '29 that the government has a budget close to BRL 2 billion? And what should we expect in terms of EBITDA for Vasta in the fourth quarter, if we can grow this EBITDA of Saber in '26 comparing year-to-year? Guilherme Melega: So thank you, Guilherme here. I'll talk about the Vasta ACV. As shown in the presentation, we are having quite a positive track record in the evolution of ACV. We have a CAGR of 17,000, but I can tell you that we'll keep the growth for '26 at a similar level as we had from '24 to '25. So in the mid-double digit of growth. Roberto Valério: Okay. Thank you, Melega. Regarding your question of Saber, Caio, you are correct. The last purchase of high school government typically makes 1 purchase a year. It can be fund 1 or 2 of the average. In the fourth quarter, we are talking about high school. We've had market shares in schools and teaching systems choosing 30% of all the purchase being with our books from Saber. And we'll have a take rate of 30% of the program compared to a take rate of 22% in '21. So it's 8% more in share. So this is the information. So yes, we do expect to grow our income in this sense. And we know that MEC as FNDE are discussing budget to comply with this purchase. And remember that next year's program is the new high school program. It's different with more disciplines, more content. But your interpretation is correct, basically confirming what you said in your comment. Caio Moscardini: Okay. And regarding Saber in the fourth quarter, going from '24 to '25, it should grow year-by-year. Frederico da Cunha Villa: Caio, Fred speaking here. Our point of attention is only seasonality. If you have a displacement from the fourth quarter to the first one, as I mentioned, due to the delays, but EBITDA should be neutral positive because as it is a year of purchase, as Roberto mentioned, I also have expenses with marketing and advertising, which affects a lot of the cost, but due to the growth of 8%, it can be positive. Operator: The next question is from Samuel Alves, sell-side analyst at BTG Pactual. Samuel Alves: My first question is about receivables and maybe it's related to the comments before about Pague Fácil because we saw an important increase in receivables after 1 year. So can it be related to Pague Fácil so that I get your idea about the aging? This is the first question. And a second question is having a follow-up on the topic of the PDA. If I'm not mistaken, the company had a certain target of EBITDA to '25 in Saber of about BRL 200 million, BRL 230 million, if I'm not mistaken, but something like that. So you were mentioning this point that Fred mentioned now about the marketing expenses and the cycle of purchase as a challenge. So it caught my attention, the comment of EBITDA being neutral or positive compared to the years in the fourth quarter because it would be above that. So was it my misperception of not understanding your comment considering it was BRL 360 million. I guess the EBITDA last year of BRL 200 million was adjusted. Just to make it more clear about Saber's performance. Roberto Valério: Well, Samuel, I'll start with Saber and Fred will talk about the aging. It's important to consider that Fred's aspect is that we are not so certain or clear on the income of high school in the fourth quarter. As the orders are delayed, maybe part of this income will decrease in the first week of January. So it's difficult to be content and understand what is the EBITDA in the fourth quarter considering the uncertainty in the displacement of income. We have almost no doubt regarding the effectiveness of the purchase of the government. Therefore, government needs to handle the books to students in February when classes start. So maybe this misperception is a little more regarding the conviction that we have that the fourth quarter specifically will have a neutral positive EBITDA without knowing exactly what is the displacement of the income. So any displacement should be of weeks because the program must be carried out. I don't know if I made myself clear, if you have any doubts, we can discuss more. And I'll then pass on the floor to Fred to talk about aging. Frederico da Cunha Villa: Samuel, Fred here. About the aging of receivables, you are analyzing the IPR of the company. So I have the growth in the installment programs for Pague Fácil. So I'm growing this potential, but the second effect of growth in the aging above 365 days is not for Pague Fácil. It's the fat effect PP, the program that already finished. And here, we have more than 70% provision. So we have our natural efforts here for charging, nothing different from what we already have, nothing different from previous quarters or years. Operator: Our question is from Lucas Nagano, sell-side analyst, Morgan Stanley. Lucas Nagano: We have 2 questions as well. The first one is regarding Pague Fácil. And first of all, I'd like to check some points on the coverage because you mentioned the provision in the beginning is 40% and inadequacy default is converted to 10%. So if it's 47%, is it the same of the PND of the previous year or it varies in the cycle? And the second one is regarding nursing, considering that the government will facilitate the accreditation. How far it could smoothen the effects of the margin? How feasible would be the implementation and offer of professors and the demand available for this level of teaching? Frederico da Cunha Villa: Lucas, Fred, I'll start with Pague Fácil doubt because our provision uses always the history -- as a criteria, the past history because, as I mentioned, Pague Fácil and PMT are just the commercial trade name. So I need to use the history, and we use it. In the beginning, we provisioned 60%. But as I naturally have returns every month, the index of provision coverage is 47%. So just to make it clear to you, I use the history in the beginning, and I provisioned 60% of the budget. And in the history, it's 47%. You can do the math, okay? Roberto the second question. Roberto Valério: Okay. Thank you, Fred. Well, Lucas, regarding nursing, your question about the feasibility to carry out on-site nursing and this transition, the feasibility on our site is complete. I would like to emphasize 2 things. One, our nursing costs where we would offer nursing in the post already had on-site hours of 42% with the new rule, it's 70%. So I already have tutors and professors and labs and classrooms and everything. So we would be working in a lower percentage. So going from 42% or 52% to 70% is as simple as increasing the amount of hours of the professors and tutors that we have. This is our reality because we always operate with health care courses with off-site labs. We didn't have practice of offering nursing as you asked. In 100% online model, we always have the labs and so on. So if we have a fast track made by MEC based on the evidence that we already have the lab and all the colors, it would be quite fast this impact and it's fast and the impact basically 0 considering that students are migrating from DL to on-site where we have these offers presentially. So this is my understanding. Obviously, we need to leave to be sure that the scenario is the practice, but I have enough elements to say that, yes, that's it. Lucas Nagano: And just a quick follow-up, how should it affect the first point of this post. Roberto Valério: Well, the average price of an on-site nursing course is 30% higher than the semi-presential. This is how the prices were made. And I think that pricing is less related to ability of payment of the students and more related to the level of competition of prices among the many players in the city. If you remove players because they have no labs or professors or so on, the trend is that you can repass the prices and students can pay. So that's why we are seeing a strong growth in the campus even with the on-site being more expensive than semi-presidential or DL. Operator: The next question is from Eduardo Resende, sell-side analyst, UBS. Eduardo Resende: I have 2 questions here. The first regarding the migration of DL students to the on-site or hybrid model as you mentioned. And I would like to understand what was the difference in the commercial strategy now to the next cycle that you see this movement. So anything that you had to do differently in the marketing or other fronts that might be helping that. And the second question is regarding Acerta Brasil and Saber. This year and last year, we had this line contributing a lot to the growth. And I'd like to understand if we have space to expand in the next years or if we now raise the bar too low for that? That's my question. Those are my questions. Roberto Valério: Eduardo now to answer your questions regarding the new commercial strategies to foster the migration from DL to on-site. The answer is no. It's a natural movement on the market. The students had options, and we are talking specifically about the campus. We had the on-site and DL offers as DL is cheaper, we have more demand on DL, but we kept making groups and enrolling students for on-site. We don't have DL. Now they have to enroll for the on-site education. So we keep the levels of enrollment the same, but they simply migrated from a simple line of product to the other one with a higher average ticket, which means a net profit with a greater nominal contribution. As I said, a lower percentage of profit, but with a greater nominal contribution. But directly talking about your question, we have nothing specific. It's a natural movement of the market. And now talking about Acerta Brasil. There's no doubt Acerta Brasil reinforces the learning, especially for Portuguese and math that we deal with the state and Municipal Secretaries of Education. It's a good product. The indicators show that the evolution of the students using this material. And we still have space to grow. Brazil has many states and cities, and we have more than 5,000 cities, and we sell to a small amount of that. So we believe we still have space to grow. Operator: Next question is from Flavio Yoshida, sell-side analyst, Bank of America. Flavio Yoshida: My doubt here is regarding Pague Fácil as well. I'd like to understand better the economics of the students in Pague Fácil when we compare to out-of-pocket students and understanding the dropout and the quality of payment of Pague Fácil. And my second question is specifically regarding the technology CapEx. We know that when we consider the 9 months of '25 compared to the previous year, we had an expressive increase of almost 70%. So I would like to understand the drivers here and if we should wait impressive growth in '26 as well? Roberto Valério: Fred, you start with CapEx. Frederico da Cunha Villa: Yes, I start with CapEx. Flavio, thank you for your question. Regarding CapEx, technology is a product here. So we have strong investments in technology. We are doing this investment and note that in the 9 months compared to '24 and '23, we also grew, and we are here building this too, that is an academic RP, and we believe nobody has that on the market aside from the investments we are also making to improve the student learning and all the development of AI. And here, this is what we look in terms of product view. What we mentioned before is that we don't understand that in the total CapEx of the company, we are not growing nominally here compared to the year. And for the next years, we believe that the CapEx is simply a see-saw reduced technology and invest more in the field, but it's natural. I cannot say only technology, but the CapEx as a whole should even grow nominally comparing the years. Roberto Valério: The second question regarding Pague Fácil. Well, Flavio, it is important. I'll try to explain better because the student Pague Fácil is the out-of-pocket students, they pay, they are not funded. We don't fund any student. All of them pay to us every month. We don't fund -- we haven't funded students for a while, and this is Pague Fácil because the first monthly payments that are -- as they understand latest that they pay in installment. So considering January so that you understand, if the student enrolls in December, for example, December '25 to start studying in February '26, when they pay the monthly fee in December, what are they paying? They are paying the January monthly fee. So the second is February, the third day, March, April, so on. So when it is already March and the student comes late, they say, "Hey, but it's not fair. Why do I have to pay January and February if I didn't study. We still didn't have classes, it's already March," and then we say, "Well, in fact, the point is you pay for the semester in 6 installments as it's already March. I am facilitating. That's why it's called Pague Fácil, easily. So you are late. So I let you pay installments January and February. So you choose 46 or 47 installments." So we explain to the students and to make it clear, Pague Fácil historically is a student that is late in paying the installments. They don't want to pay it all the time. So we facilitate by paying the installments. So there is no difference between Pague Fácil and the one that pays. The difference is that we only had this offer of Pague Fácil start in February, March, April, and now we are offering even for December, January for those who were correcting payments. So that's why we increased the penetration of Pague Fácil. So in this case, there is more quality or less quality. We understand they have more quality because if you enroll previously, you are scheduled to that you organize if you are enrolling in January or December, they are more organized and more engaged, probably a better payer. So in our understanding, the fact of allowing the monthly fees in installments wouldn't facilitate the dropout because they are good students. They come before the ones that are late in their enrollment. So it's important to say that all this process to the students is quite clear. They sign a contract acceptance terms, so they can pay the installments that are, let's say, late or they choose how to participate. So obviously, they have to choose the benefit. That's why they have such a big penetration. So that's why we are completely transparent in all questions that we understand this strategy than simply reducing the prices to be competitive commercially. So this is the strategy plan of Pague Fácil. Operator: The next question is from Renan Prata, sell-side analyst, Citi. Renan Prata: Quite briefly regarding the results, I think this line that we have 4 semesters with gains. I would like to understand your point of view on this funding. And I don't know what you are thinking for this line and the other, if you can give an update of the trade-off of Vasta because there was some delay regarding SEC, but if you can update us, it will help as well. Roberto Valério: Renan, the first question of risco sacado. The risk is something that we know we are keeping that. And in this case, it is in Saber and Vasta that is the installment, the funding of our raw material, mainly paper and printing. There is a correlation with the growth of revenue. As I grow the revenue, I need more paper and print the books and so on. So note that I'm growing the revenue in Somos Educação and not Saber, but this strategy is ongoing. So why? Because today, my average cost of debt is CDI plus 1.5% and risco sacado is 2.9%. So what happens is that we are doing that naturally, Renan, because if I simply remove all the risk and put it into a debt, I have no problems in leverage and the debtor risk was always clear in the company. But if I do that, I reduce the operational cash at the moment 0 in BRL 490 million. So naturally, you will see that this line that was correlated to the revenue will be a line that will reduce quarter-by-quarter until we understand that we do not have to consider the debtor risk is the main reason is the average cost of the debtor risk regarding our debt. First question. The second one regarding the trader offer of Vasta, it's public. So I won't say anything different. So we are just waiting for the American SEC that is the Brazilian CGM that is in the shutdown process due to political problems in North America. So we are waiting for the reopening of SEC so that we can have the operational and legal bureaucracy for the operation. We postponed the operation due to the shutdown of the SEC. And until the deadline that is December 9, our expectation in discussions with our legal consultants in North America that SEC will open in November, and this is a data that I'm just repassing what I've heard. There is no commitment in what I'm saying. So the expectation is that until 9 we can have more elements in this operation to close everything. Operator: The Q&A session is over. So we will now pass on the floor to Mr. Roberto Valério to his final considerations. Roberto Valério: Well, I thank you all for your participation. I'd like to reinforce my thanks to everyone of the 26,000 workers that are working nonstop so that we can reach the results and get better to our clients and students. Thank you very much. And we are still available with our team to clear any doubts necessary. Thank you very much, and we see you in the next quarter. Operator: The results conference regarding the third quarter of '25 of Cogna Educação is over. The Department of Relation with Investor is available to clear any doubts you might have. Thank you very much to the participants, and have a nice afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Agus Aris Gunandar: Good afternoon, everyone. Thank you for joining today's earnings call for PT Lippo Karawaci Tbk. My name is Agus Aris Gunandar, Head of Investor Relations, and I'll be your moderator for today's session. With me is Pak Fendi Santoso, our CFO, who will give you a presentation of the company's results for the 9 months ending September 2025, which will then be followed by a Q&A session. [Operator Instructions] Pak Fendi, can you please proceed with the presentation. Fendi Santoso: All right. Thank you, Pak Agus. Good afternoon, everyone. Thank you for attending this earnings call that will discuss 9 months performance of PT Lippo Karawaci Tbk. So let me just go straight jump into the performance for the 9 months. Probably before we start with the results, let me just give you -- give everyone a context to what we see from the macro point of view. We still see that demand is relatively a bit soft in this quarter. And the overall economy still remains pretty relatively soft with the Indonesian consumer buying power also remain subdued. That being said, we are starting to see that on a quarter-on-quarter basis, third quarter compared to the first quarter and second quarter of this year has improved a lot. And we are also seeing that's happening across our businesses, both in real estate, lifestyle and health care. So for the first 9 months of 2025, our marketing sales for the real estate reached IDR 4 trillion, and this is compared to -- this is 64% compared to our full year target of about IDR 6.25 trillion that we've guided everyone earlier this year. Our revenue continued to post a very strong year-on-year growth, 74%, registering IDR 5.51 trillion of revenue and EBITDA increased by 4% at about IDR 843 billion. And our product launches for the first 9 months includes the premium series as well as the more affordable housing. We'll touch base on real estate performance later on the next few slides. But moving on to the lifestyle. Overall, relatively stable. Lifestyle revenue hit IDR 994 billion with EBITDA increased by about 21%. So our mall is actually doing relatively well with growth of about 6%, 7% on the visitors side, occupancy also improved by about 5 percentage points to 84%. This is higher than the average occupancy rate of mall in Indonesia. But our hotel revenue continued to see headwinds, and this is driven by the government budget cut spending that happened earlier this year. That being said, on a quarter-on-quarter basis, we are actually seeing improvements on our hotel business where occupancy rate improved quite substantially from the second quarter of this year. On health care revenue, Siloam’ performed extremely well for the third quarter. The first 9 months, it recorded about IDR 7.29 trillion, which is 3% increase year-on-year and EBITDA at about IDR 2.08 trillion with margins standing at about 29%. So that's overall on -- I'll spend a little bit more time on each segment later on the next few slides. But just on the statutory level, we will be posting about IDR 6.5 trillion of revenue for the first 9 months of 2025, slight lower compared to what we published last year, but this is because of Siloam’ still was consolidated in the first 6 months of 2024. And as such, the occupancy sits obviously higher. But then if we remove Siloam’ from the first half of 2024, we're actually seeing that the revenue grew by about 52% compared to last year on a pro forma on a like-for-like basis. Similar on EBITDA, we posted about IDR 997 billion for the first 9 months of 2025 compared to last year, lower because of the consolidation of Siloam’ in the first half of 2024. And if we remove this, our EBITDA actually grew by about 4% this year. This is the P&L that we will -- that we published in the 9 months 2025. We will touch base on revenue and EBITDA. Income from associates obviously increased, and this is because 9 months 2025 already fully deconsolidated and assumes and classify Siloam’ as our associate company and as such, contributions from its profits goes to the income from associates. So that's up by about 230%. I think additionally, we have also seen improvements from our [indiscernible] performance and contribution is actually quite positive this first 9 months of 2025. Net interest expense come down and is driven by our liability management as we've reduced our debt quite substantially over the last 12 months. And amortization and depreciation and taxes also reduced because of -- mostly because of the deconsolidation of Siloam that happened last year. And that resulted in our underlying NPAT of about IDR 442 billion, higher by about 8% compared to last year and NPAT of IDR 368 billion, substantially lower from last year, given that last year, we've enjoyed quite a lot of nonoperational and one-off items, including the gain from our deconsolidations of Siloam last year as well as the sale that we did on our Siloam stake last year. This is the cash flow for LPKR. I think relatively, we remain -- our liquidity remains strong. The focus of this year was to complete a lot of our projects that we sold in the previous years. And as such, the payments of about IDR 4.6 trillion that we had in the first 9 months of the year, this is offset obviously by the collection that we've gotten from consumers, from our customers from marketing sales. Net interest expenses, IDR 175 billion. This is substantially lower compared to last year where we spent about IDR 765 billion, and this is reflecting a successful deleveraging initiative and commitment to ensure that we have a stronger balance sheet moving forward. This is also in the cash from financing activity, IDR 1.8 trillion outflow given that we've settled all our U.S. dollar bonds in the beginning of the year as well as continue to repay our loans with the banks. On the financing side, I'm pleased to announce, I think we've shared this in the last -- in the previous earnings call that we've successfully secured a loan from BTN to refinance our syndicated loans. So I'm pleased to announce that we've now successfully reduced our cost of funds by about 60 basis points. So today, we are paying about BI rate plus 1.4%, which translates to about 6.15%. And then this is on [ ideal ] loans, which I think will continue to support our liquidity moving forward. As I mentioned, we fully paid all our U.S. dollar bonds. Now our liabilities are all in rupiah denominated. So and as such, we managed to remove the FX risk that's inherent in our business in the past. So now the revenue and cost and liabilities are matched. And we landed in September 2025 at about $2.75 trillion net debt and an improved debt maturity profile following our refinancing of the syndicated loans. So I'll move on to segment by segment. I'll touch on the real estate first. So on the property development projects sold in the first 9 months, we've sold 22 projects of landed residentials, around 9 projects of low-rise to high-rise residentials and then 16 shop houses projects. We spoke about marketing sales in the previous slides, but 70% of our landed housings -- 70% of our total marketing sales are contributed by our landed housings. We've done about 11 launches in the first 9 months. Lippo Karawaci, we've done 5 launches: Park Serpong 4 and 5, Bentley Homes and Bentley -- Belmont and Bentley Homes in Central and Marq in the heart of [indiscernible] cities. Lippo Cikarang, we've launched 3 launches, The Allegra at Casa De Lago, The Hive Tanamera and The Hive Neo Patio, which is shop houses and also 3 launches in Tanjung Bunga. Financial performance, I think we've touched base on this. But moving forward, we continue to focus on the affordable homes designed for young families as well as moving -- focusing more to the premium residents that meet lifestyle aspirations of the affluent market. Marketing sales, IDR 4 trillion for the first 9 months, 64%, as I mentioned, compared to what we've targeted for this year at IDR 6.25 trillion. I think the majority of the marketing sales are coming from [indiscernible] residentials at about IDR 2.1 trillion, followed by Lippo Cikarang at about IDR 1.2 trillion. We still have plenty of land bank that we can develop and which translate about 25-plus years of remaining land bank that we can develop at the current run rate. Highlights of marketing sales for the first 9 months, Lippo Karawaci is still dominated by landed housing at 77% in terms of value and 84% in terms of number of units. Lippo Cikarang, I think it's more balanced between landed housing, which contributed about 55% of the total marketing sales and commercial area, which is about 34%. In terms of the payment method, mortgage is still dominating the way our customers are buying our property at about 65%, which is lower compared to last year because a lot of people are opted for installments this year. In terms of the ticket size, still dominated by product with price less than IDR 1 billion that contributed about 66% and with -- and then the product that priced at IDR 1 billion to IDR 2 billion accounts for about 25% of total marketing sales. This is the project handover highlights. I think in totality for the first 9 months, we've handed over around 8,000 units. And obviously, predominantly from -- the Park Serpong is just an example of the cluster of Park Serpongs that we've completed and handed over, Cityzen Park East, Citizen Park North and Park West. In Lippo Village, we've also done quite a bit of handed over in the first 9 months, Cendana Essence, Site A Area 1 and 2, Cendana Cove Verdant and Cendana Cove also in Lippo Karawaci and also the handovers that we've done in [ Makassar ]. This is just to give you the highlights of the product innovations. There are a bunch of products that we introduced in the third quarter of this year from a building area of about 35 square meters at price at about IDR 397 million, up to close to 100 square meter property with price at about IDR 897 million in rupiah. I think 2 products that I would just give you a context to what the customers are liking is Treetops Alpha Livin and Goldtops, which is a 3-story homes that we've recently introduced in the first half of the year. This is just a picture of the grand launching of Park Serpong Phase 5. It was done on 30th August 2025, pretty successful at 87% takeup rate. We've sold about -- we've made about IDR 200-plus billion of marketing sales from the launching only. We continue to enhance our offering in Park Serpong. We will be introducing Lentera National, which is a K1 to 12 education school campus supported by Pelita Harapan Group. So this is part of the [indiscernible] Pelita Harapan education offerings. So this is, I think, going to enhance our propositions to -- and our service to the residents of Park Serpong. We've also introduced minimart, some sports facilities just to support the communities. We've also introduced shuttle bus that connects Park Serpong with some key establishment within the areas. And also, we are developing a modern market. We're going to introduce this very soon, situated in Park Serpong. And we've secured about 1.5 hectares for this modern market that will actually enhance our shop houses' marketing sales as when this product launches. So that's on the real estate segment. I'll move on to lifestyle. Just to recap for everyone, we've managed about 59 malls nationwide across 39 cities with net leasable area comprises of about 2.5 million square meters with very well diverse tenant mix comprising of grocery retailing, department store, F&B, leisure, fashions, casual leasings and all that from -- and then supported by well-known tenants, both locally as well as internationally. Performance continued to show a pretty strong growth. Revenue increased by about 7% and EBITDA increased by 15%, given the operating leverage that we enjoyed for this business. The mall visitors also continued to grow year-on-year by about 7% and occupancy rates also improving from 80% last year to 84.4% this year. We continue to do a lot of activities. This is just to give you some highlights to activities that we had in our mall properties. The Lippo Mall Kemang celebrated its 13th anniversary. And then we've held an event of fashion show, live music and community tenants in the month of September and October. Cibubur Junction is undergoing an upgrade. We are repositioning our tenant mix and going to renovate the program starting Q4 2025. So there's going to be more exciting tenants coming in. I believe that once this project is completed, I think it will drive more traffic into Cibubur Junctions. We also done a tenant gathering of Lippo Mall Indonesia and Plangi Nusantara, which received a lot of support from our tenants, too. On our hotel business, we've operated about 10 hotels and 2 leisure facilities across 9 cities in Indonesia. The performance is still facing headwinds with revenue comes down by 6%. And this is, as I mentioned earlier, this is driven by the challenges that we had for hotels that have been enjoying a lot of [ government ] events as the government cut spending and hold budgets of spending in the first half of the year and EBITDA coming down by 24%. Occupancy is lower compared to last year by 7% to 60%. However, just wanted to highlight that in the third quarter of this year, occupancy actually stands at about 71%. And compared to the second quarter of this year, so Q-on-Q, it's actually improving by 10 percentage points. So it was 61%, increased to 71% in the third quarter. So we have started to see things are recovering pretty nicely from our hotel business, but yet still not where we want it to be compared to last year's. Average room rates also improved by about 2% to IDR 635,000 per night. Now moving on to our third segment, which is health care. I think overall, we are starting to see that our health care business in the third quarter improved compared to the soft demand in the first half of the year with revenue actually improved by 7.8%. And then this is despite of a few unfavorable external events happening in the third quarter of 2025. If you recall, in early August, there was demonstrations happening across Indonesia, especially in Jakarta, where it affected our hospital operations as well as in earlier September or late August, there was a flooding also happening in Bali that impacted our hospital operations in Bali, where we had to shut down for 1 week. So those 2 incidents actually contributed to a lower revenue of about IDR 49 billion. So if we added up that loss of revenue to the third quarter of 2025, our revenue actually on a quarter-on-quarter basis improved by about 11%. So hopefully, in the fourth quarter, there's no more unforeseeable external events that's impacting our business, and we'll continue to see the recovery trends happening on the next few quarters. EBITDA, up by 19% also. On the operating metrics, I think overall, it's pretty positive on a quarter-on-quarter basis. Our outpatient visit improved by about 8.5% to 1.1 million in the third quarter of 2025. Our OPD to IPD conversions quite -- remains quite stable at 2.9%. Inpatient admissions also increased by 8.2% compared to the previous quarter. Inpatient days also improved by about 9% with ALOS stands pretty stable at about 3.1% compared to the last quarter. And occupancy rates improved by about 3.6 percentage points to 65.8%. So that's contributing to a relatively strong performance in the third quarter of this year. I think that's all I have for today's 9-month performance of Lippo Karawaci. I'll pause there to see if there's anyone have questions. Agus Aris Gunandar: Thank you, Pak Fendi, for the presentation. We do have received several questions in the Q&A box. Let me read the question as follows. The first one is from [indiscernible]. He's asking for an update on the MSU or [indiscernible] handovers and how much is left as of 9 months of 2025? Fendi Santoso: Yes. So I think mostly we've done all our obligation for the MSUs units that we need to hand over this year. I think in terms of the units already available, I think we are in the process of completing that handover, which the team is going to complete this by end of the month or early December. So I think we've done about 4,600, if I recall correctly, 4,500 to 4,600 for this year. Yes. So I think there's another question here. What is the occupancy rate of Lippo Malls as of current? I think I've mentioned this earlier. In the third quarter of this year, we had about 71%. So that's improving actually from the previous quarter of 61%. Overall, for the first 9 months on average, it's about 60% -- sorry, the Lippo Malls, 84%, sorry. I think we had that 84%, sorry, for the mall. So there's another question on the presales forming 64%. What will be the driving factor for the fourth quarter to reach this target? So we are actually doing a few more launches this year. We just had one launch that happens in Manado, which is getting quite a bit of good traction. And there are a few launches that we are going to do this year. So I think we are still -- the team is still aiming to hit that IDR 6.25 trillion marketing sales target for the year. So yes. Agus Aris Gunandar: Okay. I see there's no more questions on the chat box. So I think we have reached a conclusion of our discussion today. We'll be sharing the presentation material shortly after the session. And once again, thank you for joining Lippo Karawaci's 9-month 2025 Earnings Call. And we do look forward to meeting you again for our full year 2025 earnings call. And we wish everyone a very, very good afternoon. Thank you. Fendi Santoso: Thank you.
Operator: Good afternoon, and welcome to Banco de Chile's Third Quarter 202 Results Conference Call. If you need a copy of the financial management review, it is available on the company's website. Today with us, we have Mr. Rodrigo Aravena, Chief Economist and Institutional Relations Officer; Mr. Pablo Mejia, Head of Investor Relations; and Daniel Galarce, Head of Financial Control and Capital. Before we begin, I'd like to remind you that this call is being recorded, and the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed notes in the company's press release regarding forward-looking statements. I will now turn the call over to Mr. Rodrigo Aravena. Please go ahead. Rodrigo Aravena: Good afternoon, everyone. Thank you for joining this conference call, where we will present the key results and developments achieved by our bank during the third quarter of this year. We are pleased to report that Banco de Chile has once again delivered strong results, reaffirming our solid market position. Our performance this quarter reflects not only robust financial outcomes, but also meaningful progress in a strategic initiative that strengthens our long-term competitiveness. Key highlights for the quarter include net income as of September 2025 reached CLP 927 million, representing a year-on-year growth of 1.9% that resulted in an ROAC of 22.3%. These results were driven by strong customer income, fund asset quality and ongoing efficiency improvements. These achievements are particularly significant given the challenging macroeconomic and political environment marked by subdued loan growth, especially among corporations. In times of uncertainty, solid fundamentals and proven risk management become critical differentiators. Banco de Chile continues to stand out among peers in asset quality, additional provisions and capital strength, providing resilience and a solid basis for the future. Let's now turn to the macroeconomic context. Please refer to Slide #3. Consistent with the trend observed in previous quarters, the Chilean economy continues to show signs of recovery, particularly in consumption and investments. As illustrated in the graph on the left, GDP growth has maintained an upward trajectory since the second half of 2024, supported by a notable rebound in domestic demand. In the second quarter of this year, GDP expanded by 3.1% year-on-year, remaining above the estimated long-term potential growth rate of around 2%, which resulted in a 2.8% year-on-year expansion in the first half of this year. It is worth noting that this acceleration occurred despite a moderation in external demand. Export growth slowed to 5.4% year-on-year in the second quarter, down from 10.5% in the previous quarter. This reflects the trends of domestic demand, which improved significantly from 1.6% year-on-year in the first quarter to 5.8% year-on-year in the second quarter. A key driver behind this performance was the sharp increase in investment, particularly in machinery and equipment, which surged by 11.4% year-on-year during the period. These indicators confirm that the positive trend in domestic demand has persisted into the second half of this year. As shown in the chart on the upper right, imports have accelerated in recent months, driven by stronger domestic expenditure, particularly investments, evident in the sharp increase in capital goods imports. Furthermore, weighted investments for the next 5 years according to the corporation of capital goods rose by 19% in the second quarter, reflecting a substantial expansion in the pipeline of new projects across the mining and energy sectors as illustrated in the chart on the bottom right. All these figures would result in improved economic performance over the next period while positively impacting loan growth and banking activity. Please go to Slide #4 to analyze inflation and interest rate evolution. Inflation remains above the Central Bank target at the chart on the left displays. In September, headline inflation increased to 4.4% from 4.1% in June. The measure that excludes volatile items was relatively stable, rising just 10 basis points to 3.9% in the same period. This suggests inflation is still driven by volatile items such as energy, which increased 11.4% year-on-year in September. In response, the Central Bank maintained the interest rate at 4.75% in the monetary policy meeting held in October. According to the statement released after the meeting, the persistence of some inflationary risk and the slight improvement of macro conditions require more information before continuing to reduce the interest rate towards neutral levels. Despite this decision, it's important to mention that the Central Bank of Chile has already reduced the interest rate by 650 basis points from the peak of 11.25% reached in 2023, positioning it among the most proactive central banks in terms of monetary easing. The Chilean peso has remained volatile, hovering around CLP 150 per dollar in recent months. However, as shown in the bottom right chart, the U.S. dollar measured by the DXY index has globally weakened this year, a trend not yet reflected in the local exchange rate, partly due to faster pace of interest rate cuts. Now I'd like to present our base scenario for this year. Please go to Slide #5. We have revised our GDP forecast up for 2025 from 2.3% in the previous call to 2.5% now. This adjustment is due to stronger-than-expected growth in domestic demand and improvement in some leading indicators, as mentioned earlier. As a result, the economy will likely achieve a similar expansion as compared to 2024 despite weaker global activity, which is expected to reduce the export pace of growth. However, the better outlook for domestic demand has offset this external drag. This scenario is consistent with a gradual decline in hyperinflation to 3.9% by December 2025, assuming no relevant shocks or significant depreciation of the Chilean peso in the coming months. Under this condition, we expect the Central Bank will likely cut the monetary policy interest rate once more in the fourth quarter to end the year in 4.5%. Finally, it's important to reiterate the unusually high level of uncertainty we face, particularly from global factors. Domestically, attention will also be focused on the upcoming presidential and parliamentary election scheduled for November and the presidential runoff expected in December 2025. Before reviewing the bank's results in detail, let's take a brief look at industry trends. As shown in the chart on the top left, the banking industry delivered another solid quarter. Net income reached CLP 1.3 trillion and the return on average equity stood at 14.7%. While below the previous quarter, this figure confirmed the central ability to sustain healthy profitability despite lower inflation. This performance reflects the resilience of core banking activity, particularly concentrated in commercial banking after a long period that was dominated by the extraordinary revenues coming from treasury activities on the ground of extremely high levels of inflation and higher-than-normal interest rate, among others. Turning to asset quality. The chart on the top right shows that nonperforming loans remain relatively stable for the industry at 2.5% with a coverage ratio of 143%, consistent with recent quarters. Despite a challenging macroeconomic backdrop marked by elevated borrowing costs and labor market pressures, banks have managed to keep delinquency under control while maintaining prudent provisioning and strong buffers to absorb potential increases in credit risk. On the credit side, the bottom left chart highlights that the loan-to-GDP ratio stood at 76% as of September 2025, continuing a below-trend behavior from pre-pandemic highs. This reflects the subdued pace of credit expansion relative to economic activity in recent years. Finally, the bottom right chart further illustrated the persistent weakness in real loan growth across all segments. Since December 2019, total loans have contracted 2.3% with consumer lending showing the sharpest decline of 18%, followed by commercial loans at 9.5%. This slow demand for credit has been driven by, firstly, by liquidity surplus caused by pension fund withdrawal in 2021, 2022, which was after followed by high interest rates, increased inflation and cautious corporate borrowing amid economic and political uncertainty and persistent labor market challenges more recently. In summary, while profitability and asset quality remains strong, lending activity continues to lag. Looking ahead, a gradual recovery in loan growth could materialize as uncertainty eases, particularly regarding external risk and in the local front, the outcome of upcoming presidential and parliamentary election, together with revised approval procedures for large-scale investment projects, allowing the industry to return closer to historical GDP multiples. Next, Pablo will share information regarding Banco de Chile developments and financial results. Pablo Ricci: Thank you, Rodrigo. Let's turn to Slide 8, which brings our strategy and ambitions into focus. It's our road map for growth and leadership. The core of our strategy is guided by a well-defined purpose, which is to contribute to the progress of Chile, its people and its companies. Supporting this are our guiding principles that shape how we operate in the medium term, efficiency, collaboration and a customer-first mindset and a focus on creating value in the areas we compete. These elements ensure our agility, innovation and long-term sustainability. On the right, our midterm targets show where we're heading. industry-leading profitability, market leadership in lending and local currency deposits, superior service quality as reflected by a top Net Promoter Score and a strong corporate reputation among the top 3 companies in Chile. We're also committed to efficiency, which translates into a cost-to-income ratio that must remain below 42%, driven by digital transformation and continuous improvements in technology and operational processes. In short, this strategy enables us to deliver sustainable growth and create lasting value for all of our stakeholders. Please move to Slide 9, where we will go over our key business achievements. In the third quarter of 2025, we continued advancing initiatives that strengthen our position as a more efficient digital and sustainable institution. A major milestone this quarter was the successful integration of our former collection services subsidiary, SOCOFIN, into the bank's operations. This merger was completed without affecting productivity metrics for the collection of overdue loans and has generated important cost and operational synergies that have translated into increased efficiency and enhanced customer experience. Productivity also continued to rise in the third quarter of 2025, driven by technological innovation and digital solutions. In consumer loan originations, executives increased productivity by 13% in the number of operations and 11% in the amounts sold compared to the same period last year. These results highlight the positive impact of our digital transformation on overall performance. We also worked to optimize our physical branch network and strengthen customer service. Through branch efficiencies, we aim to keep our service line aligned with clients' evolving needs while improving efficiency and delivering a better experience. On the digital front, we expanded the use of AI virtual assistants for both customers and employees. FANi, our chatbot now supports all FAN accounts, including SMEs through the FAN and Print the Plan. Additionally, we introduced AI tools to assist staff with internal processes, boosting productivity and service quality. To deepen partnerships with businesses, we launched the API store, a platform that enables secure technological integration with corporate clients. This initiative allows companies to automate operations directly with our financial services, adding value to our offerings. In line with this is our sustainability commitment. We introduced a training plan to promote responsible supplier management. As part of this effort, we are developing educational capsules to inform suppliers about our revised purchasing procedures and encourage best practices within their organizations. Another highlight of this quarter was the 4270 project, an unprecedented audiovisual initiative that captured Chile's 4,270 kilometers from north to south through a 90-day drone journey. By documenting the country's diverse landscapes, traditions and cultural richness, this project aims to strengthen national identity and reconnect Chileans with their shared heritage. Beyond its artistic value, this initiative reinforces our brand positioning by associating Banco de Chile with pride, unity and long-term commitment to the country. The project was conceived as a gift to Chile, offering more than 500 royalty-free high-quality images for education and cultural use and has earned international recognition, including a Gold Lion at the Cannes Festival and the showcase at Expo Osaka 2025. Finally, our customer-focused strategy continues to deliver solid results. For the third year in a row, we ranked first in customer satisfaction at the Procalidad Awards, and we were honored as the best of the best among large financial institutions, the only bank to achieve this distinction. These recognitions confirm the success of our strategy and their commitment to serving clients with excellence. Please turn to Slide 11 to begin our discussion on our results. We continue to deliver strong results in the third quarter of 2025, posting a net income of CLP 293 billion, equivalent to a return on average capital of 22.4%, as shown on the chart and table to the left. This represents a net income increase of 1.7% compared to the same period last year despite a sequential decline from the previous quarter, reflecting the impact of lower inflation on margins. It's important to highlight that we outperformed our peers in both net income market share and return on average assets, as illustrated on the charts to the right. Specifically, as of September 2025, our market share in net income reached 22%, well above the closest -- our closest competitors and our return on average assets stood at 2.3%, maintaining a wide gap over peers. These results underscore our consistent focus on customer engagement, prudent risk management, disciplined cost control and above all, the resilience of our core business and recurrent income-generating capacity, particularly centered on customer income, which has continued to grow steadily and enabled us to deal with the expected normalization of key market factors. Our strategy remains firmly oriented towards building a sustainable and profitable bank, and we continue to aspire to be the industry benchmark in profitability. Let's take a closer look at the operating income performance on the next Slide 12. We continue to demonstrate the strongest operating revenue-generating capacity in the local industry, reaffirming the resilience of our superior business model through different market cycles. As shown on the chart to the left, operating revenues totaled CLP 736 billion in the third quarter of 2025, representing a 2.1% increase year-on-year despite a backdrop of subdued business activity and the effect of lower inflation on treasury revenues. This performance was supported by solid customer income of CLP 630 billion, which grew 5.4% year-on-year, while noncustomer income amounted to CLP 105 billion, reflecting a 14.1% decline compared to the same quarter last year. The contraction in noncustomer income was mainly explained by lower inflation-related revenues from the management of our structural UF net asset exposure that hedges our equity from changes in inflation as UF variation dropped to 0.6% this quarter from 0.9% recorded in the same quarter last year. To a lesser extent, revenues coming from the management of our trading and debt securities portfolios also recorded a slight decrease year-on-year due to both lower market mark-to-market revenues due to unfavorable changes in interest rates and a decrease in revenues coming from the management of our intraday FX position. In turn, customer income has continued to grow, supported by a robust performance in income from loans and net fees, which helped offset the pressure from lower inflation-related revenues. Within loans, better lending spreads and growth in average balances drove income generation, particularly concentrated in consumer and commercial loans as our loan book has continued to return to more normalized margins to the extent FOGAPE loans keep on amortizing. Furthermore, net fee income expanded by 10% compared to the third quarter of 2024, led by mutual fund management fees, which increased 19% and transactional services up 6%, together with increased contributions from insurance and stock brokerage fees due to improved cross-selling and credit-related insurance and the participation of our stock brokerage subsidiary in a couple of important transactions carried out in the local capital market this quarter. This performance highlights the strength of our diversified revenue base beyond traditional lending activities. As a result, our net interest margin stood at 4.65% for the 9-month period ended September 30, 2025, maintaining a clear market-leading position in the industry despite margin compression caused by inflation and the financial environment marked by lower interest rates. Furthermore, our fee margin as a percentage of interest-earning assets reached 1.3%, which enabled us to further drive our operating margin to the level of 6.4%, well above the industry average and our main peers, demonstrating the effectiveness of our strategy and our ability to consistently deliver value to our customers and shareholders regardless of prevailing economic conditions. Please turn to Slide 13, where we will review the evolution of our loan portfolio. As shown on the left, total loans reached CLP 39.6 trillion as of September 2025, representing a 3.7% year-on-year increase and a 0.6% sequential growth. This expansion remains contained and continues to reflect subdued credit dynamics across the industry, consistent with the Central Bank's latest credit survey, which indicates that overall demand and supply conditions remain stable, although noticing some signs of recovery in certain segments. Breaking this down by product, mortgage loans grew 7.3% year-on-year, well above inflation, supported by stronger demand through selective origination in middle- and upper-income segments and demand for housing that continues to be driven by demographic issues rather than economic cycle. Consumer loans increased 3.7% year-on-year amid cautious borrowing behavior and interest rates that remain above neutral levels as well as the profile of our customers characterized by liquidity levels above our peers would partly explain our performance in consumer loans. While loan growth in this lending family has been slower than the industry, it's important to note that our strategic focus continues to be centered into the higher income segments, avoiding aggressive expansion into lower income markets targeted by some market players, which explains an overall loss in market share that, however, is consistent with our long-term strategic view. Regarding commercial loans, we posted a 1.3% year-on-year increase in September 2025, constrained by weak investment and uncertainty. However, we'd like to emphasize that we are seeing some early signs of recovery, particularly in the SMEs and certain wholesale banking units, such as the large companies area, which is consistent with higher-than-expected capital expenditures in some industries earlier this year as reported by the Central Bank and national accounts. On the right side of this slide, you can see that retail banking continues to be the main commercial focus by accounting for 66% of total loans with personal banking representing 52% of the whole book. Accordingly, wholesale loans represent 34% of our book and is split between corporate clients, representing 20% and large companies, representing 14%. When looking at the loan growth by segment, we can see some interesting trends. Personal banking expanded 5.8%, driven by mortgage loans, while SMEs and large company segment have also posted positive year-on-year growth levels of 4.8% and 7.1%, both above 12-month inflation. SME loan expansion was supported by demand from non-FOGAPE loans that continues to grow steadily by expanding 8% year-on-year, while the large companies banking unit has managed to grow positively for the third quarter in a row on the grounds of commercial leasing and trade finance loans. Corporate loans, however, contracted 4.3% year-on-year, reflecting lagged investment activity and selective credit demand among corporations, which is highly aligned with findings released by the Central Bank in the last quarterly credit survey. It's important to note that our loan growth remains slightly below the 12-month inflation, and we have experienced a minor decline in overall market share over the last year, mainly due to competitors expanding into segments outside our strategic scope and the countercyclical role played by the state-owned bank BancoEstado. Positively, we gained share in mortgage loans, thanks to our competitive funding and strong customer relationships. Overall, our portfolio remains well diversified and positioned to capture opportunities as business sentiment improves, interest rates continue to converge to neutral levels and the domestic demand strengthens. Slide 14 highlights our strong balance sheet mix supported by long-term financial stability. As shown on the chart to the left, loans represented 71.4% of total assets as of September 2025, while our securities portfolio reached 12.5% of total assets, up 54% from a year earlier. The increase in our securities portfolio was primarily driven by the funding strategy carried out by our treasury in the third quarter, which resulted in long-term bond placements aimed at replacing upcoming amortizations, reducing term spread and currency mismatches in the banking book and supporting future loan growth. In the short run, part of this funding has been invested in high-quality fixed income securities, which has translated into improved liquidity metrics over the last couple of months. In this regard, our securities portfolio is mainly composed of securities issued by the Chilean Central Bank and government, which accounted for 65% of the total amount, followed by local bank instruments, mostly certificates of deposits, representing 28%. As a percentage of total assets, available-for-sale securities represented 5.9%, trading securities amounted to 5.8%, while held-to-maturity represented only 0.8% of total assets, all as of September 30, 2025. On the funding side, deposits remain our main source of financing, representing 53.1% of the total assets with demand deposits accounting for 25.8% and time deposits representing 27%. Given these figures, our noninterest-bearing demand deposits fund 36% of our loan book, which is a key competitive advantage that supports our leading net interest margin, as shown on the chart on the top right. More importantly, our deposit base is highly concentrated in retail banking counterparties, which provide us with more stable sources of funding over time. Regarding debt issued, it increased significantly during the third quarter of 2025, rising from 19% of our total liabilities in the third quarter of 2024 to 20% in the third quarter of 2025 as a result of recent placements. This growth was mainly driven by senior bond issuances in the local market, particularly this quarter, which added CLP 1.6 trillion to our former balances, representing a year-on-year increase of 16%. Prior to this quarter, long-term bond placements had primarily been focused on replacing scheduled maturities of previously issued bonds. However, beginning this quarter of 2025, we reassessed our funding strategy in light of the gradual rebound expected for lending activity, particularly in longer-term loans. Similarly, the gradual convergence of key market factors such as the monetary policy rate and inflation towards neutral levels significantly reduces the opportunity to benefit from temporary balance sheet mismatches. With this outlook in mind, during this quarter, we carried out several placements of bonds in the local market for an amount of CLP 1.1 trillion with an average interest rate of approximately 3% and an average maturity of 11.1 years and a 5-year bond denominated in Mexican pesos equivalent to CLP 50 billion, bearing an interest rate of 9.75% in Mexican currency. Together with raising long-term funding for future loan growth, these bond issuances also allowed us to reduce our structural UF gap from the peak of CLP 9.7 trillion in March 2025 to CLP 8.3 trillion in September 2025, implying a sensitivity of roughly CLP 83 billion in net interest income for every 1% change in inflation. This is aligned with our revised view on inflation that does not significantly differ from the market ones. The placement of long-term bonds also had a positive effect on interest rate mismatches in the banking book as bonds issued were mostly denominated in U.S. with tenures above 10 years, which closed the gap generated by steady growth in residential mortgage loans. As a result, regulatory and internal rate risk in the banking book metrics for short- and long-term rate risk posted a significant sequential decrease of around 20% Furthermore, our liquidity ratios remained well above the regulatory requirements with an LCR of 207% and NSFR of 120%, both well above the prevailing regulatory thresholds of 100% and 90%, respectively, reflecting prudent liquidity management and the positive impact of recent bond placements on this matter. Please turn to Slide 15 for our capital position. As illustrated, Banco de Chile continues to demonstrate a strong capital foundation, comfortably above regulatory thresholds and peer averages. Our CET1 ratio reached 14.2%, reflecting our leadership in the industry. When including Tier 2 instruments, our total Basel III capital ratio stood at 18%, providing wide room to support organic and inorganic growth initiatives and absorb potential market volatility. The solid capital position reflects a disciplined approach to profitability and sustained earnings retention over recent years. Additionally, the modest loan growth has also contributed to maintaining positive capital gaps. Our capital strategy was designed to navigate the final stages of Basel III implementation while preserving flexibility for both organic expansion and potential strategic opportunities. It's worth highlighting that Chile operates under one of the most demanding regulatory environments globally, characterized by higher risk-weighted asset density as compared to jurisdictions where internal models play a significant role. In fact, risk-weighted asset calculations under Basel III in Chile resemble those under the formal Basel I framework. Furthermore, local regulations impose capital requirements similar to those in markets with lower risk-weighted asset densities, including systemic surcharges, Pillar 2 charges and the conservation and countercyclical buffers, all working together and on a fully loaded basis. Despite these stringent conditions, Banco de Chile consistently exceeds all capital requirements, underscoring once again the resilience and the strength of our business and balance sheet by delivering a unique combination of lower risk and higher capital and outpacing in profitability. Please turn to Slide 16 to review our asset quality. We continue to set the benchmark in asset quality, supported by disciplined risk management and a conservative provisioning framework. In the third quarter, expected credit losses only reached CLP 80 billion, marking a sequential decline and reinforcing the positive trend we saw during the year. Despite the year-on-year figure remained almost unchanged, there were notable shifts in the composition of expected credit losses. Specifically, the Wholesale Banking segment recorded a net provision release of CLP 18 billion, mainly driven by a comparison base effect following the deterioration of asset quality of certain customers belonging to the real estate construction and financial services industries during the third quarter of 2024 as well as an improvement in the credit profile of a manufacturing client this quarter. Conversely, the Retail Banking segment posted a year-on-year increase of CLP 4 billion in risk expenses, primarily due to higher level of overdue loans above 30 days when compared to the same quarter last year. These movements were largely offset by a rise of CLP 5 billion of impairment of financial assets explained by a comparison base effect related to lower probabilities of default for fixed income securities issued by local financial institutions in the third quarter last year, a loan growth effect of CLP 5 billion, driven by a 4.2% year-on-year increase in average loan balances, mainly fostered by residential mortgages and a year-on-year increase of CLP 2 billion in provisions for cross-border loans. Mostly driven by a comparison base effect associated with the lower exposures to offshore banking counterparties and Chilean peso appreciation of 4.7% in the third quarter of 2024. As a result, this performance translated into a cost of risk of 0.8% in the third quarter of 2025, which remains below our historical average and highlights the resilience of our diversified loan portfolio amid a still-adjusting credit cycle. Nonperforming loans across the industry remained above pre-pandemic levels, as shown in the top right chart. Our delinquency ratio stood at 1.6%, significantly below peers. This gap underscores the strength of our underwriting standards and the proactive risk management. From a forward-looking perspective, despite fluctuations observed in 2025, we believe that the delinquency indicators will continue to converge to historical levels in both retail and wholesale banking segments. Now in terms of coverage, we maintain the highest ratio in the industry. As of September, total provisions amounted to CLP 1.5 trillion, including CLP 821 billion in specific credit risk allowances and CLP 631 billion in additional provisions. As a result, our total coverage ratio stands at 234%, positioning us with the highest coverage among peers. In summary, our strong asset quality metrics, exceptional coverage levels and prudent risk practices continue to differentiate Banco de Chile and position us to navigate evolving credit conditions with confidence. Please turn to Slide 17. Operating expenses totaled CLP 276 billion this quarter, representing a modest increase of 1.2% when compared to the third quarter of 2024. This growth remains well below the UF variation rate of 4.2% over the last 12 months, highlighting our disciplined approach to cost management. The contained increase reflects our continued efforts to optimize resources and drive efficiency through strategic initiatives and diverse digital transformation projects across the organization. The top chart provides a detailed breakdown of the annual variation expenses. Personnel expenses decreased by 1%, supported by headcount optimization of 5.7% over the last 12 months, which helped offset inflationary pressures on salaries. On the other hand, administration expenses rose by 5.3%, mainly due to higher marketing expenses linked to sponsorship activities aligned with our commercial strategy, increased IT-related costs and to a lesser extent, higher ATM rental costs due to relocations of part of our network. As shown on the chart on the bottom right, our efficiency ratio reached 36.8% for the 9-month period ended September 30, 2025, which significantly outperforms historical levels and competes closely with the market leader in this indicator. This achievement underscores the effectiveness of our ongoing productivity initiatives, which should provide further efficiency gains in the future. Looking ahead, we remain confident that our strong cost discipline, branch optimization efforts and continued investment in technology will allow us to sustain this positive trend. Please turn to Slide 18. Before we conclude, I want to highlight a few ideas presented in this call. First, we have adjusted our GDP forecast for 2025 to 2.5%, up from 2.3%, reflecting a more positive outlook for the Chilean economy. Chile continues to stand out for its strong macro fundamentals, a resilient financial system and a credible policy framework, making it a reliable destination for long-term investment even amid global uncertainty. Second, Banco de Chile remains the clear leader in profitability and capital strength. As shown on the left, we delivered CLP 927 billion in net income with a CET1 ratio of 14.2% and a return on average assets of 2.3%, significantly ahead of our peers. These achievements reinforce our ability to combine strong earnings with robust capital levels. Third, we have revised our guidance for the full year 2025. We expect our return on average capital to be around 22.5%, efficiency near 37% and cost of risk close to 0.9%. These metrics reflect our disciplined approach to both risk management and operational efficiency. Finally, we're confident in our capacity to remain the most profitable bank in Chile over the long term, supported by a strong customer base, solid asset quality and sound capital levels. Thank you. And if you have any questions, we'd be happy to answer them. Operator: [Operator Instructions] So our first question is from Daniel Vaz from Banco Safra. Daniel Vaz: I just want to touch base on your midterm targets. I think the only thing a little bit more distance that we see is the top 1 market share for commercial loans and consumer loans, and we see some stable market shares like in the past few months when we look at the big tables. Just wondering, you're a bank that focused a lot on profitability and focus on maintaining the discipline of the underwriting process. Trying to understand how are you going to tackle this top 1 commercial loans and consumer loans going forward, especially considering that the Chilean market is probably going to a better outlook for commercial loans. We see a little bit more appetite for consumer as well. So how exactly you're going to tackle this first position on both market shares? Like is going to the same clients or going to a more attractive position versus your competitors to still clients or any other things that you would highlight? Pablo Ricci: Daniel, thanks for the question. Maybe Rodrigo will start on the first part there. Rodrigo Aravena: Perfect. Well, thank you very much for the question. Today, we have a more positive view of the Chilean economy in the future. Even though the economic growth expected for this year, which is around 2.3%, 2.5% and probably in the next year, the economic growth will be similar. It's very important to pay attention to the composition of the growth because, for example, in the last year, when the economy grew by 2.6%, we have to remember that the key driver were exports, which are not very relevant as a driver for loan growth, for example, right? More recently, we have seen some positive signs for investment including the acceleration for capital good imports and also the pipeline of expected projects for the next 5 years is also improving a lot, especially in the last quarter. In terms of consumption, we see that the lower trend for inflation is also a positive news for the perspective for consumption as well. So at the end of the day, in our baseline scenario, we're going to have a more dynamic domestic demand, especially on the investment side which will be a positive driver for loan growth in the future. Even though we are not expecting an important acceleration in part of investment because we have to remember that in Chile, between 50% and 55% of investment is related with construction. That part of investment will likely recover not in the short term, but the 45% remaining of investment, which is related with machinery and equipment today is getting better. So that's why even though we are not expecting important changes in the GDP forecast for the next year, we are expecting a more -- a different composition of growth with a more dynamism in domestic demand, which is a good news for loan growth in the future. Also, we have to pay attention to the evolution and the final results of elections in Chile. We're going to have election from the President for the Senate for the lower house as well. So at the end of the day, there are important factors that could accelerate or not the economic growth in the future. But I think that so far, the most important aspect to keep in mind is the potential recovery in domestic demand. Pablo Ricci: So yes, in terms of our midterm targets, these are midterm targets that go beyond not only 2026, but it's a midterm aspiration. And those aspirations, as shown on the slide, we want to be #1 in terms of total commercial loans and consumer loans. So our growth strategy is focused on 3 key ideas. So the first, and we'll go into each one of these a little bit, is digital transformation as a growth engine for the bank. Also as a second area of focus is focus on the high potential segments, notwithstanding all the entire commercial loan book is interesting for us, but it's been more challenging in this environment. And third is operational productivity. So in the digital transformation area, what we've been focusing is leveraging technology to scale the efficiency, enhance customer experience and really drive new growth opportunities across the bank in all the segments. So in that regard, what we're seeing is an increase on digital onboarding. Most of transactions are being done online, and we're expanding our digital capabilities in order to capture this new growth through different channels of the bank in order to grow consumer loans in the middle- and upper-income segments. And we're also implementing the use of AI across the bank in order to improve the service, improve the understanding of our customers and risk management as well. So all of this is improving the customer experience and operational efficiencies and the ability to grow. And in the high potential customer segments or high potential segments, what we're looking to do is to grow and create a larger value creation. And in that area where we're focused on in commercial loans, especially as SMEs, where we see potential to continue growing in the medium term. We've seen good levels of growth recently, especially if we exclude certain government-guaranteed loans. Consumer loans as well, there's a large area to grow. If we look at what's happened today versus prior to the pandemic, this segment has decreased its importance in the overall proportion of loans in Chile. So the loans to GDP penetration has come from levels above 90% to around the 75%. And one of the strongest hit not the most important in the total loan book of the industry is consumer loans. So the strongest hit with a lower percentage in the mix is consumer loans that dropped somewhere almost 20%, 18%. So this area, we think will continue to grow once the economy improves, once unemployment reduces, there's better growth in labor across the board. So here is a very interesting area to grow. SME is very interesting because it's also very cyclical in terms of the economy. So as long as the economy continues to improve, better unemployment, we should see a better activity in these segments and with a better overall view -- business view of Chile, there should be more demand for loans in these 2 segments. And finally, in the large corporate segment, we've seen very little growth, very little demand. But as Rodrigo said, there's a lot of projects in the pipeline with a positive evolution in the future. This should also help drive loan growth for the industry. Saying that, we're in a very good position to capture this growth in organically or inorganically because we have a huge level of capital that allows us to do this. We don't have any impediments that make us more reluctant to grow and take on growth because we have a very good level of capital in order to do this, and that's the idea of the capital that we have. And finally, operational productivity, which is what we mentioned in the presentation, this helps all the areas improve overall and maintain our profitability high. Operator: Our next question is from Tito Labarta from Goldman Sachs. Daer Labarta: Just with the upcoming presidential elections, just kind of curious sort of where you think things stand from here? And depending on which candidates when -- how do you see that potentially impacting the macro-outlook for next year and then also trickling down to the bank's profitability? Rodrigo Aravena: Thank you for the question. I'm Rodrigo Aravena. I think that it's very important to be aware that in Chile, we have a political system, which is based on important counterweight between the central government, the Congress, the system, et cetera. So that's why it's not only a matter of who's going to be the next in Chile. We have also take into consideration the future composition of the Congress as well. According to the surveys, there's going to be a runoff in December, but we're going to have the final results of the Congress in November in the next week. Even though there is uncertainty about the final composition of the Congress and also in terms of who's going to win the election. I think that it's worth mentioning that today, which is an important difference compared to the election that we had 4 years ago, that there are some consensus in Chile between different candidates and different political factors as well. In terms of put on the table, I would say, 3 important aspects in the policy agenda. First of all, there is a consensus in Chile in terms of the need to improve the long-term sources of economic growth. When we analyze all the different proposals, they are aware about the importance to promote more economic growth mainly investment, especially considering that the external environment will be a bit more challenging in the future. So we don't have important differences in terms of the diagnosis of the importance of economic growth. Also, today, there are not important proposals with higher tax rates. In fact, there are some proposals that are based on lower corporate tax rate, for example, which is a good news as well for the future. And also, we also have an important consensus in terms of the importance to improve, for example, the licenses and permit system that we have in Chile, which is an important factor to promote investment in the future. So all in all, today, I, which is the main difference compared to the elections that we had 4 years ago, there are not important differences in terms of proposals for economic growth for taxes, et cetera. So when we consider this scenario and also the recent improvement in some leading indicators, I think that we have good reason to expect a more dynamism in domestic demand in the future, especially in investment and consumption, even though we have uncertainty for the final result of the presidential elections. Pablo Ricci: And in terms of the bank, the most important result of this is more demand and activity in Chile, which should drive loan growth in all the segments. So in commercial loans, large corporates and multinationals concessions and SMEs, consumer loans, et cetera. So what we've seen is a period of low growth, high interest rates. And now we're moving into a more attractive period with better business confidence, hopefully, better consumer confidence, and that should lead to stronger loan growth, and we have the capital in order to grow. So we don't need more capital. So that means additional points in terms of the bottom line for ROE. Operator: Our next question is from Neha Agarwala from HSBC. Neha Agarwala: Congratulations on the results. Just a quick one on the outlook for 2026. What kind of pickup should we -- can we expect in the coming quarters in terms of loan growth? And what would be the drivers for earnings for 2026, given that there should be some pressure on the NIMs with easing inflation? Pablo Ricci: Neha, I think in 2026, well, today, we don't have guidance yet because it's -- we're working on the budget, and it's something that's being discussed internally in the bank. But what we can say is similar to what we've said in the other questions is what we're foreseeing is a better overall aspect of Chile in the next years. And this should allow us to have in the banking industry to have better results in terms of loan growth, the main area, the main driver for growth for us in the following year. The inflation level, what we expect is to return to levels closer to 3%, somewhere similar in terms of the overnight rate, not too much lower. We're already close to the long-term levels there. So in order to really generate a stronger bottom line over the next years, we should see loan growth is the main driver. So what we have and what's very positive for Banco de Chile is that we have an attractive level of CET1 total base ratio, and this is allowing us to grow when the opportunities arise. And hopefully, that's sooner than later. Rodrigo Aravena: And also Neha, this is Rodrigo Gara. Important to mention as well that we are not expecting important changes in interest rate for the next year. Today, it's likely that the Central Bank will reduce interest rate by 25 basis points the next meeting or probably in the first quarter of the next year. Today, the annual inflation is at 3.4%. So for the next year, it's reasonable to expect a convergence towards the target, which is 3%. So I mean we are not expecting important adjustment in the key factors behind the ROE and NIM as well since we are not seeing important room for adjustment in both interest rate and inflation as well. Operator: [Operator Instructions] Our next question is from Andres Soto from Santander. Andres Soto: My first question is for your loan growth next year, which I will assume you are expecting an acceleration versus 2025. Which segments are you expecting to see faster growth? Is going to be commercial lending in your comments about the third quarter results. You mentioned some market share losses in consumer as other players are focusing in the lower segments of the population. So I would like to understand what is missing for you guys to take a more optimistic view on consumer lending. You have mentioned in this call, this is a segment that is still depressed compared to the pre-pandemic levels. So what is missing for you to see faster growth in the consumer? And overall, what is going to be the driver in 2026 for the total loan growth? Pablo Ricci: Well, in terms of loan growth, what we're seeing the main driver, as you know, commercial loans is the largest mix of the portfolio. So -- and what's been most impacted over the last 5, 6 years has been commercial loans as importance in terms of volumes. So in terms of volumes, we should see a recovery in terms of commercial loans. Within that, we're expecting with better business confidence with more -- less uncertainty, we should see a return of larger corporate demand in Chile. SMEs as well should have a very good activity in this environment with a better global activity in GDP, unemployment, they're much more cyclical, as I mentioned. And in consumer loans, we should see slowly as we should continue to see slowly that the consumer loans will continue to improve in line with unemployment rates. For what's happened in the consumer loan segment is that some players in Chile have implemented or have focused on the lower income segments where we're not active today, penetrating that market more than us. Probably we have a customer base that's a higher net worth customer base. as well that it's not demanding as much loans. But we continue to grow well. So in a new environment next year with better business and consumer confidence, we should see more attractive loan growth in this segment, and we're implementing different digital initiatives to understand the customers in order to offer them products to the channels that they desire with business intelligence, much more focused on each customer rather than global plans that are focused over the entire segment. So we're trying to personalize much more of the information that's going to these customers. Next year should be a more positive year overall. Andres Soto: My next question is regarding capital. Your core equity Tier 1 is 400 basis points above all your peers, basically. What level do you guys feel necessary for the growth that you see ahead? And how you imagine the capital normalization of Banco de Chile taking place? How long is going to take place for you to get to a level you see as the adequate level for capital? Daniel Ignacio Galarce Toro: Andres, this is Daniel Galarce. From the capital point of view, as we have said, of course, we have today important buffers and favorable gaps over the regulatory limits. Basically, everything depends on how the portfolio will normalize in terms of loan growth in the future. And basically, in which products we will increase and we will expand our portfolio in the future as well. As Pablo said, we are expecting to grow more in commercial and consumer loans. We want to be leaders in those lending products and those products are more intensive in terms of use of capital, of course. So everything depends on the evolution of loan growth in the future. So probably we will have a normalization in terms of capital buffers probably over the midterm, 3 years or something like that, depending on the economic activity in the country. Andres Soto: And which level will be that? Daniel Ignacio Galarce Toro: Well, we don't have any specific target, but in the long run, we will -- we need and our aim is to be always at least 1.5%, 2%, something like that in the range of 1% to 2% above regulatory limits. Operator: We would like to thank everyone for the questions and the participation. I will now hand it back to the Banco de Chile team for the closing remarks. Pablo Ricci: Thanks for listening, and we look forward to speaking with you for our full-year results next year. Operator: That concludes the call for today. Thank you and have a nice day.
Operator: Good evening, everyone. Thank you for standing by. Welcome to StoneCo's Third Quarter 2025 Earnings Conference Call. By now, everyone should have access to our earnings release. The company also posted a presentation to go along with its call. All material can be found online at investors.stone.co. Before we begin the call, I advise you to review the disclaimer included in the press release and presentation, which outlines important information about forward-looking statements and non-IFRS financial measures. In addition, many of the risks regarding the business are disclosed in the company's Form 20-F filed with the Securities and Exchange Commission, which is available at www.sec.gov. [Operator Instructions] Joining the call today is Stone's CEO, Pedro Zinner; the CFO and IRO, Mateus Scherer; the Strategy and Marketing Officer, Lia Matos; and the Head of IR, Roberta Noronha. I would now like to turn the conference over to your host, Pedro Zinner. Please proceed. Pedro Zinner: Thank you, operator, and good evening, everyone. I'd like to start with a brief update on our key performance metrics and our capital allocation strategy. In the third quarter, we continue to make solid progress toward our 2025 objectives, even in a more challenging macro environment. Our adjusted gross profit grew 15.2% year-to-date despite our ongoing share buyback program, which has had some impact on this metric. Meanwhile, for the first 9 months of 2025, our adjusted basic EPS reached BRL 6.9 per share, up 37% year-to-date, keeping us well on track to meet our full year target. Despite external headwinds, our team is performing with discipline and focus, delivering consistent value to our clients and shareholders. Turning to capital allocation. We have maintained a disciplined approach to returning capital to shareholders through our share buybacks. In the last 12 months, we have returned BRL 2.8 billion to shareholders, about 10% yield for the period. Building on the BRL 3 billion in excess capital we identified last year, I'm pleased to report that by the end of October, we had already returned 74% of that amount to investors. This underscores our commitment to return excess capital through buybacks or dividends when we don't have immediate value-accretive investment opportunities. Our goal remains the same, exercise financial prudence while maximizing long-term value creation for our clients and shareholders. With that, I'll now hand it over to Lia for a closer look at our quarterly numbers. Lia, please go ahead. Lia de Matos: Thank you, Pedro, and good evening, everyone. Starting on Slide 4, we dive into our consolidated bottom line and return on equity results. We are pleased to see another quarter of consistent performance towards our goals despite a continued challenging macro environment. Our adjusted net income grew 18% year-over-year with a 13% increase in continuing operations. This performance was driven by 3 key factors. The first one relates to the successful adjustment to our pricing policy implemented earlier this year, which helped offset the impact of higher interest rates in the country. Second, the strategic use of client deposits as a funding source helped improve efficiency by lowering our average funding spreads. And third, a lower effective tax rate compared to the same period last year also contributed to the results. These effects were partially offset by our decision to more evenly distribute marketing expenses this year, which negatively affected the year-over-year comparison. Our adjusted basic EPS reached BRL 2.57 per share, growing 31% year-over-year. The above net income growth was supported by continued execution in our share buyback program. Regarding returns, our ROE continued to expand sequentially. Consolidated ROE expanded 8 percentage points year-over-year to 24%, while Financial Services ROE from continuing operations increased 4 percentage points over the same period to reach 33% in the quarter. Now let's detail our continuing operation’s top line performance on Slide 5. Total revenue and income grew 16% year-over-year, reaching BRL 3.6 billion, driven by continued solid execution in our core business. Importantly, this growth was achieved despite lower floating revenues as we began deploying client deposits as a funding alternative in our operations starting earlier this year. While this strategy naturally reduces floating revenues, it generates savings in financial expenses, reinforcing the strength of our funding model. Our adjusted gross profit from continuing operations was BRL 1.6 billion in the quarter, growing 12% year-over-year. This growth was largely aligned with TPV as higher revenues were partially offset by increased financial expenses driven by the higher CDI rates. On Slide 6, we highlight our operating metrics, beginning with our payments business for MSMBs. Our active client base grew 17% year-over-year, reaching 4.7 million clients with 38% classified as heavy users, leveraging more than 3 of the solutions we offer. This demonstrates not only growth in the scale, but also the engagement across our product ecosystem. MSMB TPV grew 11% year-over-year in the third quarter, reaching BRL 126 billion. Such growth comes from a combination of a 49% growth in PIX QR code volumes, which continues to outpace card TPV and capture share from debit transactions and the 6% growth in card volumes. Compared to the previous quarter, the yearly growth showed a slight deceleration reflecting a more challenging macro environment and softer same-store sales among our clients, trends that are persisting in the fourth quarter, and we're monitoring carefully. On Slide 7, we highlight the performance of our banking operation. We're pleased to report continued growth in our active client base, which increased 22% year-over-year, reaching 3.5 million clients. This sustained expansion reflects both strong client acquisition and the evolution of our payments and banking bundle offers. Client deposits grew 32% year-over-year and 2% quarter-over-quarter, reaching BRL 9 billion during the period. While we observed a slight decline in our deposit base relative to MSMB TPV from 7.2% in the second quarter to 7.1% in the third quarter, this primarily reflects daily seasonality driven by clients' cash out obligations, and we saw a quick rebound on the days that followed. Viewed from another perspective, the average daily deposit base increased 40% year-over-year and 6% quarter-over-quarter, expanding relative to TPV. The composition of deposits in the quarter moved slightly towards more time deposits, which now accounts for 84% of total deposits, slightly up from 83% in the previous quarter. This growth underscores increased adoption of our investment solution, leading to a higher engagement with our banking features. Now turning to Slide 8. We review the evolution of our credit operation. In the quarter, we observed an acceleration in portfolio growth, combined with disciplined asset quality and in strict alignment with our risk appetite statement parameters. The total credit portfolio grew 27% sequentially, accelerating compared to the previous quarter and reaching BRL 2.3 billion. Of this, BRL 2.1 billion is attributable to our merchant solutions, primarily working capital financing for MSMBs, which grew 28% quarter-over-quarter. Additionally, just over BRL 200 million relates to credit cards, which increased 18% over the same period. Despite the acceleration in portfolio growth, our credit quality remains strong. NPLs 15 to 90 days reached 3.12%, while NPLs over 90 days stood at 5.03%. The rise in NPLs over 90 days reflects the natural maturation of the portfolio, whereas increase in NPLs 15 to 90 days was primarily due to specific client payment delay, which has already normalized in the fourth quarter. As you may recall, in the second quarter, we made a deliberate decision to increase coverage ratio levels in response to the weaker macro outlook. With no additional adjustments required this quarter, the coverage ratio declined slightly to 265%, yet remaining at a conservative level. Similarly, our cost of risk, which reflects provisions recorded during the quarter, decreased from 20.2% to 16.8% sequentially, staying within the expected mid-teens range and reflecting disciplined risk management. Following the provision adjustments in Q2, we implemented corresponding pricing changes. This ensures a disciplined balance between risk and return while supporting sustainable growth. As you can see in the slide, the average monthly credit rate was 2.9% in Q3, up from 2.7% in Q2. The metric is calculated by dividing the credit revenues by the average credit portfolio. However, the result is significantly impacted by product mix as the inclusion of nonfinance credit card portfolio and higher growth in specialized debt disbursements can dilute the rates. In summary, I'm pleased with how our company has evolved and remained resilient despite ongoing macroeconomic headwinds. We continue to execute with focus on our clients, confident that there are multiple opportunities to help them grow further and manage their business in a more seamless and effective way. Now I want to pass it over to Mateus, who will discuss our financial performance in more detail. Mateus? Mateus Schwening: Thank you, Lia, and good evening, everyone. Let's discuss our adjusted consolidated P&L for continuing operations, which is shown on Slide 9. Our cost of services increased 12% year-over-year, decreasing 90 basis points as a percentage of revenues. This reduction reflects the combination of efficiency gains in logistics, lower transaction and technology costs and lower provision for acquiring losses, which were partially offset by higher loan loss provisions in the period. Administrative expenses increased 7% year-over-year, resulting in a reduction of 50 basis points as a percentage of revenues, driven by continued operating leverage across our support functions. Selling expenses increased 21% year-over-year, increasing 50 basis points relative to revenues. This reflects a more evenly distributed marketing spend in 2025 compared to last year, when they were skewed towards the first half of the year given the strong investments in sponsoring a specific reality show. Financial expenses increased 28% year-over-year, representing a 280 basis points increase as a percentage of revenues. This was largely due to a higher average CDI rate year-over-year, which was partially mitigated by increased use of client deposits as a lower cost funding source, which intensified since the end of the first quarter. Lastly, I would just like to remind that the execution of our capital distribution strategy negatively affects our financial expenses. Other expenses increased 2% year-over-year and reduced 40 basis points relative to revenues, which was mainly due to an increase in gains related to the sale of POS. Our effective tax rate was 15.3% in the quarter, down from 18.6% in the third quarter of '24. The year-over-year decrease was primarily driven by an intragroup interest on equity operation and higher benefits from Lei do Bem. Moving to Slide 10. Our adjusted net cash position ended the quarter at BRL 3.5 billion, decreasing BRL 140 million sequentially despite BRL 465 million in share buybacks executed in the quarter. Excluding these buybacks, adjusted net cash would have increased by BRL 325 million. Once again, I want to thank you all for your time and continued support. Our focus remains on executing our strategy effectively and in a value-accretive manner while listening closely to our clients, meeting their needs and ultimately creating long-term value for our shareholders. With that said, we are now ready to open the call to questions. Operator: [Operator Instructions] Our first question comes from Kaio Prato with UBS. Kaio Penso Da Prato: I have 2 on my side, please. First, on your prepayment business, would you say that you are at the all-time high level of spreads in the business post the pricing adjustments now? And how do you see the sustainability of this level going forward, given the current competitive scenario and the potential beginning of the cycle? So, this is the first. And then my second, which is also linked. Looking forward, what do you think are the main drivers for earnings growth of the company apart from the policy rates that should be a clear support. So, what do you think should be the main source of growth? Is this an acceleration in credit growth? Is this efficiency or any other initiatives? You can help us understand what should be the drivers for 2026, given the slowdown also on TPV that we are seeing, except from the policy rates would be good. Mateus Schwening: [Audio Gap] overall gross profit. But in terms of pricing specifically, I think what we did successfully was to pass through the increase in interest rates, but I don't think we are at the all-time high spreads. The second question around earnings growth levers… Lia de Matos: Kaio, can you hear us? Kaio Penso Da Prato: Now I can hear you, but I think we missed the answer. Lia de Matos: Oh okay. Sorry, we just got noticed that you weren't hearing. I think maybe Mateus... Mateus Schwening: Can you hear me well? Lia de Matos: Worth replaying the answer. Kaio Penso Da Prato: Yes. Now I can hear you. If you can repeat, please. Mateus Schwening: Okay. Sorry for that. Let me replay the answer. So, the first one around prepayments and pricing. I would not agree with you that we are at the all-time high spreads. I think when we look at the gross profit yield, so gross profit as a percentage of TPV, it is higher than it was in the past at 1.26% for the third Q '25 versus, for example, 1.21% in the beginning of '24. But that increase has been mostly due to the increased penetration of banking and credit over time and not a result of prices on prepayments on a stand-alone basis. And I think this is consistent with the overall strategy. I think what we did quite well was indeed to pass through the increase in interest rates that we saw in the country. But I wouldn't say it's all-time high. I think when we look at spreads, we think that they are at a healthy level. And then in terms of earnings growth levers for next year, I think we've been growing especially the credit portfolio in a pretty good pace according to the plan. But when you look at the contribution for credit in the P&L now in '25, it is still quite small because whenever we grow the portfolio, we upfront the provisions. Now as we go into 2026, I think probably credit is going to be of a larger contribution to the overall P&L, simply as a result of maturing the offering and having a much higher base to start with. And other than that, I think OpEx in general is something that we are paying special attention given the weaker macro environment. So, we feel that there may be some levers in terms of OpEx management to boost earnings growth in 2026 as well. Operator: Our next question comes from Guilherme Grespan with JP Morgan. Guilherme Grespan: My question is going to be on the payments TPV and environment. I know this is basically a common question in every call, but we have been seeing a deceleration on part of the volumes, and we see some players starting to come up more hitting the tape. To mention a few, we have iFood going after, I think, a very important part of your base, which is restaurants. We have BTG launching [ acquiring ]. We have smaller players such as CloudWalk also appear a little bit more. So, my question to you is how you're sensing the competitive environment in your base, if you're feeling is there any specific player being an aggressor here? And how do you see the pricing trends going forward? Because the rate that Kaio mentioned, I think it's been postponed a little bit, the potential tailwind coming from the funding cost. So, I wonder just to check if you see any environment for the spreads in the business to stay where they are or even increase in the next 6 months? Lia de Matos: Thank you, Guilherme. Let me start maybe elaborating a little bit on market share and TPV dynamics and then pass it over to Mateus to talk a little bit about thoughts on pricing. So -- we still have to wait for the official ABECS numbers, right? But in our view, the third quarter should be roughly stable in terms of market share. In the second quarter, we did see a bigger market share loss as a result of our decision to reprice, as we've said before. This was sort of a onetime effect as we see it, in the quarter. We expect this to stabilize somewhat in the third quarter. And we reinstate that this decision was accretive overall for the business. That said, when we look ahead in terms of TPV growth, we continue to see gradual deceleration, and this is primarily a reflection of industry dynamics, meaning industry itself decelerating, but also a weaker macro environment, which we expect to impact more the smaller clients within our base, right? So, I think that's the message regarding market share and TPV dynamics. But looking ahead, we remain confident in our ability to continue to evolve in our plan consistently, like Mateus mentioned, more and more, we expect credit to be a driver of profitability and growth looking forward. And we're not with the sole purpose of pursuing market share at any cost. So, profitability remains our priority. And the path forward is not -- it's not simply through pricing adjustments, right? It should be through enhancing our value proposition to clients, evolving on our product offerings, scaling credit, evolving on our bundling strategy and really making sure that we can consistently win clients within the segment overall, in line with our strategic priority. Mateus Schwening: And if I may add and then talk also about pricing, I think you mentioned other new players or new entrants in the market. I think we've seen these kinds of movements before, players bringing new offerings or expanding their sales footprint. They tend to come in waves. At any given point in time, there's always someone trying something new in the market, and I think this is normal. That said, when you look at the actual economics behind these new players or new initiatives, it seems that overall players remain rational, and I don't see anyone pursuing growth at any cost. That said, when we talk about rate cuts, I think we've been vocal about this a couple of times, which is short term, for sure, there is a positive impact to us. Every 100 basis point cut in interest rates, there's a positive benefit of around BRL 200 million to BRL 250 million in EBT. But in terms of overall spreads, I don't think it's reasonable to assume that we're going to keep the benefit from interest rates long term. I think it's a matter of timing, how long we can keep these prices until we pass it through. So, I think the message here is, yes, there's going to be a positive impact 2026 if rates goes down. I don't think we should assume that we're going to be able to keep those spreads longer term. I think overall, the level of spreads are healthy in our view. Operator: Our next question comes from Renato Meloni with Autonomous Research. [Technical Difficulty] I believe we are having some technical issues with Renato. I'm going to go with Eduardo Rosman with BTG. Eduardo Rosman: My question, I think, would be to Pedro, right? Where do you believe the company stands in the organizational redesign, right? I think you've been highlighting over the last few quarters that the goal is to be like a stronger unified brand and product offering with a more kind of a team-oriented culture and trying to build like a truly kind of a customer-centric mindset. How do you feel about the progress so far on that front? Pedro Zinner: Rosman, thank you for the question. I think this is -- I think we evolved a lot. I think as you mentioned, we made a big shift from a kind of a BU organization, very much silo-centric in some ways to a fully functional organization as we have as of today, right? I think this is really helping us in terms of setting the strategy from a bundle perspective and how we actually put this bundle offering into our clients in the best way for them and for the company. So, I think in a nutshell, I think we are almost there. I think there are some pain points that we have to adjust over time. But in a nutshell, I think we are in the right direction. Operator: Our next question comes from Antonio Ruette with Bank of America. Antonio Gregorin Ruette: So, I have 2 questions on my side. So, first on credit, you mentioned that now your credit product is more mature and it should start to represent more on your P&L. So, if you look at your portfolio today, do you have a better estimate on what should be your cost of risk, your NPL and your ideal coverage ratio now that you have a better sense of what your portfolio should be? Also, I have a second question on your revenue composition. If you look at your accounting statement, you can see like revenues for transactions declining over 20% and revenues for the financial income growing more than 30%. I understand here that there is an allocation that you can do between these 2 revenues in terms of prepayment and MDR. But -- and the ideal answer here would be -- would look at both together. But if you were to split, what would explain the movements? If you could go through them, it would be great. Mateus Schwening: Thanks for the question, Antonio. So, let's just start with credit first. In terms of cost of risk, I think the expectation is that they should remain in the mid-teens going forward. I think we've mentioned this before, but part of the impact that we saw in second Q '25 was retroactive, movement that we did due to macro and now it's normalized in third Q '25. That said, when we look ahead, we do expect cost of risk to stay above the levels we had in the first quarter of '25 due to the macro-driven updates we did in our credit models. So that's the expectation on that end. In terms of NPLs, I think the answer is actually dependent on the rate of growth for the portfolio. When we look at the expected credit losses that we have for the product, they should be in the very high singles or either very low double digits. When you look at the NPL metric, it now stands at around 5%. But the main reason for that is because we have still a lot of vintages that are not fully mature, right? The portfolio is still growing. So, as we mature, NPL over 90s, they should continue to grow probably towards that very high single-digit mark. But in terms of targets, I think we're not really targeting a level of cost of risk or a level of NPL metrics. I think what we're trying to maximize here is the NPV of the cohorts and especially the NPV of the client relationships. And I think a good point around that is that when you look at the interest rates that we charge for the product, we had an increase in the cost of risk in the past 2 quarters, but that increase was also followed by an increase in the interest rates that we're charging to our clients. And as long as we see this opportunity to make these kinds of trade-offs, we're happy to do as long as it increases the NPV for our client relationships. So that's on the credit piece. On the revenue side, I think you touched on the answer, which is these movements between transaction revenue and financial income is mostly a result of rebalancing between the 2 lines. Now that we have most of the volume from the company flowing through a single platform, we have a lot more flexibility in how we set up these bundles and how we allocate revenues internally. So, I know you asked us to try to segregate these lines. But when you look at the bundles that we're offering nowadays, there is no such thing. So, the client usually pays a single fee and embedded in that fee, we have the prepayment revenues and the transactional revenues. So honestly, I think the best way to look at it is looking at both lines combined. Operator: Our next question comes from Marcelo Mizrahi with Bradesco BBI. Marcelo Mizrahi: I have a question regarding the changes on the stages of the credit. We saw in the last quarters, especially in this last one, the cure of the Stage 2, Stage 2, a higher amount. So can you guys please explain a little bit the concept of what's the kind of the credit that is classified at Stage 2 that are the ones that come back to Stage 1. So why we were seeing such a lot of changes on the stages in the last 2 quarters? And probably it's because of the type of the credit. So just to understand how do you guys classify this credit? You know that -- we know that looking forward, the company will grow a lot. So, it's very important to understand. Mateus Schwening: Yes, for sure. Thanks for the question, Mizrahi. So, around Stage 2 and 3, especially, I think when you look at Stage 3, it's much simpler. So, most of the increase that we had in Stage 3 amounts from the balances overdue over 90 days. So that's pretty much the maturation of the portfolio. When it comes to Stage 2, I think we have 2 different factors here. The first is actually the maturation of the portfolio as well, but we also have the entry of some credit restrictions affecting a portion of clients in the market. So, for example, if a merchant defaults somewhere else, even if that merchant is not defaulting our portfolio, we move that client to Stage 2. And this can create a lot of volatility between the stages because, as you know, credit restrictions in Brazil are quite volatile. So that's the main explanation. Operator: Our next question comes from Daniel Vaz with Safra. Daniel Vaz: Pedro, Lia, Mateus, just to go back to Lia's comment on the credit side, I think it was something about increasing the pricing, right? I just wanted to touch base on that and elaborate a bit more on what exactly this scenario refers to. I mean, should we interpret this repricing or upward pricing as a reflection of a somewhat riskier environment? And just to double-click on that, how sensitive have the clients been to these adjustments, right? So, I think when we see, for example, on the retail end, not a good comparison, but new bank has been like testing a lot pricing upwards, and we don't see too much elasticity on that. So, it will be good to hear on the elasticity of your product and how sensitive clients have been to these adjustments. Mateus Schwening: Daniel, Mateus here. Thanks for the question. So, I think that's actually a great point, which is I think credit is probably the product that we started the latest. So naturally, when we think around pricing credit, it started as a cost-plus model, and we are now starting to test real sensitivity from our clients and test the right pricing point. So I think what we did in second Q and third Q, if you look at Slide 8 from the earnings presentation, the average yield of the portfolio increased from 2.6% in the first Q to 2.9% in the third Q, even though we have a higher mix of credit cards in the portfolio, which have no interest right for the part that is on [indiscernible]. And I think that happens at the same time that the macro environment is becoming more complex, but it's not a response from the macro environment. I think the reason why we've been able to price upwards is mostly because we are maturing on the overall pricing process for the product. And I think like you mentioned, other players were successful in terms of increasing pricing without too many sensitivity from the customers. And I think we're figuring out the same thing on our side. Daniel Vaz: If I may follow up, have you just tested like way higher yields on the credit and to some group of clients, to control group of clients? How have this test performed so far? If you could comment on that, it would be great as well. Mateus Schwening: Yes I think we are early beginnings on the testing side. We avoided to do like huge spikes in prices because of selection bias on the cohorts. So, I think what we had here were gradual increases. But again, I think it's early beginnings in terms of actually figuring out how much the clients are willing to pay in the product. And I think there's more opportunity to come. Operator: Our next question comes from Renato Meloni with Autonomous Research. Renato Meloni: Can you guys hear me? Mateus Schwening: Yes. Lia de Matos: Yes. Renato Meloni: Sorry, I had an issue with my mic earlier. I wanted to ask on the COGS reduction, and you mentioned about the efficiency gains on logistics or transaction technology costs. So, I wonder if you could expand a little bit on those gains. And I'm trying to understand here if this is a one-off or you can still keep doing this and maybe what's a normalized level that you could see? Mateus Schwening: Thanks for the question, Renato. So, in terms of cost to serve, I think broadly speaking, when we look at the metric, excluding the credit provisions, we're starting to see signs of operational leverage, particularly in customer service, where the adoption of AI has been driving a lot of efficiency gains and in logistics, where scale is generating also meaningful cost benefits. In the quarter, specifically, we also benefited from lower transactional costs in tech and lower provisions for acquiring losses, which were partially offset by higher amortization of intangible as we are completing a lot of projects that were started in previous years. Now in terms of what is one-off or recurring, I think the only portion of cost to serve that is not recurring is the level of provisions for acquiring losses because they were positively impacted by a specific collection initiative in the quarter. And when we look ahead, we do expect more amortization of technological projects to come because we are more and more completing a lot of projects that were started a couple of quarters ago. So, this trend of elevated D&A should continue throughout the next year. So, I think the message in terms of cost of service, overall, we are indeed seeing a lot of efficiency and operational leverage coming, but I wouldn't take the third quarter levels as a new normal. Operator: Our next question comes from Neha Agarwala with HSBC. Neha Agarwala: Congratulations on the results. A quick one on asset quality. I think in your opening remarks, you mentioned there was one particular case regarding nonpayment or delay in payments. Could you elaborate on that? What happened? And my second question is on the volumes. I think Lia mentioned that we expect deceleration in volume growth in the coming quarters. For the MSMB segment, we are already at 11% year-on-year for this quarter. What do you mean by deceleration in the coming year? Should we expect something like 8%, 9% or it could go lower than that? Any color about the level in the next 2, 3 quarters would be very helpful. Mateus Schwening: Thanks for the question. I will start with the asset quality and then Lia can add on the TPV side. So, on the asset quality, I think it's quite simple. We had a specific issue with a client in the specialized desk, which delayed a couple of days, but it's already normalized. This was not a big case. So, we're talking around 40 basis points of the NPL 15 to 90 days. So, if you do the math, it's around between BRL 2 million and BRL 4 million, so a very small low one. But again, I think the main message here is that it affected the NPL 15, 90 days in the quarter, but it's already -- it has already been addressed. Lia de Matos: Good. Neha, just complementing on the question regarding TPV dynamics and what to say looking ahead, right? It's hard to pinpoint a number, but the general trend and what we've been monitoring and what we've been seeing is growth which is slightly above the industry growth. The general trend of deceleration is mostly driven by the industry, right? We are seeing this year more specific macro impact to our client base, but we expect that to soften throughout next year. But in general, I think what we can say is industry deceleration as we've been vocal about for several quarters already and our growth sustaining above the industry with slight market share gain in the long run. So, I think that's the overall trend that we can talk about. Pinpointing whether it's 11%, whether it's more or less, I think it's a little bit more difficult. Our perspectives on industry growth for next year is on high single digits, low double digits, but hard to pinpoint specific figures. We prefer to wait and see how the year will close out. Operator: Our next question comes from Gustavo Schroden with Citi. Gustavo Schroden: Sorry to insist about the interest rates topic, but I think that we've seen changes regarding the expectations for interest rates next year. So maybe the easing cycle should be less pronounced than before expected, right? So especially assuming yesterday's minutes from the Central Bank. So, my question here is that you are -- I mean, I think that everybody here is modeling and thinking on Stone assuming this low interest rates next year. But if you take into consideration that the average interest rates next year should be also even slightly above this year. So my question is how sensitive is Stone funding costs to this average interest rates for next year? So again, we've seen you increasing prices. Lia mentioned about the higher interest rates for SMBs. And so my point here is, in this scenario of a higher average interest rates, how should we think the funding costs and prices next year? Mateus Schwening: Thanks for the question, Gustavo. So first of all, in terms of the actual environment, I don't think we have a strong view. So we set up the operation in a way that we respond to the changes that we have in interest rates. We don't spend a lot of time trying to forecast the scenario. But indeed, if you were to look at the scenario now, there is a small decline embedded in the yield curve. And our sensitivity to that decline is that for every 100 basis points reduction in interest rates, all else being equal, so meaning no price reductions, we have a positive impact in our pretax earnings of around BRL 200 million and BRL 250 million. Now in terms of what's actually going to happen, I think our intention and our desire is to keep our time. So we tend to pass it through to clients, but there is kind of a lag every time interest rates decline. But like I said a couple of answers ago, long term, when you look at the actual gross profit yield that we're having on the payment side, we think it's in a very healthy level. So I don't think it's reasonable to assume that we're going to keep it long term. As for the trend for financial expenses, again, I think it's very dependent on the level of interest rates. So we're going to see the scenario and adjust accordingly. Gustavo Schroden: Great, Mateus. Just let me do a follow-up here because you said the sensitivity that you mentioned for each 100 basis point decrease, it is for, I mean, end of period interest rates or average interest rates? Mateus Schwening: It is for average. So whenever we have an average decline of 100 basis points, then we will have the impact for the full year. Operator: Our next question comes from Tito Labarta with Goldman Sachs. Daer Labarta: My question is on your gross profit, right? I mean you're still on track to deliver your guidance for the year, but it has been decelerating. Given some of the questions on slower TPV growth, rates are stable, you're mostly done repricing, should we expect the gross profit to continue to decelerate a bit from here, at least all else equal, just given the trends in the industry? Should we expect any positive seasonality in 4Q? And we did see a bit of a jump in your loan book this quarter. Like at what point do you think you could get to where the loan book is enough that it starts to boost that gross profit, right? I think it's still -- it's growing fast, but from a low base, right? So just to think about the evolution of gross profit given where we are today and when that can maybe inflect and maybe grow faster from here? Mateus Schwening: Tito, thanks for the question. So, I think when you look at the gross profit yield, usually 4Q is seasonally lower because we have more debit and PIX transactions in the mix, which tend to have a lower take rate on the payment side. But I think in general, when we look long term, I think the expectation is that payment spreads, they are at a healthy place. So, we don't see a lot of pressure, but also not a lot of upside in that part of the business. I think what's going to be the defining factor for '26 on that end is actually the interest rate movements that we just discussed. But other than that, I think the expectation is indeed that banking and credit will continue to grow at a faster pace than the TPV growth. And then over time, that should be accretive to gross profit yields. In terms of the credit that you asked, I think we are already starting to see the signs of a bigger contribution in the P&L. So, if you look at the revenue jump versus the delta in provisions that we had between the second Q and the third Q, it was already significant. Of course, when you look at gross profit as a whole, it is still a very small factor. But I think it has already started, and I think it gets more significant throughout 2026. Daer Labarta: Thanks Mateus. That's helpful. And yes, I understand the negative seasonality on the gross profit yield, but you should also have some positive seasonality on volumes. So net-net, I mean, not asking for guidance, but just a little bit how that could potentially impact gross profit in 4Q? Mateus Schwening: Yes. I think when you look at gross profit on a nominal basis, then the seasonality in the first Q is positive for sure. I think when you look at the yields, then you have a negative seasonality because of the mix. But overall, I think if you're thinking about nominal terms, then the seasonality for first Q is positive. Operator: Our next question comes from Pedro Leduc with Itaú. Pedro Leduc: Congrats on the results. Two quick questions. I know you guys have lifted the 2027 guidance once you did the Linx deal. I know it's not in the presentation here. But wondering if you plan on reinstating it at some point, maybe with the 4Q release, if it's '27, maybe it's something another period of time? It seems like you're tracking for this year extremely well and for most of the 2027 figures as well. But just trying to get a sense if you guys plan on reinstating it, if it's in the same time period, same inflows. And then the second question, kind of tying up to this one as well. In that previous '27 slide, you talked about a 20% effective tax rate. You're running at 15%. In the meanwhile, we're having changes in taxation for several of the Brazilian entities. Just trying to get a sense from you how we can think about this income tax rate maybe next year and then thinking whenever you guys plan on releasing a longer-term guidance. Pedro Zinner: Pedro, Pedro here. I'll address the first part of the question, then I'll turn it over to Mateus. I think it's true that TPV performance has been more challenging than we initially anticipated back in 2023. And I think as Lia mentioned, partly, I think it's due to the macro environment, which is worse than we initially expected. But we want to see how the year will close out first before we can talk more concretely about 2027 guidance revision, right? So, in fact, we plan to adjust gross profit indicator to reflect only continuing operations. And we may take the opportunity for a more comprehensive review of 2027 guidance when we do that. But that said, I think it's important to note that when we look at the long-term plan as a whole, our execution remains broadly on track with the credit book, deposit base and the overall profitability, I think we are on the right track since we established back in 2023. I'll hand it over to Mateus. Pedro Leduc: Thank you, Pedro. Mateus Schwening: Yes, so on the effective tax rate, I think 2 messages here. So yes, we are indeed operating below the 20% mark that we provided at the long-term guidance. And if you look at the 4Q, usually 4Q tends to be lower than third Q because of seasonality and also we have more [ lead ] demand in the last quarter. But longer term, if we're thinking about the effective tax rate for 2026 and onwards, I think it's still too early to provide a precise view as there are too many moving pieces. I think you have also seen the number of proposed changes that are being discussed through provisional measures and draft bills. But that said, when we take everything into account, we continue to believe that the effective tax rate should land in mid- to high teens over time. More specific than that, I think we still need more visibility on how the proposed changes will ultimately unfold. But that's the perspective we have at this moment. Pedro Leduc: Okay. So mid- to high teens without seeing if there's any changes, right? Mateus Schwening: Yes, I think mid- to high teens broadly, then whether it's going to be mid or high, I think it's dependent on the changes. Operator: The question-and-answer session is now closed. We would like to hand the floor back to Pedro Zinner for closing remarks. Pedro Zinner: Well, thank you all for participating in the call and for the questions made. And I'm looking forward with the team to see you in our full year-end results in March next year. Okay. Thank you. Operator: Stone's conference call is now closed. We thank you for your participation and wish you a good evening.
Operator: Greetings, and welcome to Marcus & Millichap's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Jacques Cornet. Thank you. You may begin. Thank you, operator. Jacques Cornet: Good morning, and welcome to Marcus & Millichap's Third Quarter 2025 Earnings Conference Call. With us today are President and Chief Executive Officer, Hessam Nadji; and Chief Financial Officer, Steven DeGennaro. Before I turn the call over to management, please remember that our prepared remarks and the responses to questions may contain forward-looking statements. Words such as may, will, expect, believe, estimate, anticipate, goal and variations of these words and similar expressions are intended to identify forward-looking statements. Actual results can differ materially from those implied by such forward-looking statements due to a variety of factors, including, but not limited to, general economic conditions and commercial real estate market conditions, the company's ability to retain and attract transaction professionals; company's ability to retain its business philosophy and partnership culture amid competitive pressures, company's ability to integrate new agents and sustain its growth and other factors discussed in the company's public filings, including its annual report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2025. Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can make no assurance that its expectations will be attained. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. In addition, certain financial information presented on this call represents non-GAAP financial measures. The company's earnings release, which was issued this morning and is available on the company's website, represents a reconciliation to the appropriate GAAP measures and explains why the company believes such non-GAAP measures are useful to investors. The conference call is being webcast. The webcast link is available on the Investor Relations section of the company's website at www.marcusmillichap.com, along with the slide presentation you may reference during the prepared remarks. With that, it's my pleasure to turn the call over to CEO, Hessam Nadji. Hessam Nadji: Thank you, Jacques. Good morning, and welcome to our third quarter 2025 earnings call. I'm pleased to report that we delivered a strong quarter with total revenue increasing 15% over Q3 2024. This marks the fifth consecutive quarter of year-over-year revenue growth as we continue to navigate the severe and complex market disruption of the past 3 years. Adjusted EBITDA for the quarter was $7 million compared to approximately breakeven in the prior year period. This year's third quarter results included a $4 million legal reserve that Steve will address in his remarks. Excluding this reserve, the company's SG&A was modestly lower than the prior year, reflecting our ongoing focus on cost management while still making strategic investments in technology, talent and branding. As noted on prior calls, the expensing of investments made over the past several years in talent retention and acquisition during a period of hampered revenue production has been a significant drag on our earnings. We expect this dynamic to shift into operating leverage as the market improves. During the quarter, our results outpaced the market based on transaction growth of 25% for MMI versus an estimated market growth of 12% in transactions based on RCA data for sales of $2.5 million plus assets. This was driven by momentum in our private client brokerage business, which was up 17% in revenue and 22% in the number of transactions. This critical segment, defined as transactions in the $1 million to $10 million price range is improving, thanks to more banks and credit unions returning to the market, gradual price discovery and more investors finally coming off the sidelines. Private client apartments and single-tenant retail posted strong revenue gains of 35% and 16%, respectively. The company's mid-market segment also contributed to the quarter's results with a revenue increase of 35% from deals in the $10 million to $20 million price range, mostly dominated by larger private and quasi-institutional investors and developers. Our team's elevated client outreach campaigns and countless opinions of value that did not culminate in transactions over the past 2 years were instrumental in staying close to our clients during a time of uncertainty and providing guidance when they became ready to execute. This is the essence of Marcus & Millichap's client-centric and relationship-driven culture and business model that continue to differentiate us. Our larger deals valued at $20 million or more declined 12% in revenue and 13% in transaction count for the quarter, similar to what we have reported last quarter. Once again, this is a result of outsized growth in larger deals last year, which led the recovery from the 2023 market shock. Our $20 million and above transactions grew by 19% in calendar year 2024, 30% in the third quarter of 2024 and 59% in last year's final quarter. As a result, we faced a very difficult comparison this year. Given this dynamic, our overall brokerage volume in the third quarter posted a 2% gain compared to a 17% increase in market volume as reported by RCA, again for the $2.5 million plus asset sales. Our IPA division continues to deepen its institutional client base, which we're taking to the next level by the recent addition of 2 new executives, Andrew Laehy, who heads our IPA Multifamily division; and Dags Chen, our new Head of IPA Research. Each of these is a seasoned institutional executive with more than 20 years of experience with some of the most renowned institutional investors in the industry. The added leadership, which we're very excited about, combined with our healthy pipeline and robust exclusive inventory position us well to continue the expansion of our institutional platform as a supplement to our private client market dominance. Financing revenue once again exhibited strong growth, up 28%, reflecting improved lending conditions and our team's ability to leverage our extensive network of active lenders. So far this year, we've closed over 1,100 financing transactions with nearly 350 separate lenders, enabling our team to pivot when lenders move in and out of the market. Revenue growth has been widespread with contributions from our veteran originators, IPA Capital Markets as well as recent additions of experienced originators. We're also seeing steady progress in integrating our sales and financing teams, offering combined services to our private and institutional clients. Our loan sales and advisory division, Mission Capital, is also seeing a significant uptick in activity and has posted solid revenue growth this year as more lenders are finally moving both performing and nonperforming loans to the marketplace. Other developments of note include the net addition of 29 investment brokers in the quarter. As I've shared on previous calls, restoring and improving the company's organic talent development after a post-pandemic disruption has remained a priority, and our actions are starting to produce results, although the turnover rate of newer professionals is still elevated due to a difficult market environment. The quarter's improvement is encouraging as is our continued success in attracting and integrating experienced professionals. Our team also made progress in expanding MMI's brokerage transaction services, which is designed as a centralized resource for analytics and production support to our sales force. We see this as an area that can directly benefit from AI, technology and bringing more efficiency and expanded output to our team and to our clients. Lastly, I'm pleased to report that our auction division, which started in 2022, continues to gain traction, particularly in its collaboration with our investment brokers who are bringing this added marketing channel to many of our clients. So far this year, we've closed 191 sales through our auction platform, accounting for an estimated 25% share of total commercial property auctions in the U.S. Looking forward, we're encouraged by the ongoing improvement in our key operating metrics, including shorter marketing timelines, fewer significant price reductions and near-record exclusive listing inventory. Marketing and closing timelines still remain longer than usual and continue to weigh on productivity, largely due to persistently tight underwriting by lenders and a narrow margin of error on valuations among buyers and sellers. However, the trend is improving, which allows us to allocate more bandwidth to new business development as the market regains alignment. From a market perspective, this year's rate reduction failed to bring down long-term yields and did not spark a significant boost in the transaction pipeline as it did going into the fourth quarter of last year. Nonetheless, we remain cautiously optimistic about the start of a new sales and financing cycle as the market resets with measured improvement in the trading environment for 3 key reasons. First, we believe the Fed will continue to reduce interest rates over the next year, notwithstanding what may or may not happen in December to shore up the labor market. Although long-term rates are likely range bound, the more accommodative Fed and the end of quantitative tightening will be constructive for real estate transactions. Second, the price adjustments that have occurred over the last 2 years are making many assets compelling on a replacement cost basis. Although there is clearly a flight to safety with capital preferring high-quality assets in strong locations, investor confidence and fear of missing out are becoming more evident in the marketplace. This is most pronounced in apartments, industrial and retail in the majority of the metros we serve. The recovery in the office sector is clearly broadening with the growing return to office mandates and average daily attendance at 80% of pre-pandemic levels. This measure was at 50% just 2 years ago and 57% just last year. Last but not least, the pullback in new construction driven by limited risk appetite by equity capital and high construction costs will set the stage for stronger occupancies and rent growth across most property types in 2026 and 2027. Again, this is most pronounced for apartments and industrial, which were the most active in new deliveries over the past 5 years. Self-storage was also affected by this, and we'll see improvements in the coming years. For MMI, our vision of expanding market coverage through improved organic hiring and scaling our experienced professional recruiting as well as synergistic acquisitions remains our primary growth path. These are the parallel paths we have set to expand our private client market share and continue building on IPS success. Going into 2026, we're expanding our growth strategy in retail and industrial in particular, both of which offer significant growth or opportunity in the majority of the markets we serve. We also believe that further scaling of our financing capabilities has much room to run as we're proving through the success of many senior level originators who have joined MMI in the last several years. On the acquisition front, we continue to see a wide bid-ask spread and misaligned expectations on the guaranteed portion of valuations and therefore, capitalizing on more accretive opportunities to recruit experienced individuals and teams. Given the fragmented nature of our core business and the limited number of large viable M&A targets, most of our efforts focus on boutique firms with highly concentrated ownership, which presents its own challenges. We're expanding our recruiting team and resources to increase capacity for additional experienced talent acquisition, while we continue to explore complementary business expansions. From a capital allocation standpoint, our dividend and share repurchase program over the past 3.5 years has enabled us to maximize shareholder value while maintaining an exceptionally strong balance sheet. In the near term, we face a particularly challenging comparison to last year's exceptional fourth quarter, which benefited from the significant reduction in interest rates. That said, we expect to see continued sequential improvement in our business as the drivers of transaction activity continue to improve. Our strategy remains focused on leveraging our unique platform, expanding our market reach and investing in the tools and talent that will drive long-term growth. With that, I will turn the call over to Steve for more details on the quarter. Steve? Steve Degennaro: Thank you, Hessam. As mentioned, total revenue for the third quarter was $194 million, an increase of 15% compared to $169 million for the same period in the prior year. Year-to-date, total revenue was $511 million, up 12% compared to $456 million last year. Breaking down revenue by segment, real estate brokerage commissions for the third quarter accounted for 84% of total revenue or $162 million, an increase of 14% year-over-year. While transaction volume declined 2% to $8.4 billion, the company closed nearly 1,600 transactions at an average commission rate of 1.9%, which was nearly 30 bps higher than last year. The increase in private client volume drove a 4% decrease in average fee per transaction due to the higher mix of smaller deals. We are not experiencing any notable fee erosion in the marketplace in any of our price tranches. For the 9 months year-to-date, real estate brokerage commission accounted for 84% of total revenue or $427 million, an increase of 10% year-over-year. The year-to-date improvement included 8% growth in transaction volume to $23 billion across 4,136 transactions and a 2% increase in the average commission rate. Average transaction size year-to-date was $5.6 million compared to $5.8 million a year ago, reflecting a higher proportion of private client revenue for the 9-month period. Within brokerage for the quarter, our core private client business accounted for 63% of brokerage revenue or $102 million, up from 62% and $87.5 million in the same period last year. Private Client transactions grew 24% in volume and 22% in transaction count. Year-to-date, private client contributed 64% of brokerage revenue or $274 million versus 63% and $245 million last year. Middle market and larger transaction segments together accounted for 32% of brokerage revenue, generating $52 million in revenue compared to 35% and $49 million last year. While we achieved a 4% increase in the number of transactions within these segments, the overall dollar volume decreased 17%, reflecting a change in mix to more middle market activity and fewer transactions in the larger transaction space. Large transactions significantly outgrew the market last year, creating a tough year-on-year comparison. Year-to-date, middle market and larger transaction segments combined represented 32% of brokerage revenue or $136 million compared to 33% and $126 million last year. Revenue from our financing business, which includes MMCC, grew 28% year-over-year to $26 million in the third quarter. The strong growth was driven primarily by a 34% increase in transaction volume totaling $2.9 billion across 406 financing transactions, which was a 28% increase year-over-year. The average financing commission rate was nominally down 4 bps as expected due to an increase in larger deals closed in the quarter. The overall performance reflects the continued momentum and progress in scaling our financing platform. For the 9-month period, financing revenue was $71 million, a 33% increase compared to last year. This growth was driven by a 40% rise in transaction count and $8.2 billion in volume, up 46% year-over-year. Other revenue, primarily from leasing, consulting and advisory fees was $5 million in the third quarter compared with $6 million in the same period last year. For the 9-month period, other revenue totaled $13 million compared to $16 million in the prior year. Turning to expenses. Total operating expense for the quarter was $196 million compared to $180 million a year ago. For the 9-month period, total operating expense was $540 million compared to $496 million last year. Year-over-year increases in absolute dollars for both the quarter and year-to-date period are largely attributable to the increase in cost of services resulting from higher revenue. Cost of services for the quarter was $121 million or 62.4% of revenue compared to 62.2% last year. For the 9-month period, cost of services totaled $316 million or 61.8% of revenue, up 50 basis points year-over-year. The increase in cost of services as a percentage of revenue was primarily driven by year-over-year revenue growth resulting in producers achieving higher commission thresholds. SG&A expense for the quarter was $73 million or 37.4% of revenue compared to $71 million or 41.9% of revenue in the same period last year. The current quarter results include a $4 million reserve for a litigation matter that we believe has a number of legal rulings we intend to aggressively appeal. Also, as Hessam pointed out, our SG&A expense would have decreased by $2 million year-over-year, excluding the legal reserve as a result of tight cost controls. I'd also like to reiterate that we have continued to make investments in key strategic areas throughout the market disruption with an eye towards long-term competitiveness. For the 9-month period, SG&A totaled $216 million or 42.2% of revenue, down from 44.9% in the prior year. For the third quarter, we reported net income of $240,000 or $0.01 per share, which includes an $0.08 per share charge for the legal reserve that we took in the quarter. This compares to a net loss of $5.4 million or $0.14 loss per share in the prior year. In spite of the $4 million legal reserve, the year-over-year earnings per share improvement of $0.15 marks a notable return to profitability. During the third quarter, we maintained the same tax methodology we adopted in the second quarter and recorded a provision for income taxes of $1.2 million. For the 9-month period, the net loss was $20.9 million or $0.54 per share compared to a net loss of $23.8 million or $0.61 per share in the same period of the prior year. Adjusted EBITDA for the third quarter was $6.9 million compared to breakeven adjusted EBITDA in the same period last year. Year-to-date, adjusted EBITDA was nearly breakeven compared to a loss of $8.7 million in the prior year. Adjusted EBITDA for both the quarter and year-to-date would have been $4 million higher if not for the legal reserve, underscoring the substantial progress in operating performance over the prior year. Moving to the balance sheet. We continue to be well capitalized with no debt and $382 million in cash, cash equivalents and marketable securities, a $49 million increase over last quarter. Subsequent to quarter end, we returned $10 million in capital to shareholders through a dividend paid in early October. During the 9 months ended September 30, the company repurchased nearly 265,000 shares of common stock at an average price of $30.33 per share for a total of $8 million. Since August of 2022, the company has repurchased more than 2.4 million shares of common stock at an average price of $32.03 per share for a total price of $77 million. From the inception of our dividend and share repurchase programs over 3 years ago, we have returned a combined $200 million in capital to shareholders. We remain committed to a balanced long-term capital allocation strategy, which includes investing in technology, recruiting and retaining the best-in-class producers, strategic acquisitions and returning capital to shareholders. We are encouraged to see signs of market stabilization evidenced by improved listing activity, a stronger pipeline, a better lending environment and renewed investor engagement. Ongoing uncertainty around global macro conditions, inflation, tariff policy and the labor market still exist, but the Fed has signaled a more accommodative environment, which should drive more transactional activity. For the fourth quarter, we anticipate quarter-over-quarter sequential revenue growth consistent with normal year-end seasonality. However, being mindful that our prior year results benefited from an exceptional surge in activity as investors capitalized on rate declines. Cost of services as a percentage of revenue should follow the usual pattern as revenue builds through the year and be sequentially higher than the third quarter. As for SG&A, after normalizing for the legal reserve in the third quarter, SG&A for the fourth quarter should increase modestly on a dollar basis. With the current tax methodology, tax expense is expected to be in the range of $4 million to $6 million for the fourth quarter. With that, operator, we can now open the call for Q&A. Operator: [Operator Instructions] Our first question is from Mitch Germain with Citizens. Mitch Germain: I appreciate the chance to ask a question. And I know you talked about some of the tougher comps in the larger transaction segment of your business, but your hiring efforts have been on more experienced producers. So maybe just talk about that dynamic in terms of the ability to get some of that larger deal activity accelerating again. Hessam Nadji: Sure, Mitch. The look sort of beyond the headline numbers in that category for us shows that in the usual price ranges where our IPA division and more senior Marcus & Millichap professionals execute transactions in the $20 million to $50 million price range. Our business has been fairly steady. There was pretty much a same amount of deals done this year in the third quarter than last year. What happened last year is that we had an outsized number of very large deals, $70 million plus that we executed, which is predominantly why the comparison has become tough. Last year, we executed 21 deals priced above $71 million and this year, there was $7. And there is no particular pattern to that or reflection of any change in strategy. It's just a matter of the size deals that many, many of our institutional clients and large private clients happen to execute at a given time. So the strategy, both on the support levels of our existing IPA and senior Marcus & Millichap teams that are doing larger deals is unwavering, is on track. No changes at all have been executed there other than adding more leadership, adding a new Head of Research and investing more in expanding the IPA platform and capturing more share of the larger market transaction because we really believe it integrates well with our private client business, particularly as we see more and more of our private clients move equity from smaller assets and multi-decade held portfolios into larger institutional quality assets as they get closer and closer to retirement and estate planning. That bridging of the capital migration from private owners to the institutional market is a huge value proposition of IPA and Marcus & Millichap. And we're just really at the beginning stages of building that out, especially as the demographics continue to move in that direction. On the hiring front, the experienced brokers that we target for acquisition or recruiting are very select in terms of which markets we have what need and what product type we have what need. And it's those needs and avoiding overlap with our existing capacity in a market that drives the recruiting strategy. So it's a very market-by-market, property type-by-property type effort, and it takes a long time because you have to develop relationships with those individuals. They have to get to know the platform over time. And many of them are with other brands where they may not be maximizing their potential. And frankly, that's the reason that a number of them have joined IPA Marcus & Millichap over the last 5 years. Mitch Germain: Got you. That's super helpful. Curious about the conversations you're having with some of your customers. I know that many of them have really been on the sidelines last several years. And it does seem like some of them are now returning to the markets. Are you getting a sense that they've either, A) Just accepted the new pricing dynamic that's in the market? And B) Are you seeing them begin to feel a little bit more constructive about transacting in this backdrop? Hessam Nadji: Yes and yes. We're seeing more motivation to put property on the market because of the reality that there is no Fed miracle. Many of our private clients over the last 1.5 years were expecting a much more dramatic drop in interest rates, the evidence for which wasn't there. And we've been very consistent in our analysis of the market where we did not believe interest rates would go back down significantly, and they haven't. That realization is now creating more motivation is the first thing. The second is more and more of our private clients that didn't have a reason to sell are now facing reasons to sell because of loan maturities, maybe some operational issues and death, divorce, partnership breakups and all the other private client motivation. So we are seeing motivation also pick up due to that reason. Most importantly, though, Mitch, is a combination of moderately better interest rates. We have seen lender spreads come in, which is favorable. But the price adjustments is the primary reason there is now more alignment in the market where we had a lot of unsuccessful listings on the market over the last 18 months due to unrealistic pricing. And frankly, for us, there was a process of price discovery because there was so much moving around in the marketplace. It was hard to tell where the market really was. You had to put product out to market the best you could with great underwriting and see what the market response was going to be. The number of listings that are now basically aging or becoming unsellable at the expected price of the seller is dropping, which is telling us that the market is finding that realignment. And then more and more of our deals are having less significant price adjustments and fewer are falling out of contract, all of which tells us that this alignment in price expectation is starting to happen. Is it there all the way? Absolutely not. We still have a ways to go. There's still plenty of owners that believe their assets are worth more than they actually are based on real numbers and especially year 1 and year 2 operations, which is where we're finding the most friction between buyers and sellers. Mitch Germain: Great. Last one for me is I checked your financials to see when was the last time you had a similar level of revenues and you're extremely more profitable back then. And so I'm curious, and I really appreciate Steve's discussion around some of the legal reserve and some of the platform scale. But what's the new magic number to get back to producing the type of profitability that you did before? Obviously, you've had cost of living adjustments and numerous issues that may have changed in your business from 4 years or 5 years ago. I'm just curious, how do you become a bit more scalable and start to see a little bit greater improvement in bottom line when you start producing, I don't know, 200 plus in terms of revenues per quarter? Hessam Nadji: Mitch, this is Hessam. Let me share some comments on that one, and then I'll turn it over to Steve. The most important difference over the last, let's say, 6 years, 7 years of our operating structure is the fact that we have invested capital in talent acquisition, talent retention and essentially talent development at levels that the company hadn't engaged in prior to this period. And as a result of that, we have more experienced market leaders that have joined the company from the outside. Our retention of our top-level producers has been stellar, and we have invested in their careers by bringing them on or keeping them at Marcus & Millichap over the long term. As you know, all of those kinds of long-term agreements have performance thresholds, have stickiness for the company's ultimate margin protection over the term of an agreement. But that capital that's been invested is actually being amortized on an ongoing straight-line basis at a time when all of that talent is facing a disruptive marketplace that has not been functioning. Therefore, their normal just long-term average revenue production capability has been significantly hampered. So you have an additional expense line of a noncash item in the amortization of the capital that has been put out in getting this amazing talent pool retained and added to our company, yet the revenue component from all that talent has been significantly held back. As that starts to change, what has been a drag should become an operating leverage for us. In terms of the comparison of cost structure, that's probably the largest item, and it's a noncash item, as you know. Other investments in the platform do include a much bigger commitment to technology that we have implemented over the last 5 years than previously to when I became CEO. because, frankly, the company needed to move a lot faster and be a lot more nimble on things like a CRM system on things like automated matching of buyers and sellers to our website. And a lot of it was really sprung out of the pandemic because we pivoted and took major leaps forward in internal automation and a lot of automation we now offer to our clients through MyMMI, which is a major investment in a platform where clients, buyers, in particular, can tell us what they're looking for and the matching of their investment parameters to our fresh inventory is an amazing sort of mechanism for bringing efficiency to both our clients and to our sales force. So those are some key elements of why the expense structure has changed. We're building the firm for a much larger revenue base than where we are today. And because of the talent that's been brought on board and retained and these investments, we really believe in a normal market operating environment, we'll be able to achieve that leverage. So I just want to give that context, but let me turn it over to Steve. Steve Degennaro: That's pretty broad context. I guess a couple of additional points I would make and specific to your question, Mitch, that significant leverage, you're starting to see it happen at this revenue level. We're just shy of $200 million in this quarter. you can kind of do the math that sands the legal reserve, what results would have been. So we're kind of at that inflection point where you really see an acceleration of profitability, perhaps not all the way back to where we were at comparable revenue levels 6 years, 7 years, 8 years ago for reasons Hessam mentioned. But this is the inflection point. One additional point, the investments in not only retention and recruiting of those senior agents, the technology as well that Hessam mentioned, but central services where we will also gain additional leverage by adding more value and therefore, connectivity to the firm with our producers. So just a couple of additional points to tack on there. Operator: Our next question is from Blaine Heck with Wells Fargo. Blaine Heck: Hessam, you mentioned the banks and credit unions expanding lending, which is clearly a positive for the transaction market. But I'm wondering if you can give some context around the scale of that expansion and how you feel about their willingness to lend today, especially on smaller transactions just relative to their activity maybe last year and relative to a more normalized level of activity in a functional transaction market. Hessam Nadji: Happy to, Blaine. There is a marked difference from even a year ago in just the number of lenders at any given time willing to give us quotes on certain assets, number one. Number two, with quotes coming back so out of market about a year ago, a good number of lender quotes were just not usable. And if you contrast that to where we are today, we have more lenders signaling to us that they're back in the market and the quotes that are coming back are a lot closer to consummating a transaction than they were even a year ago. The loan to values are improving. And the -- part of that is lender spreads having come in. And probably the most important change is that it seems like what was clogging up the banking system in terms of loans that had to be extended, loans that needed workouts and so on has largely been addressed or there are plans to address them and fewer lenders appear to be clogged up versus a year ago. So it's taken our team of 100 or so originators across the country that are technologically connected to our -- to each other on a collaborative basis where we have real-time information sharing on what lenders are quoting at what levels based on specific loans that are being requested or mandates that we have. And that information sharing is another reason we're able to move faster in securing the right financing for each of our clients. In terms of the composition of where the capital is coming from for our financing, something close to 50% is now being funded by banks and credit unions. That percentage hasn't changed a whole lot from a year ago, but the time that it's taking and the number of lenders you have to knock on doors with a year ago is where the improvement has been. So it's taking less time to secure loans from banks and credit unions. We're seeing that also predominantly from the regional banks, a lot of regional banks were out of the market a year ago that are back in the market, which is for us as a local private client provider that regional bank connectivity has been significantly important over the history of the firm, and it's improving. Blaine Heck: Great. That's great color and seems like a marked improvement over the last year. I guess to the second part of the question, when you compare the activity today to maybe what you saw in pre-pandemic periods, are we all the way back? Are we halfway back? How would you compare the activity versus kind of optimal capital efficiency? Hessam Nadji: On an overall basis, we believe the market is still somewhere around 15% to 20% below normal as a whole. But if you look at various price points and property types, the real answer is in that level of detail. So for example, if you look at Southern California, for example, or if you look at other regions like Texas, some markets are a lot closer to the velocity in what we consider a normal period, and we used 2014 to 2019 as the last sort of 5-year period of a normal, less choppy environment. The Texas markets are a lot closer to that normal than, let's say, the California markets are. Large apartments are still well below their normalized 5-year average pre-pandemic as are small apartments and single-tenant net lease. I would say that small apartments and single-tenant net lease are about 20% to 25% below where that average trading in a normal environment should fall. Blaine Heck: Got it. Very helpful. Switching gears, can you talk a little bit more about the auction business? I don't think we've discussed that in very good detail in past quarters. Just how large you see that segment growing in the next few years? And maybe touch on any differences in the fees you generate from that business versus your more typical brokerage business? . Hessam Nadji: Absolutely. Well, first of all, it goes back to specialization and expertise. We built the capabilities that are now in place organically by bringing on auction specialists that had significant experience -- and then shortly after we knew that there was a real market for it, both internally in terms of the collaboration and externally, we brought on Jim Palmer as the executive in charge. That goes back to our philosophy that you have to have management that has had practical experience in the niche. And Jim certainly brings that with his years and years of involvement in the auction business. So the combination of auction specialist producers that are dedicated to the auction business that's all they do, strategically located in various regions under the direction of a dedicated executive with experience, Jim Palmer, is the combination that has made this very successful for us. And one of the benefits is that for our investment sales force that is out there, especially in a disruptive market with conventional marketing -- and as we've discussed and I've made comments on just earlier on this call, the response to listings, aging listings and listings that weren't movable in a conventional way over the past, let's say, 24 months, we've found that more and more of them are good candidates for marketing through an auction platform. And the auction platform obviously has the benefit of having prequalified bidders where we know that they're financially capable and committed to executing transactions. And as we've not only been able to find the right niche in executing the auction model, the benefit of the internal collaboration is that we collect the brokerage service fee for the seller and then there is the auction-related fees on top of that and a buyer premium that is added. So it's a win-win for the client. and it's multiple fee generation opportunities for the firm. Blaine Heck: Got it. That's very helpful. Last one for me. With respect to the litigation, was this a onetime event? Or do you expect some ongoing headwinds? And maybe you can just give some color on the nature of the litigation. Is this related to ongoing segments of your business such that there could be more coming or just a more nuanced situation? Hessam Nadji: Yes. Blaine, I'll take that. First of all, I'll refer you and everyone to the 10-Q that will be on file with the SEC later today for some additional context. In addition to that, I'll say that we do anywhere from 8,000 to 10,000 transactions a year. So inevitably, from time to time, disputes of varying nature will -- are going to arise, most of which go away in the normal course of business. A very small number of those actually go to trial. And this matter, unfortunately, which involves a disputed disclosure-related claim actually did go to trial. It certainly is an outlier. We believe that the verdict, which went against us was rendered in error. And therefore, we have very strong grounds for appeal. We intend to exhaust all our legal avenues to have the award reduced or reversed entirely. The -- so no, it's not an indication of any greater pattern or a specific segment of the business. It's an extreme outlier. No -- not an indication of any greater issue. With respect to the amount, just based on the information that we've got available and our assessment at this time, we felt that was the appropriate amount to reserve. Operator: There are no further questions at this time. I'd like to hand the floor back over to Hessam Nadji for any closing comments. Hessam Nadji: Thank you, operator, and thank you, everyone, for joining the call. We look forward to seeing a lot of you on the road and having you back on our next earnings call. This call is adjourned. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, ladies and gentlemen, and welcome to Amadeus Third Quarter 2025 Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Luis Maroto, President and CEO of Amadeus. Please go ahead. Luis Camino: Good afternoon. Welcome to our Q3 results presentation, and thank you for attending today. I'm joined by Caroline Borg, our CFO. So let's begin. We'll start on Slide 4. Amadeus had a strong third quarter full of momentum, which drove revenue growth acceleration and margin expansion. Year-to-date, group revenue has grown by 8% and adjusted EBIT increased by 9%, both at constant currency. Our prospects remain strong, and we entered the last quarter of the year with confidence to deliver on our outlook for the year. Amadeus is a B2B technology partner of reference in travel, and it is deeply integrated into the travel ecosystem. Many of the world's most important travel players leverage on us for their core technology. In the quarter, we continued to span our relevance. We grew our customer relationships with airlines, hotels, travel sellers and airports. We won new customers across our portfolios and broaden our offering. We are pleased to announce we have won the Ascott Limited as a new customer for Amadeus Central Reservation System in hospitality. Ascott is Singapore based and its portfolio expands more than 230 cities in over 40 countries through Asia, EMEA and North America. ACRS market leading attribute-based selling capabilities will empower Ascott to deliver uniquely personalized merchandising, enhance guest experiences and drive growth across its portfolio. The current scope of our ACRS agreement covers Ascott's global portfolio, excluding Quest-branded properties and those located in China. Further expansion is expected as Ascott continues to execute its global growth strategy. Investing for the future has been key to our success. In the year, we have deployed over EUR 1 billion in R&D into our solutions, technologies and capabilities to extend our reach in travel and to further connect the travel ecosystem. Today, we want to take the opportunity to serve some further insights into how we are leveraging AI to generate further opportunities. As you know, as a leader in the travel and technology space, we have been evolving and applying AI into our products and solutions for almost 20 years. Our journey began with operations research, machine learning continued with deep learning and introduction of generative AI, revolutionizing essential functions like flight scheduling and search, airport resource management, passenger disruption handling and revenue management systems. We use AI to optimize airplane usage to reduce the impact of disruption on passengers, to improve hotel occupancy forecasting and to improve the creation of shopping recommendations among others. We use AI at an enormous scale. We have been investing for an AI-driven future, and we are building the technological foundations to excel at Agentic AI in travel. As we complete our cloud transformation, we are also creating the first data mesh in travel, a trusted industry data source with several insights across domains and solid governance. For the potential of Agentic AI to be realized across travel, this is key. We are embedding Agentic AI as a capability of our platform for the benefit of our portfolio and we are uniquely placed to infuse Agentic AI across the travel ecosystem in the years to come. At Amadeus, we are also leveraging on strategic partnerships with world-leading technology players to boost our strengths. We are focused on our strategic partnership with Microsoft and Google to propel our AI innovation, deploy effective multi-public cloud operations and develop unique business collaborations. Garv is a recent example of AI co-innovation. Garv is an AI agent built on top of our airport data platform. Airport employees with Microsoft teams can ask questions using natural language and Garv reasons through problems, make decisions and learns from experience. Please turn to Slide 5 now for a strategic update. Amadeus is leading the airline retailing transformation with Nevio, our AI powered next-generation airline IT platform. Nevio's leading capabilities are being recognized by existing and prospective customers, increasing our competitive advantage and further deepening our customer proximity. Nevio has a distinct value proposition. It allows us to offer our customers the possibility of doing much more, and it also allows Amadeus to better attract new customers, thanks to its modularity. We are active in numerous RFPs. We continue to advance negotiations and we aim to expand our group of Nevio customers. In the quarter, we continued to deliver new Nevio capabilities. Finnair has introduced a significant step in airline retailing becoming the first airline to launch native ancillary combos, powered by Amadeus Nevio product catalog. This is part of our offer management offering and consolidates our products and services into one catalog. It is a single repository for all content that an airline can offer to travelers. These products and services can then be provided by the airline directly or by third parties, and they can be offered individually or bundled into an offer tailor to the traveler, and they can also be self-service purchases by the traveler. In hospitality, we have become a leading IT provider to the hospitality industry. We believe the Amadeus platform offers the most comprehensive portfolio of core capabilities to the hotel industry and is the most probably connected ecosystem of partners. We are uniquely placed to address industry needs and expand in this large and growing market. We are progressing well with the implementation of Marriott International and Accor to the Amadeus hospitality platform. The first Marriott International properties are now live in -- on ACRS and progressing well with more to be rolled out around the world over the next few months. Feedback on capabilities has been positive. InterContinental Hotel Groups, MGM, Marriott International, Accor and now the Ascott Limited, we are creating a global community platform of world-leading hotels and a mission to transport relationships with guests. Amadeus' travel platform is a platform that enables travel providers around the world to retail through third parties everywhere on the globe. This quarter, we expanded its reach by adding new travel sellers and increasing our share of wallet with existing travel seller customers, for example, with Trip.com. We also expanded the content bookable on our platform, for example, with low-cost carrier flyadeal, enhancing the platform's attractiveness. We also continue to sign new NDC agreements. Our goal is to become the undisputed aggregator of NDC content and we believe Amadeus has the most advanced and compressive NDC technology in the industry, and we aim to do NDC at scale. Finally, regarding our technological capabilities, including AI, Agentic AI promises to transport travel in positive ways, bringing increased personalization to travelers as well as productivity and efficiency gains across the value chain. We are uniquely placed to deliver Agentic AI functionality into our installed customer base and into new customers. Amadeus can build solutions for the travel industry that others cannot easily replicate. Our technology is natively integrated into travel players covering critical end-to-end flows and managing vast amounts of extensive data in travel. We have identified over 500 potential use cases whereby applying generative AI, we can bring value to our vast customer base through the announcements of our products or the creation of new ones as well as for internal efficiencies. We are enhancing our solutions together with our customers with very positive feedback. Some that had been launched already are Cytric Easy AI assistant for employees to plan and book personalized corporate travel with the Microsoft teams, Amadeus Advisor for leveraging business intelligence in hospitality. We have trained and deployed several productivity boosting AI agents for travel sellers on top of our selling platform, Connect. We are additionally investing in call center automation for airlines. We have received huge interest for this and it is a clear opportunity for all travel providers and travel sellers to gain efficiency and productivity at call centers. We are expanding our hospitality platform as well with Ascott for an AI automated call center powered by Amadeus and Salesforce. And we are also actively engaging with AI platforms to assess how we can best serve them within the travel industry. Please turn to Slide 6 for our most recent developments in Air IT Solutions. We continue to see great success in revenue management through the quarter. Amadeus innovative modular AI power and data-driven revenue management technology enables customers to optimize pricing, enhance operational efficiency and respond dynamically to market changes. Qatar Airways, Vietnam Airlines and Jazeera Airways have contracted for Amadeus Revenue Management solutions. Also as part of its acceleration towards modern retailing, Singapore Airlines has implemented Amadeus Dynamic pricing. We expanded our Altéa customer base in Asia with both Sun PhuQuoc Airways and Air Borneo contracted for our Altéa PSS. Several customers expanded the scope of solutions adopted from our portfolio, including Wizz Air, Aeroitalia, Malaysia Airlines, FireFly and Air Sial. In Airport IT, we continue to deliver innovative solutions. As I previously mentioned, we introduced Garv, an AI agent that enables better decision-making. Also together with Lufthansa, we successfully tested the biometrics enabled EU Digital Identity Wallet. This is an initiative led by the EU Commission that aims to have a digital version of EU ID, passport and driving license in an EU Digital Identity Wallet by the end of '26. We also have commercial wins with customers such as Manchester Airport, Changi Airport, Aeropuertos Mexicanos and Alyzia Handling who added solutions from our portfolio. Moving on to our volume performance in the first 9 months of the year, Amadeus PB grew by 3.7% or 4.3%, we exclude the leap year effect in the base driven by the global traffic evolution in the period, supported also by the Vietnam Airlines implementation, which slapped in [ April '25 ]. All of our regions, excluding North America reported solid growth. Asia Pac was our fastest-growing region, reporting 8% PB growth. In North America, Amadeus PB evolution was impacted by soft performance of some of our customers in the region. Western Europe and Asia Pac were our largest regions. In the third quarter, Amadeus PB grew 2.2%, moderating slightly relative to quarter 2, mirroring global traffic growth but with an improving trend within the quarter. You will see PB volume growth moderation in the quarter was more than offset by revenue growth by an accelerating revenue per PB. In the first few weeks of October, we have seen our PB volume growth trending ahead of quarter 3. Slide 7 for our developments in hospitality and other solutions. In the first 9 months of the year, the segment's revenue grew 8% at constant currency, supported by positive trends and evolutions by new customer implementation and increased volumes at both hospitality and payments, particularly in quarter 3, which supported revenue growth acceleration in the quarter. We have commercial wins in the third quarter across our business domains. I was saying before, we are pleased that the Ascott Limited has contracted for Amadeus Central Reservation System, represents a step forward in Amadeus' journey to transform the hospitality industry through its ACRS community and it demonstrates the value of our open and scalable technology for hoteliers of different sizes and needs. We'll also span our hospitality platform with Ascott with our AI power automated call centers for hoteliers. Our Business intelligence solutions continue to attract new customers, such as EOS Hospitality and Scandic Hotels. Our Business Intelligence solutions include Amadeus Advisor and AI agent designed to simplify that access and empower hoteliers with smarter insights to drive more informed decisions. Further on the AI front in hospitality, we have built an AI power solution within meeting broker to automate and accelerate hotelier's responses to group and events RFPs. Trip.Biz part of Trip.com Group expanded its hotel distribution agreement with Amadeus to support its continued growth outside of China, and Abu Dhabi's Department of Cultural and Tourism, and Adeera Hotel Group based in Saudi Arabia are adopting Amadeus Digital Media Technology. In the quarter, we expanded our partnerships. We have partnered with Shiji, a global provider of hospitality technology solutions to offer hotels a combined offering, including industry-leading reservation, property management, guest experience solutions through a single provider. We have also partnered with Sensible Weather, the leading weather warranty provider for travel and hospitality to integrate automatic reimbursement capabilities for unexpected adverse weather conditions into the Amadeus iHotelier Central Reservation System. In payment, Outpayce has made progress in scaling our payments offering. We have initiated the issuing of prepaid virtual cards and implemented various new customers such as HBX Group, who are now in production. Also Sweden-based tour operator Sembo and Hong Kong-based Junting Travel has expanded their B2B wallet agreements with Amadeus. Please turn to Slide 8 for our distribution highlights. During the third quarter, we signed 14 new contracts or renewals of distribution agreements with airlines, including low-cost carrier flyadeal, taking the total to 43 for the first 9 months of the year. To date, we have signed 75 NDC agreements with airlines, including Riyadh Air in the third quarter and 35 airline services in content accessible to the Amadeus travel platform. We had great commercial developments with major travel agencies. We expanded our travel seller customer base with travel management companies such as Corporate Information Travel in Malaysia an UOB Travel in Singapore as well as with leading French tour operator Voyageurs du Monde. All of these travel sellers will benefit from access to the broadest range of travel content, including NDC. We strengthened our relationship with online travel agencies such as Trip.com, which expanded its agreement with us and Fareportal, which continues to scale its NDC option through the Amadeus travel platform. Retail travel agency, Internova Travel Group and tour operator Cercle de Vacances expanded their partnership with Amadeus to also include NDC content. To review our volume performance in the first 9 months of '25, Amadeus bookings grew by 2.7% or 3.1%, excluding the leap year effect supported by continued commercial gains across regions most notably in Asia Pac, which was our fastest-growing region, growing 12% over prior year. In third quarter, Amadeus booking growth accelerated to 4% from a softer Q2 growth backed by a more stable overall global environment compared to first half. Growth accelerated across most regions, particularly the Middle East and Africa, Asia Pac and Western Europe. The volume growth acceleration in the quarter offset the expected moderation we saw in revenue per booking growth in quarter 3, which can sometimes be lumpy. And to the first weeks of October, we have seen a moderation in our booking growth relative to quarter 3. With this, I will now pass on to Caroline to review our financial performance. Caroline Borg: Thank you, Luis. I'm delighted to be presenting our strong Q3 results today. So please turn to Slide 10 to review our solid financial performance to date with high single-digit revenue and adjusted EBIT growth at constant currency coupled with steady free cash flow generation, reinforcing our expanding relevance in travel. Given that the first 9 months of the year, the U.S. dollar has depreciated significantly in relation to the euro, we are displaying our performance of revenue, EBITDA, adjusted EBIT and free cash flow versus prior year also at constant currency to facilitate understanding of Amadeus' underlying financial performance. More details on our exposure to FX on our constant currency calculations as well as complete information on our IFRS figures and their evolution are available in the appendix of this presentation and in the Amadeus' January to September 2025 management review. In the first 9 months of the year, we've delivered strong growth across many of our key financial metrics. Revenue of EUR 4,895 million, 8% growth at constant currency, 6% reported growth. Operating income of EUR 1,420 million, 8% reported growth. Adjusted EBIT of EUR 1,471 million, 9% growth at constant currency, 8% growth reported. Profit of EUR 1,088 million, 10% growth and diluted EPS at 11% growth. Adjusted profit of EUR 1,109 million, 8% growth and diluted adjusted EPS of 9% growth. Free cash flow of EUR 955 million and expected 2% below prior year. Leverage at 0.9x net debt to the last 12 months EBITDA as at the end of the period. And as you know, we've been ongoing -- we have an ongoing share repurchase program for a maximum investment amount of EUR 1.3 billion, which I can announce just completed yesterday. Our 2025 outlook at constant currency remains unchanged. So now let's go to Slide 11 for our revenue evolution at constant currency. Our group revenue grew by 8% as a result of revenue expansion across all of our segments. Air IT Solutions revenue growth of 7.9% was driven by the PB volumes that Luis has just described previously and a 4% higher revenue per PB, which is fundamentally resulted from positive pricing impacts from new agreements and renegotiations, upselling of our incremental solutions, including those from Nevio and inflation. And in addition to that, we delivered strong growth of our airline expert services and our airport IT businesses. These effects were partially offset by a negative platform mix as Navitaire New Skies outperformed Altéa. We expect that revenue per PB growth to moderate in Q4 relative to Q3. Hospitality and Other Solutions revenues grew 8.1%, which was largely driven by the hotel IT, hotel distribution and business intelligence domains, supported by customer implementations and increased volumes. As we communicated in H1, Digital Media revenue growth showed an improvement in Q3. Revenue growth was also driven by payments where both our merchant services and payout services businesses expanded notably. As we have communicated previously, we expected revenue growth for this segment to accelerate into the second half of the year. In Q3, we have delivered faster revenue growth relative to the prior quarter, and we expect this growth to continue to accelerate again in Q4. Air Distribution revenue growth of 8% was driven by the booking evolution that Luis has just described previously, coupled with a strong revenue per booking growth of 5.2%, primarily resulting from positive pricing effects, including contract renewals, new agreements and inflation. As Luis mentioned, these effects can be lumpy in nature. And as we communicated in our half 1 results, revenue per booking growth in Q2 was exceptionally high with revenue per booking growth in Q3 moderating as expected and we expect that moderation to continue into Q4. So now let's go to Slide 12 for a review of our adjusted EBIT evolution. At constant currency, our adjusted EBIT grew 8.7% resulting from the 8% revenue evolution discussed on the previous slide. And in addition, our cost of revenue growth of 3.1% is fundamentally driven by an increase in transactions such as in air distribution and hotel distribution bookings and in payments due to the B2B wallet expansion. Reported fixed cost growth of 8% mostly resulted from, firstly, an increase in resources, particularly in our R&D activity, coupled with a high unitary cost. Secondly, higher cloud costs due to a combination of our own volume growth and also to our progressive migration of solutions to the public cloud as we continue to mature. And thirdly, to the Vision-Box consolidation impact in Q1. Fixed cost growth is expected to moderate in Q4 relative to Q3. Ordinary D&A expense increased by 4.2% as a result of higher amortization of internally developed software, partially offset by a lower depreciation expense at our data center given the migration of our systems to the public cloud. At constant currency, EBITDA margin was 39.1%, slightly below prior year, and adjusted EBIT margin was 29.8%, a small expansion versus last year. So now on to Slide 13 for a review of our adjusted profit evolution. Adjusted profit grew by 8.2% as a result of our adjusted EBIT growth, lower net financial expenses and higher taxes than last year. Diluted adjusted EPS grew by 8.9% in the period. Net financial expenses declined driven by lower average gross debt and cost of debt and taxes increased as a result of higher taxable income and a higher effective tax rate at 22%, which was impacted by the changes in local tax regulations and lower tax credits expected for the year. Adjusted profit evolution in Q4 2025 will be impacted by the unusually low effective tax rate that we had in the same period last year, Q4 2024, resulting from positive effects coming from previous years compared to the 22.1% tax rate expected for Q4 2025. Now on to Slide 14 to review our R&D and capital expenditure. As Luis was saying before, reinvesting into our business is the #1 priority for us. To evolve our technology capabilities and solutions for the benefit of our customers is something we are proud of, and it is hugely important to continue to enrich the competitive advantages we have built through the years of leadership in travel. At September, our year-to-date R&D investment grew by 10.6%. Half of our investment was dedicated to the expansion of our portfolio and the evolution of our solutions and AI capabilities, including Amadeus Nevio, Navitaire Stratos for airlines, our hospitality platform, NDC technology for airlines, travel sellers and corporations and solutions for our airports and payment services. 1/4 to 1/3 was dedicated to customer implementations across our business such as Marriott International and Accor for ACRS, our new Nevio customers, as Luis was previously saying and airline portfolio upselling, and customers implementing NDC technology as well as efforts related to bespoke consulting services provided to our customers. The remainder was dedicated to our migration to the cloud and our partnerships with Microsoft and Google as well as the development of our internal technology systems. In the 9-month period, our capital expenditure increased by EUR 80.5 million or 15.3%, mainly driven by higher capitalizations from software development. Capital expenditure represented 12.4% of revenue in the first 9 months of the year. And now on to Slide 15 for a review of our free cash flow generation and net debt evolution. In the first 9 months, we generated EUR 955.2 million of free cash flow. Free cash flow was slightly below our prior year by 2.1% as we expected and as a result of increase in our capital expenditure, as I just previously discussed, deployed to elevate our portfolio of solutions and to strengthen our value proposition. We also had an increased change in working capital outflow and taxes, partially offset by our EBITDA expansion and a reduction in interest payments backed by lower gross debt and cost of debt versus prior year. In Q4 and the full year free cash flow growth will be impacted by nonrecurring tax collections that increased free cash flow in 2024 by EUR 107 million in Q4 and EUR 116.2 million in the full year, as we described in the full year 2024 management review. Net debt amounted to EUR 2,219.9 million at the end of September, EUR 108.6 million higher than at the end of December due to the acquisition of treasury shares under the share buyback programs, including our ongoing EUR 1.3 billion program, which, as I said previously, has just completed as well as the dividend payment and a small acquisition in the Travel Intelligence space, partially offset by our free cash flow generation and the conversion of bonds into shares. Our leverage is 0.9x net debt to EBITDA as at the end of September. And finally, please turn to Slide 16 for our current views on 2025. In the first 9 months of the year, we've delivered steady and profitable growth, demonstrating the resilience and diversity of our business. We entered the last year of the year with confidence to deliver our group results within our 2025 outlook guidance range at constant currency, with revenues growing at the lower end of the range and EBITDA and adjusted EBIT growing faster than revenues. With that, we have finished the presentation, but before we open to questions, I'd like to share that this year we'll be presenting our full year 2025 results in person in London at the London Stock Exchange. We will be publishing a save the date on our website and circulating the information soon. We look forward to seeing you there. With that, we can now open the call to take any questions. Operator: [Operator Instructions]. We'll take our first question comes from Alex Irving with Bernstein. Alexander Irving: Two from me, please. First, on our distribution. Do you see the LLM, ChatGPT and so on, becoming a major distribution channel for airlines? And what steps are you taking to position for this? Second, if you do see this becoming an important channel, then does this create the ability for airlines to reduce their dependence on GDSs given the LLMs should have both the scale and the technological competence to plug directly into airline APIs. And would you expect airlines to offer content parity with GDS channels or to advance their own channels when selling through LLMs? Luis Camino: Okay. Look, let me see how I see things. Of course, we will need to see how things evolve. But you know the travel space is complex. There is a lot of content fragmentation that in my view, needs to be aggregated and standardized and if we also think about the transition to offer an order and dynamic pricing capabilities, this will even add more complexity in the future in the way to really connect to travel providers and to really get the content. So whoever wants to consume travel, we'll need to work in my view, with people that can provide this content in a perfect way. I mean we are not just talking ourselves. We are talking about the need to be service and we also need to see that the look-to-book ratio is reasonable. You know that with NDC is already a challenge in terms of the number of transactions per booking. And with AI, this could be even more costly. So based on all that, we don't believe the goal of the AI platforms will want to become merchants, to be content aggregators and deal with all this complexity, we feel that these platforms will need real-time pricing, not static content. And you have seen many of them reaching today agreements with online TAs to get this content. So yes, there will be changes. This is a constant in our industry. We will target that as an opportunity. I mean, as you probably know, we are the largest provider of airline.com engines. We are the largest processor of online travel agency, and we work a lot with metasearchers. So this is -- the metasearch was also something that appear and we work with the majority of them. So our goal really is to keep our role. Of course, as an IT provider. And as I mentioned during my presentation, we have a lot of cases. This is going to be normal for any technology company, and we also feel in distribution we can play a role to orchestrate what is coming. And yes, the AI platforms will be a new channel of getting into the final booking, and we are engaging with them as we do with the metasearches to see how we can play a role. So we feel quite confident about that, but also we need to see how things evolve in the future and what is the final intent of the AI platforms. Operator: The next question comes from the line of Adam Wood with Morgan Stanley. Adam Wood: Maybe first of all, you made an interesting comment about the opportunity in call center automation. Maybe first of all, could you just talk a little bit about how far along you are from a technology point of view on that? And then maybe more importantly, from a strategy point of view, I guess that's a very labor-intensive industry today. It's not going to be a technology replacement cycle immediately. There's going to be a need to move from one to the other. I guess you don't want to hire a lot of labor to help manage that transition. So can you just talk a little bit about what the strategy is to help people move from your labor incentive call center operation to one that could be powered by your technology. And then secondly, we're obviously seeing flight restrictions in the U.S. Would that be included in the guidance range that you've given? Or would that potentially create downside if that was to persist through the end of the year? Luis Camino: Okay. Again, we don't know what will be the impact in the U.S. But with our current figures year-to-date, I mean, we feel confident we can manage I mean again, it depends how things evolve, but it's already assuming that in the U.S., there may be some impact. As you know, we have more or less 20% of our volumes in the U.S., less in PBs. Hopefully, this will be short. But again, I think an impact may happen. Of course, this may impact us in that part of the world, but we expect to be within the range that we have provided to you. With regards to the call center automation, we are working in pilots and working very closely with customers. We believe this is an opportunity. Again, I mean, is not new to us because we have been delivering technology on this front, and there will be a transition to things that we are delivering, both for our customers, but also internally in the way we operate. So we are quite advanced in working with airlines. And of course, in many cases, we are in pilot mode. In other cases, we have launched the technology, but all that is moving well. That's what I can say. Operator: The next question comes from the line of Sven Merkt with Barclays. Sven Merkt: Maybe one on hospitality. Obviously saw a very good improvement in growth in the third quarter, and there are reasons to believe that we should see a further improvement in Q4. That said, you still need a substantial acceleration in the fourth quarter to hit the low end of the full year guidance. And therefore, it would be great if you could comment on your confidence on getting there? And then secondly, could you please give us an update on the cloud migration. Is there anything you can say more precisely when this will be completed? And what impact we need to take into account in our cost and cash flow modeling for the upcoming quarters? Caroline Borg: Yes. Great. I can take both of those. So let's start with the hospitality acceleration. We've seen well, firstly, we mentioned that half 2 would accelerate beyond half 1. We also mentioned that we would be starting to see some recovery in our media slowdown from half 1. So elements of our hospitality business that have really benefited in the Q is our Hospitality Distribution business. As I said, recovery of Media, our Business Intelligence operations and our operations in payments around our merchant services and our B2B Wallet. So we've been very pleased with the improvement and the growth in hospitality. And we do expect that to continue to accelerate into the future -- into Q4, particularly. We also mentioned, Luis mentioned our implementation of Marriott, and we're starting to see that ramp up come through within Q3 and Q4. So we do feel confident in our Q4 projection for hospitality to continue to accelerate its growth. With respect to your cloud migration cost, we are in the high 90s percent complete, I think about 96% complete. We expect to complete early in 2026 and we're starting to see the evolution of our cost base as we transition through our cloud migration. It is true that there'll be some costs that we will not recur once we move to the cloud migration. Those costs are costs that are purely related to the migration activities. But given our ethos of reinvesting ourselves into our solutions and product offerings, we expect to redeploy a lot of those people into other activities. So the impact, we will see fixed costs growth moderating, continue into Q4, but the impact will not be that big from the cloud migration per se in terms of cost evolution. Operator: And the next question comes from the line of Toby Ogg with JPMorgan. Toby Ogg: Perhaps just on the growth side. So you've been running at 8% year-to-date ex FX revenue growth so far, and you're continuing to steer towards the lower end of the 2025 growth guidance. Just thinking about the midterm growth guidance of 9% to 12.5% growth CAGR that, I think, implies that growth next year should accelerate. Could you just give us a sense for how confident you are around that acceleration? And then what gives you that confidence? And then just secondly, just on the comments around the first week of October. You mentioned an improvement in the PB growth versus Q3, but a moderation in the air bookings growth versus Q3. We're now a week into November. Is there any color that you can share just on how those metrics have been trending through the remainder of October? Luis Camino: Okay. Look, it's -- again, there are seasonality matters. What we have seen overall is that October was a bit weaker. But again, there are some seasonality effects, mainly in Asia Pac as we had in India, some holidays and in Korea, some specific volumes. So you always have these kind of cases. So this was the main reason, which is not happening in November. It is true that in November, and in the last part of October, we have seen some impact in the U.S., as I mentioned before, not much, but yes, some weakness there. So I will say bookings underlying are healthy. We don't see in the rest of the regions, any change compared to what we have seen in the previous months. But again, in October, there were some specific matters just in Asia. And in November, this was not there, but we have seen some weakness in the U.S. So if we exclude these effects, the volumes will be quite positive. Caroline Borg: Yes. And if I take the question on our FY '26 growth trajectory. Look, firstly, we're not going to give '26 guidance today. We will come back in February with our 2026 guidance. However, to your question, we did communicate our midterm guidance, which covered 2026 at our Investor Day a number of years ago. We've delivered a strong 2024. We are on track to deliver a good 2025. So we are quite confident in our midterm guidance at a group level to maintain those CAGRs of 9% to 12.5%. But as I said, we will come back with more details on segments in February and tell you more about our evolution on how we see things once we've closed FY '25. Operator: And the next question comes from the line of Victor Cheng with Bank of America. Hin Fung Cheng: Maybe, first of all, do you see potentially more risk maybe from Direct Connect given NDC is now maturing at version 24.1 and AI is helping build these pipelines. I think in Q3 earlier, there is one large tech savvy TMC that switched from using GDS to direct connect for NDC content. So is that -- do you see that as a risk of more of that happening? Or is it more of a one-off scenario? Luis Camino: We don't see an increase in direct connect to be honest. And I think I have mentioned myself that I don't believe on direct connect in general, it is expensive for both parties, requires adaptation. And if we think about NDC, there are new versions, that, of course, both parties will need to really support airlines and the travel agencies and adapt to that. There are not so many travel agencies that have global systems. And that means that, yes, when you deal with one system different in each country, you need to connect and try to really do this direct connect per country. Of course, you need to aggregate all these direct connects and then the rest of the content. So -- and then yes, I mentioned already the look-to-book ratios and the fact that the GDS has optimized that, and we are working really in trying to see with NDC and also with AI, how this is going to be handled in the sense of having intelligent search that is not hitting the inventory of the airlines every time there is a request because otherwise, this will be difficult to manage. So I don't think direct connects will be the norm. Again, we have said there are some specific reasons for some specific parts of the inventories that can work. But in our conversations, we don't think there is any push today in general, of course, there could be exceptional or specific cases in general from the travel agencies to really move into that direction and deal with the airlines. So we feel the contrary. There are more conversations about how we can bring back part of this content with the right technology and in the right way. Hin Fung Cheng: Very clear. And if I can have one more follow-up. I think you have detail of interesting AI developments from Amadeus. But maybe can you help me understand on a high level, how you view Agentic AI can disrupt the distribution market either from a workflow perspective or from a structure or an economics perspective, any potential channel shifts or how Amadeus can participate and position itself in the new workflow? Luis Camino: I mean, again, I tried to explain before, probably without much success. But I mean, again, we feel -- it depends how things move, of course, but we are extremely well positioned to really deal with whatever technology, including that. There will be a new channel. Yes, there will be a new channel of search and shopping. This has happened. Again, if you think about the way the metasearch works, including Google, of course, we will need to see how the AI platforms move and what is their intention. We don't think they will become a merchant, as the metasearchers are not doing so. And therefore, we are in a position to really provide them with the content that is required. I mean, moving -- because they don't need a static content, they need real pricing if they really want to move ahead and we don't think it's in the interest to really integrate vertically and try to really deal with all the complexity of the servicing and all the complexity of the pricing that is required, which is not an easy task. Therefore, our goal is to really be content aggregation to really orchestrate the needs of the AI platforms. But of course, yes, there will be a new channel of sales and inspiration and they will need to really go through the process with providers. Some of them are already working with some travel agencies, some of them, we can provide IT services as we do. I mean, we also announced in the last quarter our partnership with Google to deal with our Meta Connect, and this is a proof that both as they deal with metasearch and now the Agentic AI, we'll need to work with partners, and we feel we have this capability. And again, I was mentioning, of course, the huge amount of transactions that this may generate if -- I mean, this is not for free. As you know they need to use a lot of data, a lot of hits to the system and therefore, we aim to be orchestrating all that as the key technology provider. And that's our goal. And again, we engage with AI platforms. We engage with airlines about all that and as we have done at the times of other technology changes, we aim to be playing that role in the middle. Operator: The next question comes from the line of Charles Brennan with Jefferies. Charles Brennan: Great. Maybe I'll just start with a clarification on the hospitality side, actually. You seem to attribute the revenue increase more to the media side and maybe payment side. In the prepared remarks, I didn't hear you reference Marriott. Can you just confirm that Marriott did start as planned in Q3? Or were there any delays in that contract? And then with Ascott, we've seen these hotel chains take years to come on board and contribute to revenue. Should we assume that's the same for Ascott. Is it more of a '27 revenue event than '26? And then separately, can I just ask about pricing and the pricing algorithm that we should expect more broadly across the group. I think you're flagging in both Air IT and Distribution, we're going to see pricing per booking and PB declining in Q4 relative to Q3. I know you said you weren't going to give us guidance for 2026, but can you just talk through the broad algorithm that gets us to the pricing dynamics for '26 between underlying inflation and perhaps the non-volume-related revenues that feed into that pricing equation? Luis Camino: Let me deal with hospitality. I mean we didn't mention as a key impact because the impact is already happening, but it's small. We started to really work with properties, but it's completely according to plan. And in the coming months, well, as we speak, we keep rolling into more properties. But the main impact, as we said for months will happen in '26, so there is no delay. Everything is moving according to the plan, but we started slower than we will have in the coming months when we see everything is working properly, which is the case. With regards to Ascott, yes, we will start the migration in '26. So it will not take so much time because the platform is much more mature, but we should expect the impact in '27. Caroline Borg: Yes. And then in relation to the revenue growth, maybe I'll bring it a little bit more into the FY '25 because we wanted -- we want to deliver FY '25 first as a jump-off point for '26. And as I said, we'll give some FY '26 information in February. I think Luis adequately said that there is still some volatility in the macroeconomic environment, so we could see a moderation in group revenue growth in the Q4. And that's driven by what we're already seeing in terms of booking volume moderation that we've started to see in October. We've also seen some softening of our revenue per booking due to the timing of our customer, negotiations and renewals. We are seeing some softening revenue per PB due to pricing dynamics and we will -- we do expect to have a lower growth in service -- in our service revenue in Q4, but all of that is offset, as Luis was mentioning, by the acceleration that we are delivering in hospitality. We are seeing some really good implementation on our customer implementations and ramp up. And I apologize if I missed that off the script, but that's definitely a key part, recovery of our media business and the activities and commercial momentum that we gain across our payments businesses. Operator: And the next question comes from the line of Michael Briest with UBS. Michael Briest: Great. It's good to see distribution back at, I guess, nearly 90% of 2019 levels. But looking at the regional color, it's very diverse. So I mean, Europe is still maybe 30% below Latin America, nearly 40% below, while Asia is over nearly 25% above 2019. Can you talk to the dynamics in that market? Is that your win rates and competitive dynamics? Is it the way the airlines and the agents have adopted NDC and direct connects? That would be the first question. And then on the buyback, you're almost 80% done, leverage is the same as it was at the start of the year. Presumably you're completed in Q4, conceptually, do you feel comfortable if there's no M&A that we could maybe see further buybacks in 2026? Luis Camino: Okay. In terms of volumes, again, it's difficult to really come back to 2019. But as we have mentioned, there can be in the distribution business as in the past, the fact that low-cost carriers were growing faster during many, many years, including in '25, in many parts of the world, okay? I don't remember exactly where all the details of the comparison with '29. We also move out of Russia at one point. So there are a number of effects where we have been impacted. And yes, there has been a move that has happened in the previous years of full service carriers selling more direct and less to the travel agency. So some of the most easier in the disintermediated volumes have moved to alternatives, mainly the direct sales more than really direct connects, okay? Some direct connects, but the majority of that has been the normal way of airlines pushing more direct sales. So that has been mainly what has happened when you talk about 6 years not very, very different when you compare 2019 with 2012, to be honest, we have always seen this disintermediation effects. We are seeing less in '25, as you see from the volumes that we are reporting and when you see the growth of passengers. But still, yes, I mean there are some of these dynamics that are still there. And that's clearly a reality despite that fact. I mean we have been able to really offset part of that with share, with bringing back some volumes and we feel optimistic about this business moving forward. Caroline Borg: Yes. And maybe I'll take the question on buybacks, which effectively talks to our capital allocation policy, which, as you know, and you will expect me to say, we do have a disciplined capital allocation policy, prioritizing the investments that we're making to drive organic revenue growth. I think we mentioned that a lot. In addition to the dividend policy, we also completed the buyback this year and M&A still remains and has been a really key relevant part of our growth strategy. So we continually review all of those pillars and what other potential uses of our funds moving forward. And we will come back in February when we're in the process of setting our budget expectations at the moment and we'll come back in February with any changes to that dynamic. Operator: The next question comes from the line of James Goodall with Rothschild. James Goodall: So firstly, just sort of coming back to Investor Day, where you outlined your medium-term targets. You also gave us a TAM for all of your various business segments of EUR 41 billion. I guess, since then, we've seen a fairly material evolution in terms of the products that you're offering and where you're sort of headed. Does that mean that you'd see a larger TAM today than you did back at Investor Day? And then secondly, on Nevio and Stratos, we haven't seen a new customer for a while and Nevio was still waiting for one on Stratos. Are you comfortable with the current pace of agreements there? Is there any color you can give us in terms of how conversations are going with network airlines and LTCs and what we should sort of expect over the next sort of 12 to 18 months? Luis Camino: Let me start with the last one. Yes, I mean, we have a lot of engagements as we speak. So the probability of having something close is high. I will say. But more than that, it's difficult to say because nothing is done until it's really done, okay? So hopefully, this will happen. But what I can say is that engagement is high. We feel and we believe the potential of that is very good for airlines. And therefore, there will be a natural move into offer an order in the medium term. The question is when but we have the feeling things are accelerated in terms of engagement with carriers. But of course, from that, we need to get the agreement with them and sign a contract, but the prospects are positive. And with regards to the TAM, I mean, in theory, you are right. I mean we are expanding our solutions in many parts of our business. We have not revisited that number, so I cannot give you what will be the number today. We don't have that -- but in theory, yes, I mean we are addressing more parts of the travel industry. So in theory, this should extend the EUR 41 billion. Operator: The next question comes from the line of Laurent Daure with Kepler Cheuvreux. Laurent Daure: I also have 2 questions. The first is on the Air Distribution business. You commented on the higher pricing and in particular, renegotiation and new agreements. I was wondering how in this kind of environment, what are the pillars to convince your customer to pay higher prices. And my second question is on Nevio. I understand it's tough to estimate the closing of some deals, but I was wondering whether the long sales cycle in your view, mostly comes from a tough environment. Or do you believe some of your potential customers are looking to see how the first implementation will be going in the near future? Luis Camino: I mean, look, I think it's a matter of priority. This is not just about our sales providing the technology. It's also about the way the airline is aiming to really deal with our retailing capabilities. Again, I mean if you see and you listen some of the presentation of the airlines, what they talk about that, I mean they are objectives that they have. So it's a matter of when they are ready to really jump into the pool. It is also true we are developing and implementing some of the solutions. Some others are ready. So I really feel that will be traction. And then as we implement some of these carriers to really get the full benefits, of course, there will be some need for -- especially with the ones that they are working in the same alliance or with the partners that they have to really in the same logic. Otherwise, we need to be reaching between the new times and the old times. And therefore, there will be an additional pressure between them to really move into this logic. So that's why I said, look, I'm optimistic. We have seen already in our P&L already in the third quarter some revenues coming from the Nevio implementations. So progressively, we will see revenue upside in the years to come. But of course, it will depend on the timing of the signatures and the timing of the implementation. Caroline Borg: And I can take the distribution question. So you asked a question about what's the commercial kind of foundations around distribution. Well, clearly, things like commercial success, market share gains, contract renewals, agreement, inflations all affect the pricing dynamic. We also have said that traditionally, quarters can be lumpy because of the combination of those things happen. But another criteria that can also affect the pricing dynamic is really the content that is being provided. So as we transition -- as the industry has transitioned from full content agreements into relevant content agreements, we offer more discount to -- for our providers with the more content that gets provided. So there's a mix also in terms of the dynamic of content that's being shared and what the pricing drives that as well. Operator: And the next question comes from the line of Thomas Poutrieux with BNP Paribas. Thomas Poutrieux: I just have one, please. And I was wondering if you could elaborate on the nature of the expansion of your relationship with Trip.com in particular. I think this one is interesting given their own relationship with Travel Fusion. So are you basically adding NDC concerns or LCC concerns? Or is it just that geographical expansion of your historical relationship? Any color here would be helpful. Luis Camino: Yes, it is both. I mean, we are expanding with them. We have a very close relationship with them. We are increasing our set of wallet, expanding in different countries. So it's increasing the volumes we are having with them. They have been extremely -- yes, they have the ownership with Travel Fusion, but we have been independently of that, working very closely with them and getting very healthy volumes from Trip.com, and we have a very close relationship with them, definitely. So it's an expansion of a relationship, but we have had that should translate into incremental volumes for us. Operator: And that concludes our question-and-answer session. I would like to turn it back to Luis Maroto for closing remarks. Luis Camino: Thank you very much for attending the call and your questions, and we're looking forward to meet in London at the end of February. Thank you very much. Operator: And the conference has now ended. Thank you for participating. You may all disconnect your lines.
Operator: Greetings. Welcome to Rand Capital Corporation Third Quarter Fiscal Year 2025 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Craig Mychajluk, Investor Relations. Please proceed. Craig Mychajluk: Thank you, and good morning, everyone. We appreciate your interest in Rand Capital and for joining us today for our third quarter 2025 financial results conference call. On the line with me are Dan Penberthy, our President and Chief Executive Officer; and Margaret Brechtel, our Executive Vice President and Chief Financial Officer. A copy of the release and slides that accompany our conversation is available at randcapital.com. If you're following along with the slide deck, please turn to Slide 2. I'd like to point out some important information. As you are likely aware, we may make forward-looking statements during this presentation. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ from where we are today. You can find a summary of these risks and uncertainties and other factors in the earnings release and other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. During today's call, we'll also discuss some non-GAAP financial measures. We believe these will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results in accordance with generally accepted accounting principles. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's earnings release. Craig Mychajluk: With that, please turn to Slide 3, and I'll hand the discussion over to Dan. Dan? Daniel Penberthy: Thank you, Craig, and good morning. I want to emphasize how we have been navigating a market that continues to present challenges. New deal origination across the BDC landscape does remain sluggish and borrowers are still contending with tighter senior credit conditions and higher financing costs. Thus, we have had to be patient and selective in our deal origination. However, I believe we are seeing some positive turns now in our favor. We've remained somewhat active in the quarter and deployed $2.9 million in new and follow-on investments. We are also seeing, as many peers have noted a greater use of PIK or PIK interest by borrowers as they adapt to today's financing environment. This is something we monitor carefully and will need to reduce over time, but it also reflects the flexibility that our capital can provide and helping companies bridge through tighter credit markets. Most importantly, we finished the quarter with nearly $28 million in liquidity and no debt outstanding under our senior credit facilities. That kind of balance sheet strength is our real differentiator in this environment. It gives us the flexibility to support our dividend, remain patient when deal flow is muted and quickly move when compelling opportunities arise. Even though total investment income declined year-over-year, the steps we have taken to control expenses enabled us to grow net investment income. This quarter really underscored our ability to execute with discipline and maintain a resilience in our dividend for our shareholders. Please now turn to Slide 4. I want to highlight the consistency of that dividend. We declared and paid our regularly quarterly distribution of $0.29 per share, marking the third consecutive quarter at this level. We recognize how important this income stream is for our shareholders, and we are proud that we have been able to sustain it even as new investment activity has slowed. One of the advantages of our model is that it is built to support this dividend through different parts of the economic cycle. Even in periods when repayments outweigh new originations, our expense management and strong liquidity allow us to maintain the payout. Many BDCs talk about dividend stability as a marker of portfolio strength and the strength and quality of the BDC. We believe our results demonstrate exactly that. Moving to Slide 5. Let's take a closer look at our portfolio. At September 30, our investments had a fair value of $44.3 million across 19 companies. That represents a decline from year-end and sequentially, largely due to significant repayments from our portfolio companies and some valuation adjustments. Our mix at quarter end was 83% debt and 17% equity with a weighted average yield of 12.2%. That yield reflects the sub-debt investing nature of our portfolio structure. As we move to Slide 6, I will touch on the puts and takes in the portfolio this quarter. We stayed selective, yet active, adding 1 new investment, and we supported an existing portfolio company. First, the new investment, we committed $2.5 million to BlackJet Direct Marketing, structured as a $2.25 million term loan at 14%, plus 1% PIK interest. We also contributed or invested rather a $250,000 equity investment alongside our debt instrument. BlackJet focuses on targeted direct mail for the travel and tourism, home services and legal services verticals. These are areas where precise customer acquisition remains critical and where our capital can support growth also delivering an attractive risk-adjusted return for Rand. Equally important to the financial aspects of the transaction was the involvement of the lead equity sponsor and our sub-debt co-investor, both of whom we have partnered with and our deal team had on prior transactions. We also funded a $400,000 follow-on investment in a debt instrument to food service supply. That business specializes in design, distribution and installation work for commercial kitchen renovations and new builds. It does remain a contributor to our income, which supports our dividend. After quarter end valuation adjustments, our total debt and equity investment in FSS stood at a fair value of $4.3 million. On the realized side, activity was meaningful. Seybert's or The Rack Group repaid $7.6 million of principal. We continue rather to hold an equity position in Seybert's with a value of $500,000. That preserves our participation in the business' long-term potential. Seybert's or the Rack Group's repayment illustrates the natural progression of a growing enterprise as operational success within the portfolio company translates into their sustained revenue and profit growth, the business becomes eligible for a more favorable commercial bank financing, which is often taken on to refinance prior obligations such as Rand's debt. This does support further development and growth in the company and that is a key critical item to why we hold these equity interest, which we will directly benefit from. We also exited Lumious, receiving $713,000 in loan and principal, recognizing a $77,000 realized loss. It is a small step back, but it does return capital in excess of our prior quarter's valuation, and we can redeploy these funds into new opportunities. And finally, we recognized a $2.9 million realized loss on Tilson Technology Management following its Chapter 11 process and asset sales, we had valued this at $0 during the prior quarter so this was posted as a realized loss now. While Tilson's outcome was disappointing, it's important to note that our separate investment in SQF Holdco, which is now called Verta is not part of the Tilson bankruptcy. This remains on the books of Rand at $2.0 million and continues to operate independently. Verta stands for vertical infrastructure, think 5G antennas on telephone poles or cell towers or on the top of water towers for businesses like T-Mobile. Stepping back now, this mix of new deployment, support of follow-on and repayments is exactly how our model is designed to work, recycling capital for maturities and exits into yield orientated structures. It does keep the portfolio resilient while preserving the optionality to lean in as origination conditions improve. With that context, let's look at how these moves reshaped our industry mix for the quarter. On Slide 7, you will see how our portfolio is spread across industries as repayments and adjustments came through this quarter, the mix shifted modestly. The most notable change was within consumer products as that exposure came down following the Seybert's or Rack Group repayment. That business is in the niche industry of Billiards supply. While individual positions may change, what's important is that our portfolio remains balanced which we believe reduces overall exposure to any single sector and does give us the ability to participate in growth across a range of industries. Slide 8 highlights our 5 largest portfolio companies, which together represent about half of our total portfolio value. Each of these investments is structured to deliver attractive yields generally between 12% and 14%, with features such as PIK that provide for flexibility for borrowers while still supporting Rand's income stream. Following the Rack Group repayment and the FSS valuation change, INEA or EFINEA and Caitec now rank among our largest positions. The strength and consistency of these holdings is what gives us confidence in our ability to support the dividend and protect shareholder value. With that, I'll now turn it over to Margaret who will walk you through our financials in more detail. Margaret Brechtel: Thanks, Dan, and good morning, everyone. I will start on Slide 10 which provides an overview of our financial summary and operational highlights for the third quarter of 2025. Total investment income was $1.6 million, down from $2.2 million in last year's third quarter. The change reflects both debt repayments and a slowdown in originations, dynamics consistent across the BDC space this year. Of note, 39% of investment income was attributable to noncash PIK interest compared with 24% in the same period last year. Also during the quarter, 15 portfolio companies contributed to investment income versus 21 companies in the prior year period. That said, while income came in lower, we were able to offset that decrease on the expense side. Total expenses decreased to $596,000 from $1.3 million in the prior year period. The improvement was driven by lower incentive fees, reduced interest expense and a decline in base management fees. The result was net investment income of $993,000 which compared favorably with $887,000 in the same quarter last year is a strong example of how expense discipline and conservative balance sheet management can drive earnings resilience even when portfolio activity is muted. It is worth noting that on a per share basis, net investment income for the quarter was down $0.01, which reflected the increase in shares outstanding following the fourth quarter 2024 dividend which was distributed in the first quarter of 2025 and partially paid in common stock. Moving to Slide 11, we can see the quarter's impact on net asset value. At September 30, 2025, our net asset value stood at $53.6 million or $18.06 per share compared with $19.10 per share at the end of the sequential second quarter. This decline was driven primarily by valuation adjustments across the portfolio alongside the dividend we paid in the quarter. While these adjustments are challenging, we believe they reflect a conservative and transparent approach to valuation, one that ensures net asset value fully incorporates the realities of market conditions and company performance. The waterfall chart shows that we generated nearly $1 million of net investment income, which helped partially offset valuation changes. Importantly, the balance sheet remains healthy, liquid and debt-free as noted on Slide 12. We closed the quarter with $9.5 million in cash, and our senior secured credit facility provides up to $25 million in borrowing capacity with $18.3 million available at quarter end. This liquidity gives us significant flexibility to respond quickly when market conditions improve and quality opportunities arise. Turning to the dividend, we declared and paid a regular quarterly distribution of $0.29 per share. This continues the consistent run of dividends throughout 2025, maintaining that payout through a period of repayments and lower originations speaks to both the strength of our portfolio and the discipline with which we are managing expenses. We will announce our fourth quarter dividend in early December. With that, I will turn the discussion back over to Dan. Daniel Penberthy: Thanks, Margaret. Moving to Slide 13. Looking ahead, I want to bring together the themes you have heard throughout today's presentation. We are navigating a cautious market, but we are doing so from a position of strength. We have a portfolio of income-generating assets, a balance sheet with no debt and nearly $28 million in liquidity and an ability, we believe, which can preserve the dividend even in these interim periods, which are slower investment cycles. These are not small achievement given the current lending environment, which is challenging. What stands out to me is our ability to remain both disciplined and flexible. Disciplined in terms of sticking to our underwriting standards, carefully managing expenses, and protecting shareholder value. Flexibility in having the liquidity in capital resources and staffing to move quickly when the right opportunities surface, and they will. We are beginning to see early signs that anticipated interest rate reductions could also help stimulate deal origination in the quarters ahead. If that momentum builds, Rand is well positioned to deploy capital into yield-focused debt investments that can support earnings growth, NAV stability and ongoing dividend coverage. So while Q3 reflected some headwinds, repayments from our portfolio, valuation adjustments and muted origination, we believe these are transitional dynamics. Our job is to keep brand positioned to capitalize when this market turns. We are confident in our ability to continue creating long-term value for our shareholders. Thank you for being a shareholder, and we look forward to updating you on our progress in the fourth quarter. Have a great day. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Good evening. My name is Tamika, and I will be your conference operator today. At this time, I would like to welcome everyone to the FiscalNote Holdings, Inc. Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] With that, I will now turn the call over to the company to begin. Please go ahead. Bob Burrows: Good evening. My name is Bob Burrows, Investor Relations for FiscalNote, and we are pleased you all could join us. The purpose of today's call is to discuss FiscalNote's third quarter 2025 financial results and guidance for both the fourth quarter and full year of 2025. Joining me with prepared comments are Josh Resnik, CEO and President; and Jon Slabaugh, CFO and Chief Investment Officer. Other members of the senior management team will be available as needed during the Q&A session that will follow these prepared comments. Please note today's press release, related current report on Form 8-K and updated version of the corporate overview presentation can all be found on the Investor Relations portion of the company website. In terms of important housekeeping, please take note of the following. During this call, we may make certain statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks and uncertainties. Our actual results could differ materially from expectations reflected in any forward-looking statements. For a discussion of the material risks and important factors that could affect our actual results as well as the risks and other important factors discussed in today's earnings release, please refer to our SEC filings, which are available either on our company website or the Securities and Exchange Commission's EDGAR system. Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release or the updated version of the corporate overview presentation for a reconciliation of these measures to the most directly comparable GAAP financial measure. And finally, we use key performance indicators or KPIs in evaluating the performance of our business. These include annual recurring revenue or ARR, and net revenue retention, or NRR. And with that, I'd like to turn the call now over to FiscalNote's CEO and President, Josh Resnik. Josh? Joshua Resnik: Thank you, Bob, and thanks to everyone for joining us today. I'm glad to be here to discuss FiscalNote's third quarter 2025 results and to share an update on the progress we've made on our strategic objectives. We've been clear and consistent as to our priorities. Put simply, we continue to take a disciplined, focused approach to managing the business, and you see that reflected in our adjusted EBITDA profitability as well as our management of the balance sheet and progress towards free cash flow. This, in turn, enables us to build a durable foundation for long-term profitable growth. In Q3, revenue totaled $22.4 million, in line with guidance, and adjusted EBITDA was $2.2 million, exceeding guidance. This translates to a margin of 10% and represents the fifth consecutive quarter of adjusted EBITDA margins at or above 10%, reflecting the ongoing benefits of our cost discipline, sharper prioritization of core growth initiatives and improving operating leverage. On a pro forma basis, excluding noncash and other nonrecurring charges and the impact of the 2024 divestitures, OpEx decreased by approximately 8%, reflecting continued cost discipline and operating efficiency. On this front, we're adopting additional automation-based approaches to certain aspects of our operations, which should drive higher productivity across the enterprise and yield incremental improvements to our overall profile over time. During the quarter, we also shored up our balance sheet with maturities extended out by 4 years, thus strengthening our capital structure and providing long-term flexibility to execute on our strategy. I'll turn to growth and commercial momentum now. This quarter, we stabilized ARR with a modest quarter-to-quarter increase on a pro forma basis. This signals an initial stabilization of the core business and underscores that the strategic actions we're taking are starting to produce tangible results. Most importantly, it reflects early traction as we continue building a product-led organization positioned for higher levels of long-term growth. I'll explain some of the factors behind the current results, and we'll also walk through how this fits in the context of our transformation of the business. Inbound demand remains strong, indicating a continued need for our solutions as well as specific interest in Policy, and our teams are maintaining a healthy sales pipeline. Corporate new logo sales also showed continued momentum in Q3. I noted last quarter that win rates among enterprise clients rose 400 basis points quarter-over-quarter. In Q3, we saw that momentum continue with another 400 basis point improvement in that segment when compared with Q2. Year-to-date, across all corporate segments, win rates are up 500 basis points overall. And equally important, we're not just winning more, we're winning higher-value deals. Average contract values have trended meaningfully upward over the course of the year. And notably, corporate multiyear contracts for our policy data now account for approximately 50% of new logo ARR, up from about 20% in early 2024, a 2.5x increase that strengthens revenue visibility and is expected to support further improvements in gross retention in 2026. This progress in corporates is especially noteworthy in light of the ongoing volatility in the federal space, including continued disruption this quarter due to the extended government shutdown. Strong corporate performance has helped offset that pressure and should serve as a solid foundation for further growth as conditions in the federal sector stabilize over time. Our product innovation continues to underpin this progress. And in Q3, we released a series of meaningful enhancements to policy notes, including AI-powered legislative drafting, social listening to identify early policy signals, upgraded reporting and AI-generated tariff impact reports. More recently, we launched Bill Comparison, an AI-driven capability that allows users to instantly redline and compare versions of pending bills, a powerful example of our ability to leverage advanced AI to deliver meaningful incremental value to our users and increasingly move towards automating customer workflows. Year-to-date, our product team has now launched more than 35 major enhancements to the PolicyNote platform since its launch in January. These continuous improvements are reinforcing PolicyNote as a cornerstone of our ecosystem and a key contributor to strengthening customer engagement and retention. Usage trends on PolicyNote remain overwhelmingly positive across all nature of metrics that we track internally, including the behaviors that indicate high usage frequency, product stickiness and highly valuable integration into customer workflows. We view these patterns as early indicators of future improvements to gross and net retention. And combined with our increasing success in new logo sales, they are expected to serve as the foundation for durable long-term growth. This is why we have placed a focus on moving our existing customers on to PolicyNote. And to that end, migration to PolicyNote continues to go well with the vast majority of accounts using our legacy FiscalNote platform having been successfully transitioned to PolicyNote. This will put us in a position to have completed the migration from the legacy FiscalNote platform by the end of this calendar year as planned. As for our 2025 guidance, Jon will walk through that in more detail. But importantly, the update we've given for both total revenues and adjusted EBITDA remain within our previous ranges and reflect our current outlook on the business with 2 months before year-end. In summary, we continue to see growing momentum in our corporate pipeline and steady progress in our migration of PolicyNote, which together provide a clear path to renewed sustainable growth. These results reflect steady execution, disciplined management and tangible progress against our strategic priorities. While there is still work ahead, the trajectory is positive, and we remain confident in our ability to deliver sustainable growth, expanding profitability and long-term value for shareholders. With that, I'll turn it over to Jon to walk through the financials in more detail. Jon? Jon Slabaugh: Thank you, Josh. Good evening, and thank you for joining us. In the third quarter, FiscalNote successfully met its previous guidance for both total revenue and adjusted EBITDA. As a result, we're updating our full year revenue guidance to a range of $95 million to $96 million with adjusted EBITDA projected to be approximately $10 million. Both figures remain within our previously established ranges. This updated guidance reflects the strong performance observed in our core business while also accounting for the specific impacts of our public sector business due to unusual disruptions in the federal sector. Overall, operationally, the business is showing resilience and indications of stabilization in the core policy products. Underlying our operations, we also secured our capital structure in a way that affords us the runway and flexibility necessary to execute on our product-led strategy. On that note, FiscalNote previously had several convertible notes on its balance sheet, all subordinate to our senior term loan. These notes carried significant payment and maturity obligations starting in 2025 and continuing into 2026 and 2027, preventing the company from refinancing its senior debt. The August transactions replaced and/or amended these convertible notes, reducing their balance and eliminating most of our annual PIK interest. These transactions enabled FiscalNote to refinance its senior term loan and collectively, the transactions allow us to better manage our capital structure and provide a stronger foundation for our product-led growth strategy moving forward. The new debt stack can be found in both the revised corporate overview presentation issued today in conjunction with our earnings release and in the Form 10-Q. With that as a backdrop, let me dive into some of the key drivers behind our third quarter financial results. Total revenue for Q3 2025 was $22.4 million, above the midpoint of our forecast of $21 million to $23 million. When compared to the prior year, revenue was $7 million lower, primarily due to the divestiture of ACL in October of 2024, Oxford Analytica and Dragonfly at the end of Q1 2025 and TimeBase at the end of Q2 2025. Subscription revenue, which remains the cornerstone of our business, was $21.2 million for the quarter, $6 million lower, again, largely due to divestitures. Subscription revenue accounted for 94% of total revenue, slightly higher than our historical trend of 92%. On a pro forma basis, after adjusting for the impact of the mentioned divestitures, Q3 2025 subscription revenue was $1.8 million lower than the prior year period, reflecting our continued transition to PolicyNote from the legacy FiscalNote platform. As of Q3 2025, annual recurring revenue was $84.8 million versus $92.2 million in 2024 on a pro forma basis, a decline of $7.4 million. As Josh spoke to earlier, on a sequential basis, Q3 2025 ARR increased by $100,000 versus Q2 2025 on a pro forma basis, adjusting for the divestitures. This is an important indicator of our mounting momentum for our PolicyNote platform launched in January of this year. For the third quarter 2025, net revenue retention was 98%, level with the prior year and up 200 basis points over the second quarter on a pro forma basis. Principal operating expenses in Q3 2025 extended the trend of year-over-year decreases, reflecting the impact of ongoing efficiency measures initiated in 2023, advanced in 2024 and maintained across 2025. Such discipline is essential to our path to expanding operating margins and adjusted EBITDA going forward. Looking at expenses in more detail. Q3 2025 cost of revenue decreased by $1.5 million or 23% versus prior year. R&D decreased by $1.2 million or 36% Sales and marketing decreased by $2.8 million or 31% and editorial decreased by $1.4 million or 30%. As for G&A, we saw an increase of $3.3 million or 31%, which included approximately $3.1 million of noncash charges and approximately $4.3 million of cash costs related to our refinancing activities, the sale of TimeBase as well as other nonrecurring costs, which we recorded in G&A during the quarter. Excluding these items, G&A would have declined year-over-year as well. Total Q3 2025 operating expenses fell by $4 million or 11% versus the prior year. On a pro forma basis, excluding noncash and other nonrecurring charges and the impact of the 2024 divestitures, OpEx decreased by approximately $1.7 million or 8%. Q3 2025 gross margin was 79%, level with the prior year on a GAAP basis. Q3 2025 adjusted gross margin was 87% as compared to 86% in the prior year. Both reflect the impact of disciplined cost management. Adjusted EBITDA was a positive $2.2 million, a decline over the prior year due to the mentioned divestitures but slightly above the guidance we gave and the ninth consecutive quarter of positive performance on this important profitability metric. Going forward, we will continue to drive increasing operating leverage across the business while steadily expanding our top line through product-led growth. Cash and cash equivalents, including short-term investments at the end of Q3 2025 were $31.8 million, reflecting a sufficient cash level to fund our continuing progress turning around the core business and transitioning into a durable and sustainable growth engine. Finally, let me speak to guidance. We are updating our guidance remaining within our previous guidance range. Specifically, we are narrowing the forecast to now expect full year 2025 revenue of approximately $95 million to $96 million from a previous range of $94 million to $100 million and full year 2025 adjusted EBITDA of approximately $10 million from a previous range of $10 million to $12 million. As a consequence, we are expecting fourth quarter 2025 total revenues of $22 million to $23 million and adjusted EBITDA of approximately $2 million. Overall, our Q3 and year-to-date performance demonstrate a healthy business with increasing strength and resilience. Our streamlined operating plan prioritizes innovation, consistently generating positive customer feedback and highlighting the value of policy Notes enhancement since its January launch. We are also committed to prudent cash management, controlling capital expenditures, reducing cash interest expense and operating expenses. These efforts are all aimed at accelerating our progress towards positive free cash flow and sustainable, profitable long-term growth. Year-to-date, we have achieved a great deal in 2025, and we are encouraged by the clear positive trends we are seeing across the product and customer metrics, which drive everything. We know we are on the right path, and we look forward to reporting our continued success in establishing durable growth in the business and creating substantial value for customers and shareholders alike. That concludes my prepared remarks. I'll turn it over to the operator to begin the question-and-answer session. Operator? Operator: [Operator Instructions] Your first question is from the line of Mike Latimore with Northland Capital Markets. Mike Latimore: Good to see the ARR, NRR improvement here. Nice to see. Josh, on the -- I think you said that ACV of deals or ACV overall is getting bigger. Can you give a little more color on that? Is it more users at current customers, more usage across the customer base or some solid cross-sells like global data? Joshua Resnik: Sure, Mike. Thanks for the question. The single biggest driver behind the higher ACVs really is leveraging global data more. We've done some work to restructure our global data packages, and I think have done a very good job bringing those to market. That, in turn, extends use cases through the enterprise, which makes it prime for our larger corporate clients, so the larger enterprise and extending down through to mid-market. So we see a lot of potential for that going forward as well. Mike Latimore: Got you. Okay. And then you've been migrating customers to policy node. Sometimes when companies do those kind of migrations, they see churn pick up. It seems like you haven't seen any change materially in churn with these migrations. Is that fair? Joshua Resnik: Yes, that's correct. We haven't really seen any meaningful migration-related churn. We've had a very positive experience moving customers on to PolicyNote, both in terms of how the migration itself has gone, but also as we've mentioned, with the usage metrics and engagement that we see once customers are on there. Mike Latimore: Got it. And then I think you highlighted new logo bookings were good again. I just wanted to clarify that you said that. And then was that trajectory as expected or any different from what you were thinking? Joshua Resnik: So Mike, yes, that's correct. So we did see continued improvement in new logo bookings for corporates in particular, where we do expect to see continued improvements in advancements over time. What we've seen has been success on win rates, success on the higher ACVs and success in continuing to sign new customers to multiyear commitments. And again, we think that's a factor of better execution that we've seen, better offerings that we have, both in terms of policy note, specifically the global data packages and the like. We believe that we're delivering significant value to these customers and can continue to drive improvements in ACVs over time. Mike Latimore: Got it. And then just one question on kind of operating efficiency. I think you mentioned that there might be opportunity for more automation within the business over time. I guess, can you just provide a little more detail on that and maybe the magnitude of the effect there? Joshua Resnik: Sure, Mike. I'd be happy to do that. So what I'm referring to there are areas where we're really starting to see some tangible success in different areas of the business, leveraging automation in different ways. And so for example, we've been doing a better job of taking advantage of opportunities with using Agentic AI and our coding with our R&D teams. And we've seen that reflected in tangible success with new features that we've been able to launch much more quickly, leveraging Agentic AI than what we would have been able to do without. And that's an example where I expect to see much higher productivity, which will enable us to drive more advanced features for our customers more quickly, which should help improve productivity and top line. And again, with our -- the way we're operating the business, our expanding margins, more and more of those top line dollars will flow right to the bottom line. There are also other areas of the business where we're leveraging more automation and actually driving internal efficiencies, being able to accomplish more with less. And I expect we'll see both flavors of improvements continue over time. It will be a real focus of ours for 2026. So no tangible discussion around that until we get to talking about 2026 numbers at a later point, but it's something that we're really starting to see some uptake and opportunity there. Operator: [Operator Instructions] Your next question is from Zach Cummins with B. Riley Securities. Ethan Widell: This is Ethan Widell calling in for Zach Cummins. To start, it sounds like good news with ARR stabilizing. Can you maybe speak a little bit to your expectations with regard to a time line for renewed year-over-year ARR growth? Joshua Resnik: Thanks for the question, Ethan. So we don't guide on ARR. So we're not providing specific guidance there. And again, as we -- at a later point as we talk about 2026, we'll start to talk specifically about what that looks like. What I'll say is that, generally speaking, we're encouraged by the progress that we're seeing in the business. We've talked a lot about the transformation that we've made operationally, the transformation that we've seen through PolicyNote, and we're encouraged by this early traction and stabilization that we're seeing now. The single biggest lever for us in the long term is going to be -- will be around gross retention and net retention. And again, as we've said, part of the foundation for those improvements in gross retention will come through PolicyNote, the better product, the higher engagement, better experience, et cetera, as well as what we're able to do with multiyears from a new logo standpoint. And we're going to keep pushing on the new logo improvements as well. And -- but again, when we're talking about kind of what you can expect on a year-over-year basis in the future and so on, that will be a discussion at a later point. Ethan Widell: Understood. I appreciate that color. And then with regard to the federal government shutdown, can you maybe quantify the impact that you're seeing there? And when you speak to volatility in the federal space, is that primarily from the shutdown? Or are there other elements at play there? Joshua Resnik: Yes. In regards to federal government, we've talked about this throughout the year as we've been seeing the developments in federal. And we've talked previously about the fact that just through the efficiency efforts within federal, limitations on spending and the like that we were seeing some friction and impact. to that segment of our business over the course of the year. We're now seeing some added impact through the extended shutdown. The extent of that impact is not perfectly clear because, again, the kind of the length of shutdown is still remaining unclear. I would say, though, for the full year, you could estimate the overall impact at somewhere between $2 million and $3 million. Operator: There are no further questions. Mr. Burrows, I'll turn the call back over to you for closing remarks. Bob Burrows: Thank you, Tamika. That concludes our call this evening, and we appreciate everyone's participation and look forward to speaking with all of you again in the future. Good night. Operator: This concludes today's conference call. You may now disconnect.
Operator: [Interpreted] Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference of the third quarter of fiscal year 2025 earnings results by KT. We would like to have welcoming remarks from KT IRO, and then CFO will present earnings results and entertain your questions. [Operator Instructions] Now we would like to turn the conference over to KT IRO. Jaegil Choi: [Interpreted] Good afternoon. This is Choi Jaegil, KT's IRO. We will begin the third quarter 2025 earnings presentation. Please be reminded that today's presentation includes K-IFRS-based financial estimates and operating results, which have not yet been reviewed by an outside auditor. We, therefore, cannot ensure accuracy nor completeness of financial and business data, aside from the historical actuals. So please note that these figures may be subject to change in the future. With that said, let me now invite our CFO, Jang Min, to discuss KT's Q3 2025 earnings. Min Jang: [Interpreted] Good afternoon. This is Jang Min, KT's CFO. Before going into the earnings for Q3 2025, I would like to extend my sincere apologies to our customers and investors for the unauthorized micro payments and infringement incident perpetrated through the illegal base station connection. KT is currently implementing a comprehensive plan to compensate customers affected by such unauthorized micro payments and personal information breach. Starting November 5, KT is replacing used SIM free of charge for all of its customers. Going forward, KT will do its utmost to put in place technical and system-based guardrails to protect customers, and to ensure that such incidents are prevented through preemptive and far-reaching security measures. On November 4, we officially began the process for CEO nomination. KT's Director Candidate Nomination Committee, comprising of all of the independent auditors, will select a pool of candidates from various different channels to recommend one candidate to the Board of Directors before the end of the year. BOD will then make the final confirmation and the new CEO will be appointed at the General Meeting of Shareholders. Now I will move on to KT's third quarter earnings for 2025. Based on our telco business and continuing growth of group's core portfolio, as well as real estate profit gained from Gwangjin District development, KT sustained growth in revenue and operating profit this quarter. We are also collaborating with global big tech companies to launch specific services, and have secured a solid footing for AX business execution by opening KT Innovation Hub, placing momentum behind the transformation towards an AICT company. We released consecutively our proprietary model, Mi:dm2.0, SOTA K, which is a model developed in collaboration with Microsoft, as well as Llama K, based on Meta's open source technology, introducing AI LLM lineup catering to Korean requirements. Under the AI multimodal strategy, we will expand AI-driven usage base across various verticals including media press, education, public and financial domains. In October, we opened KT Innovation Hub under strategic partnership with Microsoft, where we can hold exhibitions on AX and AI experience and provide industry-specific consulting services. AI experts of both companies, together with our clients, will be working together in the hub to explore new AX business opportunities. Third quarter dividend is KRW 600 per share as we maintained 20% higher dividend payout year-over-year as was the case in Q1 and Q2. Corporate value enhancement plan also is ongoing as planned. We had concrete results in securing capacity required for structural transformation into becoming an ICT company, with SOTA K launch being one of such endeavors. We continue to work on streamlining assets and driving profitability enhancements through rationalizing low-margin businesses and liquidation of noncore assets. As part of the value enhancement plan, we also completed KRW 250 billion share buyback on 13th of August. Next on financial performance for Q3 of '25. Operating revenue was up 7.1% year-over-year, reporting KRW 7.1267 trillion and sustained growth from core businesses, including telecom, real estate, cloud and data center and profitability improvement efforts as well as onetime real estate sales gains. Operating profit was up 16% Y-o-Y, reporting KRW 538.2 billion. Net income was up 16.2% Y-o-Y, recording KRW 445.3 billion, driven by increase in operating profit. EBITDA increased 5.2% Y-o-Y, reaching KRW 1.5039 trillion. Next page, I will walk through the operating expense items. Operating expense increased 6.4% year-on-year to KRW 6.5886 trillion, an increase in cost of goods sold, cost of services and selling expense. Next is the financial position of the company. Debt-to-equity ratio at end of September 2025 was 123.3%, while our net debt ratio went up 4.2 percentage points year-over-year, reaching 34.5%. Next, on CapEx. Total CapEx up to the third quarter of '25 of KT and its main subsidiaries accounted for KRW 1.9637 trillion. KT's separate basis CapEx was KRW 1.3295 trillion, while major subsidiaries spent KRW 634.2 billion. Next, performance breakdown by business. Wireless revenue was up 4% year-on-year, reaching KRW 1.8096 trillion. Subscriber base expansion around 5G drove the top line growth, with 5G penetration as of third quarter end reaching 80.7%. Next is fixed-line business. Broadband internet revenue increased 2.3% year-on-year to KRW 636.7 billion on the back of GiGA Internet subscriber growth and value-added services. Backed by higher IPTV subscriber net addition and sale of premium plans, media business posted growth of 3.1% year-over-year. Home telephony revenue fell 6.6% year-over-year to KRW 160.9 billion. Next is B2B business. B2B service revenue reported 0.7% year-over-year growth on the back of enterprise messaging, corporate broadband and network-based business growth, despite streamlining of low-margin businesses. For the AI and IT business, revenue came down 5.7% year-over-year due to structural enhancement work done on certain businesses in line with our selective focus strategy, notwithstanding AICC project wins from large customers and ongoing monetization. Next is performance of major subsidiaries. Revenue from content subsidiaries dipped 1.8% year-over-year due to less number of original title production. KT cloud revenue was up 20.3% year-on-year, following higher data center usage by global clients and AI cloud demand growth. KT Estate revenue was up 23.9% year-on-year to KRW 186.9 billion, backed by good performance from hotel business and new development projects. This ends report on KT's third quarter earnings results. Once again, I would like to extend my sincere apology for causing concern over unauthorized micro payments and the infringement incident. KT will cooperate with the government's investigation process and exert our utmost effort in ensuring network security and stronger customer protection. Also, we will bring true AI CT transformation. And by successfully implementing corporate value enhancement plan, we'll endeavor to drive stepwise upgrade in KT's corporate value. Once again, thank you to our investors and analysts for your continued interest and support. Jaegil Choi: [Interpreted] For more information, please refer to the document and materials that we had previously circulated. We will now begin the Q&A session. To give as much opportunity as possible, I would like to ask that you limit your questions to 2 per person. Operator: [Interpreted] [Operator Instructions] The first question will be provided by Hoi Jae Kim from Daishin Securities. H.J. Kim: [Interpreted] I'm Kim Hoi Jae from Daishin Securities. You were able to record good financial performance up until the third quarter. I know that for the fourth quarter, usually there is a seasonality expense-related impact, so it will be hard to make that projection. But still I would like to get some color as to what your projection is going forward for the fourth quarter. And you've decided to pay out dividend per share of KRW 600 up until Q3. Just wondering whether there is further upside to the dividend payment for -- when the fourth quarter comes? And also until -- so in 2025, you had decided to do a share buyback and cancellation in the amount amounting to KRW 1 trillion. Just wondering whether in 2026, you will be able to grow that size of share buyback and cancellations? Min Jang: [Interpreted] Thank you for that question. Responding to the question on Q4 outlook. As you have correctly mentioned, in the fourth quarter, there are usually seasonality issue. And also, we have to consider all the measures to compensate for customers. And also, there are certain uncertainties that currently exists relating to the fines or the penalties that we will be subject to. So at this point, we are making a quite conservative stance when it comes to making a forecast going forward, but we are putting our utmost efforts to minimize any impact or any damage to our customers and also to our financials. Now, however, because we were able to report a quite solid performance up until Q3, if we were to make projections on the full year 2025 financials, thanks to our efforts in growing our top line growth, at the same time, improving the profitability and considering that there was also a one-off gain from the NCP business, the real estate, and also due to the fact that we are able to drive our core business-centric group affiliate growth, we believe that both on a consolidated and separate basis, we could achieve a year-over-year growth. On the second question, basically, when it comes to the dividends, yes, there will be a onetime impact coming from this hacking incident, and there will be certain uncertainties in terms of its impact on the financials. However, we will be considering the annual based financial performance as well as the expectations that the shareholders have, based upon which I am most certain that our BoD will make a reasonable decision. So lastly, regarding our announcement of the plan to do the share buyback and the cancellation amounting to a total size of KRW 1 trillion, so for this year, we had already conducted the buyback and cancellation amounting to KRW 250 billion. And your question was whether for next year, can you expect about the same amount or more bigger as we go forward. I can tell you that our value up plan will continue to be implemented. And in consideration of the confidence that the market is giving us, we will make sure that either this could happen on the same size basis as it was for this year, for next year or there could be certain adjustments. We will very flexibly and nimbly respond to changes in the overall operational backdrop and deciding on the specific size. Next question, please. Operator: [Interpreted] The following question will be presented by Chan-Young Lee from Eugene Investment & Securities. Chan-Young Lee: [Interpreted] I am Lee Chan-Young from Eugene Investment & Securities. My question relates to the recent hacking incident. I would like to understand as to what the financial impact will be in line with your compensation to the customers and your subscribers, and also for the measures that you are putting in place to make sure that you prevent a recurrence of such incident going forward. And I would like to know the extent of this expense that is currently captured in Q3 numbers. And also going forward, what will be the timing or the scope of that expense? Min Jang: [Interpreted] Thank you for that question. As I've mentioned before, we have put in place a measure and a compensation plan to compensate for any harm that has been inflicted due to the unauthorized micropayment incident as well as the data breach issue. Now -- and also on November 5, we had made the announcement that we will be replacing the used SIM cards of all of the KT customers. And if and when we go through this investigation process by the government as well as the police, if additional harm is identified, then the -- eventually, the final amount of the compensation will be determined. Now in terms of the timing as well as the size of this expense, we cannot make a perfect prediction based on where we are today. However, we believe that in terms of the used SIM chip replacement, the relevant costs will be recognized under Q4 figures. There is also free data that we are planning to provide and KRW 150,000 discount on the handset tariff as well as certain other expenses. Now these expenses, when they are actually incurred, that would be the timing upon which it will be booked in our financials. Now we've also already made an announcement to the market that for the coming 5 years, that we have put in place an information security-related investment in the amount that exceeds KRW 1 trillion. We've actually communicated that plant was into the market. And looking back at our track record, we've been investing about KRW 120 billion to KRW 130 billion on a per annum basis for this security purposes. So we believe that this KRW 1 trillion, which we'll be investing in the upcoming 5 years, is not going to be overly burdensome for the company. Next question, please. Operator: [Interpreted] The following question will be presented by Eun Jung Shin from DB Securities. Eun Shin: [Interpreted] I just have one question. Your CEO appointment process has just begun. Can you just walk us through the process under which your new CEO will be appointed? And when there is a new CEO that comes into office, will there be any changes to the current value of program that the company has? Min Jang: [Interpreted] Thank you for that question. Let me walk you through our CEO appointment process. We've actually officially kick started the discussion process on appointment of the new CEO as of the November 4. And under the BoD rules, there is going to be a director candidate recommendation committee that's going to be comprised of all of our independent directors, who are 8 of them in total, and they will go through the relevant processes. So first off, we begin with the candidacy pool of the CEO, who's going to be recommended by a third party and outside entity. And also, we will go through an open call process as well and also receive recommendation from the current shareholders as well as include a candidate from the -- internally from inside the company. So the Director of Candidates Recommendation Committee will then go through the screening and vetting process based upon the documentation, and we'll also engage in interviews. And by the end of the year, the committee is going to select one CEO candidate to be tabled at the BoD. So this one candidate that is recommended by the recommendation committee is going to be tabled at the BoD, BOD making the final confirmation on that candidate, and this candidate will go through the General Meeting of Shareholders deliberation process in 2026 to be finally appointed as the CEO of the company. Lastly, your question on the consistency of the sustainability of the current value up plan that's in place. Now the company went through the BoD resolution last November and had made appropriate market disclosure. And we also went through the disclosure on the implementation progress in May as well. And so I do not think that there is a correlation between the CEO change and the changes to the value up plan. Basically, because of a new CEO, there is not -- the value up plan itself is going to be made invalid for instance, because the BoD understands the direction for the company that is deflated in the value up plan and actually, the value up plan is a commitment and promise that we make to the market. And therefore, I believe the action plans that are included in the plan itself is going to be sustained. Operator: [Interpreted] There are no questions in the queue right now. Jaegil Choi: [Interpreted] With no questions in the queue. We would now like to close the Q&A session. Thank you, everyone, for your interest and for your questions. And once again, thank you very much for joining us despite your very busy schedules. This ends KT's third quarter 2025 earnings call. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good day, and thank you for standing by. Welcome to the Alarm.com Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matthew Zartman. Please go ahead. Matthew Zartman: Thank you, operator. Good afternoon, everyone, and welcome to Alarm.com's Third Quarter 2025 Earnings Conference Call. This call is being recorded. Joining us today are Steve Trundle, our CEO; Kevin Bradley, our CFO; and Dan Kerzner, President of our Platforms business. During today's call, we will be making forward-looking statements, which are predictions, projections, estimates, and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. We refer you to the risk factors discussed in our quarterly report on Form 10-Q and our Form 8-K, which will be filed shortly with the SEC, along with the associated press release. The call is subject to these risk factors, and we encourage you to review them. Alarm.com assumes no obligation to update forward-looking statements or other information, which speak as of their respective dates. In addition, several non-GAAP financial measures will be discussed on the call. A reconciliation of GAAP to non-GAAP measures can be found in today's press release on our Investor Relations website. I'll now turn the call over to Steve Trundle. Steve? Stephen Trundle: Thank you, Matt. Good afternoon, and welcome to everyone. We are pleased to report financial results for the third quarter that were above our expectations. SaaS and license revenue in the third quarter grew to $175.4 million and adjusted EBITDA was $59.2 million. We saw better-than-expected performance across the business during the quarter, with particular strength in our energy business. Following my remarks, Dan Kerzner, who is the President of our Platforms business, will walk through several new product releases and how we're increasingly applying AI to our platform and business. And then Kevin Bradley, our CFO, will review our financial results, guidance, and provide our early initial look at next year. I'll begin with our annual Partner Summit, which we held here in Washington, D.C., in early October. We hosted about 200 key service provider partners from around the globe. Our team presented newly released and upcoming products while simultaneously taking the pulse on what our partners are seeing in the markets they serve. In my conversations, partners expressed nice enthusiasm for our overall road map and particularly for our new residential and commercial video products, including our upcoming battery cameras. Our remote video monitoring capability delivered through our subsidiary, CHeKT, also drew strong partner interest. CHeKT connects central station workflows with AI-driven video analytics to enable central station operators to cost effectively monitor live video feeds, deter crime before it occurs, and seamlessly initiate an emergency response when the situation calls for escalation. I also spoke to a few of our end customers who have large commercial installations. It was good to hear that they are pleased with the direction of our product and the enhancements we have been making to our multisite access control video and intrusion software solutions. We continue to hear from our partners that our unified commercial solutions are winning in the market due to the ease of managing these complex systems through a single integrated interface. Over the last year, we've seen a healthy uptick in commercial video account creation and our commercial access control subscriber base increased approximately 30%. Our growth initiatives, commercial, international and EnergyHub, collectively continued to drive SaaS revenue growth in the 20% to 25% year-over-year range and accounted for 30% of total SaaS revenue this quarter. I want to highlight EnergyHub's progress with its platform strategy, which is enabling higher-value services for its utility clients and reinforcing its competitive advantage and leading market share in the North American residential market. As a reminder, EnergyHub's software platform helps utilities match electricity demand and supply in real time. It does this by orchestrating distributed energy resources such as smart thermostats, residential batteries, and EVs to provide load flexibility. Demand for EnergyHub is driven by the long-term grid challenges faced by utilities. These include increasing load from electrification of transportation and the growing footprint of data centers, along with growing variability in generation as the grid decarbonizes. EnergyHub's load flexibility solutions are faster and more cost-effective to deploy than building new infrastructure. The EnergyHub team is focused on platform expansion to support more classes and manufacturers of edge devices. Last month, EnergyHub announced an expanded partnership with Tesla. Owners of Tesla's Wall Connector EV chargers can enroll their product in EnergyHub programs directly in the Tesla App. A large U.S. utility is already using the integration to accelerate EV program enrollments, and it's being introduced to many of the more than 30 EV-managed charging programs that EnergyHub supports in North America. The goal of EnergyHub's ecosystem expansion is to drive platform adoption by providing a single orchestration layer across device classes. EnergyHub also provides AI-driven dynamic load shaping capabilities that increase flexibility and address a broader range of grid management use cases. In summary, I'm pleased with our third quarter results and the continued growth we see across the business. Alarm.com has developed strong, durable positions, addressing diverse and dynamic opportunities in residential and commercial security and residential energy management. Our IoT-based software solutions are transforming those markets, and we are well positioned to drive further growth over time. I want to thank our service provider partners and our team for their hard work and our investors for their continued trust in our business. I'll now turn things over to Dan Kerzner. Dan? Daniel Kerzner: Thanks, Steve. I'm pleased to join our call this quarter and speak with our investors and analysts. For context, the Platforms business that I lead includes product development for our core residential and commercial platforms, shared services for our growth ventures, and sales and marketing for North America, our largest market. Our team drives profitable growth through innovation, delivering new capabilities that expand our addressable market and strengthen the competitive position of our service providers. I'll begin with an update on several products we released recently and share some examples of how our AI is already intersecting with current elements of our service provider and subscriber offerings and platforms. Video remains a strategic growth driver across our residential, commercial, and international markets. It's central to our platform strategy because each new video capability extends system utility, both directly and by thoughtfully integrating video with other aspects of the offering. This approach increases SaaS adoption and customer engagement and retention. To share a sense of the scale, the platform uploads roughly 1 million hours of video per day. This quarter, we introduced a variety of important updates to the lineup. We added to our outdoor video camera lineup with the new 730 spotlight camera. It delivers high-quality video at night through an integrated spotlight and a 4-megapixel sensor. It also includes built-in 2-way audio, so central station operators can communicate directly through the camera and Bluetooth enrollment that simplifies installation. The 730 also supports our intelligent video-based proactive deterrence capabilities. This includes AI Deterrence, an upgraded video solution that identifies individuals and delivers AI-generated verbal warnings dynamically adapted to a person's clothing, behavior, and location. The voice is designed to emulate a security professional and uses our service provider's brand name to add authenticity and authority. We recently enhanced this feature with a broader library of human-like dynamically generated voices and built-in randomization that automatically varies tone, phrasing, and delivery to create more unpredictable and thus convincing deterrence messages. Capabilities like AI Deterrence and remote video monitoring reflect our strategy to deploy software that evolves video cameras from passive sensors into active, responsive devices that drive higher recurring revenue and subscriber lifetime value. As we continue to embed AI within the core platform, we can derive more insights from the IoT devices in a property and cost effectively deliver unique value to consumers and businesses. Turning to our commercial solutions. We continue to expand the reach and flexibility of our video platform. Commercial properties often have diverse surveillance requirements, which are met by a wide variety of camera form factors. By extending our software to operate with select third-party cameras, we've made it easier for service providers to bring Alarm.com's video capabilities into these environments without developing proprietary hardware. This approach broadens our market coverage and enables more efficient targeted R&D investment and opens additional SaaS opportunities with existing commercial accounts. Since launching this capability, we've seen strong engagement. Accounts that leverage our third-party camera support connect roughly twice as many cameras to our video software as accounts without it, revenue streams we may not have otherwise captured. We recently expanded support to include panoramic, multisensor, and pan tilt zoom cameras, form factors widely used in airports, parking facilities, and industrial sites. We also enable 2-way audio and advanced analytics for our leading camera manufacturer partners. These integrations enable us to attach our premium remote video monitoring service to a broad range of widely deployed cameras. Another focus for our teams is partner enablement. Our service provider relationships are a cornerstone of both our durable market position and our growth strategy. We offer enterprise-grade tools that enable our partners to operate their businesses through our platform, from field installation to ongoing support and management of very large fleets of connected devices. Last year, we launched an initial version of our generative AI chatbot in our technician app to help field teams quickly troubleshoot installation issues. We recently released an upgraded version that can handle more complex questions and multistep workflows. In the 4 months following the upgrade, the average number of inquiries handled by our chatbot increased by 2.5x, while customer satisfaction ratings rose more than 70% over the same period. Our goal is to provide service providers with streamlined, multichannel access to world-class support. With more technicians using our AI-augmented support offerings, our teams can prioritize more complex challenges and first-time installations. Over time, this facilitates faster adoption of new features and enables our partners to expand their use of our commercial, residential, and video services. Overall, I'm pleased with the progress our R&D team made this quarter and throughout the year. These product introductions demonstrate how our platform strategy scales innovation efficiently across markets while creating tangible growth opportunities for our partners. With that, I'll hand things over to Kevin to review our financials. Kevin? Kevin Bradley: Thank you, Dan. I'll begin by reviewing our third quarter financial results, then provide updated guidance for Q4 and full year 2025, and lastly, provide our initial thoughts on 2026. I'm pleased to report another quarter of financial results that exceeded our expectations and consensus estimates. Our performance reflects continued broad-based contributions across the diverse components of the business. SaaS and license revenue grew 10.1% year-over-year to $175.4 million, exceeding the midpoint of our guide of $171.5 million. As Steve noted, our growth initiatives, which consist of our commercial, EnergyHub, and international efforts, continue to deliver SaaS revenue growth of roughly 20% to 25% year-over-year and represented 30% of total SaaS revenue in the quarter. EnergyHub delivered a particularly strong quarter, with the team both executing on new program launches and driving solid same-store growth. Total revenue grew 6.6% year-over-year to $256.4 million during the quarter, and gross profit increased 8.4% to $168.8 million. Despite some anticipated and temporary headwinds to hardware gross margins, total gross margins increased 100 basis points year-over-year due to the improving quality of SaaS in both the Alarm.com and Other segments, as well as a higher weighting towards SaaS overall. Hardware gross margins were impacted as we began selling through certain inventory carrying reciprocal tariff costs towards the latter part of the quarter. We expect this to continue into Q4 before returning to a more normal margin range in January 2026 when we modify our tariff pass-through fees to incorporate the higher reciprocal tariff rates. We also chose to selectively use faster and more expensive shipping methods to support the recent launch of 2 of our new video cameras, the V516 and the V730 that Dan discussed. This also contributed to some hardware gross margin compression. But as I noted a moment ago, even with these temporary headwinds, our total gross margin rates were up 100 basis points year-over-year. During the third quarter, total operating expenses, including depreciation and amortization, were $131.8 million. Excluding depreciation and amortization as well as stock-based compensation and other items we adjust from G&A for non-GAAP purposes, total operating expenses were $113.1 million, a 7% increase year-over-year. R&D expense in the quarter, inclusive of stock-based compensation, was $66.6 million, up 7.1% year-over-year. GAAP net income during the third quarter was $35.3 million, or $0.65 per diluted share. Non-GAAP adjusted net income grew 20.6% year-over-year to $42.4 million, and non-GAAP EPS increased by 22.6% year-over-year to $0.76 per diluted share. Effective August 15, 2025, the settlement method for our convertible notes that mature in January 2026 became locked into the [indiscernible] in cash. And as such, we began removing the 3.4 million of dilutive shares midway through the third quarter. Adjusted EBITDA grew 18.4% year-over-year to $59.2 million. Our adjusted EBITDA performance includes a $3.6 million benefit derived from a mark-to-market gain on a security in our treasury portfolio. Substantially all of our treasury is held in money market funds, but our policy allows for a small percentage to be held in other marketable securities. We produced $65.9 million of free cash flow and ended the quarter with $1.1 billion in cash. Our efficient go-to-market model and growing base of durable recurring revenue continues to generate strong cash flow and reinforce a healthy balance sheet. I want to remind investors of the cash flow tailwind that should emerge based on the federal tax bill signed into law in July 2025, which included a provision that allows companies to transition back to immediately and fully deducting all domestic R&D expenses incurred during the year for tax purposes. We continue to estimate that this change eliminates what would have been a little under $200 million in total cash tax payments over the next 5 years under prior law. I'll turn now to our financial outlook. For the fourth quarter of 2025, we expect SaaS and license revenue of between $176 million and $176.2 million. As a reminder, EnergyHub's revenue recurs annually and is slightly seasonally weighted toward the second half of the year. The fourth quarter is typically its largest revenue quarter in absolute dollars, but also tends to grow at a slower rate than other quarters on a year-over-year basis. Additionally, EnergyHub's strong Q3 performance included some contributions that pulled forward from Q4. Collectively, these factors create a modest seasonal headwind to consolidated SaaS growth. For full year 2025, we are raising our SaaS and license revenue outlook to between $685.2 million and $685.4 million, an increase from prior guidance of $4.1 million at the midpoint. We now expect total revenue slightly above $1 billion, including $315 million to $316 million of hardware and other revenue. We are also raising our non-GAAP adjusted EBITDA outlook to $199 million, up from the midpoint of $195.8 million in prior guidance. This implies roughly 100 basis points of margin expansion compared to 2024. We are projecting non-GAAP adjusted net income of $140.5 million, or $2.53 per diluted share. This is up from prior guidance of $136 million to $136.5 million, or $2.40 per diluted share. EPS is based on 58.9 million weighted average diluted shares outstanding for the year. Q4's diluted shares will be around 56.7 million as we operate through a full quarter without the 3.4 million dilutive shares associated with the convertible notes due January 2026. We currently project our non-GAAP tax rate for 2025 to remain at 21% under current tax rules. We expect full year 2025 stock-based compensation expense of around $35 million. Before turning to our preliminary view of 2026, I want to comment on our annual planning process, which is well underway. We continue to believe that our strong returns on invested capital and the positions we've established across multiple markets support organic reinvestment as the primary component of our capital allocation framework. As we go through our planning process each year, we begin with an analysis of all our existing initiatives to determine which ones best support ongoing investments in growth. We also identify initiatives that we have been working on for some time, but where progress has not developed as we had expected. That process forms a framework for reallocation within the portfolio. This year, much like last year, we are seeing that many of the higher growth areas of the business can self-fund a bit more than they did just a few years ago. As we rotated out of a few initiatives and assess productivity, we found ourselves in a position to let go of some existing jobs during October, which is always a difficult but sometimes necessary decision. While we are still focused on closing out 2025, we currently project a preliminary early look estimate of SaaS and license revenue of between $722 million and $724 million in 2026. Total revenue can range between $1.037 billion and $1.044 billion. We currently project our non-GAAP adjusted EBITDA for 2026 to be in the range of $210 million to $212 million. We will be working to firm up our estimates and we'll provide our formal annual guidance for 2026 when we report our fourth quarter 2025 financial results early next year. As our early look estimates suggest, we are complementing organic reinvestment with some margin expansion. We have a midterm target to exit 2027 with adjusted EBITDA margins in the 21% range, assuming historically typical hardware margins of 22% to 24% and a similar mix of hardware revenue and SaaS revenue that we have today. Our plans beyond this will depend upon the growth profiles and prospects of the various initiatives that we are engaged in at that time. In the meantime, meaningful operating cash flows continue to contribute to our strong cash position, affording us additional flexibility across our broader capital allocation framework. In closing, we're pleased with the broad-based momentum in the business that we've seen throughout the year. We believe that we're well positioned to deliver continued revenue growth and profitability while investing to expand our long-term opportunities. With that, operator, please open the call for Q&A. Operator: [Operator Instructions] Our first question comes from Adam Tindle with Raymond James. Adam Tindle: Kevin, I just wanted to start on the early framework for 2026. If I was just doing the math here quickly, correctly, it implies that the SaaS revenue growth is about 6%. And I was going back through my notes, and I think that's about where you initially thought 2025 might be, and we're now pushing maybe closer to 9% as we look to close out the year. So I guess the question would be, as you formulated the initial SaaS guidance in particular, what are maybe some of the similarities and differences in moving parts in 2026 versus 2025? And what could be some potential upside drivers? Kevin Bradley: Adam, thanks for the question. As you noted, when we first looked at 2025, we were first looking about 6.1%, so very similar to what we're first looking 2026 right now. And our updated guide for 2025 is about 8.5%, 8.6%, so about 250 basis points higher. Throughout the course of this year, we've had the growth initiatives contributing a little bit under 30% of SaaS revenue and growing 20%, 25%. I think as we look forward to 2026, the expectation would be roughly similar in terms of growth rate profile, meaning we think it will maintain 20% to 25% growth. So that will be consistent. When we started 2025, we noted a 200 basis point headwind on the residential side. That has not really come to fruition this year as a combination of a little bit better account creation than we had anticipated at the beginning of the year, as well as a very little bit of currency tailwind, which probably added about 20 basis points of growth this year. So as we look forward, we're basically pushing right some of that growth rate headwind that we had signaled at the beginning of this year on the core residential business to next year. And then we're basically assuming no additional currency headwinds. Adam Tindle: Just a follow-up for Steve, if I could. I'm noticing obviously very strong profitability here. And if I'm looking at the implied EBITDA margin for this year, it's looking like it's going to be pushing towards 20%. And the initial guidance for next year suggests another 20%, maybe even a little bit greater with some upside throughout the year. So very healthy profitability levels. I guess the question, Steve, would be your thoughts on the balance of growth and profitability going forward, understand you've managed that well in the past, but you're now reaching new levels of scale, $1 billion business at this point. So those incremental points in EBITDA are very high dollars. So just wonder if you could maybe just opine a little bit on how you're thinking about the balance of growth and profitability. Stephen Trundle: Thanks, Adam. Yes, I'd say we're still primarily focused on where we can find growth and what type of investment we need to get that growth. So we're still pretty excited about the growth initiatives. Kevin mentioned, we always have a few other skunk works projects that we hope may come to fruition over the coming years. I'd say that's where we start is like let's look at where can we get growth in the, say, 5-to 10-year period. That said, we've been improving the efficiency of the company. We're going to continue to do that. Kevin just telegraphed an exit rate anyway for 2027. That suggests we're going to continue to move the adjusted EBITDA margins up some in the business. But we're getting to a place that I think is a bit more healthy and a nice place where we're generating strong cash flows, refilling the bucket [indiscernible] initiatives and still able to sustain some growth. Operator: Our next question comes from Samad Samana with Jefferies. William Fitzsimmons: This is actually Billy Fitzsimmons on for Samad. I want to double-click on the EnergyHub business. There's obviously a ton going on in the utility market right now. Data center demand is driving record levels of investments and consumers are also contending with higher bills, in many cases, as a result. And so maybe against this backdrop, can you just walk me through how maybe your conversations have progressed with key customers over the course of the year? Curious if you have any anecdotes on specific customer conversations. And then can we just double-click on the commentary around how there was maybe a slight pull forward in that business from 4Q into 3Q? Stephen Trundle: Billy, I'll start with the higher-level question about the market and then Kevin may have a comment on the pull forward. Yes, the macro trends there are advantageous to us at the moment. As you noted, the data center explosion, the electrification of transportation, all of these things are driving demand for electricity. And it just so happens that what we do in the form of a virtual power plant is one of the least, probably the least, expensive way to add capacity and also something that's actionable and can contribute almost immediately. So the macro framework is great for that business. And as a result, our key customers, I think, are moving much faster and getting more serious about the contribution that VPP can make to their capacity challenge. So we're seeing less piloting trials, test-and-see type of approaches, and much more folks moving towards this type of solution as a committed part of their capacity is what we're seeing in the market. And I'd say -- in terms of the pull forward, Kevin, do you have any comments on that? Kevin Bradley: Billy, so I would characterize it as being in the hundreds of thousands of dollars, not millions of dollars. But one of the longest running programs at EnergyHub is a market-based program that's run out of Texas. And historically, what happens there is we're performing against that program throughout the year, predominantly in the summer. And then that has settled up in Q4 and the revenue associated with it is booked in Q4. And that's one of the reasons that EnergyHub has always been somewhat seasonally weighted in terms of revenue towards Q4. Some of that settlement happened to occur in Q3 this year, and the rest will occur in Q4. So there's just a little bit of pull forward there. Operator: Our next question comes from Stephen Sheldon with William Blair. Matthew Filek: You have Matt Filek on for Stephen Sheldon. On EnergyHub, can you help give us a sense on the current growth rate and how you're thinking about the durability of that growth over the next, call it, 2 to 3 years, especially in light of the strong demand you're seeing and some of the secular themes you're benefiting from? Stephen Trundle: Just starting with the growth rate. So we don't break out each growth initiative, but we commented the growth rate for our growth initiatives is in the 20% to 25% range overall. EnergyHub is probably the most meaningful contributor to that growth initiative -- growth rate, meaning you can probably guess that they're a tad above that. And then the second part of the question, I guess, was the macro environment, what's driving it, Matt? Matthew Filek: Well, really more so, how durable do you think that growth is in light of the secular themes you're benefiting from? Stephen Trundle: Yes. At the moment, we believe that growth is quite durable. There are a lot of different things going on. First, at the moment, we have about 45 million installed connected thermostats in the U.S. The penetration in terms of participation of those stats in a VPP program with us is around 3% to 5%. So we've got a lot of headroom in terms of adding more consumers onto the platform in our core thermostat-driven business. At the same time, we're out there building a business around EVs and building a business around batteries. We've had a couple of announcements recently on both of those fronts. So you've got another vector of growth there. Batteries, in particular, are very interesting for us to work with, because they're even more -- we're even more able to control utilization of stored kilowatt-hours there than we are with the thermostat where it may impact actually someone's temperature in their home. So we're seeing growth there. And then, of course, we have -- the next thing we can do is sign up additional utilities. We're probably 30% share of the largest 150 utilities in North America at the moment, meaning those that are out there with over 100,000 meters. So we've got share opportunity as well. And then because we're the largest in this space, we are the preferred partner for anyone that makes a device. If someone wants to be contributing power to the grid, and they want to participate in the economics associated with that, EnergyHub is the place to go. So I feel like the growth -- putting all that together, the growth story there is durable and compelling, and we feel good about it going into certainly next year and '27. Matthew Filek: Sounds like there's plenty of runway there. Maybe shifting gears to the core residential business. I was wondering if you could maybe talk about how much of a focus subscription pricing increases have been there, and how much of a focus do you expect pricing increases maybe to be over the near term. Stephen Trundle: Yes. I'd say in the history of the company, we've driven growth without much pricing. That changed a couple of years ago. We began to incorporate pricing into the growth picture. That was driven by the hard reality of a core inflation rate that had moved up dramatically. We've continued that practice, and we'll have to continue it. So pricing is part of it, and we're routinely surveying what inflation rates are and moving on price in that ballpark range typically. Operator: [Operator Instructions] Our next question comes from Ella Smith with J.P. Morgan. Eleanor Smith: So I'm curious, SaaS continues to grow as a percentage of your overall revenue. To what extent do you expect this positive mix dynamic to support your gross profit margins over a multiyear period? Stephen Trundle: Ella, at the moment, SaaS has been increasingly becoming a bigger chunk of the mix. And that, of course, contributes to gross margin expansion on a percentage basis. Looking into next year, I think we expect that trend to probably continue somewhat. That said, we have a number of things that we're excited about that are coming to market either right now or into next year. Dan spoke at length about some of the new form factors and new capabilities on our video product line. If we're successful in promoting that line and driving demand, obviously, we'll see higher hardware revenues as a result of that, and that mix could shift a little bit. But I don't think you're going to see it shift dramatically from where it is today. I'd say the trend line or where we are today is roughly where we'll be. You might see things move 100 or 200 basis points in terms of mix in the next 12 months or so. Eleanor Smith: And for a quick follow-up, how would you characterize your current M&A strategy? And do you expect to be acquisitive in 2026? Stephen Trundle: I would characterize our current strategy as active but deliberate. We are constantly assessing opportunities, different size classifications, and we're well positioned going into 2026. So I would imagine you'll see a pace in '26 that's not dissimilar from what you've seen in the last couple of years. And we can't guarantee that -- we're always opportunistic, and we're not in a race to go do acquisitions. But when we see the right fit, that means great management team, that means synergistic with our channel, synergistic with our technology, and honestly, synergistic at some level with our P&L. When we see those things come together, then we do strike. So I would expect that you'll continue to see some activity next year. Operator: [Operator Instructions] Our next question comes from Saket Kalia with Barclays. Alyssa Lee: You've got Alyssa Lee on for Saket Kalia. I think you touched on commercial and EnergyHub a little bit out of your growth initiatives. But how are you thinking about the international opportunity into next year? How is EBS progressing? And how do you see that into next year? Stephen Trundle: Alyssa, so international continues to be one of the 3 legs of the stool in terms of growth initiatives. I would say of the 3 we've talked about, commercial, EnergyHub, and international, international is probably a bit more of the laggard of those 3. We're not making quite as much progress there as I would like to see. So we're continuing to work to build that out. On the positive, you roll the clock back 24 months and international was 4% of revenue. I think when we put the Q out, you'll see it be 6% of revenue at the moment. So we are growing international, and we've got a nice strong foundation there to continue to build off. And I guess the optimist in me says we have a lot of room to drive a little more growth and some acceleration on the international piece, so that it contributes a bit more to that overall range that we articulated, which is 20% to 25% on the growth initiatives. Alyssa Lee: And maybe as a follow-up, how did renewal rates and gross adds shape up this quarter? And how did macro backdrop influence those? Stephen Trundle: Yes. So the renewal rate came in right where it was last quarter. They both rounded down to about 94%. They were, I'd say, 10, 20 basis points above that, but rounded to 94%. So that was substantially similar. Gross adds were exactly where we expected them to be. They were neither higher nor lower. I think we attribute most of that to the fact that from a housing market perspective, things basically stayed where they were in Q2. There was incrementally some excitement about potentially a lower rate environment that we thought might unblock that a little bit, but then I think found, based on commentary from builders in the last couple of weeks, that fears about the job market have basically all but offset that. And here we are in about the same place sequentially. Operator: Our next question comes from Jack Vander Aarde with Maxim Group. Jack Vander Aarde: I joined a little bit late, so I'll try not to be too redundant. Two questions. Growth businesses continue to ramp well. I caught some of the Q&A on EnergyHub and the focus on utility power grids, batteries, EVs. Maybe just outside of that, can you tie that into just your perspective on the autonomous robotics and delivery and drones? How does this fit into your EnergyHub and just your overall vision? Or does it -- I know you have patents on some stuff, and you guys are a patent machine over there, too. So just would love to get your thoughts, maybe taking the ball a step further of the autonomous delivery. Stephen Trundle: Jack, yes, wide-ranging question there. So let's start with the relationship to EnergyHub. The devices that -- these autonomous devices that we expect to see around the home, all actually act as little mini -- can be mini batteries on the grid. So I would expect much as we attempt to connect to everything today, anything where there's a store of power, as these devices become more real, those batteries become attractive to us. And certainly, their charging cycles are things we can manage. You don't want to be charging -- if you're in a market where there are peak rates, you don't want to be charging your army of robots during the hour when you'll be paying peak rate. You want to charge them at some other point in time. So I think that's all good. Whether there will be that much capacity there in these type of batteries or not, I don't think we fully know yet. It depends on the capability of these autonomous devices. And then the next piece is really are these vehicles for security video cameras, and we continue to believe that they are. We currently go to market with an autonomous drone unit for high-security outdoor applications and are seeing that product deployed in places like shipyards or big-tech parking lots, any place where you have a wide amount of acreage to cover and you have a need for high security and it's not unreasonable to ask a guard to very, very quickly monitor a large property. So we're seeing uptake there. It's a relatively small part of our business still, but it's a place where we continue to have some energy. And then we're watching for the right partnering opportunities and/or right organic opportunities to build out more in that category. I wouldn't say it's as important to us at the moment as some of the things we're doing with AI and core video, but it's something that we continue to watch. Jack Vander Aarde: I appreciate all the color there. I know it was a wide question, but that was a great answer. One more for me. Outside of the M&A, I heard a question on that earlier. I know that's part of the general strategy. But just maybe looking at the balance sheet and the cash that you guys do have, it's very noticeable, obviously. Any other uses for that cash? Another hot topic area is clearly to get around is the digital asset space, treasuries, just integration with blockchain. Is any of this on your guys' radar? Or how do you just view the space in general? Stephen Trundle: Well, I may toss some of this one to Kevin. But in terms of the balance sheet, balance sheet is, yes, big, as you note right now. We're closing out one of the convertibles in January, but we've got pretty strong cash flow production. So we expect to have a nice amount of capacity on the balance sheet for all of next year. In terms of deployment, certainly, it's primarily about corp dev and having dry powder there. Do we consider other types of assets? We give them some consideration. At the moment, though, we're pretty focused on deploying capital in a way that helps us, for the most part, grow our core business. So we're not looking to deviate too much from that strategy. Anything else, Kevin, do you want to add or... Kevin Bradley: Yes, sure. Our primary motive, I think, with the balance sheet is for it to be a source of resilience and flexibility for the reasons that Steve mentioned. So the primary reason to have that there is to be able to be opportunistic in the corp dev space. You obviously see us do a little bit of buyback activity as well. It's useful in that domain. We were more active than we had been in several quarters during Q3 as we saw the opportunity to buy at 7.5%-plus cash flow yield on it. Those are the 2 things really that we focus on right now in terms of use of the balance sheet, less so crypto or other assets like that. Operator: [Operator Instructions] I'm not showing any further questions at this time. And as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.
Operator: Welcome, ladies and gentlemen, to the Third Quarter 2025 Earnings Conference Call of Organogenesis Holdings, Inc. [Operator Instructions] Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly. Before we begin, I would like to remind everyone that our remarks today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including Item 1A, Risk Factors of the company's most recent annual report and its subsequently filed quarterly reports. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Although it may voluntarily do so from time to time, the company undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with the generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website. I would now like to turn the call over to Mr. Gary S. Gillheeney, Senior, Organogenesis Holdings President, Chief Executive Officer and Chair of the Board. Please go ahead, sir. Gary Gillheeney: Thank you, operator, and welcome, everyone, to Organogenesis Holdings Third Quarter 2025 Earnings Conference Call. I'm joined on the call today by Dave Francisco, our Chief Financial Officer. Let me start with a brief agenda of what we'll cover during our prepared remarks. I'll begin with an overview of our third quarter revenue results and provide an update on key operating and strategic developments in recent months. Dave will then provide you with an in-depth review of our third quarter financial results, our balance sheet and financial condition at quarter end, as well as our financial guidance for 2025, which we updated in our press release this afternoon. Then we'll open up the call for questions. Let me begin with a review of our revenue results for Q3. We delivered sales results, which exceeded the high end of our guidance range outlined in our second quarter call, driven primarily by better-than-expected growth in sales of our Advanced Wound Care products, which increased 31% year-over-year. Sales of our Surgical & Sports Medicine products also performed well, increasing 25% year-over-year in the third quarter. The record revenue performance we delivered in the third quarter reflects our team's strong execution and commitment to our strategy to build upon our deep customer relationships and promoting access to existing and recently launched products despite continued aggressive pricing strategies from our competitors. On October 31, CMS announced the final Medicare physician fee schedule for the calendar year 2026. As mentioned in our last quarter's earnings call, this is a watershed moment for the industry and the most impactful development in more than a decade. And we congratulate CMS on taking this significant step in payment reform and are pleased CMS finalized skin substitute classifications based on FDA regulatory status and a per square centimeter payment methodology in both the physician office and hospital outpatient settings. We are pleased that CMS has recognized the clinical differentiation of PMA products and has taken steps toward higher payment and expanded access for PMA products. We remain committed to working with CMS and other stakeholders to further expand access to these life-saving technologies as well as incentivize investment and innovation in the space and achieve long-term market stability. We believe this new policy will address abuse under the current system and the resulting rapid escalation in Medicare spending while ensuring a much-needed consistent payment approach across sites of care. With more than 40 years in regenerative medicine and a diverse evidence-based portfolio with technologies in each FDA category, we believe we are best positioned in the skin substitute market for 2026 and beyond, and we'll continue to be a leader in the space with highly innovative, highly efficacious products that deliver on our mission of advancing healing and recovery beyond our customers' expectation. Before turning the call over to David, I wanted to provide some updates on key clinical and regulatory developments in recent months. Beginning with an update on our ReNu program. On September 25, we announced that the second Phase III trial of ReNu did not achieve statistical significance for its primary endpoint despite demonstrating a numerical improvement in baseline pain reduction that exceeded the results of the first Phase III trial. Baseline pain reduction at 6 months for ReNu was negative 6.9 for the second Phase III study compared to negative 6.0 in the first Phase III study. Additionally, ReNu results from the second Phase III study continue to demonstrate a favorable safety profile. Given the first Phase III trial achieved statistically significant reduction in pain compared to saline and the second Phase III trial demonstrated a numerical improvement in baseline pain reduction that exceeded the results of the first Phase III trial. We believe these combined results support the potential approval of ReNu for pain symptoms associated with knee osteoarthritis included in those patients classified as the most severe. ReNu has been studied in 3 large RCTs of more than 1,300 patients combined. Organogenesis believes the totality of this data is compelling evidence for the FDA to review in a biologic license application. Additionally, FDA granted ReNu Regenerative Medicine Advanced Therapy, or RMAT designation based on ReNu demonstrating the potential to treat an unmet need in symptomatic knee osteoarthritis, a serious condition affecting more than 30 million Americans. We have a meeting scheduled for December 12 with the FDA to discuss our submission, including using the combined efficacy analysis from both Phase III studies to support a BLA approval. We believe gathering robust and comprehensive clinical and real-world evidence is an essential component of developing a competitive product portfolio and driving further penetration in the markets where we compete. While we did not meet the November 1 submission deadline for new data for LCD coverage consideration in 2026 for PuraPly AM, for DFU and Affinity or VLU, these studies and analyses continue, and we intend to submit for coverage once they're published. We remain confident in our strong competitive position in the skin substitute market heading into next year. We have substantial advantages, including strong brand equity, deep customer relationships and importantly, 3 highly innovative, highly efficacious commercialized products on the covered list if the LCDs take effect as scheduled on January 1, 2026, specifically our Apligraf product for DFU and VLU and our Affinity and NuShield products for DFU. We have strongly advocated for CMS to implement an integrated coverage and payment policy for the skin substitute market. We believe they have taken the right steps to address rapidly escalating Medicare costs while ensuring patient access to the most appropriate clinically effective technologies. We believe these changes present an enormous opportunity for Organogenesis to serve more patients and importantly, will be positive for the long-term health of the wound care market. Beyond 2026, we expect to advance our competitive position as we leverage our development engine fueling new innovation, capacity to launch and reintroduce products, including our Dermagraft product, which is already covered for DFU and VLU under the LCDs. Strategic investments in expanding the body of clinical evidence supporting our technologies and a transformational opportunity with ReNu. With that, I'd like to turn the call over to Dave. David Francisco: Thanks, Gary. I'll begin with a review of our third quarter financial results. And unless otherwise specified, all growth rates referenced during my prepared remarks are on a year-over-year basis. Net product revenue for the third quarter was $150.5 million, up 31% year-over-year and up 49% sequentially. As Gary mentioned, these results came in above the high end of our expectations we provided on our Q2 call, which called for total revenue in the range of $130 million to $145 million. Our Advanced Wound Care net product revenue for the third quarter was $141.5 million, up 31%. As Gary mentioned, the commercial team executed well in the period, building upon the momentum that we experienced towards the end of Q2 that we discussed on our last earnings call. Net product revenue from Surgical & Sports Medicine products for the third quarter was $9 million, up 25%, primarily due to an increase across the PuraPly family of products. Our total revenue results for the third quarter included $0.4 million of grant income related to the grant issued from the Rhode Island Life Sciences Hub, offsetting our employee-related costs in our Smithfield facility. This compares to no impact in the prior year period, and we continue to expect grant income to be immaterial in 2025. Gross profit for the third quarter was $114.2 million or 76% of net product revenue, compared to 77% last year. The change in gross profit was due primarily to a shift in product mix. Operating expenses for the third quarter were $130.1 million compared to $108.9 million last year, an increase of $21.2 million or 19%. Excluding cost of goods sold of $36.3 million for the third quarter and $26.8 million last year, our non-GAAP operating expenses for the third quarter were $93.9 million compared to $82.1 million last year, an increase of $11.7 million or 14%. The year-over-year change in operating expenses, excluding cost of goods sold, was driven by a $7.9 million or 11% increase in SG&A expenses, a $2.9 million or 28% increase in research and development expenses and a $0.9 million write-down of certain nonrecurring expenses. Operating income for the third quarter was $20.7 million compared to an operating income of $6.2 million last year, an increase of $14.5 million. Excluding noncash amortization and certain nonrecurring costs in both periods, our non-GAAP operating income was $23 million compared to $7.1 million income last year. GAAP net income for the third quarter was $21.6 million compared to a net income of $12.3 million last year, an increase of $9.2 million. Net income to common for the third quarter was $14.5 million compared to a net income of $12.3 million last year. As a reminder, net income to common includes the impacts of the cumulative dividend, the noncash accretion to redemption value on our convertible preferred stock and undistributed earnings allocated to participating redeemable convertible preferred stock. Adjusted EBITDA for the third quarter was $30.1 million compared to adjusted EBITDA of $13.4 million last year. Now turning to the balance sheet. As of September 30, 2025, the company had $64.4 million in cash, cash equivalents and restricted cash with no outstanding debt obligations, compared to $136.2 million in cash, cash equivalents and restricted cash with no outstanding debt obligations as of December 31, 2024. On October 31, 2025, we amended our credit agreement to better align with the underlying fundamentals of our business. The amended credit agreement now provides access to up to $75 million of future borrowings. We believe we are well capitalized with our cash on hand and other components of working capital as of September 30, 2025, and available under our revolving credit facility and net cash flows from product sales. Now turning to a review of our 2025 revenue guidance, which we updated in this afternoon's press release. For the 12 months ended December 31, 2025, the company now expects net revenue of between $500 million and $525 million, representing a year-over-year increase in the range of 4% to 9%. The 2025 net revenue guidance range now assumes net revenue from Advanced Wound Care products of between $470 million and $490 million, representing a year-over-year increase in the range of 4% to 8%. Net revenue from Surgical & Sports Medicine products between $30 million and $35 million, representing a year-over-year increase in the range of 6% to 23%. With respect to our profitability and EBITDA guidance, the company now expects GAAP net income in the range of $8.6 million to net income of $25.4 million compared to a range of a net loss of $6.4 million to net income of $16.4 million previously. EBITDA in the range of $19.1 million to $41.9 million compared to $6.2 million to $37 million previously. Non-GAAP adjusted net income in the range of $21.5 million to $38.4 million compared to $5.5 million to $28.3 million previously, and adjusted EBITDA in the range of $45.5 million to $68.3 million compared to $31.1 million to $61.9 million previously. In addition to our formal financial guidance for 2025, we are providing some considerations for our modeling purposes. Our profitability guidance for 2025 now assumes gross margins in the range of approximately 74% to 76%. GAAP operating expenses, excluding cost of goods sold, up 1% to 2% year-over-year. and excluding noncash intangible amortization of approximately $3.4 million, the nonrecurring FDA payment related to our renewed BLA filing of $4.6 million and the $9.8 million write-down of assets and restructuring activities in the first 9 months of 2025, our total non-GAAP operating expenses will increase in the range of 3% to 5% year-over-year. With that, I'll turn the call over to the operator to open up the call for your questions. Operator: [Operator Instructions] We will take our first question from Ross Osborn from Cantor Fitzgerald. Ross Osborn: Congrats on the strong quarter. So starting off, I would be curious to hear how your conversations are going with the clinical community in terms of when you're expecting physician behavior to change following the PFS. Is that December this year, earlier? Any thoughts there? Gary Gillheeney: Yes. So this is Gary, Ross. We're starting to see some of that behavior change now. where clinicians are moving to products that are on the approved LCD list. We're seeing some contracts starting to get processed to get those products on and apparently get the other products off. So we're starting to see some of the administrative behavior starting now. I'm not -- I don't think we've seen any sales behavior at this point in time, but we're certainly seeing the pieces being put in place where there'll be a change in utilization going forward based on the physician fee schedule. Ross Osborn: Okay. Got it. And then looking to next year, what can you do from a company standpoint to help generate awareness regarding your products as incremental volume opens up as many players that were selling higher ASP products won't be able to operate in the market. Gary Gillheeney: Well, fortunately, we have strong brand equity for our products, and we focus on the clinical efficacy of what our portfolio contains. We will continue to message that. I think that plays extremely well in today's -- or into next year's world. We think with wiser as well, getting products that are appropriate for use and will get reimbursed. I think -- will carry a lot of weight. The clinical evidence of those products will support utilizing those products and will carry a lot of weight. And those are the messages that we'll continue to beat and to make sure the market is aware of what we have, the clinical evidence, the likelihood of reimbursement as a result of being on the LCD and being appropriate with appropriate data, if challenged. Operator: [Operator Instructions] Our next question comes from the line of Ryan Zimmerman from BTIG. Iseult McMahon: This is Izzy, on for Ryan. So I wanted to start or continue, I guess, on the physician fee schedule for 2026. I was curious how you think the new rates might impact margins as we start to think about our models for next year? David Francisco: Yes, sure. So I mean, obviously, it's a little bit early to be talking about 2026, but we'll maybe connect on a couple of things around the revenue profile and the margin one as well. Again, we're not providing financial guidance today, but I'm glad you asked the question because I think there are several key changes in the marketplace for 2026 that I think people should be cognizant of. First off, with the LCD going into place, there's over -- well over 200 products that will no longer be covered for DFUs and VLUs under that LCD that's scheduled right now to go and be enacted on 1/1/26. As Gary mentioned in his prepared remarks, we have 3 commercialized products that are covered by the LCD with an additional one in Dermagraft coming back online in the back half of 2027. And those products are NuShield, which is a dehydrated amnion that's covered for DFUs, Affinity, which is a living amnion, which is covered for DFUs and then our Apligraf product, which is a bioengineered cellular product -- and it's the only PMA-approved product for both DFUs and VLUs. So we're excited about having those on the covered list. In addition to that, the financial incentives will be dramatically reduced in the marketplace, leveling the playing field, which is what we've been advocating for, for quite some time. And overall, as Gary mentioned, too, we have the brand equity, efficacy and service, which puts us in a very nice position, which is the attributes that we'll be competing against in 2026 once the field is leveled, as I mentioned. And then, of course, we've got a broad portfolio across many different FDA classifications that are addressing multiple indications. And then the last piece I'd say is that the commercial team has done a nice job of pivoting in a dynamic market environment. And I think that's indicated over the last couple of years and certainly in this last quarter. So all those things coming together, I think there's obviously no implication to the surgical business next year. So that's one element that you should think about. And I think the other components around wound care would be is that our dominant position in the hospital outpatient setting can drive incremental growth given that the reimbursement there has been unbundled. In addition to that, I think, obviously, there's been several new entrants into the market over the last couple of years, and we expect that share that's been lost over the last couple of years to be regained. And so we expect to participate in that. The offset to that is, of course, the market has expanded to some extent, and we expect that to contract based on overuse. And then the last piece I'd say is overall on the market standpoint, ASPs across the entire market will decline. So from that perspective, ours will as well, but there's a couple of other components there. Obviously, with Apligraf on the market and again, the only PMA-approved product for both DFUs and VLUs, very, very strong product, particularly in HOPD, will now be reimbursed at a much higher rate than it has been in years past. So from our perspective, we see a lot of growth drivers next year, and we also see improvements in margin and cash flow as well. Iseult McMahon: That's very helpful. And to your point about ASPs coming down, I was curious if you were surprised at all by the final rate ending up in that $127 range? Or is that kind of where you were expecting? Gary Gillheeney: Yes. We -- I think we were public and thought that it was going to come out, finalized at the rate that it was proposed in the proposed rule. We didn't think that at this point in time, CMS was going to change that rate, though they have indicated that they recognize PMAs, have a clinical differentiation and resource costs associated with them in value and expect that, that reimbursement will be higher over time than the 510(k)s and the 361. So I think over time, we're going to see a change. And I think one of those will be the PMAs will be separated. And perhaps once the market absorbs this change, CMS will take a look and see if that rate of 127 for the 361s and 510(k)s is appropriate or not? Or has it really, in some way, curtailed care in any way, shape or form. But I think they want to see if that's what's going to happen. So that's why we think they left everything at what's 127. Now the proposed rule was 125 -- that's why we felt it would come out at the 125 or something close to it. Iseult McMahon: Got it. That's helpful. And then just shifting focus over to ReNu. I know you're meeting with the FDA in December, but I was curious if the initial approval time lines that you had called out before, I believe it was late 2026 or early 2027 are still on the table given the recent data readout. Gary Gillheeney: Sure. So we still think there is an opportunity to still file and we'll be filing in a modular form in December if we have a successful meeting with the FDA. But I would guide to a 2-month delay is probably safe. It's possible we could stay on our current time line, but 2 months, I think, is reasonable based on where we are today in preparing for that December 12 meeting. Operator: [Operator Instructions] We are currently showing no remaining questions in the queue at this time. That does conclude our conference for today. Thank you for your participation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Mogo Third Quarter Earnings Conference Call. [Operator Instructions] This call is being recorded on Friday, November 7, 2025. I would now like to turn the conference over to Craig Armitage. Please go ahead. Craig Armitage: Thank you, and good morning, everyone. Just a few quick notes before we get started. Today's call will contain forward-looking statements that are based on current assumptions and subject to risks and uncertainties. These could cause actual results to differ materially from those projected. The company undertakes no obligation to update these statements, except as required by law. Information about the risks and uncertainties are included in Mogo's Q3 filings as well as periodic filings with regulators in Canada and the United States, which you can find on SEDAR+, EDGAR and you can also access via the Mogo Investor Relations website. Lastly, today's session will include several adjusted financial measures or non-IFRS measures. Please consider these as a supplement to and not a substitute for the IFRS measures. You'll see that we've included reconciliations to those in the press release and in the investor deck that accompanies the webcast. One last note, we understand there was some difficulty accessing the webcast on the Mogo IR page today. I believe that has been updated. So just refresh your screen if you're trying to access that and you hear this and certainly, the replay will be available there. With that, I'll turn the call over to Dave Feller. Go ahead, Dave. David Feller: Thanks, Craig, and thanks, everyone, for joining today. Q3 was another quarter of disciplined execution and good performance across all the areas of the business. We continue to strengthen our financial foundation while advancing the most important strategic initiative in our history, the launch of our new intelligent investing platform. Key highlights include on wealth, AUM reached a record $498 million, up 22% year-over-year, and wealth revenue grew 27%. On the payments business, revenue grew 11% year-over-year, driven by continued strength in Europe. And our Bitcoin holdings rose more than 300% quarter-over-quarter. Profitability, adjusted EBITDA was $2 million, 11.6% margin. And on the back of strong platform performance, we raised our 2025 EBITDA guidance. On the balance sheet, total cash investments ended the quarter at $46 million, providing flexibility to fund growth. It was a steady high-quality quarter across the 3 strategic pillars, wealth, payments and Bitcoin, each compounding value and read together. Over the past few years, we've been building both sides of our wealth business, Mogo focused on automated investing in MogoTrade, our self-directed trading platform. Each gave us a valuable insight into how investors behave, how they save, how they trade and how their decision impact long-term outcomes. And those insights made one thing clear, the future wasn't 2 separate experiences, it was one unified platform. And that's what we've built with Intelligent investing, a completely reimagined wealth platform that brings together our managed and self-directed investing under a single brand, a single architecture and a single philosophy. This isn't an update or a redesign. It's a full new build from first principles, a new behavioral operating system for wealth designed to help investors perform better. Two legacy apps, Mogo and MogoTrade will now sunset as we transition fully into intelligent investing. It's a major evolution for our company, one platform, one brand and one mission to build the behavioral and technological infrastructure for disciplined generational wealth. The problem we're solving is structural. Most of the financial system is built around activity because that's what drives revenue for firms. Every trade, every fund switch, every notification is a profit event for the platform, but it usually hurts the investor. After analyzing 3 years of real trading data across our own platforms, we sought firsthand. Most self-directed investors don't lose because of high fees. They lose because of the behavior. Buffett and Munger have warned for years that many modern training apps look more like casinos and investing platforms. And our data confirmed it. The industry's promise of democratizing investing through frictionless access, mission-free trading, hasn't improved outcomes. It has accelerate the problem. And with the rise of sports gambling and now prediction markets appearing alongside stocks, crypto and options trading, those same dopamine-driven mechanics are spreading faster than ever. The lines between investing, trading and betting are blurring and outcomes are getting worse. For Mogo, that's the opportunity. We have both the data and the capability to build the system that corrects this, a platform that rewards discipline, not dopamine. By unifying our managed and self-directed experience into intelligent investing, we are building what we believe will be the next dominant model in wealth: a platform where investors’ success drives business success. Our solution is intelligent investing, a behavioral operating system for wealth. It solves the biggest gap in modern investing. The lack of structure, feedback and discipline that keeps most investors from capturing the full power of compounding. The Investor with the right behavior, steady contributions, patience and conviction follows a calm upward compounding path that leads to generational wealth. Most platforms push the opposite, short-term speculation and reaction that erodes returns. Intelligent investing makes disciplined inevitable by combining automation, behavioral design and market intelligence. The structure alone isn't enough. A key part of our strategy is to make this experience exciting and aspirational, to compete head-to-head with dopamine-fueled casinos. For our product and our brand, we are redefining what excitement investing means. We are making discipline the new adrenaline, patience the new dopamine, and mastery the new status. Our members will be active, but actively learning, developing, and patient, fully engaged, not by speculation but by progress. Because the real thrill is watching discipline compound into wealth. That's what intelligent investing is built to deliver: the system that turns long-term thinking into long-term results. Today, we have members on our platform who are on track to over $50 million and $100 million. That'’s what we mean by generational wealth, what's possible with the right approach. I wanted to walk through a few of the unique behavioral features that differentiate intelligent investing from other platforms. We've made hundreds of improvements across the experience, all designed to help investors perform better. I'll highlight just a few that best capture our behavioral design and discipline that define the platform. Let'’s start with our flagship S&P 500 portfolios. These portfolios serve as a behavioral anchor, combining the proven performance of the S&P 500 with structure, automation, and consistency that drives better behavior. The edge isn't just being in the S&P 500, it is being in a managed disciplined way. When we compare... Gregory Feller: You know what? It sounds like Dave got disconnected. So why don't I continue on? I'm going to turn to Slide 10, which is a discussion on Carta. So Dave was really just giving an update on our new wealth intelligent investing platform and giving you some of the exciting features that are coming up on that. I can tell you, everybody on the team is super excited about what we're seeing there. And I think the phrase that Dave coined of platforms being dopamine-fueled casinos are more real than ever, especially with the rise of prediction markets. So we really think the market is -- this is something that the market needs. Now I just want to turn to Carta, which is our second pillar, payments, Carta Worldwide. Carta continues to be an important strategic component of our platform, business built on long-term contracts, recurring transaction volume and trust relationships with top tier enterprise clients. In Q3, processing volume grew 12% year-over-year on a like-for-like basis at $2.8 billion, reflecting steady international demand and continued growth from our major customers. Today, the platform supports over 7 million end users and processes more than $12 billion in annualized volume, providing card issuing, transaction processing and settlement across multiple networks, including Visa and Mastercard. What differentiates Carta is its API-first architecture built on the Oracle Cloud. Looking ahead, we're exploring the integration of stablecoin payments within Carta's network that includes potential partnerships with leading stablecoin providers aimed at enabling faster, lower-cost, cross-border settlement and programmable payouts. This is about future proofing our infrastructure to support clients who want to move value seamlessly across both fiat and digital rails. And we think Carta is well positioned to become a trusted gateway of stablecoin payments as adoption accelerates. Turning to Bitcoin strategy, which represents the next evolution of our capital allocation, in July, our board approved a strategic initiative authorizing up to $50 million in Bitcoin allocation. During Q3, we increased our Bitcoin holdings by over 300%, from Q2 reaching $4.7 million, funded through excess cash from investment monetizations. Our wealth, payments, and Bitcoin initiatives together position Mogo at the crossroads of 2 very powerful trends: the digitization of value and the modernization of financial infrastructure. We believe this dual compounding focus of operating business and Bitcoin will be a long-term differentiator for Mogo. Now, I’ll turn to our Q3 results. Q3 was another solid quarter of execution across our 3 main growth pillars of wealth, payments, and Bitcoin. Each advanced meaningfully: wealth achieved record assets under management, payments delivered double-digit growth, and Bitcoin treasury strategy accelerated. Our ecosystem continues to scale across both consumer and enterprise channels. Total members in Canada reached 2.3 million, up 6%. Assets under management hit a record $498 million, up 22%. On the B2B side, payments volume grew 12% year-over-year to $2.8 billion on a like-for-like basis. Adjusted total revenue grew 2% year-over-year to $17 million, but the composition of that growth continues to shift towards higher quality recurring streams. Wealth revenue rose 27%, driven by deeper adoption of managed portfolios and a higher AUM. Payments revenue increased 11%, reflecting steady transaction growth and long-term customer retention. These 2 components helped drive overall growth and adjusted subscription services revenue of 7%, underscoring the strength and durability of our mostly recurring revenue-based model. As expected, interest revenue was down 5% in the quarter following the new rate cap implemented at the start of the year. However, interest revenue was up slightly on a sequential basis, demonstrating underlying portfolio growth. Profitability remained central to our execution. In Q3, adjusted EBITDA was $2 million, representing an 11.6% margin, up sequentially from Q2 and roughly flat versus last year. Net cash flow before loan book was lower year-over-year due to timing of working capital items, which were a headwind this quarter versus the same period last year. On a consolidated basis, total cash increased in the quarter by almost $7 million, reflecting the impact of portfolio monetizations. Year-to-date, total EBITDA is $5 million, and total cash flow before investment and loan investments reached $13.6 million, up from $10.4 million for the first 9 months in 2024. Bottom line is, we maintain cost control even as we continue investing in platform monetization and intelligent investing rollout. Our balance sheet remains a clear differentiator for Mogo. We ended the quarter with $46.1 million in total cash and investments, including $18 million in cash and restricted cash, $20.8 million in marketable securities, and $7.1 million in private investments. Book value stood at approximately $77.5 million, or CAD 3.24 per share, providing a strong capital foundation to execute our Bitcoin allocation strategy while maintaining liquidity and flexibility. We continue to optimize our capital structure with a focus on return on invested capital and balance sheet optionality. Turning to our outlook, we reaffirmed our 2025 revenue guidance and are raising our adjusted EBITDA outlook from $5 million to $6 million to $6 million to $7 million for the full year. This improvement reflects the operating leverage in our model and continued execution across both wealth and payment pillars. As we move into Q4 and 2026, our priorities remain clear: grow our recurring revenue base, maintain profitability discipline and allocate capital with a long-term mindset anchored to Bitcoin and hard asset value creation. Mogo is entering 2026 with a focused strategy, a stronger balance sheet and a platform designed for intelligent sustainable growth. With that, we will open it up to questions. Craig Armitage: Dave, do you want to go back -- it's Craig here. Do you want to go back and do Slides 8 and 9 that... David Feller: Sure. Sorry about that. Apologies. Yes, I got cut off there. So I wanted to walk through just a few of the unique features in our new intelligent investing. One of them is our new performance dashboard, which we see as a professional grade view for active investors. Every member will now be able to see how they're performing against the S&P 500. So they always know how they stack up to a buy-and-hold strategy. Also breaks down what's driving the results. Winners and losers by count and weight portfolio turnover, volatility and drawdown and shows how their performance ranks also versus other members. It also introduces a new behavioral score that connects processed outcomes, tracking things like consistency in the buy-gate process and patience in holding positions. This level of transparency is something that most platforms would never offer because it reduces training activity. But for us, it's a strategic advantage. It encourages patience, selectivity and long-term focus, the traits that drive performance and retention. It's what professionals track and now every investor can see it. Next up, we have what we call the buy-gate investment memo, a professional-grade system for making better, more informed decisions. Before every purchase, members go through a structured process, the same checklist that best investors use for allocating capital: management assessment, moat and competitive advantage, investment thesis and key drivers, kill criteria, and bias check. Once complete, the platform creates an investment memo, a living record of their reasoning that can be revisited and refined over time. Even speculative buys are part of this framework, but now they’'re tracked and analyzed separately so investors can see what’'s working and what isn't. This is a system for turning decisions into data, bringing the same rigor and feedback loops used by professionals to every investor. And these are just a few of the hundred improvements we’'ve made across the platform, each designed to make discipline inevitable and performance sustainable. We will begin the rollout of intelligent investing later this month and continue into Q1. We couldn't be more excited for our members and our new platform, and I personally am excited and proud of the great work the team has done, as they truly believe we've built a truly differentiated platform and one that really aligns with our view that the future of investing won't be won by those that deliver and drive the most activity, but ultimately, the platforms that actually deliver the best outcomes. So back to -- we'll go down to the -- back to the Q&A, Craig? Operator: [Operator Instructions] Your first question comes from the line of Scott Buck from H.C. Wainwright. Scott Buck: I guess, first, I wonder if you could kind of walk us through how you see the balance between growth and margins as you work from kind of where you are today at 18 or so percent to that Rule of 40. Gregory Feller: So yes, Scott, it's Greg. I think the -- our overall philosophy right now is to stay EBITDA positive, while looking to drive overall top line growth, right, I think -- and so as we roll out intelligent investing later this quarter and going into Q1, I think we are going to be in a position to have to make some more investments for that rollout. But obviously, the philosophy there is that we expect offsetting growth on any impact on EBITDA margin. But we think that's the right bias for it to drive accelerating growth, again, keeping that overall Rule of 40 framework where our goal there is to see that Rule of 40 number overall increase, again, Rule of 40 being revenue growth and adjusted EBITDA margin. Scott Buck: Great. That's helpful, Greg. And then on the rollout of intelligent investing, could you provide a little bit around the logistics of how you'll be rolling it out? And then you mentioned some likely increased spend. I assume that comes through the marketing line, but any additional color there would be helpful as well. David Feller: Sure. It's Dave. So we're starting first with rolling out our managed solution. So again, we're moving from essentially 2 platforms. We had Mogo, which was our managed solution, and we had MogoTrade, which is our self-directed. Both of those, obviously, are still the current platforms that our users, members are on. So phase one is going to be actually rolling out the managed first. So Mogo users and everybody with a managed account will essentially transition into this new app. So they'll literally go from one day updating from the old app to the new app, which is the new intelligent investing, starting with the managed, roll that out across our member base, and then introduce and roll out the new self-directed. Everybody with an existing Mogo account will essentially log in to their existing account, but it will obviously all be on the new platform, new interface, etc. And the same thing on the self-directed. Everybody on the self-directed platform will log in, and their account and everything will be on this new platform. And now it will be unified into one app so we expect that this process will start this month, and it will continue into Q1. Assuming everything is going well and we are -- —obviously, there is always feedback and adjustments, and that process will continue. But we would hope by Q1, at some point in Q1, we are beginning to start progressing on the marketing front and really starting to try to get back to accelerated growth there. Scott Buck: Great. David. That's helpful. And I want to ask about the -- how the lending business kind of fits in with the core wealth and payments at this point? Are you sourcing customers for wealth through lending? Or what -- I guess I'm trying to understand what the strategic fit is? David Feller: Greg, do you want to talk about that or I can talk a little bit about that. Gregory Feller: Yes, go ahead. David Feller: I mean, I'll start and Greg can add. I mean, ultimately, I think what you're seeing with a lot of these platforms, right? You take a look at Robinhood, Wealthsimple, et cetera. Everybody usually starts with a product and then continues to evolve and start adding others, right? Wealthsimple initially launched a robo-adviser, then they got into self-directed investing. Now they're doing credit cards. Everybody eventually is getting into lending as well. So in the long run, you see lending as obviously, as I think, a key part of a lot of these platforms. And our big advantage is that we've been in the lending business from the beginning. So obviously, a lot of experience and a lot of data on the unsecured part. Some of those -- there's no question that a lot of those members, I mean, ultimately, every single individual needs to get invested, right? So we -- our goal with on the lending side is to help people go from being in debt and actually getting on a path to saving and investing, especially those that are boring typically in kind of the subprime rate. But yes, I think long-term lending, I expect, is going to be a key component of all of these platforms. And -- but for now, for us, obviously, our main focus in terms of growth drivers of the business is going to continue to be really on the payments and on the Wealth side, right? But Greg, I don't know if you want to add little more color in there. Gregory Feller: Yes. I would just say that our goal for lending, look, lending we've been doing for 20 years, it's been a stable cash flow generator for us. It's been one that as I've always said, because it's not our core growth focus, we can turn those dials up and down depending on our general view and outlook on the overall environment. So our book has stayed relatively stable for a few years. So we really haven't been meaningfully growing our book. Our goal is that lending is -- right now, lending is a drag on overall revenue growth because of the rate cap impact in '25. Our goal is that revenue is not a drag on revenue growth as we moved into 2026. But that, by far, the primary driver of top line growth is coming from wealth and payments. So that's sort of how we look at it. So by definition, lending, we believe, will become a smaller and smaller percent of our overall business. But continue to be a contributor of cash flow to the overall business as well. And as Dave said, strategically, there probably isn't a fintech platform out there because if -- that doesn't have it because it really at the end of the day, as you broaden out and offer more and more services and you look at what Robinhood is doing, they effectively want to become your primary bank, right, and offer all of your financial products and you cannot do that if you don't actually do lending. So lending is a strategic asset for sure in the space. What I would argue the hardest one to get into because it actually requires years and years of data and experience to be able to do that profitably. And I would say Mogo has one of the strongest databases in the sub-private space in Canada having been doing this for 20 years. Scott Buck: Great. That's fair. And I appreciate the added color there. One last one. Just curious if you guys have an update on where you stand on the regulatory process in terms of being able to offer crypto trading with the new wealth platform that's rolling out? Gregory Feller: Yes. So we are progressing on the whole crypto path and including partnership discussions because basically everybody that really expands into this area builds partnerships because there's a pretty broad ecosystem there. So I would say, stay tuned as we go into 2026 for announcements around progress around bringing crypto into our platform. Operator: [Operator Instructions] There are no further questions at this time. I'd like to turn the call back over to Dave Feller for closing comments. Sir, please go ahead. David Feller: Thank you. Thanks again for joining us on our Q3 call. We look forward to giving you an update in the next -- in Q1 on full year results. Thanks again. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Operator: Good morning, and welcome to Ares Commercial Real Estate Corporation's Third Quarter Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded on Friday, November 7, 2025. I will now turn the call over to Mr. John Stilmar, Partner of Public Markets Investor Relations. John Stilmar: Thank you, and good morning, everybody. We appreciate you for joining us on today's conference call. In addition to our press release and the 10-Q that we filed with the SEC, we've posted an earnings presentation under the Investor Resources section of our website at www.arescre.com. Before we begin, I want to remind everyone that comments made during the course of this conference call and webcast as well as the accompanying documents contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of words such as anticipate, believe, expect, intend, will, should, may and similar such expressions. These forward-looking statements are based on management's current expectations of market conditions and management's judgment. These statements are not guarantees of future performance, conditions or results and involve a number of risks and uncertainties. The company's actual results could differ materially from those expressed in the forward-looking statements as a result of a number of factors, including those listed in its SEC filings. Ares Commercial Real Estate assumes no obligation to update any such forward-looking statements. During this conference call, we'll refer to certain non-GAAP financial measures. We use these as measures of operating performance, and these measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. These measures may not be comparable to like titled measures used by other companies. Now I'd like to turn the call over to our CEO, Bryan Donohoe. Bryan? Bryan Donohoe: Thanks, John. Good morning, everyone, and thanks for joining us today. I'm here today with Jeff Gonzalez, our Chief Financial Officer; Tae-Sik Yoon, our Chief Operating Officer; as well as other members of the management and Investor Relations teams. In the third quarter, we continued to execute against our strategic objectives of maintaining a strong balance sheet, addressing our risk rated 4 and 5 loans and further reducing our office loans. Our execution against these goals drove increased sequential quarterly earnings, stable CECL reserves and consistent book value per share while reducing our net debt-to-equity ratio as compared to the prior quarter. Supported by the strength of our balance sheet and the progress within our risk rated 4 and 5 loan portfolio, we broadened the company's strategic objectives to include more active capital deployment. We believe the collective execution against these goals will ultimately result in a larger and more diversified loan portfolio and drive long-term earnings growth for our investors. Let me now walk you through the specifics of our progress this quarter and outline the framework for how we expect these initiatives to evolve. Across the Office portfolio, we saw improved leasing and market fundamentals supported by a more positive demand environment. During the third quarter, we reduced the Office portfolio to $495 million, a decrease of 6% quarter-over-quarter and 26% year-over-year. This decrease was driven by both normal course repayments and the strategic restructuring of a risk rated 4 loan collateralized by a well-leased New York City office property. At the end of the third quarter, 5 of our 7 remaining office loans were risk rated 3 or better. Shifting now towards our progress in addressing our risk rated 4 and 5 loans. During the third quarter, we had $28 million loan collateralized by a multifamily property migrate though we expect an expeditious resolution. Discussions are ongoing, but we view the potential loss severity, if any, as low as the occupancy of the property now exceeds 95%. The other movement across our risk rated 4 and 5 loans in the quarter came from the resolution of an $11 million previously risk rated 4, subordinated loan collateralized by an office property in Manhattan. The underlying property has had strong leasing over the past 6 months, achieving over 80% occupancy. With the progress of the property and a strong borrower relationship, we amended the capital structure to combine a $59 million risk rated 3 senior loan and a portion of the $11 million risk rated 4 subordinate loan into a single larger $65 million senior loan secured by the same property. In exchange, we extended the final maturity of the loan by 2 years to provide for further market stabilization. Although the restructuring resulted in a realized loss of $1.6 million, the CECL reserve was reduced by approximately $7 million. Furthermore, following the end of the quarter, we completed a restructuring of an $81 million senior loan collateralized by an office property in Arizona that was lowered to a risk rated 4 during the second quarter. Since then, we've seen positive leasing momentum at the property and continued sponsor support in the form of additional equity capital. In response to these positive developments, in the fourth quarter, we restructured the loan to provide greater flexibility for the sponsor to complete the business plan. When looking at our risk rated 4 and 5 loans in aggregate, 2 loans comprise more than 70% of the outstanding principal balance. The first of these 2 loans is our risk rated 5 Chicago office loan, which has a carrying value of $141 million and remains on nonaccrual. Fundamentals at this property remains sound with occupancy above 90% and a weighted average lease term of more than 8 years. Discussions with the borrower are ongoing and among the options we are exploring with the borrower is a potential sale of the asset. The second of the 2 is a risk rated 4 Brooklyn, New York residential condominium loan with a carrying value of $120 million. During the quarter, construction continued, and we anticipate the formal marketing process for the sale of the underlying condominium units to begin later in the fourth quarter of this year. We're proud of the progress we've made on the risk rated 4 and 5 loans and remain committed to driving continued improvement in the portfolio. Our risk rated 1-3 loans continue to perform well and are primarily collateralized by multifamily, industrial and self storage properties. As we continue to make improvements across the portfolio and collect repayments that further bolster our balance sheet, we are able to accelerate our investment activity into what we see as an accretive market opportunity given the market presence and capabilities of the Ares Real Estate Group. Through continuous investment, Ares now operates one of the largest vertically integrated Real Estate platforms globally, which supports broader sourcing and credit capabilities. The Ares Real Estate Group has grown to over 740 Real Estate professionals. Consistent with the expansion of the Ares Real Estate Group, the Ares Real Estate Debt Strategy has experienced meaningful growth and incremental scale. In the last 12 months, the Real Estate Debt Group has originated more than $6 billion in new loan commitments, a meaningful step function change in terms of scale and capital deployment as compared to 5 or 6 years ago. We believe ACRE is well positioned to capitalize on this expanded scale of the Ares Real Estate Platform. During the third quarter, we closed 5 new loan commitments totaling $93 million across multifamily and self storage properties. Our investing momentum has continued into the fourth quarter, closing over $270 million of loans across 5 new loan commitments collateralized by industrial, multifamily, hotel and self storage properties. One important, but maybe less obvious way ACRE is benefiting from the investment scale of the Ares platform is through the ability to co-invest with other Ares Real Estate funds. Beginning in the third quarter, more than half of ACRE's new commitments were co-investments with other Ares Real Estate vehicles. We believe the ability for ACRE to co-invest results in a more granular and diversified portfolio while also allowing ACRE to transcend its capital base to invest in larger institutional quality Real Estate. An additional benefit from the Ares platform, which underscores the attractiveness of our recent originations, is our ability to obtain accretive financing terms with advance rates between 75% and 80%. Importantly, we believe the types of loans closed in the third and fourth quarter with favorable financing profiles could provide a window into what ACRE's reshaped portfolio and financial profile could look like in the future. As we look ahead, we remain confident in ACRE's long-term earnings potential. We believe the path to achieving earnings growth will ultimately depend on our continued resolutions on our nonaccrual loans, which total approximately $170 million of carrying value, net of applicable CECL reserves as well as reinvesting the proceeds to expand our loan portfolio. Although we expect the current pace of repayments to continue in the near term, we're focused on redeploying the capital from repayments efficiently to minimize the earnings drag. That being said, our goal is to return to portfolio growth in the first half of 2026. Let me now turn the call over to Jeff, who will provide more details on our third quarter results. Jeffrey Gonzales: Thank you, Bryan. For the third quarter of 2025, we reported GAAP net income of approximately $5 million or $0.08 per diluted common share. Our distributable earnings for the third quarter of 2025 was approximately $6 million or $0.10 per diluted common share. This includes the impact of the realized loss of $1.6 million or $0.03 per diluted common share related to the restructuring of the risk rated 4 loan collateralized by an office property. Distributable earnings for the third quarter, excluding this loss, was approximately $7 million or $0.13 per diluted common share. Additionally, during the third quarter, we collected $2 million or $0.03 per diluted common share of cash interest on loans that were on nonaccrual and was accounted for as a reduction in our loan basis. We continue to strengthen our financial flexibility and balance sheet positioning. We lowered our net debt-to-equity ratio, excluding CECL, to 1.1x at the end of the third quarter, a decrease from 1.2x quarter-over-quarter and 1.8x year-over-year. We further reduced our outstanding borrowings to $811 million at the end of the quarter, a decrease of 9% quarter-over-quarter and a decrease of 40% year-over-year. We collected an additional [repayment] during the quarter, bringing the year-to-date total repayments to $498 million, more than double the amount we collected at this time last year. These repayments further bolstered our liquidity position and financial flexibility, allowing us to focus on both of our objectives of accelerating resolutions on risk rated 4 and 5 loans and now accelerating investment activity. We expect current market conditions to result in a continued pace of repayments across our portfolio. Bolstered by the amount of repayments received during the third quarter, we maintained our strong liquidity position. As of September 30, 2025, our available capital was $173 million, including $88 million of cash. Turning to our CECL reserve. The total CECL reserve declined to $117 million as of September 30, 2025, a decrease of approximately $2 million from the CECL reserve as of June 30, 2025. This reduction was primarily due to the restructuring of the risk rated 4 office loan previously mentioned and other loan-specific attributes. The total CECL reserve at the end of the third quarter of $117 million represents approximately 9% of the total outstanding principal balance of our loans held for investment. 95% of our total $117 million CECL reserve or $112 million relates to our risk rated 4 and 5 loans and approximately half of this is attributed to the only risk rated 5 loan in the portfolio. Overall, the $112 million of reserves attributable to our risk rated 4 and 5 loans represents approximately 25% of the outstanding principal balance of those risk rated 4 and 5 loans. Both CECL and our book value remained relatively stable quarter-over-quarter. Our book value is $9.47 per share, which includes the $117 million CECL reserve. Our goal remains to prove out book value over time while advancing our efforts to rebuild earnings and reestablish full dividend coverage. We believe the progress we have achieved thus far is a clear reflection of our commitment, and we remain confident that our continued deliberate action will further crystallize these results. To conclude, the Board declared a regular cash dividend for the fourth quarter of 2025. The fourth quarter dividend will be payable on January 15, 2026, to common stockholders of record as of December 31, 2025. At our current stock price on November 4, 2025, the annualized dividend yield on our third quarter dividend is approximately 14%. With that, I will turn the call back over to Bryan for some closing remarks. Bryan Donohoe: Thank you, Jeff. We believe our financial position and results continue to demonstrate meaningful progress against our goals. The overall portfolio is exhibiting stable to improving underlying fundamentals and the more active Real Estate market is providing a firm backdrop for repayments and transaction activity. We have a strong conviction that the power of the Ares platform and the expanded presence of the overall Ares Real Estate team provides us with the right people, deep capabilities and robust Real Estate footprint to further execute upon our expanded goals. Through consistent execution, we are confident that ACRE is on the right track to drive shareholder value and benefit from the secular growth of the Commercial Real Estate lending opportunity. As always, we appreciate you joining our call today, and we'd be happy to open the line for questions. Operator: [Operator Instructions] We'll take our first question from Steve Delaney with Citizens Capital Markets. Steve Delaney: Congratulations on a very solid quarter. Just a couple of pennies below full dividend coverage. As you explained to us, it’s interesting to look at the mix of your new loans in the third quarter versus what you shared with us about the loans originated post 9/30. So, 5 loans in the third quarter with an average loan size of $19 million, and that strikes me as middle market. And then when we look at the 5 loans in the fourth quarter, the average is $54 million, which looks more like it's beginning to creep into the large loan. Now I know averages can be misleading. But could you just comment on sort of your focus in the market, your niche Ares, your parent Ares can do pretty much anything they want. But for ACRE, for your mortgage REIT, your public mortgage REIT, where is your sweet spot? And sort of what should we expect in terms of average loan sizes? And is it safe to say that do you see yourself as primarily a middle market lender? So just a little bit about that portfolio strategy, if you could. Bryan Donohoe: Yes, Steve, I appreciate the question, and it's a good one. The first thing I'd offer up is that we have a little bit of a denominator issue that we shouldn't read too much into in that the data set we're extrapolating off of remains pretty small at this point. So, it's an absolutely fair question about where we're going to take it. And the first example of that would be in the loans closed in the quarter, that contained a good bit of self storage assets, which by their nature, are going to have smaller tickets associated with them. And the notional balance will, as you say, look more like a middle market lender. We really, really like that asset class. We've created a few different mousetraps with which to participate in it despite the underlying assets remaining at least subjectively from an outsider viewpoint, subscale. So, when we kind of move the playbook forward and think about further repayments and then what does this portfolio theoretically look like going forward. We mentioned the ability to share in larger transactions with the broader Ares Real Estate platform, and we believe that to be an advantage in that we will be able to participate in larger institutional assets while taking a share that while continuing to be selective, will also allow for proper portfolio management or concentration, if you want to look at it from a different way. So when we think about the asset classes in which we've been most active across debt and equity here, our core competencies remain in industrial, we're the third largest owner in the world today, multifamily, where we've got a vertically integrated equity team sourcing and managing those opportunities as well as student housing to some degree and self storage to as much of a degree as we can find. So, we feel in those asset classes, we have more of a right to win given our equity background and orientation. And our view is that that would be a great portfolio to focus on for ACRE and its shareholders as well. Steve Delaney: Those are great defensive property types. And what you're telling us is you might see an occasional office loan, but you're not, you don't see yourself as primarily as an office lender. That's what I'm taking away from your comments. And I think that's a positive characteristic. Just one final thing. This is big picture. We're a couple of years into this for the 20-some commercial mortgage REITs, we're a couple of years into kind of a rougher market. When you look back now, Bryan, at the loans that we're seeing today and the loans that you're booking today, what is the biggest difference you think between these, today's loans and the 2021, '22 vintage, which has broadly performed pretty poorly. I'm just curious if there's 1 or 2 things that you see in today's market that are different. Bryan Donohoe: Well, I think there's certainly supply and demand fundamentals has shifted. I think the office market, which has been more than well publicized broadly and the headwinds there. But those asset classes that are higher in CapEx, right, have struggled more in an inflationary environment. So even when you look at strong performing office assets out there in the world today, generally, you're seeing TI packages that are higher than what would have been underwritten in 2020, '21, '22, right? So that's a pretty interesting shift. I think in terms of the broad-based change in the Real Estate market is we're now investing in an asset class that has reset materially lower in value. So, your attachment point as a lender has come down from a basis perspective while lesser competition is also allowing for lenders to dictate terms, the most significant of which will be the Loan-To-Value attachment point. So, the L in the equation is coming down, but the V has come down as well. Operator: Our next question will come from Jade Rahmani with KBW. Jade Rahmani: It looks like a strong quarter and a big turning point. Just in terms of duration of timeline to work out the remaining risk 4 or 5 loans, noting that you mentioned 2 of those, Chicago and Brooklyn comprised 70%. But over what time period do you expect that to transpire? Bryan Donohoe: Yes. It's a good question, Jade. Obviously, we have insights, but certain things that we can control there. We've got certainly progress toward each that we spoke of in our prepared remarks and market fundamentals around these assets generally either remain strong or trending in the right direction. I think for the last few quarters, we've talked about expediting resolutions where we saw it to be the best net outcome, right? And sometimes given our balance sheet flexibility, putting us in a position to accelerate those resolutions without it being overly punitive to the remaining balance sheet. I think we're constantly balancing the velocity plus the principal resolution of principal recovery in certain cases, and we'll continue to do so. But I think we're sitting in a more transparent seat than we were certainly 2 years ago. And there is no bigger focus for us than resolving these assets. So, we're going to continue to balance the ultimate price resolution with the velocity. Jade Rahmani: Can you comment on what drove the multifamily downgrade? I note that it has a December '25 maturity date. always looking at maturity dates. And I do see that 2 Texas multifamily have near-term maturity dates. One was in October. If you could comment on those. And just generally, multifamily, I know the Ares foothold in that sector, but we have seen pockets of credit issues this quarter in multifamily. So, a comment would be helpful. Bryan Donohoe: Sure, Jade. I think with respect to the downgrade, obviously, you mentioned the upcoming maturity date. This is an asset that has seen, as we mentioned, an uptick in performance. But given that near-term maturity and probably a revenue and expense alignment that I think we're hoping to see continued progress on, but really driven just by that maturity date and working with the sponsor to make sure that we have adequate coverage and can create a flight path, I would say, for the proper resolution of the property in the near term. But clearly, the maturity date was the driver there. What we're seeing in multifamily generally, and then I'll come back to your question on the Texas asset is that demand continues to surprise to the upside in terms of absorption. But that absorption number of, I think it was close to 500,000 units nationally over the last 12 months is about 30% or thereabouts higher, maybe a little bit more than that, higher than a consistent yearly average. So, I think that speaks to the go-forward plan, but you're also seeing relatively stagnant rent growth over the last, call it, 90 to 180 days. So, a little bit of cross current there. But clearly, as a market, you're seeing digestion of a huge amount of supply and certainly differentiation amongst markets and amongst assets within those markets. So, what that leads to, I think, is a pretty positive outlook for the next 3 to 4 years, given the falloff in supply, but business plans that in certain markets are taking longer to materialize. So, the takeaway, what that leads to for us is potentially longer duration of investments, which in certain asset classes might not be reflective of strength. In this case, I think it's reflective of a more positive forward outlook. And bringing it back to your specific question on the Texas asset, that loan was extended for a short period of time for those purposes, to just allow that continued progress. Jade Rahmani: And that would be both of the Texas loans? $23 million? Bryan Donohoe: Yes. I think it's, let me come back to you, Jade, but I think it's going to be a 1-year extension there. But really in the normal course for this one. Operator: At this time, there are no further questions. So, I'd like to turn the call back over to Bryan for any additional or closing remarks. Bryan Donohoe: Appreciate it. I just want to thank everyone for their time and attention today. We appreciate the continued support of Ares Commercial Real Estate, and we all look forward to speaking with you again on our next earnings call. Thanks, everybody. Operator: Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today's call, an archived replay of this conference call will be available approximately 1 hour after the end of this call through December 7, 2025, to domestic callers by dialing 1 (800) 723-0479 and to international callers by dialing 1 (402) 220-2650. An archived replay will also be available on a webcast link located on the homepage of the Investor Resources section of our website. Thank you all, and you may now disconnect.